Loans, Notes, Trade and Other Receivables Disclosure | Note 5 - Loans and the Allowance for Loan Losses Loans Receivable: 2017 2016 (dollars in thousands) Commercial $ 824,082 $ 553,576 Commercial real estate 2,592,909 2,204,710 Commercial construction 483,216 486,228 Residential real estate 271,795 232,547 Consumer 2,808 2,380 Gross loans 4,174,810 3,479,441 Net deferred fees (3,354) (3,609) Loans receivable $ 4,171,456 $ 3,475,832 At December 31, 2017 and 2016, loan balances of approximately $1.9 billion and $1.7 billion, respectively, were pledged to secure borrowings from the Federal Home Loan Bank. The loan segments in the above table have unique risk characteristics with respect to credit quality: · The repayment of commercial loans is generally dependent on the creditworthiness and cash flow of borrowers, and if applicable, guarantors, which may be negatively impacted by adverse economic conditions. While the majority of these loans are secured, collateral type, marketing, coverage, valuation and monitoring is not as uniform as in other portfolio classes and recovery from liquidation of such collateral may be subject to greater variability. · Payment on commercial mortgages is driven principally by operating results of the managed properties or underlying business and secondarily by the sale or refinance of such properties. Both primary and secondary sources of repayment, and value of the properties in liquidation, may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. · Properties underlying construction, land and land development loans often do not generate sufficient cash flows to service debt and thus repayment is subject to ability of the borrower and, if applicable, guarantors, to complete development or construction of the property and carry the project, often for extended periods of time. As a result, the performance of these loans is contingent upon future events whose probability at the time of origination is uncertain. · The ability of borrowers to service debt in the residential and consumer loan portfolios is generally subject to personal income which may be impacted by general economic conditions, such as increased unemployment levels. These loans are predominately collateralized by first and/or second liens on single family properties. If a borrower cannot maintain the loan, the Company’s ability to recover against the collateral in sufficient amount and in a timely manner may be significantly influenced by market, legal and regulatory conditions. Loans Held-For-Sale: 2017 2016 (dollars in thousands) Commercial $ - $ 70,105 Commercial real estate 24,475 7,712 Residential mortgage loans 370 188 Total carrying amount $ 24,845 $ 78,005 As of December 31, 2016, the commercial loans held-for-sale segment included the Company’s entire taxi medallion portfolio, with a carrying value of $65.6 million (with an unpaid principal balance of $102.1 million). During the fourth quarter of 2017, the Bank’s entire taxi medallion loan portfolio was transferred back to loans held-for-investment from the held-for-sale designation. As of December 31, 2017, the loans secured by NYC taxi medallions, predominantly corporate medallions, had a carrying value of $46.8 million, compared to $65.6 million as of December 31, 2016. Purchased Credit-Impaired Loans: 2017 2016 (dollars in thousands) Commercial $ 2,683 $ 7,098 Commercial real estate - 982 Total carrying amount $ 2,683 $ 8,080 For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the year ended December 31, 2017 and 2016. No allowances for loan losses were reversed during 2017 and 2016. The accretable yield, or income expected to be collected, on the purchased credit-impaired loans above is as follows as of December 31, 2017 and December 31, 2016. 2017 2016 (dollars in thousands) Balance at January 1, $ 2,860 $ 3,599 Accretion of income (1,473) (739) Balance at December 31, $ 1,387 $ 2,860 Loans Receivable on Nonaccrual Status: 2017 2016 (dollars in thousands) Commercial $ 47,363 $ 1,460 Commercial real estate 12,757 1,081 Commercial construction - - Residential real estate 5,493 3,193 Total loans receivable on nonaccrual status $ 65,613 $ 5,734 The increase in nonaccrual loans is primarily attributable to the entire taxi medallion portfolio (approximately $46.8 million, or 1.1% of loans receivable) moving back to the loans held-for-investment category from the loans held-for-sale category. 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. Credit Quality Indicators December 31, 2017 Pass Special Mention Substandard Doubtful Total (dollars in thousands) Commercial $ 767,020 $ 3,764 $ 53,298 $ - $ 824,082 Commercial real estate 2,534,973 34,335 23,601 - 2,592,909 Commercial construction 475,066 5,521 2,629 - 483,216 Residential real estate 266,163 - 5,632 - 271,795 Consumer 2,767 - 41 - 2,808 Gross loans $ 4,045,989 $ 43,620 $ 85,201 $ - $ 4,174,810 December 31, 2016 Pass Special 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 increase in the Substandard classification is primarily attributable to the entire taxi medallion portfolio (approximately $46.8 million, or 1.1% of loans receivable) moving back to the loans held-for-investment category from the loans held-for-sale category. The following table provides an analysis of the impaired loans by segment at December 31, 2017, 2016 and December 31, 2017 No Related Allowance Recorded Recorded Unpaid Related Average Interest (dollars in thousands) Commercial $ 49,761 $ 101,066 $ 10,552 $ 161 Commercial real estate 23,905 23,976 24,099 585 Commercial construction 6,662 6,662 5,509 322 Residential real estate 3,203 3,442 3,255 - Consumer - - - - Total $ 83,531 $ 135,146 $ 43,415 $ 1,068 With An Allowance Recorded Commercial real estate $ 1,133 $ 1,133 $ 39 $ 1,152 $ 51 Total Commercial $ 49,761 $ 101,066 $ - $ 10,765 $ 161 Commercial real estate 25,038 25,109 39 25,251 636 Commercial construction 6,662 6,662 - 5,509 322 Residential real estate 3,203 3,442 - 3,255 - Consumer - - - - - Total (including related allowance) $ 84,664 $ 136,279 $ 39 $ 44,567 $ 1,119 December 31, 2016 No Related Allowance Recorded Recorded Unpaid Related Average Interest (dollars in thousands) Commercial $ 3,637 $ 4,063 $ 4,052 $ 64 Commercial real estate 18,288 18,288 18,532 250 Commercial construction 5,909 5,909 5,308 79 Residential real estate 1,851 2,055 1,908 19 Consumer 62 62 72 4 Total $ 29,747 $ 30,377 $ 29,872 $ 416 With An Allowance Recorded Commercial real estate $ 1,244 $ 1,244 $ 145 $ 1,274 $ - Total Commercial $ 3,637 $ 4,063 $ - $ 4,052 $ 64 Commercial real estate 19,532 19,532 145 19,806 250 Commercial construction 5,909 5,909 - 5,308 79 Residential real estate 1,851 2,055 - 1,908 19 Consumer 62 62 - 72 4 Total (including related allowance) $ 30,991 $ 31,621 $ 145 $ 31,146 $ 416 December 31, 2015 No Related Allowance Recorded Recorded Unpaid Related Average Interest (dollars in thousands) Commercial $ 610 $ 645 $ 686 $ - Commercial real estate 15,517 16,512 6,363 60 Commercial construction 2,149 2,141 1,535 - Residential real estate 3,954 4,329 3,322 10 Consumer 87 86 96 5 Total $ 22,317 $ 23,713 $ 12,002 $ 75 With An Allowance Recorded Commercial $ 84,787 $ 84,449 $ 6,725 $ 55,445 $ 1,895 Total Commercial $ 85,397 $ 85,094 $ 6,725 $ 56,131 $ 1,895 Commercial real estate 15,517 16,512 - 6,363 60 Commercial construction 2,149 2,141 - 1,535 - Residential real estate 3,954 4,329 - 3,322 10 Consumer 87 86 - 96 5 Total $ 107,104 $ 108,162 $ 6,725 $ 67,447 $ 1,970 The increase in recorded investment of impaired loans is primarily attributable to the entire taxi medallion portfolio (approximately $46.8 million, or 1.1% of loans receivable) moving back to the loans held-for-investment category from the loans held-for-sale category. Included in the impaired loans table are $14.9 million, $13.3 million and $85.9 million of performing TDRs as of December 31, 2017, 2016 and 2015, respectively. Cash basis interest and interest income recognized on accrual basis approximate each other. Aging Analysis: December 31, 2017 30-59 Days 60-89 Days 90 Days or Nonaccrual Total Past Current Total Loans Commercial $ 1,708 $ 183 $ 1,664 $ 47,363 $ 50,918 $ 773,164 $ 824,082 Commercial real estate 545 1,475 - 12,757 14,777 2,578,132 2,592,909 Commercial construction - - - - - 483,216 483,216 Residential real estate 1,578 - - 5,493 7,071 264,724 271,795 Consumer 18 - - - 18 2,790 2,808 Total $ 3,849 $ 1,658 $ 1,664 $ 65,613 $ 72,784 $ 4,102,026 $ 4,174,810 The amount reported 90 days or greater past due and still accruing as of December 31, 2017 are comprised of PCI loans, net of their fair value marks, which are accreting income per their valuation at date of acquisition. There were no non-PCI loans 90 days or greater past due and still accruing as of December 31, 2017. December 31, 2016 30-59 Days 60-89 Days 90 Days or Nonaccrual Total Past Current Total Loans 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 5,712 226,835 232,547 Consumer - - - - - 2,380 2,380 Total $ 7,534 $ 1,990 $ 5,293 $ 5,734 $ 20,551 $ 3,458,890 $ 3,479,441 The amount reported 90 days or greater past due and still accruing as of December 31, 2016 are comprised of PCI loans, net of their fair value marks, which are accreting income per their valuation at date of acquisition. There were no non-PCI loans 90 days or greater past due and still accruing as of December 31, 2016. 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 quality, and the related portion of the allowance for loan losses that are allocated to each loan portfolio segment: December 31, 2017 Commercial Commercial real estate Commercial construction Residential real estate Consumer Unallocated Total (dollars in thousands) Allowance for loan losses Individually evaluated for impairment $ - $ 39 $ - $ - $ - $ - $ 39 Collectively evaluated for impairment 8,032 15,472 4,747 1,051 2 605 29,909 Acquired portfolio 200 1,600 - - - - 1,800 Acquired with deteriorated credit quality - - - - - - - Total $ 8,232 $ 17,111 $ 4,747 $ 1,051 $ 2 $ 605 $ 31,748 Gross loans Individually evaluated for impairment $ 49,761 $ 25,038 $ 6,662 $ 3,203 $ - $ 84,664 Collectively evaluated for impairment 757,923 2,190,686 476,554 212,350 2,338 3,639,851 Acquired portfolio 13,715 377,185 - 56,242 470 447,612 Acquired with deteriorated credit quality 2,683 - - - - 2,683 Total $ 824,082 $ 2,592,909 $ 483,216 $ 271,795 $ 2,808 $ 4,174,810 December 31, 2016 Commercial Commercial Commercial Residential Consumer Unallocated Total (dollars in thousands) Allowance for loan losses 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 $ 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 $ 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. A summary of the activity in the allowance for loan losses is as follows: Commercial Commercial Commercial Residential Consumer Unallocated Total (dollars in thousands) Balance at January 1, 2017 $ 6,632 $ 12,583 $ 4,789 $ 958 $ 3 $ 779 $ 25,744 Loan charge-offs (70) (155) - - (14) - (239) Recoveries 178 51 - 12 2 - 243 Provision for loan losses 1,493 4,633 (42) 80 10 (174) 6,000 Balance at December 31, 2017 $ 8,233 $ 17,112 $ 4,747 $ 1,050 $ 1 $ 605 $ 31,748 Commercial Commercial Commercial Residential Consumer Unallocated Total (dollars in thousands) Balance at January 1, 2016 $ 10,949 $ 10,926 $ 3,253 $ 976 $ 4 $ 464 $ 26,572 Loan charge-offs (39,343) (107) - (94) (29 ) - (39,573) Recoveries 4 35 - 3 3 - 45 Provision for loan losses 35,022 1,729 1,536 73 25 315 38,700 Balance at December 31, 2016 $ 6,632 $ 12,583 $ 4,789 $ 958 $ 3 $ 779 $ 25,744 Commercial Commercial Commercial Residential Consumer Unallocated Total (dollars in thousands) Balance at January 1, 2015 $ 3,083 $ 7,799 $ 1,239 $ 1,113 $ 7 $ 919 $ 14,160 Loans charge-offs (101) (406) - - (31) - (538) Recoveries 13 327 - 2 3 - 345 Provision for loan losses 7,954 3,206 2,014 (139) 25 (455) 12,605 Balance at December 31, 2015 $ 10,949 $ 10,926 $ 3,253 $ 976 $ 4 $ 464 $ 26,572 For the year ended December 31, 2016, the loan charge-offs within the commercial loan segment were primarily made up of $36.7 million in charge-offs related to the taxi medallion portfolio and a $1.1 million charge related to a lease financing receivable of the former Union Center operations building. The $36.7 million charge on the taxi medallion portfolio occurred in conjunction with the transfer of the taxi medallion loans to loans held-for-sale. The amount transferred to loans held-for-sale as of December 31, 2016 had a carrying value of $65.6 million following the charge-off. 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 six 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 December 31, 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 loans by segment modified as troubled debt restructurings and the related changes to the allowance for loan and leases losses that occurred during the year ended December 31, 2017 and December 31, 2016: December 31, 2017 December 31, 2016 (dollars in thousands) Recorded Investment ALLL Recorded Investment ALLL Troubled debt restructurings Balance January 1, $ 13,818 $ - $ 86,629 $ 4,500 Additions 10,378 - 26,325 8,250 Payoffs/paydowns (3,098) (2,616) Transfers (580) - (96,520) - Other - - - (12,750) Balance December 31, $ 20,518 $ - $ 13,818 $ - TDRs totaled $20.5 million at December 31, 2017, of which $5.6 million were on nonaccrual status and $14.9 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. As of December 31, 2017, the taxi medallion loans that were modified in a troubled debt restructuring in 2016 and 2015 were transferred back to the loans held-for-investment category from the loans held-for-sale category. As of December 31, 2017, all taxi medallion loans remain on nonaccrual status. The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2017 (dollars in thousands): Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Loans Investment Investment (dollars in thousands) Troubled debt restructurings: Commercial 1 $ 692 $ 692 Commercial real estate 2 3,007 3,007 Commercial construction 2 6,662 6,662 Residential real estate 1 17 17 Consumer - - - Total 6 $ 10,378 $ 10,378 TDRs as of December 31, 2017 did not increase the ALLL during the year ended December 31, 2017. There were no charge-offs in connection with a loan modification at the time of modification during the year ended December 31, 2017. There were no TDRs for which there was a payment default within twelve months following the modification during the year ended December 31, 2017. The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2016: Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Loans Investment Investment (dollars in thousands) Troubled debt restructurings: Commercial 19 $ 22,420 $ 22,420 Commercial real estate 3 2,155 2,155 Commercial construction 1 1,750 1,750 Residential real estate - - - Consumer - - - Total 23 $ 26,325 $ 26,325 Included in the above troubled debt restructurings were 15 loans secured by 27 New York City taxi medallions totaling $18.5 million as of the date of the respective modifications. These loan modifications included interest rate reductions and maturity extensions. All 15 loans were accruing prior to modification, while 14 remained in accrual status post-modification. As of December 31, 2016, the taxi medallion loans that were modified in a troubled debt restructuring in 2016 were transferred to the loans held-for-sale category (along with the 2015 taxi medallion modified troubled debt restructurings) and, concurrently, were put on nonaccrual. There were no charge-offs in connection with a loan modification at the time of modification during the year ended December 31, 2016. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2016. The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2015: Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Loans Investment Investment (dollars in thousands) Troubled debt restructurings: Commercial 48 $ 78,466 $ 78,466 Commercial real estate 3 5,049 5,049 Commercial construction 1 661 661 Residential real estate 1 110 110 Consumer 1 4 4 Total 54 $ 84,290 $ 84,290 The increase in TDRs was due to loans secured by New York City taxi medallions that were modified during the second quarter of 2015. The modifications consisted of a deferral of principal amortization from approximately 25-30 year amortization to interest-only. There was no extension of the loans’ contractual maturity dates, there was no forgiveness of principal, and the interest rates on these loans were increased from approximately 3%-3.25% to 3.75%. These loans were accruing prior to modification and remained in accrual status post-modification. There were no charge-offs in connection with a loan modification at the time of modification during the year ended December 31, 2015. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2015. |