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BCB BANCORP INC - Quarter Report: 2019 June (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 June 30, 2019

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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)



Securities registered pursuant to section 12(b) of the Securities and Exchange Act of 1934:

 



 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

BCBP

The Nasdaq Stock Market, LLC

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 every Interactive Data File required to be submitted 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 such files).       Yes       No

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

 

 

 

 

 

 

 

Large Accelerated Filer

 

  

Accelerated Filer

 

 

 

 

 

 

Non-Accelerated Filer

 

  

Smaller Reporting Company   

 

 



 

 

 

 

 

 



 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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 August 1, 2019, BCB Bancorp, Inc., had 16,460,891 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 June 30, 2019 (unaudited) and December 31, 2018 (unaudited)

  

 

  

Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018 (unaudited)

  

 

  

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018 (unaudited)

  

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018 (unaudited)

  

 

  

Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)

  

 

  

Notes to Unaudited Consolidated Financial Statements

  

 

 

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

  

 

36 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  

 

43 

 

Item 4. Controls and Procedures

  

 

44 

  

 

 

PART II. OTHER INFORMATION

  

 

44 

 

Item 1. Legal Proceedings

  

 

44 

  

Item 1A. Risk Factors

  

 

45 

  

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. CONSOLIDATED FINANCIAL INFORMATION

ITEM I. CONSOLIDATED FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

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



 



 

 

 

 

 



 

 

 

 

 



June 30,

 

December 31,



2019

 

2018



 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and amounts due from depository institutions

$

20,660 

 

$

18,970 

Interest-earning deposits

 

206,982 

 

 

176,294 

  Total cash and cash equivalents

 

227,642 

 

 

195,264 



 

 

 

 

 

Interest-earning time deposits

 

735 

 

 

735 

Debt securities available for sale

 

116,258 

 

 

119,335 

Equity investments

 

5,901 

 

 

7,672 

Loans held for sale

 

 -

 

 

1,153 

Loans receivable, net of allowance for loan losses

 

 

 

 

 

  of $23,789 and $22,359 respectively

 

2,299,765 

 

 

2,278,492 

Federal Home Loan Bank of New York stock, at cost

 

13,821 

 

 

13,405 

Premises and equipment, net

 

19,482 

 

 

20,293 

Accrued interest receivable

 

9,315 

 

 

8,378 

Other real estate owned

 

1,235 

 

 

1,333 

Deferred income taxes

 

12,962 

 

 

13,601 

Goodwill and other intangibles

 

5,587 

 

 

5,604 

Capitalized leases - operating lease right-of-use asset

 

14,650 

 

 

 -

Other assets

 

10,777 

 

 

9,466 

   Total Assets

$

2,738,130 

 

$

2,674,731 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 



 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-interest bearing deposits

$

278,602 

 

$

263,960 

Interest bearing deposits

 

1,929,620 

 

 

1,916,764 

 Total deposits

 

2,208,222 

 

 

2,180,724 

FHLB advances

 

245,800 

 

 

245,800 

Subordinated debt

 

36,693 

 

 

36,577 

Operating lease liability

 

14,724 

 

 

 -

Other liabilities and accrued interest payable

 

11,538 

 

 

11,415 

   Total Liabilities

 

2,516,977 

 

 

2,474,516 



 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

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

 

 

 

 

 

   issued and outstanding 8,340 shares of series C 6%, series D 4.5%, series G 6%, (liquidation value $10,000 per share)

 

 

 

 

 

  and series F 6% (liquidation value $1,000 per share) noncumulative perpetual preferred stock

 

 

 

 

 

  at June 30, 2019 and 7,807 shares of series C 6%, series D 4.5%, (liquidation value $10,000 per share)

 

 

 

 

 

   and series F 6% (liquidation value $1,000 per share) noncumulative perpetual preferred stock at December 31, 2018

 

 -

 

 

 -

Additional paid-in capital preferred stock

 

25,016 

 

 

19,706 

Common stock: no par value; 20,000,000 shares authorized; issued 18,380,491 and 18,352,748

 

 

 

 

 

 at June 30, 2019 and December 31, 2018, respectively, outstanding 16,460,891 shares and

 

 

 

 

 

   15,889,306 shares, at June 30, 2019 and December 31, 2018, respectively

 

 -

 

 

 -

Additional paid-in capital common stock

 

176,767 

 

 

175,500 

Retained earnings

 

43,347 

 

 

38,405 

Accumulated other comprehensive (loss)

 

(1,929)

 

 

(5,076)

Treasury stock, at cost, 1,967,218 and 2,463,442 shares at June 30, 2019 and December 31, 2018, respectively

 

(22,048)

 

 

(28,320)

   Total Stockholders' Equity

 

221,153 

 

 

200,215 



 

 

 

 

 

    Total Liabilities and Stockholders' Equity

$

2,738,130 

 

$

2,674,731 



 

 

 

 

 

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 June 30,

 

Six Months Ended June 30,



 

2019

 

 

2018

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 Loans, including fees

$

28,634 

 

$

24,048 

 

$

56,867 

 

$

43,569 

 Mortgage-backed securities

 

738 

 

 

837 

 

 

1,508 

 

 

1,536 

 Other investment securities

 

197 

 

 

196 

 

 

325 

 

 

300 

 FHLB stock and other interest earning assets

 

1,173 

 

 

615 

 

 

2,520 

 

 

1,233 

    Total interest income

 

30,742 

 

 

25,696 

 

 

61,220 

 

 

46,638 



 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 Deposits:

 

 

 

 

 

 

 

 

 

 

 

    Demand

 

1,750 

 

 

975 

 

 

3,326 

 

 

1,772 

    Savings and club

 

110 

 

 

105 

 

 

223 

 

 

202 

    Certificates of deposit

 

6,097 

 

 

3,405 

 

 

12,087 

 

 

6,135 



 

7,957 

 

 

4,485 

 

 

15,636 

 

 

8,109 

    Borrowings

 

1,920 

 

 

1,221 

 

 

3,817 

 

 

2,099 

      Total interest expense

 

9,877 

 

 

5,706 

 

 

19,453 

 

 

10,208 



 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

20,865 

 

 

19,990 

 

 

41,767 

 

 

36,430 

Provision for loan losses

 

755 

 

 

2,060 

 

 

1,644 

 

 

3,402 



 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

20,110 

 

 

17,930 

 

 

40,123 

 

 

33,028 



 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

  Fees and service charges

 

802 

 

 

971 

 

 

1,685 

 

 

1,681 

  Gain on sales of loans

 

437 

 

 

576 

 

 

755 

 

 

1,159 

  Gain (loss) on bulk sale of impaired loans held in portfolio

 

 -

 

 

 -

 

 

107 

 

 

(24)

  Gain (loss) on sales of other real estate owned

 

45 

 

 

(10)

 

 

53 

 

 

(10)

  Gain on sale of investment securities

 

21 

 

 

 -

 

 

21 

 

 

 -

  Unrealized (loss) gain on equity investments

 

(26)

 

 

(33)

 

 

265 

 

 

(160)

  Other

 

49 

 

 

59 

 

 

102 

 

 

2,303 

     Total non-interest income

 

1,328 

 

 

1,563 

 

 

2,988 

 

 

4,949 



 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

  Salaries and employee benefits

 

6,918 

 

 

7,125 

 

 

13,833 

 

 

13,392 

  Occupancy and equipment

 

2,649 

 

 

2,476 

 

 

5,279 

 

 

4,538 

  Data processing and service fees

 

731 

 

 

828 

 

 

1,452 

 

 

1,557 

  Professional fees

 

473 

 

 

533 

 

 

1,006 

 

 

1,038 

  Director fees

 

316 

 

 

201 

 

 

634 

 

 

402 

  Regulatory assessments

 

417 

 

 

290 

 

 

874 

 

 

529 

  Advertising and promotional

 

123 

 

 

100 

 

 

196 

 

 

185 

  Other real estate owned, net

 

124 

 

 

160 

 

 

108 

 

 

191 

  Merger related costs

 

 -

 

 

2,039 

 

 

 -

 

 

2,184 

  Other

 

2,143 

 

 

2,228 

 

 

4,289 

 

 

3,975 

     Total non-interest expense

 

13,894 

 

 

15,980 

 

 

27,671 

 

 

27,991 



 

 

 

 

 

 

 

 

 

 

 

Income before income tax provision

 

7,544 

 

 

3,513 

 

 

15,440 

 

 

9,986 

Income tax provision

 

2,317 

 

 

1,200 

 

 

4,762 

 

 

3,041 



 

 

 

 

 

 

 

 

 

 

 

Net Income

$

5,227 

 

$

2,313 

 

$

10,678 

 

$

6,945 

Preferred stock dividends

 

342 

 

 

262 

 

 

659 

 

 

428 

Net Income available to common stockholders

$

4,885 

 

$

2,051 

 

$

10,019 

 

$

6,517 



 

 

 

 

 

 

 

 

 

 

 

Net Income per common share-basic and diluted

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.30 

 

$

0.13 

 

$

0.62 

 

$

0.43 

Diluted

$

0.30 

 

$

0.13 

 

$

0.62 

 

$

0.42 



 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

16,413 

 

 

15,610 

 

 

16,245 

 

 

15,329 

Diluted

 

16,471 

 

 

15,748 

 

 

16,290 

 

 

15,465 

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 June 30,

 

Six Months Ended June 30,



2019

 

2018

 

2019

 

2018



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Net Income

$

5,227 

 

$

2,313 

 

$

10,678 

 

$

6,945 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses) gains on available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

1,935 

 

 

(964)

 

 

4,201 

 

 

(3,344)

Tax Effect

 

(485)

 

 

143 

 

 

(1,054)

 

 

812 

Net of Tax Effect

 

1,450 

 

 

(821)

 

 

3,147 

 

 

(2,532)

Other comprehensive income (loss)

 

1,450 

 

 

(821)

 

 

3,147 

 

 

(2,532)

Comprehensive income

$

6,677 

 

$

1,492 

 

$

13,825 

 

$

4,413 



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 Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

$

 -

 

$

 -

 

$

195,206 

 

$

38,405 

 

$

(28,320)

 

$

(5,076)

 

$

200,215 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

 -

 

 

 -

 

 

6,239 

 

 

 -

 

 

 -

 

 

 -

 

 

6,239 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series G Preferred Stock

 

 -

 

 

 -

 

 

5,310 

 

 

 -

 

 

 -

 

 

 -

 

 

5,310 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 -

 

 

 -

 

 

397 

 

 

 -

 

 

 -

 

 

 -

 

 

397 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury Stock allocated to Common Stock issuance

 

 -

 

 

 -

 

 

(5,707)

 

 

(565)

 

 

6,272 

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock

 

 -

 

 

 -

 

 

 -

 

 

(659)

 

 

 -

 

 

 -

 

 

(659)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 -

 

 

 -

 

 

 -

 

 

(4,326)

 

 

 -

 

 

 -

 

 

(4,326)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

 -

 

 

 -

 

 

186 

 

 

(186)

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

 -

 

 

 -

 

 

152 

 

 

 -

 

 

 -

 

 

 -

 

 

152 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 -

 

 

 -

 

 

 -

 

 

10,678 

 

 

 -

 

 

 -

 

 

10,678 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

3,147 

 

 

3,147 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

$

 -

 

$

 -

 

$

201,783 

 

$

43,347 

 

$

(22,048)

 

$

(1,929)

 

$

221,153 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Preferred Stock

 

Common Stock

 

Additional             Paid-In Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

$

 -

 

$

 -

 

$

201,395 

 

$

40,750 

 

$

(22,048)

 

$

(3,379)

 

$

216,718 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 -

 

 

 -

 

 

207 

 

 

 -

 

 

 -

 

 

 -

 

 

207 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock

 

 -

 

 

 -

 

 

 -

 

 

(342)

 

 

 -

 

 

 -

 

 

(342)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 -

 

 

 -

 

 

 -

 

 

(2,190)

 

 

 -

 

 

 -

 

 

(2,190)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

 -

 

 

 -

 

 

98 

 

 

(98)

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

 -

 

 

 -

 

 

83 

 

 

 -

 

 

 -

 

 

 

 

 

83 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 -

 

 

 -

 

 

 -

 

 

5,227 

 

 

 -

 

 

 -

 

 

5,227 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

1,450 

 

 

1,450 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

$

 -

 

$

 -

 

$

201,783 

 

$

43,347 

 

$

(22,048)

 

$

(1,929)

 

$

221,153 



See accompanying notes to unaudited consolidated financial statements.

 

4


 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity (Continued)

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





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Preferred Stock

 

Common Stock

 

Additional Paid-in Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

$

-

 

$

-

 

$

177,471 

 

$

31,241 

 

$

(29,116)

 

$

(3,142)

 

$

176,454 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of IA Bancorp

 

-

 

 

-

 

 

17,405 

 

 

-

 

 

-

 

 

-

 

 

17,405 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of Stock Options

 

-

 

 

-

 

 

 

 

-

 

 

-

 

 

-

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based Compensation Expense

 

-

 

 

-

 

 

164 

 

 

-

 

 

-

 

 

-

 

 

164 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6%, Series D 4.5%, Series E 6%, and Series F 6% noncumulative perpetual preferred stock

 

-

 

 

-

 

 

-

 

 

(428)

 

 

-

 

 

-

 

 

(428)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

-

 

 

-

 

 

-

 

 

(4,151)

 

 

-

 

 

-

 

 

(4,151)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

-

 

 

-

 

 

163 

 

 

(163)

 

 

-

 

 

-

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

-

 

 

-

 

 

217 

 

 

-

 

 

-

 

 

-

 

 

217 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

-

 

 

-

 

 

6,945 

 

 

-

 

 

-

 

 

6,945 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of unrealized gains on AFS equity securities

 

-

 

 

-

 

 

-

 

 

126 

 

 

-

 

 

(126)

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,532)

 

 

(2,532)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

$

-

 

$

-

 

$

195,422 

 

$

33,570 

 

$

(29,116)

 

$

(5,800)

 

$

194,076 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Preferred Stock

 

Common Stock

 

Additional Paid-in Capital

 

Retained Earnings

 

Treasury Stock

 

Accumulated Other Comprehensive Income (Loss)

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

$

-

 

$

-

 

$

177,753 

 

$

33,728 

 

$

(29,116)

 

$

(4,979)

 

$

177,386 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Acquisition of IA Bancorp

 

-

 

 

-

 

 

17,405 

 

 

-

 

 

-

 

 

-

 

 

17,405 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

-

 

 

-

 

 

79 

 

 

-

 

 

-

 

 

-

 

 

79 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable on Series C 6%, Series D 4.5%, Series E 6%, and Series F 6% noncumulative perpetual preferred stock

 

-

 

 

-

 

 

-

 

 

(262)

 

 

-

 

 

-

 

 

(262)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

-

 

 

-

 

 

-

 

 

(2,126)

 

 

-

 

 

-

 

 

(2,126)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment Plan

 

-

 

 

-

 

 

83 

 

 

(83)

 

 

-

 

 

-

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Purchase Plan

 

-

 

 

-

 

 

102 

 

 

-

 

 

-

 

 

 

 

 

102 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

-

 

 

-

 

 

2,313 

 

 

-

 

 

-

 

 

2,313 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(821)

 

 

(821)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

$

-

 

$

-

 

$

195,422 

 

$

33,570 

 

$

(29,116)

 

$

(5,800)

 

$

194,076 

See accompanying notes to unaudited consolidated financial statements.

 

5


 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands, Unaudited)







 

 

 

 

 



Six Months Ended June 30,



2019

 

2018

Cash Flows from Operating Activities :

 

 

 

 

 

  Net Income

$

10,678 

 

$

6,945 

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

 

 

 

 

 

        Depreciation of premises and equipment

 

1,424 

 

 

1,284 

        Amortization and accretion, net

 

(1,542)

 

 

(943)

        Provision for loan losses

 

1,644 

 

 

3,402 

        Deferred income tax (benefit)

 

(569)

 

 

(284)

        Loans originated for sale

 

(8,560)

 

 

(13,230)

        Proceeds from sales of loans

 

10,468 

 

 

14,279 

        Gain on sales of loans originated for sale

 

(755)

 

 

(1,159)

       (Gain) loss on sales of other real estate owned

 

(53)

 

 

10 

        Gains on sales of securities available for sale

 

(21)

 

 

 -

        Fair value adjustment of OREO

 

 -

 

 

101 

        Unrealized (gain) loss on equity investments

 

(265)

 

 

160 

        (Gain) loss on bulk sale of impaired loans held in portfolio

 

(107)

 

 

24 

        Stock-based compensation expense

 

397 

 

 

164 

        (Increase) in interest receivable

 

(937)

 

 

(798)

        (Increase) in other assets

 

(1,311)

 

 

(4,147)

        Increase in accrued interest payable

 

288 

 

 

263 

        Increase in other liabilities

 

34 

 

 

2,567 

Net Cash Provided by Operating Activities

 

10,813 

 

 

8,638 

Cash flows from investing activities:

 

 

 

 

 

        Proceeds from repayments, calls, and maturities on securities available for sale

 

8,328 

 

 

13,400 

        Purchases of securities available for sale

 

(1,153)

 

 

(16,336)

        Proceeds from sales of other real estate owned

 

1,058 

 

 

408 

        Proceeds from bulk sale of impaired loans held

 

402 

 

 

250 

        Proceeds from sales of securities available for sale

 

2,057 

 

 

 -

        Net increase in loans receivable

 

(22,312)

 

 

(296,800)

        Additions to premises and equipment

 

(613)

 

 

(737)

        Purchase of Federal Home Loan Bank of New York stock

 

(416)

 

 

(5,370)

        Cash acquired in acquisition

 

 -

 

 

7,597 

        Cash paid in acquisition

 

 -

 

 

(2,550)

Net Cash Used In Investing Activities

 

(12,649)

 

 

(300,138)

Cash flows from financing activities:

 

 

 

 

 

        Net increase in deposits

 

27,498 

 

 

237,070 

        Proceeds from Federal Home Loan Bank of New York advances

 

 -

 

 

175,000 

        Repayments of Federal Home Loan Bank of New York advances

 

 -

 

 

(60,000)

        Cash dividends paid on common stock

 

(4,326)

 

 

(4,151)

        Cash dividends paid on preferred stock

 

(659)

 

 

(428)

        Net proceeds from issuance of common stock

 

6,391 

 

 

217 

        Net proceeds from issuance of preferred stock

 

5,310 

 

 

 -

        Exercise of stock options

 

 -

 

 

Net Cash Provided by Financing Activities

 

34,214 

 

 

347,710 



 

 

 

 

 

Net Increase In Cash and Cash Equivalents

 

32,378 

 

 

56,210 

Cash and Cash Equivalents-Beginning

 

195,264 

 

 

124,235 



 

 

 

 

 

Cash and Cash Equivalents-Ending

$

227,642 

 

$

180,445 



 

 

 

 

 

Supplementary Cash Flow Information:

 

 

 

 

 

     Cash paid during the year for:

 

 

 

 

 

        Income taxes

$

6,342 

 

$

5,933 

        Interest

 

19,165 

 

 

9,945 

Non-cash items:

 

 

 

 

 

        Transfer of loans to other real estate owned

$

907 

 

$

837 



See accompanying notes to unaudited consolidated financial statements

 

6


 

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., Pamrapo Service Corporation, REO Special Asset I, LLC., and REO Special Asset II, LLC. 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 consolidated 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, 2019 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, 2018, 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 June 30, 2019, and the date these consolidated financial statements were issued.



Note 2 - Recent Accounting Pronouncements



In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which will supersede the current lease requirements in Topic 840. The ASU requires lessees to recognize a right of use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of income. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new guidance became effective for the Company in 2019. The standard has been applied using a modified retrospective transition method. The right-of-use asset and lease liability are reported on the Company’s consolidated statement of financial condition. The adoption of the provisions of this update did not have a significant impact to our consolidated statements of income. At June 30, 2019, the Company had $14.6 million in capitalized lease right-of-use assets and $14.7 million in related lease liabilities.



In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the consolidated financial statements. The amendments are effective for the Company in 2020. In July 2019, the FASB proposed changes to the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. The proposal would delay the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company, the proposed delay would be applicable to the Company, if it is approved by the FASB. The Company is evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations. The effect of this change cannot be ascertained at this point, and will depend upon factors including asset components, asset quality and market conditions at the adoption date.



In January 2016, the FASB issued ASU 2016-01, Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company recorded a cumulative effect adjustment to the balance sheet as of January 1, 2018 in the amount of $126,000, representing the unrealized gain of $175,000 at December 31, 2017 net of taxes of $49,000. The Company recorded a loss and gain to the income statement in the amounts of $26,000 and $265,000 for the three and six months ended June 30, 2019 and losses of $33,000 and $160,000 for the three and six months ended June 30, 2018.



In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). The main objective of this ASU is to simplify the accounting for goodwill impairment by requiring impairment charges be based upon the first step in the current two-step impairment test under Accounting Standards Codification (ASC) 350. Currently, if the fair value of a reporting unit is lower than its carrying amount (Step 1), an entity calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). This ASU’s objective is to simplify how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact of the pending adoption on its consolidated financial statements.



In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as a result of a broader disclosure project. The Update amends the disclosure requirements for fair value measurements to improve the effectiveness of the disclosure. The Update removes and modifies certain disclosure requirements, as well as adds requirements for public business entities. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of the Update and delay adoption of the additional disclosures until their effective date. This ASU will affect the Company’s disclosures only and will not have a financial statement impact.



 

7


 



Note 3 – Reclassification



Certain amounts as of December 31, 2018 and for the three and six month periods ended June 30, 2018 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 4 – Pension and Equity Incentive Plans



Pension Plan



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.



Net periodic pension cost (benefit) for the three and six months ended June 30, 2019 and June 30, 2018 was $40,000, $80,000, $10,000, and $20,000, respectively. Net periodic postretirement cost for the SERP plan for each of the three and six months ended June 30, 2019 and June 30, 2018 was $3,000, $6,000, $3,000, and $6,000, respectively.



Equity Incentive Plans



The Company, under the plan approved by its shareholders on April 26, 2018 (“2018 Equity Incentive Plan”), authorized the issuance of up to 1,000,000 shares of common stock of the Company pursuant to grants of stock options and restricted stock units. Employees and directors of the Company and the Bank are eligible to participate in the 2018 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 June 14, 2019, a grant of 68,750 options was declared for members of the Board of Directors of the Bank and the Company which vest at a rate of 50% per year, over two years, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on June 14, 2019 and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with their filing requirements. On June 14, 2019, a grant of 30,125 options was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On June 14, 2019, an award of 33,110 shares of restricted stock was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On June 14, 2019, an award of 14,508 shares of restricted stock was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.



On December 14, 2018, a grant of 300,000 options was declared for members of the Board of Directors of the Bank and the Company which vest at a rate of 50% per year, over two years, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on December 14, 2018 and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with their filing requirements. On December 14, 2018, an award of 54,000 shares of restricted stock was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On December 14, 2018, an award of 13,321 shares of restricted stock was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.



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 September 13, 2017, a grant of 275,000 options was declared for certain members of the Board of Directors of the Bank and the Company 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 September 13, 2017 and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with their filing requirements. There were 75,000 stock options granted to employees in the fourth quarter of 2017 which vests at a rate of 20% per year.



 

8


 

Note 4 – Pension and Equity Incentive Plans (continued)



The following table presents a summary of the status of the Company’s restricted shares as of June 30, 2019.





 

 

 



Number of Shares Awarded

 

Weighted Average Grant Date Fair Value

Non-vested at December 31, 2018

67,321 

$

11.26 

  Granted

47,618 

 

12.46 

  Vested

 -

 

 

  Forfeited

 -

 

 

Non-vested at June 30, 2019

114,939 

$

11.86 



Expected future expenses relating to the non-vested restricted shares outstanding as of June 30, 2019 was $1.1 million over a weighted average period of 1.71 years.



The following tables present a summary of the status of the Company’s outstanding stock option awards as of June 30, 2019 and June 30, 2018.





 

 

 

 

 

 

 

 



  

Number of  Option Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price



 

 

 

 

 

 

 

 

Outstanding at December 31, 2018

 

1,104,600 

 

$

8.93 - 13.32

 

$

11.36 



 

 

 

 

 

 

 

 

Options granted

 

98,875 

 

 

12.46 

 

 

12.46 

Options exercised

 

 -

 

 

 

 

 

 

Options forfeited

 

(1,000)

 

 

10.55 

 

 

10.55 

Options expired

 

 -

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Outstanding at June 30, 2019

 

1,202,475 

 

$

8.93 - 13.32

 

$

11.45 



As of June 30, 2019, stock options which were granted and were exercisable totaled 268,033 stock options.



It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 934,442 shares of unvested options outstanding as of June 30, 2019 was $1.8 million over a weighted average period of 4.81 years.





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



  

Number of Option Shares

 

 

Range of Exercise Prices

 

 

Weighted Average Exercise Price



 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

889,300 

 

$

8.93-13.32

 

$

11.42



 

 

 

 

 

 

 

 

Options granted

 

 -

 

 

 -

 

 

 -

Options exercised

 

(200)

 

 

10.55

 

 

10.55

Options forfeited

 

 -

 

 

 -

 

 

 -

Options expired

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

Outstanding at June 30, 2018

 

889,100 

 

$

8.93-13.32

 

$

10.91



As of June 30, 2018, stock options which were granted and were exercisable totaled 183,867 stock options.



It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to 705,233 shares of unvested options outstanding as of June 30, 2018 was $1.2 million over a weighted average period of 7.00 years.  

 

 

9


 

Note 5 – 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 and six months ended June 30, 2019 and 2018, 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 June 30, 2019 and 2018 the weighted average number of outstanding options considered to be anti-dilutive were 32,177 and 636 respectively. For the six months ended June 30, 2019 and 2018, the weighted average number of outstanding options considered to be anti-dilutive were 26,602 and 1,012, respectively. At June 30, 2019, the Company has 6,465 shares of its Series F 6% noncumulative perpetual preferred stock (“Series F shares”) issued and outstanding, which are convertible into the Company’s common stock. The conversion of Series F shares to common shares was not included in the computation of diluted earnings per share as they would be anti-dilutive.



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









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three Months Ended June 30,



 

2019

 

2018



 

 

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

 

$

4,885 

 

 

 

 

 

 

$

2,051 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

4,885 

 

16,413 

 

$

0.30 

 

$

2,051 

 

15,610 

 

$

0.13 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 -

 

58 

 

 

 

 

 

 -

 

138 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

4,885 

 

16,471 

 

$

0.30 

 

$

2,051 

 

15,748 

 

$

0.13 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Six Months Ended June 30,



 

2019

 

2018



 

 

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

 

$

10,019 

 

 

 

 

 

 

$

6,517 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

10,019 

 

16,245 

 

$

0.62 

 

$

6,517 

 

15,329 

 

$

0.43 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 -

 

45 

 

 

 

 

 

 -

 

136 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income available to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders

 

$

10,019 

 

16,290 

 

$

0.62 

 

$

6,517 

 

15,465 

 

$

0.42 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

10


 

Note 6 –Debt Securities Available for Sale



The following tables present by maturity the amortized cost, gross unrealized gains and losses on, and fair value of, securities available for sale as of June 30, 2019 and December 31, 2018:



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



June 30, 2019



 

 

  

Gross

  

Gross

  

 



Amortized

 

Unrealized

 

Unrealized

 

 

 



Cost

 

Gains

 

Losses

 

Fair Value



(In thousands)

Mortgage-backed securities:

 

 

  

 

 

  

 

 

  

 

 

  Due after one year through five years

$

5,500 

 

$

59 

 

$

75 

 

$

5,484 

  Due after five years through ten years

 

2,862 

  

 

63 

  

 

 -

  

 

2,925 

  Due after ten years

 

103,936 

 

 

784 

 

 

641 

 

 

104,079 



 

 

 

 

 

 

 

 

 

 

 

Municipal obligations:

 

 

 

 

 

 

 

 

 

 

 

  Due within one year

 

498 

 

 

 

 

 -

 

 

499 

  Due after one year through five years

 

919 

 

 

36 

 

 

 -

 

 

955 

  Due after five years through ten years

 

1,223 

 

 

57 

 

 

 -

 

 

1,280 

  Due after ten years

 

1,026 

  

 

10 

  

 

 -

  

 

1,036 



$

115,964 

  

$

1,010 

  

$

716 

  

$

116,258 









 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



December 31, 2018



 

 

  

Gross

  

Gross

  

 



Amortized

 

Unrealized

 

Unrealized

 

 

 



Cost

 

Gains

 

Losses

 

Fair Value



(In thousands)

Mortgage-backed securities:

 

 

  

 

 

  

 

 

  

 

 

Due after one year through five years

$

5,613 

 

$

10 

 

$

124 

 

$

5,499 

Due after five years through ten years

 

3,246 

 

 

 

 

 

 

3,247 

Due after ten years

 

110,710 

 

 

52 

 

 

3,868 

 

 

106,894 



 

 

 

 

 

 

 

 

 

 

 

Municipal obligations:

 

 

 

 

 

 

 

 

 

 

 

Due within one year

 

495 

 

 

 -

 

 

 -

 

 

495 

Due after one year through five years

 

917 

 

 

10 

 

 

 -

 

 

927 

Due after five years through ten years

 

1,225 

 

 

13 

 

 

 

 

1,237 

Due after ten years

 

1,036 

 

 

 -

  

 

 -

 

 

1,036 



$

123,242 

 

$

87 

 

$

3,994 

 

$

119,335 



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)

June 30, 2019

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Residential mortgage-backed securities

$

1,303 

  

$

  

$

56,236 

  

$

709 

  

$

57,539 

  

$

716 

Municipal obligations

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



$

1,303 

  

$

  

$

56,236 

  

$

709 

  

$

57,539 

  

$

716 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

Residential mortgage-backed securities

$

39,289 

  

$

879 

  

$

62,860 

  

$

3,114 

  

$

102,149 

  

$

3,993 

Municipal obligations

 

1,879 

 

 

 

 

 -

 

 

 -

 

 

1,879 

 

 



$

41,168 

  

$

880 

  

$

62,860 

  

$

3,114 

  

$

104,028 

  

$

3,994 



Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Company intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery. At June 30, 2019 and December 31, 2018, management performed an assessment for possible OTTI of the Company’s residential mortgage-backed securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Company’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of these securities, at June 30, 2019 and December 31, 2018, to be temporary.

 

11


 

Note 7 - Loans Receivable and Allowance for Loan Losses



The following tables present the recorded investment in loans receivable as of June 30, 2019 and December 31, 2018 by segment and class:





 

 

 

 

 



 

 

 

 

 



June 30, 2019

 

December 31, 2018



 

(In thousands)

Residential one-to-four family

$

258,688 

 

$

258,085 

Commercial and multi-family

 

1,702,132 

 

 

1,697,837 

Construction

 

134,963 

 

 

107,783 

Commercial business(1) 

 

164,569 

 

 

165,193 

Home equity(2) 

 

63,927 

 

 

72,895 

Consumer

 

727 

 

 

809 



 

2,325,006 

 

 

2,302,602 



 

 

 

 

 

Less:

 

 

 

 

 

Deferred loan fees, net

 

(1,452)

 

 

(1,751)

Allowance for loan losses

 

(23,789)

 

 

(22,359)

Sub-total

 

(25,241)

 

 

(24,110)



 

 

 

 

 

Total Loans, net

$

2,299,765 

 

$

2,278,492 









 

 

 

 

 



 

 

 

 

 



June 30, 2019

 

December 31, 2018



 

(In thousands)

Originated loans:

 

 

 

 

 

Residential one-to-four family

$

216,742 

 

$

213,200 

Commercial and multi-family

 

1,556,580 

 

 

1,540,766 

Construction

 

134,963 

 

 

106,187 

Commercial business(1) 

 

140,980 

 

 

136,966 

Home equity(2) 

 

47,084 

 

 

54,271 

Consumer

 

676 

 

 

726 



 

 

 

 

 

Sub-total

 

2,097,025 

 

 

2,052,116 



 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

Residential one-to-four family

 

40,576 

 

 

43,495 

Commercial and multi-family

 

139,903 

 

 

150,239 

Construction

 

 -

 

 

1,596 

Commercial business(1) 

 

22,649 

 

 

27,373 

Home equity(2) 

 

16,601 

 

 

18,376 

Consumer

 

51 

 

 

83 



 

 

 

 

 

Sub-total

 

219,780 

 

 

241,162 



 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

Residential one-to-four family

 

1,370 

 

 

1,390 

Commercial and multi-family

 

5,649 

 

 

6,832 

Construction

 

 -

 

 

 -

Commercial business(1) 

 

940 

 

 

854 

Home equity(2) 

 

242 

 

 

248 

Consumer

 

 -

 

 

 -



 

 

 

 

 

Sub-total

 

8,201 

 

 

9,324 



 

 

 

 

 

Total Loans

 

2,325,006 

 

 

2,302,602 



 

 

 

 

 

Less:

 

 

 

 

 

Deferred loan fees, net

 

(1,452)

 

 

(1,751)

Allowance for loan losses

 

(23,789)

 

 

(22,359)



 

 

 

 

 

Sub-total

 

(25,241)

 

 

(24,110)



 

 

 

 

 

Total Loans, net

$

2,299,765 

 

$

2,278,492 



 

 

 

 

 

_____________________________

 

 

 

 

 

(1) Includes business lines of credit.

 

 

 

 

 

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 



 

12


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



Purchased Credit Impaired Loans



The carrying value of loans acquired in the IAB acquisition and accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $6.1 million at June 30, 2019, which was $1.1 million less than the balance at December 31, 2018. Under ASC Subtopic 310-30, these loans, referred to as purchased credit impaired (“PCI”) loans, may be aggregated and accounted for as pools of loans if the loans being aggregated have common risk characteristics. The Company elected to account for the loans with evidence of credit deterioration individually rather than aggregate them into pools. The difference between the undiscounted cash flows expected at acquisition and the investment in the acquired loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non- accretable difference,” are not recognized as a yield adjustment, as a loss accrual or as a valuation allowance.



Increases in expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield on the loans over the remaining life, while decreases in expected cash flows are recognized as impairments through a loss provision and an increase in the allowance for loan and lease losses. Valuation allowances (recognized in the allowance for loan and lease losses) on these impaired loans reflect only losses incurred after the acquisition (representing all cash flows that were expected at acquisition but currently are not expected to be received).



The following table presents changes in the accretable discount on loans acquired with deteriorated credit quality for which the Company applies the provisions of ASC 310-30 (in thousands):







 

 

 

 

 

 

 

 

 



 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Balance, beginning of Period

$

2,451

$

2,146

 

$

2,704

$

2,230

  Additions from acquisition of IAB

 

-

 

1,399

 

 

-

 

1,399

  Accretion recorded to interest income

 

(222)

 

(292)

 

 

(475)

 

(376)

Balance, end of Period

$

2,229

$

3,253

 

$

2,229

$

3,253



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







 

 

 

 

 



 

 

 

 

 



June 30,

 

December 31,



2019

 

2018



 

 

 

 

 

Unpaid principal balance

$

271,944 

 

$

301,357 

Recorded investment

 

227,981 

 

 

250,486 





 

13


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



Allowance for Loan Losses



The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. 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 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:



·

Lending Policies and Procedures

·

Personnel responsible for the particular portfolio - relative to experience and ability of staff

·

Trend for past due, criticized and classified loans

·

Relevant economic factors

·

Quality of the loan review system

·

Value of collateral for collateral dependent loans

·

The effect of any concentrations of credit and the changes in the level of such concentrations

·

Other external factors



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 by loan class or loan type. The allowance for performing loans is evaluated based on historical loan experience with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent, troubled debt restructured, or adversely classified. These loans are individually evaluated for loan loss either by current appraisal, or net present value. 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 single family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential family real estate loans decrease the interest rate risk to the Bank 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 properties 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 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 involve a 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 Bank 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 Bank’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 decrease the interest rate risk to the Bank 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.



An unallocated component is maintained to cover uncertainties that could affect management’s estimates of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.



 

14


 

Note 7 - 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 June 30, 2019, and the related portion of the allowances for loan losses that is allocated to each loan class, as of June 30, 2019 (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Residential

 

 

Commercial & Multi-family

 

Construction

 

Commercial Business (1)

 

Home Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

$

2,471 

 

$

15,077 

 

$

1,209 

 

$

3,328 

 

$

265 

 

$

 -

 

$

32 

 

$

22,382 

Acquired loans initially recorded at fair value:

 

404 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

404 

Acquired loans with deteriorated credit:

 

32 

 

 

144 

 

 

 -

 

 

39 

 

 

 

 

 -

 

 

 -

 

 

218 

Beginning Balance, March 31, 2019

 

2,907 

 

 

15,221 

 

 

1,209 

 

 

3,367 

 

 

268 

 

 

 -

 

 

32 

 

 

23,004 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

Acquired loans initially recorded at fair value:

 

 

 

 -

 

 

10 

 

 

 

 

 

 

 -

 

 

 -

 

 

23 

Sub-total:

 

 

 

 -

 

 

10 

 

 

 

 

 

 

 -

 

 

 -

 

 

30 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

109 

 

 

(826)

 

 

245 

 

 

660 

 

 

 

 

 

 

118 

 

 

316 

Acquired loans initially recorded at fair value:

 

324 

 

 

 -

 

 

(10)

 

 

(2)

 

 

(8)

 

 

 -

 

 

 -

 

 

304 

Acquired loans with deteriorated credit:

 

114 

 

 

(7)

 

 

 -

 

 

28 

 

 

 -

 

 

 -

 

 

 -

 

 

135 

Sub-total:

 

547 

 

 

(833)

 

 

235 

 

 

686 

 

 

 

 

 

 

118 

 

 

755 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

2,580 

 

 

14,251 

 

 

1,454 

 

 

3,995 

 

 

274 

 

 

 

 

150 

 

 

22,705 

Acquired loans initially recorded at fair value:

 

731 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

731 

Acquired loans with deteriorated credit:

 

146 

 

 

137 

 

 

 -

 

 

67 

 

 

 

 

 -

 

 

 -

 

 

353 

Ending Balance, June 30, 2019

$

3,457 

 

$

14,388 

 

$

1,454 

 

$

4,062 

 

$

277 

 

$

 

$

150 

 

$

23,789 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

$

216,742 

 

$

1,556,580 

 

$

134,963 

 

$

140,980 

 

$

47,084 

 

$

676 

 

$

 -

 

$

2,097,025 

Ending Balance Acquired loans initially recorded at fair value:

 

40,576 

 

 

139,903 

 

 

 -

 

 

22,649 

 

 

16,601 

 

 

51 

 

 

 -

 

 

219,780 

Ending Balance Acquired loans with deteriorated credit:

 

1,370 

 

 

5,649 

 

 

 -

 

 

940 

 

 

242 

 

 

 -

 

 

 -

 

 

8,201 

Total Gross Loans:

$

258,688 

 

$

1,702,132 

 

$

134,963 

 

$

164,569 

 

$

63,927 

 

$

727 

 

$

 -

 

$

2,325,006 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans individually

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

$

4,554 

 

$

11,266 

 

$

 -

 

$

1,955 

 

$

757 

 

$

 -

 

$

 -

 

$

18,532 

Ending Balance Acquired loans initially recorded at fair value:

 

5,264 

 

 

4,793 

 

 

 -

 

 

427 

 

 

497 

 

 

 -

 

 

 -

 

 

10,981 

Ending Balance Acquired loans with deteriorated credit:

 

1,370 

 

 

5,450 

 

 

 -

 

 

899 

 

 

43 

 

 

 -

 

 

 -

 

 

7,762 

Ending Balance Loans individually 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

$

11,188 

 

$

21,509 

 

$

 -

 

$

3,281 

 

$

1,297 

 

$

 -

 

$

 -

 

$

37,275 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans collectively

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

$

212,188 

 

$

1,545,314 

 

$

134,963 

 

$

139,025 

 

$

46,327 

 

$

676 

 

$

 -

 

$

2,078,493 

Ending Balance Acquired loans initially recorded at fair value:

 

35,312 

 

 

135,110 

 

 

 -

 

 

22,222 

 

 

16,104 

 

 

51 

 

 

 -

 

 

208,799 

Ending Balance Acquired loans with deteriorated credit:

 

 -

 

 

199 

 

 

 -

 

 

41 

 

 

199 

 

 

 -

 

 

 -

 

 

439 

Ending Balance Loans collectively 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

$

247,500 

 

$

1,680,623 

 

$

134,963 

 

$

161,288 

 

$

62,630 

 

$

727 

 

$

 -

 

$

2,287,731 

_____________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes business lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

15


 

Note 7 - 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 six months ended June 30, 2019 (in thousands).







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Residential

 

 

Commercial & Multi-family

 

Construction

 

Commercial Business (1)

 

 

Home Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

2,374 

 

$

14,000 

 

$

1,003 

 

$

3,869 

 

$

313 

 

$

 

$

189 

 

$

21,750 

Acquired loans initially recorded at fair value:

 

 

335 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

335 

Acquired loans with deteriorated credit:

 

 

39 

 

 

168 

 

 

 -

 

 

64 

 

 

 

 

 -

 

 

 -

 

 

274 

Beginning Balance, January 1, 2018

 

 

2,748 

 

 

14,168 

 

 

1,003 

 

 

3,933 

 

 

316 

 

 

 

 

189 

 

 

22,359 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

111 

 

 

 -

 

 

145 

 

 

 -

 

 

 -

 

 

 -

 

 

256 

Sub-total:

 

 

 -

 

 

111 

 

 

 -

 

 

145 

 

 

 -

 

 

 -

 

 

 -

 

 

256 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

 -

 

 

 -

 

 

15 

 

 

 -

 

 

 -

 

 

 -

 

 

15 

Acquired loans initially recorded at fair value:

 

 

 

 

10 

 

 

 -

 

 

 

 

11 

 

 

 -

 

 

 -

 

 

27 

Sub-total:

 

 

 

 

10 

 

 

 -

 

 

18 

 

 

11 

 

 

 -

 

 

 -

 

 

42 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

206 

 

 

362 

 

 

451 

 

 

256 

 

 

(39)

 

 

(1)

 

 

(39)

 

 

1,196 

Acquired loans initially recorded at fair value:

 

 

393 

 

 

(10)

 

 

 -

 

 

(3)

 

 

(11)

 

 

 -

 

 

 -

 

 

369 

Acquired loans with deteriorated credit:

 

 

107 

 

 

(31)

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

79 

Sub-total:

 

 

706 

 

 

321 

 

 

451 

 

 

256 

 

 

(50)

 

 

(1)

 

 

(39)

 

 

1,644 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

2,580 

 

 

14,251 

 

 

1,454 

 

 

3,995 

 

 

274 

 

 

 

 

150 

 

 

22,705 

Acquired loans initially recorded at fair value:

 

 

731 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

731 

Acquired loans with deteriorated credit:

 

 

146 

 

 

137 

 

 

 -

 

 

67 

 

 

 

 

 -

 

 

 -

 

 

353 

Ending Balance, June 30, 2019

 

$

3,457 

 

$

14,388 

 

$

1,454 

 

$

4,062 

 

$

277 

 

$

 

$

150 

 

$

23,789 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_____________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes business lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

16


 

Note 7 - 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 June 30, 2018 (in thousands).







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Residential

 

 

Commercial & Multi-family

 

Construction

 

Commercial Business (1)

 

Home Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

2,245 

 

$

11,880 

 

$

492 

 

$

2,676 

 

$

384 

 

$

 

$

198 

 

$

17,879 

Acquired loans initially recorded at fair value:

 

 

369 

 

 

 -

 

 

 -

 

 

24 

 

 

 -

 

 

 -

 

 

 -

 

 

393 

Acquired loans with deteriorated credit:

 

 

53 

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

65 

Beginning Balance, March 31, 2018

 

 

2,667 

 

 

11,892 

 

 

492 

 

 

2,700 

 

 

384 

 

 

 

 

198 

 

 

18,337 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 -

Sub-total:

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

Acquired loans initially recorded at fair value:

 

 

85 

 

 

 -

 

 

 -

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

97 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

144 

 

 

 -

 

 

 -

 

 

 -

 

 

144 

Sub-total:

 

 

86 

 

 

 -

 

 

 -

 

 

162 

 

 

 -

 

 

 -

 

 

 -

 

 

248 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 

 

1,204 

 

 

24 

 

 

723 

 

 

63 

 

 

37 

 

 

90 

 

 

2,144 

Acquired loans initially recorded at fair value:

 

 

(36)

 

 

92 

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

60 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

(144)

 

 

 -

 

 

 -

 

 

 -

 

 

(144)

Sub-total:

 

 

(33)

 

 

1,296 

 

 

24 

 

 

583 

 

 

63 

 

 

37 

 

 

90 

 

 

2,060 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

2,249 

 

 

13,084 

 

 

516 

 

 

3,400 

 

 

447 

 

 

41 

 

 

288 

 

 

20,025 

Acquired loans initially recorded at fair value:

 

 

418 

 

 

92 

 

 

 -

 

 

40 

 

 

 -

 

 

 -

 

 

 -

 

 

550 

Acquired loans with deteriorated credit:

 

 

53 

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

65 

Ending Balance, June 30, 2018

 

$

2,720 

 

$

13,188 

 

$

516 

 

$

3,440 

 

$

447 

 

$

41 

 

$

288 

 

$

20,640 

_____________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes business lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

17


 

Note 7 - 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 six months ended June 30, 2018 (in thousands).







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Residential

 

 

Commercial & Multi-family

 

Construction

 

Commercial Business (1)

 

 

Home Equity (2)

 

Consumer

 

Unallocated

 

Total

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

$

2,368 

 

$

11,656 

 

$

518 

 

$

2,018 

 

$

338 

 

$

 

$

177 

 

$

17,081 

Acquired loans initially recorded at fair value:

 

 

242 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

242 

Acquired loans with deteriorated credit:

 

 

40 

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

52 

Beginning Balance, December 31, 2018

 

 

2,650 

 

 

11,668 

 

 

518 

 

 

2,018 

 

 

338 

 

 

 

 

177 

 

 

17,375 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

302 

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

307 

Acquired loans initially recorded at fair value:

 

 

72 

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

78 

Sub-total:

 

 

374 

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

385 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

Acquired loans recorded at fair value:

 

 

85 

 

 

 -

 

 

 -

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

97 

Acquired loans with deteriorated credit:

 

 

 -

 

 

 -

 

 

 -

 

 

144 

 

 

 -

 

 

 -

 

 

 -

 

 

144 

Sub-total:

 

 

86 

 

 

 -

 

 

 -

 

 

162 

 

 

 -

 

 

 -

 

 

 -

 

 

248 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

182 

 

 

1,428 

 

 

(2)

 

 

1,381 

 

 

109 

 

 

35 

 

 

111 

 

 

3,244 

Acquired loans initially recorded at fair value:

 

 

163 

 

 

92 

 

 

 -

 

 

28 

 

 

 

 

 -

 

 

 -

 

 

289 

Acquired loans with deteriorated credit:

 

 

13 

 

 

 -

 

 

 -

 

 

(144)

 

 

 -

 

 

 -

 

 

 -

 

 

(131)

Sub-total:

 

 

358 

 

 

1,520 

 

 

(2)

 

 

1,265 

 

 

115 

 

 

35 

 

 

111 

 

 

3,402 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated Loans:

 

 

2,249 

 

 

13,084 

 

 

516 

 

 

3,400 

 

 

447 

 

 

41 

 

 

288 

 

 

20,025 

Acquired loans initially recorded at fair value:

 

 

418 

 

 

92 

 

 

 -

 

 

40 

 

 

 -

 

 

 -

 

 

 -

 

 

550 

Acquired loans with deteriorated credit:

 

 

53 

 

 

12 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

65 

Ending Balance, June 30, 2018

 

$

2,720 

 

$

13,188 

 

$

516 

 

$

3,440 

 

$

447 

 

$

41 

 

$

288 

 

$

20,640 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_____________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes business lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes home equity lines of credit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





 

18


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



The following table sets forth the activity in the Bank’s allowance for loan losses for the year ended December 31, 2018 and recorded in loans receivable at December 31, 2018. 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).







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

Residential

 

 

Commercial & Multi-family

 

 

Construction

 

 

Commercial Business (1)

 

 

Home Equity (2)

 

 

Consumer

 

 

Unallocated

 

 

Total

Loans Receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

213,200 

 

$

1,540,766 

 

$

106,187 

 

$

136,966 

 

$

54,271 

 

$

726 

 

$

-

 

$

2,052,116 

Ending Balance Acquired Loans:

 

 

43,495 

 

 

150,239 

 

 

1,596 

 

 

27,373 

 

 

18,376 

 

 

83 

 

 

-

 

 

241,162 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,390 

 

 

6,832 

 

 

-

 

 

854 

 

 

248 

 

 

-

 

 

-

 

 

9,324 

Total Gross Loans:

 

$

258,085 

 

$

1,697,837 

 

$

107,783 

 

$

165,193 

 

$

72,895 

 

$

809 

 

$

-

 

$

2,302,602 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans individually

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

6,043 

 

$

12,822 

 

$

-

 

$

2,372 

 

$

915 

 

$

-

 

$

-

 

$

22,152 

Ending Balance Acquired Loans:

 

 

6,139 

 

 

4,881 

 

 

-

 

 

53 

 

 

306 

 

 

-

 

 

-

 

 

11,379 

Ending Balance Acquired loans with deteriorated credit:

 

 

1,390 

 

 

6,628 

 

 

-

 

 

810 

 

 

49 

 

 

-

 

 

-

 

 

8,877 

Ending Balance Loans individually evaluated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for impairment:

 

$

13,572 

 

$

24,331 

 

$

-

 

$

3,235 

 

$

1,270 

 

$

-

 

$

-

 

$

42,408 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance: Loans collectively

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance Originated Loans:

 

$

207,157 

 

$

1,527,944 

 

$

106,187 

 

$

134,594 

 

$

53,356 

 

$

726 

 

$

-

 

$

2,029,964 

Ending Balance Acquired Loans:

 

 

37,356 

 

 

145,358 

 

 

1,596 

 

 

27,320 

 

 

18,070 

 

 

83 

 

 

-

 

 

229,783 

Ending Balance Acquired loans with deteriorated credit:

 

 

-

 

 

204 

 

 

-

 

 

44 

 

 

199 

 

 

-

 

 

-

 

 

447 

Ending Balance Loans collectively 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

evaluated for impairment:

 

$

244,513 

 

$

1,673,506 

 

$

107,783 

 

$

161,958 

 

$

71,625 

 

$

809 

 

$

-

 

$

2,260,194 









 

19


 

Note 7 - 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 June 30, 2019 and December 31, 2018. 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 June 30, 2019 and December 31, 2018, 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 June 30, 2019

 

 

As of December 31, 2018



 

(In thousands)

 

 

(In thousands)

Non-Accruing Loans:

 

 

 

 

 



 

 

 

 

 

Originated loans:

 

 

 

 

 

Residential one-to-four family

$

1,022 

 

$

1,160 

Commercial and multi-family

 

1,881 

 

 

2,568 

Commercial business(1) 

 

745 

 

 

356 

Home equity(2) 

 

129 

 

 

277 



 

 

 

 

 

Sub-total:

 

3,777 

 

 

4,361 



 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

Residential one-to-four family

 

1,116 

 

 

2,165 

Commercial and multi-family

 

 -

 

 

605 

Commercial business(1) 

 

378 

 

 

48 

Home equity(2) 

 

217 

 

 

42 



 

 

 

 

 

Sub-total:

 

1,711 

 

 

2,860 



 

 

 

 

 

Total

$

5,488 

 

$

7,221 



 

 

 

 

 



 

 

 

 

 



 

 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



Nonaccrual loans in the preceding table do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $5.9 million at June 30, 2019, and $7.0 million at December 31, 2018.

 

20


 

Note 7 - 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 and six months ended June 30, 2019 and 2018 (In thousands):









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

 

Six Months Ended June 30,



 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

2019

 

 

2019

 

 

2018

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest



 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

Originated loans

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,818 

 

$

18 

 

$

1,912 

 

$

 

$

2,753 

 

$

46 

 

$

1,965 

 

$

15 

Commercial and Multi-family

 

11,499 

 

 

120 

 

 

11,973 

 

 

86 

 

 

11,903 

 

 

254 

 

 

12,052 

 

 

172 

Commercial business(1) 

 

1,145 

 

 

41 

 

 

 -

 

 

43 

 

 

1,088 

 

 

83 

 

 

622 

 

 

87 

Home equity(2) 

 

680 

 

 

 

 

843 

 

 

 

 

707 

 

 

12 

 

 

912 

 

 

15 

Consumer

 

 -

 

 

 -

 

 

926 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

16,142 

 

$

185 

 

$

15,654 

 

$

143 

 

$

16,451 

 

$

395 

 

$

15,551 

 

$

289 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,216 

 

$

25 

 

$

3,385 

 

$

23 

 

$

2,518 

 

$

50 

 

$

3,630 

 

$

46 

Commercial and Multi-family

 

3,917 

 

 

55 

 

 

3,639 

 

 

54 

 

 

3,932 

 

 

110 

 

 

3,683 

 

 

109 

Commercial business(1) 

 

51 

 

 

 

 

 -

 

 

 -

 

 

52 

 

 

 

 

 

 

 

 -

Home equity(2) 

 

336 

 

 

 

 

245 

 

 

 

 

291 

 

 

 

 

235 

 

 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

$

6,520 

 

$

84 

 

$

7,269 

 

$

80 

 

$

6,800 

 

$

168 

 

$

7,548 

 

$

162 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family(3)

$

929 

 

$

14 

 

$

1,035 

 

$

16 

 

$

960 

 

$

30 

 

$

1,161 

 

$

33 

Commercial and Multi-family(3)

 

5,461 

 

 

 

 

6,091 

 

 

122 

 

 

5,850 

 

 

13 

 

 

4,231 

 

 

244 

Construction(3) 

 

 -

 

 

 -

 

 

1,335 

 

 

213 

 

 

 -

 

 

 -

 

 

890 

 

 

426 

Commercial business(1)(3)

 

829 

 

 

 -

 

 

493 

 

 

135 

 

 

823 

 

 

 -

 

 

329 

 

 

270 

Home equity(2)(3) 

 

45 

 

 

 -

 

 

200 

 

 

 

 

46 

 

 

 -

 

 

133 

 

 

10 

Consumer(3) 

 

 -

 

 

 -

 

 

27 

 

 

 

 

 -

 

 

 -

 

 

18 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

7,264 

 

$

21 

 

$

9,181 

 

$

492 

 

$

7,679 

 

$

43 

 

$

6,762 

 

$

984 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

29,926 

 

$

290 

 

$

32,104 

 

$

715 

 

$

30,930 

 

$

606 

 

$

29,861 

 

$

1,435 

__________

(1)

Includes business lines of credit.

(2)

Includes home equity lines of credit.

(3)

Does not include accretable yield on loans acquired with deteriorated credit.



 

21


 

Note 7 - 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 and six months ended June 30, 2019 and 2018. (In thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

 

Six Months Ended June 30,



 

2019

 

 

2019

 

 

2018

 

 

2018

 

 

2019

 

 

2019

 

 

2018

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest

 

 

Average

 

 

Interest



 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

 

 

Recorded

 

 

Income

Originated loans

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

 

 

Investment

 

 

Recognized

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,452 

 

$

24 

 

$

4,752 

 

$

47 

 

$

2,775 

 

$

49 

 

$

5,125 

 

$

95 

Commercial and Multi-family

 

 -

 

 

 -

 

 

485 

 

 

 -

 

 

37 

 

 

 -

 

 

323 

 

 

 -

Commercial business(1) 

 

574 

 

 

27 

 

 

1,094 

 

 

20 

 

 

849 

 

 

54 

 

 

1,262 

 

 

40 

Home equity(2) 

 

152 

 

 

 

 

156 

 

 

 

 

152 

 

 

 

 

156 

 

 

Consumer

 

 -

 

 

 -

 

 

21 

 

 

 -

 

 

 -

 

 

 -

 

 

14 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

3,178 

 

$

53 

 

$

6,508 

 

$

69 

 

$

3,813 

 

$

107 

 

$

6,880 

 

$

138 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

3,245 

 

$

28 

 

$

3,564 

 

$

28 

 

$

3,169 

 

$

52 

 

$

3,519 

 

$

56 

Commercial and Multi-family

 

897 

 

 

 

 

923 

 

 

 

 

905 

 

 

 

 

1,035 

 

 

Commercial business(1) 

 

189 

 

 

 -

 

 

 -

 

 

 -

 

 

126 

 

 

 -

 

 

 -

 

 

 -

Home equity(2) 

 

84 

 

 

 

 

85 

 

 

 

 

84 

 

 

 

 

85 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

$

4,415 

 

$

33 

 

$

4,572 

 

$

34 

 

$

4,284 

 

$

63 

 

$

4,639 

 

$

68 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family(3) 

$

447 

 

$

 

$

370 

 

$

 

$

420 

 

$

12 

 

$

246 

 

$

10 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

447 

 

$

 

$

370 

 

$

 

$

420 

 

$

12 

 

$

246 

 

$

10 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

$

8,040 

 

$

93 

 

$

11,450 

 

$

108 

 

$

8,517 

 

$

182 

 

$

11,765 

 

$

216 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

(3) Does not include accretable yield on loans acquired with deteriorated credit.



 

22


 

Note 7 - 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

June 30, 2019 and December 31, 2018. (In thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of June 30, 2019

 

 

As of December 31, 2018



 

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

$

2,112 

 

$

2,180 

 

$

-

 

$

2,623 

 

$

2,689 

 

$

-

Commercial and multi-family

 

11,266 

 

 

11,749 

 

 

-

 

 

12,711 

 

 

13,308 

 

 

-

Commercial business(1) 

 

1,138 

 

 

3,714 

 

 

-

 

 

974 

 

 

3,411 

 

 

-

Home equity(2) 

 

606 

 

 

614 

 

 

-

 

 

762 

 

 

779 

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

15,122 

 

$

18,257 

 

$

 -

 

$

17,070 

 

$

20,187 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

value with no related allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

2,049 

 

$

2,175 

 

$

-

 

$

3,123 

 

$

3,254 

 

$

-

Commercial and Multi-family

 

3,903 

 

 

3,903 

 

 

-

 

 

3,961 

 

 

3,961 

 

 

-

Commercial business(1) 

 

50 

 

 

50 

 

 

-

 

 

53 

 

 

53 

 

 

-

Home equity(2) 

 

413 

 

 

416 

 

 

-

 

 

222 

 

 

222 

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

6,415 

 

$

6,544 

 

$

 -

 

$

7,359 

 

$

7,490 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit with no related allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

842 

 

$

1,398 

 

$

-

 

$

1,023 

 

$

1,579 

 

$

-

Commercial and Multi-family

 

5,450 

 

 

6,574 

 

 

-

 

 

6,628 

 

 

7,957 

 

 

-

Commercial business(1) 

 

899 

 

 

6,453 

 

 

-

 

 

810 

 

 

6,253 

 

 

-

Home equity(2) 

 

43 

 

 

52 

 

 

-

 

 

49 

 

 

57 

 

 

-



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

7,234 

 

$

14,477 

 

$

 -

 

$

8,510 

 

$

15,846 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

28,771 

 

$

39,278 

 

$

 -

 

$

32,939 

 

$

43,523 

 

$

 -

__________

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

 

23


 

Note 7 - 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 June 30, 2019 and December 31, 2018. (In thousands):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of June 30, 2019

 

 

As of December 31, 2018



 

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

$

2,442 

 

$

2,449 

 

$

92 

 

$

3,420 

 

$

3,420 

 

$

229 

Commercial and Multi-family

 

 -

 

 

 -

 

 

 -

 

 

111 

 

 

153 

 

 

111 

Commercial business(1) 

 

817 

 

 

1,944 

 

 

773 

 

 

1,398 

 

 

1,549 

 

 

905 

Home equity(2) 

 

151 

 

 

151 

 

 

19 

 

 

153 

 

 

153 

 

 

21 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

3,410 

 

$

4,544 

 

$

884 

 

$

5,082 

 

$

5,275 

 

$

1,266 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

value with an allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

3,215 

 

$

3,380 

 

$

500 

 

$

3,016 

 

$

3,166 

 

$

532 

Commercial and Multi-family

 

890 

 

 

1,079 

 

 

315 

 

 

920 

 

 

1,094 

 

 

369 

Commercial business(1) 

 

377 

 

 

1,489 

 

 

377 

 

 

 -

 

 

 -

 

 

 -

Home equity(2) 

 

84 

 

 

84 

 

 

 

 

84 

 

 

84 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total

$

4,566 

 

$

6,032 

 

$

1,197 

 

$

4,020 

 

$

4,344 

 

$

906 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

credit with an allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

528 

 

$

575 

 

$

12 

 

$

367 

 

$

414 

 

$



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

528 

 

$

575 

 

$

12 

 

$

367 

 

$

414 

 

$



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with an allowance recorded:

$

8,504 

 

$

11,151 

 

$

2,093 

 

$

9,469 

 

$

10,033 

 

$

2,181 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with no related allowance recorded:

$

28,771 

 

$

39,278 

 

$

 -

 

$

32,939 

 

$

43,523 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Impaired Loans:

$

37,275 

 

$

50,429 

 

$

2,093 

 

$

42,408 

 

$

53,556 

 

$

2,181 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



 

24


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



A troubled debt restructured (“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 concession that would otherwise not be granted to the borrower. The types of concessions granted generally include, but are not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. 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.







 

 

 

 

 



 

At June 30, 2019

 

 

At December 31, 2018



 

(In thousands)

Recorded investment in TDRs:

 

 

 

 

 

Accrual status

$

21,828 

 

$

22,477 

Non-accrual status

 

2,201 

 

 

4,136 

      Total recorded investment in TDRs

$

24,029 

 

$

26,613 





There were no new TDRs originated for the three months ended June 30, 2019 and June 30, 2018.



TDRs originated for the six months ended June 30, 2019 totaled $1.2 million for three contracts and $819,000 for two contracts during the six months ended June 30, 2018.



TDRs for which there was a payment default within twelve months of restructuring totaled $0 during the three months ended June 30, 2019 and $639,000 for one contract during the three months ended June 30, 2018.



TDRs for which there was a payment default within twelve months of restructuring totaled $0 during the six months ended June 30, 2019 and $851,674 for two contracts during the six months ended June 30, 2018.





 

25


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



The following table sets forth the delinquency status of total loans receivable as of June 30, 2019:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

1,851 

 

$

630 

 

$

214 

 

$

2,695 

 

$

214,047 

 

$

216,742 

 

$

 -

Commercial and multi-family

 

7,694 

 

 

1,062 

 

 

1,257 

 

 

10,013 

 

 

1,546,567 

 

 

1,556,580 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

134,963 

 

 

134,963 

 

 

 -

Commercial business(1) 

 

593 

 

 

 -

 

 

553 

 

 

1,146 

 

 

139,834 

 

 

140,980 

 

 

 -

Home equity(2) 

 

 -

 

 

 -

 

 

37 

 

 

37 

 

 

47,047 

 

 

47,084 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

676 

 

 

676 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

10,138 

 

$

1,692 

 

$

2,061 

 

$

13,891 

 

$

2,083,134 

 

$

2,097,025 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

267 

 

$

387 

 

$

986 

 

$

1,640 

 

$

38,936 

 

 

40,576 

 

$

 -

Commercial and multi-family

 

2,922 

 

 

259 

 

 

 -

 

 

3,181 

 

 

136,722 

 

 

139,903 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

358 

 

 

 -

 

 

378 

 

 

736 

 

 

21,913 

 

 

22,649 

 

 

 -

Home equity(2) 

 

188 

 

 

41 

 

 

199 

 

 

428 

 

 

16,173 

 

 

16,601 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

51 

 

 

51 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

3,735 

 

$

687 

 

$

1,563 

 

$

5,985 

 

$

213,795 

 

$

219,780 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

1,370 

 

 

1,370 

 

$

-

Commercial and multi-family

 

 -

 

 

 -

 

 

4,859 

 

 

4,859 

 

 

790 

 

 

5,649 

 

 

 -

Commercial business(1) 

 

 -

 

 

699 

 

 

188 

 

 

887 

 

 

53 

 

 

940 

 

 

 -

Home equity(2) 

 

199 

 

 

 -

 

 

43 

 

 

242 

 

 

 -

 

 

242 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

Sub-total:

$

199 

 

$

699 

 

$

5,090 

 

$

5,988 

 

$

2,213 

 

$

8,201 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

14,072 

 

$

3,078 

 

$

8,714 

 

$

25,864 

 

$

2,299,142 

 

$

2,325,006 

 

$

 -

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



 

26


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



The following table sets forth the delinquency status of total loans receivable at December 31, 2018:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

980 

 

$

1,014 

 

$

1,452 

 

$

3,446 

 

$

209,754 

 

$

213,200 

 

$

545 

Commercial and multi-family

 

7,074 

 

 

299 

 

 

988 

 

 

8,361 

 

 

1,532,405 

 

 

1,540,766 

 

 

877 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

106,187 

 

 

106,187 

 

 

 -

Commercial business(1) 

 

1,331 

 

 

 -

 

 

349 

 

 

1,680 

 

 

135,286 

 

 

136,966 

 

 

 -

Home equity(2) 

 

498 

 

 

87 

 

 

 -

 

 

585 

 

 

53,686 

 

 

54,271 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

726 

 

 

726 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

9,883 

 

$

1,400 

 

$

2,789 

 

$

14,072 

 

$

2,038,044 

 

$

2,052,116 

 

$

1,422 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

1,117 

 

$

520 

 

$

1,917 

 

$

3,554 

 

$

39,941 

 

 

43,495 

 

$

 -

Commercial and multi-family

 

1,480 

 

 

78 

 

 

 -

 

 

1,558 

 

 

148,681 

 

 

150,239 

 

 

 -

Construction

 

594 

 

 

 -

 

 

 -

 

 

594 

 

 

1,002 

 

 

1,596 

 

 

 -

Commercial business(1) 

 

1,876 

 

 

 -

 

 

46 

 

 

1,922 

 

 

25,451 

 

 

27,373 

 

 

 -

Home equity(2) 

 

682 

 

 

22 

 

 

42 

 

 

746 

 

 

17,630 

 

 

18,376 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

83 

 

 

83 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

5,749 

 

$

620 

 

$

2,005 

 

$

8,374 

 

$

232,788 

 

$

241,162 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$

1,390 

 

$

1,390 

 

$

-

Commercial and multi-family

 

 -

 

 

 -

 

 

6,012 

 

 

6,012 

 

 

820 

 

 

6,832 

 

 

 -

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

 -

 

 

806 

 

 

806 

 

 

48 

 

 

854 

 

 

 -

Home equity(2) 

 

 -

 

 

 -

 

 

48 

 

 

48 

 

 

200 

 

 

248 

 

 

 -

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

 -

 

$

 -

 

$

6,866 

 

$

6,866 

 

$

2,458 

 

$

9,324 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

15,632 

 

$

2,020 

 

$

11,660 

 

$

29,312 

 

$

2,273,290 

 

$

2,302,602 

 

$

1,422 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



 

27


 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)



Criticized and Classified Assets.    



Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.”



When the Company classifies problem assets, the Company 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 June 30, 2019, we had $0 in assets classified as losses, and $22.7 million in assets classified as substandard, of which $22.7 million were classified as impaired. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, or the collateral underlying the loan is in the process of being revalued.



The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies.  The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below:



6 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.



7 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support.  Loans on “nonaccrual” status.  The loan needs special and corrective attention.



8 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.



9 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.



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 June 30, 2019. (In thousands):









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Pass

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

213,084 

 

$

2,006 

 

$

1,652 

 

$

 -

 

$

 -

 

$

216,742 

Commercial and multi-family

 

1,544,930 

 

 

2,209 

 

 

9,441 

 

 

 -

 

 

 -

 

 

1,556,580 

Construction

 

133,585 

 

 

1,378 

 

 

 -

 

 

 -

 

 

 -

 

 

134,963 

Commercial business(1) 

 

137,350 

 

 

2,044 

 

 

1,586 

 

 

 -

 

 

 -

 

 

140,980 

Home equity(2) 

 

46,894 

 

 

61 

 

 

129 

 

 

 -

 

 

 -

 

 

47,084 

Consumer

 

670 

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

676 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

2,076,513 

 

$

7,704 

 

$

12,808 

 

$

 -

 

$

 -

 

$

2,097,025 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

39,363 

 

$

 -

 

$

1,213 

 

$

 -

 

$

 -

 

 

40,576 

Commercial and multi-family

 

136,619 

 

 

1,150 

 

 

2,134 

 

 

 -

 

 

 -

 

 

139,903 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

21,196 

 

 

1,076 

 

 

377 

 

 

 -

 

 

 -

 

 

22,649 

Home equity(2) 

 

16,362 

 

 

 -

 

 

239 

 

 

 -

 

 

 -

 

 

16,601 

Consumer

 

51 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

51 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

213,591 

 

$

2,226 

 

$

3,963 

 

$

 -

 

$

 -

 

$

219,780 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

800 

 

$

557 

 

$

13 

 

$

 -

 

$

 -

 

 

1,370 

Commercial and multi-family

 

199 

 

 

497 

 

 

4,953 

 

 

 -

 

 

 -

 

 

5,649 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

 -

 

 

41 

 

 

899 

 

 

 -

 

 

 -

 

 

940 

Home equity(2) 

 

199 

 

 

 -

 

 

43 

 

 

 -

 

 

 -

 

 

242 

Consumer

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

1,198 

 

$

1,095 

 

$

5,908 

 

$

 -

 

$

 -

 

$

8,201 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Loans

$

2,291,302 

 

$

11,025 

 

$

22,679 

 

$

 -

 

$

 -

 

$

2,325,006 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

28


 

Note 7 - 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, 2018. (In thousands):







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Pass

 

Special Mention

 

Substandard

 

Doubtful

 

Loss

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

207,991 

 

$

2,400 

 

$

2,809 

 

$

 -

 

$

 -

 

$

213,200 

Commercial and multi-family

 

1,526,591 

 

 

3,608 

 

 

10,567 

 

 

 -

 

 

 -

 

 

1,540,766 

Construction

 

105,886 

 

 

301 

 

 

 -

 

 

 -

 

 

 -

 

 

106,187 

Commercial business(1) 

 

133,054 

 

 

1,923 

 

 

1,989 

 

 

 -

 

 

 -

 

 

136,966 

Home equity(2) 

 

53,903 

 

 

91 

 

 

277 

 

 

 -

 

 

 -

 

 

54,271 

Consumer

 

719 

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

726 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

2,028,144 

 

$

8,330 

 

$

15,642 

 

$

 -

 

$

 -

 

$

2,052,116 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans initially recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

41,009 

 

$

 

$

2,485 

 

$

 -

 

$

 -

 

 

43,495 

Commercial and multi-family

 

146,701 

 

 

2,618 

 

 

920 

 

 

 -

 

 

 -

 

 

150,239 

Construction

 

1,596 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

1,596 

Commercial business(1) 

 

26,199 

 

 

1,128 

 

 

46 

 

 

 -

 

 

 -

 

 

27,373 

Home equity(2) 

 

18,309 

 

 

 -

 

 

67 

 

 

 -

 

 

 -

 

 

18,376 

Consumer

 

83 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

83 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

233,897 

 

$

3,747 

 

$

3,518 

 

$

 -

 

$

 -

 

$

241,162 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

$

812 

 

$

562 

 

$

16 

 

$

 -

 

$

 -

 

 

1,390 

Commercial and multi-family

 

204 

 

 

502 

 

 

6,126 

 

 

 -

 

 

 -

 

 

6,832 

Construction

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Commercial business(1) 

 

(4)

 

 

48 

 

 

810 

 

 

 -

 

 

 -

 

 

854 

Home equity(2) 

 

199 

 

 

 -

 

 

49 

 

 

 -

 

 

 -

 

 

248 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub-total:

$

1,211 

 

$

1,112 

 

$

7,001 

 

$

 -

 

$

 -

 

$

9,324 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Loans

$

2,263,252 

 

$

13,189 

 

$

26,161 

 

$

 -

 

$

 -

 

$

2,302,602 

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

29


 

Note 8 – Stockholders’ Equity



On April 17, 2018, the Company issued 631,896 shares of its common stock, 438,889 shares of series E 6% non-cumulative convertible preferred stock and 6,465 shares of series F 6% non-cumulative convertible preferred stock in connection with its acquisition of IA Bancorp, Inc. The series E 6% non-cumulative convertible preferred stock was converted, at the shareholders’ discretion, on July 10, 2018. The series F 6% non-cumulative perpetual convertible preferred stock is convertible at the shareholder’s discretion.



On May 16, 2018, the Company issued 82,950 shares of its common stock in connection with the conversion of the 438,889 shares of Series E preferred stock issued in connection with the acquisition of IA Bancorp, Inc.



On January 30, 2019, the Company closed a private placement of Series G 6.0% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $5,330,000 for 533 shares.



On February 25, 2019, the Company closed a private placement offering of 496,224 shares of its common stock, of which directors and officers of the Company purchased 286,244 shares (the “Offering”). The Offering resulted in gross proceeds of $6.272 million to the Company.

 

Note 9 – Goodwill and Other Intangible Assets



The Company’s intangible assets consist of goodwill and core deposit intangibles in connection with the acquisition of IA Bancorp, Inc. as of April 17, 2018. Goodwill is not amortized but is subject to annual tests for impairment or more often if events or circumstances indicate it may be impaired.



The Company’s core deposit intangibles are amortized on an accelerated basis using an estimated life of 10 years and in accordance with U.S. GAAP are evaluated annually for impairment. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. 



We believe that the fair values of our intangible assets were in excess of their carrying amounts and therefore there was no impairment to intangible assets at June 30, 2019. 



Amortization expense of the core deposit intangibles was $18,000 and $37,000 for the three and six months ended June 30, 2019. The unamortized balance of the core deposit intangibles and the amount of goodwill at June 30, 2019 were $334,000 and $5.2 million, respectively.

 

30


 

Note 10 – 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 June 30, 2019:

 

 

 

  

 

 

  

 

 

  

 

 

Securities Available for Sale

 

 

 

  

 

 

  

 

 

  

 

 

    Residential mortgage backed securities

 

$

112,488 

 

$

 -

 

$

112,488 

 

$

 -

    Municipal obligations

 

 

3,770 

 

 

 -

 

 

3,770 

 

 

 -

Total Securities Available for Sale

 

 

116,258 

 

 

 -

 

 

116,258 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

   Equity Investments

 

 

5,901 

 

 

5,901 

 

 

 -

 

 

 -

Total Securities Available for Sale

 

$

5,901 

 

$

5,901 

 

$

 -

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018:

 

 

 

  

 

 

  

 

 

  

 

 

Securities Available for Sale

 

 

 

  

 

 

 

 

 

  

 

 

    Residential mortgage backed securities

 

$

115,640 

 

$

 -

 

$

115,640 

 

$

 -

    Municipal obligations

 

 

3,695 

 

 

 -

 

 

3,695 

 

 

 -

Total Securities Available for Sale

 

 

119,335 

 

 

 -

 

 

119,335 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

    Equity Investments

 

 

7,672 

 

 

7,672 

 

 

 -

 

 

 -

Total Securities

 

$

7,672 

 

$

7,672 

 

$

 -

 

$

 -



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 June 30, 2019 and 2018.



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 June 30, 2019

 

 

 

  

 

 

  

 

 

  

 

 

Impaired Loans

 

$

6,411 

  

$

 -

  

$

 -

  

$

6,411 

Other real estate owned

 

$

1,235 

  

$

 -

  

$

 -

  

$

1,235 



 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018:

 

 

 

  

 

 

  

 

 

  

 

 

Impaired Loans

 

$

7,288 

 

$

 -

 

$

 -

 

$

7,288 

Other real estate owned

 

$

1,333 

  

$

 -

  

$

 -

  

$

1,333 



 

31


 

Note 10 – Fair Values of Financial Instruments (Continued)



The following tables present additional quantitative information as of June 30, 2019 and December 31, 2018 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

 

June 30, 2019:

 

 

 

 

 

Impaired Loans

$

6,411

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%



 

 

 

 

 

Other real estate owned

$

1,235

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%



 

 

 

 

 







 

 

 

 

 



 

Fair Value

Valuation

Unobservable

 



 

Estimate

Techniques

Input

Range

December 31, 2018:

 

 

 

 

 

Impaired Loans

$

7,288 

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%



 

 

 

 

 

Other real estate owned

$

1,333 

Appraisal of collateral (1)

Appraisal adjustments (2)

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 objectively determinable.

(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.



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 June 30, 2019 and December 31, 2018.



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 fair values.



Securities Available for Sale



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.



Equity Securities



The fair values of available-for-sale securities are based on quoted market prices (Level 1).



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 June 30, 2019 and December 31, 2018.



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.

 

32


 

Note 10 – Fair Values of Financial Instruments (Continued)



Impaired Loans



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 original 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 June 30, 2019 and December 31, 2018 consisted of the loan balances of $8.5 million and $9.5 million, net of a valuation allowance of $2.1 million and $2.2 million, respectively.



Real Estate Owned (Generally Carried at Lower of Cost or Fair Value)



Real Estate Owned is generally carried at 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.



Borrowings and Subordinated Debt (Carried at Cost)



Fair values 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. 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.

 

 

33


 

Note 10 – Fair Values of Financial Instruments (Continued)



The carrying values and estimated fair values of financial instruments were as follows as of June 30, 2019 and December 31, 2018:

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

As of June 30, 2019



 

 



 

 

 

 

 

 

 

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

 

$

227,642 

 

$

227,642 

  

$

227,642 

  

$

 -

 

$

 -

Interest-earning time deposits

 

 

735 

 

 

735 

  

 

735 

  

 

 -

 

 

 -

Debt securities available for sale

 

 

116,258 

 

 

116,258 

 

 

 -

 

 

116,258 

 

 

 -

Equity investments

 

 

5,901 

 

 

5,901 

  

 

5,901 

  

 

 -

 

 

 -

Loans held for sale

 

 

 -

 

 

 -

  

 

 -

  

 

 -

 

 

 -

Loans receivable, net

 

 

2,299,765 

 

 

2,302,528 

  

 

 -

  

 

 -

 

 

2,302,528 

FHLB of New York stock, at cost

 

 

13,821 

 

 

13,821 

  

 

 -

  

 

13,821 

 

 

 -

Accrued interest receivable

 

 

9,315 

 

 

9,315 

  

 

 -

  

 

9,315 

 

 

 -

Other Real Estate Owned

 

 

1,235 

 

 

1,235 

  

 

 -

  

 

 -

 

 

1,235 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

Deposits

 

 

2,208,222 

 

 

2,218,589 

  

 

1,139,602 

  

 

1,078,987 

 

 

 -

Borrowings

 

 

245,800 

 

 

245,305 

  

 

 -

  

 

245,305 

 

 

 -

Subordinated debentures

 

 

36,693 

 

 

36,619 

 

 

 -

 

 

36,619 

 

 

 -

Accrued interest payable

 

 

2,849 

 

 

2,849 

  

 

 -

  

 

2,849 

 

 

 -







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

As of December 31, 2018



 

 



 

 

 

 

 

 

 

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

 

$

195,264 

 

$

195,264 

  

$

195,264 

  

$

 -

 

$

 -

Interest-earning time deposits

 

 

735 

 

 

735 

  

 

735 

  

 

 -

 

 

 -

Debt securities available for sale

 

 

119,335 

 

 

119,335 

 

 

 -

 

 

119,335 

 

 

 -

Equity investments

 

 

7,672 

 

 

7,672 

  

 

7,672 

  

 

 -

 

 

 -

Loans held for sale

 

 

1,153 

 

 

1,153 

  

 

 -

  

 

1,153 

 

 

 -

Loans receivable, net

 

 

2,278,492 

 

 

2,245,150 

  

 

 -

  

 

 -

 

 

2,245,150 

FHLB of New York stock, at cost

 

 

13,405 

 

 

13,405 

  

 

 -

  

 

13,405 

 

 

 -

Accrued interest receivable

 

 

8,378 

 

 

8,378 

  

 

 -

  

 

8,378 

 

 

 -

Other Real Estate Owned

 

 

1,333 

 

 

1,333 

  

 

 -

  

 

 -

 

 

1,333 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

Deposits

 

 

2,180,724 

 

 

2,189,404 

  

 

1,075,539 

  

 

1,113,865 

 

 

 -

Borrowings

 

 

245,800 

 

 

244,049 

  

 

 -

  

 

244,049 

 

 

 -

Subordinated debentures

 

 

36,577 

 

 

36,316 

 

 

 -

 

 

36,316 

 

 

 -

Accrued interest payable

 

 

2,561 

 

 

2,561 

  

 

 -

  

 

2,561 

 

 

 -



 

34


 

Note 11 – Subordinated debt



On July 30, 2018, the Company issued $33.5 million of fixed-to-floating rate subordinated debentures (the “Notes”) in a private placement. The Notes have a ten-year term and bear interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). From and including August 1, 2023, the interest rate will adjust to a floating rate based on the three-month LIBOR plus 2.72%. until redemption or maturity (the "Floating Interest Rate Period"). The Notes are scheduled to mature on August 1, 2028. Subject to limited exceptions, the Company cannot redeem the Notes for the first five years of the term. The Company will pay interest in arrears semi-annually during the Fixed Interest Rate Period and quarterly during the Floating Interest Rate Period during the term of the Notes. The Notes constitute an unsecured and subordinated obligation of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. The Notes qualify as Tier 2 capital for the Company for regulatory purposes, when applicable, and the portion that the Company contributes to the Bank will qualify as Tier 1 capital for the Bank. The additional capital will be used for general corporate purposes including organic growth initiatives. Subordinated debt includes associated deferred costs of $930,000 at June 30, 2019.



The Company also has $4,124,000 of mandatory redeemable Trust Preferred securities. The interest rate on these floating rate junior subordinated debentures adjusts quarterly, equal to the three-month LIBOR and 2.65%.



As it is anticipated that LIBOR will be discontinued after 2021, the Company is reviewing the agreements for the above debentures to determine alternative reference rates, and does not anticipate there will be a significant financial statement impact.

 

Note 12 – Lease Obligations



In February 2016, FASB issued ASU 2016-02, Leases, which requires a lessee to recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a right-of-use (“ROU”) asset. The Company adopted this standard in the first quarter of 2019 using the option to apply the transition provisions of the new standard at the adoption date instead of the earliest period presented as provided in ASU 2018-11.





The Company leases 28 of our offices under various operating lease agreements. The leases have remaining terms of 1 year to 13 years. The leases contain provisions for the payment by the Company of its pro-rata share of real estate taxes, insurance, common area maintenance and other variable expenses. The Company will allocate payments made under such leases between lease and non-lease components. Some leases contain renewal options and options to purchase the assets.



The Company evaluates its contracts and service agreements in order to determine if there is an asset imbedded in such contracts and agreements. Such determination is based upon whether there is a specific asset covered by the agreement, whether the Company is entitled to all of the economic benefits to the asset over the term of the agreement, and whether the Company has full control and use of the asset over the term of the agreement without substitution rights or direction of use of the asset by the lessor. 



The Company includes in its determination of its lease liability and concurrent right of use asset those renewal or purchase options for which it is reasonably certain it will exercise. Currently, the Company does not expect to exercise such options and, accordingly, they are excluded in the determination of the lease liabilities and the concurrent right of use assets.



The Company has elected not to recognize a lease liability and a right of use asset for leases with a lease term of 12 or fewer months.



To calculate its lease liabilities, the Company uses a discount rate based upon the applicable borrowing rates of the Federal Home Loan Bank for maturities corresponding to the termination dates of the specific leases.



The following tables present certain information related to the Company’s adoption of ASU 2016-02 (in thousands):





 

 

 

 

 



 

Three Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2019

Operating lease cost

$

812 

 

$

1,562 

Variable lease cost-operating leases

$

170 

 

$

302 



 

 

 

 

 



 

At June 30, 2019

 

 

 

Supplemental balance sheet information related to leases:

 

 

 

 

 

Operating Leases

 

 

 

 

 

Operating lease right-of-use assets

$

14,650 

 

 

 



 

 

 

 

 

Current liabilities

$

2,649 

 

 

 

Operating lease liabilities (noncurrent portion)

 

12,075 

 

 

 

Total operating lease liabilities

$

14,724 

 

 

 



The following tables summarize the Company’s weighted average remaining lease terms and weighted average discount rates:





 

 

Weighted Average Remaining Lease Term

 

 

Operating leases

years



 

 

Weighted Average Discount Rate

 

 

Operating leases

3.15 

%



 

35


 

Note 12 – Lease Obligations (continued)



The following table summarizes the Company’s maturity of lease obligations for operating and finance leases at June 30, 2019:





 

 

Maturities of lease liabilities:



 

At June 30, 2019



 

Operating Leases

One year or less

$

2,649 

Over one year through three years

 

4,871 

Over three years through five years

 

3,356 

Over five years

 

3,848 

Total 

$

14,724 

 

Note 13 – Subsequent Events



On July 10, 2019, the Board of Directors of the Company declared a common stock dividend of $0.14 per share to shareholders of record on August 9, 2019 with a payment date of August 23, 2019.

 

ITEM 2.



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



Forward-Looking Statements



This report on Form 10-Q contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, or the PSLRA. Such forward-looking statements, in addition to historical information, involve risk and uncertainties, and are based on the beliefs, assumptions and expectations of our management team. Words such as “expects,” “believes,” “should,” “plans,” “anticipates,” “will,” “potential,” “could,” “intend,” “may,” “outlook,” “predict,” “project,” “would,” “estimated,” “assumes,” “likely,” and variation of such similar expressions are intended to identify such forward-looking statements. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.

 

Factors that could cause future results to vary from current management expectations as reflected in our forward looking statements include, but are not limited to:



·

unfavorable economic conditions in the United States generally and particularly in our primary market area;

·

the effects of declines in housing markets and real estate values that may adversely impact the collateral underlying our loans;

·

increase in unemployment levels and slowdowns in economic growth;

·

our level of non-performing assets and the costs associated with resolving any problem loans including litigation and other costs;

·

the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of our loan and investment securities portfolios;

·

the credit risk associated with our loan portfolio;

·

changes in the quality and composition of the Bank’s loan and investment portfolios;

·

changes in our ability to access cost-effective funding;

·

deposit flows;

·

legislative and regulatory changes, including increases in Federal Deposit Insurance Corporation, or FDIC, insurance rates;

·

monetary and fiscal policies of the federal government;

·

changes in tax policies, rates and regulations of federal, state and local tax authorities;

·

inflation;

·

demands for our loan products;

·

demand for financial services;

·

competition;

·

changes in the securities or secondary mortgage markets;

·

changes in management’s business strategies;

·

our ability to enter new markets successfully;

·

our ability to successfully integrate acquired businesses;

·

changes in consumer spending;

·

our ability to retain key employees;

·

the effects of any reputational, credit, interest rate, market, operational, legal, liquidity, regulatory risk;

·

expanded regulatory requirements as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which could adversely affect operating results; and

·

other factors discussed elsewhere in this report, and in other reports we filed with the SEC, including under “Risk Factors” in Part I, Item 1A of our annual Report on Form 10-K and our other periodic reports that we file with the SEC.



You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Form 10-Q. We do not assume any obligation to revise forward-looking statements except as may be required by law.



Overview



BCB Bancorp, Inc. is a New Jersey corporation, and is the holding company parent of BCB Community Bank, or the Bank. The Company has not engaged in any significant business activity other than owning all of the outstanding common stock of BCB Community Bank. Our executive office is located at 104-110 Avenue C, Bayonne, New Jersey 07002. At June 30, 2019, we had approximately $2.738 billion in consolidated assets, $2.208 billion in deposits and $221.1 million in consolidated stockholders’ equity.



BCB Community Bank opened for business on November 1, 2000 as Bayonne Community Bank, a New Jersey chartered commercial bank. The Bank changed its name from Bayonne Community Bank to BCB Community Bank in April 2007. At June 30, 2019 the Bank operated through thirty branches in Bayonne, Carteret, Colonia, Edison, Jersey City, Hoboken, Fairfield, Holmdel, Lodi, Lyndhurst, Maplewood, Monroe Township, Parsippany, Plainsboro, River Edge, Rutherford, South Orange,

 

36


 

Union, and Woodbridge, New Jersey, as well as three branches in Hicksville and Staten Island, NY, and through executive offices located at 104-110 Avenue C and an administrative office located at 591-595 Avenue C, Bayonne, New Jersey 07002. The Bank’s deposit accounts are insured by the FDIC, and the Bank is a member of the Federal Home Loan Bank System.

 

We are a community-oriented financial institution. Our business is to offer FDIC-insured deposit products and to invest funds held in deposit accounts at the Bank, together with funds generated from operations, in loans and investment securities. We offer our customers:



·

loans, including commercial and multi-family real estate loans, one- to four-family mortgage loans, home equity loans, construction loans, consumer loans and commercial business loans. In recent years the primary growth in our loan portfolio has been in loans secured by commercial real estate and multi-family properties;



·

FDIC-insured deposit products, including savings and club accounts, interest and non-interest bearing demand accounts, money market accounts, certificates of deposit and individual retirement accounts; and



·

retail and commercial banking services including wire transfers, money orders, safe deposit boxes, a night depository, debit cards, online banking, mobile banking, gift cards, fraud detection (positive pay), and automated teller services.



Critical Accounting Policies



The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loan losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2019, it is reasonably possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.



See further discussion of these critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2018 and Note 1, Basis of Presentation, to the unaudited Consolidated Financial Statements. There has been no change in critical accounting policies since the Company’s last annual report on Form 10-K.



Financial Condition



Total assets increased by $63.4 million, or 2.4 percent, to $2.738 billion at June 30, 2019 from $2.675 billion at December 31, 2018. The increase in total assets was primarily the result of an increase in total cash and cash equivalents as a result of new deposit relationships, organic loan growth, and the inclusion of operating leases on the balance sheet due to accounting standards changes as mandated by the Financial Accounting Standards Board’s Accounting Standards Update - Leases Topic 842.



Loans receivable increased by $21.3 million, or 0.9 percent, to $2.300 billion at June 30, 2019 from $2.278 billion at December 31, 2018. The organic growth in loans over the first six months of 2019 represented increases of $27.2 million in construction loans, $4.3 million in commercial real estate and multi-family loans, and $603,000 in residential one-to-four family loans, partly offset by decreases of $9.0 million in home equity loans, $624,000 in commercial business loans, and $82,000 in consumer loans. The allowance for loan losses was $23.8 million, or 433.5 percent of non-accruing loans and 1.02 percent of gross loans, at June 30, 2019 as compared to an allowance for loan losses of $22.4 million, or 309.6 percent of non-accruing loans and 0.97 percent of gross loans, at December 31, 2018.



Total cash and cash equivalents increased by $32.4 million, or 16.6 percent, to $227.6 million at June 30, 2019 from $195.2 million at December 31, 2018. The Company’s level of cash and cash equivalents is a part of the Company’s strategy to maintain strong levels of liquidity.



Total investment securities decreased by $4.8 million, or 3.8 percent, to $122.2 million at June 30, 2019 from $127.0 million at December 31, 2018.



On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2016-02 - Leases, requiring on-balance sheet reporting for all operating leases. Adoption of the Standard resulted in the recording of $14.7 million in operating lease right-of-use assets and a corresponding $14.7 million in operating lease liabilities at June 30, 2019.



Deposit liabilities increased by $27.5 million, or 1.3 percent, to $2.208 billion at June 30, 2019 from $2.181 billion at December 31, 2018. Increases over the first six months of 2019 included $45.3 million in money market checking accounts, $14.0 million in non-interest bearing deposits, and $6.9 million in transaction accounts, partly offset by decreases of $36.0 million in certificates of deposit, and $2.7 million in savings and club accounts. The decrease in the Company’s amount of certificates of deposit was related to reduced levels of listing service and brokered certificates of deposit, which saw decreases of $17.3 million and $132.0 million, respectively, during the first six months of 2019. The Company uses listing service and brokered certificates of deposit as additional sources of deposit liquidity, which totaled $19.6 million and $116.0 million, respectively, at June 30, 2019.



Debt obligations remained flat at $282.5 million at June 30, 2019 and December 31, 2018 and consisted of both Federal Home Loan Bank (“FHLB”) borrowings and subordinated debt balances. FHLB borrowings reflect the use of long-term advances to augment deposits as the Company’s funding source for originating loans and investing in investment securities. The weighted average interest rate of FHLB advances was 2.18 percent at June 30, 2019. The issuance of subordinated debt was to maintain adequate capital ratios for further growth. The fixed interest rate of subordinated debt balances was 5.625% at June 30, 2019.



Stockholders’ equity increased by $20.9 million, or 10.5 percent, to $221.2 million at June 30, 2019 from $200.3 million at December 31, 2018. The increase in stockholders’ equity was primarily attributable to the Company’s issuance of $6.3 million of common stock in a private placement which closed in February, 2019 and the issuance of $5.3 million of preferred series G stock in a private placement, which was issued in January, 2019. Retained earnings increased by $4.9 million to $43.3 million at June 30, 2019 from $38.4 million at December 31, 2018, due primarily to the increase in net income, net of dividends paid. Accumulated other comprehensive losses decreased $3.1 million to $1.9 million at June 30, 2019 from $5.0 million at December 31, 2018.



 

37


 

Net Interest Income Analysis



Net interest income represents the difference between income earned on our interest-earning assets and the expense incurred on our interest-bearing liabilities, and is analyzed and monitored by the Company on a regular basis. The following tables set forth average balance sheets, yields, and costs. The yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or expense.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,



 

2019

 

 

2018



 

Average Balance

 

 

Interest Earned/Paid

 

Average Yield/Rate (3)

 

 

Average Balance

 

 

Interest Earned/Paid

 

Average Yield/Rate (3)



 

(Dollars in thousands)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable

$

2,329,209 

 

$

28,634 

 

4.92% 

 

$

2,033,372 

 

$

24,048 

 

4.74% 

Investment Securities

 

124,520 

 

 

935 

 

3.00% 

 

 

146,760 

 

 

1,033 

 

2.82% 

Interest-earning deposits

 

184,266 

 

 

1,173 

 

2.55% 

 

 

96,853 

 

 

615 

 

2.55% 

  Total Interest-earning assets

 

2,637,995 

 

 

30,742 

 

4.66% 

 

 

2,276,985 

 

 

25,696 

 

4.53% 

Non-interest-earning assets

 

78,478 

 

 

 

 

 

 

 

46,060 

 

 

 

 

 

  Total assets

$

2,716,473 

 

 

 

 

 

 

$

2,323,045 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand accounts

$

341,418 

 

$

648 

 

0.76% 

 

$

333,641 

 

$

473 

 

0.57% 

Money market accounts

 

253,633 

 

 

1,102 

 

1.74% 

 

 

186,650 

 

 

502 

 

1.07% 

Savings accounts

 

259,398 

 

 

110 

 

0.17% 

 

 

264,764 

 

 

105 

 

0.16% 

Certificates of Deposit

 

1,056,375 

 

 

6,097 

 

2.31% 

 

 

876,266 

 

 

3,405 

 

1.56% 

  Total interest-bearing deposits

 

1,910,824 

 

 

7,957 

 

1.67% 

 

 

1,661,321 

 

 

4,485 

 

1.08% 

Borrowed funds

 

283,424 

 

 

1,920 

 

2.71% 

 

 

228,353 

 

 

1,221 

 

2.15% 

  Total interest-bearing liabilities

 

2,194,248 

 

 

9,877 

 

1.80% 

 

 

1,889,674 

 

 

5,706 

 

1.21% 

Non-interest-bearing liabilities

 

304,680 

 

 

 

 

 

 

 

244,544 

 

 

 

 

 

  Total liabilities

 

2,498,928 

 

 

 

 

 

 

 

2,134,218 

 

 

 

 

 

Stockholders' equity

 

217,545 

 

 

 

 

 

 

 

188,827 

 

 

 

 

 

  Total liabilities and stockholders' equity

$

2,716,473 

 

 

 

 

 

 

$

2,323,045 

 

 

 

 

 

Net interest income

 

 

 

$

20,865 

 

 

 

 

 

 

$

19,990 

 

 

Net interest rate spread(1)

 

 

 

 

 

 

2.86% 

 

 

 

 

 

 

 

3.32% 

Net interest margin(2)

 

 

 

 

 

 

3.16% 

 

 

 

 

 

 

 

3.52% 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(1)

Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(2)

Net interest margin represents net interest income divided by average total interest-earning assets.

(3)

Annualized.

 

38


 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six Months Ended June 30,



 

2019

 

 

2018



 

Average Balance

 

 

Interest Earned/Paid

 

Average Yield/Rate (3)

 

 

Average Balance

 

 

Interest Earned/Paid

 

Average Yield/Rate (3)



 

(Dollars in thousands)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable

$

2,322,674 

 

$

56,867 

 

4.90% 

 

$

1,876,349 

 

$

43,569 

 

4.68% 

Investment Securities

 

125,139 

 

 

1,833 

 

2.93% 

 

 

138,133 

 

 

1,836 

 

2.68% 

Interest-earning deposits

 

185,368 

 

 

2,520 

 

2.72% 

 

 

109,937 

 

 

1,233 

 

2.26% 

  Total Interest-earning assets

 

2,633,181 

 

 

61,220 

 

4.65% 

 

 

2,124,419 

 

 

46,638 

 

4.43% 

Non-interest-earning assets

 

70,550 

 

 

 

 

 

 

 

44,647 

 

 

 

 

 

  Total assets

$

2,703,731 

 

 

 

 

 

 

$

2,169,066 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand accounts

$

341,538 

 

$

1,252 

 

0.73% 

 

$

323,843 

 

$

903 

 

0.56% 

Money market accounts

 

245,368 

 

 

2,074 

 

1.69% 

 

 

172,074 

 

 

869 

 

1.02% 

Savings accounts

 

259,958 

 

 

223 

 

0.17% 

 

 

261,792 

 

 

202 

 

0.16% 

Certificates of Deposit

 

1,070,757 

 

 

12,087 

 

2.26% 

 

 

798,672 

 

 

6,135 

 

1.55% 

  Total interest-bearing deposits

 

1,917,621 

 

 

15,636 

 

1.63% 

 

 

1,556,381 

 

 

8,109 

 

1.05% 

Borrowed funds

 

283,442 

 

 

3,817 

 

2.69% 

 

 

205,311 

 

 

2,099 

 

2.06% 

  Total interest-bearing liabilities

 

2,201,063 

 

 

19,453 

 

1.77% 

 

 

1,761,692 

 

 

10,208 

 

1.17% 

Non-interest-bearing liabilities

 

290,511 

 

 

 

 

 

 

 

224,561 

 

 

 

 

 

  Total liabilities

 

2,491,574 

 

 

 

 

 

 

 

1,986,253 

 

 

 

 

 

Stockholders' equity

 

212,157 

 

 

 

 

 

 

 

182,813 

 

 

 

 

 

  Total liabilities and stockholders' equity

$

2,703,731 

 

 

 

 

 

 

$

2,169,066 

 

 

 

 

 

Net interest income

 

 

 

$

41,767 

 

 

 

 

 

 

$

36,430 

 

 

Net interest rate spread(1)

 

 

 

 

 

 

2.88% 

 

 

 

 

 

 

 

3.26% 

Net interest margin(2)

 

 

 

 

 

 

3.17% 

 

 

 

 

 

 

 

3.46% 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(1)

Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(2)

Net interest margin represents net interest income divided by average total interest-earning assets.

(3)

Annualized.



Results of Operations comparison for the Three Months Ended June 30, 2019 and 2018



Net income increased $2.9 million, or 126.0 percent, to $5.2 million for the three months ended June 30, 2019, compared with $2.3 million for the three months ended June 30, 2018. The increase in net income was primarily related to an increase in total interest income and decreases in the provision for loan losses and non-interest expenses, partly offset by an increase in interest expense, a decrease in total non-interest income, and a higher income tax provision for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018.



Net interest income increased by $875,000, or 4.4 percent, to $20.9 million for the three months ended June 30, 2019 from $20.0 million for the three months ended June 30, 2018. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $361.0 million, or 15.9 percent, to $2.638 billion for the three months ended June 30, 2019 from $2.277 billion for the three months ended June 30, 2018. There was also an increase in the average yield on interest-earning assets of 13 basis points to 4.66 percent for the three months ended June 30, 2019 from 4.53 percent for the three months ended June 30, 2018. There was also an increase in the average balance of interest-bearing liabilities of $304.6 million, or 16.1 percent, to $2.194 billion for the three months ended June 30, 2019 from $1.890 billion for the three months ended June 30, 2018, and an increase in the average rate on interest-bearing liabilities of 59 basis points to 1.80 percent for the three months ended June 30, 2019 from 1.21 percent for the three months ended June 30, 2018.



Interest income on loans receivable increased by $4.6 million, or 19.1 percent, to $28.6 million for the three months ended June 30, 2019 from $24.0 million for the three months ended June 30, 2018. The increase was primarily attributable to an increase in the average balance of loans receivable of $295.8 million, or 14.5 percent, to $2.329 billion for the three months ended June 30, 2019 from $2.033 billion for the three months ended June 30, 2018, as well as an increase in the average yield on loans of 18 basis points to 4.92 percent for the three months ended June 30, 2019 from 4.74 percent for the three months ended June 30, 2018. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included growing the Bank’s geographic footprint vis-à-vis our organic branching strategy and the acquisition of IAB which was completed in the second quarter of 2018, while the increase in the average yield on loans related to the rising interest rate environment. Interest income on loans also included $518,000 of amortization of purchase credit fair value adjustments related to the acquisition of IAB for the three months ended June 30, 2019, which added approximately eight basis points to the average yield on interest earning assets on an annualized basis.



Interest income on securities decreased by $98,000, or 9.5 percent, to $935,000 for the three months ended June 30, 2019 from $1.0 million for the three months ended June 30, 2018. This decrease was primarily due to a decrease in the average balance of securities of $22.2 million, or 15.2 percent, to $124.5 million for the three months ended June 30, 2019 from $146.7 million for the three months ended June 30, 2018, partly offset by an increase in the average yield on securities of 18 basis points to 3.00 percent for the three months ended June 30, 2019 from 2.82 percent for the three months ended June 30, 2018.



Interest income on other interest-earning assets increased by $558,000, or 90.7 percent, to $1.2 million for the three months ended June 30, 2019 from $615,000 for the three months ended June 30, 2018. This increase was primarily due to an increase in the average balance of other interest earning assets of $87.4 million, or 90.3 percent, to $184.3 million for the three months ended June 30, 2019 from $96.9 million for the three months ended June 30, 2018. The increase in the average balance of other interest-earning assets was consistent with the Company’s strategy of maintaining strong levels of liquidity.

 

Total interest expense increased by $4.2 million, or 73.1 percent, to $9.9 million for the three months ended June 30, 2019 from $5.7 million for the three months ended June 30, 2018. This increase resulted, primarily, from an increase in the average balance of interest-bearing liabilities of $304.6 million, or 16.1 percent, to $2.194 billion for the three months ended June 30, 2019 from $1.890 billion for the three months ended June 30, 2018, as well as an increase in the average rate on interest-bearing liabilities of 59 basis points to 1.80 percent for the three months ended June 30, 2019 from 1.21 percent for the three months ended June 30, 2018. Interest expense, net related to the issuance of subordinated debt in July 2018, totaled $529,000 for the three months ended June 30, 2019, which added approximately seven basis points to the average cost of funds on an annualized basis.



 

39


 

Net interest margin was 3.16 percent for the three-month period ended June 30, 2019 and 3.52 percent for the three-month period ended June 30, 2018. The decrease in the net interest margin was the result of the higher interest rate environment, with the increase in the cost of funds outpacing the return on interest earning assets for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018.



The provision for loan losses decreased by $1.3 million, to $755,000 for the three months ended June 30, 2019 from $2.1 million for the three months ended June 30, 2018. 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 June 30, 2019, the Company recognized $30,000 in recoveries compared to $243,000 in net recoveries for the three months ended June 30, 2018. The Bank had non-accrual loans totaling $5.5 million, or 0.24 percent, of gross loans at June 30, 2019 as compared to $7.2 million, or 0.31 percent, of gross loans at December 31, 2018. The allowance for loan losses was $23.8 million, or 1.02 percent, of gross loans at June 30, 2019, and $22.4 million, or 0.97 percent, of gross loans at December 31, 2018 and $20.6 million, or 0.96 percent, of gross loans at June 30, 2018. 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 June 30, 2019 and December 31, 2018.



Total non-interest income decreased by $235,000, or 15.0 percent, to $1.3 million for the three months ended June 30, 2019 from $1.6 million for the three months ended June 30, 2018. The decrease in total non-interest income was mainly related to lower income from fees and service charges as well as lower gains on sale of loans, partly offset by higher gains on sale of other real estate owned properties and gains on sale of investment securities. Fees and service charges decreased $169,000, or 17.4 percent to $802,000 for the three months ended June 30, 2019 from $971,000 for the three months ended June 30, 2018. Gain on sales of loans decreased by $139,000, or 24.1 percent, to $437,000 for the three months ended June 30, 2019 from $576,000 for the three months ended June 30, 2018. Gain on sale of other real estate owned properties increased by $55,000, to $45,000 for the three months ended June 30, 2019 from a loss of $10,000 for the three months ended June 30, 2018. Gain on sale of investment securities was $21,000 for the three months ended June 30, 2019, with no comparable figure for the three months ended June 30, 2018.

 

Total non-interest expense decreased by $2.1 million, or 13.1 percent, to $13.9 million for the three months ended June 30, 2019 from $16.0 million for the three months ended June 30, 2018.



Merger-related expenses decreased $2.0 million, which was the amount incurred in the three months ended June 30, 2018 with no comparable figure for the three months ended June 30, 2019.



Salaries and employee benefits expense decreased by $207,000, or 2.9 percent, to $6.9 million for the three months ended June 30, 2019 from $7.1 million for the three months ended June 30, 2018. The decrease in salaries and employee benefits related in part to a reduction in full-time equivalent employees, from 371 at June 30, 2018 to 366 at June 30, 2019, as part of management’s continued initiative to manage headcount throughout the organization.



Occupancy expense increased by $173,000, or 7.0 percent, to $2.6 million for the three months ended June 30, 2019 from $2.5 million for the three months ended June 30, 2018, largely related to the opening of two new branches in 2019.



Data processing expense decreased by $97,000, or 11.7 percent, to $731,000 for the three months ended June 30, 2019 from $828,000 for the three months ended June 30, 2018, primarily attributable to non-recurring charges in the second quarter of 2018 upon the merger with IAB.



Director fee expense increased by $115,000, or 57.2 percent, to $316,000 for the three months ended June 30, 2019 from $201,000 for the three months ended June 30, 2018, primarily related to the awarding of stock options and restricted stock under the 2018 Equity Incentive Plan, during the three months ended June 30, 2019.



Regulatory fees associated with FDIC assessments increased by $127,000, or 43.8 percent, to $417,000 for the three months ended June 30, 2019 from $290,000 for the three months ended June 30, 2018. The increase was primarily due to higher FDIC insurance assessment costs, which in part results from the growth of the Bank, and the inclusion of IAB for the full quarter in the current-year period.



There were also less significant variances in professional fees, advertising and promotional, other real estate owned, net and other expenses, which netted to a reduction of expenses of $158,000 from the prior year. Other non-interest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses. 



The income tax provision increased by $1.1 million, or 93.1 percent, to $2.3 million for the three months ended June 30, 2019 from $1.2 million for the three months ended June 30, 2018. The increase in the income tax provision comes as a result of higher taxable income for the three months ended June 30, 2019 as compared to that same period for 2018. The consolidated effective tax rate for the three months ended June 30, 2019 was 30.7 percent compared to 34.2 percent for the three months ended June 30, 2018. The lower effective tax rate in the current period primarily related to an adjustment for the three months ended June 30, 2018 related to an increase in the New Jersey corporate business tax of 2.5 percent which was enacted July 1, 2018, and effective retroactively to January 1, 2018.  



Results of Operations comparison for the Six Months Ended June 30, 2019 and 2018



Net income increased $3.7 million, or 53.8 percent, to $10.7 million for the six months ended June 30, 2019, compared with $7.0 million for the six months ended June 30, 2018. The increase in net income was primarily related to an increase in total interest income, a decrease in the provision for loan losses and a decrease in non-interest expense, partly offset by an increase in interest expense, a decrease in total non-interest income, and a higher income tax provision for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.



Net interest income increased by $5.3 million, or 14.7 percent, to $41.8 million for the six months ended June 30, 2019 from $36.5 million for the six months ended June 30, 2018. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $508.8 million, or 24.0 percent, to $2.633 billion for the six months ended June 30, 2019 from $2.124 billion for the six months ended June 30, 2018. There was an increase in the average yield on interest-earning assets of 22 basis points to 4.65 percent for the six months ended June 30, 2019 from 4.43 percent for the six months ended June 30, 2018. Offsetting the increase in interest income was an increase in the average balance of interest-bearing liabilities of $439.4 million, or 24.9 percent, to $2.201 billion for the six months ended June 30, 2019 from $1.762 billion for the six months ended June 30, 2018, and an increase in the average rate on interest-bearing liabilities of 60 basis points to 1.77 percent for the six months ended June 30, 2019 from 1.17 percent for the six months ended June 30, 2018.



Interest income on loans receivable increased by $13.3 million, or 30.5 percent, to $56.9 million for the six months ended June 30, 2019 from $43.6 million for the six months ended June 30, 2018. The increase was primarily attributable to an increase in the average balance of loans receivable of $446.3 million, or 23.8 percent, to $2.323 billion for the six months ended June 30, 2019 from $1.876 billion for the six months ended June 30, 2018, as well as an increase in the average yield on loans of 22 basis points to 4.90 percent for the six months ended June 30, 2019 from 4.68 percent for the six months ended June 30, 2018. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included growing the Bank’s geographic footprint vis-à-vis our organic branching strategy

 

40


 

and the acquisition of IAB, which was completed in the second quarter of 2018, while the increase in the average yield on loans related to the rising interest rate environment. Interest income on loans also included $1.0 million of amortization of purchase credit fair value adjustments related to the acquisition of IAB for the six months ended June 30, 2019, which added approximately eight basis points to the average yield on interest earning assets on an annualized basis.



Interest income on securities decreased by $3,000 to $1.8 million for the six months ended June 30, 2019 which was comparable to the same period for the prior year. This decrease was primarily due to a decrease in the average balance of securities of $13.0 million, or 9.4 percent, to $125.1 million for the six months ended June 30, 2019 from $138.1 million for the six months ended June 30, 2018, partly offset by an increase in the average yield on securities of 25 basis points to 2.93 percent for the six months ended June 30, 2019 from 2.68 percent for the six months ended June 30, 2018.



Interest income on other interest-earning assets increased by $1.3 million, or 104.4 percent, to $2.5 million for the six months ended June 30, 2019 from $1.2 million for the six months ended June 30, 2018. This increase was primarily due to an increase in the average balance of other interest earning assets of $75.4 million, or 68.6 percent, to $185.4 million for the six months ended June 30, 2019 from $110.0 million for the six months ended June 30, 2018 as well as an increase in the average yield on other interest-earning assets of 46 basis points to 2.72 percent for the six months ended June 30, 2019 from 2.26 percent for the six months ended June 30, 2018. The increase in the average balance of other interest-earning assets was consistent with the Company’s strategy of maintaining strong levels of liquidity. The increase in the average yield on other interest-earning assets correlates to the increases in the fed funds rate that have occurred over the last 12 months. 

 

Total interest expense increased by $9.2 million, or 90.6 percent, to $19.4 million for the six months ended June 30, 2019 from $10.2 million for the six months ended June 30, 2018. This increase resulted, primarily, from an increase in the average balance of interest-bearing liabilities of $439.4 million, or 24.9 percent, to $2.201 billion for the six months ended June 30, 2019 from $1.762 billion for the six months ended June 30, 2018, as well as an increase in the average rate on interest-bearing liabilities of 60 basis points to 1.77 percent for the six months ended June 30, 2019 from 1.17 percent for the six months ended June 30, 2018. Interest expense, net related to the issuance of subordinated debt in July 2018, totaled $1.0 million for the six months ended June 30, 2019, which added approximately seven basis points to the average cost of funds on an annualized basis.



Net interest margin was 3.17 percent for the six-month period ended June 30, 2019 and 3.46 percent for the six-month period ended June 30, 2018. The decrease in the net interest margin was the result of the higher interest rate environment within the period, with the increase in the cost of funds outpacing the return on interest earning assets for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.



The provision for loan losses decreased by $1.8 million, to $1.6 million for the six months ended June 30, 2019 from $3.4 million for the six months ended June 30, 2018. 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 six months ended June 30, 2019, the Company experienced $214,000 in net charge-offs compared to $137,000 in net charge-offs for the six months ended June 30, 2018. The Bank had non-accrual loans totaling $5.5 million, or 0.24 percent, of gross loans at June 30, 2019 as compared to $7.2 million, or 0.31 percent, of gross loans at December 31, 2018. The allowance for loan losses was $23.8 million, or 1.02 percent, of gross loans at June 30, 2019, and $22.4 million, or 0.97 percent, of gross loans at December 31, 2018 and $20.6 million, or 0.96 percent, of gross loans at June 30, 2018. 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 June 30, 2019 and December 31, 2018.



Total non-interest income decreased by $2.0 million, or 39.6 percent, to $3.0 million for the six months ended June 30, 2019 from $5.0 million for the six months ended June 30, 2018. The decrease in total non-interest income mainly related to a decrease in the amount of other non-interest income of $2.2 million, or 95.6 percent, to $102,000 for the six months ended June 30, 2019 from $2.3 million for the six months ended June 30, 2018. The decrease in other non-interest income was the result of $2.2 million in proceeds from a legal settlement recognized in the first quarter of 2018. The decrease in total non-interest income also related to a decrease in the gain on sale of loans of $404,000, or 34.9 percent, to $755,000 for the six months ended June 30, 2019 from $1.1 million for the six months ended June 30, 2018. The decrease in total non-interest income was partly offset by an increase in unrealized gains on equity securities of $425,000, with a gain of $265,000 for the six months ended June 30, 2019 as compared to an unrealized loss on equity securities of $160,000 for the six months ended June 30, 2018. There was an increase in gains on the sale of impaired loans of $131,000, with a gain of $107,000 for the six months ended June 30, 2019 as compared to a loss of $24,000 for the six months ended June 30, 2018. There was an increase in gains on other real estate owned properties of $63,000, with a gain of $53,000 for the six months ended June 30, 2019 as compared to a loss of $10,000 for the six months ended June 30, 2018. There was an increase in the gain on sales of investment securities of $21,000 for the six months ended June 30, 2019 with no comparable figure for the six months ended June 30, 2018.

 

Total non-interest expense decreased by $320,000, or 1.1 percent, to $27.7 million for the six months ended June 30, 2019 from $28.0 million for the six months ended June 30, 2018.



Merger-related expenses decreased $2.2 million, which was the amount incurred in the six months ended June 30, 2018 with no comparable figure for the six months ended June 30, 2019.



Salaries and employee benefits expense increased by $441,000, or 3.3 percent, to $13.8 million for the six months ended June 30, 2019 from $13.4 million for the six months ended June 30, 2018. The increase in salaries and employee benefits related in part to the inclusion of IAB employees after the merger was completed in April, 2018, as well as normal salary increases. These increases were partly offset by a reduction in full-time equivalent employees, from 371 at June 30, 2018 to 366 at June 30, 2019, as part of management’s continued initiative to manage headcount throughout the organization.



Occupancy expense increased by $741,000, or 16.3 percent, to $5.3 million for the six months ended June 30, 2019 from $4.5 million for the six months ended June 30, 2018, largely related to the opening of two new branches in 2019.

Data processing expense decreased by $105,000, or 6.7 percent, to $1.4 million for the six months ended June 30, 2019 from $1.5 million for the six months ended June 30, 2018, primarily attributable to non-recurring charges in the second quarter of 2018 upon the merger with IAB.



Director fees increased by $232,000, or 57.7 percent, to $634,000 for the six months ended June 30, 2019 from $402,000 for the six months ended June 30, 2018, primarily related to the awarding of stock options and restricted stock under the 2018 Equity Incentive Plan during the second quarter of 2019.



Regulatory fees associated with FDIC assessments increased by $345,000, or 65.2 percent, to $874,000 for the six months ended June 30, 2019 from $529,000 for the six months ended June 30, 2018. The increase was primarily due to higher FDIC insurance assessment costs, which in part results from the growth of the Bank, and the inclusion of IAB for the full six months in the current-year period.



There were also less significant variances in professional fees, advertising and promotional, other real estate owned, net and other expenses, which netted to increased expenses of $210,000 from the prior year. Other non-interest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses. 

 

41


 



The income tax provision increased by $1.7 million, or 56.6 percent, to $4.8 million for the six months ended June 30, 2019 from $3.1 million for the six months ended June 30, 2018. The increase in the income tax provision comes as a result of higher taxable income for the six months ended June 30, 2019 as compared to that same period for 2018. The consolidated effective tax rate for the six months ended June 30, 2019 was 30.8 percent compared to 30.5 percent for the six months ended June 30, 2018.



 

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.



The Company had total borrowings of $282.5 million at June 30, 2019 and $282.4 million at December 31, 2018. The average rate of FHLB advances was 2.18 percent at June 30, 2019, and December 31, 2018. The subordinated debentures have a ten-year term and will bear interest at a fixed annual rate of 5.625% for the first five years of the term. From and including August 1, 2023, the interest rate will adjust to a floating rate based on the LIBOR plus 2.72% until redemption or maturity.  



The private placement subordinated debentures have a ten-year term and bear interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). From and including August 1, 2023, the interest rate will adjust to a floating rate based on the three-month LIBOR plus 2.72%. until redemption or maturity. The Notes are scheduled to mature on August 1, 2028.



As it is anticipated that LIBOR will be discontinued after 2021, the Company is reviewing the agreements for the above debentures to determine alternative reference rates, and does not anticipate there will be a significant financial statement impact.



The Company had the ability at June 30, 2019 to obtain additional funding from the FHLB of up to $270.9 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 $739.1 million at June 30, 2019. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.



Capital Resources



At June 30, 2019, and December 31, 2018, BCB Community Bank exceeded all of its regulatory capital requirements to which it was subject. The following table sets forth the regulatory capital ratios for BCB Community Bank as well as regulatory capital requirements for the periods presented.



The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. 



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 on January 1, 2015.  The capital conservation buffer was phased in starting at 0.625% in 2016 and increasing by 0.625% annually until it reached 2.5% in 2019. The Bank currently complies with the minimum capital requirements set forth in the final rule and operates under the 2.5% capital conservation buffer.



Notwithstanding the foregoing, pursuant to recent regulatory reform, the FDIC proposed a rule that establishes a community bank leverage ratio (tangible equity to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III. Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized. Until the FDIC’s proposed rule is finalized, the Basel III risk-based and leverage ratios remain in effect. 

 

42


 

Capital Resources (continued)









 

 

 

 

 

 

 

 

 

 

 

 



  

Actual

 

 

For Capital Adequacy Purposes

 

 

For Well Capitalized Under Prompt Corrective Action



Dollars in thousands

As of June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

 

 

 

 

 

 

 

 

 

 

 

Total capital (to risk-weighted assets)

$

275,363  12.67 

%

$

173,930  8.00 

%

$

217,413  10.00 

%

Tier 1 capital (to risk-weighted assets)

  

251,574  11.57 

 

 

130,448  6.00 

 

 

173,930  8.00 

 

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

  

251,574  11.57 

 

 

97,836  4.50 

 

 

141,318  6.50 

 

Tier 1 capital (to average assets)

 

251,574  9.28 

 

 

108,422  4.00 

 

 

135,528  5.00 

 



 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

Bank

 

 

 

 

 

 

 

 

 

 

 

 

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

$

255,631  12.01 

%

$

170,222  8.00 

%

$

212,777  10.00 

%

Tier 1 capital (to risk-weighted assets)

 

233,272  10.96 

 

 

127,666  6.00 

 

 

170,222  8.00 

 

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

 

233,272  10.96 

 

 

95,750  4.50 

 

 

138,305  6.50 

 

Tier 1 capital (to average assets)

 

233,272  8.72 

 

 

106,999  4.00 

 

 

133,749  5.00 

 



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 June 30, 2019. 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 June 30, 2019.



The following table sets forth the Company’s NPV as of that date (dollars in thousands).

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



  

 

 

 

 

 

 

 

 

 

NPV as a % of Assets

 

Change in Calculation

  

Net Portfolio Value

 

$ Change from PAR

 

% Change from PAR

 

NPV Ratio

 

Change



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

+300bp

  

$

164,674 

  

$

(75,128)

 

(31.33)

%

 

6.48 

%

 

(230)

bps

+200bp

  

 

192,493 

 

 

(47,309)

 

(19.73)

 

 

7.38 

 

 

(139)

bps

+100bp

  

 

221,688 

  

 

(18,113)

 

(7.55)

 

 

8.30 

 

 

(48)

bps

PAR

  

 

239,801 

  

 

 -

 

 -

 

 

8.78 

 

 

 -

bps

-100bp

 

 

256,955 

 

 

17,153 

 

7.15 

 

 

9.19 

 

 

42 

bps

bp – basis points



The table above indicates that as of June 30, 2019, in the event of a 100 basis point increase in interest rates, we would experience a decrease to 8.30% 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.

 

43


 

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.





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. As of June 30, 2019, 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 effect on our financial condition or results of operations.

    

 

44


 

ITEM 1.A. RISK FACTORS



The performance of the Bank's New York multifamily and mixed-use loans could be adversely impacted by recent legislation.



The performance of certain of our multifamily and mixed-use loans could be adversely impacted because of recent New York legislation involving rent control and rent stabilization, which are outside the control of the borrower or the Bank, and could impair the value of the security for the loan or the future cash flow of such properties. On June 14, 2019, the State of New York enacted legislation increasing restrictions on rent increases in a rent-regulated apartment building, including, among other provisions, (i) repealing the “vacancy bonus” and “longevity bonus,” which allowed a property owner to raise rents as much as 20% each time a rental unit became vacant, (ii) eliminating high rent vacancy deregulation and high-income deregulation, which allowed a rental unit to be removed from rent stabilization once it crossed a statutory high-rent threshold and became vacant, or the tenant’s income exceeded the statutory amount in the preceding two years, and (iii) eliminating an exception that allowed a property owner who offered preferential rents to tenants to raise the rent to the full legal rent upon renewal.  The new legislation still permits a property owner to charge up to the full legal rent once the tenant vacates. As a result of this new legislation as well as previously existing laws and regulations, it is possible that rental income might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses (e.g., utilities, taxes, etc.). In addition, if the cash flow from a collateral property is reduced (e.g., if leases are not obtained or renewed), the borrower’s ability to repay the loan and the value of the security for the loan may be impaired.



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



None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



Not applicable.



ITEM 4. MINE SAFTEY DISCLOSURES



Not applicable



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS





 

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

Certification of Principal Accounting Officer 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





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: August 7, 2019

 

By:

 

/s/ Thomas Coughlin

 

 

 

 

Thomas Coughlin

 

 

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date: August 7, 2019

 

By:

 

/s/ Thomas P. Keating

 

 

 

 

Thomas P. Keating

Senior Vice President and Chief Financial Officer

 

 

 

 

(Principal Accounting and Financial Officer)



 

45