Loans | 5 - LOANS The following tables set forth by class of loans the amount of loans individually and collectively evaluated for impairment and the portion of the allowance for loan losses allocable to such loans. June 30, 2017 Loans Allowance for Loan Losses Individually Evaluated for Impairment Collectively Evaluated for Impairment Ending Balance Individually Evaluated for Impairment Collectively Evaluated for Impairment Ending Balance (in thousands) Commercial and industrial $ 159 $ 123,632 $ 123,791 $ 50 $ 1,494 $ 1,544 Commercial mortgages: Multifamily — 607,173 607,173 — 5,921 5,921 Other — 416,183 416,183 — 4,674 4,674 Owner-occupied 7,637 97,461 105,098 843 842 1,685 Residential mortgages: Closed end 638 1,426,917 1,427,555 19 17,016 17,035 Revolving home equity 1,474 86,918 88,392 507 696 1,203 Consumer and other — 5,864 5,864 — 74 74 $ 9,908 $ 2,764,148 $ 2,774,056 $ 1,419 $ 30,717 $ 32,136 December 31, 2016 Commercial and industrial $ 131 $ 125,907 $ 126,038 $ — $ 1,408 $ 1,408 Commercial mortgages: Multifamily — 610,385 610,385 — 6,119 6,119 Other — 371,142 371,142 — 4,296 4,296 Owner-occupied 558 103,113 103,671 — 959 959 Residential mortgages: Closed end 856 1,237,575 1,238,431 45 15,695 15,740 Revolving home equity 1,770 84,691 86,461 482 919 1,401 Consumer and other — 9,293 9,293 — 134 134 $ 3,315 $ 2,542,106 $ 2,545,421 $ 527 $ 29,530 $ 30,057 The following tables present the activity in the allowance for loan losses for the six and three months ended June 3 0 , 2017 and 2016. Balance at 1/1/17 Chargeoffs Recoveries Provision for Loan Losses (Credit) Balance at 6/30/17 (in thousands) Commercial and industrial $ 1,408 $ 6 $ 7 $ 135 $ 1,544 Commercial mortgages: Multifamily 6,119 — — (198) 5,921 Other 4,296 — — 378 4,674 Owner-occupied 959 — — 726 1,685 Residential mortgages: Closed end 15,740 — 2 1,293 17,035 Revolving home equity 1,401 — — (198) 1,203 Consumer and other 134 6 1 (55) 74 $ 30,057 $ 12 $ 10 $ 2,081 $ 32,136 Balance at 4/1/17 Chargeoffs Recoveries Provision for Loan Losses (Credit) Balance at 6/30/17 (in thousands) Commercial and industrial $ 1,527 $ — $ 4 $ 13 $ 1,544 Commercial mortgages: Multifamily 5,806 — — 115 5,921 Other 4,303 — — 371 4,674 Owner-occupied 998 — — 687 1,685 Residential mortgages: Closed end 16,758 — 1 276 17,035 Revolving home equity 1,339 — — (136) 1,203 Consumer and other 112 6 1 (33) 74 $ 30,843 $ 6 $ 6 $ 1,293 $ 32,136 Balance at 1/1/16 Chargeoffs Recoveries Provision for Loan Losses (Credit) Balance at 6/30/16 (in thousands) Commercial and industrial $ 928 $ — $ 4 $ 242 $ 1,174 Commercial mortgages: Multifamily 6,858 — — (512) 6,346 Other 3,674 — — 154 3,828 Owner-occupied 1,047 — — 128 1,175 Residential mortgages: Closed end 13,639 — 8 501 14,148 Revolving home equity 1,016 — 12 (115) 913 Consumer and other 94 — 5 (6) 93 $ 27,256 $ — $ 29 $ 392 $ 27,677 Balance at 4/1/16 Chargeoffs Recoveries Provision for Loan Losses (Credit) Balance at 6/30/16 (in thousands) Commercial and industrial $ 1,112 $ — $ — $ 62 $ 1,174 Commercial mortgages: Multifamily 6,805 — — (459) 6,346 Other 3,853 — — (25) 3,828 Owner-occupied 1,093 — — 82 1,175 Residential mortgages: Closed end 13,643 — — 505 14,148 Revolving home equity 927 — 9 (23) 913 Consumer and other 91 — 5 (3) 93 $ 27,524 $ — $ 14 $ 139 $ 27,677 For individually impaired loans, the following tables set forth by class of loans at June 30, 2017 and December 31, 2016 the recorded investment, unpaid principal balance and related allowance. The tables also set forth the average recorded investment of individually impaired loans and interest income recognized while the loans were impaired during the six and three months ended June 30, 2017 and 2016 . The recorded investment is the unpaid principal balance of the loans less any interest payments applied to principal and any direct chargeoffs plus or minus net deferred loan costs and fees. Any principal and interest payments received on nonaccrual impaired loans are applied to the recorded investment in the loans. The Bank recognizes interest income on other impaired loans using the accrual method of accounting. Six Months Ended Three Months Ended June 30, 2017 June 30, 2017 June 30, 2017 Unpaid Average Interest Average Interest Recorded Principal Related Recorded Income Recorded Income Investment Balance Allowance Investment Recognized Investment Recognized (in thousands) With no related allowance recorded: Commercial and industrial $ 61 $ 61 $ — $ 81 $ 2 $ 63 $ — Commercial mortgages - owner-occupied 545 628 — 549 11 547 7 Residential mortgages - closed end 257 350 — 266 — 261 — With an allowance recorded: Commercial and industrial 98 98 50 99 — 99 — Commercial mortgages - owner-occupied 7,092 7,084 843 7,130 — 7,107 — Residential mortgages: Closed end 381 378 19 387 9 383 — Revolving home equity 1,474 1,474 507 1,480 — 1,475 — Total: Commercial and industrial 159 159 50 180 2 162 — Commercial mortgages - owner-occupied 7,637 7,712 843 7,679 11 7,654 7 Residential mortgages: Closed end 638 728 19 653 9 644 — Revolving home equity 1,474 1,474 507 1,480 — 1,475 — $ 9,908 $ 10,073 $ 1,419 $ 9,992 $ 22 $ 9,935 $ 7 Six Months Ended Three Months Ended December 31, 2016 June 30, 2016 June 30, 2016 Unpaid Average Interest Average Interest Recorded Principal Related Recorded Income Recorded Income Investment Balance Allowance Investment Recognized Investment Recognized (in thousands) With no related allowance recorded: Commercial and industrial $ 131 $ 131 $ — $ — $ — $ — $ — Commercial mortgages - owner-occupied 558 636 — 4,403 — 4,378 — Residential mortgages: Closed end 230 313 — 294 — 289 — Revolving home equity 280 279 — 520 5 520 3 With an allowance recorded: Residential mortgages: Closed end 626 634 45 3,463 68 3,451 34 Revolving home equity 1,490 1,491 482 — — — — Total: Commercial and industrial 131 131 — — — — — Commercial mortgages - owner-occupied 558 636 — 4,403 — 4,378 — Residential mortgages: Closed end 856 947 45 3,757 68 3,740 34 Revolving home equity 1,770 1,770 482 520 5 520 3 $ 3,315 $ 3,484 $ 527 $ 8,680 $ 73 $ 8,638 $ 37 Aging of Loans . The following tables present the aging of the recorded investment in loans by class of loans. June 30, 2017 Past Due Total Past 90 Days or Due Loans & 30-59 Days 60-89 Days More and Nonaccrual Nonaccrual Total Past Due Past Due Still Accruing Loans Loans Current Loans (in thousands) Commercial and industrial $ 123 $ 106 $ — $ 159 $ 388 $ 123,403 $ 123,791 Commercial mortgages: Multifamily — — — — — 607,173 607,173 Other — — — — — 416,183 416,183 Owner-occupied — — — 7,092 7,092 98,006 105,098 Residential mortgages: Closed end 1,442 — — 257 1,699 1,425,856 1,427,555 Revolving home equity 2,915 — — 1,474 4,389 84,003 88,392 Consumer and other 2 — — — 2 5,862 5,864 $ 4,482 $ 106 $ — $ 8,982 $ 13,570 $ 2,760,486 $ 2,774,056 December 31, 2016 Commercial and industrial $ 224 $ — $ — $ — $ 224 $ 125,814 $ 126,038 Commercial mortgages: Multifamily — — — — — 610,385 610,385 Other — — — — — 371,142 371,142 Owner-occupied — — 621 558 1,179 102,492 103,671 Residential mortgages: Closed end 881 — — 230 1,111 1,237,320 1,238,431 Revolving home equity — — — 1,770 1,770 84,691 86,461 Consumer and other 1 — — — 1 9,292 9,293 $ 1,106 $ — $ 621 $ 2,558 $ 4,285 $ 2,541,136 $ 2,545,421 The loans in the preceding table that were past due 90 days or more and still accruing at December 31, 2016 were well secured and in the process of collection. There were no loans in the process of foreclosure nor did the Bank hold any foreclosed residential real estate property at June 3 0 , 2017 or December 31, 2016. Troubled Debt Restructurings. A restructuring constitutes a troubled debt restructuring when it includes a concession by the Bank and the borrower is experiencing financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Bank performs the evaluation under its internal underwriting policy. During the six months ended June 30, 2017 and 2016 , the Bank did not modify any loans in troubled debt restructurings. At June 30, 2017 and December 31, 2016 , the Bank had an allowance for loan losses of $19,000 and $45,000 , respectively, allocated to specific troubled debt restructurings. The Bank had no commitments to lend additional amounts in connection with loans that were classified as troubled debt restructurings. There were no troubled debt restructurings for which there was a payment default during the six months ended June 3 0 , 2017 and 2016 that were modified during the twelve-month period prior to default. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. Risk Characteristics . Credit risk within the Bank’s loan portfolio primarily stems from factors such as borrower size, geographic concentration, industry concentration, real estate values, local and national economic conditions and environmental impairment of properties securing mortgage loans. The Bank’s commercial loans, including those secured by mortgages, are primarily made to small and medium-sized businesses. Such loans sometimes involve a higher degree of risk than those to larger companies because such businesses may have shorter operating histories, higher debt-to-equity ratios and may lack sophistication in internal record keeping and financial and operational controls. In addition, the majority of the Bank’s loans are made to businesses and consumers on Long Island and in the boroughs of New York City, and a large percentage of these loans are mortgage loans secured by properties located in those areas. The primary source of repayment for multifamily loans is cash flows from the underlying properties, a substantial portion of which are rent stabilized or rent controlled. Such cash flows are dependent on the strength of the local economy. Credit Quality Indicators. The Bank categorizes loans into risk categories based on relevant information about the borrower’s ability to service their debt including, but not limited to, current financial information for the borrower and any guarantors, payment experience, credit underwriting documentation, public records and current economic trends. Commercial and industrial loans and commercial mortgage loans are risk rated utilizing a ten point rating system. The ten point risk rating system is described hereinafter. Internally Assigned Risk Rating 1 – 2 Cash flow is of high quality and stable. Borrower has very good liquidity and ready access to traditional sources of credit. This category also includes loans to borrowers secured by cash and/or marketable securities within approved margin requirements. 3 – 4 Cash flow quality is strong, but shows some variability. Borrower has good liquidity and asset quality. Borrower has access to traditional sources of credit with minimal restrictions. 5 – 6 Cash flow quality is acceptable but shows some variability. Liquidity varies with operating cycle and assets provide an adequate margin of protection. Borrower has access to traditional sources of credit, but generally on a secured basis. 7 Watch - Cash flow has a high degree of variability and subject to economic downturns. Liquidity is strained and the ability of the borrower to access traditional sources of credit is diminished. 8 Special Mention - The borrower has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to risk sufficient to warrant adverse classification. 9 Substandard - Loans are inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. 10 Doubtful - Loans have all the inherent weaknesses of those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Risk ratings on commercial and industrial loans and commercial mortgages are initially assigned by the lending officer together with any necessary approval authority. The ratings are periodically reviewed and evaluated based upon borrower contact, credit department review or independent loan review. The Bank's loan risk rating and review policy establishes requirements for the annual review of commercial real estate and commercial and industrial loans. The requirements include details of the scope of coverage and selection process based on loan-type and risk rating. Among other things, at least 60% of the recorded investment of commercial real estate loans as of December 31 of the prior year must be reviewed annually. The frequency of the review of other loans is determined by the Bank’s ongoing assessments of the borrower’s condition. Residential mortgage loans, revolving home equity lines and other consumer loans are risk rated utilizing a three point rating system. In most cases, the borrower’s credit score dictates the risk rating. However, regardless of credit score, loans that are on management’s watch list or have been criticized or classified by management are assigned a risk rating of 3. A credit score is a tool used in the Bank’s loan approval process, and a minimum score of 680 is generally required for new loans. Credit scores for each borrower are updated at least annually. The risk ratings along with their definitions are as follows: Internally Assigned Risk Rating 1 Credit score is equal to or greater than 680. 2 Credit score is 635 to 679. 3 Credit score is below 635 or, regardless of credit score, the loan has been classified, criticized or placed on watch. The following tables present the recorded investment in commercial and industrial loans and commercial mortgage loans by class of loans and risk rating. Loans shown as Pass are all loans other than those risk rated Watch, Special Mention, Substandard or Doubtful. June 30, 2017 Internally Assigned Risk Rating Special Pass Watch Mention Substandard Doubtful Total (in thousands) Commercial and industrial $ 122,588 $ 708 $ 336 $ 159 $ $ 123,791 Commercial mortgages: Multifamily 597,595 2,381 7,197 — 607,173 Other 405,654 7,692 2,837 — 416,183 Owner-occupied 92,988 2,974 1,499 7,637 105,098 $ 1,218,825 $ 13,755 $ 11,869 $ 7,796 $ — $ 1,252,245 December 31, 2016 Commercial and industrial $ 125,097 $ 810 $ — $ 131 $ — $ 126,038 Commercial mortgages: Multifamily 603,103 — 7,282 — — 610,385 Other 369,740 1,402 — — — 371,142 Owner-occupied 102,725 389 — 557 — 103,671 $ 1,200,665 $ 2,601 $ 7,282 $ 688 $ — $ 1,211,236 The following tables present the recorded investment in residential mortgage loans, home equity lines and other consumer loans by class of loans and risk rating. Loans shown as Pass are all loans other than those risk rated Watch, Special Mention, Substandard or Doubtful. June 30, 2017 Internally Assigned Risk Rating Special Pass Watch Mention Substandard Doubtful Total (in thousands) Residential mortgages: Closed end $ 1,424,616 $ 2,301 $ — $ 638 $ — $ 1,427,555 Revolving home equity 85,548 661 709 1,474 — 88,392 Consumer and other 5,462 — — — — 5,462 $ 1,515,626 $ 2,962 $ 709 $ 2,112 $ — $ 1,521,409 December 31, 2016 Residential mortgages: Closed end $ 1,236,152 $ 982 $ 441 $ 856 $ — $ 1,238,431 Revolving home equity 84,189 — 501 1,771 — 86,461 Consumer and other 8,614 — — — — 8,614 $ 1,328,955 $ 982 $ 942 $ 2,627 $ — $ 1,333,506 Deposit account overdrafts were $402,000 and $679,000 at June 3 0 , 2017 and December 31, 2016, respectively. Overdrafts are not assigned a risk rating and are therefore excluded from consumer loans in the tables above. |