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LOANS (Tables)
 9 Months Ended
Sep. 30, 2013
LOANS [Abstract]  
Categorizes total loans
At September 30, 2013 and December 31, 2012, net loans disaggregated by class consisted of the following (in thousands):

 
 
September 30, 2013
  
December 31, 2012
 
Commercial and industrial
 
$
172,386
  
$
168,709
 
Commercial real estate
  
448,728
   
360,010
 
Multifamily
  
136,983
   
9,261
 
Real estate construction
  
8,134
   
15,469
 
Residential mortgages
  
162,658
   
146,575
 
Home equity
  
59,100
   
66,468
 
Consumer
  
11,340
   
14,288
 
Gross loans
  
999,329
   
780,780
 
Allowance for loan losses
  
(17,619
)
  
(17,781
)
Net loans at end of period
 
$
981,710
  
$
762,999
 
 
Summary of the activity in the allowance for loan losses by loan class
For the three and nine months ended September 30, 2013 and 2012, the activity in the allowance for loan losses disaggregated by class is shown below (in thousands).
 
 
 
Commercial
and
industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
mortgages
  
Home
equity
  
Consumer
  
Unallocated
  
Total
 
 
 
  
  
  
  
  
  
  
  
 
Three months ended September 30, 2013
 
  
  
  
  
  
  
  
  
 
Balance at beginning of period
 
$
4,778
  
$
6,701
  
$
529
  
$
278
  
$
2,341
  
$
1,059
  
$
247
  
$
1,360
  
$
17,293
 
Charge-offs
  
(60
)
  
(70
)
  
-
   
-
   
-
   
-
   
(11
)
  
-
   
(141
)
Recoveries
  
390
   
12
   
-
   
-
   
4
   
5
   
56
   
-
   
467
 
(Credit) provision for loan losses
  
(1,870
)
  
485
   
903
   
(4
)
  
218
   
17
   
(59
)
  
310
   
-
 
Balance at end of period
 
$
3,238
  
$
7,128
  
$
1,432
  
$
274
  
$
2,563
  
$
1,081
  
$
233
  
$
1,670
  
$
17,619
 
 
                                    
Three months ended September 30, 2012
                                    
Balance at beginning of period
 
$
15,082
  
$
8,088
  
$
93
  
$
163
  
$
1,634
  
$
2,008
  
$
176
  
$
1,983
  
$
29,227
 
Charge-offs
  
(6,689
)
  
(8,102
)
  
-
   
(2,123
)
  
(2,885
)
  
(1,360
)
  
(179
)
  
-
   
(21,338
)
Recoveries
  
462
   
-
   
-
   
260
   
112
   
246
   
52
   
-
   
1,132
 
(Credit) provision for loan losses
  
(327
)
  
6,752
   
(41
)
  
1,762
   
2,289
   
449
   
121
   
995
   
12,000
 
Balance at end of period
 
$
8,528
  
$
6,738
  
$
52
  
$
62
  
$
1,150
  
$
1,343
  
$
170
  
$
2,978
  
$
21,021
 

 
 
Commercial
and
industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
mortgages
  
Home
equity
  
Consumer
  
Unallocated
  
Total
 
 
 
  
  
  
  
  
  
  
  
 
Nine months ended September 30, 2013
 
  
  
  
  
  
  
  
  
 
Balance at beginning of period
 
$
6,181
  
$
5,999
  
$
150
  
$
141
  
$
1,576
  
$
907
  
$
189
  
$
2,638
  
$
17,781
 
Charge-offs
  
(1,687
)
  
(70
)
  
-
   
-
   
(74
)
  
-
   
(133
)
  
-
   
(1,964
)
Recoveries
  
1,600
   
85
   
-
   
-
   
5
   
7
   
105
   
-
   
1,802
 
(Credit) provision for loan losses
  
(2,856
)
  
1,114
   
1,282
   
133
   
1,056
   
167
   
72
   
(968
)
  
-
 
Balance at end of period
 
$
3,238
  
$
7,128
  
$
1,432
  
$
274
  
$
2,563
  
$
1,081
  
$
233
  
$
1,670
  
$
17,619
 
 
                                    
Nine months ended September 30, 2012
                                    
Balance at beginning of period
 
$
25,047
  
$
10,470
  
$
559
  
$
623
  
$
2,401
  
$
512
  
$
313
  
$
33
  
$
39,958
 
Charge-offs
  
(7,816
)
  
(15,794
)
  
-
   
(2,123
)
  
(3,473
)
  
(1,953
)
  
(261
)
  
-
   
(31,420
)
Recoveries
  
2,086
   
-
   
-
   
340
   
114
   
246
   
97
   
-
   
2,883
 
(Credit) provision for loan losses
  
(10,789
)
  
12,062
   
(507
)
  
1,222
   
2,108
   
2,538
   
21
   
2,945
   
9,600
 
Balance at end of period
 
$
8,528
  
$
6,738
  
$
52
  
$
62
  
$
1,150
  
$
1,343
  
$
170
  
$
2,978
  
$
21,021
 
Additional information of allowance for loan losses
At September 30, 2013 and December 31, 2012, the ending balance in the allowance for loan losses disaggregated by class and impairment methodology follows below (in thousands). Also shown below are total loans at September 30, 2013 and December 31, 2012 disaggregated by class and impairment methodology (in thousands).

September 30, 2013
 
Commercial
and
industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
mortgages
  
Home equity
  
Consumer
  
Unallocated
  
Total
 
Allowance for loan losses:
 
  
  
  
  
  
  
  
  
 
Ending balance: individually evaluated for impairment
 
$
343
  
$
-
  
$
-
  
$
-
  
$
761
  
$
395
  
$
75
  
$
-
  
$
1,574
 
Ending balance: collectively evaluated for impairment
  
2,895
   
7,128
   
1,432
   
274
   
1,802
   
686
   
158
   
1,670
   
16,045
 
Ending balance
 
$
3,238
  
$
7,128
  
$
1,432
  
$
274
  
$
2,563
  
$
1,081
  
$
233
  
$
1,670
  
$
17,619
 
Loan balances:
                                    
Ending balance: individually evaluated for impairment
 
$
13,637
  
$
13,719
  
$
-
  
$
-
  
$
5,082
  
$
1,399
  
$
281
  
$
-
  
$
34,118
 
Ending balance: collectively evaluated for impairment
  
158,749
   
435,009
   
136,983
   
8,134
   
157,576
   
57,701
   
11,059
   
-
   
965,211
 
Ending balance
 
$
172,386
  
$
448,728
  
$
136,983
  
$
8,134
  
$
162,658
  
$
59,100
  
$
11,340
  
$
-
  
$
999,329
 

December 31, 2012
 
Commercial
and
industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
mortgages
  
Home equity
  
Consumer
  
Unallocated
  
Total
 
Allowance for loan losses:
 
  
  
  
  
  
  
  
  
 
Ending balance: individually evaluated for impairment
 
$
340
  
$
22
  
$
-
  
$
1
  
$
575
  
$
86
  
$
-
  
$
-
  
$
1,024
 
Ending balance: collectively evaluated for impairment
  
5,841
   
5,977
   
150
   
140
   
1,001
   
821
   
189
   
2,638
   
16,757
 
Ending balance
 
$
6,181
  
$
5,999
  
$
150
  
$
141
  
$
1,576
  
$
907
  
$
189
  
$
2,638
  
$
17,781
 
Loan balances:
                                    
Ending balance: individually evaluated for impairment
 
$
10,369
  
$
9,443
  
$
-
  
$
1,961
  
$
4,660
  
$
502
  
$
21
  
$
-
  
$
26,956
 
Ending balance: collectively evaluated for impairment
  
158,340
   
350,567
   
9,261
   
13,508
   
141,915
   
65,966
   
14,267
   
-
   
753,824
 
Ending balance
 
$
168,709
  
$
360,010
  
$
9,261
  
$
15,469
  
$
146,575
  
$
66,468
  
$
14,288
  
$
-
  
$
780,780
 
 
Summary of impaired loans
The following table presents certain information pertaining to the Company’s impaired loans disaggregated by class at September 30, 2013 and December 31, 2012 (in thousands):
 
 
 
September 30, 2013
  
December 31, 2012
 
 
 
Unpaid
Principal
Balance
  
Recorded
Balance
  
Allowance
Allocated
  
Unpaid
Principal
Balance
  
Recorded
Balance
  
Allowance
 Allocated
 
With no allowance recorded:
 
  
  
  
  
  
 
Commercial and industrial
 
$
13,999
  
$
12,795
  
$
-
  
$
7,913
  
$
7,492
  
$
-
 
Commercial real estate
  
14,255
   
13,719
   
-
   
8,859
   
7,282
   
-
 
Real estate construction
  
-
   
-
   
-
   
1,334
   
1,305
   
-
 
Residential mortgages
  
2,113
   
1,984
   
-
   
1,918
   
1,788
   
-
 
Home equity
  
821
   
821
   
-
   
418
   
416
   
-
 
Consumer
  
19
   
8
   
-
   
21
   
21
   
-
 
Subtotal
  
31,207
   
29,327
   
-
   
20,463
   
18,304
   
-
 
 
                        
With an allowance recorded:
                        
Commercial and industrial
  
842
   
842
   
343
   
2,884
   
2,877
   
340
 
Commercial real estate
  
-
   
-
   
-
   
2,161
   
2,161
   
22
 
Real estate construction
  
-
   
-
   
-
   
656
   
656
   
1
 
Residential mortgages
  
3,223
   
3,098
   
761
   
3,015
   
2,872
   
575
 
Home equity
  
578
   
578
   
395
   
86
   
86
   
86
 
Consumer
  
276
   
273
   
75
   
-
   
-
   
-
 
Subtotal
  
4,919
   
4,791
   
1,574
   
8,802
   
8,652
   
1,024
 
Total
 
$
36,126
  
$
34,118
  
$
1,574
  
$
29,265
  
$
26,956
  
$
1,024
 

Shown below is additional information pertaining to the Company’s impaired loans disaggregated by class for the three and nine months ended September 30, 2013 and 2012 (in thousands):

 
 
Three Months Ended September 30, 2013
  
Three Months Ended September 30, 2012
 
 
 
Average recorded
investment in
impaired loans
  
Interest income
recognized on
impaired loans
  
Interest income
recognized on a
 cash basis on
impaired loans
  
Average recorded
investment in
impaired loans
  
Interest income
recognized on
impaired loans
  
Interest income
recognized on a
cash basis on
impaired loans
 
Commercial and industrial
 
$
12,695
  
$
47
  
$
-
  
$
19,946
  
$
58
  
$
-
 
Commercial real estate
  
8,406
   
224
   
-
   
24,146
   
209
   
-
 
Real estate construction
  
-
   
80
   
-
   
13,166
   
72
   
-
 
Residential mortgages
  
5,202
   
73
   
-
   
4,973
   
42
   
-
 
Home equity
  
1,174
   
4
   
-
   
2,360
   
4
   
-
 
Consumer
  
183
   
-
   
-
   
352
   
-
   
-
 
Total
 
$
27,660
  
$
428
  
$
-
  
$
64,943
  
$
385
  
$
-
 

 
 
Nine Months Ended September 30, 2013
  
Nine Months Ended September 30, 2012
 
 
 
Average recorded
investment in
impaired loans
  
Interest income
recognized on
impaired loans
  
Interest income
recognized on a
cash basis on
impaired loans
  
Average recorded
investment in
impaired loans
  
Interest income
recognized on
impaired loans
  
Interest income
recognized on a
cash basis on
impaired loans
 
Commercial and industrial
 
$
12,799
  
$
279
  
$
-
  
$
27,660
  
$
373
  
$
-
 
Commercial real estate
  
8,635
   
369
   
-
   
48,318
   
468
   
-
 
Real estate construction
  
683
   
94
   
-
   
16,809
   
410
   
-
 
Residential mortgages
  
5,098
   
167
   
-
   
7,202
   
127
   
-
 
Home equity
  
1,092
   
8
   
-
   
3,396
   
4
   
-
 
Consumer
  
192
   
8
   
-
   
546
   
-
   
-
 
Total
 
$
28,499
  
$
925
  
$
-
  
$
103,931
  
$
1,382
  
$
-
 
 
Troubled debt restructurings
The following tables (dollars in thousands) present certain information regarding outstanding TDRs at September 30, 2013 and December 31, 2012, TDRs executed during the three and nine months ended September 30, 2013 and 2012 and TDRs with payment defaults of 90 days or more within twelve months of restructuring during the nine months ended September 30, 2013 and 2012. There were no such payment defaults during the three months ended September 30, 2013 and 2012.

 
 
September 30, 2013
  
December 31, 2012
 
Total TDRs
 
Number of
Loans
  
Outstanding
Recorded
Balance
  
Number of
Loans
  
Outstanding
Recorded
Balance
 
 
 
  
  
  
 
Commercial and industrial
  
42
  
$
5,934
   
41
  
$
6,468
 
Commercial real estate
  
7
   
4,933
   
9
   
6,238
 
Residential mortgages
  
17
   
3,922
   
15
   
3,587
 
Consumer
  
4
   
161
   
5
   
311
 
 
  
70
  
$
14,950
   
70
  
$
16,604
 

 
 
Three months ended September 30, 2013
  
Three months ended September 30, 2012
 
 
 
  
Pre-Modification
  
Post-Modification
  
  
Pre-Modification
  
Post-Modification
 
 
 
Number
  
Outstanding
  
Outstanding
  
Number
  
Outstanding
  
Outstanding
 
 
 
of
  
Recorded
  
Recorded
  
of
  
Recorded
  
Recorded
 
New TDRs
 
Loans
  
Balance
  
Balance
  
Loans
  
Balance
  
Balance
 
 
 
  
  
  
  
  
 
Commercial and industrial
  
1
  
$
228
  
$
228
   
3
  
$
815
  
$
815
 
Residential mortgages
  
1
   
19
   
19
   
-
   
-
   
-
 
 
  
2
  
$
247
  
$
247
   
3
  
$
815
  
$
815
 

 
 
Nine months ended September 30, 2013
  
Nine months ended September 30, 2012
 
 
 
  
Pre-Modification
  
Post-Modification
  
  
Pre-Modification
  
Post-Modification
 
 
 
Number
  
Outstanding
  
Outstanding
  
Number
  
Outstanding
  
Outstanding
 
 
 
of
  
Recorded
  
Recorded
  
of
  
Recorded
  
Recorded
 
New TDRs
 
Loans
  
Balance
  
Balance
  
Loans
  
Balance
  
Balance
 
 
 
  
  
  
  
  
 
Commercial and industrial
  
5
  
$
1,120
  
$
1,120
   
13
  
$
5,920
  
$
5,920
 
Residential mortgages
  
4
   
924
   
924
   
1
   
81
   
81
 
Consumer
  
1
   
17
   
17
   
1
   
49
   
49
 
 
  
10
  
$
2,061
  
$
2,061
   
15
  
$
6,050
  
$
6,050
 
 
 
 
Nine months ended September 30, 2013
  
Nine months ended September 30, 2012
 
 
 
  
Outstanding
  
  
Outstanding
 
 
 
Number
  
Recorded
  
Number
  
Recorded
 
Defaulted TDRs
 
of Loans
  
Balance
  
of Loans
  
Balance
 
 
 
  
  
  
 
Commercial and industrial
  
-
  
$
-
   
2
  
$
1,200
 
 
  
-
  
$
-
   
2
  
$
1,200
 
Summary of loans modified and renewed and not considered TDRs
Information regarding modifications and renewals executed during the three and nine months ended September 30, 2013 and 2012 that are not considered TDRs is shown below (dollars in thousands):
 
  
Three months ended September 30, 2013
  
Three months ended September 30, 2012
 
    
Outstanding
    
Outstanding
 
  
Number
  
Recorded
  
Number
  
Recorded
 
Non-TDR Modifications
 
of Loans
  
Balance
  
of Loans
  
Balance
 
         
Commercial and industrial
  
11
  
$
2,240
   
2
  
$
1,325
 
Commercial real estate
  
11
   
6,367
   
6
   
5,008
 
Multifamily
  
1
   
410
   
-
   
-
 
 
  
23
  
$
9,017
   
8
  
$
6,333
 

 
 
Nine months ended September 30, 2013
  
Nine months ended September 30, 2012
 
 
 
  
Outstanding
  
  
Outstanding
 
 
 
Number
  
Recorded
  
Number
  
Recorded
 
Non-TDR Modifications
 
of Loans
  
Balance
  
of Loans
  
Balance
 
 
 
  
  
  
 
Commercial and industrial
  
19
  
$
6,741
   
8
  
$
3,863
 
Commercial real estate
  
31
   
32,485
   
15
   
15,123
 
Multifamily
  
1
   
410
   
-
   
-
 
 
  
51
  
$
39,636
   
23
  
$
18,986
 
Summary of non-performing assets
The following is a summary of information pertaining to non-performing assets at September 30, 2013 and December 31, 2012 (in thousands):

 
 
September 30, 2013
  
December 31, 2012
 
Non-accrual loans
 
$
22,577
  
$
16,435
 
Non-accrual loans held-for-sale
  
-
   
907
 
Loans 90 days past due and still accruing
  
-
   
-
 
OREO
  
-
   
1,572
 
Total non-performing assets
 
$
22,577
  
$
18,914
 
TDRs accruing interest
 
$
10,024
  
$
9,954
 
TDRs non-accruing
 
$
4,926
  
$
6,650
 
 
Summarizes non-accrual loans by loan class
The following table summarizes non-accrual loans by loan class at September 30, 2013 and December 31, 2012 (dollars in thousands):
 
 
 
September 30, 2013
  
December 31, 2012
 
 
 
Non-
accrual
loans
  
% of
Total
  
Total
Loans
  
% of
Total
Loans
  
Non-
accrual
loans
  
% of
Total
  
Total
Loans
  
% of
Total
Loans
 
Commercial and industrial
 
$
9,947
   
44.1
%
 
$
172,386
   
1.0
%
 
$
6,529
   
39.8
%
 
$
168,709
   
0.8
%
Commercial real estate
  
9,505
   
42.1
   
448,728
   
1.0
   
5,192
   
31.6
   
360,010
   
0.7
 
Multifamily
  
-
   
-
   
136,983
   
-
   
-
   
-
   
9,261
   
-
 
Real estate construction
  
-
   
-
   
8,134
   
-
   
1,961
   
11.9
   
15,469
   
0.3
 
Residential mortgages
  
1,929
   
8.5
   
162,658
   
0.2
   
2,466
   
15.0
   
146,575
   
0.3
 
Home equity
  
1,063
   
4.7
   
59,100
   
0.1
   
266
   
1.6
   
66,468
   
-
 
Consumer
  
133
   
0.6
   
11,340
   
-
   
21
   
0.1
   
14,288
   
-
 
Total
 
$
22,577
   
100.0
%
 
$
999,329
   
2.3
%
 
$
16,435
   
100.0
%
 
$
780,780
   
2.1
%
Collateral value securing non-accrual loans
The following table details the collateral value securing non-accrual loans at September 30, 2013 and December 31, 2012 (in thousands):

 
 
September 30, 2013
  
December 31, 2012
 
 
 
Principal
Balance
  
Collateral
Value
  
Principal
Balance
  
Collateral
Value
 
Commercial and industrial (1)
 
$
9,947
  
$
6,000
  
$
6,529
  
$
4,400
 
Commercial real estate
  
9,505
   
17,785
   
5,192
   
12,675
 
Real estate construction
  
-
   
-
   
1,961
   
3,661
 
Residential mortgages
  
1,929
   
4,347
   
2,466
   
5,141
 
Home equity
  
1,063
   
5,100
   
266
   
849
 
Consumer
  
133
   
-
   
21
   
-
 
Total
 
$
22,577
  
$
33,232
  
$
16,435
  
$
26,726
 
 
(1) Repayment of commercial and industrial loans is expected primarily from the cash flow of the business. The collateral typically securing these loans is a lien on all corporate assets via a blanket UCC filing and does not usually include real estate. For purposes of this disclosure, the Company has ascribed no value to the non-real estate collateral for this class of loans.
 
Summary of current and past due loans
At September 30, 2013 and December 31, 2012, past due loans disaggregated by class were as follows (in thousands):

 
 
Past Due
  
  
 
September 30, 2013
 
30 - 59 days
  
60 - 89 days
  
90 days and over
  
Total
  
Current
  
Total
 
Commercial and industrial
 
$
86
  
$
-
  
$
9,947
  
$
10,033
  
$
162,353
  
$
172,386
 
Commercial real estate
  
-
   
639
   
9,505
   
10,144
   
438,584
   
448,728
 
Multifamily
  
-
   
-
   
-
   
-
   
136,983
   
136,983
 
Real estate construction
  
-
   
-
   
-
   
-
   
8,134
   
8,134
 
Residential mortgages
  
1,465
   
761
   
1,929
   
4,155
   
158,503
   
162,658
 
Home equity
  
1,527
   
143
   
1,063
   
2,733
   
56,367
   
59,100
 
Consumer
  
18
   
-
   
133
   
151
   
11,189
   
11,340
 
Total
 
$
3,096
  
$
1,543
  
$
22,577
  
$
27,216
  
$
972,113
  
$
999,329
 
% of Total Loans
  
0.3
%
  
0.1
%
  
2.3
%
  
2.7
%
  
97.3
%
  
100.0
%
 
 
 
Past Due
  
  
 
December 31, 2012
 
30 - 59 days
  
60 - 89 days
  
90 days and over
  
Total
  
Current
  
Total
 
Commercial and industrial
 
$
6,591
  
$
1,274
  
$
6,529
  
$
14,394
  
$
154,315
  
$
168,709
 
Commercial real estate
  
1,145
   
329
   
5,192
   
6,666
   
353,344
   
360,010
 
Multifamily
  
-
   
-
   
-
   
-
   
9,261
   
9,261
 
Real estate construction
  
1,382
   
-
   
1,961
   
3,343
   
12,126
   
15,469
 
Residential mortgages
  
2,867
   
6
   
2,466
   
5,339
   
141,236
   
146,575
 
Home equity
  
261
   
100
   
266
   
627
   
65,841
   
66,468
 
Consumer
  
189
   
18
   
21
   
228
   
14,060
   
14,288
 
Total
 
$
12,435
  
$
1,727
  
$
16,435
  
$
30,597
  
$
750,183
  
$
780,780
 
% of Total Loans
  
1.6
%
  
0.2
%
  
2.1
%
  
3.9
%
  
96.1
%
  
100.0
%
Credit risk profile by internally assigned grade
At September 30, 2013 and December 31, 2012, based upon the most recent analysis performed, the following table presents the Company’s loan portfolio credit risk profile by internally assigned grade disaggregated by class of loan (in thousands):

September 30, 2013
 
Commercial
and
 industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
mortgages
  
Home
equity
  
Consumer
  
Total
  
% of
Total
 
Grade:
 
  
  
  
  
  
  
  
  
 
Pass
 
$
150,149
  
$
413,226
  
$
136,983
  
$
8,134
  
$
157,634
  
$
57,951
  
$
11,054
  
$
935,131
   
93.6
%
Special mention
  
2,707
   
8,988
   
-
   
-
   
-
   
-
   
-
   
11,695
   
1.2
 
Substandard
  
19,530
   
26,514
   
-
   
-
   
5,024
   
1,149
   
286
   
52,503
   
5.2
 
Total
 
$
172,386
  
$
448,728
  
$
136,983
  
$
8,134
  
$
162,658
  
$
59,100
  
$
11,340
  
$
999,329
   
100.0
%
 
December 31, 2012
 
Commercial
and
industrial
  
Commercial
real estate
  
Multifamily
  
Real estate
construction
  
Residential
 mortgages
  
Home
equity
  
Consumer
  
Total
  
% of
Total
 
Grade:
 
  
  
  
  
  
  
  
  
 
Pass
 
$
143,804
  
$
301,862
  
$
9,261
  
$
4,790
  
$
141,915
  
$
65,966
  
$
14,267
  
$
681,865
   
87.3
%
Special mention
  
5,995
   
38,670
   
-
   
-
   
-
   
-
   
-
   
44,665
   
5.7
 
Substandard
  
18,910
   
19,478
   
-
   
10,679
   
4,660
   
502
   
21
   
54,250
   
7.0
 
Total
 
$
168,709
  
$
360,010
  
$
9,261
  
$
15,469
  
$
146,575
  
$
66,468
  
$
14,288
  
$
780,780
   
100.0
%