3.LOANS AND LEASES, NET

Major categories of loans and leases at December 31, 2014 and 2013 are summarized as follows:


	2014		2013
Mortgage loans on real estate:		(in thousands)
Residential Mortgages	$	98,374	$	94,027
Commercial and multi-family		363,252		361,247
Construction-Residential		721		1,509
Construction-Commercial		40,986		23,902
Home equities		59,948		57,228
Total real estate loans		563,281		537,913

Commercial and industrial loans		129,456		106,952
Consumer loans		1,764		938
Other		404		323
Net deferred loan origination costs		759		870
Total gross loans		695,664		646,996

Allowance for loan losses		(12,533)		(11,503)

Loans, net	$	683,131	$	635,493

Residential Mortgages: The Company originates adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner-occupied properties located in the Company’s market area. They are amortized over 10 to 30 years. Loans on one-to-four-family residential real estate are mostly originated in amounts of no more than 80% of appraised value or have private mortgage insurance. Mortgage title insurance and hazard insurance are normally required. Construction loans have a unique risk, because they are secured by an incomplete dwelling.

The Bank, in its normal course of business, sells certain residential mortgages which it originates to FNMA. The Company maintains servicing rights on the loans that it sells to FNMA and earns a fee thereon. The Bank determines with each origination of residential real estate loans which desired maturities, within the context of overall maturities in the loan portfolio, provide the appropriate mix to optimize the Bank’s ability to absorb the corresponding interest rate risk within the Company’s tolerance ranges. This practice allows the Company to manage interest rate risk, liquidity risk, and credit risk. At December 31, 2014 and 2013, the Company had approximately $71.6 million and $63.5 million, respectively, in unpaid principal balances of loans that it services for FNMA. For the years ended December 31, 2014 and 2013, the Company sold $15.3 million and $0.8 million, respectively, in loans to FNMA and realized gains on those sales of $203 thousand and $25 thousand, respectively. Gains or losses recognized upon the sale of loans are determined on a specific identification basis. The Company had a related asset of approximately $0.5 million for the servicing portfolio rights as of December 31, 2014 and 2013. There were $0.4 million in loans held for sale at December 31, 2014 compared with no loans held for sale at December 31, 2013. Loans held for sale are typically in the portfolio for less than a month. As a result, the carrying value approximates fair value. The Company has never been contacted by FNMA to repurchase any loans due to improper documentation or fraud.

Due to the lack of foreclosure activity and absence of any ongoing litigation at December 31, 2014 and 2013, the Company had no accrual for loss contingencies or potential costs associated with foreclosure-related activities at those dates.

Commercial and Multi-Family Mortgages and Commercial Construction Loans: Commercial real estate loans are made to finance the purchases of real estate with completed structures or in the midst of being constructed. These commercial real estate loans are secured by first liens on the real estate, which may include apartments, hotels, retail stores or plazas, healthcare facilities, and other non-owner-occupied facilities. These loans are generally less risky than commercial and industrial loans, since they are secured by real estate and buildings. The Company offers commercial mortgage loans with up to an 80% LTV ratio for up to 20 years on a variable and fixed rate basis. Many of these mortgage loans either mature or are subject to a rate call after three to five years. The Company’s underwriting analysis includes credit verification, independent appraisals, a review of the borrower's financial condition, and the underlying cash flows. These loans are typically originated in amounts of no more than 80% of the appraised value of the property. Construction loans have a unique risk, because they are secured by an incomplete dwelling.

As of December 31, 2014, there were $179.1 million in residential and commercial mortgage loans pledged to FHLBNY to serve as collateral for borrowings.

Home Equities: The Company originates home equity lines of credit and second mortgage loans (loans secured by a second lien position on one-to-four-family residential real estate). These loans carry a higher risk than first mortgage residential loans as they are in a second position relating to collateral. Risk is reduced through underwriting criteria, which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security interest, with title insurance when necessary, is taken in the underlying real estate.

Commercial and Industrial Loans: These loans generally include term loans and lines of credit. Such loans are made available to businesses for working capital (including inventory and receivables), business expansion (including acquisition of real estate, expansion and improvements) and equipment purchases. As a general practice, a collateral lien is placed on equipment or other assets owned by the borrower. These loans generally carry a higher risk than commercial real estate loans based on the nature of the underlying collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also attempts to secure real estate as collateral and obtain personal guarantees of the borrowers. To further reduce risk and enhance liquidity, these loans generally carry variable rates of interest, re-pricing in three- to five-year periods, and have a maturity of five years or less. Lines of credit generally carry floating rates of interest (e.g., prime plus a margin).

Consumer Loans: The Company funds a variety of consumer loans, including direct automobile loans, recreational vehicle loans, boat loans, aircraft loans, home improvement loans, and personal loans (collateralized and uncollateralized). Most of these loans carry a fixed rate of interest with principal repayment terms typically ranging up to five years, based upon the nature of the collateral and the size of the loan. The majority of consumer loans are underwritten on a secured basis using the underlying collateral being financed. A minimal amount of loans are unsecured, which carry a higher risk of loss.

Other Loans: These loans included $0.1 million at December 31, 2014 and $0.2 million at December 31, 2013 of overdrawn deposit accounts classified as loans.

Net loan commitment fees are deferred and amortized into fee income or other expense on a straight-line basis over the commitment period.

The Company maintains an allowance for loan and lease losses in order to capture the probable losses inherent in its loan and lease portfolio. There is a risk that the Company may experience significant loan and lease losses in 2015 and beyond which could exceed the allowance for loan and lease losses. This risk is heightened by the current uncertain and adverse economic conditions. If the Company's assumptions and judgments prove to be incorrect or bank regulators require the Company to increase its provision for loan and lease losses or recognize further loan and lease charge-offs, the Company may have to increase its allowance for loan and lease losses or loan and lease charge-offs which could have a material adverse effect on the Company's operating results and financial condition. There can be no assurance that the Company's allowance for loan and lease losses will be adequate to protect the Company against loan and lease losses that it may incur.

Changes in the allowance for loan and lease losses for the years ended December 31, 2014, 2013 and 2012 follow:


	2014		2013		2012
	(in thousands)
Balance, beginning of year	$	11,503	$	9,732	$	11,495
Provisions for loan and lease losses		1,229		1,540		(68)
Recoveries		863		942		225
Loans and leases charged off		(1,062)		(711)		(1,920)
Balance, end of year	$	12,533	$	11,503	$	9,732

The following tables summarize the allowance for loan and lease losses, as of December 31, 2014 and 2013, respectively, by portfolio segments. The segments presented are at the level management uses to assess and monitor the risk and performance of the portfolio. The Company does not currently consider other factors such as industry and geography in assessing the loan portfolio.


2014

(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
and lease losses:
Beginning balance	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503
Charge-offs		(957)		(57)		(46)		-		(2)		-		-		(1,062)
Recoveries		574		58		40		18		-		173		-		863
Provision		790		737		47		(115)		(57)		(173)		-		1,229
Ending balance	$	4,896	$	5,650	$	78	$	941	$	819	$	-	$	149	$	12,533

Allowance for loan
and lease losses:
Ending balance:
Individually evaluated
for impairment	$	988	$	274	$	48	$	3	$	-	$	-	$	-	$	1,313
Collectively evaluated
for impairment		3,908		5,376		30		938		819		-		149		11,220
Total	$	4,896	$	5,650	$	78	$	941	$	819	$	-	$	149	$	12,533

Loans and leases:
Ending balance:
Individually evaluated
for impairment	$	5,718	$	5,817	$	48	$	2,535	$	911	$	-	$	-	$	15,029
Collectively evaluated
for impairment		123,738		398,421		2,120		96,560		59,037		-		-		679,876
Total	$	129,456	$	404,238	$	2,168	$	99,095	$	59,948	$	-	$	-	$	694,905

Note: Loan and lease balances do not include $759 thousand in net deferred loan and lease originations as of December 31, 2014.

* includes construction loans

** includes other loans


2013

(in thousands)	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer **		Residential Mortgages*		HELOC		Direct Financing Leases		Unallocated		Total
Allowance for loan
and lease losses:
Beginning balance	$	3,617	$	4,493	$	18	$	662	$	746	$	47	$	149	$	9,732
Charge-offs		(20)		(460)		(64)		(39)		(128)		-		-		(711)
Recoveries		240		444		13		2		1		242		-		942
Provision		652		435		70		413		259		(289)		-		1,540
Ending balance	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503

Allowance for loan
and lease losses:
Ending balance:
Individually evaluated
for impairment	$	1,187	$	216	$	20	$	47	$	39	$	-	$	-	$	1,509
Collectively evaluated
for impairment		3,302		4,696		17		991		839		-		149		9,994
Total	$	4,489	$	4,912	$	37	$	1,038	$	878	$	-	$	149	$	11,503

Loans and leases:
Ending balance:
Individually evaluated
for impairment	$	4,388	$	12,054	$	20	$	1,952	$	447	$	-	$	-	$	18,861
Collectively evaluated
for impairment		102,564		373,095		1,241		93,584		56,781		-		-		627,265
Total	$	106,952	$	385,149	$	1,261	$	95,536	$	57,228	$	-	$	-	$	646,126

Note: Loan and lease balances do not include $870 thousand in net deferred loan and lease originations as of December 31, 2013.

* includes construction loans

** includes other loans

The national economy continued to slowly shows signs of improvement in 2014, with national and state unemployment improving from 6.7% and 7.1%, respectively, as of December 31, 2013 to 5.6% and 5.8%, respectively, as of December 31, 2014. However, the unemployment rate remains above historical standards and other economic indicators such as GDP growth continue to reflect gradual improvement in the economy. Although the economy has yielded signs of improvement, management did not significantly impact the provision for loan losses specifically related to the current economic environment. The current year provision for loans was primarily driven by loan growth and an increase in criticized commercial real estate loans in 2014.

The following table provides data, at the class level, of credit quality indicators of certain loans and leases, as of December 31, 2014 and 2013, respectively:


December 31, 2014
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	29,421	$	299,798	$	329,219	$	83,789
4		10,492		50,691		61,183		30,223
5		1,073		7,853		8,926		8,662
6		-		4,757		4,757		6,613
7		-		153		153		169
Total	$	40,986	$	363,252	$	404,238	$	129,456


December 31, 2013
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
3	$	19,086	$	297,819	$	316,905	$	78,294
4		3,283		47,584		50,867		15,194
5		-		4,028		4,028		9,468
6		1,533		11,479		13,012		3,744
7		-		337		337		252
Total	$	23,902	$	361,247	$	385,149	$	106,952

The Company’s risk ratings are monitored by the individual relationship managers and changed as deemed appropriate after receiving updated financial information from the borrowers or deterioration or improvement in the performance of a loan is evident in the customer’s payment history. Each commercial relationship is individually assigned a risk rating. The Company also maintains a loan review process that monitors the management of the Company’s commercial loan portfolio by the relationship managers. The Company’s loan review function reviews at least 40% of the commercial and commercial mortgage portfolio annually.

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process. Consumers are not required to provide the Company with updated financial information as differentiated from the requirements for the Company’s commercial customers. Consumer loans are also smaller in balances. Given the lack of updated information since the initial underwriting of the loan and small size of individual loans, the Company uses the delinquency status as the credit quality indicator for consumer loans. The delinquency table is shown below. The Company does not lend to sub-prime borrowers. Unless the loan is well secured and in the process of collection, all consumer loans that are more than 90 days past due are placed in non-accrual status.

Once a consumer loan reaches 60 days past due, management orders an appraisal and runs a credit report on the borrower. If the loan is placed in nonaccrual status, an impairment test is performed. The book value of the loan is compared to the collateral value as determined by an independent appraisal, discounted for potential selling costs, appraisal age, or other factors particular to the property or borrower. In order to perform the impairment test, management determines the amount of the senior liens held by other lenders in the cases in which the Company holds a junior lien. When the Company is not in the first lien position, the collateral value is more heavily discounted to account for the increased risk.

The following table provides an analysis of the age of the recorded investment in loans and leases that were past due as of December 31, 2014 and 2013, respectively:


December 31, 2014
(in thousands)
															Non-accruing
							Total Past		Current		Total		90+ Days		Loans and
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Leases

Commercial and
industrial	$	153	$	60	$	274	$	487	$	128,969	$	129,456	$	-	$	5,500
Residential real estate:
Residential		848		158		682		1,688		96,686		98,374		-		1,296
Construction		-		-		-		-		721		721		-		-

Commercial real estate:
Commercial		4,201		3,115		513		7,829		355,423		363,252		-		3,162
Construction		8		-		201		209		40,777		40,986		201		-
Home equities		594		120		192		906		59,042		59,948		-		415
Direct financing leases		-		-		-		-		-		-		-		-
Consumer		13		1		-		14		1,750		1,764		-		17
Other		-		-		-		-		404		404		-		-
Total Loans	$	5,817	$	3,454	$	1,862	$	11,133	$	683,772	$	694,905	$	201	$	10,390


December 31, 2013
(in thousands)
															Non-accruing
							Total Past		Current		Total		90+ Days		Loans and
	30-59 days		60-89 days		90+ days		Due		Balance		Balance		Accruing		Leases

Commercial and
industrial	$	197	$	447	$	358	$	1,002	$	105,950	$	106,952	$	-	$	2,970
Residential real estate:
Residential		392		72		915		1,379		92,648		94,027		-		1,376
Construction		-		-		-		-		1,509		1,509		-		-

Commercial real estate:
Commercial		6,976		1,050		75		8,101		353,146		361,247		-		8,873
Construction		-		-		-		-		23,902		23,902		-		-
Home equities		100		267		76		443		56,785		57,228		-		447
Direct financing leases		1		2		47		50		-		-		-		47
Consumer		1		21		-		22		916		938		-		20
Other		-		-		-		-		323		323		-		-
Total Loans	$	7,667	$	1,859	$	1,471	$	10,997	$	635,179	$	646,126	$	-	$	13,733

The following table provides data, at the class level, of impaired loans and leases:




		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,017	$	1,022	$	-	$	1,096	$	9	$	66

Residential real estate:
Residential		2,264		2,435		-		2,271		37		68
Construction		-		-		-		-		-		-

Commercial real estate:
Commercial		2,103		2,208		-		2,139		33		91
Construction		1,074		1,074		-		1,169		-		44

Home equities		911		950		-		917		17		22

Direct financing leases		-		-		-		-		-		-

Consumer		-		-		-		-		-		-

Other		-		-		-		-		-		-

Total impaired loans and leases	$	7,369	$	7,689	$	-	$	7,592	$	96	$	291



		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,701	$	4,734	$	988	$	4,701	$	64	$	234

Residential real estate:
Residential		271		285		3		271		20		-
Construction		-		-		-		-		-		-

Commercial real estate:
Commercial		2,640		2,785		274		2,708		96		50
Construction		-		-		-		-		-		-

Home equities		-		-		-		-		-		-

Direct financing leases		-		-		-		-		-		-

Consumer		48		60		48		49		5		6

Other		-		-		-		-		-		-

Total impaired loans and leases	$	7,660	$	7,864	$	1,313	$	7,729	$	185	$	290



		At December 31, 2014
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	5,718	$	5,756	$	988	$	5,797	$	73	$	300
		-		-		-		-		-		-
Residential real estate:
Residential		2,535		2,720		3		2,542		57		68
Construction		-		-		-		-		-		-
		-		-		-		-		-		-
Commercial real estate:
Commercial		4,743		4,993		274		4,847		129		141
Construction		1,074		1,074		-		1,169		-		44
		-		-		-		-		-		-
Home equities		911		950		-		917		17		22
		-		-		-		-		-		-
Direct financing leases		-		-		-		-		-		-
		-		-		-		-		-		-
Consumer		48		60		48		49		5		6
		-		-		-		-		-		-
Other		-		-		-		-		-		-

Total impaired loans and leases	$	15,029	$	15,553	$	1,313	$	15,321	$	281	$	581




		At December 31, 2013
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,247	$	1,352	$	-	$	1,405	$	100	$	59

Residential real estate:
Residential		1,331		1,460		-		1,388		61		9
Construction		-		-		-		-		-		-

Commercial real estate:
Commercial		9,937		10,288		-		9,832		302		109
Construction		599		599		-		707		-		26

Home equities		408		438		-		402		19		4

Direct financing leases		26		27		-		29		-		-

Consumer		-		-		-		-		-		-

Other		-		-		-		-		-		-

Total impaired loans and leases	$	13,548	$	14,164	$	-	$	13,763	$	482	$	207



		At December 31, 2013
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	3,141	$	3,191	$	1,187	$	3,577	$	60	$	108

Residential real estate:
Residential		621		624		47		622		10		27
Construction		-		-		-		-		-		-

Commercial real estate:
Commercial		584		650		70		604		6		26
Construction		934		934		146		934		-		33

Home equities		39		39		39		39		-		2

Direct financing leases		-		-		-		-		-		-

Consumer		20		29		20		11		3		2

Other		-		-		-		-		-		-

Total impaired loans and leases	$	5,339	$	5,467	$	1,509	$	5,787	$	79	$	198



		At December 31, 2013
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Foregone		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	4,388	$	4,543	$	1,187	$	4,982	$	160	$	167
		-		-		-		-		-		-
Residential real estate:
Residential		1,952		2,084		47		2,010		71		36
Construction		-		-		-		-		-		-
		-		-		-		-		-		-
Commercial real estate:
Commercial		10,521		10,938		70		10,436		308		135
Construction		1,533		1,533		146		1,641		-		59
		-		-		-		-		-		-
Home equities		447		477		39		441		19		6
		-		-		-		-		-		-
Direct financing leases		26		27		-		29		-		-
		-		-		-		-		-		-
Consumer		20		29		20		11		3		2
		-		-		-		-		-		-
Other		-		-		-		-		-		-

Total impaired loans and leases	$	18,887	$	19,631	$	1,509	$	19,550	$	561	$	405

There were $7.4 million in impaired loans with no related allowance at December 31, 2014, and $13.5 million in impaired loans with no related allowance at December 31, 2013. As management identifies impaired loans that are collateral dependent, new appraisals are ordered to determine the fair value of the collateral. It should also be noted that when estimating the fair value of collateral for the purpose of performing an impairment test, management further reduces the appraised value of the collateral to account for estimated selling or carrying costs, age of the appraisal if applicable, or any other perceived market or borrower-specific risks to the value of the collateral.

The majority of the interest income in the preceding table was interest income recognized prior to these loans and leases being identified as impaired and placed on non-accrual. The interest income foregone in the preceding table represents interest income that the Company did not recognize on those loans and leases while they were on non-accrual and impaired.

The following table summarizes the Bank’s non-accrual loans and leases and loans and leases 90 days or more past due and still accruing:




	December 31, 2014			December 31, 2013
		(in thousands)
Non-accruing loans and leases:
Commercial and industrial loans	$	5,500		$	2,970
Residential real estate:
Residential		1,296			1,376
Construction		-			-
Commercial real estate:
Commercial and multi-family		3,162			8,873
Construction		-			-
Home equities		415			447
Direct financing leases		-			47
Consumer loans		17			20
Other		-			-
Total non-accruing loans and leases	$	10,390		$	13,733

Accruing loans 90+ days past due		201			-
Total non-performing loans and leases	$	10,591		$	13,733

Total non-performing loans and leases
to total assets		1.25	%		1.65	%
Total non-performing loans and leases
to total loans and leases		1.52	%		2.12	%

The Bank had no loan commitments to borrowers in non-accrual status at December 31, 2014 and 2013.

Troubled debt restructurings (“TDRs”)

The Company had $6.6 million in loans and leases that were restructured and deemed to be TDR’s at December 31, 2014 with $1.9 million of those balances in non-accrual status. Any TDR that is placed on non-accrual is not returned to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. All of the restructurings were allowed in an effort to maximize the Company’s ability to collect on loans and leases where borrowers were experiencing financial difficulty. The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired.

The following table presents the Company’s TDR loans and leases as of December 31, 2014, and 2013, respectively:




		December 31, 2014
		($ in thousands)

		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	492	$	274	$	218	$	173

Residential real estate:
Residential		1,833		594		1,239		-
Construction		-		-		-		-

Commercial real estate:
Commercial and multi family		2,428		847		1,581		33
Construction		1,074		-		1,074		-

Home equities		728		233		495		-
Direct financing leases		-		-		-		-
Consumer loans		31		-		31		31
Other		-		-		-		-

Total troubled restructured loans and leases	$	6,586	$	1,948	$	4,638	$	237



		December 31, 2013
		($ in thousands)

		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	4,262	$	2,903	$	1,359	$	983

Residential real estate:
Residential		1,031		454		577		-
Construction		-		-		-		-

Commercial real estate:
Commercial and multi family		10,211		8,563		1,648		33
Construction		1,533		-		1,533		-
								-
Home equities		56		56		-		-
Direct financing leases		26		12		14		-
Consumer loans		-		-		-		-
Other		-		-		-		-

Total troubled restructured loans and leases	$	17,119	$	11,988	$	5,131	$	1,016

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the customer time to improve cash flow or sell the property. Other common types of concessions leading to the designation of a TDR are lines of credit that are termed out and extensions of maturities at rates that are less than market given the risk profile of the borrower.

The following tables show the data for TDR activity by type of concession granted to the borrower during 2014 and 2013:



	Year ended December 31, 2014					Year ended December 31, 2013
	($ in thousands)					($ in thousands)

Troubled Debt Restructurings by Type of Concession	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 and Industrial:
Deferral of principal	1	$	16	$	16	6	$	2,400	$	2,400
Interest rate reduction	-		-		-	2		330		330
Extension of maturity and
interest rate reduction	-		-		-	5		361		361
Combination of concessions	-		-		-	1		250		250
Residential Real Estate & Construction:
Extension of maturity	2		615		615	4		583		583
Extension of maturity and
interest rate reduction	1		208		208	-		-		-
Commercial Real Estate & Construction:
Deferral of principal	-		-		-	2		6,438		7,963
Extension of maturity	-		-		-	2		739		739
Extension of maturity and
interest rate reduction	1		250		250	-		-		-
Home Equities:
Extension of maturity	9		592		592	-		-		-
Extension of maturity and
interest rate reduction	2		84		84	1		136		136
Term out line of credit	-		-		-	1		57		57
Consumer loans
Rate reduction	1		31		31	-		-		-
Other	-		-		-	-		-		-

Modifications made to loans in a troubled debt restructuring did not have a material impact on the Company’s net income for the years ended December 31, 2014 and 2013. All of the C&I and commercial real estate TDR’s were already considered impaired and sufficiently reserved for before being identified as a TDR.

The reserve for a TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. At December 31, 2014, there were no commitments to lend additional funds to debtors owing loans or leases whose terms have been modified in TDRs.

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan or lease in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR and the loan or lease is determined to be uncollectible, the loan or lease will be charged off to its collateral value. A loan or lease is considered in default when the loan or lease is 90 days past due or is charged off. The following table presents loans and leases which were classified as TDR’s during the previous twelve months which have subsequently defaulted during the twelve month periods ended December 31:




	Year Ended December 31, 2014			Year Ended December 31, 2013
	($ in thousands)			($ in thousands)
Troubled Debt Restructurings	Number of	Recorded		Number of	Recorded
That Subsequently Defaulted	Contracts	Investment		Contracts	Investment
Commercial and Industrial	3	$	191	7	$	224
Residential Real Estate:
Residential	-		-	-		-
Construction	-		-	-		-
Commercial Real Estate:
Commercial and Multi-Family	1		250	1		160
Construction	-		-	-		-
Home Equities	1		54	-		-
Direct financing leases	-		-	-		-
Consumer loans	-		-	-		-
Other	-		-	-		-