(5) Loans and Allowance for Loan Losses

	March 31, 2019
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	152,731		15,386		168,117
Other		21,983		247		22,230
Real estate mortgage - 1 to 4 family:
First mortgages		2,438,732		847,444		3,286,176
Home equity loans		71,753		18,264		90,017
Home equity lines of credit		237,874		44,160		282,034
Installment		10,043		2,536		12,579
Total loans, net	$	2,933,116	$	928,037		3,861,153
Less: Allowance for loan losses						44,671
Net loans					$	3,816,482

	December 31, 2018
(dollars in thousands)	New York and other states*		Florida		Total
Commercial:
Commercial real estate	$	156,278		15,275		171,553
Other		24,330		263		24,593
Real estate mortgage - 1 to 4 family:
First mortgages		2,442,711		845,166		3,287,877
Home equity loans		71,523		17,308		88,831
Home equity lines of credit		243,765		45,775		289,540
Installment		9,462		2,240		11,702
Total loans, net	$	2,948,069		926,027		3,874,096
Less: Allowance for loan losses						44,766
Net loans					$	3,829,330

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

At March 31, 2019 and December 31, 2018, the Company had approximately $27.2 million and $26.7 million of real estate construction loans, respectively. Of the $27.2 million in real estate construction loans at March 31, 2019, approximately $13.8 million are secured by first mortgages to residential borrowers while approximately $13.4 million were to commercial borrowers for residential construction projects. Of the $26.7 million in real estate construction loans at December 31, 2018, approximately $14.2 million are secured by first mortgages to residential borrowers while approximately $12.5 million were to commercial borrowers for residential construction projects. The vast majority of construction loans are in the Company’s New York market.

The Company lends in the geographic territory of its branch locations in New York, Florida, Massachusetts, New Jersey and Vermont. Although the loan portfolio is diversified, a portion of its debtors’ ability to repay depends significantly on the economic conditions prevailing in the respective geographic territory.

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

	March 31, 2019
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	696		-		696
Other		5		-		5
Real estate mortgage - 1 to 4 family:
First mortgages		18,282		1,542		19,824
Home equity loans		363		-		363
Home equity lines of credit		3,698		102		3,800
Installment		26		-		26
Total non-accrual loans		23,070		1,644		24,714
Restructured real estate mortgages - 1 to 4 family		33		-		33
Total nonperforming loans	$	23,103		1,644		24,747

	December 31, 2018
(dollars in thousands)	New York and other states*		Florida		Total
Loans in non-accrual status:
Commercial:
Commercial real estate	$	639		-		639
Other		6		-		6
Real estate mortgage - 1 to 4 family:
First mortgages		18,202		1,812		20,014
Home equity loans		247		-		247
Home equity lines of credit		3,924		103		4,027
Installment		4		15		19
Total non-accrual loans		23,022		1,930		24,952
Restructured real estate mortgages - 1 to 4 family		34		-		34
Total nonperforming loans	$	23,056		1,930		24,986

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

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of March 31, 2019 and December 31, 2018, other real estate owned included $703 thousand and $1.1 million of residential foreclosed properties, respectively. In addition, non-accrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $12.4 million as of March 31, 2019 and December 31, 2018.

The following tables present the aging of the recorded investment in past due loans by loan class and by region as of March 31, 2019 and December 31, 2018:

	March 31, 2019

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

Commercial:
Commercial real estate	$	96		-		565		661		152,070		152,731
Other		-		-		-		-		21,983		21,983
Real estate mortgage - 1 to 4 family:
First mortgages		2,798		780		13,471		17,049		2,421,683		2,438,732
Home equity loans		16		27		209		252		71,501		71,753
Home equity lines of credit		913		341		1,999		3,253		234,621		237,874
Installment		70		47		26		143		9,900		10,043

Total	$	3,893		1,195		16,270		21,358		2,911,758		2,933,116

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

Commercial:
Commercial real estate	$	-		-		-		-		15,386		15,386
Other		-		-		-		-		247		247
Real estate mortgage - 1 to 4 family:
First mortgages		603		158		571		1,332		846,112		847,444
Home equity loans		-		50		-		50		18,214		18,264
Home equity lines of credit		120		-		50		170		43,990		44,160
Installment		5		19		-		24		2,512		2,536

Total	$	728		227		621		1,576		926,461		928,037

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

Commercial:
Commercial real estate	$	96		-		565		661		167,456		168,117
Other		-		-		-		-		22,230		22,230
Real estate mortgage - 1 to 4 family:
First mortgages		3,401		938		14,042		18,381		3,267,795		3,286,176
Home equity loans		16		77		209		302		89,715		90,017
Home equity lines of credit		1,033		341		2,049		3,423		278,611		282,034
Installment		75		66		26		167		12,412		12,579

Total	$	4,621		1,422		16,891		22,934		3,838,219		3,861,153

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

	December 31, 2018

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

Commercial:
Commercial real estate	$	198		-		370		568		155,710		156,278
Other		-		-		-		-		24,330		24,330
Real estate mortgage - 1 to 4 family:
First mortgages		3,276		898		13,267		17,441		2,425,270		2,442,711
Home equity loans		158		94		212		464		71,059		71,523
Home equity lines of credit		963		348		1,691		3,002		240,763		243,765
Installment		44		29		2		75		9,387		9,462

Total	$	4,639		1,369		15,542		21,550		2,926,519		2,948,069

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

Commercial:
Commercial real estate	$	-		-		-		-		15,275		15,275
Other		-		-		-		-		263		263
Real estate mortgage - 1 to 4 family:
First mortgages		417		407		721		1,545		843,621		845,166
Home equity loans		50		-		-		50		17,258		17,308
Home equity lines of credit		40		-		50		90		45,685		45,775
Installment		12		7		15		34		2,206		2,240

Total	$	519		414		786		1,719		924,308		926,027

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

Commercial:
Commercial real estate	$	198		-		370		568		170,985		171,553
Other		-		-		-		-		24,593		24,593
Real estate mortgage - 1 to 4 family:
First mortgages		3,693		1,305		13,988		18,986		3,268,891		3,287,877
Home equity loans		208		94		212		514		88,317		88,831
Home equity lines of credit		1,003		348		1,741		3,092		286,448		289,540
Installment		56		36		17		109		11,593		11,702

Total	$	5,158		1,783		16,328		23,269		3,850,827		3,874,096

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

At March 31, 2019 and December 31, 2018, there were no loans that were 90 days past due and still accruing interest. As a result, non-accrual loans include all loans 90 days or more past due as well as certain loans less than 90 days past due that were placed on non-accrual status for reasons other than delinquent status. There are no commitments to extend further credit on non-accrual or restructured loans.

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

	For the three months ended March 31, 2019
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,048			39,772		946		44,766
Loans charged off:
New York and other states*		7			392		29		428
Florida		-			29		31		60
Total loan chargeoffss		7			421		60		488

Recoveries of loans previously charged off:
New York and other states*		3			74		6		83
Florida		-			10		-		10
Total recoveries		3			84		6		93
Net loans charged off		4			337		54		395
Provision for loan losses		(310	)		550		60		300
Balance at end of period	$	3,734			39,985		952		44,671

	For the three months ended March 31, 2018
(dollars in thousands)	Commercial			Real Estate Mortgage- 1 to 4 Family		Installment		Total
Balance at beginning of period	$	4,324			39,077		769		44,170
Loans charged off:
New York and other states*		-			131		71		202
Florida		-			-		3		3
Total loan chargeoffs		-			131		74		205

Recoveries of loans previously charged off:
New York and other states*		6			103		6		115
Florida		-			-		-		-
Total recoveries		6			103		6		115
Net loans charged off (recoveries)		(6	)		28		68		90
Provision for loan losses		(75	)		310		64		300
Balance at end of period	$	4,255			39,359		765		44,379

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

The Company has identified non-accrual commercial and commercial real estate loans, as well as all loans restructured under a troubled debt restructuring (“TDR”), as impaired loans. 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 as a TDR.

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 as of March 31, 2019 and December 31, 2018:

	March 31, 2019
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		3,734		39,985		952		44,671

Total ending allowance balance	$	3,734		39,985		952		44,671

Loans:
Individually evaluated for impairment	$	1,467		19,694		-		21,161
Collectively evaluated for impairment		188,880		3,638,533		12,579		3,839,992

Total ending loans balance	$	190,347		3,658,227		12,579		3,861,153

	December 31, 2018
(dollars in thousands)	Commercial Loans		1-to-4 Family Residential Real Estate		Installment Loans		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-		-		-		-
Collectively evaluated for impairment		4,048		39,772		946		44,766

Total ending allowance balance	$	4,048		39,772		946		44,766

Loans:
Individually evaluated for impairment	$	1,424		20,864		-		22,288
Collectively evaluated for impairment		194,722		3,645,384		11,702		3,851,808

Total ending loans balance	$	196,146		3,666,248		11,702		3,874,096

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 at March 31, 2019 and December 31, 2018 are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is considered collateral dependent.

The following tables present impaired loans by loan class as of March 31, 2019 and December 31, 2018:

	March 31, 2019

New York and other states*:	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	1,319	$	1,490		-		1,281
Other		37		87		-		132
Real estate mortgage - 1 to 4 family:
First mortgages		14,922		15,233		-		14,944
Home equity loans		247		267		-		252
Home equity lines of credit		2,161		2,301		-		2,585

Total	$	18,686		19,378		-		19,194

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

Commercial:
Commercial real estate	$	111		111		-		84
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,030		2,030		-		2,291
Home equity loans		82		82		-		85
Home equity lines of credit		252		252		-		253

Total	$	2,475		2,475		-		2,713

Total:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	1,430		1,601		-		1,365
Other		37		87		-		132
Real estate mortgage - 1 to 4 family:
First mortgages		16,952		17,263		-		17,235
Home equity loans		329		349		-		337
Home equity lines of credit		2,413		2,553		-		2,838

Total	$	21,161		21,853		-		21,907

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

	December 31, 2018

New York and other states*:	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	1,274		1,444		-		1,503
Other		38		88		-		123
Real estate mortgage - 1 to 4 family:
First mortgages		15,210		15,661		-		15,577
Home equity loans		252		272		-		262
Home equity lines of credit		2,772		2,996		-		2,772

Total	$	19,546		20,461		-		20,237

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

Commercial:
Commercial real estate	$	112		112		-		57
Other		-		-		-		-
Real estate mortgage - 1 to 4 family:
First mortgages		2,293		2,399		-		2,455
Home equity loans		84		84		-		86
Home equity lines of credit		253		253		-		326

Total	$	2,742		2,848		-		2,924

Total:
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment

Commercial:
Commercial real estate	$	1,386		1,556		-		1,560
Other		38		88		-		123
Real estate mortgage - 1 to 4 family:
First mortgages		17,503		18,060		-		18,032
Home equity loans		336		356		-		348
Home equity lines of credit		3,025		3,249		-		3,098

Total	$	22,288		23,309		-		23,161

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

The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as impaired. Interest income recognized on impaired loans was not material during the three months ended March 31, 2019 and 2018.

As of March 31, 2019 and December 31, 2018 impaired loans included approximately $10.9 million and $11.1 million of loans in accruing status that were identified as TDR’s in accordance with regulatory guidance related to Chapter 7 bankruptcy loans.

Management evaluates impairment on impaired loans on a quarterly basis. If, during this evaluation, impairment of the loan is identified, a chargeoff is taken at that time. As a result, as of March 31, 2019 and December 31, 2018, 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 following table presents, by class, loans that were modified as TDR’s:

	Three months ended 3/31/2019						Three months ended 3/31/2018

New York and other states*:	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
(dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Commercial:
Commercial real estate		-	$	-		-		-	$	-		-
Real estate mortgage - 1 to 4 family:
First mortgages		4	$	656		656		4	$	642		642
Home equity loans		-		-		-		-		-		-
Home equity lines of credit		-		-		-		3		240		240

Total		4	$	656	$	656		7	$	882	$	882

Florida:

Number of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

Number of

Contracts

Pre-Modification

Outstanding

Recorded

Investment

Post-Modification

Outstanding

Recorded

Investment

(dollars in thousands)

Commercial:

Commercial real estate

Real estate mortgage - 1 to 4 family:

First mortgages

Home equity loans

Home equity lines of credit

Total

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

The addition of these TDR’s did not have a significant impact on the allowance for loan losses.

In situations where the Bank considers a loan modification, management determines whether the borrower is experiencing financial difficulty by performing an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s underwriting policy.

Generally, the modification of the terms of loans was the result of the borrower filing for bankruptcy protection. Chapter 13 bankruptcies generally include the deferral of all past due amounts for a period of generally 60 months in accordance with the bankruptcy court order. In the case of Chapter 7 bankruptcies, as previously noted, even though there is no modification of terms, the borrowers’ debt to the Company was discharged and they did not reaffirm the debt.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In situations involving a borrower filing for Chapter 13 bankruptcy protection, however, a loan is considered to be in payment default once it is 30 days contractually past due, consistent with the treatment by the bankruptcy court.

The following table presents, by class, TDR’s that defaulted during the three months ended March 31, 2019 and 2018 which had been modified within the last twelve months:

	Three months ended 3/31/2019				Three months ended 3/31/2018
New York and other states*:	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
(dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		-	$	-		-	$	-
Real estate mortgage - 1 to 4 family:
First mortgages		-	$	-		-	$	-
Home equity lines of credit		-		-		1		3

Total		-	$	-		1	$	3

Florida: (dollars in thousands)	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Commercial:
Commercial real estate		-	$	-		-	$	-
Real estate mortgage - 1 to 4 family:
First mortgages		-	$	-		1	$	72
Home equity lines of credit		-		-		-		-

Total		-	$	-		1	$	72

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

The TDR’s that subsequently defaulted described above did not have a material impact on the allowance for loan losses.

The Company categorizes commercial 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 grading process analyzes non-homogeneous loans, such as commercial and commercial real estate loans, individually by grading the loans based on credit risk. The loan grades assigned to all loan types are tested by the Company’s internal loan review department in accordance with the Company’s internal loan review policy.

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 classified as such 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.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those loans classified as 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. All doubtful 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.

As of March 31, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	March 31, 2019

New York and other states*:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	148,784		3,947		152,731
Other		20,985		998		21,983

	$	169,769		4,945		174,714

Florida:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	15,386		-		15,386
Other		247		-		247

	$	15,633		-		15,633

Total:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	164,170		3,947		168,117
Other		21,232		998		22,230

	$	185,402		4,945		190,347

* Includes New York, New Jersey and Massachusetts.

	December 31, 2018

New York and other states:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	152,045		4,233		156,278
Other		23,331		999		24,330

	$	175,376		5,232		180,608

Florida:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	15,163		112		15,275
Other		263		-		263

	$	15,426		112		15,538

Total:
(dollars in thousands)	Pass		Classified		Total

Commercial:
Commercial real estate	$	167,208		4,345		171,553
Other		23,594		999		24,593

	$	190,802		5,344		196,146

* Includes New York, New Jersey and Massachusetts.

Included in classified loans in the above tables are impaired loans of $1.5 million and $1.4 million at March 31, 2019 and December 31, 2018, respectively.

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 as of March 31, 2019 and December 31, 2018 is included in the aging of the recorded investment of the past due loans table. In addition, the total nonperforming portion of these homogeneous loan pools as of March 31, 2019 and December 31, 2018 is presented in the non-accrual loans table.