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Loans and the Allowance for Loan and Lease Losses
 9 Months Ended
Sep. 30, 2016
Receivables [Abstract]  
Loans and the Allowance for Loan and Lease Losses

Note 6. Loans and the Allowance for Loan and Lease Losses

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 and lease 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 and leases, 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 and leases: commercial (including lease financing), commercial real estate, commercial construction, residential real estate (including home equity) and consumer.

Interest income on commercial, commercial real estate, commercial construction and residential loans are 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 its 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 and lease 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.

Allowance for Loan and Lease Losses

The allowance for loan and lease 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 and lease 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 and lease 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 purchases 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 the amount paid, such that there is no carryover of the seller’s allowance for loan and lease losses. After acquisition, losses are recognized by an increase in the allowance for loan and lease losses.

Such purchased credit-impaired loans (“PCI”) are accounted for individually. 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.

Payments received earlier than expected or in excess of expected cash flows from sales or other resolutions may result in the carrying value of a pool being reduced to zero even though outstanding contractual balances and expected cash flows remain related to loans in the pool. Once the carrying value of a pool is reduced to zero, any future proceeds, which may include cash or real estate acquired in foreclosure, from the remaining loans, representing further realization of accretable yield, are recognized as interest income upon receipt.

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.

The following table sets forth the composition of the Company’s loan portfolio, including net deferred loan fees, at September 30, 2016 and December 31, 2015:

September 30, December 31,
2016       2015
  (in thousands)
Commercial $ 644,430 $ 570,116
Commercial real estate 2,100,804 1,966,696
Commercial construction 471,109     328,838
Residential real estate   229,401   233,690
Consumer 2,879 2,454
       Gross loans 3,448,623 3,101,794  
Net deferred loan fees (3,147 ) (2,787 )
       Total loans receivable $       3,445,476 $       3,099,007

As of September 30, 2016, the bank designated approximately $15.1 million as loans held-for-sale. This designation occurred during the third quarter of 2016 and consisted of approximately $1.6 million of mortgage loans and approximately $13.5 million of commercial and commercial real estate loans.

At September 30, 2016 and December 31, 2015 loan balances of approximately $1.6 billion were pledged to secure borrowings from the Federal Home Loan Bank 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 carrying amount of those loans is as follows at September 30, 2016 and December 31, 2015.

September 30, December 31,
2016       2015
(in thousands)
Commercial $ 7,027 $ 7,078
Commercial real estate 1,002 1,775
Residential real estate   -   328
       Total carrying amount $ 8,029   $ 9,181

For those purchased loans disclosed above, the Company did not increase the allowance for loan and lease losses for the three and nine months ended September 30, 2016.

The accretable yield, or income expected to be collected, on the purchased loans disclosed above for the three and nine months ended September 30, 2016 is as follows (in thousands):

Three Months Three Months
Ended Ended
September       September
30, 2016 30, 2015
Beginning balance $               3,233     $               4,013  
New loans purchased   -   -  
Accretion of income   (185 )     (207 )
Reclassification from nonaccretable differences -     -
Disposals   -       -  
Ending balance $ 3,048 $ 3,806

Nine Months Nine Months
Ended Ended
      September       September
30, 2016 30, 2015
Beginning balance $             3,599 $             4,467
New loans purchased - -
Accretion of income (551 ) (661 )
Reclassification from nonaccretable differences - -
Disposals - -
Ending balance $ 3,048 $ 3,806

The following table presents information about the recorded investment in loan receivables on nonaccrual status by segment at September 30, 2016 and December 31, 2015:

Loans Receivable on Nonaccrual Status

September 30, December 31,
2016       2015
(in thousands)
Commercial $ 5,982 $ 6,586
Commercial real estate 2,489   9,112
Commercial construction -   1,479
Residential real estate 3,022 3,559
       Total loans receivable on nonaccrual status $ 11,493 $ 20,736

During the quarter ended September 30, 2016, the bank sold a lease financing receivable for approximately $2.6 million, net of closing costs. At the time of sale, the recorded investment of the lease financing receivable was $3.7 million, with a specific allowance for loan loss reserve of $1.3 million. The amount of net proceeds that exceeded the net carrying value was recorded as an increase to the allowance for loan losses.

The Company continuously monitors the credit quality of its loans receivable. In addition to its internal staff, the Company utilizes the services of a third party loan review firm to rate the credit quality of its loans receivable. 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.

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, 2016 and December 31, 2015:

September 30, 2016
Special
      Pass       Mention       Substandard       Doubtful       Total
(in thousands)
Commercial $        531,599 $        2,787 $        110,044 $        - $        644,430
Commercial real estate 2,049,986 32,504 18,314 - 2,100,804
Commercial construction 469,735 1,374 - - 471,109
Residential real estate 226,012 -   3,389 - 229,401
Consumer 2,812 - 67 - 2,879
 
       Total loans $ 3,280,144 $ 36,665 $ 131,814 $ - $ 3,448,623
 
December 31, 2015
Special
Pass Mention Substandard Doubtful Total
(in thousands)
Commercial $ 462,358 $ 11,760 $ 95,998 $ - $ 570,116
Commercial real estate 1,919,041 18,990 28,426 239 1,966,696
Commercial construction 326,697 662 1,479 - 328,838
Residential real estate 229,426 - 4,264 - 233,690
Consumer 2,368 - 86 - 2,454
 
       Total loans $ 2,939,890 $ 31,412 $ 130,253 $ 239 $ 3,101,794

The following table provides an analysis of the impaired loans, by loan segment, at September 30, 2016 and December 31, 2015:

September 30, 2016
Unpaid
Recorded Principal Related
      Investment       Balance       Allowance
No related allowance recorded (in thousands)
Commercial $ 6,718 $ 7,025
Commercial real estate 9,166 9,182
Commercial construction 1,374 1,374
Residential real estate 3,389 3,823
Consumer 67 67
       Total $        20,714 $        21,471
 
With an allowance recorded
Commercial $ 95,964 $ 95,964 $        12,931
Commercial real estate 153 153 105
       Total $ 96,117 $ 96,117 $ 13,036
 
Total
Commercial $ 102,682 $ 103,989 $ 12,931
Commercial real estate 9,319 9,335 105
Commercial construction 1,374 1,374 -
Residential real estate 3,389 3,823 -
Consumer 67 67 -
       Total $ 116,831 $ 117,588 $ 13,036
 
 
December 31, 2015
Unpaid
Recorded Principal Related
Investment Balance Allowance
No related allowance recorded (in thousands)
Commercial $ 610 $ 645
Commercial real estate 15,517 16,512
Commercial construction 2,149 2,141
Residential real estate 3,954 4,329
Consumer 87 86
       Total $ 22,317 $ 23,713
 
With an allowance recorded
Commercial $ 84,787 $ 84,449 $ 6,725
 
Total
Commercial $ 85,397 $ 85,094 $ 6,725
Commercial real estate 15,517 16,512 -
Commercial construction 2,149 2,141 -
Residential real estate 3,954 4,329 -
Consumer 87 86 -
       Total $ 107,104 $ 108,162 $ 6,725

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, 2016 and 2015 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2016 2015   2016 2015  
Average Interest Average Interest Average Interest Average Interest
Recorded Income Recorded Income Recorded Income Recorded Income
    Investment    Recognized    Investment    Recognized    Investment    Recognized    Investment    Recognized
Impaired loans with no
related allowance
recorded:
 
Commercial $       6,704 $       66 $       712 $       - $       4,317 $       86 $       707 $       -
Commercial real estate 9,129 65 4,869 15 8,167 118 4,905 46
Commercial
construction 1,224 21 1,479 - 979 54 1,479 -
Residential real estate 3,271 5 3,221 7 3,247 15 3,251 12
Consumer 70 1 100 1 74 3 102 4
Total $ 20,398 $ 158 $ 10,381 23 $ 16,784 $ 276 $ 10,444 $ 62
 
Impaired loans with an
allowance recorded:
 
Commercial $ 91,393 $ 925 $ 79,732 $ 722 $ 85,620 $ 2,447 $ 45,747 $ 1,206
Commercial real estate 153 - - - 153 - - -
Total $ 91,5476 $ 925 $ 79,732 $ 722 $ 102,577 $ 2,447 $ 45,747 $ 1,206
 
Total impaired loans:
 
Commercial $ 98,097 $ 991 $ 80,444 $ 722 $ 89,937 $ 2,533 $ 46,454 $ 1,206
Commercial real estate 9,282 65 4,869 15 8,320 118 4,905 46
Commercial
construction 1,224 21 1,479 - 979 54 1,479 -
Residential real estate 3,271 5 3,221 7 3,247 15 3,251 12
Consumer 70 1 100 1 74 3 102 4
 
Total $ 111,944 $ 1,083 $ 90,113 $ 745 $ 102,557 $ 2,753 $ 56,191 $ 1,268

Included in impaired loans at September 30, 2016 and December 31, 2015 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. 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, 2016 and December 31, 2015 by segment:

Aging Analysis

September 30, 2016
90 Days or Greater than 90 Days
30-59 Days 60-89 Days Greater Past Total Loans Past Due and Still
Past Due Past Due Due Total Current Receivable Accruing/Accreting
   (in thousands)
Commercial $      -    $      249    $      5,363    $      5,612    $      638,818    $      644,430    $      4,543
Commercial real
estate 461 1,600 2,385 4,446 2,096,358 2,100,804 654
Commercial
construction - - - - 471,109 471,109 -
Residential real
estate 505 924 1,778 3,207 226,194 229,401 -
Consumer 9 - - 9 2,870 2,879
       Total $ 975 $ 2,773 $ 9,526 $ 13,274 $ 3,435,349 $ 3,448,623 $ 5,197
 
 
December 31, 2015
90 Days or Greater than 90 Days
30-59 Days 60-89 Days Greater Past Total Loans Past Due and Still
Past Due Past Due Due Total Current Receivable Accruing/Accreting
(in thousands)
Commercial $ 6,887 $ 3,505 $ 6,865 $ 17,257 $ 552,859 $ 570,116 $ -
Commercial real
estate 1,998 988 9,561 12,547 1,954,149 1,966,696 -
Commercial
construction - - 1,479 1,479 327,359 328,838 -
Residential real
estate - - 2,122 2,122 231,568 233,690 -
Consumer 4 9 - 13 2,441 2,454 -
       Total $ 8,889 $ 4,502 $ 20,027 $ 33,418 $ 3,068,376 $ 3,101,794 $ -

Included in the 90 days and still accruing/accreting bucket 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 quality, and the related portion of the allowance for loan and lease losses that are allocated to each loan portfolio segment:

September 30, 2016
Commercial Commercial Residential
    Commercial     real estate     construction     real estate     Consumer     Unallocated     Total
(in thousands)
Allowance for loan and lease losses
Individually evaluated for impairment $       12,931 $       105 $       - $       - $       - $       - $       13,036
Collectively evaluated for impairment 7,465 11,270 4,072 1,174 4 594 24,579
Acquired portfolio - - - - - - -
Acquired with deteriorated credit quality - - - - - - -
Total $ 20,396 $ 11,375 $ 4,072 $ 1,174 $ 4 $ 594 $ 37,615
 
Gross loans
Individually evaluated for impairment $ 102,682 $ 9,319 $ 1,374 $ 3,389 $ 67 $ - $ 116,831
Collectively evaluated for impairment 487,657 1,480,859 462,687 153,488 2,178 - 2,586,869
Acquired portfolio 47,064 609,624 7,048 72,524 634 - 736,894
Acquired with deteriorated credit quality 7,027 1,002 - - - - 8,029
Total $ 644,430 $ 2,100,804 $ 471,109 $ 229,401 $ 2,879 $ - $ 3,448,623
 
 
December 31, 2015
Commercial Commercial Residential
Commercial real estate construction real estate Consumer Unallocated Total
(in thousands)
Allowance for loan and lease losses
Individually evaluated for impairment $ 6,725 $ - $ - $ - $ - $ - $ 6,725
Collectively evaluated for impairment 4,224 10,926 3,253 976 4 464 19,847
Acquired portfolio - - - - - - -
Acquired with deteriorated credit quality - - - - - - -
Total $ 10,949 $ 10,926 $ 3,253 $ 976 $ 4 $ 464 $ 26,572
 
Gross loans
Individually evaluated for impairment $ 85,397 $ 15,517 $ 2,149 $ 3,954 $ 87 $ - $ 107,104
Collectively evaluated for impairment 395,424 1,269,140 315,785 136,633 1,649 - 2,118,631
Acquired portfolio 82,217 680,264 10,904 92,775 718 866,878
Acquired with deteriorated credit quality 7,078 1,775 - 328 - - 9,181
Total $ 570,116 $ 1,966,696 $ 328,838 $ 233,690 $ 2,454 $ - $ 3,101,794

The Company’s allowance for loan and lease 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 and lease losses methodology as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

A summary of the activity in the allowance for loan and lease losses is as follows:

Three Months Ended September 30, 2016
Commercial Commercial Residential
    Commercial       real estate     construction     real estate     Consumer     Unallocated     Total
(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 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
 
 
Three Months Ended September 30, 2015
Commercial Commercial Residential
Commercial real estate construction real estate Consumer Unallocated Total
(in thousands)
Balance at June 30, 2015 $ 4,633 $ 9,195 $ 1,945 $ 1,161 $ 7 $ 539 $ 17,480
 
Charge-offs - (124 ) - - - - (124 )
 
Recoveries 2 - - - - - 2
 
Provision 2,488 1,203 701 (149 ) (3 ) (65 ) 4,175
 
Balance at September 30,
2015 $ 4,633 $ 9,195 $ 2,646 $ 1,012 $ 4 $ 474 $ 21,533

Nine Months Ended September 30, 2016
Commercial Commercial Residential
    Commercial     real estate     construction     real estate     Consumer     Unallocated     Total
(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 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
 
Nine Months Ended September 30, 2015
Commercial Commercial Residential
Commercial real estate construction real estate Consumer Unallocated Total
(in thousands)
Balance at December 31,
2014 $ 3,083 $ 7,799 $ 1,239 $ 1,113 $ 7 $ 919 $ 14,160
 
Charge-offs (100 ) (406 ) - - (13 ) - (519 )
 
Recoveries 12 327 - 2 1 - 342
 
Provision 4,128 2,554 1,407 (103 ) 9 (445 ) 7,550
 
Balance at September 30,
2015 $ 7,123 $ 10,274 $ 2,646 $ 1,012 $ 4 $ 474 $ 21,533

Troubled Debt Restructurings

At September 30, 2016, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due in excess of 90 days and still accruing interest, or whose terms have been modified in troubled debt restructurings.

The policy of the Company generally is to grant commercial, mortgage and consumer loans to residents and businesses within its market area. The ability of borrowers to repay their obligations is 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 and lease losses are provided for all known and inherent risks. Collateral and/or personal guarantees are required for virtually all loans. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Loans modified in troubled debt restructurings 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. At December 31, 2015, loans modified in troubled debt restructurings totaled $86.6 million, of which $0.7 million were on nonaccrual status and $85.9 million were performing under restructured terms. The Company has allocated $12.5 and $4.5 million in specific allocations with respect to loans whose loan terms had been modified in troubled debt restructurings as of September 30, 2016 and December 31, 2015, respectively. Performing TDRs as of September 30, 2016 increased the allowance for loan and lease losses by $5.0 and $8.3 million during the three and nine months ended September 30, 2016, respectively. Performing TDRs as of December 31, 2015 did not increase the allowance for loan and lease losses during the year ended December 31, 2015.

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 valuation per New York City corporate medallion used for the calculation at September 30, 2016 was approximately $700,000. Since December 31, 2015, an additional $8.3 million specific allocation was required at September 30, 2016 due to a decline in the Company’s estimated valuation of New York City taxi medallions since December 31, 2015, when the specific allocation was $4.5 million.

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 troubled debt restructurings 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 troubled debt restructurings described above increased the allowance for loan and leases 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 nine months ended September 30, 2016. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2016.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2015 (dollars in thousands):

Pre-Modification Post-Modification
Outstanding Outstanding
Number of Recorded Recorded
       Loans       Investment       Investment
Troubled debt restructurings:
       Commercial 47 $        75,363 $        75,363
       Commercial real estate - - -
       Commercial construction - - -
       Residential real estate - - -
       Consumer - - -
 
              Total 47 $ 75,363 $ 75,363

The troubled debt restructurings included in the table above were loans secured by New York City taxi medallions that were modified during the third 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.

The troubled debt restructurings described above increased the allowance for loan and lease losses by $2.0 million during the nine months ended September 30, 2015. There were no charge-offs in connection with a loan modification at the time of modification during the nine months ended September 30, 2015. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2015.