LOANS (Tables)

6 Months Ended

Jun. 30, 2014

At June 30, 2014 and December 31, 2013, net loans disaggregated by class consisted of the following (in thousands):

	June 30, 2014			December 31, 2013
Commercial and industrial	$	181,318		$	171,199
Commercial real estate		487,901			464,560
Multifamily		245,122			184,624
Mixed use commercial		26,132			4,797
Real estate construction		15,601			6,565
Residential mortgages		176,370			169,552
Home equity		54,197			57,112
Consumer		8,855			10,439
Gross loans		1,195,496			1,068,848
Allowance for loan losses		(18,478	)		(17,263	)
Net loans at end of period	$	1,177,018		$	1,051,585

Summary of the activity in the allowance for loan losses by loan class

The following summarizes the activity in the allowance for loan losses disaggregated by class for the periods indicated (in thousands).

	Three months ended June 30, 2014												Three months ended June 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision (credit) for loan losses			Balance at end of period		Balance at beginning of period		Charge-offs			Recoveries		(Credit) provision for loan losses			Balance at end of period
Commercial and industrial	$	2,481	$	(200	)	$	211	$	440		$	2,932	$	5,345	$	(1,279	)	$	911	$	(199	)	$	4,778
Commercial real estate		7,208		-			485		206			7,899		5,718		-			1		802			6,521
Multifamily		2,640		-			-		(196	)		2,444		852		-			-		(323	)		529
Mixed use commercial		87		-			-		125			212		-		-			-		180			180
Real estate construction		217		-			-		13			230		845		-			-		(567	)		278
Residential mortgages		2,627		(32	)		4		51			2,650		2,441		(74	)		-		(26	)		2,341
Home equity		718		-			18		25			761		924		-			1		134			1,059
Consumer		186		(2	)		7		(25	)		166		245		(111	)		10		103			247
Unallocated		1,573		-			-		(389	)		1,184		1,464		-			-		(104	)		1,360
Total	$	17,737	$	(234	)	$	725	$	250		$	18,478	$	17,834	$	(1,464	)	$	923	$	-		$	17,293

	Six months ended June 30, 2014												Six months ended June 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision (credit) for loan losses			Balance at end of period		Balance at beginning of period		Charge-offs			Recoveries		(Credit) provision for loan losses			Balance at end of period
Commercial and industrial	$	2,615	$	(315	)	$	503	$	129		$	2,932	$	6,181	$	(1,627	)	$	1,210	$	(986	)	$	4,778
Commercial real estate		6,572		-			497		830			7,899		5,965		-			73		483			6,521
Multifamily		2,159		-			-		285			2,444		150		-			-		379			529
Mixed use commercial		54		-			-		158			212		34		-			-		146			180
Real estate construction		88		-			-		142			230		141		-			-		137			278
Residential mortgages		2,463		(32	)		8		211			2,650		1,576		(74	)		1		838			2,341
Home equity		745		-			45		(29	)		761		907		-			2		150			1,059
Consumer		241		(4	)		13		(84	)		166		189		(122	)		49		131			247
Unallocated		2,326		-			-		(1,142	)		1,184		2,638		-			-		(1,278	)		1,360
Total	$	17,263	$	(351	)	$	1,066	$	500		$	18,478	$	17,781	$	(1,823	)	$	1,335	$	-		$	17,293

Additional information of allowance for loan losses

At June 30, 2014 and December 31, 2013, the ending balance in the allowance for loan losses disaggregated by class and impairment methodology is as follows (in thousands). Also in the tables below are total loans at June 30, 2014 and December 31, 2013 disaggregated by class and impairment methodology (in thousands).

	Allowance for Loan Losses						Loan Balances
June 30, 2014	Individually evaluated for impairment		Collectively evaluated for impairment		Ending balance		Individually evaluated for impairment		Collectively evaluated for impairment		Ending balance
Commercial and industrial	$	27	$	2,905	$	2,932	$	6,842	$	174,476	$	181,318
Commercial real estate		-		7,899		7,899		11,065		476,836		487,901
Multifamily		-		2,444		2,444		-		245,122		245,122
Mixed use commercial		-		212		212		-		26,132		26,132
Real estate construction		-		230		230		-		15,601		15,601
Residential mortgages		700		1,950		2,650		5,105		171,265		176,370
Home equity		94		667		761		751		53,446		54,197
Consumer		59		107		166		245		8,610		8,855
Unallocated		-		1,184		1,184		-		-		-
Total	$	880	$	17,598	$	18,478	$	24,008	$	1,171,488	$	1,195,496

	Allowance for Loan Losses						Loan Balances
December 31, 2013	Individually evaluated for impairment		Collectively evaluated for impairment		Ending balance		Individually evaluated for impairment		Collectively evaluated for impairment		Ending balance
Commercial and industrial	$	41	$	2,574	$	2,615	$	7,754	$	163,445	$	171,199
Commercial real estate		-		6,572		6,572		11,821		452,739		464,560
Multifamily		-		2,159		2,159		-		184,624		184,624
Mixed use commercial		-		54		54		-		4,797		4,797
Real estate construction		-		88		88		-		6,565		6,565
Residential mortgages		709		1,754		2,463		5,049		164,503		169,552
Home equity		93		652		745		1,082		56,030		57,112
Consumer		102		139		241		284		10,155		10,439
Unallocated		-		2,326		2,326		-		-		-
Total	$	945	$	16,318	$	17,263	$	25,990	$	1,042,858	$	1,068,848

Summary of impaired loans

The following table presents the Company’s impaired loans disaggregated by class at June 30, 2014 and December 31, 2013 (in thousands).

	June 30, 2014						December 31, 2013
	Unpaid Principal Balance		Recorded Balance		Allowance Allocated		Unpaid Principal Balance		Recorded Balance		Allowance Allocated
With no allowance recorded:
Commercial and industrial	$	6,918	$	6,727	$	-	$	6,711	$	6,711	$	-
Commercial real estate		11,484		11,065		-		12,239		11,821		-
Residential mortgages		2,388		2,259		-		2,305		2,176		-
Home equity		559		559		-		891		891		-
Consumer		99		99		-		25		9		-
Subtotal		21,448		20,709		-		22,171		21,608		-

With an allowance recorded:
Commercial and industrial		116		115		27		1,043		1,043		41
Residential mortgages		2,846		2,846		700		2,873		2,873		709
Home equity		328		192		94		328		191		93
Consumer		145		146		59		274		275		102
Subtotal		3,435		3,299		880		4,518		4,382		945
Total	$	24,883	$	24,008	$	880	$	26,689	$	25,990	$	945

The following table presents the Company’s average recorded investment in impaired loans and the related interest income recognized disaggregated by class for the three and six months ended June 30, 2014 and 2013 (in thousands). No interest income was recognized on a cash basis on impaired loans for the periods presented.

	Three Months Ended June 30,								Six Months Ended June 30,
	2014				2013				2014				2013
	Average recorded investment in impaired loans		Interest income recognized on impaired loans		Average recorded investment in impaired loans		Interest income recognized on impaired loans		Average recorded investment in impaired loans		Interest income recognized on impaired loans		Average recorded investment in impaired loans		Interest income recognized on impaired loans
Commercial and industrial	$	7,290	$	292	$	14,146	$	175	$	7,428	$	551	$	14,682	$	232
Commercial real estate		11,167		56		8,532		76		11,361		155		8,589		145
Real estate construction		-		-		420		14		-		-		981		14
Residential mortgages		5,021		40		5,442		52		5,028		76		5,476		94
Home equity		720		3		950		1		745		20		951		4
Consumer		204		5		277		3		188		7		279		8
Total	$	24,402	$	396	$	29,767	$	321	$	24,750	$	809	$	30,958	$	497

Troubled debt restructurings

Outstanding TDRs, disaggregated by class, at June 30, 2014 and December 31, 2013 are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
TDRs Outstanding	Number of Loans		Outstanding Recorded Balance		Number of Loans		Outstanding Recorded Balance
Commercial and industrial		43	$	6,519		43	$	6,022
Commercial real estate		10		11,016		7		6,022
Residential mortgages		19		4,107		17		3,891
Home equity		2		109		-		-
Consumer		6		243		3		150
Total		80	$	21,994		70	$	16,085

The following presents, disaggregated by class, information regarding TDRs executed during the three and six months ended June 30, 2014 and 2013 (dollars in thousands):

	Three Months Ended June 30,
	2014						2013
			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		7	$	1,500	$	1,500		2	$	572	$	572
Commercial real estate		2		5,161		5,161		-		-		-
Residential mortgages		3		273		273		-		-		-
Home equity		2		109		109		-		-		-
Consumer		3		99		99		-		-		-
Total		17	$	7,142	$	7,142		2	$	572	$	572

	Six Months Ended June 30,
	2014						2013
			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		10	$	1,877	$	1,877		4	$	892	$	892
Commercial real estate		2		5,161		5,161		-		-		-
Residential mortgages		3		273		273		3		905		905
Home equity		2		109		109		-		-		-
Consumer		3		99		99		1		17		17
Total		20	$	7,519	$	7,519		8	$	1,814	$	1,814

Presented below and disaggregated by class is information regarding loans modified as TDRs that had payment defaults of 90 days or more within twelve months of restructuring during the six months ended June 30, 2014 and 2013 (dollars in thousands). There were no such loans during the three months ended June 30, 2014 and 2013.

	Six Months Ended June 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Defaulted TDRs	of Loans		Balance		of Loans		Balance
Commercial real estate		2	$	1,566		-	$	-
Total		2	$	1,566		-	$	-

Summary of loans modified and renewed and not considered TDRs

The following presents information regarding modifications and renewals executed during the three and six months ended June 30, 2014 and 2013 that are not considered TDRs (dollars in thousands):

	Three Months Ended June 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Non-TDR Modifications	of Loans		Balance		of Loans		Balance
Commercial and industrial		-	$	-		8	$	4,501
Commercial real estate		9		22,707		9		6,415
Total		9	$	22,707		17	$	10,916

	Six Months Ended June 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Non-TDR Modifications	of Loans		Balance		of Loans		Balance
Commercial and industrial		-	$	-		8	$	4,501
Commercial real estate		12		24,112		20		26,118
Total		12	$	24,112		28	$	30,619

Summary of non-performing assets

The following table presents a summary of non-performing assets for each period (in thousands):

	June 30, 2014		December 31, 2013
Non-accrual loans	$	13,911	$	15,183
Non-accrual loans held for sale		-		-
Loans 90 days past due and still accruing		-		-
OREO		-		-
Total non-performing assets	$	13,911	$	15,183
TDRs accruing interest	$	9,790	$	10,647
TDRs non-accruing	$	12,204	$	5,438

Summarizes non-accrual loans by loan class

At June 30, 2014 and December 31, 2013, non-accrual loans disaggregated by class were as follows (dollars in thousands):

	June 30, 2014										December 31, 2013
	Non-accrual loans		% of Total			Total Loans		% of Total Loans			Non-accrual loans		% of Total			Total Loans		% of Total Loans
Commercial and industrial	$	4,891		35.2	%	$	181,318		0.4	%	$	5,014		33.0	%	$	171,199		0.4	%
Commercial real estate		6,776		48.7			487,901		0.6			7,492		49.3			464,560		0.7
Multifamily		-		-			245,122		-			-		-			184,624		-
Mixed use commercial		-		-			26,132		-			-		-			4,797		-
Real estate construction		-		-			15,601		-			-		-			6,565		-
Residential mortgages		1,734		12.5			176,370		0.2			1,897		12.5			169,552		0.2
Home equity		501		3.6			54,197		-			647		4.3			57,112		0.1
Consumer		9		-			8,855		-			133		0.9			10,439		-
Total	$	13,911		100.0	%	$	1,195,496		1.2	%	$	15,183		100.0	%	$	1,068,848		1.4	%

Collateral value securing non-accrual loans

The following table presents the collateral value securing non-accrual loans for each period (in thousands):

	June 30, 2014				December 31, 2013
	Principal Balance		Collateral Value		Principal Balance		Collateral Value
Commercial and industrial (1)	$	4,891	$	2,500	$	5,014	$	3,750
Commercial real estate		6,776		9,960		7,492		13,050
Residential mortgages		1,734		3,064		1,897		3,764
Home equity		501		1,678		647		3,072
Consumer		9		-		133		-
Total	$	13,911	$	17,202	$	15,183	$	23,636

(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 June 30, 2014 and December 31, 2013, past due loans disaggregated by class were as follows (in thousands).

	Past Due
June 30, 2014	30 - 59 days			60 - 89 days			90 days and over			Total			Current			Total
Commercial and industrial	$	194		$	-		$	4,891		$	5,085		$	176,233		$	181,318
Commercial real estate		981			352			6,776			8,109			479,792			487,901
Multifamily		-			-			-			-			245,122			245,122
Mixed use commercial		-			-			-			-			26,132			26,132
Real estate construction		-			-			-			-			15,601			15,601
Residential mortgages		470			1,008			1,734			3,212			173,158			176,370
Home equity		1,172			-			501			1,673			52,524			54,197
Consumer		42			79			9			130			8,725			8,855
Total	$	2,859		$	1,439		$	13,911		$	18,209		$	1,177,287		$	1,195,496
% of Total Loans		0.2	%		0.1	%		1.2	%		1.5	%		98.5	%		100.0	%

	Past Due
December 31, 2013	30 - 59 days			60 - 89 days		90 days and over			Total			Current			Total
Commercial and industrial	$	13		$	-	$	5,014		$	5,027		$	166,172		$	171,199
Commercial real estate		631			-		7,492			8,123			456,437			464,560
Multifamily		-			-		-			-			184,624			184,624
Mixed use commercial		-			-		-			-			4,797			4,797
Real estate construction		-			-		-			-			6,565			6,565
Residential mortgages		1,535			339		1,897			3,771			165,781			169,552
Home equity		795			100		647			1,542			55,570			57,112
Consumer		75			-		133			208			10,231			10,439
Total	$	3,049		$	439	$	15,183		$	18,671		$	1,050,177		$	1,068,848
% of Total Loans		0.3	%		-		1.4	%		1.7	%		98.3	%		100.0	%

Credit risk profile by internally assigned grade

The following presents the Company’s loan portfolio credit risk profile by internally assigned grade disaggregated by class of loan at June 30, 2014 and December 31, 2013 (in thousands).

	June 30, 2014												December 31, 2013
	Grade												Grade
	Pass			Special mention			Substandard			Total			Pass			Special mention			Substandard			Total
Commercial and industrial	$	168,310		$	3,963		$	9,045		$	181,318		$	158,536		$	2,934		$	9,729		$	171,199
Commercial real estate		462,656			6,002			19,243			487,901			440,505			2,817			21,238			464,560
Multifamily		245,122			-			-			245,122			184,624			-			-			184,624
Mixed use commercial		26,132			-			-			26,132			4,797			-			-			4,797
Real estate construction		15,601			-			-			15,601			6,565			-			-			6,565
Residential mortgages		171,746			-			4,624			176,370			164,559			-			4,993			169,552
Home equity		53,696			-			501			54,197			56,379			-			733			57,112
Consumer		8,602			-			253			8,855			10,156			-			283			10,439
Total	$	1,151,865		$	9,965		$	33,666		$	1,195,496		$	1,026,121		$	5,751		$	36,976		$	1,068,848
% of Total		96.4	%		0.8	%		2.8	%		100.0	%		96.0	%		0.5	%		3.5	%		100.0	%