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Loans and the Allowance for Loan and Lease Losses
 12 Months Ended
Dec. 31, 2016
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure

Note 5 - Loans and the Allowance for Loan and Lease Losses

Loans held-for-sale

The following table presents loans held-for-sale by loan segment:

    2016     2015  
    (in thousands)  
Commercial   $ 70,105     $ -  
Commercial real estate     7,712          
Residential mortgage loans     188       -  
Total carrying amount   $ 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.  As of December 31, 2016 the majority of the taxi medallion portfolio ($63.0 million, or 96%) was designated as nonaccrual.

Loans Receivable

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

    2016   2015  
    (in thousands)  
Commercial   $ 553,576   $ 570,116  
Commercial real estate     2,204,710     1,966,696  
Commercial construction     486,228     328,838  
Residential real estate     232,547     233,690  
Consumer     2,380     2,454  
Gross loans     3,479,441     3,101,794  
Net deferred (fees)     (3,609)     (2,787)  
Total loans receivable   $ 3,475,832   $ 3,099,007  

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.

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 December 31, 2016 and December 31, 2015.

    2016     2015  
    (in thousands)  
Commercial   $ 7,098     $ 7,078  
Commercial real estate     982       1,775  
Commercial construction     -       -  
Residential real estate     -       328  
Consumer     -       -  
Total carrying amount   $ 8,080     $ 9,181  

For those purchased loans disclosed above, the Company did not increase the allowance for loan and lease losses for the year ended December 31, 2016. No allowances for loan and lease losses were reversed during 2016.

The accretable yield, or income expected to be collected, on the purchased credit impaired loans above is as follows at December 31, 2016 and December 31, 2015.

    2016     2015  
    (in thousands)  
Balance at beginning of period   $ 3,599     $ 4,805  
New loans purchased     -       -  
Accretion of income     (739)       (1,206)  
Reclassifications from nonaccretable difference     -       -  
Disposals     -       -  
Balance at end of period   $ 2,860     $ 3,599  

 

Loans Receivable on Nonaccrual Status

The following table presents nonaccrual loans included in loans receivable by loan segment as of the periods presented.

    2016     2015  
    (in thousands)  
Commercial   $ 1,460     $ 6,586  
Commercial real estate     1,081       9,112  
Commercial construction     -       1,479  
Residential real estate     3,193       3,559  
Total loans receivable on nonaccrual status   $ 5,734     $ 20,736  

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 individually evaluated for impairment.

At December 31, 2016 and 2015, loan balances of approximately $1.7 billion and $1.6 billion, respectively, were pledged to secure borrowings from the Federal Home Loan Bank.

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 simple 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. The following table presents information about the loan credit quality by loan segment at December 31, 2016 and 2015:

Credit Quality Indicators

   December 31, 2016 
   Pass   Special
Mention		   Substandard   Doubtful   Total 
   (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 
Total loans  $3,405,931   $37,816   $35,694   $-   $3,479,441 

 

   December 31, 2015 
   Pass   Special
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 segment at December 31, 2016, 2015 and 2014:

   December 31, 2016 
   (dollars in thousands) 
No Related Allowance Recorded  Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Investment		   Interest
Income
Recognized		 
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 
   (dollars in thousands) 
No Related Allowance Recorded  Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Investment		   Interest
Income
Recognized		 
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 

 

   December 31, 2014 
   (dollars in thousands) 
No Related Allowance Recorded  Recorded
Investment		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Investment		   Interest
Income
Recognized		 
Commercial  $481   $527           $494   $- 
Commercial real estate   5,890    6,857         6,276    129 
Residential real estate   3,072    3,406         3,170    41 
Consumer   109    101         107    - 
Total  $9,552   $10,891        $10,047   $170 

 

With An Allowance Recorded               
Commercial  $387   $389   $111   $389   $- 
Commercial real estate   3,520    3,520    150    3,584    171 
Total  $3,907   $3,909   $261   $3,973   $171 
Total                         
Commercial  $868   $917   $111   $883   $- 
Commercial real estate   9,410    10,107    150    9,860    300 
Residential real estate   3,072    3,406    -    3,170    41 
Consumer   109    101    -    106    - 
Total  $13,459   $14,531   $261   $14,019   $341 

Included in the impaired loans table are $13.3 million, $85.9 million and $1.8 million of performing TDRs as of December 31, 2016, 2015 and 2014, respectively. Cash basis interest and interest income recognized on accrual basis approximate each other.

The following table provides an analysis of the aging of the loans by segment, excluding net deferred fees that are past due at December 31, 2016 and December 31, 2015 by class:

Aging Analysis:

   December 31, 2016 
   30-59 Days
Past Due		   60-89 Days
Past Due		   90 Days or
Greater Past
Due and Still
Accruing		   Nonaccrual   Total Past
Due and
Nonaccrual		   Current   Total Loans
Receivable		  
                             
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 

    December 31, 2015  
    30-59 Days
Past Due		     60-89 Days
Past Due		     90 Days or
Greater Past
Due and Still
Accruing		     Nonaccrual     Total Past
Due and
Nonaccrual		     Current     Total Loans
Receivable		   
                                           
Commercial   $ 6,178     $ 3,505     $ -     $ 6,586     $ 16,269     $ 553,847     $ 570,116  
Commercial real estate     1,998       988       -       9,112       12,098       1,954,598       1,966,696  
Commercial construction     -       -       -       1,479       1,479       327,359       328,838  
Residential real estate     -       -       -       3,559       3,559       230,131       233,690  
Consumer     4       9       -       -       13       2,441       2,454  
Total   $ 8,180     $ 4,502     $ -     $ 20,736     $ 33,418     $ 3,068,376       3,101,794  

 Included in the 90 days or greater and still accruing are PCI 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: 

   December 31, 2016 
   Commercial   Commercial
real estate		   Commercial
construction		   Residential
real estate		   Consumer   Unallocated   Total 
   (in thousands) 
Allowance for loan and lease 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 

 

   December 31, 2015 
   Commercial   Commercial
real estate		   Commercial
construction		   Residential
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.

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

    Year Ended December 31, 2016  
    (dollars in thousands)  
    Commercial   Commercial
real estate		   Commercial
construction		   Residential
real estate		   Consumer   Unallocated   Total  
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 and lease 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  

 

    Year Ended December 31, 2015  
    (dollars in thousands)  
    Commercial   Commercial
real estate		   Commercial
construction		   Residential
real estate		   Consumer   Unallocated   Total  
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 and lease 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  

 

    Year Ended December 31, 2014  
    (dollars in thousands)  
    Commercial   Commercial
real estate		   Commercial
construction		   Residential
real estate		   Consumer   Unallocated   Total  
Balance at January 1, 2014   $ 1,698   $ 5,746   $ 362   $ 990   $ 146   $ 1,391   $ 10,333  
Loans charge-off     (379)     (398)     -     (159)     -     -     (936)  
Recoveries     50     -     -     19     11     -     80  
Provision for loan and lease losses     1,714     2,451     877     263     (150)     (472)     4,683  
Balance at December 31, 2014   $ 3,083   $ 7,799   $ 1,239   $ 1,113   $ 7   $ 919   $ 14,160  

For the year ended, 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, 2016, 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, 2016 and December 31, 2015 (dollars in thousands):

 

December 31, 2016 December 31, 2015
Recorded Recorded
      Investment       ALLL       Investment       ALLL
Troubled debt restructurings
       Beginning balance $ 86,629 $       4,500 $ 2,788 $       -
Additions 26,325 8,250 84,290 4,500
Payoffs/paydowns (2,616) (449)
Transfers (96,520) - -
Other - (12,750) - -
       Ending balance $ 13,818 $ - $ 86,629 $ 4,500

Loans modified in troubled debt restructurings totaled $13.8 million at December 31, 2016, of which $0.5 million were on nonaccrual status, $13.3 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.

During the year, approximately $96.5 million of taxi medallion loans were transferred to the loans held-for-sale category and, concurrently, were made nonaccrual. Prior to the transfer, the taxi medallion loans modified in a troubled debt restructuring had a specific reserve of $12.5 million, which was charged-off as part of the transfer of the entire taxi medallion loan portfolio to loans held-for-sale.

The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2016 (dollars in thousands):

Pre-Modification Post-Modification
Outstanding Outstanding
Number of Recorded Recorded
      Loans       Investment       Investment
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 (dollars in thousands):

Pre-Modification Post-Modification
Outstanding Outstanding
Number of Recorded Recorded
      Loans       Investment       Investment
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.

The following table presents loans by segment modified as troubled debt restructurings that occurred during the year ended December 31, 2014 (dollars in thousands):

Pre-Modification Post-Modification
Outstanding Outstanding
Number of Recorded Recorded
      Loans       Investment       Investment
Troubled debt restructurings:
       Commercial 1 $ 672 $ 289
       Commercial real estate - - -
       Commercial construction - - -
       Residential real estate 2 275 272
 
              Total 3 $ 947 $ 561

The TDRs presented as of December 31, 2014 did not increase the allowance for loan and lease losses and resulted in charge-offs of $333,000 during the year ended December 31, 2014. 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, 2014.