Loans and the Allowance for Loan Losses | Note 6. Loans and the Allowance for Loan Losses Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, premiums and discounts related to purchase accounting, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Loan segments are defined as a group of loans, which share similar initial measurement attributes, risk characteristics, and methods for monitoring and assessing credit risk. Management has determined that the Company has five segments of loans: commercial, commercial real estate, commercial construction, residential real estate (including home equity) and consumer. The recognition of interest income on commercial, commercial real estate, commercial construction and residential loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. A loan is moved to nonaccrual status in accordance with the Company’s policy, typically after 90 days of non-payment. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The policy of the Company is to generally grant commercial, residential and consumer loans to residents and businesses within our market area. The borrowers’ abilities to repay their obligations are dependent upon various factors including the borrowers’ income and net worth, cash flows generated by the borrowers’ underlying collateral, value of the underlying collateral, and priority of the lender’s lien on the property. Such factors are dependent upon various economic conditions and individual circumstances beyond the control of the Company. The Company is therefore subject to risk of loss. The Company believes its lending policies and procedures adequately minimize the potential exposure to such risks and that adequate provisions for loan losses are provided for all known and inherent risks. Collateral and/or personal guarantees are required for a large majority of the Company’s loans. Loans Held-for-Sale Residential mortgage loans, originated and intended for sale in the secondary market, are carried at the lower of aggregate cost or estimated fair value as determined by outstanding commitments from investors. For these loans originated and intended for sale, gains and losses on loan sales (sale proceeds minus carrying value) are recorded in other income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in other income upon sale of the loan. Other loans held-for-sale are carried at the lower of aggregate cost or estimated fair value. A portion of these loans, taxi medallion loans, have no material observable trading in any market. Fair value is established with consideration of a range of market participant indications, for all or parts of these loans, and discounted cash flow analyses, which have significant unobservable inputs. See Note 7 for further discussion. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Allowance for Loan losses The allowance for loan losses is a valuation allowance for probable incurred credit losses. Losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (“TDRs”) and classified as impaired. As part of the evaluation of impaired loans, the Company individually reviews for impairment all non-homogeneous loans internally classified as substandard or below. Generally, smaller impaired non-homogeneous loans and impaired homogeneous loans are collectively evaluated for impairment. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. TDRs are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience, the primary factor, is determined by loan class and is based on the actual loss history experienced by the Bank over an actual three-year rolling calculation. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment and with the exogenous factor adjustments based on the risks present for each loan category. These exogenous factors include consideration of the following: concentrations of credit; delinquency & nonaccrual trends; economic & business conditions including evaluation of the national and regional economies and industries with significant loan concentrations; external factors including legal, regulatory or competitive pressures that may impact the loan portfolio; changes in the experience, ability, or size of the lending staff, management, or board of directors that may impact the loan portfolio; changes in underwriting standards, collection procedures, charge-off practices, or other changes in lending policies and procedures that may impact the loan portfolio; loss and recovery trends; changes in portfolio size and mix; and trends in problem loans. Purchased Credit-Impaired Loans The Company acquires groups of loans in conjunction with mergers, some of which have shown evidence of credit deterioration since origination. These purchased credit-impaired loans are recorded at their estimated fair value, such that there is no carryover of the seller’s allowance for loan losses (“ALLL”). After acquisition, probable incurred credit losses are recognized by an increase in the ALLL. Such purchased credit-impaired loans (“PCI”) are identified on an individual basis. The Company estimates the amount and timing of expected cash flows for each loan and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). A PCI loan may be resolved either through a sale of the loan, by working with the customer and obtaining partial or full repayment, by short sale of the collateral, or by foreclosure. A gain or loss on resolution would be recognized based on the difference between the proceeds received and the carrying amount of the loan. PCI loans that met the criteria for nonaccrual may be considered performing, regardless of whether the customer is contractually delinquent, if management can reasonably estimate the timing and amount of the expected cash flows on such loans and if management expects to fully collect the new carrying value of the loans. As such, management may no longer consider the loans to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. Loans held-for-sale The following table presents loans held-for-sale by loan segment: September 30, December 31, 2017 2016 (dollars in thousands) Commercial $ 47,430 $ 70,105 Commercial real estate 41,811 7,712 Residential real estate 145 188 Total carrying amount $ 89,386 $ 78,005 As of September 30, 2017 and December 31, 2016, the commercial loans held-for-sale segment included the Company’s entire taxi medallion portfolio, with a carrying value of $47.4 million and $65.6 million, net of $15.3 million and $-0- million valuation allowance, respectively. The commercial real estate segment reflects multifamily loans, with a carrying value of $41.8 million as of September 30, 2017. These loans were designated as loans held-for-sale during the quarter ended September 30, 2017. No portion of the valuation allowance has been designated toward the loans held-for-sale within the commercial real estate segment. Activity in the valuation allowance was as follows for periods presented: Three Months Three Months Ended Ended September 30, September 30, 2017 2016 (dollars in thousands) Balance at beginning of period $ 12,325 $ - Reduction from loans paid off (38 ) Increase in valuation allowance 3,000 - Balance at end of period $ 15,287 $ - Nine Months Nine Months Ended Ended September 30, September 30, 2017 2016 (dollars in thousands) Balance at beginning of period $ - $ - Reduction from loans paid off (38 ) Increase in valuation allowance 15,325 - Balance at end of period $ 15,287 $ - Loans receivable : The following table sets forth the composition of the Company’s loan portfolio, including net deferred loan fees, at September 30, 2017 and December 31, 2016: September 30, December 31, 2017 2016 (dollars in thousands) Commercial $ 641,613 $ 553,576 Commercial real estate 2,585,205 2,204,710 Commercial construction 399,453 486,228 Residential real estate 264,244 232,547 Consumer 1,912 2,380 Gross loans 3,892,427 3,479,441 Net deferred loan fees (3,138 ) (3,609 ) Total loans receivable $ 3,889,289 $ 3,475,832 At September 30, 2017 and December 31, 2016, loan balances of approximately $1.9 billion and $1.8 billion, respectively, were pledged to secure borrowings from the FHLB of New York. Purchased Credit-Impaired Loans: The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment of those loans is as follows at September 30, 2017 and December 31, 2016. September 30, December 31, 2017 2016 (dollars in thousands) Commercial $ 5,243 $ 7,098 Commercial real estate 232 982 Total carrying amount $ 5,475 $ 8,080 For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during both the three and nine months ended September 30, 2017 and September 30, 2016. There were no reversals from the allowance for loan losses during the three and nine months ended September 30, 2017 and 2016. The following tables presents the accretable yield, or income expected to be collected, on the purchased credit-impaired loans for the following periods: Three Months Three Months Ended Ended September 30, September 30, 2017 2016 (dollars in thousands) Balance at beginning of period $ 2,496 $ 3,233 Accretion of income (180 ) (185 ) Balance at end of period $ 2,316 $ 3,048 Nine Months Nine Months Ended Ended September 30, September 30, 2017 2016 (dollars in thousands) Balance at beginning of period $ 2,860 $ 3,599 Accretion of income (544 ) (551 ) Balance at end of period $ 2,316 $ 3,048 Loans Receivable on Nonaccrual Status: The following tables presents nonaccrual loans included in loans receivable by loan segment as of the periods presented: September 30, December 31, 2017 2016 (dollars in thousands) Commercial $ 951 $ 1,460 Commercial real estate 8,369 1,081 Residential real estate 4,435 3,193 Total loans receivable on nonaccrual status $ 13,755 $ 5,734 Nonaccrual loans and loans 90 days or greater past due and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and loans individually evaluated for impairment. The Company continuously monitors the credit quality of its loans receivable. In addition to its internal monitoring, the Company utilizes the services of a third-party loan review firm to periodically validate the credit quality of its loans receivable on a sample basis. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies are not corrected. All loans past due 90 days or greater and all impaired loans are included in the appropriate category below. Credit Quality Indicators: The following table presents information, excluding loans held-for-sale and net deferred loan fees, about the Company’s loan credit quality at September 30, 2017 and December 31, 2016: September 30, 2017 Special Pass Mention Substandard Doubtful Total (dollars in thousands) Commercial $ 630,818 $ 3,882 $ 6,913 $ - $ 641,613 Commercial real estate 2,535,005 30,875 19,325 - 2,585,205 Commercial construction 393,625 3,239 2,589 - 399,453 Residential real estate 264,244 - - - 264,244 Consumer 1,912 - - - 1,912 Gross loans $ 3,825,604 $ 37,996 $ 28,827 $ - $ 3,892,427 December 31, 2016 Special Pass Mention Substandard Doubtful Total (dollars in thousands) Commercial $ 539,961 $ 3,255 $ 10,360 $ - $ 553,576 Commercial real estate 2,154,343 31,173 19,194 - 2,204,710 Commercial construction 480,319 3,388 2,521 - 486,228 Residential real estate 228,990 - 3,557 - 232,547 Consumer 2,318 - 62 - 2,380 Gross loans $ 3,405,931 $ 37,816 $ 35,694 $ - $ 3,479,441 The following table provides an analysis of the impaired loans by segment as of September 30, 2017 and December 31, 2016: September 30, 2017 Unpaid Recorded Principal Related Investment Balance Allowance No related allowance recorded (dollars in thousands) Commercial $ 3,068 $ 3,073 Commercial real estate 19,221 19,283 Commercial construction 4,340 4,340 Residential real estate 2,520 2,749 Consumer 46 46 Total $ 29,195 $ 29,491 With an allowance recorded Commercial real estate $ 1,640 $ 2,052 $ 110 Total Commercial $ 3,068 $ 3,073 $ - Commercial real estate 20,861 21,335 110 Commercial construction 4,340 4,340 - Residential real estate 2,520 2,749 - Consumer 46 46 - Total (including allowance) $ 30,835 $ 31,543 $ 110 December 31, 2016 Unpaid Recorded Principal Related Investment Balance Allowance No related allowance recorded (dollars in thousands) Commercial $ 3,637 $ 4,063 Commercial real estate 18,288 18,288 Commercial construction 5,909 5,909 Residential real estate 1,851 2,055 Consumer 62 62 Total $ 29,747 $ 30,377 With an allowance recorded Commercial real estate $ 1,244 $ 1,244 $ 145 Total Commercial $ 3,637 $ 4,063 $ - Commercial real estate 19,532 19,532 145 Commercial construction 5,909 5,909 - Residential real estate 1,851 2,055 - Consumer 62 62 - Total (including allowance) $ 30,991 $ 31,621 $ 145 The following table provides an analysis related to the average recorded investment and interest income recognized on impaired loans by segment as of and for the three and nine months ended September 30, 2017 and 2016: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Average Interest Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Recorded Income Investment Recognized Investment Recognized Investment Recognized Investment Recognized (dollars in thousands) Impaired loans (no allowance) Commercial $ 3,100 $ 34 $ 6,704 $ 66 $ 3,149 $ 115 $ 4,317 $ 86 Commercial real estate 19,302 221 9,129 65 18,813 424 8,167 118 Commercial construction 4,285 63 1,224 21 4,273 215 979 54 Residential real estate 2,529 2 3,271 5 2,551 6 3,247 15 Consumer 48 1 70 1 54 2 74 3 Total $ 29,264 $ 321 $ 20,398 $ 158 $ 28,840 $ 762 $ 16,784 $ 276 Impaired loans (allowance): Commercial $ - $ - $ 91,393 $ 925 $ - $ - $ 85,620 $ 2,447 Commercial real estate 1,645 2 153 - 1,654 39 153 - Total $ 1,645 $ 2 $ 91,546 $ 925 $ 1,654 $ 39 $ 85,773 $ 2,447 Total impaired loans: Commercial $ 3,100 $ 34 $ 98,097 $ 991 $ 3,149 $ 115 $ 89,937 $ 2,533 Commercial real estate 20,947 223 9,282 65 20,467 463 8,320 118 Commercial construction 4,285 63 1,224 21 4,273 215 979 54 Residential mortgage 2,259 2 3,271 5 2,551 6 3,247 15 Consumer 48 1 70 1 54 2 74 3 Total $ 30,909 $ 323 $ 111,944 $ 1,083 $ 30,494 $ 801 $ 102,557 $ 2,723 Included in impaired loans at September 30, 2017 and December 31, 2016 are loans that are deemed troubled debt restructurings. The recorded investment in loans include accrued interest receivable and other capitalized costs such as real estate taxes paid on behalf of the borrower and loan origination fees, net, when applicable. Cash basis interest and interest income recognized on accrual basis approximate each other. The following table provides an analysis of the aging of gross loans (excluding loans held-for-sale) that are past due at September 30, 2017 and December 31, 2016 by segment: Aging Analysis September 30, 2017 90 Days or Greater Past Total Past 30-59 Days 60-89 Days Due and Still Due and Past Due Past Due Accruing Nonaccrual Nonaccrual Current Gross Loans (dollars in thousands) Commercial $ 199 $ 288 $ 4,209 $ 951 $ 5,647 $ 635,966 $ 641,613 Commercial real estate 586 8,057 - 8,369 17,012 2,568,193 2,585,205 Commercial construction - - - - - 399,453 399,453 Residential real estate 918 541 - 4,435 5,894 258,350 264,244 Consumer - 2 - - 2 1,910 1,912 Total $ 1,703 $ 8,888 $ 4,209 $ 13,755 $ 28,555 $ 3,863,872 $ 3,892,427 Dece mber 31, 2016 90 Days or Greater Past Total Past 30-59 Days 60-89 Days Due and Still Due and Past Due Past Due Accruing Nonaccrual Nonaccrual Current Gross Loans (dollars in thousands) Commercial $ 475 $ 18 $ 4,630 $ 1,460 $ 6,583 $ 546,993 $ 553,576 Commercial real estate 4,928 1,584 663 1,081 8,256 2,196,454 2,204,710 Commercial construction - - - - - 486,228 486,228 Residential real estate 2,131 388 - 3,193 5,712 223,835 232,547 Consumer - - - - - 2,380 2.380 Total $ 7,534 $ 1,990 $ 5,293 $ 5,734 $ 20,551 $ 3,458,890 $ 3,479,441 Included in the 90 days or greater past due and still accruing/accreting category as of both September 30, 2017 and December 31, 2016 are three purchased credit-impaired loans, net of their fair value marks, which are accreting income per their valuation at date of acquisition. The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated credit quality, and the related portion of the allowance for loan losses (“ALLL”) that are allocated to each loan portfolio segment: September 30, 2017 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) ALLL Individually evaluated for impairment $ - $ 110 $ - $ - $ - $ - $ 110 Collectively evaluated for impairment 7,716 15,224 3,940 1,052 2 326 28,260 Acquired portfolio - 1,500 - - - - 1,500 Acquired with deteriorated credit quality - - - - - - - Total ALLL $ 7,716 $ 16,834 $ 3,940 $ 1,052 $ 2 $ 326 $ 29,870 Gross loans Individually evaluated for impairment $ 3,068 $ 20,861 $ 4,340 $ 2,520 $ 46 $ 30,835 Collectively evaluated for impairment 618,012 2,142,385 395,113 199,902 1,410 3,356,822 Acquired portfolio 15,290 421,727 - 61,822 456 499,295 Acquired with deteriorated credit quality 5,243 232 - - - 5,475 Total gross loans $ 641,613 $ 2,585,205 $ 399,453 $ 264,244 $ 1,912 $ 3,892,427 December 31, 2016 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) ALLL Individually evaluated for impairment $ - $ 145 $ - $ - $ - $ - $ 145 Collectively evaluated for impairment 6,632 12,438 4,789 958 3 779 25,599 Acquired portfolio - - - - - - - Acquired with deteriorated credit quality - - - - - - - Total ALLL $ 6,632 $ 12,583 $ 4,789 $ 958 $ 3 $ 779 $ 25,744 Gross loans Individually evaluated for impairment $ 3,637 $ 19,532 $ 5,909 $ 1,851 $ 62 $ 30,991 Collectively evaluated for impairment 517,869 1,621,745 478,865 163,686 1,757 2,783,922 Acquired portfolio 24,972 562,451 1,454 67,010 561 656,448 Acquired with deteriorated credit quality 7,098 982 - - - 8,080 Total gross loans $ 553,576 $ 2,204,710 $ 486,228 $ 232,547 $ 2,380 $ 3,479,441 The Company’s allowance for loan losses is analyzed quarterly. Many factors are considered, including growth in the portfolio, delinquencies, nonaccrual loan levels, and other factors inherent in the extension of credit. There have been no material changes to the allowance for loan losses (“ALLL”) methodology as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. A summary of the activity in the ALLL is as follows: Three Months Ended September 30, 2017 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) Balance at June 30, 2017 $ 7,238 $ 15,389 $ 4,241 $ 985 $ 2 $ 546 $ 28,401 Charge-offs - - - - (1 ) - (1 ) Recoveries 17 2 - - 1 - 20 Provision for loan losses 461 1,443 (301 ) 67 - (220 ) 1,450 Balance at September 30, 2017 $ 7,716 $ 16,834 $ 3,940 $ 1,052 $ 2 $ 326 $ 29,870 Three Months Ended September 30, 2016 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) Balance at June 30, 2016 $ 15,548 $ 11,371 $ 4,040 $ 1,091 $ 4 $ 709 $ 32,763 Charge-offs (1,878 ) - - (27 ) (5 ) - (1,910 ) Recoveries 1 10 - - 1 - 12 Provision for loan losses 6,725 (6 ) 32 110 4 (115 ) 6,750 Balance at September 30, 2016 $ 20,396 $ 11,375 $ 4,072 $ 1,174 $ 4 $ 594 $ 37,615 Nine Months Ended September 30, 2017 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) Balance at December 31, 2016 $ 6,632 $ 12,583 $ 4,789 $ 958 $ 3 $ 779 $ 25,744 Charge-offs - (71 ) - - (12 ) - (83 ) Recoveries 158 50 - - 1 - 209 Provision for loan losses 926 4,272 (849 ) 94 10 (453 ) 4,000 Balance at September 30, 2017 $ 7,716 $ 16,834 $ 3,940 $ 1,052 $ 2 $ 326 $ 29,870 Nine Months Ended September 30, 2016 Commercial Commercial Residential Commercial real estate construction real estate Consumer Unallocated Total (dollars in thousands) Balance at December 31, 2015 $ 10,949 $ 10,926 $ 3,253 $ 976 $ 4 $ 464 $ 26,572 Charge-offs (2,396 ) - - (94 ) (10 ) - (2,500 ) Recoveries 2 35 - 3 3 - 43 Provision for loan losses 11,841 414 819 289 7 130 13,500 Balance at September 30, 2016 $ 20,396 $ 11,375 $ 4,072 $ 1,174 $ 4 $ 594 $ 37,615 Troubled Debt Restructurings Loans are considered to have been modified in a troubled debt restructuring (“TDRs”) when due to a borrower’s financial difficulties, the Company makes certain concessions to the borrower that it would not otherwise consider. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Generally, a nonaccrual loan that has been modified in a troubled debt restructuring remains on nonaccrual status for a period of nine months to demonstrate that the borrower is able to meet the terms of the modified loan. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status. At September 30, 2017, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due 90 days or greater and still accruing interest, or whose terms have been modified in troubled debt restructurings. The following table presents a rollforward of TDRs and the related changes to the allowance for loan losses (“ALLL”) that occurred for the periods presented: Nine Months Ended Year Ended September 30, 2017 December 31, 2016 (dollars in thousands) Recorded Recorded Investment ALLL Investment ALLL Troubled Debt Restructurings Beginning balance $ 13,818 $ - $ 86,629 $ 4,500 Additions 5,668 - 26,325 8,250 Payoffs/paydowns (1,309 ) - (2,616 ) - Transfers (580 ) - (96,520 ) - Other - - - (12,750 ) Ending balance $ 17,597 $ - $ 13,818 $ - TDRs totaled $17.6 million at September 30, 2017, of which $4.8 million were on nonaccrual status and $12.8 million were performing under restructured terms. At December 31, 2016, TDRs totaled $13.8 million, of which $0.5 million were on nonaccrual status and $13.3 million were performing under restructured terms. TDRs as of September 30, 2017 did not increase the ALLL during the three and nine months ended September 30, 2017. There were no charge-offs in connection with a loan modification at the time of modification during the three or nine months ended September 30, 2017. There were no TDRs for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2017. TDRs totaled $106.7 million at September 30, 2016, of which $1.4 million were on nonaccrual status and $105.3 million were performing under restructured terms. The Company had allocated $12.5 in specific allocations with respect to loans whose loan terms had been modified in troubled debt restructurings as of September 30, 2016. TDRs as of September 30, 2016 increased the ALLL by $5.0 and $8.3 million during the three and nine months ended September 30, 2016, respectively. The $12.5 million in specific allocations referenced above were associated with New York City taxi medallion lending and were calculated based on the present value of estimated cash flows, including contractual debt interest service through maturity, and principal repayments based on the estimated fair value of the collateral excluding any consideration for personal guarantees of borrowers, which provide an additional source of repayment but cannot be relied upon. The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2016 (dollars in thousands): Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Loans Investment Investment Troubled debt restructurings: Commercial 16 $ 19,311 $ 19,311 Commercial real estate 2 581 581 Commercial construction - - - Residential real estate - - - Consumer - - - Total 18 $ 19,892 $ 19,892 Included in the above TDRs were 14 loans secured by 25 New York City taxi medallions totaling $17.3 million. These loan modifications included interest rate reductions and maturity extensions. All 14 loans were accruing prior to modification, while 13 remained in accrual status post-modification. The TDRs described above increased the allowance for loan losses by $8.3 million during the nine months ended September 30, 2016. There were no charge-offs in connection with a loan modification at the time of modification during the three and nine months ended September 30, 2016. There were no TDRs for which there was a payment default within twelve months following the modification during the three or nine months ended September 30, 2016. |