Note 5 - Loans

9 Months Ended

Sep. 30, 2011

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

5.Loans

Loans are reported at their outstanding principal 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 unlikely to occur. 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. In assessing the adequacy of the Company's allowance for loan losses, management considers various factors such as, the current fair value of collateral for collateral dependent loans, the Company's historical loss experience, recent trends in losses, collection policies and collection experience, trends in the volume of non-performing and classified loans, changes in the composition and volume of the gross loan portfolio and local and national economic conditions. The Company’s Board of Directors (the “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 indicated the inability to bring the loan current, or due to other circumstances which, in our opinion, indicate the borrower will be unable to bring the loan current within a reasonable time, or if the collateral value is deemed to have been impaired. 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 and/or updated internal evaluations are obtained as soon as practical and before the loan become 90 days delinquent. The loan balances of collateral dependant impaired loans are compared to the loan’s updated fair value. The balance which exceeds fair value is charged-off.  Management reviews the allowance for loan losses on a quarterly basis and records as a provision the amount deemed appropriate, after considering current year charge-offs, charge-off trends, new loan production, current balance by particular loan categories and delinquent loans by particular loan categories.

A loan is considered impaired when, based upon the most current information, the Company believes it is probable that it will be unable to collect all amounts due, both principal and interest, according to the contractual 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 the fair value of the collateral if the loan is collateral dependent. Interest income on impaired loans is recorded on a cash basis. The Company’s management considers all non-accrual loans impaired.

The Company reviews each impaired loan to determine if a charge-off is to be recorded or if a valuation allowance is to be allocated to the loan. The Company does not allocate a valuation allowance to loans for which we have 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 uses multiple valuation approaches in evaluating the underlying collateral. These include obtaining a third party appraisal, an income approach and a sales approach. When obtained, third party appraisals are given the most weight. 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 we do not obtain third party appraisals, 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 September 30, 2011, the Company utilized recent third party appraisals of the collateral to measure impairment for $74.4 million, or 53.8%, of collateral dependent impaired loans and used internal evaluations of the property’s value for $64.0 million, or 46.2%, of collateral dependent impaired loans.

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

	For the three months ended				For the nine months ended
	September 30,		September 30,		September 30,		September 30,
(In thousands)	2011		2010		2011		2010
Multi-family residential	$	2,188	$	1,808	$	3,984	$	4,042
Commercial real estate		1,549		806		4,071		1,138
One-to-four family – mixed-use property		808		758		1,288		1,583
One-to-four family – residential		-		21		1,928		115
Construction		-		-		703		862
Small Business Administration		137		93		608		345
Commercial business and other		73		22		514		(163	)
Total net loan charge-offs	$	4,755	$	3,508	$	13,096	$	7,922

The Company may restructure a loan to enable a borrower to continue making payments when it is deemed to be in our 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. The Company classifies these loans as troubled debt restructured (“TDR”).

The Company reviews its delinquencies on a loan by loan basis and continually explores ways to help borrowers meet their obligations and return them back to current status. Management takes a proactive approach to managing delinquent loans, including conducting site examinations and encouraging borrowers to meet with a Bank representative. We have been developing short-term payment plans that enable certain borrowers to bring their loans current. In addition, we have restructured certain problem loans by either: reducing the interest rate until the next reset date, extending the amortization period thereby lowering the monthly payments, deferring a portion of the interest payment, or changing the loan to interest only payments for a limited time period. At times, certain problem loans have been restructured by combining more than one of these options. These restructurings have not included a reduction of principal balance. We believe 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 Savings Bank grants a concession to a borrower who is experiencing financial difficulties. Loans which have been current for six consecutive months at the time they are restructured as TDR remain on accrual status. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status 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 excluded from the TDR table below, as they are placed on non-accrual status and reported as non-performing loans.

No loans were modified and classified as a TDR during the three months ended September 30, 2011.During the three months ended September 30, 2010, two multi-family loans totaling $7.2 million were modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower, with one also having the loan’s amortization term extended, and one also having deferral of the payment of a portion of the interest; and  two commercial mortgage loans totaling $2.5 million were modified and classified as TDR as each of these borrowers was given an interest rate that was considered below market for that borrower, with one loan also changed to payments of interest only.

During the nine months ended September 30, 2011, six multi-family loans totaling $1.8 million were modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower and each had the loan’s amortization term extended; two constructions loans totaling $24.2 million were modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower; one commercial business loan for $2.0 million was modified and classified as a TDR as the borrower was given an interest rate that was considered below market for that borrower; and three one-to-four family – mixed-use property loans totaling $0.9 million was modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower with two of the loans also having the loan’s amortization term extended. During the nine months ended September 30, 2010, three multi-family loans totaling $7.5 million were modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower, with one also having the loan’s amortization term extended, and one also having deferral of the payment of a portion of the interest; three commercial mortgage loans totaling $5.6 million were modified and classified as a TDR as each of these borrowers was given an interest rate that was considered below market for that borrower, with one loan also changed to payments of interest only; and one one-to-four family – mixed-use property loan for $0.5 million was modified and classified as a TDR as the borrower was given an interest rate that was considered below market for that borrower. For each of the loans that were modified and classified as a TDR the borrower was experiencing financial difficulties. The recorded investment of each of the loans modified and classified to a TDR was unchanged as there was no principal forgiven in any of these modifications.

The allocation of a portion of the allowance for loan losses for a TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or if the loan is collateral dependent, the fair value of the collateral less costs to sell. At September 30, 2011, 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 to these loans.

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

	September 30, 2011				December 31, 2010
	Number		Recorded		Number		Recorded
(Dollars in thousands)	of contracts		investment		of contracts		investment
Multi-family residential		11	$	9,893		5	$	7,946
Commercial real estate		2		2,480		3		5,815
One-to-four family - mixed-use property		3		797		1		206
Construction		1		8,508		-		-
Commercial business and other		1		2,000		-		-
Total performing troubled debt restructured		18	$	23,678		9	$	13,967

During the three months ended September 30, 2011, one construction loan for $11.5 million, which was modified and classified as a TDR within the previous 12 months, was reclassified to non-accrual status as it was no longer performing in accordance with its modified terms. No loans which were previously modified and classified as a TDR were reclassified to non-accrual status during the three months ended September 30, 2010. During the nine months ended September 30, 2011, one construction loan for $11.5 million, one commercial loan for $3.3 million and two one-to-four family – mixed-use property loans totaling $0.7 million , which were modified and classified as a TDR within the previous 12 months, were reclassified to non-accrual status as they are no longer performing in accordance with their modified terms. During the nine months ended September 30, 2010, one commercial loan for $1.4 million and two one-to-four family – mixed-use property loans totaling $0.9 million , which were modified and classified as a TDR within the previous 12 months, were reclassified to non-accrual status as they are no longer performing in accordance with their modified terms.

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

	September 30, 2011				December 31, 2010
	Number		Recorded		Number		Recorded
(Dollars in thousands)	of contracts		investment		of contracts		investment
Multi-family residential		-	$	-		-	$	-
Commercial real estate		2		4,427		1		1,496
One-to-four family - mixed-use property		4		1,626		3		1,287
One-to-four family - residential		-		-		1		491
Construction		1		11,466		-		-
Total troubled debt restructurings  that subsequently defaulted		7	$	17,519		5	$	3,274

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

	September 30,		December 31,
(In thousands)	2011		2010
Loans 90 days or more past due and still accruing:
Multi-family residential	$	-	$	103
Commercial real estate		423		3,328
Construction		5,245		-
Commercial business and other		-		6
Total		5,668		3,437
Non-accrual loans:
Multi-family residential		27,846		35,633
Commercial real estate		21,062		22,806
One-to-four family - mixed-use property		29,890		30,478
One-to-four family - residential		10,673		10,695
Co-operative apartments		152		-
Construction		14,331		4,465
Small business administration		613		1,159
Commercial business and other		6,122		3,419
Total		110,689		108,655
Total non-performing loans	$	116,357	$	112,092

The interest foregone on non-accrual loans and loans classified as TDR totaled $2.2 million and $1.9 million for the three months ended September 30, 2011 and 2010, respectively.  The interest foregone on non-accrual loans and loans classified as TDR totaled $6.3 million and $5.5 million for the nine months ended September 30, 2011 and 2010, respectively.

The following table shows an age analysis of our recorded investment in loans at September 30, 2011:

					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(in thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	15,200	$	4,228	$	26,671	$	46,099	$	1,287,708	$	1,333,807
Commercial real estate		10,911		5,215		21,062		37,188		567,593		604,781
One-to-four family - mixed-use property		22,030		1,834		29,890		53,754		652,182		705,936
One-to-four family - residential		5,114		1,477		10,672		17,263		205,289		222,552
Co-operative apartments		204		-		152		356		5,206		5,562
Construction loans		13,960		5,353		2,865		22,178		29,344		51,522
Small Business Administration		112		-		566		678		13,782		14,460
Taxi medallion		-		-		-		-		68,570		68,570
Commercial business and other		1,929		2,150		6,123		10,202		196,357		206,559
Total	$	69,460	$	20,257	$	98,001	$	187,718	$	3,026,031	$	3,213,749

The following table shows an age analysis of our recorded investment in loans at December 31, 2010:

					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(in thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	30,799	$	7,014	$	35,736	$	73,549	$	1,178,627	$	1,252,176
Commercial real estate		17,167		2,181		26,134		45,482		617,312		662,794
One-to-four family - mixed-use property		19,596		6,376		30,478		56,450		672,360		728,810
One-to-four family - residential		4,826		1,046		10,695		16,567		224,809		241,376
Co-operative apartments		133		-		-		133		6,082		6,215
Construction loans		2,900		5,485		4,465		12,850		62,669		75,519
Small Business Administration		418		991		1,159		2,568		14,943		17,511
Taxi medallion		-		-		-		-		88,264		88,264
Commercial business and other		4,534		3		3,425		7,962		179,199		187,161
Total	$	80,373	$	23,096	$	112,092	$	215,561	$	3,044,265	$	3,259,826

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

	For the nine months
	ended September 30
(In thousands)	2011			2010
Balance, beginning of period	$	27,699		$	20,324
Provision for loan losses		15,000			15,000
Charge-off's		(13,534	)		(8,851	)
Recoveries		438			929
Balance, end of period	$	29,603		$	27,402

The following table shows the activity in the allowance for loan losses for the nine months ended September 30, 2011:

(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	$	9,007	$	4,905	$	5,997		$	938	$	17	$	589	$	1,303	$	639		$	4,304	$	27,699
Charge-off's		4,093		4,194		1,401			1,991		-		703		628		-			524		13,534
Recoveries		109		123		113			63		-		-		20		-			10		438
Provision		4,835		4,596		(224	)		2,676		7		1,101		491		(588	)		2,106		15,000
Ending balance	$	9,858	$	5,430	$	4,485		$	1,686	$	24	$	987	$	1,186	$	51		$	5,896	$	29,603
Ending balance: individually evaluated for impairment	$	83	$	139	$	32		$	-	$	-	$	321	$	255	$	-		$	2,927	$	3,757
Ending balance: collectively evaluated for impairment	$	9,775	$	5,291	$	4,453		$	1,686	$	24	$	666	$	931	$	51		$	2,969	$	25,846
Financing Recevables:
Ending balance	$	1,333,807	$	604,781	$	705,936		$	222,552	$	5,562	$	51,522	$	14,460	$	68,570		$	206,559	$	3,213,749
Ending balance: individually evaluated for impairment	$	27,817	$	13,366	$	16,123		$	2,684	$	-	$	19,974	$	510	$	-		$	7,854	$	88,328
Ending balance: collectively evaluated for impairment	$	1,305,990	$	591,415	$	689,813		$	219,868	$	5,562	$	31,548	$	13,950	$	68,570		$	198,705	$	3,125,421

The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses, average recorded investment and interest income recognized for loans that were considered impaired at or for the nine month period ended September 30, 2011:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	(Dollars in thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	34,537	$	38,716	$	-	$	36,707	$	296
Commercial real estate		43,466		49,448		-		37,099		938
One-to-four family mixed-use property		34,016		36,317		-		32,306		192
One-to-four family residential		11,589		13,610		-		10,656		60
Co-operative apartments		152		152		-		95		-
Construction		12,079		12,080		-		11,223		377
Non-mortgage loans:
Small Business Administration		-		-		-		-		-
Taxi Medallion		9,231		9,540		-		14,681		219
Commercial Business and other		-		-		-		-		-
Total loans with no related allowance recorded		145,070		159,863		-		142,767		2,082
With an allowance recorded:
Mortgage loans:
Multi-family residential		9,894		9,894		83		12,011		299
Commercial real estate		2,480		2,480		139		3,395		77
One-to-four family mixed-use property		797		797		32		1,589		34
One-to-four family residential		-		-		-		191		-
Co-operative apartments		-		-		-		-		-
Construction		19,974		19,974		321		22,540		485
Non-mortgage loans:
Small Business Administration		510		510		255		971		3
Taxi Medallion		-		-		-		-		-
Commercial Business and other		7,814		8,478		2,927		7,999		160
Total loans with an allowance recorded		41,469		42,133		3,757		48,696		1,058
Total Impaired Loans:
Total mortgage loans	$	168,984	$	183,468	$	575	$	167,812	$	2,758
Total non-mortgage loans	$	17,555	$	18,528	$	3,182	$	23,651	$	382

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.” 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.  Loans that are designated as Loss are charged to the Allowance for Loan Losses. Loans that are non-accrual are designated as Substandard, Doubtful or Loss. 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 September 30, 2011:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	14,894	$	43,362	$	-	$	-	$	58,256
Commercial real estate		13,381		45,946		-		-		59,327
One-to-four family - mixed-use property		17,842		34,016		-		-		51,858
One-to-four family - residential		3,410		11,590		-		-		15,000
Co-operative apartments		-		152		-		-		152
Construction loans		2,570		32,053		-		-		34,623
Small Business Administration		768		221		289		-		1,278
Commercial business and other		14,556		15,810		1,237		-		31,603
Total loans	$	67,421	$	183,150	$	1,526	$	-	$	252,097

The following table sets forth the recorded investment in loans designated as Criticized or Classified at December 31, 2010:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	20,277	$	51,626	$	-	$	-	$	71,903
Commercial real estate		13,228		32,120		-		-		45,348
One-to-four family - mixed-use property		15,546		33,539		-		-		49,085
One-to-four family - residential		2,849		10,874		-		-		13,723
Co-operative apartments		-		-		-		-		-
Construction loans		5,945		30,589		-		-		36,534
Small Business Administration		558		1,432		-		-		1,990
Commercial business and other		14,302		13,628		1,238		-		29,168
Total loans	$	72,705	$	173,808	$	1,238	$	-	$	247,751