Annual Statements Open main menu

BCB BANCORP INC - Quarter Report: 2015 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-50275

 

BCB Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

New Jersey

 

26-0065262

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

I.D. No.)

 

 

104-110 Avenue C Bayonne, New Jersey

 

07002

(Address of principal executive offices)

 

(Zip Code)

 

(201) 823-0700

(Registrant’s telephone number, including area code)

 

 

Not Applicable

 (Former name, former address and former fiscal year if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes    *   No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       Yes       No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large Accelerated Filer

 

*

  

Accelerated Filer

 

 

 

 

 

 

Non-Accelerated Filer

 

*

  

Smaller Reporting Company   

 *

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).      Yes      No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 5, 2015, BCB Bancorp, Inc., had 8,409,144 shares of common stock, no par value, outstanding.

 

 

 


 

 

 

 

 

 

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

 

 

 

 

 

 

 

  

Page

 

PART I. CONSOLIDATED FINANCIAL INFORMATION

  

 

 

 

 

 

Item 1. Consolidated Financial Statements 

  

 

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2015 (unaudited) and December 31, 2014 

  

 

  

 

 

Consolidated Statements of Income for the three months ended March 31, 2015 and March 31, 2014 (unaudited) 

  

 

  

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and March 31, 2014  (unaudited) 

 

 

 

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2015 (unaudited) 

  

 

  

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and March 31, 2014 (unaudited)

  

 

  

 

Notes to Unaudited Consolidated Financial Statements

  

 

  

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

  

 

40 

  

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk 

  

 

42 

  

 

 

Item 4. Controls and Procedures 

  

 

43 

  

 

 

PART II. OTHER INFORMATION 

  

 

44 

  

 

 

Item 1. Legal Proceedings 

  

 

44 

  

 

 

Item 1A. Risk Factors 

  

 

44 

  

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

  

 

45 

  

 

 

Item 3. Defaults Upon Senior Securities 

  

 

45 

  

 

 

Item 4. Mine Safety Disclosures 

  

 

45 

  

 

 

Item 5. Other Information 

  

 

45 

  

 

 

Item 6. Exhibits 

  

 

45 

  

 

 

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In  Thousands, Except Share and Per Share Data, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2015

 

2014

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and amounts due from depository institutions

$

8,732 

 

$

11,202 

Interest-earning deposits

 

19,803 

 

 

20,921 

  Total cash and cash equivalents

 

28,535 

 

 

32,123 

 

 

 

 

 

 

Interest-earning time deposits

 

993 

 

 

993 

Securities available for sale

 

9,593 

 

 

9,768 

Loans held for sale

 

3,604 

 

 

3,325 

Loans receivable, net of allowance for loan losses of $16,728 and

 

 

 

 

 

   $16,151, respectively

 

1,294,230 

 

 

1,207,850 

Federal Home Loan Bank of New York stock, at cost

 

9,730 

 

 

8,830 

Premises and equipment, net

 

15,757 

 

 

14,295 

Accrued interest receivable

 

4,726 

 

 

4,454 

Other real estate owned

 

2,185 

 

 

3,485 

Deferred income taxes

 

9,918 

 

 

9,703 

Other assets

 

4,490 

 

 

7,074 

   Total Assets

$

1,383,761 

 

$

1,301,900 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-interest bearing deposits

$

141,182 

 

$

127,308 

Interest bearing deposits

 

944,717 

 

 

901,248 

 Total deposits

 

1,085,899 

 

 

1,028,556 

Short-term debt

 

3,000 

 

 

26,000 

Long-term debt

 

180,000 

 

 

133,000 

Subordinated debentures

 

4,124 

 

 

4,124 

Other liabilities

 

7,788 

 

 

7,968 

   Total Liabilities

 

1,280,811 

 

 

1,199,648 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

Preferred stock: $0.01 par value, 10,000,000 shares authorized,

 

 

 

 

 

issued and outstanding 1,343 shares of series A and B 6% noncumulative perpetual

 

 

 

 

 

preferred stock (liquidation value $10,000 per share)

 

 -

 

 

 -

Additional paid-in capital preferred stock

 

13,326 

 

 

13,326 

Common stock; $0.064 par value; 20,000,000 shares authorized, issued 10,939,407

 

 

 

 

 

and 10,924,054 at March 31, 2015 and December 31, 2014, respectively,

 

 

 

 

 

8,409,144 shares and 8,393,791 shares, respectively outstanding

 

699 

 

 

699 

Additional paid-in capital common stock

 

92,879 

 

 

92,686 

Retained earnings

 

26,452 

 

 

25,983 

Accumulated other comprehensive loss

 

(1,310)

 

 

(1,337)

Treasury stock, at cost, 2,529,263 and 2,530,263 shares, respectively

 

(29,096)

 

 

(29,105)

   Total Stockholders' Equity

 

102,950 

 

 

102,252 

 

 

 

 

 

 

   Total Liabilities and Stockholders' Equity

$

1,383,761 

 

$

1,301,900 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

 

 

1

 


 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income 

(In Thousands, except for per share amounts, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 Loans, including fees

$

15,367 

 

$

13,681 

 

 Investments, taxable

 

146 

 

 

915 

 

 Investments, non-taxable

 

 -

 

 

12 

 

 Other interest-earning assets

 

 

 

13 

 

    Total interest income

 

15,520 

 

 

14,621 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 Deposits:

 

 

 

 

 

 

    Demand

 

172 

 

 

121 

 

    Savings and club

 

122 

 

 

91 

 

    Certificates of deposit

 

1,121 

 

 

1,092 

 

 

 

1,415 

 

 

1,304 

 

    Borrowed money

 

1,514 

 

 

1,253 

 

      Total interest expense

 

2,929 

 

 

2,557 

 

 

 

 

 

 

 

 

Net interest income

 

12,591 

 

 

12,064 

 

Provision for loan losses

 

720 

 

 

1,000 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

11,871 

 

 

11,064 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

  Fees and service charges

 

500 

 

 

504 

 

  Gain on sales of loans originated for sale

 

676 

 

 

777 

 

  Other

 

29 

 

 

19 

 

     Total non-interest income

 

1,205 

 

 

1,300 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

  Salaries and employee benefits

 

5,225 

 

 

4,461 

 

  Occupancy expense of premises

 

1,310 

 

 

980 

 

  Equipment

 

1,532 

 

 

1,357 

 

  Professional fees

 

102 

 

 

490 

 

  Director fees

 

179 

 

 

168 

 

  Regulatory assessments

 

275 

 

 

252 

 

  Advertising

 

438 

 

 

174 

 

  Other real estate owned, net

 

49 

 

 

 

  Other

 

874 

 

 

666 

 

     Total non-interest expense

 

9,984 

 

 

8,556 

 

 

 

 

 

 

 

 

Income before income tax provision

 

3,092 

 

 

3,808 

 

Income tax provision

 

1,246 

 

 

1,573 

 

 

 

 

 

 

 

 

Net Income

$

1,846 

 

$

2,235 

 

Preferred stock dividends

 

202 

 

 

193 

 

Net Income available to common stockholders

$

1,644 

 

$

2,042 

 

 

 

 

 

 

 

 

Net Income per common share-basic and diluted

 

 

 

 

 

 

Basic

$

0.20 

 

$

0.24 

 

Diluted

$

0.20 

 

$

0.24 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

Basic

 

8,400 

 

 

8,340 

 

Diluted

 

8,421 

 

 

8,342 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

2

 


 

BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

1,846 

 

$

2,235 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Unrealized gains on available-for-sale securities:

 

 

 

 

 

 

Unrealized holding gains arising during the period (a)

 

42 

 

 

126 

 

Less: reclassification adjustment for gains included in net income (b)

 

 -

 

 

 -

 

Benefit plans (c)

 

(15)

 

 

 -

 

Other comprehensive income

 

27 

 

 

126 

 

Comprehensive income

$

1,873 

 

$

2,361 

 

 

 

(a)

Represents the net change of the unrealized gain on available-for-sale securities. Represents unrealized gains of $71,000 and $213,000, respectively, less deferred taxes of $29,000 and $87,000,  respectively.

(b)

No sales of available-for-sale securities occurred during the three months ended March 31, 2015 and 2014.

(c)

Represents the net change of unrecognized loss included in net periodic pension cost. Represents a gross change of $25,000,  less deferred taxes of $10,000,  for the three months ended March 31, 2015.  The Statements of Income line items impacted by these amounts are salaries and employee benefits and income tax provision.

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

3

 


 

 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In Thousands, except share and per share data, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Additional             Paid-In Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Loss

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance at January 1, 2015

$

 

$

699 

 

$

106,012 

 

$

25,983 

 

$

(29,105)

 

$

(1,337)

 

$

102,252 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

17 

 

 

 

 

 

 

 

 

17 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury Stock adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series A and Series B 6% noncumulative perpetual preferred stock

 

 

 

 

 

 

 

(202)

 

 

 

 

 

 

(202)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends on common stock ($0.14 per share) declared

 

 

 

 

 

 

 

(1,115)

 

 

 

 

 

 

(1,115)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

 

 

 

 

60 

 

 

(60)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

 

 

 

 

116 

 

 

 

 

 

 

 

 

116 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

1,846 

 

 

 

 

 

 

1,846 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income 

 

 

 

 

 

 

 

 

 

 

 

27 

 

 

27 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance at March 31, 2015

$

 

$

699 

 

$

106,205 

 

$

26,452 

 

$

(29,096)

 

$

(1,310)

 

$

102,950 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Additional             Paid-In Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Loss

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance at January 1, 2014

$

 

$

694 

 

$

104,620 

 

$

23,710 

 

$

(29,093)

 

$

129 

 

$

100,060 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of Series B preferred stock

 

 

 

 

 

771 

 

 

 

 

 

 

 

 

771 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of Stock Options (12,092 shares)

 

 

 

 

 

132 

 

 

 

 

 

 

 

 

133 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury Stock Purchases (410 shares)

 

 

 

 

 

 

 

 

 

(6)

 

 

 

 

(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series A and Series B 6% noncumulative perpetual preferred stock

 

 

 

 

 

 

 

(193)

 

 

 

 

 

 

(193)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends on common stock ($0.12 per share) declared

 

 

 

 

 

 

 

(1,001)

 

 

 

 

 

 

(1,001)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

2,235 

 

 

 

 

 

 

2,235 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income 

 

 

 

 

 

 

 

 

 

 

 

126 

 

 

126 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance at March 31, 2014

$

 

$

695 

 

$

105,523 

 

$

24,751 

 

$

(29,099)

 

$

255 

 

$

102,125 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

4

 


 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

2015

 

2014

Cash Flows from Operating Activities :

 

 

 

 

 

  Net Income

$

1,846 

 

$

2,235 

  Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

        Depreciation of premises and equipment

 

501 

 

 

357 

        Amortization and accretion, net

 

(142)

 

 

(174)

        Provision for loan losses

 

720 

 

 

1,000 

        Deferred income tax (benefit)

 

(234)

 

 

 -

        Loans originated for sale

 

(8,011)

 

 

(5,512)

        Proceeds from sale of loans originated for sale

 

8,408 

 

 

5,203 

        Gain on sales of loans

 

(676)

 

 

(777)

        Stock compensation expense

 

17 

 

 

 -

        (Increase) decrease in interest receivable

 

(272)

 

 

55 

        Decrease (increase) in other assets

 

2,583 

 

 

(606)

        Increase (decrease) in accrued interest payable

 

68 

 

 

(27)

        (Decrease) in other liabilities

 

(272)

 

 

(839)

 

 

 

 

 

 

Net Cash Provided by Operating Activities

 

4,536 

 

 

915 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

        Proceeds from repayments, calls and maturities on securities held to maturity

 

 -

 

 

4,410 

        Purchases of securities held to maturity

 

 -

 

 

(1,066)

        Proceeds from calls on securities available for sale

 

229 

 

 

 -

        Proceeds from sales of other real estate owned

 

1,300 

 

 

 -

        Net (increase) in loans receivable

 

(86,942)

 

 

(41,254)

        Additions to premises and equipment

 

(1,962)

 

 

(119)

        Purchase of Federal Home Loan Bank of New York stock

 

(900)

 

 

(540)

 

 

 

 

 

 

Net Cash (Used in) Investing Activities

 

(88,275)

 

 

(38,569)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

        Net increase in deposits

 

57,343 

 

 

23,335 

        Proceeds from long-term debt

 

47,000 

 

 

 -

        Net change in short-term debt

 

(23,000)

 

 

12,000 

        Purchases/adjustments of treasury stock

 

 

 

(6)

        Cash dividend paid on common stock

 

(1,115)

 

 

(1,001)

        Cash dividend paid on preferred stock

 

(202)

 

 

(193)

        Net proceeds from issuance of common stock

 

116 

 

 

132 

        Net proceeds from issuance of preferred stock

 

 -

 

 

771 

        Exercise of stock options

 

 -

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

80,151 

 

 

35,039 

 

 

 

 

 

 

Net (Decrease) In Cash and Cash Equivalents

 

(3,588)

 

 

(2,615)

Cash and Cash Equivalents-Beginning

 

32,123 

 

 

29,844 

 

 

 

 

 

 

Cash and Cash Equivalents-Ending

$

28,535 

 

$

27,229 

 

 

 

 

 

 

Supplementary Cash Flow Information:

 

 

 

 

 

     Cash paid (refunds received) during the period for:

 

 

 

 

 

        Income taxes

$

(398)

 

$

2,375 

        Interest

$

2,861 

 

$

2,583 

 

 

 

 

 

 

Non-cash items:

 

 

 

 

 

        Transfer of loans to other real estate owned

$

 -

 

$

518 

        Reclassification of loans originated for sale to held to maturity

$

 -

 

$

460 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

 

5

 


 

 

BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Company, BCB New York Asset Management, Inc. and Pamrapo Service Corporation. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and, therefore, do not necessarily include all information that would be included in audited financial statements. The information furnished reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of consolidated financial condition and results of operations. All such adjustments are of a normal recurring nature. These results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2015 or any other future period. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2014, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In preparing these consolidated financial statements, the Company evaluated the events and transactions that occurred between March 31, 2015, and the date these consolidated financial statements were issued.

 

 

Recent Accounting Pronouncements

 

Accounting Standards Update 2014-14: Receivables – Troubled Debt Restructurings by Creditors (Topic 310-40) – Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure 

 

This ASU was issued as a result of the diversity in practice related to how creditors classify government-guaranteed mortgage loans upon foreclosure. The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure when the following conditions are met: 1) the loan has a government guarantee that is not separable from the loan before foreclosure, 2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim and 3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor.

 

The amendments in this ASU were effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The amendments in this ASU should be adopted on either a prospective transition method or a modified retrospective transition method. However, a reporting entity must apply the same method of transition as elected under ASU 2014-04.  Early adoption, including adoption in an interim period, is permitted if the reporting entity has adopted ASU 2014-04. The adoption of ASU 2014-14 did not have a significant impact on the Company’s financial condition, results of operations, or cash flows.

 

Accounting Standards Update 2014-09: Revenue from Contracts with Customers (Topic 606)

 

ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU.

 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

For a public business entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Financial Accounting Standards Board (“FASB”) has proposed a one year deferral of this standard update until annual reporting periods beginning after December 31, 2017.

 

An entity should apply the amendments in this ASU using one of the following two methods:

 

Retrospectively to each prior reporting period presented and the entity may elect any of the following practical expedients:

·

For completed contracts, an entity need not restate contracts that begin and end within the same annual reporting period.

·

For completed contracts that have variable consideration, an entity may use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods.

·

For all reporting periods presented before the date of initial application, an entity need not disclose the amount of the transaction price allocated to remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue.

 

 

 

6

 


 

Retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects this transition method it also should provide the additional disclosures in reporting periods that include the date of initial application of:

·

The amount by which each financial statement line item is affected in the current reporting period by the application of this ASU as compared to the guidance that was in effect before the change.

·

An explanation of the reasons for significant changes.

The Company is currently evaluating the impact of ASU 2014-09 on our Consolidated Financial Statements.

 

Accounting Standards Update 2014-14:  Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure

 

The objective of this ASU is to reduce the diversity in practice of when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan and when the related loan receivable should be derecognized and the real estate owned recognized.

 

This amendment clarifies that an in substance repossession or foreclosure occurs when either a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure, or b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Upon completion of either of these two events the creditor is considered to have received physical possession of residential real estate property and therefore should derecognize the loan receivable and recognize the real estate owned.

 

Additionally, this amendment requires interim and annual disclosure of both a) the amount of foreclosed residential real estate property held by the creditor and b) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. At March 31, 2015 the amount of foreclosed 1-4 family residential properties held by the Company was $270,000.  As of March 31, 2015 the amount of 1-4 family residential loans in the process of foreclosure was $6.4 million.  

 

 

The provisions of this ASU are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2014. This ASU can be adopted using either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of ASU 2014-14 did not have a significant impact on the Company’s financial condition, results of operations, or cash flows.

 

 

Proposed Accounting Standards Update (Exposure Draft):  Financial Instruments (Topic 825-15) - Credit Losses

 

The Board is currently in the process of redeliberating significant issues raised through feedback received from comment letters and outreach activities. FASB expects to issue this proposed accounting standards update in late 2015. An effective date has yet to be discussed.

 

Impairment model - The Board will continue to refine the Current Expected Credit Loss (CECL) model in the December 2012 proposed Update.

Measurement of expected credit losses - The guidance in the proposed Update regarding an entity’s estimate of expected credit losses will be clarified as follows:

 

1. An entity should revert to a historical average loss experience for the future periods beyond which the entity is able to make or obtain reasonable and supportable forecasts.

2. An entity should consider all contractual cash flows over the life of the related financial assets.

3. When determining the contractual cash flows and the life of the related financial assets:

a.

An entity should consider expected prepayments

b.

An entity should not consider expected extensions, renewals, and modifications unless the entity reasonably expects that it will execute a troubled debt restructuring with a borrower.

4. An entity’s estimate of expected credit losses should always reflect the risk of loss, even when that risk is remote. However, an entity would not be required to recognize a loss on a financial asset in which the risk of nonpayment is greater than zero yet the amount of loss would be zero.

5. In addition to using a discounted cash flow model to estimate expected credit losses, an entity would not be prohibited from developing an estimate of credit losses using loss-rate methods, probability-of-default methods, or a provision matrix using loss factors.

6. The final guidance on expected credit losses will include implementation guidance describing the factors that an entity should consider to adjust historical loss experience for current conditions and reasonable and supportable forecasts.

 

Accounting for purchased credit impaired (PCI) financial assets - An entity would be required to allocate to each individual financial asset the non-credit-related discount or premium resulting from acquiring a pool of PCI financial assets.

 

Accounting for troubled debt restructurings (TDRs) - The guidance in the proposed Update regarding the cost basis adjustment for troubled debt restructurings will be clarified to require an entity to increase the cost basis of the restructured financial asset through a corresponding increase in the entity’s allowance for expected credit losses in certain TDRs.

 

An entity may consider prepayment expectations and prospectively reflect an adjusted yield if prepayment speeds are different than expected. (This decision is contingent on the Board’s review of staff prepared examples illustrating this approach.)

 

Nonaccrual of interest income - The Board decided that the final Accounting Standards Update issued for this project will not provide guidance on when an entity ceases to accrue interest income. However, the Board decided to consider adding as pre-agenda research whether U.S. GAAP should provide nonaccrual guidance. The Company is currently evaluating the impact of this update.

 

Proposed Accounting Standards Update (Exposure Draft):  Leases (Topic 842) - A Revision of the 2010 Proposed FASB Accounting Standards Update, Leases (Topic 840)

 

The FASB decided on a dual approach for lessee accounting in which a lessee will determine lease classification in accordance with the principle in existing lease requirements.  Lessees would account for most existing capital or financing type leases as Type A leases and most existing operating leases as Type B leases.  Both Type A and Type B leases result in the lessee recognizing a right-of-use asset and a lease liability.  Type A leases will recognize amortization of the right-of-use asset separately from interest expense on the lease liability while Type B leases will recognize a single total lease expense in the income statement. The IASB decided on a single approach for lessee accounting under which the lessee would account for all leases as Type A leases. The FASB and IASB are currently deliberating the disclosure requirements under this amendment. An effective date has yet to be discussed.

 

Interim Final Rule on Basel III Conforming Amendments

 

7

 


 

The Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System issued an Interim Final Rule on Basel III Conforming Amendments. In summary, each agency has issued an interim final rule with request for comments (final rule) that makes technical and conforming amendments to its regulations governing national banks and federal savings associations. The final rule, which was effective March 31, 2014, amends various regulations in order to make those regulations consistent with the recently adopted Basel III Capital Framework. The Basel III final rule revised the regulatory capital rules, adding a new common equity tier 1 requirement, revising the definitions of tier 1 and tier 2 capital, and integrating federal savings associations into 12 CFR part 3 and 12 CFR part 6 (Prompt Corrective Action). The final rule made technical, clarifying, and conforming amendments to the OCC's rules, by providing cross-references to new capital rules, where necessary, and deleting obsolete references. The final rule also made changes to subordinated debt rules to clarify the requirements subordinated debt must meet and the procedures required to issue and redeem subordinated debt.

 

A summary of technical and conforming amendments and subordinated debt rules include:

 

Technical and conforming amendments:

 

Historically, regulatory capital requirements have served as a measure for numerous statutory and regulatory limits used as supervisory tools for safety and soundness purposes, including lending limits and investment securities. The final rule amends the rules to replace cross-references to the current regulatory capital rules with cross-references to the Basel III final rule, where appropriate.

 

The Basel III Capital Framework provides different mandatory compliance dates for advanced approaches national banks and federal savings associations and non-advanced approaches national banks and federal savings associations.1 Advanced approaches institutions must comply with the Basel III Capital Framework beginning on January 1, 2014, while non-advanced approaches institutions must comply with the framework beginning on January 1, 2015. In order to accommodate these different compliance dates, the existing regulatory capital rules for calendar year 2014 were retained for non-advanced approaches national banks and federal savings associations.

 

The Basel III Capital Framework integrated federal savings associations into 12 CFR part 6, "Prompt Corrective Action." This final rule replaces cross-references in various rules to 12 CFR part 165, the Prompt Corrective Action rule formerly applicable to federal savings associations, with cross-references to 12 CFR part 6, which applies to both national banks and federal savings associations effective January 1, 2014.

 

 

 

 

8

 


 

 

Note 2 – Reclassification

 

Certain amounts as of December 31, 2014 and the three month period ended March 31, 2014 have been reclassified to conform to the current period’s presentation. These changes had no effect on the Company’s results of operations or financial position.

 

 

Note 3 – Pension and Other Postretirement Plans

The Company assumed, through the merger with Pamrapo Bancorp, Inc., a non-contributory defined benefit pension plan covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the defined benefit pension plan (“Pension Plan”), was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the “Pension Plan” to the freeze date have been retained. Accordingly, no employees are permitted to commence participation in the Pension Plan and future salary increases and future years of service are not considered when computing an employee’s benefits under the Pension Plan. The Pension Plan is funded in conformity with the funding requirements of applicable government regulations. The Company also acquired through the merger with Pamrapo Bancorp, Inc. a supplemental executive retirement plan (“SERP”) in which certain former employees of Pamrapo Savings Bank are covered. A SERP is an unfunded non-qualified deferred retirement plan. Participants who retire at the age of 65 ( the “Normal Retirement Age”), are entitled to an annual retirement benefit equal to 75% of compensation reduced by their retirement plan annual benefits. Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.

 

Periodic pension and SERP cost, which is recorded as part of salaries and employee benefits expense in our Consolidated Statements of Income, is comprised of the following. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

Pension plan:

  

 

 

  

 

 

Interest cost

$

64 

 

$

100 

  

Expected return on plan assets

  

(108)

 

  

(154)

 

Amortization of unrecognized loss

  

18 

 

  

 -

 

 

 

 

 

 

 

 

Net periodic pension benefit

$

(26)

 

$

(54)

  

 

  

 

 

  

 

 

SERP plan:

  

 

 

  

 

 

Interest cost

$

 

$

  

 

  

 

 

  

 

 

Net periodic postretirement cost

$

 

$

  

 

 

9

 


 

Note 3 – Pension and Other Postretirement Plans (Continued) 

 

The Company, under the plan approved by its shareholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of the Company pursuant to grants of stock options. Employees and directors of the Company and the Bank are eligible to participate in the 2011 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code.  Only employees are permitted to receive incentive stock options. On March 7, 2014, a grant of 110,000 options and on January 17, 2013, a grant of 130,000 options was declared for certain members of the Board of Directors which vest at a rate of 10% per year, over ten years commencing on the first anniversary of the grant date. The exercise price was recorded as of the close of business on March 7, 2014 and January 17, 2013, respectively and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with its filing requirements. There were 6,000 stock options granted to employees in the fourth quarter of 2014, which vest at a rate of 20% per year. During the third quarter of 2013, there were 29,928 stock options granted which vested immediately. The exercise price was recorded as of the close of business on August 7, 2013.

 

There was no stock option activity in the three months ended March 31, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Option Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price

 

  

 

 

 

 

 

 

 

Outstanding at December 31, 2014

 

289,720 

 

$

8.93-15.65

 

$

11.18

 

 

 

 

 

 

 

 

 

Options granted                                         

 

-

 

 

-

 

 

-

Options exercised                                        

 

 -

 

 

-

 

 

-

Options forfeited                                    

 

 -

 

 

-

 

 

-

Options expired                                      

 

 -

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2015                             

 

289,720 

 

$

8.93-15.65

 

$

11.18

 

 

As of March 31, 2015, stock options which were granted and were exercisable totaled 74,220 stock options.

 

 

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 215,500 shares underlying unexercised options outstanding as of March 31, 2015 is $587,244 over a weighted average period of 8.24 years. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Option Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price

 

  

 

 

 

 

 

 

 

Outstanding at December 31, 2013

 

344,128 

 

$

8.93-18.41

 

$

11.09

 

 

 

 

 

 

 

 

 

Options granted                                         

 

 -

 

 

-

 

 

-

Options exercised                                        

 

(12,092)

 

 

8.93-11.84

 

 

11.01

Options forfeited                                    

 

 -

 

 

-

 

 

-

Options expired                                      

 

 -

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2014                                

 

332,036 

 

$

8.93-18.41

 

$

11.09

 

 

 

 

As of March 31, 2014, stock options which are granted and were exercisable totaled 158,036 stock options.

 

 

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 174,000 shares underlying unexercised options outstanding as of March 31, 2014 is $258,046 over a weighted average period of 8.96 years. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 


 

 

Note 4 – Net Income per Common Share

 

Basic net income per common share is computed by dividing net income less dividends on preferred stock by the weighted average number of shares of common stock outstanding. The diluted net income per common share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effects of outstanding stock options, if dilutive, using the treasury stock method. Dilution is not applicable in periods of net loss. For the three months ended March 31, 2015 and 2014, the difference in the weighted average number of basic and diluted common shares was due solely to the effects of outstanding stock options. No adjustments to net income were necessary in calculating basic and diluted net income per share. For the three months ended March 31, 2015 and 2014, the weighted average number of outstanding options considered to be anti-dilutive were 127,000, and 213,482, respectively.  

 

 

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

2015

 

2014

 

 

 

Income

 

Shares

 

 

Per Share

 

 

Income

 

Shares

 

 

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

 

Amount

 

 

(Numerator)

 

(Denominator)

 

 

Amount

 

 

(In Thousands, Except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

1,644 

 

 

 

 

 

 

$

2,042 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

1,644 

 

8,400 

 

$

0.20 

 

$

2,042 

 

8,340 

 

$

0.24 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 -

 

21 

 

 

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

1,644 

 

8,421 

 

$

0.20 

 

$

2,042 

 

8,342 

 

$

0.24 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 


 

 

 

Note 5 – Securities Available for Sale

 

The following tables present by maturity the amortized cost and gross unrealized gains and losses on securities available for sale as of March 31, 2015 and December 31, 2014: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

  

Gross

  

Gross

  

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

(In Thousands)

Residential mortgage-backed securities:

 

 

  

 

 

  

 

 

  

 

 

Due after five years through ten years

 

3,468 

  

 

59 

  

 

40 

  

 

3,487 

Due after ten years

 

5,985 

  

 

158 

  

 

37 

  

 

6,106 

 

$

9,453 

 

$

217 

 

$

77 

 

$

9,593 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

  

Gross

  

Gross

  

 

 

Amortized

 

Unrealized

 

Unrealized

 

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

(In Thousands)

Residential mortgage-backed securities:

 

 

  

 

 

  

 

 

  

 

 

Due after five years through ten years

$

3,485 

 

$

32 

  

$

60 

 

$

3,457 

Due after ten years

 

6,213 

  

 

140 

  

 

42 

  

 

6,311 

 

$

9,698 

 

$

172 

 

$

102 

 

$

9,768 

 

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related securities available for sale were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

  

More than 12 Months

  

Total

 

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

(In Thousands)

March 31, 2015

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Residential mortgage-backed securities

$

 -

  

$

 -

  

$

3,998 

  

$

77 

  

$

3,998 

  

$

77 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities

$

1,435 

  

$

  

$

2,750 

  

$

97 

  

$

4,185 

  

$

102 

 

$

1,435 

  

$

  

$

2,750 

  

$

97 

  

$

4,185 

  

$

102 

 

 

 

Management does not believe that any of the unrealized losses as of March 31, 2015, (which are related to three residential mortgage-backed securities) represent an other-than-temporary impairment as they are primarily related to market interest rates and not related to the underlying credit quality of the issuers of the securities as all these securities were issued by U.S. Agencies, including FNMA, FHLMC and GNMA. Additionally, the Company has the ability, and management has the intent, to hold such securities for the time necessary to recover cost and does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of their cost.

 

 

 

 

 

 

 

 

 

 

12

 


 

 

Note 6 - Loans Receivable and Allowance for Loan Losses

The following table presents the recorded investment in loans receivable as of March 31, 2015 and December 31, 2014 by segment and class:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

 

(In Thousands)

Originated loans:

 

 

 

 

 

Residential one-to-four family

$

133,862 

 

$

124,642 

Commercial and multi-family

 

804,160 

 

 

732,791 

Construction

 

79,498 

 

 

73,497 

Commercial business(1) 

 

58,791 

 

 

54,244 

Home equity(2) 

 

31,556 

 

 

30,175 

Consumer

 

2,570 

 

 

2,178 

 

 

 

 

 

 

Sub-total

 

1,110,437 

 

 

1,017,527 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

Residential one-to-four family

 

78,933 

 

 

81,051 

Commercial and multi-family

 

92,569 

 

 

95,191 

Commercial business(1) 

 

6,222 

 

 

6,381 

Home equity(2) 

 

21,961 

 

 

22,698 

Consumer

 

629 

 

 

652 

 

 

 

 

 

 

Sub-total

 

200,314 

 

 

205,973 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

Residential one-to-four family

 

1,588 

 

 

1,595 

Commercial and multi-family

 

1,126 

 

 

1,130 

Commercial business(1) 

 

194 

 

 

369 

Home equity(2) 

 

80 

 

 

82 

 

 

 

 

 

 

Sub-total

 

2,988 

 

 

3,176 

 

 

 

 

 

 

Total Loans

 

1,313,739 

 

 

1,226,676 

 

 

 

 

 

 

Less:

 

 

 

 

 

Deferred loan fees, net

 

(2,781)

 

 

(2,675)

Allowance for loan losses

 

(16,728)

 

 

(16,151)

 

 

 

 

 

 

 

 

(19,509)

 

 

(18,826)

 

 

 

 

 

 

 

 

 

 

 

 

Total Loans, net

$

1,294,230 

 

$

1,207,850 

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

13

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

 

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses.  The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements.  These elements include a general allocated reserve for performing impaired loans, a specific reserve for impaired loans and an unallocated portion.  

 

The Company consistently applies the following comprehensive methodology.  During the quarterly review of the allowance for loan losses, the Company considers a variety of qualitative factors that include:

·

General economic conditions.

·

Trends in charge-offs.

·

Trends and levels of delinquent loans.

·

Trends and levels of non-performing loans, including loans over 90 days delinquent.

·

Trends in volume and terms of loans.

·

Levels of allowance for specific classified loans.

·

Credit concentrations.

 

The methodology includes the segregation of the loan portfolio into two divisions.  Loans that are performing and loans that are impaired. Loans which are performing are evaluated homogeneously by loan class or loan type. The allowance for performing loans is evaluated based on historical loan experience, including consideration of peer loss analysis, with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent or troubled debt restructured.  These loans are individually evaluated for loan loss either by current appraisal, or net present value of cash flows. Management reviews the overall estimate for feasibility and bases the loan loss provision accordingly.

 

The loan portfolio is segmented into the following loan classes, where the risk level for each class is analyzed when determining the allowance for loan losses:

 

Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential family real estate loans decreases the interest rate risk to the Company that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower.

 

Commercial and multi-family real estate lending entails significant additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as economic conditions generally.

 

Construction lending is generally considered to be high risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Company than construction loans to individuals on their personal residence.

 

Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In most cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance.

 

Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the collateral securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower. Home equity line of credit lending entails securing an equity interest in the borrower’s home. In many cases, the Company’s position in these loans is as a junior lien holder to another institution’s superior lien. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decreases the interest rate risk to the Company that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

 

Other consumer loans generally have more credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely effected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

 

        Acquired loans added to portfolio via our purchase of banks are recorded at fair value with no carryover of a related allowance for loan losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

 

          We have acquired loans in two separate acquisitions.(Pamrapo Savings Bank in 2010 “Pamrapo” and Allegiance Community Bank in 2011 “Allegiance”) For each acquisition, we reviewed all acquired loans and considered the following factors as indicators that such acquired loan had evidence of deterioration in credit quality and was therefore in the scope of Accounting Standards Codification (“ASC”) 310-30:

·

Loans that were 90 days or more past due,

·

Loans that had an internal risk rating of substandard or worse. Substandard is consistent with regulatory definitions and is defined as having a well defined weakness that jeopardizes liquidation of the loan,

·

Loans that were classified as nonaccrual by the acquired bank at the time of acquisition, or,

·

Loans that had been previously modified in a troubled debt restructuring.

14

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

         Any acquired loans that were not individually in the scope of ASC 310-30 because they did not meet the criteria above were accounted for under ASC 310-20 (Nonrefundable fees and other costs.)  Charge-offs of the principal amount on acquired loans accounted for under ASC 310-20 would be charged off against the allowance for loan losses.   

 

Acquired loans accounted for under ASC 310-30

 

         We performed a fair market valuation on each of the loans and each loan was recorded at a discount which includes the establishment of an associated “Credit Mark” reducing the carrying value of that loan to its fair value at the time of acquisition. We determined that at least part of the discount on the acquired loans was attributable to credit quality by reference to the valuation model used to estimate the fair value of the loans. The valuation model incorporated lifetime expected credit losses into the loans’ fair valuation in consideration of factors such as evidence of credit deterioration since origination and the amounts of contractually required principal and interest that we did not expect to collect as of the acquisition date. The excess of expected cash flows from acquired loans over the estimated fair value of acquired loans at acquisition is referred to as the accretable discount and is recognized into interest income over the remaining life of the acquired loans using the interest method. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount represents estimated future credit losses expected to be incurred over the life of the acquired loans.

 

          Subsequent decreases to the expected cash flows require us to evaluate the need for an addition to the allowance for loan losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable discount which we then reclassify as accretable discount that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect takes into account actual credit performance of the acquired loans to date and our best estimates for the expected lifetime credit performance of the loans using currently available information. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable discount portion of the fair value adjustment. To the extent that we experience a deterioration in credit quality in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.

 

          In accordance with ASC 310-30, recognition of income is dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected.  We perform such an evaluation on a quarterly basis on our acquired loans individually accounted for under ASC 310-30. Cash flows for acquired loans individually accounted for under ASC 310-30 are estimated on a quarterly basis.  Based on this evaluation, a determination is made as to whether or not we have a reasonable expectation about the timing and amount of cash flows.  Such an expectation includes cash flows from normal customer repayment, foreclosure or other collection efforts. To the extent that we cannot reasonably estimate cash flows, interest income recognition is discontinued. 

 

          The Company also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates lack some element of precision.  Management must make estimates using assumptions and information that is often subjective and changing rapidly. In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance will periodically review the allowance for loan losses and may require us to adjust the allowance based on their analysis of information available to it at the time of its examination.

 

Classified Assets.  The Company’s policies provide for a classification system for problem assets.  Under this classification system, problem assets are classified as “substandard,” “doubtful,” “loss” or “special mention.”  An asset is considered substandard if it is inadequately protected by its current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that “some loss” will be sustained if the deficiencies are not corrected.  Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weakness present makes “collection or liquidation in full” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.”  Assets classified as loss are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted, and the loan, or a portion thereof, is charged-off.  Assets may be designated special mention because of potential weaknesses that do not currently warrant classification in one of the aforementioned categories.

When the Company classifies problem loans, it may establish general allowances for loan losses in an amount deemed prudent by management.  General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. As of March 31, 2015, we had $30.075 million in loans classified as substandard,  $19.608 million in loans classified as special mention and no loans classified as doubtful or loss. The loans classified as substandard represent primarily commercial loans secured either by residential real estate, commercial real estate or heavy equipment.  The loans that have been classified substandard were classified as such primarily because either updated financial information has not been provided timely, or the collateral underlying the loan was in the process of being revalued.

The current methodology for this calculation is determined with the Company’s specific Historical Loss Percentage (“HLP”) for each loan class, using two years of prior Company data (or eight quarters). The relative weights of prior quarters are decayed logarithmically and are further adjusted based on the trend of the historical loss percentage at the time. Also, instead of applying consistent percentages to each of the credit risk grades, the current methodology applies a higher factor to classified loans based on a delinquency risk trend and concentration risk trend by using the past due and non-accrual loans as a percentage of the specific loan category.

15

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2015 and recorded investment in loans receivable at March 31, 2015. The table also details the amount of total loans receivable, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial  &

 

 

 

 

Commercial

 

Home

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

Multi-family

 

Construction

 

Business (1)

 

Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

2,364 

 

$

10,028 

 

$

1,080 

 

$

876 

 

$

333 

 

$

449 

 

$

121 

 

$

15,251 

Acquired loans recorded at fair value:

 

 

417 

 

 

102 

 

 

 -

 

 

 -

 

 

58 

 

 

 -

 

 

 -

 

 

577 

Acquired loans with deteriorated credit:

 

 

64 

 

 

23 

 

 

 -

 

 

233 

 

 

 

 

 -

 

 

 -

 

 

323 

Beginning Balance, December 31, 2014

 

 

2,845 

 

 

10,153 

 

 

1,080 

 

 

1,109 

 

 

394 

 

 

449 

 

 

121 

 

 

16,151 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

10 

 

 

 -

 

 

22 

 

 

 -

 

 

 -

 

 

 -

 

 -

32 

Acquired loans recorded at fair value:

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

172 

 

 

 -

 

 

 -

 

 

 -

 

 -

172 

Sub-total:

 

 

 

 

10 

 

 

 -

 

 

194 

 

 

 -

 

 

 -

 

 

 -

 

 

208 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

64 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

64 

Acquired loans recorded at fair value:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Sub-total:

 

 

 -

 

 

64 

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

65 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

(54)

 

 

305 

 

 

(24)

 

 

388 

 

 

(17)

 

 

180 

 

 

47 

 

 

825 

Acquired loans recorded at fair value:

 

 

(77)

 

 

39 

 

 

 -

 

 

 -

 

 

(13)

 

 

 -

 

 

 -

 

 

(51)

Acquired loans with deteriorated credit:

 

 

(4)

 

 

 -

 

 

 -

 

 

(50)

 

 

 -

 

 

 -

 

 

 -

 

 

(54)

Sub-total:

 

 

(135)

 

 

344 

 

 

(24)

 

 

338 

 

 

(30)

 

 

180 

 

 

47 

 

 

720 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

2,310 

 

 

10,387 

 

 

1,056 

 

 

1,242 

 

 

316 

 

 

629 

 

 

168 

 

 

16,108 

Acquired loans recorded at fair value:

 

 

336 

 

 

141 

 

 

 -

 

 

 -

 

 

46 

 

 

 -

 

 

 -

 

 

523 

Acquired loans with deteriorated credit:

 

 

60 

 

 

23 

 

 

 -

 

 

11 

 

 

 

 

 -

 

 

 -

 

 

97 

Ending Balance, March 31, 2015

 

$

2,706 

 

$

10,551 

 

$

1,056 

 

$

1,253 

 

$

365 

 

$

629 

 

$

168 

 

$

16,728 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

133,862 

 

$

804,160 

 

$

79,498 

 

$

58,791 

 

$

31,556 

 

$

2,570 

 

$

 -

 

$

1,110,437 

Ending Balance Acquired loans recorded at fair value:

 

 

78,933 

 

 

92,569 

 

 

 -

 

 

6,222 

 

 

21,961 

 

 

629 

 

 

 -

 

 

200,314 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,588 

 

 

1,126 

 

 

 -

 

 

194 

 

 

80 

 

 

 -

 

 

 -

 

 

2,988 

Total Gross Loans:

 

$

214,383 

 

$

897,855 

 

$

79,498 

 

$

65,207 

 

$

53,597 

 

$

3,199 

 

$

 -

 

$

1,313,739 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

10,731 

 

$

9,971 

 

$

 -

 

$

4,987 

 

$

1,093 

 

$

1,670 

 

$

 -

 

$

28,452 

Ending Balance Acquired loans recorded at fair value:

 

 

9,536 

 

 

6,981 

 

 

 -

 

 

 -

 

 

1,196 

 

 

 -

 

 

 -

 

 

17,713 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,588 

 

 

874 

 

 

 -

 

 

194 

 

 

80 

 

 

 -

 

 

 -

 

 

2,736 

Ending Balance Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

21,855 

 

$

17,826 

 

$

 -

 

$

5,181 

 

$

2,369 

 

$

1,670 

 

$

 -

 

$

48,901 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

123,131 

 

$

794,189 

 

$

79,498 

 

$

53,804 

 

$

30,463 

 

$

900 

 

$

 -

 

$

1,081,985 

Ending Balance Acquired loans recorded at fair value:

 

 

69,397 

 

 

85,588 

 

 

 -

 

 

6,222 

 

 

20,765 

 

 

629 

 

 

 -

 

 

182,601 

Ending Balance Acquired loans with deteriorated credit:

 

 

 -

 

 

252 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

252 

Ending Balance Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

192,528 

 

$

880,029 

 

$

79,498 

 

$

60,026 

 

$

51,228 

 

$

1,529 

 

$

 -

 

$

1,264,838 

 

_________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

16

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table sets forth the activity in the Company’s allowance for loan losses for the year ended December 31, 2014 and recorded investment in loans receivable at December 31, 2014. The table also details the amount of total loans receivable, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial  &

 

 

 

 

Commercial

 

Home

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

Multi-family

 

Construction

 

Business (1)

 

equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

1,729 

 

$

7,419 

 

$

700 

 

$

1,295 

 

$

363 

 

$

 

$

83 

 

$

11,592 

Acquired loans recorded at fair value:

 

 

832 

 

 

1,744 

 

 

 

 

44 

 

 

129 

 

 

 -

 

 

 -

 

 

2,750 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Beginning Balance, December 31, 2013

 

 

2,561 

 

 

9,163 

 

 

701 

 

 

1,339 

 

 

492 

 

 

 

 

83 

 

 

14,342 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

388 

 

 

 -

 

 

208 

 

 

27 

 

 

 -

 

 

 -

 

 -

623 

Acquired loans recorded at fair value:

 

 

28 

 

 

755 

 

 

 -

 

 

 -

 

 

29 

 

 

 

 

 -

 

 -

814 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 -

Sub-total:

 

 

28 

 

 

1,143 

 

 

 -

 

 

208 

 

 

56 

 

 

 

 

 -

 

 

1,437 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

125 

 

 

 -

 

 

174 

 

 

 -

 

 

 -

 

 

 -

 

 

299 

Acquired loans recorded at fair value:

 

 

 -

 

 

73 

 

 

65 

 

 

 -

 

 

 

 

 

 

 -

 

 

147 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Sub-total:

 

 

 -

 

 

198 

 

 

65 

 

 

174 

 

 

 

 

 

 

 -

 

 

446 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

635 

 

 

2,872 

 

 

380 

 

 

(385)

 

 

(3)

 

 

446 

 

 

38 

 

 

3,983 

Acquired loans recorded at fair value:

 

 

(387)

 

 

(960)

 

 

(66)

 

 

(44)

 

 

(48)

 

 

(1)

 

 

 -

 

 

(1,506)

Acquired loans with deteriorated credit:

 

 

64 

 

 

23 

 

 

 -

 

 

233 

 

 

 

 

 -

 

 

 -

 

 

323 

Sub-total:

 

 

312 

 

 

1,935 

 

 

314 

 

 

(196)

 

 

(48)

 

 

445 

 

 

38 

 

 

2,800 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

2,364 

 

 

10,028 

 

 

1,080 

 

 

876 

 

 

333 

 

 

449 

 

 

121 

 

 

15,251 

Acquired loans recorded at fair value:

 

 

417 

 

 

102 

 

 

 -

 

 

 -

 

 

58 

 

 

 -

 

 

 -

 

 

577 

Acquired loans with deteriorated credit:

 

 

64 

 

 

23 

 

 

 -

 

 

233 

 

 

 

 

 -

 

 

 -

 

 

323 

Ending Balance, December 31, 2014

 

$

2,845 

 

$

10,153 

 

$

1,080 

 

$

1,109 

 

$

394 

 

$

449 

 

$

121 

 

$

16,151 

Loans Receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

124,642 

 

$

732,791 

 

$

73,497 

 

$

54,244 

 

$

30,175 

 

$

2,178 

 

$

 -

 

$

1,017,527 

Ending Balance Acquired Loans:

 

 

81,051 

 

 

95,191 

 

 

 -

 

 

6,381 

 

 

22,698 

 

 

652 

 

 

 -

 

 

205,973 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,595 

 

 

1,130 

 

 

 -

 

 

369 

 

 

82 

 

 

 -

 

 

 -

 

 

3,176 

Total Gross Loans:

 

$

207,288 

 

$

829,112 

 

$

73,497 

 

$

60,994 

 

$

52,955 

 

$

2,830 

 

 

 -

 

$

1,226,676 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

12,044 

 

$

9,522 

 

$

 -

 

$

4,935 

 

$

1,086 

 

$

1,851 

 

$

 -

 

$

29,438 

Ending Balance Acquired Loans:

 

 

9,783 

 

 

6,377 

 

 

 -

 

 

 -

 

 

1,164 

 

 

 -

 

 

 -

 

 

17,324 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,595 

 

 

877 

 

 

 -

 

 

369 

 

 

82 

 

 

 -

 

 

 -

 

 

2,923 

Ending Balance Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

23,422 

 

$

16,776 

 

$

 -

 

$

5,304 

 

$

2,332 

 

$

1,851 

 

$

 -

 

$

49,685 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

112,598 

 

$

723,269 

 

$

73,497 

 

$

49,309 

 

$

29,089 

 

$

327 

 

$

 -

 

$

988,089 

Ending Balance Acquired Loans:

 

 

71,268 

 

 

88,814 

 

 

 -

 

 

6,381 

 

 

21,534 

 

 

652 

 

 

 -

 

 

188,649 

Ending Balance Acquired loans with deteriorated credit:

 

 

 -

 

 

253 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

253 

Ending Balance Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

183,866 

 

$

812,336 

 

$

73,497 

 

$

55,690 

 

$

50,623 

 

$

979 

 

$

 -

 

$

1,176,991 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

17

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2014 and recorded investment in loans receivable at March 31, 2014. The table also details the amount of total loans receivable, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial  &

 

 

 

 

Commercial

 

Home

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

Multi-family

 

Construction

 

Business (1)

 

Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

1,729 

 

$

7,419 

 

$

700 

 

$

1,295 

 

$

363 

 

$

 

$

83 

 

$

11,592 

Acquired loans recorded at fair value:

 

 

832 

 

 

1,744 

 

 

 

 

44 

 

 

129 

 

 

 -

 

 

 -

 

 

2,750 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Beginning Balance, December 31, 2013

 

 

2,561 

 

 

9,163 

 

 

701 

 

 

1,339 

 

 

492 

 

 

 

 

83 

 

 

14,342 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

52 

 

 

 -

 

 

126 

 

 

27 

 

 

 -

 

 

 -

 

 -

205 

Acquired loans recorded at fair value:

 

 

 -

 

 

489 

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 -

491 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 -

Sub-total:

 

 

 -

 

 

541 

 

 

 -

 

 

126 

 

 

27 

 

 

 

 

 -

 

 

696 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Acquired loans recorded at fair value:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Sub-total:

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

(102)

 

 

1,154 

 

 

(45)

 

 

83 

 

 

34 

 

 

135 

 

 

64 

 

 

1,323 

Acquired loans recorded at fair value:

 

 

(125)

 

 

(476)

 

 

(1)

 

 

(44)

 

 

(1)

 

 

17 

 

 

 -

 

 

(630)

Acquired loans with deteriorated credit:

 

 

69 

 

 

81 

 

 

 -

 

 

154 

 

 

 

 

 -

 

 

 -

 

 

307 

Sub-total:

 

 

(158)

 

 

759 

 

 

(46)

 

 

193 

 

 

36 

 

 

152 

 

 

64 

 

 

1,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

1,627 

 

 

8,521 

 

 

655 

 

 

1,252 

 

 

370 

 

 

138 

 

 

147 

 

 

12,710 

Acquired loans recorded at fair value:

 

 

707 

 

 

779 

 

 

 -

 

 

 -

 

 

128 

 

 

15 

 

 

 -

 

 

1,629 

Acquired loans with deteriorated credit:

 

 

69 

 

 

81 

 

 

 -

 

 

154 

 

 

 

 

 -

 

 

 -

 

 

307 

Ending Balance, March 31, 2014

 

$

2,403 

 

$

9,381 

 

$

655 

 

$

1,406 

 

$

501 

 

$

153 

 

$

147 

 

$

14,646 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

99,324 

 

$

601,104 

 

$

35,186 

 

$

55,841 

 

$

28,164 

 

$

705 

 

$

 -

 

$

820,324 

Ending Balance Acquired loans recorded at fair value:

 

 

96,946 

 

 

120,066 

 

 

 

 

8,889 

 

 

27,036 

 

 

830 

 

 

 -

 

 

253,769 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,619 

 

 

1,874 

 

 

 -

 

 

371 

 

 

89 

 

 

 -

 

 

 -

 

 

3,953 

Total Gross Loans:

 

$

197,889 

 

$

723,044 

 

$

35,188 

 

$

65,101 

 

$

55,289 

 

$

1,535 

 

$

 -

 

$

1,078,046 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

3,100 

 

$

8,157 

 

$

 -

 

$

4,397 

 

$

1,097 

 

$

126 

 

$

 -

 

$

16,877 

Ending Balance Acquired loans recorded at fair value:

 

 

9,902 

 

 

14,230 

 

 

 -

 

 

 -

 

 

1,499 

 

 

 

 

 -

 

 

25,633 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,619 

 

 

1,612 

 

 

 -

 

 

371 

 

 

89 

 

 

 -

 

 

 -

 

 

3,691 

Ending Balance Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

14,621 

 

$

23,999 

 

$

 -

 

$

4,768 

 

$

2,685 

 

$

128 

 

$

 -

 

$

46,201 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

96,224 

 

$

592,947 

 

$

35,186 

 

$

51,444 

 

$

27,067 

 

$

579 

 

$

 -

 

$

803,447 

Ending Balance Acquired loans recorded at fair value:

 

 

87,044 

 

 

105,836 

 

 

 

 

8,889 

 

 

25,537 

 

 

828 

 

 

 -

 

 

228,136 

Ending Balance Acquired loans with deteriorated credit:

 

 

 -

 

 

262 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

262 

Ending Balance Loans collectively evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

183,268 

 

$

699,045 

 

$

35,188 

 

$

60,333 

 

$

52,604 

 

$

1,407 

 

$

 -

 

$

1,031,845 

 

 

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

18

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The table below sets forth the amounts and types of non-accrual loans in the Company’s loan portfolio as of March 31, 2015 and December 31, 2014. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of March 31, 2015 and December 31, 2014, total non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans which are maintained on non-accrual status for a minimum of six months and until the borrower has demonstrated its ability to satisfy the terms of the restructured loan.   

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

 

As of December 31, 2014

 

 

(In Thousands)

 

 

(In Thousands)

Non-Accruing Loans:

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

Residential one-to-four family

$

2,869 

 

$

2,893 

Commercial and multi-family

 

6,486 

 

 

8,386 

Construction

 

 -

 

 

 -

Commercial business(1) 

 

722 

 

 

258 

Home equity(2) 

 

328 

 

 

334 

Consumer

 

 -

 

 

 -

 

 

 

 

 

 

Sub-total:

$

10,405 

 

$

11,871 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

Residential one-to-four family

$

4,915 

 

$

4,786 

Commercial and multi-family

 

1,945 

 

 

1,969 

Construction

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

Home equity(2) 

 

560 

 

 

527 

Consumer

 

 -

 

 

 -

 

 

 

 

 

 

Sub-total:

$

7,420 

 

$

7,282 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

Residential one-to-four family

$

 -

 

$

 -

Commercial and multi-family

 

 -

 

 

 -

Construction

 

 -

 

 

 -

Commercial business(1) 

 

194 

 

 

369 

Home equity(2) 

 

79 

 

 

82 

Consumer

 

 -

 

 

 -

 

 

 

 

 

 

Sub-total:

$

273 

 

$

451 

 

 

 

 

 

 

Total

$

18,098 

 

$

19,604 

 

 

 

 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

19

 


 

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three months ended March 31, 2015 and 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2015

 

 

2014

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

Originated loans

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,404 

 

$

10 

 

$

745 

 

$

14 

 

Commercial and multi-family

 

7,179 

 

 

44 

 

 

3,844 

 

 

13 

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

3,021 

 

 

43 

 

 

2,873 

 

 

 

Home equity(2) 

 

542 

 

 

 

 

423 

 

 

 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

13,146 

 

$

102 

 

$

7,885 

 

$

34 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

4,572 

 

$

10 

 

$

4,474 

 

$

15 

 

Commercial and multi-family

 

4,914 

 

 

50 

 

 

6,404 

 

 

47 

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Home equity(2) 

 

726 

 

 

 

 

905 

 

 

 

Consumer

 

-

 

 

 -

 

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

10,212 

 

$

64 

 

$

11,787 

 

$

63 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated

 

 

 

 

 

 

 

 

 

 

 

 

credit with no related allowance

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,502 

 

$

22 

 

$

1,834 

 

$

 

Commercial and multi-family

 

876 

 

 

14 

 

 

1,714 

 

 

29 

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

97 

 

 

 

 

186 

 

 

 

Home equity(2) 

 

81 

 

 

 -

 

 

90 

 

 

 -

 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

2,556 

 

$

38 

 

$

3,824 

 

$

36 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

25,914 

 

$

204 

 

$

23,496 

 

$

133 

 

 

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

20

 


 

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three months ended March 31, 2015 and 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2015

 

 

2014

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

Originated loans

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

8,984 

 

$

85 

 

$

1,725 

 

$

28 

 

Commercial and multi-family

 

2,568 

 

 

 -

 

 

4,554 

 

 

 -

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

1,941 

 

 

22 

 

 

1,261 

 

 

18 

 

Home equity(2) 

 

548 

 

 

 

 

542 

 

 

10 

 

Consumer

 

1,761 

 

 

 -

 

 

63 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

15,802 

 

$

114 

 

$

8,145 

 

$

56 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

5,088 

 

$

49 

 

$

5,442 

 

$

55 

 

Commercial and multi-family

 

1,766 

 

 

22 

 

 

7,429 

 

 

16 

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Home equity(2) 

 

455 

 

 

 

 

575 

 

 

 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

$

7,309 

 

$

76 

 

$

13,446 

 

$

74 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

90 

 

$

 

$

46 

 

$

 

Commercial and multi-family

 

 -

 

 

 -

 

 

 -

 

 

 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Commercial business(1) 

 

185 

 

 

 -

 

 

186 

 

 

 

Home equity(2) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

275 

 

$

 

$

232 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

$

23,386 

 

$

191 

 

$

21,823 

 

$

135 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

21

 


 

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at

March 31, 2015 and December 31, 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

 

As of December 31, 2014

 

 

Recorded

 

 

Unpaid Principal

 

 

Related

 

 

Recorded

 

 

Unpaid Principal

 

 

Related

Originated loans

 

Investment

 

 

Balance

 

 

Allowance

 

 

Investment

 

 

Balance

 

 

Allowance

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,999 

 

$

2,023 

 

$

-

 

$

2,809 

 

$

2,825 

 

$

-

Commercial and multi-family

 

7,155 

 

 

7,491 

 

 

-

 

 

7,202 

 

 

7,639 

 

 

-

Construction

 

 -

 

 

-

 

 

-

 

 

 -

 

 

 -

 

 

-

Commercial business(1) 

 

2,705 

 

 

2,705 

 

 

-

 

 

3,336 

 

 

3,336 

 

 

-

Home equity(2) 

 

547 

 

 

563 

 

 

-

 

 

537 

 

 

550 

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

12,406 

 

$

12,782 

 

$

 -

 

$

13,884 

 

$

14,350 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

value with no related allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

4,448 

 

$

4,641 

 

$

-

 

$

4,696 

 

$

4,849 

 

$

-

Commercial and multi-family

 

4,825 

 

 

4,893 

 

 

-

 

 

5,002 

 

 

5,060 

 

 

-

Construction

 

 -

 

 

 -

 

 

-

 

 

 -

 

 

 -

 

 

-

Commercial business(1) 

 

 -

 

 

 -

 

 

-

 

 

 -

 

 

 -

 

 

-

Home equity(2) 

 

839 

 

 

867 

 

 

-

 

 

612 

 

 

626 

 

 

-

Consumer

 

 -

 

 

 -

 

 

-

 

 

 -

 

 

 -

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

10,112 

 

$

10,401 

 

$

 -

 

$

10,310 

 

$

10,535 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit with no related allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,498 

 

$

2,126 

 

$

-

 

$

1,505 

 

$

2,133 

 

$

-

Commercial and multi-family

 

874 

 

 

1,146 

 

 

-

 

 

877 

 

 

1,034 

 

 

-

Construction

 

 -

 

 

 -

 

 

-

 

 

 -

 

 

 -

 

 

-

Commercial business(1) 

 

194 

 

 

640 

 

 

-

 

 

 -

 

 

274 

 

 

-

Home equity(2) 

 

80 

 

 

137 

 

 

-

 

 

82 

 

 

137 

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

2,646 

 

$

4,049 

 

$

 -

 

$

2,464 

 

$

3,578 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

25,164 

 

$

27,232 

 

$

 -

 

$

26,658 

 

$

28,463 

 

$

 -

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

22

 


 

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at March 31, 2015 and December 31, 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

 

As of December 31, 2014

 

 

Recorded

 

 

Unpaid Principal

 

 

Related

 

 

Recorded

 

 

Unpaid Principal

 

 

Related

Originated loans

 

Investment

 

 

Balance

 

 

Allowance

 

 

Investment

 

 

Balance

 

 

Allowance

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

8,732 

 

$

8,756 

 

$

727 

 

$

9,235 

 

$

9,247 

 

$

720 

Commercial and multi-family

 

2,816 

 

 

2,878 

 

 

1,055 

 

 

2,320 

 

 

2,364 

 

 

933 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

2,282 

 

 

2,305 

 

 

451 

 

 

1,599 

 

 

1,722 

 

 

79 

Home equity(2) 

 

546 

 

 

547 

 

 

 

 

549 

 

 

550 

 

 

Consumer

 

1,670 

 

 

1,670 

 

 

626 

 

 

1,851 

 

 

1,851 

 

 

446 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

16,046 

 

$

16,156 

 

$

2,863 

 

$

15,554 

 

$

15,734 

 

$

2,183 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

value with an allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

5,088 

 

$

5,145 

 

$

273 

 

$

5,087 

 

$

5,130 

 

$

254 

Commercial and multi-family

 

2,156 

 

 

2,194 

 

 

222 

 

 

1,375 

 

 

1,408 

 

 

154 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Home equity(2) 

 

357 

 

 

357 

 

 

59 

 

 

552 

 

 

561 

 

 

49 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

$

7,601 

 

$

7,696 

 

$

554 

 

$

7,014 

 

$

7,099 

 

$

457 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit with an allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

90 

 

$

104 

 

$

14 

 

$

90 

 

$

105 

 

$

14 

Commercial and multi-family

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

118 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

 -

 

 

369 

 

 

369 

 

 

217 

Home equity(2) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

-

Consumer

 

 -

 

 

 -

 

 

 -

 

 

-

 

 

$                            - 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

90 

 

$

104 

 

$

14 

 

$

459 

 

$

592 

 

$

231 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

$

23,737 

 

$

23,956 

 

$

3,431 

 

$

23,027 

 

$

23,425 

 

$

2,871 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

25,164 

 

$

27,232 

 

$

-

 

$

26,658 

 

$

28,463 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans:

$

48,901 

 

$

51,188 

 

$

3,431 

 

$

49,685 

 

$

51,888 

 

$

2,871 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

23

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at March 31, 2015, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual

 

Non-accrual

 

Total

March 31, 2015

 

# of Loans

 

 

Amount

 

# of Loans

 

 

Amount

 

# of Loans

 

 

Amount

 

 

(Actual)

 

 

(In Thousands)

 

(Actual)

 

 

(In Thousands)

 

(Actual)

 

 

(In Thousands)

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

 

$

2,190 

 

 

$

1,310 

 

 

$

3,500 

Commercial and multi-family

 

 

 

2,729 

 

 

 

4,834 

 

12 

 

 

7,563 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 

 

793 

 

 -

 

 

 -

 

 

 

793 

Home equity(2) 

 

 

 

503 

 

 

 

115 

 

 

 

618 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

13 

 

$

6,215 

 

13 

 

$

6,259 

 

26 

 

$

12,474 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

21 

 

$

4,438 

 

12 

 

$

3,067 

 

33 

 

$

7,505 

Commercial and multi-family

 

13 

 

 

4,988 

 

 

 

608 

 

14 

 

 

5,596 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Home equity(2) 

 

 

 

636 

 

 

 

221 

 

 

 

857 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

39 

 

$

10,062 

 

14 

 

$

3,896 

 

53 

 

$

13,958 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

 

$

2,230 

 

 -

 

$

 -

 

 

$

2,230 

Commercial and multi-family

 

 

 

1,146 

 

 -

 

 

 -

 

 

 

1,146 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 

 

273 

 

 

 

194 

 

 

 

467 

Home equity(2) 

 

 -

 

 

 -

 

 

 

127 

 

 

 

127 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

12 

 

$

3,649 

 

 

$

321 

 

14 

 

$

3,970 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

64 

 

$

19,926 

 

29 

 

$

10,476 

 

93 

 

$

30,402 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

24

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at December 31, 2014, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual

 

Non-accrual

 

Total

December 31, 2014

 

# of Loans

 

 

Amount

 

# of Loans

 

 

Amount

 

# of Loans

 

 

Amount

 

 

(Actual)

 

 

(In Thousands)

 

(Actual)

 

 

(In Thousands)

 

(Actual)

 

 

(In Thousands)

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

 

$

2,201 

 

 

$

1,323 

 

 

$

3,524 

Commercial and multi-family

 

 

 

1,065 

 

 

 

6,446 

 

12 

 

 

7,511 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 

 

798 

 

 -

 

 

 -

 

 

 

798 

Home equity(2) 

 

 

 

508 

 

 

 

117 

 

 

 

625 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

13 

 

$

4,572 

 

13 

 

$

7,886 

 

26 

 

$

12,458 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

22 

 

$

4,782 

 

11 

 

$

2,818 

 

33 

 

$

7,600 

Commercial and multi-family

 

13 

 

 

5,011 

 

 

 

614 

 

14 

 

 

5,625 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Home equity(2) 

 

 

 

637 

 

 

 

217 

 

 

 

854 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

40 

 

$

10,430 

 

13 

 

$

3,649 

 

53 

 

$

14,079 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

 

$

2,238 

 

 -

 

$

 -

 

 

$

2,238 

Commercial and multi-family

 

 

 

1,152 

 

 -

 

 

 -

 

 

 

1,152 

Construction

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

Commercial business(1) 

 

 

 

274 

 

 

 

369 

 

 

 

643 

Home equity(2) 

 

 -

 

 

 -

 

 

 

129 

 

 

 

129 

Consumer

 

 -

 

 

 -

 

 -

 

 

 -

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

 

12 

 

$

3,664 

 

 

$

498 

 

14 

 

$

4,162 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

65 

 

$

18,666 

 

28 

 

$

12,033 

 

93 

 

$

30,699 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

25

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructuring (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A  TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower. The types of concessions granted are generally included, but not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

 

 

The following table summarizes information in regards to troubled debt restructurings which occurred during the three months ended March 31, 2015.  (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2015

 

 

 

 

Pre-Modification Outstanding

 

 

Post-Modification Outstanding

 

 

Number of Contracts

 

 

Recorded Investments

 

 

Recorded Investments

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

 

$

-

Commercial and multi-family

 

-

 

 

-

 

 

-

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

2

 

$

465

 

$

479

Commercial and multi-family

 

-

 

 

-

 

 

-

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

1

 

 

223

 

 

223

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

3

 

$

688

 

$

702

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

 

$

-

Commercial and multi-family

 

-

 

 

-

 

 

-

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Total

 

3

 

$

688

 

$

702

 

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

The loans included above are considered TDRs as a result of the Company implementing one or more of the following concessions: granting a material extension of time, issuing a forbearance agreement, adjusting the interest rate to a below market rate, accepting interest only for a period of time or a change in amortization period. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.

 

 

 

26

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the three months ended March 31, 2015. (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2015

 

 

 

 

 

 

 

Number of Contracts

 

 

Recorded Investment

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

Commercial and multi-family

 

-

 

 

-

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

Residential one-to-four family

 

1

 

$

222

Commercial and multi-family

 

-

 

 

-

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

1

 

$

222

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

Commercial and multi-family

 

-

 

 

-

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

 

 

 

 

 

Total

 

1

 

$

222

 

 

 

 

 

 

 

 

 

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 


 

Note 6-Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table summarizes information in regards to troubled debt restructurings which occurred during the three months ended March 31, 2014. (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2014

 

 

 

 

Pre-Modification Outstanding

 

 

Post-Modification Outstanding

 

 

Number of Contracts

 

 

Recorded Investments

 

 

Recorded Investments

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

1

 

$

432

 

$

432

Commercial and multi-family

 

1

 

 

187

 

 

205

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

2

 

$

619

 

$

637

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

 

$

-

Commercial and multi-family

 

-

 

 

-

 

 

-

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

 

$

-

Commercial and multi-family

 

-

 

 

-

 

 

-

Construction

 

-

 

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Total

 

2

 

$

619

 

$

637

 

 

_________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

28

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the three months ended March 31, 2014. (Dollars In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2014

 

 

 

 

 

 

 

Number of Contracts

 

 

Recorded Investment

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

Commercial and multi-family

 

-

 

 

-

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

-

 

$

-

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

Residential one-to-four family

 

2

 

$

477

Commercial and multi-family

 

1

 

 

653

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

-

 

 

-

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

3

 

$

1,130

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

Residential one-to-four family

 

-

 

$

-

Commercial and multi-family

 

-

 

 

-

Construction

 

-

 

 

-

Commercial business(1) 

 

-

 

 

-

Home equity(2) 

 

1

 

 

138

Consumer

 

-

 

 

-

 

 

 

 

 

 

Sub-total:

 

1

 

$

138

 

 

 

 

 

 

Total

 

4

 

$

1,268

 

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

29

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the delinquency status of total loans receivable as of March 31, 2015. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable

 

30-59 Days

 

60-90 Days

 

Greater Than

 

Total Past

 

 

 

 

Total Loans

 

>90 Days

 

Past Due

 

Past Due

 

90 Days

 

Due

 

Current

 

Receivable

 

and Accruing

 

 

(In Thousands)

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,677 

 

$

370 

 

$

1,559 

 

$

3,606 

 

$

130,256 

 

$

133,862 

 

$

-

Commercial and multi-family

 

7,385 

 

 

415 

 

 

3,702 

 

 

11,502 

 

 

792,658 

 

 

804,160 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

79,498 

 

 

79,498 

 

 

 -

Commercial business(1) 

 

699 

 

 

655 

 

 

722 

 

 

2,076 

 

 

56,715 

 

 

58,791 

 

 

 -

Home equity(2) 

 

575 

 

 

119 

 

 

70 

 

 

764 

 

 

30,792 

 

 

31,556 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

2,570 

 

 

2,570 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

10,336 

 

$

1,559 

 

$

6,053 

 

$

17,948 

 

$

1,092,489 

 

$

1,110,437 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,905 

 

$

898 

 

$

1,721 

 

$

5,524 

 

$

73,409 

 

 

78,933 

 

$

-

Commercial and multi-family

 

3,768 

 

 

86 

 

 

1,336 

 

 

5,190 

 

 

87,379 

 

 

92,569 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

6,222 

 

 

6,222 

 

 

 -

Home equity(2) 

 

238 

 

 

295 

 

 

160 

 

 

693 

 

 

21,268 

 

 

21,961 

 

 

 -

Consumer

 

 -

 

 

13 

 

 

 -

 

 

13 

 

 

616 

 

 

629 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

6,911 

 

$

1,292 

 

$

3,217 

 

$

11,420 

 

$

188,894 

 

$

200,314 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

36 

 

$

 -

 

$

 -

 

$

36 

 

$

1,552 

 

 

1,588 

 

$

-

Commercial and multi-family

 

252 

 

 

 -

 

 

 -

 

 

252 

 

 

874 

 

 

1,126 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

193 

 

 

193 

 

 

 

 

194 

 

 

 -

Home equity(2) 

 

 -

 

 

80 

 

 

 -

 

 

80 

 

 

 -

 

 

80 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

288 

 

$

80 

 

$

193 

 

$

561 

 

$

2,427 

 

$

2,988 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

17,535 

 

$

2,931 

 

$

9,463 

 

$

29,929 

 

$

1,283,810 

 

$

1,313,739 

 

$

 -

 

 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

30

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the delinquency status of total loans receivable at December 31, 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable

 

30-59 Days

 

60-90 Days

 

Greater Than

 

Total Past

 

 

 

 

Total Loans

 

>90 Days

 

Past Due

 

Past Due

 

90 Days

 

Due

 

Current

 

Receivable

 

and Accruing

 

 

(In Thousands)

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,636 

 

$

1,638 

 

$

231 

 

$

3,505 

 

$

121,137 

 

$

124,642 

 

$

-

Commercial and multi-family

 

5,919 

 

 

650 

 

 

3,712 

 

 

10,281 

 

 

722,510 

 

 

732,791 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

73,497 

 

 

73,497 

 

 

 -

Commercial business(1) 

 

595 

 

 

748 

 

 

22 

 

 

1,365 

 

 

52,879 

 

 

54,244 

 

 

 -

Home equity(2) 

 

478 

 

 

 -

 

 

71 

 

 

549 

 

 

29,626 

 

 

30,175 

 

 

 -

Consumer

 

22 

 

 

 -

 

 

 -

 

 

22 

 

 

2,156 

 

 

2,178 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

8,650 

 

$

3,036 

 

$

4,036 

 

$

15,722 

 

$

1,001,805 

 

$

1,017,527 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,710 

 

$

2,458 

 

$

2,072 

 

$

6,240 

 

$

74,811 

 

 

81,051 

 

$

-

Commercial and multi-family

 

2,589 

 

 

1,165 

 

 

 -

 

 

3,754 

 

 

91,437 

 

 

95,191 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

161 

 

 

 -

 

 

 -

 

 

161 

 

 

6,220 

 

 

6,381 

 

 

 -

Home equity(2) 

 

836 

 

 

470 

 

 

145 

 

 

1,451 

 

 

21,247 

 

 

22,698 

 

 

 -

Consumer

 

14 

 

 

 

 

 -

 

 

23 

 

 

629 

 

 

652 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

5,310 

 

$

4,102 

 

$

2,217 

 

$

11,629 

 

$

194,344 

 

$

205,973 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

1,595 

 

$

1,595 

 

$

-

Commercial and multi-family

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

1,130 

 

 

1,130 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

369 

 

 

369 

 

 

 -

 

 

369 

 

 

 -

Home equity(2) 

 

 -

 

 

82 

 

 

 -

 

 

82 

 

 

 -

 

 

82 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

 -

 

$

82 

 

$

369 

 

$

451 

 

$

2,725 

 

$

3,176 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

13,960 

 

$

7,220 

 

$

6,622 

 

$

27,802 

 

$

1,198,874 

 

$

1,226,676 

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

31

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention, substandard, doubtful, and loss within the Company’s internal risk rating system as of March 31, 2015. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

123,578 

 

$

6,438 

 

$

3,846 

 

$

 -

 

$

-

 

$

133,862 

Commercial and multi-family

 

792,023 

 

 

1,758 

 

 

10,379 

 

 

 -

 

 

 -

 

 

804,160 

Construction

 

79,333 

 

 

165 

 

 

 -

 

 

 -

 

 

 -

 

 

79,498 

Commercial business(1) 

 

52,371 

 

 

1,993 

 

 

4,427 

 

 

 -

 

 

 -

 

 

58,791 

Home equity(2) 

 

30,266 

 

 

842 

 

 

448 

 

 

 -

 

 

 -

 

 

31,556 

Consumer

 

243 

 

 

2,327 

 

 

 -

 

 

 -

 

 

 -

 

 

2,570 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

1,077,814 

 

$

13,523 

 

$

19,100 

 

$

 -

 

$

 -

 

$

1,110,437 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

70,310 

 

$

3,167 

 

$

5,456 

 

$

 -

 

$

 

 

 

78,933 

Commercial and multi-family

 

87,517 

 

 

1,658 

 

 

3,394 

 

 

 -

 

 

 -

 

 

92,569 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

6,222 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

6,222 

Home equity(2) 

 

20,739 

 

 

132 

 

 

1,090 

 

 

 -

 

 

 -

 

 

21,961 

Consumer

 

629 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

629 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

185,417 

 

$

4,957 

 

$

9,940 

 

$

 -

 

$

 -

 

$

200,314 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

238 

 

$

589 

 

$

761 

 

$

 -

 

$

 -

 

 

1,588 

Commercial and multi-family

 

587 

 

 

539 

 

 

 -

 

 

 -

 

 

 -

 

 

1,126 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

194 

 

 

 -

 

 

 -

 

 

194 

Home equity(2) 

 

 -

 

 

 -

 

 

80 

 

 

 -

 

 

 -

 

 

80 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

825 

 

$

1,128 

 

$

1,035 

 

$

 -

 

$

 -

 

$

2,988 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Loans

$

1,264,056 

 

$

19,608 

 

$

30,075 

 

$

 -

 

$

 -

 

$

1,313,739 

 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention, substandard, doubtful, and loss within the Company’s internal risk rating system as of December 31, 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

113,847 

 

$

6,921 

 

$

3,874 

 

$

 -

 

$

 -

 

$

124,642 

Commercial and multi-family

 

721,075 

 

 

2,322 

 

 

9,394 

 

 

 -

 

 

 -

 

 

732,791 

Construction

 

73,332 

 

 

165 

 

 

 -

 

 

 -

 

 

 -

 

 

73,497 

Commercial business(1) 

 

47,866 

 

 

2,020 

 

 

4,358 

 

 

 -

 

 

 -

 

 

54,244 

Home equity(2) 

 

29,178 

 

 

863 

 

 

134 

 

 

 -

 

 

 -

 

 

30,175 

Consumer

 

267 

 

 

1,911 

 

 

 -

 

 

 -

 

 

 -

 

 

2,178 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

985,565 

 

$

14,202 

 

$

17,760 

 

$

 -

 

$

 -

 

$

1,017,527 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

72,502 

 

$

3,069 

 

$

5,480 

 

$

 -

 

$

 -

 

 

81,051 

Commercial and multi-family

 

90,090 

 

 

2,253 

 

 

2,848 

 

 

 -

 

 

 -

 

 

95,191 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

6,381 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

6,381 

Home equity(2) 

 

21,506 

 

 

133 

 

 

1,059 

 

 

 -

 

 

 -

 

 

22,698 

Consumer

 

652 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

652 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

191,131 

 

$

5,455 

 

$

9,387 

 

$

 -

 

$

 -

 

$

205,973 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

238 

 

$

286 

 

$

1,071 

 

$

 -

 

$

 -

 

 

1,595 

Commercial and multi-family

 

589 

 

 

541 

 

 

 -

 

 

 -

 

 

 -

 

 

1,130 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

369 

 

 

 -

 

 

 -

 

 

369 

Home equity(2) 

 

 -

 

 

 -

 

 

82 

 

 

 -

 

 

 -

 

 

82 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

827 

 

$

827 

 

$

1,522 

 

$

 -

 

$

 -

 

$

3,176 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Loans

$

1,177,523 

 

$

20,484 

 

$

28,669 

 

$

 -

 

$

 -

 

$

1,226,676 

 

 

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

33

 


 

Note 6 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the unpaid principal balance and the related recorded investment of acquired loans included in our Consolidated Statements of Financial Condition. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

2015

 

2014

 

 

 

 

 

 

Unpaid principal balance

$

211,072 

 

$

216,741 

Recorded investment

 

203,302 

 

 

209,150 

 

 

 

 

The following table presents changes in the accretable discount on loans acquired for the three months ended March 31, 2015  and 2014.  (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Balance, Beginning of Period

$

70,522 

 

$

102,454 

 

     Accretion

 

(3,671)

 

 

(14,362)

 

     Net Reclassification from Non-Accretable Difference

 

83 

 

 

 -

 

Balance, End of Period

$

66,934 

 

$

88,092 

 

 

 

 

The following table presents changes in the non-accretable yield on loans acquired for the three months ended March 31, 2015 and 2014. (In Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

Balance, Beginning of Period

$

3,773 

 

$

4,413 

 

     Amounts not recognized due to chargeoffs on

 

 

 

 

 

 

     transfers to other real estate

 

 -

 

 

(91)

 

     Net Reclassification to Accretable Difference

 

(83)

 

 

(93)

 

Balance, End of Period

$

3,690 

 

$

4,229 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 


 

Note 7 – Fair Values of Financial Instruments 

 

Guidance on fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

 

 

The only assets or liabilities that the Company measured at fair value on a recurring basis were as follows.  (In  Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Level 1)

  

(Level 2)

  

 

 

 

 

 

 

 

Quoted Prices in

 

Significant

 

(Level 3)

 

 

 

 

 

Active Markets

 

Other

 

Significant

 

 

 

 

 

for Identical

 

Observable

 

Unobservable

Description

 

Total

 

Assets

 

Inputs

 

Inputs

As of March 31, 2015:

 

 

 

  

 

 

  

 

 

  

 

 

Securities available for sale — Residential mortgage backed securities

 

$

9,593 

  

$

  

$

9,593 

  

$

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014:

 

 

 

  

 

 

  

 

 

  

 

 

Securities available for sale — Residential mortgage backed securities

 

$

9,768 

  

$

  

$

9,768 

  

$

 

 

 

The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer.  There were no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended March 31, 2015 and 2014.

 

The only assets or liabilities that the Company measured at fair value on a nonrecurring basis were as follows.  (In  Thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

(Level 1)

  

(Level 2)

  

 

 

 

 

 

 

 

Quoted Prices in

 

Significant

 

(Level 3)

 

 

 

 

 

Active Markets

 

Other

 

Significant

 

 

 

 

 

for Identical

 

Observable

 

Unobservable

Description

 

Total

 

Assets

 

Inputs

 

Inputs

As of March 31, 2015:

 

 

 

  

 

 

  

 

 

  

 

 

Impaired Loans

 

$

20,306 

  

$

  

$

  

$

20,306 

Other real estate owned

 

$

2,185 

  

$

  

$

  

$

2,185 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014:

 

 

 

  

 

 

  

 

 

  

 

 

Impaired loans

 

$

20,156 

  

$

  

$

  

$

20,156 

Other real estate owned

 

$

3,485 

 

$

 

$

 

$

3,485 

 

 

 

 

 

 

 

 

35

 


 

Note 7 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of March 31, 2015 and December 31, 2014 about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value.  (Dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

Fair Value

Valuation

Unobservable

Range

 

 

Estimate

Techniques

Input

 

March 31, 2015:

 

 

 

 

 

Impaired Loans

$

20,306 

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

 

 

 

 

Liquidation expenses (3)

0%-10%

 

 

 

 

 

 

Other Real Estate Owned

$

2,185

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

 

 

 

 

Liquidation expenses (3)

0%-10%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

Valuation

Unobservable

Range

 

 

Estimate

Techniques

Input

 

December 31, 2014:

 

 

 

 

 

Impaired Loans

$

20,156

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

 

 

 

 

Liquidation expenses (3)

0%-10%

 

 

 

 

 

 

Other Real Estate Owned

$

3,485

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

 

 

 

 

Liquidation expenses (3)

0%-10%

 

(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

(3)

Includes qualitative adjustments by management and estimated liquidation expenses.

 

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments as of March 31, 2015 and December 31, 2014.

  

 

 

Cash and Cash Equivalents and Interest-Earning Time Deposits (Carried at Cost)

The carrying amounts reported in the consolidated statements of financial condition for cash and short-term instruments approximate those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Loans Held for Sale (Carried at Lower of Cost or Fair Value)

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for specific attributes of that loan. Loans held for sale are carried at their cost as of March 31, 2015 and December 31, 2014.

Loans Receivable (Carried at Cost)

The fair value of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

 

36

 


 

Note 7 – Fair Values of Financial Instruments (Continued)

Impaired Loans (Generally Carried at Fair Value)

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value at March 31, 2015 and December 31, 2014 consisted of the loan balances of $23.7 million and $23.0 million, net of a valuation allowance of $3.4 million and $2.9 million, respectively.

 

 

Real Estate Owned (Generally Carried at Fair Value)

Real Estate Owned is generally carried at fair value, when the carrying value is written down to fair value, which is determined based upon independent third-party appraisals of the properties, or based upon the expected proceeds from a pending sale. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

FHLB of New York Stock (Carried at Cost)

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Interest Receivable and Payable (Carried at Cost)

The carrying amount of interest receivable and interest payable approximates its fair value.

Deposits (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Long-Term Debt (Carried at Cost)

Fair values of long-term debt are estimated using discounted cash flow analysis, based on quoted prices for new long-term debt with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and unused lines of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these commitments was deemed immaterial and is not presented in the accompanying table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 


 

Note 7 – Fair Values of Financial Instruments (Continued)

 

 

The carrying values and estimated fair values of financial instruments were as follows as of March 31, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices in Active

 

Significant

 

Significant

 

 

Carrying

 

 

 

 

Markets for Identical Assets

 

Other Observable Inputs

 

Unobservable Inputs

 

 

Value

 

Fair Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Financial assets:

 

  

 

 

 

 

  

 

 

  

 

 

 

 

 

Cash and cash equivalents

 

$

28,535 

 

$

28,535 

  

$

28,535 

  

$

-

 

$

-

Interest-earning time deposits

 

 

993 

 

 

993 

  

 

993 

  

 

-

 

 

-

Securities available for sale

 

 

9,593 

 

 

9,593 

  

 

-

  

 

9,593 

 

 

-

Loans held for sale

 

 

3,604 

 

 

3,711 

  

 

-

  

 

3,711 

 

 

 -

Loans receivable, net

 

 

1,294,230 

 

 

1,332,447 

  

 

-

  

 

 -

 

 

1,332,447 

FHLB of New York stock, at cost

 

 

9,730 

 

 

9,730 

  

 

 -

  

 

9,730 

 

 

-

Accrued interest receivable

 

 

4,726 

 

 

4,726 

  

 

 -

  

 

4,726 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

Deposits

 

 

1,085,899 

 

 

1,089,726 

  

 

639,701 

  

 

450,025 

 

 

-

Borrowings

 

 

183,000 

 

 

187,963 

  

 

 -

  

 

187,963 

 

 

-

Subordinated debentures

 

 

4,124 

 

 

4,124 

 

 

-

 

 

4,236 

 

 

-

Acrrued interest payable

 

 

883 

 

 

883 

  

 

 -

  

 

883 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices in Active

 

Significant

 

Significant

 

 

Carrying

 

 

 

 

Markets for Identical Assets

 

Other Observable Inputs

 

Unobservable Inputs

 

 

Value

 

Fair Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Financial assets:

 

  

 

 

 

 

  

 

 

  

 

 

 

 

 

Cash and cash equivalents

 

$

32,123 

 

$

32,123 

  

$

32,123 

  

$

-

 

$

-

Interest-earning time deposits

 

 

993 

 

 

993 

  

 

993 

  

 

-

 

 

-

Securities available for sale

 

 

9,768 

 

 

9,768 

  

 

-

  

 

9,768 

 

 

-

Loans held for sale

 

 

3,325 

 

 

3,424 

  

 

-

  

 

3,424 

 

 

 -

Loans receivable, net

 

 

1,207,850 

 

 

1,244,434 

  

 

-

  

 

 -

 

 

1,244,434 

FHLB of New York stock, at cost

 

 

8,830 

 

 

8,830 

  

 

 -

  

 

8,830 

 

 

-

Accrued interest receivable

 

 

4,454 

 

 

4,454 

  

 

 -

  

 

4,454 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

Deposits

 

 

1,028,556 

 

 

1,032,275 

  

 

616,019 

  

 

416,256 

 

 

-

Debt

 

 

159,000 

 

 

163,312 

  

 

 -

  

 

163,312 

 

 

-

Subordinated debentures

 

 

4,124 

 

 

4,236 

 

 

 -

 

 

4,236 

 

 

 -

Accrued interest payable

 

 

815 

 

 

815 

  

 

 -

  

 

815 

 

 

-

 

 

 

 

 

 

 

38

 


 

 

 

 

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition 

 

Total assets increased by $81.9 million, or 6.3%, to $1.384 billion at March 31, 2015 from $1.302 billion at December 31, 2014. The increase in total assets occurred primarily as a result of an increase in loans receivable, net of $86.4 million, partially offset by a decrease in total cash and cash equivalents of $3.6 million. Management is concentrating on maintaining adequate liquidity in anticipation of funding loans in the loan pipeline as well as seeking opportunities to purchase securities in the secondary market that provide competitive returns in a risk-mitigated environment. It is our intention to grow our assets at a measured pace consistent with our capital levels and as business opportunities permit. Organic growth should occur consistent with our strategic plan under which we anticipate opening additional branch offices in 2015.

 

Total cash and cash equivalents decreased by $3.6 million, or 11.2%, to $28.5 million at March 31, 2015 from $32.1 million at December 31, 2014.

 

Loans receivable, net increased by $86.4 million, or 7.2%, to $1.294 billion at March 31, 2015 from $1.208 billion at December 31, 2014. The increase resulted primarily from a $73.7 million increase in real estate mortgages, primarily comprising commercial and multi-family, construction and commercial participation loans with other financial institutions, along with a $4.4 million increase in business loans and commercial lines of credit, an increase of $8.7 million in residential real estate loans, and a $605,000 increase in home equity loans and home equity lines of credit. As of March 31, 2015, the allowance for loan losses was $16.7 million, or 92.4%, of non-performing loans and 1.27% of gross loans. As a result of the loans acquired in the business combination transactions being recorded at their fair value, the balances in the allowance for loan losses that were on the balance sheets of the former Pamrapo Bancorp, Inc. and Allegiance Community Bank are precluded from being reported in the allowance balance previously discussed, consistent with generally accepted accounting principles.

 

Deposit liabilities increased by $57.3 million, or 5.6%, to $1.086 billion at March 31, 2015 from $1.029 billion at December 31, 2014. The increase resulted primarily from a $13.9 million increase in non-interest-bearing deposits, an increase of $33.6 million in certificate of deposits, a $29.6 million increase in NOW deposits, and a $1.3 million increase in money market interest-bearing deposits, partly offset by a decrease of $21.0 million in savings and club deposits. In addition to organic deposit growth resulting from the opening of five additional branches over the last 12 months, the Company has also added listing service certificates of deposit and brokered certificates of deposit to fund loan growth. During the quarter ended March 31, 2015, the Federal Open Market Committee (FOMC) has continued its accommodative monetary policy. This extended environment of historically low short-term market rates has resulted in continuing parallel low retail deposit account yields, directly decreasing interest expense.

 

Short-term borrowings decreased by $23.0 million, or 88.5%, to $3.0 million at March 31, 2015 from $26.0 million at December 31, 2014. Long-term borrowed money increased by $47.0 million, or 35.3%, to $180.0 million at March 31, 2015 from $133.0 million at December 31, 2014. The purpose of these borrowings reflected the use of long- and short-term Federal Home Loan Bank advances to augment deposits as the Company’s funding source for originating loans and investing in GSE investment securities. The increase in Federal Home Loan Bank advances resulted from the Company’s utilization of medium-term, fixed rate FHLB advances as part of our interest rate risk management strategy.

 

 

Stockholders’ equity increased by $700,000, or 0.7%, to $103.0 million at March 31, 2015 from $102.3 million at December 31, 2014. The increase in stockholders’ equity was primarily attributable to net income of $1.8 million, partly offset by cash dividends paid during the period totaling $1.1 million on outstanding common shares of stock and $202,000 on outstanding preferred stock. The Company accrued a dividend payable for the first quarter on the preferred shares for $202,000 which will be paid in the second quarter. As of March 31, 2015, the Bank’s Tier 1, Tier 1 Risk-Based, Total Risk-Based Capital and Common Equity Tier 1 Capital Ratios were 8.04%, 9.30%, 10.55% and 9.30%, respectively.

 

 

Three Months of Operation

 

Net income was $1.8 million for the three months ended March 31, 2015, compared with $2.2 million for the three months ended March 31, 2014. The decrease in net income was primarily related to an increase in non-interest expense, partly offset by an increase in net interest income and decreases in the provision for loan losses and income tax provision.

 

Net interest income increased by $527,000, or 4.4%, to $12.6 million for the three months ended March 31, 2015 from $12.1 million for the three months ended March 31, 2014. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $108.2 million, or 9.0%, to $1.306 billion for the three months ended March 31, 2015 from $1.198 billion for the three months ended March 31, 2014, partly offset by a decrease in the average yield on interest-earning assets of 13 basis points to 4.75% for the three months ended March 31, 2015 from 4.88% for the three months ended March 31, 2014. The average balance of interest-bearing liabilities increased by $101.7 million or 10.2% to $1.096 billion for the three months ended March 31, 2015 from $994.0 million for the three months ended March 31, 2014, while the average cost of interest-bearing liabilities increased by four basis points to 1.07% for the three months ended March 31, 2015 from 1.03% for the three months ended March 31, 2014. Net interest margin was 3.86% for the three-month period ended March 31, 2015 and 4.03% for the three-month period ended March 31, 2014.

   

Interest income on loans receivable increased by $1.7 million, or 12.3%, to $15.4 million for the three months ended March 31, 2015 from $13.7 million for the three months ended March 31, 2014. The increase was primarily attributable to an increase in the average balance of loans receivable of $209.4 million, or 19.9%, to $1.261 billion for the three months ended March 31, 2015 from $1.052 billion for the three months ended March 31, 2014, partially offset by a decrease in the average yield on loans receivable to 4.87% for the three months ended March 31, 2015 from 5.20% for the three months ended March 31, 2014. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included the hiring of additional loan production and business development personnel and the opening of five additional branches over the last 12 months. The decrease in average yield reflected the competitive price environment prevalent in the Company’s primary market area on loan facilities, as well as the repricing downward of certain variable rate loans.

Interest income on securities decreased by $781,000, or 84.3%, to $146,000 for the three months ended March 31, 2015 from $927,000 for the three months ended March 31, 2014.  This decrease was primarily due to a decrease in the average balance of securities of $101.7 million, or 84.2%, to $19.1 million for the three months ended March 31, 2015 from $120.8 million for the three months ended March 31, 2014, and a decrease in the average yield of securities to 3.06% for the three months ended March 31, 2015 from 3.07% for the three months ended March 31, 2014. The decrease in the average balance of securities primarily resulted from the sales of $99.2 million of mortgage backed securities in the third quarter of 2014.

39

 


 

Interest income on other interest-earning assets decreased by $6,000, or 46.2%, to $7,000 for the three months ended March 31, 2015 from $13,000 for the three months ended March 31, 2014. This decrease was primarily due to a decrease in the average yield on other interest-earning assets to 0.11% for the three months ended March 31, 2015 from 0.20% for the three months ended March 31, 2014. The average balance of other interest-earning assets increased $598,000, or 2.3%, to $26.2 million for the three months ended March 31, 2015 from $25.6 million for the three months ended March 31, 2014. The static nature of the average yield on other interest-earning assets reflects the current philosophy of the FOMC of keeping short-term interest rates at historically low levels for the last several years.

Total interest expense increased by $372,000, or 14.5%, to $2.9 million for the three months ended March 31, 2015 from $2.6 million for the three months ended March 31, 2014. The increase resulted primarily from an increase in the average balance of borrowings of $47.6 million, or 36.2%, to $179.1 million for the three months ended March 31, 2015 from $131.5 million for the three months ended March 31, 2014, and an increase in the average balance of deposits of $54.1 million, or 6.3%, to $916.6 million for the three months ended March 31, 2015 from $862.5 million for the three months ended March 31, 2014, as well as an increase in the average cost of interest-bearing liabilities of four basis points to 1.07% for the three months ended March 31, 2015 from 1.03% for the three months ended March 31, 2014. The increase in the average rate on interest-bearing liabilities was due to competitive forces in attracting new deposits and a change in the mix of funding sources and terms to support aggressive loan growth.

The provision for loan losses totaled $720,000 and $1.0 million for the three months ended March 31, 2015 and 2014, respectively. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. During the three months ended March 31, 2015, the Company experienced $208,000 in charge-offs. During the year ended December 31, 2014, the Company experienced $991,000 in net charge-offs (consisting of $437,000 in charge-offs and $446,000 in recoveries). The Bank had non-performing loans totaling $18.1 million, or 1.38%, of gross loans at March 31, 2015 and $19.6 million, or 1.6%, of gross loans at December 31, 2014. The allowance for loan losses was $16.7 million, or 1.27%, of gross loans at March 31, 2015, $16.2 million, or 1.32%, of gross loans at December 31, 2014 and $14.6 million, or 1.36%, of gross loans at March 31, 2014. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at March 31, 2015 and December 31, 2014.

 

Total non-interest income decreased by $95,000, or 7.3%, to $1.2 million for the three months ended March 31, 2015 from $1.3 million for the three months ended March 31, 2014. Non-interest income reflected a decrease of $101,000, or 13.0%, in gain on sale of loans originated for sale to $676,000 for the three months ended March 31, 2015 from $777,000 for the three months ended March 31, 2014.

 

Total non-interest expense increased by $1.4 million, or 16.7%, to $10.0 million for the three months ended March 31, 2015 from $8.6 million for the three months ended March 31, 2014. Salaries and employee benefits expense increased by $764,000,  or 17.1%, to $5.2 million for the three months ended March 31, 2015 from $4.5 million for the three months ended March 31, 2014. This increase in both salaries and employee benefits was mainly attributable to an increase of 52 full-time equivalent employees, or 19.2%, to 323 at March 31, 2015 from 271 at March 31, 2014, which relates to the addition of business development and loan administration employees and the opening of new branch offices in the second half of 2014 and in the first quarter of 2015. Occupancy expense increased by $330,000, or 33.7%, to $1.3 million for the three months ended March 31, 2015 from $980,000 for the three months ended March 31, 2014. Equipment expense increased by $175,000, or 12.9%, to $1.5 million for the three months ended March 31, 2015 from $1.4 million for the three months ended March 31, 2014. The increases in occupancy and equipment expenses related primarily to the opening of new branch offices in the second half of 2014 and the first quarter of 2015. Professional fees decreased by $388,000, or 79.2%, to $102,000 for the three months ended March 31, 2015 from $490,000 for the three months ended March 31, 2014. Director fees increased by $11,000, or 6.5%, to $179,000 for the three months ended March 31, 2015 from $168,000 for the three months ended March 31, 2014. Regulatory assessments increased by $23,000, or 9.1%, to $275,000 for the three months ended March 31, 2015 from $252,000 for the three months ended March 31, 2014. Advertising expense increased by $264,000, or 151.7%, to $438,000 for the three months ended March 31, 2015 from $174,000 for the three months ended March 31, 2014, primarily due to our marketing efforts related to the previously mentioned expansion of our geographic footprint and to a Bank rebranding initiative. Other real estate owned (OREO) expenses increased by $41,000 to $49,000 for the three months ended March 31, 2015 from $8,000 for the three months ended March 31, 2014. Other non-interest expense increased by $208,000, or 31.2%, to $874,000 for the three months ended March 31, 2015 from $666,000 for the three months ended March 31, 2014. Other non-interest expense comprises loan expense, stationary, forms and printing, check printing, correspondent bank fees, telephone and communication and other fees and expenses.

 

Income tax provision decreased by $327,000, or 20.8%, to $1.3 million for the three months ended March 31, 2015 from $1.6 million for the three months ended March 31, 2014. The decrease in income tax provision was a result of lower taxable income during the three-month period ended March 31, 2015 as compared with the three months ended March 31, 2014. The consolidated effective tax rate for the three months ended March 31, 2015 was 40.3% compared to 41.3% for the three months ended March 31, 2014.

 

 

 

 

 

 

 

 

 

40

 


 

 

 

Liquidity and Capital Resources 

 

Liquidity

 

The overall objective of our liquidity management practices is to ensure the availability of sufficient funds to meet financial commitments and to take advantage of lending and investment opportunities.  The Company manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings and other obligations as they mature, and to fund loan and investment portfolio opportunities as they arise.

 

The Company’s primary sources of funds to satisfy its objectives are net growth in deposits (primarily retail), principal and interest payments on loans and investment securities, proceeds from the sale of originated loans and FHLB and other borrowings.  The scheduled amortization of loans is a predictable source of funds. Deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including unsecured overnight lines of credit and other collateralized borrowings from the FHLB and other correspondent banks.

At March 31, 2015, the Company had overnight borrowings outstanding with the FHLB of $3.0 million compared to $26.0 million at December 31, 2014. The Company utilizes overnight borrowings from time to time to fund short-term liquidity needs. The Company had total borrowings of $187.1 million at March 31, 2015 as compared to $163.1 million at December 31, 2014.

 

The Company had the ability at March 31, 2015 to obtain additional funding from the FHLB of $62.7 million, utilizing unencumbered loan collateral. The Company expects to have sufficient funds available to meet current loan commitments in the normal course of business through typical sources of liquidity. Time deposits scheduled to mature in one year or less totaled $287.0 million at March 31, 2015. Based upon historical experience data, management estimates that a significant portion of such deposits will remain with the Company.

 

 

 

Capital Resources.  At March 31, 2015, and December 31, 2014, BCB Community Bank exceeded all of its regulatory capital requirements to which it is subject.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

For Capital Adequacy Purposes

 

For Well Capitalized Under Prompt Corrective Action

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

As of March 31, 2015

 

 

 

 

 

 

 

 

 

Tangible capital to tangible assets

 

8.04 

%

 

4.00 

%

 

5.00 

%

Tier 1 capital (core) (to adjusted total assets)

 

9.30 

%

 

6.00 

%

 

8.00 

%

Total capital (to risk-weighted assets)

 

10.55 

%

 

8.00 

%

 

10.00 

%

Common Equity Tier 1 Capital (to risk-weighted assets)

 

9.30 

%

 

4.50 

%

 

6.50 

%

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

Tangible capital to tangible assets

 

8.33 

%

 

4.00 

%

 

5.00 

%

Tier 1 capital (core) (to adjusted total assets)

 

10.48 

%

 

4.00 

%

 

6.00 

%

Total capital (to risk-weighted assets)

 

11.73 

%

 

8.00 

%

 

10.00 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.  Among other things, the new rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.  The final rule also requires unrealized gains and losses on certain available-for-sale securities holdings and defined benefit plan obligations to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised.  The Bank exercised the opt-out election. The rule limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. 

 

The final rule became effective for the Bank and the Company on January 1, 2015.  The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective.  The Bank and the Company currently comply with the final rule.

 

At March 31, 2015 and December 31, 2014, the Bank’s capital ratios exceeded the quantitative capital ratios required for an institution to be considered “well-capitalized.”

 

 

 

 

41

 


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management of Market Risk

General. The majority of our assets and liabilities are monetary in nature. Consequently, one of our most significant forms of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee, which consists of senior management and outside directors operating under a policy adopted by the Board of Directors, meets quarterly to review our asset/liability policies and interest rate risk position.

The following table presents the Company’s net portfolio value (“NPV”). These calculations were based upon assumptions believed to be fundamentally sound, although they may vary from assumptions utilized by other financial institutions. The information set forth below is based on data that included all financial instruments as of March 31, 2015. Assumptions have been made by the Company relating to interest rates, loan prepayment rates, core deposit duration, and the market values of certain assets and liabilities under the various interest rate scenarios. Actual maturity dates were used for fixed rate loans and certificate accounts. Investment securities were scheduled at either the maturity date or the next scheduled call date based upon management’s judgment of whether the particular security would be called in the current interest rate environment and under assumed interest rate scenarios. Variable rate loans were scheduled as of their next scheduled interest rate repricing date. Additional assumptions made in the preparation of the NPV table include prepayment rates on loans and mortgage-backed securities, core deposits without stated maturity dates were scheduled with an assumed term of 48 months, and money market and non-interest bearing accounts were scheduled with an assumed term of 24 months. The NPV at “PAR” represents the difference between the Company’s estimated value of assets and estimated value of liabilities assuming no change in interest rates. The NPV for a decrease of 200 to 300 basis points has been excluded since it would not be meaningful, in the interest rate environment as of March 31, 2015. The following sets forth the Company’s NPV as of that date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

NPV as a % of Assets

 

Change in Calculation

  

Net Portfolio Value

 

$ Change from PAR

 

% Change from PAR

 

NPV Ratio

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

+300bp

  

$

122,710 

  

$

(55,668)

 

(31.21)

%

 

9.34 

%

 

(302)

bps

+200bp

  

 

141,848 

 

 

(36,529)

 

(20.48)

 

 

10.46 

 

 

(191)

bps

+100bp

  

 

161,365 

  

 

(17,012)

 

(9.54)

 

 

11.54 

 

 

(83)

bps

PAR

  

 

178,377 

  

 

-

 

-

 

 

12.37 

 

 

-

bps

-100bp

 

 

214,384 

 

 

36,007 

 

20.19 

 

 

14.36 

 

 

200 

bps

 

bp – basis points

 

 

 

 

The table above indicates that as of March 31, 2015, in the event of a 100 basis point increase in interest rates, we would experience a 9.54%  decrease in NPV.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in NPV require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the NPV table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income, and will differ from actual results.

 

42

 


 

 

 

ITEM 4.

Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

43

 


 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

       We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of business. Other than as set forth below, as of March 31, 2015, we were not involved in any material legal proceedings the outcome of which, if determined in a manner adverse to the Company, would have a material adverse affect on our financial condition or results of operations.

    

      The Company, as the successor to Pamrapo Bancorp, Inc., and in its own corporate capacity, is a named defendant in a shareholder class action lawsuit, Kube v. Pamrapo Bancorp, Inc., et al., filed in the Superior Court of New Jersey, Hudson County, Chancery Division, General Equity (the "Action”). On May 9, 2012, the Company and the other defendants obtained partial summary judgment, dismissing three of the five Counts of the plaintiff's Complaint. On May 9, 2012, plaintiff’s counsel was awarded interim legal fees of approximately $350,000. The obligation to pay that amount has been stayed.

 

      The Company and the other defendants filed a motion for summary judgment seeking the dismissal of the remaining two Counts of the plaintiff's Complaint. That motion was denied, without prejudice, on February 19, 2014.

 

      Since that date, the parties conferred in an effort to resolve the Action. The terms of a proposed Stipulation of Settlement ("Stipulation") have been agreed to by the plaintiff class, the Company and the remaining defendants. In consideration for the full settlement and release of all Released Claims (as that term is defined in the Stipulation) and the dismissal of the Action with prejudice as against the Company and the remaining defendants, the Company, on its own behalf and on behalf of the remaining defendants, will pay $1,950,000.00 to the Class.

 

      On January 9, 2015, the court entered an Order Granting Preliminary Approval of the Proposed Class Settlement and Authorizing the Dissemination of Notice to the Class. Pursuant to the court rules, a "Fairness Hearing" to determine if the proposed settlement is fair, reasonable and adequate has been scheduled for May 22, 2015. 

 

          The Company and the other defendants in the Action ("Plaintiffs") have brought a lawsuit ("Carrier Suit") against Progressive Insurance Company ("Progressive"), the Directors' and Officers' Liability insurance carrier for Pamrapo Bancorp, Inc., at the time of its merger with the Company on July 6, 2010, and Colonial American Insurance Company ("Colonial"), the Directors' and Officers' Liability insurance carrier for the Company at the time of the merger.  The Carrier Suit seeks, among other claims, indemnification, payment of and/or contribution toward the above settlement, payment of and/or contribution toward the above award of interim attorney's fees to the plaintiff class's counsel, payment of and/or contribution toward any future award of attorney's fees to the plaintiff class's counsel, and reimbursement of the attorney's fees and defense costs incurred by the Plaintiffs in defending the Action.  

 

       Progressive made a motion to dismiss the Carrier Suit in 2014. The Plaintiffs opposed that motion. That motion was administratively terminated by Order of the court, dated December 3, 2014.  By Order of the court, dated December 3, 2014, the Plaintiffs' motion to file an Amended Complaint was granted.  

 

       On or about January 6, 2015, Progressive again made a motion to dismiss the Carrier Suit. The Plaintiffs have opposed that motion. That motion is pending.  

 

       A Mediation session ("Mediation") was held on March 11, 2015, among the parties. Following the Mediation, the Plaintiffs and Colonial agreed to settle the Plaintiff's claims against Colonial for $1,750,000.00. The terms of a Settlement Agreement are being negotiated as of March 31, 2015.

 

       The Plaintiffs and Progressive did not settle their respective claims. The Carrier Suit continues with respect to those parties. Discovery has been exchanged among the parties. The Plaintiffs are vigorously pursuing full recovery.

 

 

 

 

 

ITEM 1.A. RISK FACTORS

Other than as set forth below, there have been no changes to the risk factors set forth under Item 1.A Risk Factors as set forth in the Company’s Form 10-K for the year ended December 31, 2014.

 

The asset quality of our loan portfolio may deteriorate if the economy falters, resulting in a portion of our loans failing to perform in accordance with their terms. Under such circumstances our profitability will be adversely affected.

 

At March 31, 2015, the Company had $49.7 million in classified loans of which none were classified as doubtful, $30.1 million were classified as substandard and $19.6 million were classified as special mention.  In addition, at that date we had $18.1 million in non-accruing loans.  We have adhered to stringent underwriting standards in the origination of loans, but there can be no assurance that loans that we originated will not experience asset quality deterioration as a result of a downturn in the local economy.  Should our local economy weaken, our asset quality may deteriorate resulting in losses to the Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44

 


 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On June 28, 2012, the Company announced a seventh stock repurchase plan to repurchase 5% or 440,000 shares of the Company’s common stock. On July 17, 2013, the Company announced an eighth stock repurchase plan to repurchase 5% or 400,000 shares of the Company’s common stock. There were no stock purchases for the three months ended March 31, 2015.

 

 

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

 

ITEM 4. MINE SAFTEY DISCLOSURES

Not applicable

 

 

ITEM 5. OTHER INFORMATION

None.

 

 

ITEM 6. EXHIBITS

Exhibit 11.0 Computation of Earnings per Share.

Exhibit 31.1 and 31.2  Officers’ Certification filed pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32              Officers’ Certification filed pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS        XBRL Instance Document

Exhibit 101.SCH       XBRL Taxonomy Extension Schema

Exhibit 101.CAL       XBRL Taxonomy Extension Calculation LinkBase

Exhibit 101.DEF       XBRL Taxonomy Extension Definition LinkBase

Exhibit 101.LAB       XBRL Taxonomy Extension Label LinkBase

Exhibit 101.PRE       XBRL Taxonomy Extension Presentation LinkBase

 

45

 


 

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

 

BCB BANCORP, INC.

 

 

 

Date: May 7, 2015

 

By:

 

/s/ Thomas Coughlin

 

 

 

 

Thomas Coughlin

 

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date:  May 7, 2015

 

By:

 

/s/ Thomas P. Keating

 

 

 

 

Thomas P. Keating

Senior Vice President and Chief Financial Officer

 

 

 

 

(Principal Accounting and Financial Officer)

 

 

 

 

 

 

46