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Note 5 - Loans

3 Months Ended

Mar. 31, 2015

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5. Loans

Loans are reported at their principal outstanding balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Interest on loans is recognized on the accrual basis. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than 90 days delinquent. Subsequent cash payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. Subsequent cash payments can also be applied first as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.

The Company maintains an allowance for loan losses at an amount, which, in management’s judgment, is adequate to absorb probable estimated losses inherent in the loan portfolio. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectability of loans. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available. The allowance is established through a provision for loan losses based on management’s evaluation of the risk inherent in the various components of the loan portfolio and other factors, including historical loan loss experience (which is updated quarterly), current economic conditions, delinquency and non-accrual trends, classified loan levels, risk in the portfolio and volumes and trends in loan types, recent trends in charge-offs, changes in underwriting standards, experience, ability and depth of the Company’s lenders, collection policies and experience, internal loan review function and other external factors. The Company segregated its loans into two portfolios based on year of origination. One portfolio was reviewed for loans originated after December 31, 2009 and a second portfolio for loans originated prior to January 1, 2010. Our decision to segregate the portfolio based upon origination dates was based on changes made in our underwriting standards during 2009. By the end of 2009, all loans were being underwritten based on revised and tightened underwriting standards. Loans originated prior to 2010 have a higher delinquency rate and loss history. Each of the years in the portfolio for loans originated prior to 2010 has a similar delinquency rate. The determination of the amount of the allowance for loan losses includes estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and local economic conditions and other factors. We review our loan portfolio by separate categories with similar risk and collateral characteristics. Impaired loans are segregated and reviewed separately. All non-accrual loans are classified as impaired loans. The Company’s Board of Directors reviews and approves management’s evaluation of the adequacy of the allowance for loan losses on a quarterly basis.

The allowance for loan losses is established through charges to earnings in the form of a provision for loan losses. Increases and decreases in the allowance other than charge-offs and recoveries are included in the provision for loan losses. When a loan or a portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.

The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due 90 days or more, are classified as non-accrual unless there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Appraisals are obtained and/or updated internal evaluations are prepared as soon as practical, and before the loan becomes 90 days delinquent. The loan balances of collateral dependent impaired loans are compared to the property’s updated fair value. The Company considers fair value of collateral dependent loans to be 85% of the appraised or internally estimated value of the property. The balance which exceeds fair value is generally charged-off. The 85% is based on the actual net proceeds the Bank has received from the sale of other real estate owned (“OREO”) as a percentage of OREO’s appraised value.

A loan is considered impaired when, based upon current information, the Company believes it is probable that it will be unable to collect all amounts due, both principal and interest, in accordance with the original terms of the loan. Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or at the loan’s observable market price or, as a practical expedient, the fair value of the collateral if the loan is collateral dependent. Interest income on impaired loans is recorded on the cash basis. The Company’s management considers all non-accrual loans impaired.

The Company reviews each impaired loan on an individual basis to determine if either a charge-off or a valuation allowance needs to be allocated to the loan. The Company does not charge-off or allocate a valuation allowance to loans for which management has concluded the current value of the underlying collateral will allow for recovery of the loan balance either through the sale of the loan or by foreclosure and sale of the property.

The Company evaluates the underlying collateral through a third party appraisal, or when a third party appraisal is not available, the Company will use an internal evaluation. The internal evaluations are prepared using an income approach or a sales approach. The income approach is used for income producing properties and uses current revenues less operating expenses to determine the net cash flow of the property. Once the net cash flow is determined, the value of the property is calculated using an appropriate capitalization rate for the property. The sales approach uses comparable sales prices in the market. When an internal evaluation is used, we place greater reliance on the income approach to value the collateral.

In preparing internal evaluations of property values, the Company seeks to obtain current data on the subject property from various sources, including: (1) the borrower; (2) copies of existing leases; (3) local real estate brokers and appraisers; (4) public records (such as for real estate taxes and water and sewer charges); (5) comparable sales and rental data in the market; (6) an inspection of the property and (7) interviews with tenants. These internal evaluations primarily focus on the income approach and comparable sales data to value the property.

As of March 31, 2015, we utilized recent third party appraisals of the collateral to measure impairment for $31.0 million, or 66.4%, of collateral dependent impaired loans, and used internal evaluations of the property’s value for $15.7 million, or 33.6%, of collateral dependent impaired loans.

The Company may restructure a loan to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. This restructure may include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as Troubled Debt Restructured (“TDR”).

These restructurings have not included a reduction of principal balance. The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. Restructured loans are classified as a TDR when the Bank grants a concession to a borrower who is experiencing financial difficulties. All loans classified as TDR are considered impaired, however TDR loans which have been current for six consecutive months at the time they are restructured as TDR remain on accrual status and are not included as part of non-performing loans. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-performing loans until they have made timely payments for six consecutive months. Loans that are restructured as TDR but are not performing in accordance with the restructured terms are placed on non-accrual status and reported as non-performing loans.

The allocation of a portion of the allowance for loan losses for a performing TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate, or for a non-performing TDR which is collateral dependent, the fair value of the collateral. At March 31, 2015, there were no commitments to lend additional funds to borrowers whose loans were modified to a TDR. The modification of loans to a TDR did not have a significant effect on our operating results, nor did it require a significant allocation of the allowance for loan losses.

The following table shows loans modified and classified as TDR during the period indicated:

	For the three months ended March 31, 2015
(Dollars in thousands)	Number		Balance		Modification description
Small Business Administration		1	$	41	Received a below market interest rate and the loan amortization was extended
Total		1	$	41

The Bank did not modify and classify any loans as TDR during the three months ended March 31, 2014.

The recorded investment of the loan modified and classified to a TDR, presented in the table above, was unchanged as there was no principal forgiven in this modification.

The following table shows our recorded investment for loans classified as TDR that are performing according to their restructured terms at the periods indicated:

	March 31, 2015				December 31, 2014
(Dollars in thousands)	Number of contracts		Recorded investment		Number of contracts		Recorded investment

Multi-family residential		9	$	2,669		10	$	3,034
Commercial real estate		3		2,364		3		2,373
One-to-four family - mixed-use property		7		2,369		7		2,381
One-to-four family - residential		1		351		1		354
Small business administration		1		41		-		-
Commercial business and other		4		2,208		4		2,249
Total performing troubled debt restructured		25	$	10,002		25	$	10,391

During the three months ended March 31, 2015 one TDR loan of $0.4 million was transferred to non-performing status, which resulted in this loan being included in non-performing loans.

The following table shows our recorded investment for loans classified as TDR that are not performing according to their restructured terms at the periods indicated:

	March 31, 2015				December 31, 2014
(Dollars in thousands)	Number of contracts		Recorded investment		Number of contracts		Recorded investment

Multi-family residential		1	$	359		-	$	-
Commercial real estate		-		-		1		2,252
One-to-four family - mixed use property		1		188		1		187
Total troubled debt restructurings that subsequently defaulted		2	$	547		2	$	2,439

The following table shows our non-performing loans at the periods indicated:

(In thousands)	March 31, 2015		December 31, 2014
Loans ninety days or more past due and still accruing:
Multi-family residential	$	-	$	676
Commercial real estate		753		820
One-to-four family - mixed-use property		195		405
One-to-four family - residential		13		14
Commercial Business and other		1,932		386
Total		2,893		2,301

Non-accrual mortgage loans:
Multi-family residential		6,902		6,878
Commercial real estate		3,021		5,689
One-to-four family - mixed-use property		7,224		6,936
One-to-four family - residential		11,212		11,244
Total		28,359		30,747

Non-accrual non-mortgage loans:
Small business administration		232		-
Commercial business and other		1,035		1,143
Total		1,267		1,143
Total non-accrual loans		29,626		31,890
Total non-accrual loans and loans ninety days or more past due and still accruing	$	32,519	$	34,191

The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the periods indicated:

	For the three months ended March 31,
	2015		2014
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	691	$	1,067
Less: Interest income included in the results of operations		148		155
Total foregone interest	$	543	$	912

The following table shows an age analysis of our recorded investment in loans at March 31, 2015:

(in thousands)	30 - 59 Days ast Due		60 - 89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans
Multi-family residential	$	8,595	$	-	$	6,903	$	15,498	$	1,997,751	$	2,013,249
Commercial real estate		3,202		-		3,774		6,976		680,847		687,823
One-to-four family - mixed-use property		10,522		-		7,418		17,940		555,987		573,927
One-to-four family - residential		1,694		175		11,022		12,891		177,475		190,366
Co-operative apartments		-		-		-		-		9,413		9,413
Construction loans		-		-		-		-		2,828		2,828
Small Business Administration		56		93		232		381		7,624		8,005
Taxi medallion		-		-		-		-		21,346		21,346
Commercial business and other		4		-		2,688		2,692		475,131		477,823
Total	$	24,073	$	268	$	32,037	$	56,378	$	3,928,402	$	3,984,780

The following table shows an age analysis of our recorded investment in loans at December 31, 2014:

(in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans
Multi-family residential	$	7,721	$	1,729	$	7,554	$	17,004	$	1,906,456	$	1,923,460
Commercial real estate		2,171		1,344		6,510		10,025		611,544		621,569
One-to-four family - mixed-use property		10,408		1,154		7,341		18,903		554,876		573,779
One-to-four family - residential		1,751		2,244		11,051		15,046		172,526		187,572
Co-operative apartments		-		-		-		-		9,835		9,835
Construction loans		3,000		-		-		3,000		2,286		5,286
Small Business Administration		90		-		-		90		7,044		7,134
Taxi medallion		-		-		-		-		22,519		22,519
Commercial business and other		6		1,585		740		2,331		445,169		447,500
Total	$	25,147	$	8,056	$	33,196	$	66,399	$	3,732,255	$	3,798,654

The following table shows the activity in the allowance for loan losses for the three months ended March 31, 2015:

(in thousands)	Multi-family residential			Commercial real estate			One-to-four family - mixed-use property			One-to-four family- residential			Co-operative apartments		Construction loans			Small Business Administration			Taxi Medallion		Commercial business and other			Total

Allowance for credit losses:
Beginning balance	$	8,827		$	4,202		$	5,840		$	1,690		$	-	$	42		$	279		$	11	$	4,205		$	25,096
Charge-offs		(97	)		(18	)		(78	)		(153	)		-		-			-			-		(51	)		(397	)
Recoveries		23			72			3			-			-		-			20			-		8			126
Provision (Benefit)		(124	)		(354	)		(336	)		(72	)		-		(19	)		(33	)		-		204			(734	)
Ending balance	$	8,629		$	3,902		$	5,429		$	1,465		$	-	$	23		$	266		$	11	$	4,366		$	24,091
Ending balance: individually evaluated for impairment	$	267		$	19		$	566		$	54		$	-	$	-		$	-		$	-	$	139		$	1,045
Ending balance: collectively evaluated for impairment	$	8,362		$	3,883		$	4,863		$	1,411		$	-	$	23		$	266		$	11	$	4,227		$	23,046

Financing Receivables:
Ending Balance	$	2,013,249		$	687,823		$	573,927		$	190,366		$	9,413	$	2,828		$	8,005		$	21,346	$	477,823		$	3,984,780
Ending balance: individually evaluated for impairment	$	13,743		$	6,575		$	14,548		$	13,954		$	-	$	-		$	359		$	-	$	8,848		$	58,027
Ending balance: collectively evaluated for impairment	$	1,999,506		$	681,248		$	559,379		$	176,412		$	9,413	$	2,828		$	7,646		$	21,346	$	468,975		$	3,926,753

The following table shows the activity in the allowance for loan losses for the three months ended March 31, 2014:

(in thousands)	Multi-family residential			Commercial real estate			One-to-four family - mixed-use property			One-to-four family- residential			Co-operative apartments			Construction loans			Small Business Administration			Taxi Medallion		Commercial business and other			Total

Allowance for credit losses:
Beginning balance	$	12,084		$	4,959		$	6,328		$	2,079		$	104		$	444		$	458		$	-	$	5,320		$	31,776
Charge-offs		(605	)		(47	)		(83	)		(42	)		-			-			-			-		(124	)		(901	)
Recoveries		7			382			40			68			7			-			10			-		-			514
Provision (Benefit)		(383	)		85			857			(161	)		(111	)		(404	)		(77	)		14		(939	)		(1,119	)
Ending balance	$	11,103		$	5,379		$	7,142		$	1,944		$	-		$	40		$	391		$	14	$	4,257		$	30,270
Ending balance: individually evaluated for impairment	$	304		$	210		$	617		$	57		$	-		$	9		$	-		$	-	$	218		$	1,415
Ending balance: collectively evaluated for impairment	$	10,799		$	5,169		$	6,525		$	1,887		$	-		$	31		$	391		$	14	$	4,039		$	28,855
Financing Receivables:
Ending Balance	$	1,722,764		$	509,728		$	587,482		$	194,611		$	9,974		$	4,859		$	7,628		$	24,127	$	427,406		$	3,488,579
Ending balance: individually evaluated for impairment	$	20,898		$	19,558		$	16,060		$	13,941		$	-		$	1,316		$	-		$	-	$	10,155		$	81,928
Ending balance: collectively evaluated for impairment	$	1,701,866		$	490,170		$	571,422		$	180,670		$	9,974		$	3,543		$	7,628		$	24,127	$	417,251		$	3,406,651

The following table shows our recorded investment, unpaid principal balance, allocated allowance for loan losses, average recorded investment and interest income recognized for loans that were considered impaired at or for the three month period ended March 31, 2015:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	11,329	$	12,423	$	-	$	10,905	$	56
Commercial real estate		6,033		6,173		-		6,567		39
One-to-four family mixed-use property		11,471		12,668		-		11,749		57
One-to-four family residential		13,603		16,523		-		13,210		25
Co-operative apartments		-		-		-		-		-
Construction		-		-		-		-		-
Non-mortgage loans:
Small Business Administration		318		318		-		159		1
Taxi Medallion		-		-		-		-		-
Commercial Business and other		6,242		6,612		-		4,511		69
Total loans with no related allowance recorded		48,996		54,717		-		47,101		247
With an allowance recorded:
Mortgage loans:
Multi-family residential		2,414		2,414		267		2,597		32
Commercial real estate		542		542		19		1,458		7
One-to-four family mixed-use property		3,077		3,077		566		3,085		42
One-to-four family residential		351		351		54		353		4
Co-operative apartments		-		-		-		-		-
Construction		-		-		-		-		-
Non-mortgage loans:
Small Business Administration		41		41		-		21		1
Taxi Medallion		-		-		-		-		-
Commercial Business and other		2,606		2,606		139		2,660		35
Total loans with an allowance recorded		9,031		9,031		1,045		10,174		121
Total Impaired Loans:
Total mortgage loans	$	48,820	$	54,171	$	906	$	49,924	$	262
Total non-mortgage loans	$	9,207	$	9,577	$	139	$	7,351	$	106

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	10,481	$	11,551	$	-	$	14,168	$	194
Commercial real estate		7,100		7,221		-		11,329		51
One-to-four family mixed-use property		12,027		13,381		-		12,852		321
One-to-four family residential		12,816		15,709		-		13,015		103
Co-operative apartments		-		-		-		-		-
Construction		-		-		-		285		-
Non-mortgage loans:
Small Business Administration		-		-		-		-		-
Taxi Medallion		-		-		-		-		-
Commercial Business and other		2,779		3,149		-		3,428		137
Total loans with no related allowance recorded		45,203		51,011		-		55,077		806
With an allowance recorded:
Mortgage loans:
Multi-family residential		2,779		2,779		286		2,936		149
Commercial real estate		2,373		2,373		21		3,242		167
One-to-four family mixed-use property		3,093		3,093		579		3,249		170
One-to-four family residential		354		354		54		358		14
Co-operative apartments		-		-		-		-		-
Construction		-		-		-		187		-
Non-mortgage loans:
Small Business Administration		-		-		-		-		-
Taxi Medallion		-		-		-		-		-
Commercial Business and other		2,713		2,713		154		3,149		115
Total loans with an allowance recorded		11,312		11,312		1,094		13,121		615
Total Impaired Loans:
Total mortgage loans	$	51,023	$	56,461	$	940	$	61,621	$	1,169
Total non-mortgage loans	$	5,492	$	5,862	$	154	$	6,577	$	252

In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does not fall within one of the previous mentioned categories then the loan would be considered “Pass.” These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that jeopardizes the orderly liquidation of the debt. We designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for Loan Losses. Loans that are non-accrual are designated as Substandard or Doubtful. We designate a loan as Special Mention if the asset does not warrant classification within one of the other classifications, but does contain a potential weakness that deserves closer attention.

The following table sets forth the recorded investment in loans designated as Criticized or Classified at March 31, 2015:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	3,492	$	11,076	$	-	$	-	$	14,568
Commercial real estate		3,426		4,211		-		-		7,637
One-to-four family - mixed-use property		4,455		12,179		-		-		16,634
One-to-four family - residential		1,560		12,984		-		-		14,544
Co-operative apartments		-		618		-		-		618
Construction loans		-		-		-		-		-
Small Business Administration		294		222		-		-		516
Commercial business and other		1,293		7,164		-		-		8,457
Total loans	$	14,520	$	48,454	$	-	$	-	$	62,974

The following table sets forth the recorded investment in loans designated as Criticized or Classified at December 31, 2014:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	6,494	$	10,226	$	-	$	-	$	16,720
Commercial real estate		5,453		7,100		-		-		12,553
One-to-four family - mixed-use property		5,254		12,499		-		-		17,753
One-to-four family - residential		2,352		13,056		-		-		15,408
Co-operative apartments		623		-		-		-		623
Construction loans		-		-		-		-		-
Small Business Administration		479		-		-		-		479
Commercial business and other		2,841		3,779		-		-		6,620
Total loans	$	23,496	$	46,660	$	-	$	-	$	70,156

The following table shows the changes in the allowance for loan losses for the periods indicated:

	For the three months ended March 31
(In thousands)	2015			2014
Balance, beginning of period	$	25,096		$	31,776
Benefit for loan losses		(734	)		(1,119	)
Charge-off's		(397	)		(901	)
Recoveries		126			514
Balance, end of period	$	24,091		$	30,270

The following table shows net loan charge-offs for the periods indicated:

	Three Months Ended
(In thousands)	March 31, 2015			March 31, 2014
Multi-family residential	$	74		$	598
Commercial real estate		(54	)		(335	)
One-to-four family – mixed-use property		75			43
One-to-four family – residential		153			(26	)
Co-operative apartments		-			(7	)
Construction		-			-
Small Business Administration		(20	)		(10	)
Commercial business and other		43			124
Total net loan charge-offs	$	271		$	387

Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) amounted to $62.7 million and $174.5 million, respectively, at March 31, 2015.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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