5. Loans and Allowance for Loan Losses

The following table presents the recorded investment in loans by loan class:

	June 30, 2011
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	194,948		27,476		222,424
Other		26,550		150		26,700
Real estate mortgage - 1 to 4 family:
First mortgages		1,668,656		157,643		1,826,299
Home equity loans		49,249		1,151		50,400
Home equity lines of credit		273,962		24,352		298,314
Installment		3,786		51		3,837
Total loans, net	$	2,217,151		210,823		2,427,974
Less: Allowance for loan losses						45,561
Net loans					$	2,382,413

	December 31, 2010
(dollars in thousands)	New York and
	other states*		Florida		Total
Commercial:
Commercial real estate	$	196,803		28,644		225,447
Other		32,542		264		32,806
Real estate mortgage - 1 to 4 family:
First mortgages		1,611,645		139,932		1,751,577
Home equity loans		48,505		960		49,465
Home equity lines of credit		268,509		22,778		291,287
Installment		4,284		399		4,683
Total loans, net	$	2,162,288		192,977		2,355,265
Less: Allowance for loan losses						41,911
Net loans					$	2,313,354

* Includes New York, New Jersey, Vermont and Massachusetts.

At June 30, 2011 and December 31, 2010, the Company had approximately $13.2 million and $14.6 million of real estate construction loans. Construction loans are included in first mortgages and commercial real estate in the tables above.

The following tables present the recorded investment in non-accrual loans by loan class:

	June 30, 2011
(dollars in thousands)	New York and other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,073		7,186		12,259
Other		17		-		17
Real estate mortgage - 1 to 4 family:
First mortgages		21,515		11,758		33,273
Home equity loans		696		65		761
Home equity lines of credit		1,937		947		2,884
Installment		13		-		13
Total non-accrual loans		29,251		19,956		49,207
Restructured real estate mortgages - 1 to 4 family		324		-		324
Total nonperforming loans	$	29,575		19,956		49,531

	December 31, 2010
(dollars in thousands)	New York and other states*		Florida		Total
Loans in nonaccrual status:
Commercial:
Commercial real estate	$	5,617		8,281		13,898
Other		126		-		126
Real estate mortgage - 1 to 4 family:
First mortgages		18,067		12,888		30,955
Home equity loans		860		73		933
Home equity lines of credit		2,109		436		2,545
Installment		20		1		21
Total non-accrual loans		26,799		21,679		48,478
Restructured real estate mortgages - 1 to 4 family		336		-		336
Total nonperforming loans	$	27,135		21,679		48,814

*Includes loans originated in New York, New Jersey, Vermont and Massachusetts.

The Company has identified nonaccrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring, as impaired loans. As of June 30, 2011 and December 31, 2010, there were $12.3 million and $14.0 million, respectively, of nonaccrual commercial and commercial real estate loans classified as impaired.

As of June 30, 2011 and December 31, 2010, the Company's loan portfolio did not include any subprime loans or loans acquired with deteriorated credit quality.

The following tables present the aging of the recorded investment in past due loans by loan class and by region:

	June 30, 2011
New York and other states*:	30-59 Days		60-89 Days		90+ Days		Total 30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		3,260		3,260		191,688		194,948
Other		-		-		8		8		26,542		26,550
Real estate mortgage - 1 to 4 family:
First mortgages		8,195		3,928		18,050		30,173		1,638,483		1,668,656
Home equity loans		395		109		657		1,161		48,088		49,249
Home equity lines of credit		1,448		159		1,910		3,517		270,445		273,962
Installment		11		4		11		26		3,760		3,786

Total	$	10,049		4,200		23,896		38,145		2,179,006		2,217,151

Florida:	30-59 Days		60-89 Days		90+ Days		Total 30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		5,400		1,786		7,186		20,290		27,476
Other		-		-		-		-		150		150
Real estate mortgage - 1 to 4 family:
First mortgages		1,617		1,256		11,084		13,957		143,686		157,643
Home equity loans		-		-		65		65		1,086		1,151
Home equity lines of credit		50		-		556		606		23,746		24,352
Installment		-		2		-		2		49		51

Total	$	1,667		6,658		13,491		21,816		189,007		210,823

	December 31, 2010
New York and other states*:	30-59 Days		60-89 Days		90+ Days		Total 30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		3,870		3,870		192,933		196,803
Other		-		13		126		139		32,403		32,542
Real estate mortgage - 1 to 4 family:
First mortgages		11,129		4,275		15,615		31,019		1,580,626		1,611,645
Home equity loans		228		63		690		981		47,524		48,505
Home equity lines of credit		1,324		19		1,338		2,681		265,828		268,509
Installment		46		4		20		70		4,214		4,284

Total	$	12,727		4,374		21,659		38,760		2,123,528		2,162,288

Florida:	30-59Days		60-89Days		90+ Days		Total 30+ days				Total
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans

Commercial:
Commercial real estate	$	-		-		2,281		2,281		26,363		28,644
Other		-		-		-		-		264		264
Real estate mortgage - 1 to 4 family:
First mortgages		5,219		553		12,427		18,199		121,733		139,932
Home equity loans		26		-		73		99		861		960
Home equity lines of credit		422		10		410		842		21,936		22,778
Installment		-		-		1		1		398		399

Total	$	5,667		563		15,192		21,422		171,555		192,977

As of June 30, 2011 and December 31, 2010, there were no loans that are 90 days past due and still accruing interest. As a result, non-accrual loans includes all loans 90 days past due and greater as well as certain loans less than 90 days past due that were placed in non-accruing status for reasons other than delinquent status. The $5.4 million increase during the quarter in Florida commercial real estate 60-89 days past due is a loan already in non-accruing status.

Approximately $11 thousand, and $12 thousand of interest on nonaccrual and restructured loans was collected and recognized as income for the three months ended June 30, 2011 and 2010, respectively and approximately $22 thousand and $24 thousand of interest on nonaccrual and restructured loans was collected and recognized as income for the six months ended June 30, 2011 and 2010, respectively. There are no commitments to extend further credit on nonaccrual or restructured loans.

Activity in the allowance for loan losses by portfolio segment, is summarized as follows:

(dollars in thousands)	For the quarter ended June 30, 2011
	Commercial		Real Estate Mortgage- 1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,150		39,336		194			43,680
Loans charged off:
New York and other states*		19		810		26			855
Florida		600		1,741		-			2,341
Total loan chargeoffs		619		2,551		26			3,196

Recoveries of loans previously charged off:
New York and other states*		51		131		18			200
Florida		1		26		-			27
Total recoveries		52		157		18			227
Net loans charged off		567		2,394		8			2,969
Provision for loan losses		581		4,302		(33	)		4,850
Balance at end of period	$	4,164		41,244		153			45,561

(dollars in thousands)	For the six months ended June 30, 2011
			Real Estate
			Mortgage-
	Commercial		1 to 4 Family		Installment			Total
Balance at beginning of period	$	4,227		37,448		236			41,911
Loans charged off:
New York and other states*		69		1,815		48			1,932
Florida		600		3,618		1			4,219
Total loan chargeoffs		669		5,433		49			6,151

Recoveries of loans previously charged off:
New York and other states*		51		237		31			319
Florida		4		27		1			32
Total recoveries		55		264		32			351
Net loans charged off		614		5,169		17			5,800
Provision for loan losses		551		8,965		(66	)		9,450
Balance at end of period	$	4,164		41,244		153			45,561

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:

	June 30, 2011
	Commercial Loans		Real Estate Mortgage- 1 to 4 Family		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,164		41,244		153		45,561

Total ending allowance balance	$	4,164		41,244		153		45,561


Loans:
Individually evaluated for impairment	$	12,276		324		-		12,600
Collectively evaluated for impairment		236,848		2,174,689		3,837		2,415,374

Total ending loans balance	$	249,124		2,175,013		3,837		2,427,974

	December 31, 2010
			Real Estate Mortgage-
	Commercial Loans		1 to 4 Family		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,227		37,448		236		41,911

Total ending allowance balance	$	4,227		37,448		236		41,911


Loans:
Individually evaluated for impairment	$	14,024		336		-		14,360
Collectively evaluated for impairment		244,229		2,091,993		4,683		2,340,905

Total ending loans balance	$	258,253		2,092,329		4,683		2,355,265

The Company identifies impaired loans and measures the impairment in accordance with “Accounting by Creditors for Impairment of a Loan” (FASB ASC 310-10-35). A loan is considered impaired when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring (TDR). These standards are applicable principally to commercial and commercial real estate loans; however, certain provisions dealing with restructured loans also apply to retail loan products. A loan for which the terms have been modified, and for which the borrower is experiencing financial difficulties, is considered a TDR and is classified as impaired. TDR's, which are included in nonaccrual loans at June 30, 2011 and December 31, 2010, are measured at the present value of estimated future cash flows using the loan's effective rate at inception.

The following tables present impaired loans by loan class as of June 30, 2011 and December 31, 2010:

	June 30, 2011
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

Commercial:
Commercial real estate	$	5,073		5,659		-		5,359		-
Other		17		37		-		98		-
Real estate mortgage - 1 to 4 family:
First mortgages		324		493		-		330		18
Home equity loans		-		52		-		-		3
Home equity lines of credit		-		76		-		-		1

Total	$	5,414		6,317		-		5,787		22

Florida:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

Commercial:
Commercial real estate	$	7,186		11,156		-		7,686		-
Other		-		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-		-		-		-

Total	$	7,186		11,156		-		7,686		-

	December 31, 2010
New York and other states*:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

Commercial:
Commercial real estate	$	5,617		6,217		-		3,792		-
Other		126		189		-		179		-
Real estate mortgage - 1 to 4 family:
First mortgages		336		516		-		373		39
Home equity loans		-		58		-		-		6
Home equity lines of credit		-		77		-		-		3

Total	$	6,079		7,057		-		4,344		48

Florida:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

Commercial:
Commercial real estate	$	8,281		12,798		-		9,289		-
Other		-		-		-		1		-
Real estate mortgage - 1 to 4 family:
First mortgages		-		-		-		-		-

Total	$	8,281		12,798		-		9,290		-

The average recorded investment in impaired loans includes the year-to-date average of all impaired loans.

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired.

Management evaluates impairment on commercial and commercial real estate loans that are past due as well as in situations where circumstances dictate that an evaluation is prudent. If, during this evaluation, impairment of the loan is identified, a charge-off is taken at that time. As a result, as of June 30, 2011 and December 31, 2010, based upon management's evaluation and due to the sufficiency of chargeoffs taken, none of the allowance for loan losses has been allocated to a specific impaired loan(s).

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. On at least an annual basis, the Company's loan review process analyzes non-homogeneous loans, such as commercial and commercial real estate loans, individually by grading the loans based on credit risk. The Company uses the following definitions for classified loans:

Special Mention: Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company's credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of 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 Company will sustain some loss if the deficiencies are not corrected. All substandard loans are considered impaired.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	As of June 30, 2011
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	187,549		7,399		194,948
Other		26,413		137		26,550

	$	213,962		7,536		221,498

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	20,290		7,186		27,476
Other		150		-		150

	$	20,440		7,186		27,626

	As of December 31, 2010
New York and other states*:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	189,809		6,994		196,803
Other		32,286		256		32,542

	$	222,095		7,250		229,345

Florida:	Pass		Classified		Total

(dollars in thousands)

Commercial:
Commercial real estate	$	20,363		8,281		28,644
Other		264		-		264

	$	20,627		8,281		28,908

For homogeneous loan pools, such as residential mortgages, home equity lines of credit, and installment loans, the Company uses payment status to identify the credit risk in these loan portfolios. Payment status is reviewed on a daily basis by the Bank's collection area and on a monthly basis with respect to determining the adequacy of the allowance for loan losses. The payment status of these homogeneous pools at June 30, 2011 and December 31, 2010 is included in the aging of the recorded investment of past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools at June 30, 2011 and December 31, 2010 is presented in the recorded investment in non-accrual loans table.