LOANS (Tables)

9 Months Ended

Sep. 30, 2014

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

	September 30, 2014			December 31, 2013
Commercial and industrial	$	180,399		$	171,199
Commercial real estate		512,341			464,560
Multifamily		274,352			184,624
Mixed use commercial		27,476			4,797
Real estate construction		21,615			6,565
Residential mortgages		185,856			169,552
Home equity		52,001			57,112
Consumer		8,021			10,439
Gross loans		1,262,061			1,068,848
Allowance for loan losses		(18,800	)		(17,263	)
Net loans at end of period	$	1,243,261		$	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 September 30, 2014												Three months ended September 30, 2013
	Balance at beginning of period		Charge- offs			Recoveries		(Credit) provision 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	$	2,932	$	(104	)	$	160	$	(1,121	)	$	1,867	$	4,778	$	(60	)	$	390	$	(1,870	)	$	3,238
Commercial real estate		7,899		-			11		(499	)		7,411		6,521		(70	)		12		611			7,074
Multifamily		2,444		-			-		238			2,682		529		-			-		903			1,432
Mixed use commercial		212		-			-		(6	)		206		180		-			-		(126	)		54
Real estate construction		230		-			-		36			266		278		-			-		(4	)		274
Residential mortgages		2,650		-			4		193			2,847		2,341		-			4		218			2,563
Home equity		761		-			3		(55	)		709		1,059		-			5		17			1,081
Consumer		166		(15	)		13		13			177		247		(11	)		56		(59	)		233
Unallocated		1,184		-			-		1,451			2,635		1,360		-			-		310			1,670
Total	$	18,478	$	(119	)	$	191	$	250		$	18,800	$	17,293	$	(141	)	$	467	$	-		$	17,619

	Nine months ended September 30, 2014												Nine months ended September 30, 2013
	Balance at beginning of period		Charge- offs			Recoveries		(Credit) provision 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	$	(419	)	$	663	$	(992	)	$	1,867	$	6,181	$	(1,687	)	$	1,600	$	(2,856	)	$	3,238
Commercial real estate		6,572		-			508		331			7,411		5,965		(70	)		85		1,094			7,074
Multifamily		2,159		-			-		523			2,682		150		-			-		1,282			1,432
Mixed use commercial		54		-			-		152			206		34		-			-		20			54
Real estate construction		88		-			-		178			266		141		-			-		133			274
Residential mortgages		2,463		(32	)		12		404			2,847		1,576		(74	)		5		1,056			2,563
Home equity		745		-			48		(84	)		709		907		-			7		167			1,081
Consumer		241		(19	)		26		(71	)		177		189		(133	)		105		72			233
Unallocated		2,326		-			-		309			2,635		2,638		-			-		(968	)		1,670
Total	$	17,263	$	(470	)	$	1,257	$	750		$	18,800	$	17,781	$	(1,964	)	$	1,802	$	-		$	17,619

Additional information of allowance for loan losses

At September 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 September 30, 2014 and December 31, 2013 disaggregated by class and impairment methodology (in thousands).

	Allowance for Loan Losses						Loan Balances
September 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	$	21	$	1,846	$	1,867	$	6,536	$	173,863	$	180,399
Commercial real estate		-		7,411		7,411		10,215		502,126		512,341
Multifamily		-		2,682		2,682		-		274,352		274,352
Mixed use commercial		-		206		206		-		27,476		27,476
Real estate construction		-		266		266		-		21,615		21,615
Residential mortgages		706		2,141		2,847		5,182		180,674		185,856
Home equity		96		613		709		904		51,097		52,001
Consumer		92		85		177		327		7,694		8,021
Unallocated		-		2,635		2,635		-		-		-
Total	$	915	$	17,885	$	18,800	$	23,164	$	1,238,897	$	1,262,061

	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 September 30, 2014 and December 31, 2013 (in thousands).

	September 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	$	6,473	$	6,473	$	-	$	6,711	$	6,711	$	-
Commercial real estate		10,633		10,215		-		12,239		11,821		-
Residential mortgages		2,452		2,323		-		2,305		2,176		-
Home equity		714		714		-		891		891		-
Consumer		139		139		-		25		9		-
Subtotal		20,411		19,864		-		22,171		21,608		-

With an allowance recorded:
Commercial and industrial		63		63		21		1,043		1,043		41
Residential mortgages		2,859		2,859		706		2,873		2,873		709
Home equity		327		190		96		328		191		93
Consumer		188		188		92		274		275		102
Subtotal		3,437		3,300		915		4,518		4,382		945
Total	$	23,848	$	23,164	$	915	$	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 nine months ended September 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 September 30,								Nine Months Ended September 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	$	7,061	$	128	$	12,695	$	47	$	7,304	$	679	$	12,799	$	279
Commercial real estate		10,424		49		8,406		224		11,045		204		8,635		369
Real estate construction		-		-		-		80		-		-		683		94
Residential mortgages		5,148		24		5,202		73		5,069		100		5,098		167
Home equity		811		6		1,174		4		767		26		1,092		8
Consumer		289		7		183		-		222		14		192		8
Total	$	23,733	$	214	$	27,660	$	428	$	24,407	$	1,023	$	28,499	$	925

Troubled debt restructurings

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

	September 30, 2014				December 31, 2013
TDRs Outstanding	Number of Loans		Outstanding Recorded Balance		Number of Loans		Outstanding Recorded Balance
Commercial and industrial		36	$	4,926		43	$	6,022
Commercial real estate		8		10,172		7		6,022
Residential mortgages		19		4,089		17		3,891
Home equity		3		205		-		-
Consumer		7		285		3		150
Total		73	$	19,677		70	$	16,085

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

	Three Months Ended September 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		-	$	-	$	-		1	$	228	$	228
Residential mortgages		-		-		-		1		19		19
Home equity		1		98		98		-		-		-
Consumer		1		46		46		-		-		-
Total		2	$	144	$	144		2	$	247	$	247

	Nine Months Ended September 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		5	$	1,120	$	1,120
Commercial real estate		2		5,161		5,161		-		-		-
Residential mortgages		3		273		273		4		924		924
Home equity		3		207		207		-		-		-
Consumer		4		145		145		1		17		17
Total		22	$	7,663	$	7,663		10	$	2,061	$	2,061

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 nine months ended September 30, 2014 and 2013 (dollars in thousands). There were no such loans during the three months ended September 30, 2014 and 2013.

	Nine Months Ended September 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Defaulted TDRs	of Loans		Balance		of Loans		Balance
Commercial real estate		2	$	1,536		-	$	-
Total		2	$	1,536		-	$	-

Summary of loans modified and renewed and not considered TDRs

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

	Three Months Ended September 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Non-TDR Modifications	of Loans		Balance		of Loans		Balance
Commercial and industrial		1	$	67		11	$	2,240
Commercial real estate		2		11,017		11		6,367
Multifamily		-		-		1		410
Total		3	$	11,084		23	$	9,017

	Nine Months Ended September 30,
	2014				2013
			Outstanding				Outstanding
	Number		Recorded		Number		Recorded
Non-TDR Modifications	of Loans		Balance		of Loans		Balance
Commercial and industrial		1	$	67		19	$	6,741
Commercial real estate		14		34,798		31		32,485
Multifamily		-		-		1		410
Total		15	$	34,865		51	$	39,636

Summary of non-performing assets

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

	September 30, 2014		December 31, 2013
Non-accrual loans	$	14,654	$	15,183
Non-accrual loans held for sale		-		-
Loans 90 days past due and still accruing		-		-
OREO		-		-
Total non-performing assets	$	14,654	$	15,183
TDRs accruing interest	$	8,194	$	10,647
TDRs non-accruing	$	11,483	$	5,438

Summarizes non-accrual loans by loan class

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

	September 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	$	4,946		33.7	%	$	180,399		0.4	%	$	5,014		33.0	%	$	171,199		0.4	%
Commercial real estate		6,650		45.4			512,341		0.5			7,492		49.3			464,560		0.7
Multifamily		-		-			274,352		-			-		-			184,624		-
Mixed use commercial		-		-			27,476		-			-		-			4,797		-
Real estate construction		-		-			21,615		-			-		-			6,565		-
Residential mortgages		2,457		16.8			185,856		0.2			1,897		12.5			169,552		0.2
Home equity		557		3.8			52,001		0.1			647		4.3			57,112		0.1
Consumer		44		0.3			8,021		-			133		0.9			10,439		-
Total	$	14,654		100.0	%	$	1,262,061		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):

	September 30, 2014				December 31, 2013
	Principal Balance		Collateral Value		Principal Balance		Collateral Value
Commercial and industrial (1)	$	4,946	$	2,500	$	5,014	$	3,750
Commercial real estate		6,650		9,960		7,492		13,050
Residential mortgages		2,457		5,279		1,897		3,764
Home equity		557		3,476		647		3,072
Consumer		44		-		133		-
Total	$	14,654	$	21,215	$	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 September 30, 2014 and December 31, 2013, past due loans disaggregated by class were as follows (in thousands).

	Past Due
September 30, 2014	30 - 59 days			60 - 89 days			90 days and over			Total			Current			Total
Commercial and industrial	$	95		$	-		$	4,946		$	5,041		$	175,358		$	180,399
Commercial real estate		-			-			6,650			6,650			505,691			512,341
Multifamily		-			-			-			-			274,352			274,352
Mixed use commercial		-			-			-			-			27,476			27,476
Real estate construction		-			-			-			-			21,615			21,615
Residential mortgages		1,684			297			2,457			4,438			181,418			185,856
Home equity		1,014			75			557			1,646			50,355			52,001
Consumer		40			33			44			117			7,904			8,021
Total	$	2,833		$	405		$	14,654		$	17,892		$	1,244,169		$	1,262,061
% of Total Loans		0.2	%		0.0	%		1.2	%		1.4	%		98.6	%		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	%		0.0	%		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 September 30, 2014 and December 31, 2013 (in thousands).

	September 30, 2014												December 31, 2013
	Grade												Grade
	Pass			Special mention			Substandard			Total			Pass			Special mention			Substandard			Total
Commercial and industrial	$	170,467		$	1,308		$	8,624		$	180,399		$	158,536		$	2,934		$	9,729		$	171,199
Commercial real estate		487,532			8,985			15,824			512,341			440,505			2,817			21,238			464,560
Multifamily		274,352			-			-			274,352			184,624			-			-			184,624
Mixed use commercial		27,476			-			-			27,476			4,797			-			-			4,797
Real estate construction		21,615			-			-			21,615			6,565			-			-			6,565
Residential mortgages		181,147			-			4,709			185,856			164,559			-			4,993			169,552
Home equity		51,347			-			654			52,001			56,379			-			733			57,112
Consumer		7,692			-			329			8,021			10,156			-			283			10,439
Total	$	1,221,628		$	10,293		$	30,140		$	1,262,061		$	1,026,121		$	5,751		$	36,976		$	1,068,848
% of Total		96.8	%		0.8	%		2.4	%		100.0	%		96.0	%		0.5	%		3.5	%		100.0	%