Note 5 - Loans

3 Months Ended

Mar. 31, 2012

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 for loan losses 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. 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 generally 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 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 performed 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, 2012, the Company utilized recent third party appraisals of the collateral to measure impairment for $143.1 million, or 75.5%, of collateral dependent impaired loans and used internal evaluations of the property’s value for $46.4 million, or 24.5%, of collateral dependent impaired loans.

The Company may restructure a loan to enable a borrower 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”) when the Savings Bank grants a concession to a borrower who is experiencing financial difficulties.

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. 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, 2012, 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.

During the three months ended March 31, 2012, two one-to-four family – mixed use property loans totaling $0.5 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; and one commercial mortgage loan totaling $1.4 million was modified and classified as TDR, as the borrower had two business line of credit loans rolled into one five year fixed rate commercial mortgage and was given an interest rate that was considered below market for that borrower with the loan’s amortization term extended. For each of the loans that were modified and classified as TDR, the borrower was experiencing financial difficulties. The recorded investment of each of the loans modified and classified to TDR was unchanged as there was no principal forgiven in any of these modifications.

During the three months ended March 31, 2011, six multi-family loans totaling $1.8 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 and each had the loan’s amortization term extended; two constructions loans totaling $24.2 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; one commercial business loan for $2.0 million was modified and classified as TDR, as the borrower was given an interest rate that was considered below market for that borrower.

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

	March 31, 2012				December 31, 2011
(Dollars in thousands)	Number of contracts		Recorded investment		Number  of contracts		Recorded investment
Multi-family residential		8	$	2,356		11	$	9,412
Commercial real estate		2		2,456		2		2,499
One-to-four family - mixed-use property		4		1,084		3		795
Construction		1		5,312		1		5,888
Commercial business and other		1		2,000		1		2,000
Total performing troubled debt restructured		16	$	13,208		18	$	20,594

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

	March 31, 2012				December 31, 2011
(Dollars in thousands)	Number of contracts		Recorded investment		Number  of contracts		Recorded investment
Multi-family residential		3	$	6,856		-	$	-
Commercial real estate		3		5,313		2		4,340
One-to-four family - mixed-use property		4		1,369		3		1,193
One-to-four family - residential		-		-		-		-
Construction		1		11,496		1		11,673
Total troubled debt restructurings that subsequently defaulted		11	$	25,034		6	$	17,206

During the three months ended March 31, 2012, three multi-family TDR totaling $6.9 million were transferred to non-accrual.

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

(Dollars in thousands)	March 31, 2012		December 31, 2011
Loans ninety days or more past due and still accruing:
Multi-family residential	$	-	$	6,287
Commercial real estate		-		92
Construction		108		-
Total		108		6,379
Non-accrual mortgage loans:
Multi-family residential		25,986		19,946
Commercial real estate		24,876		19,895
One-to-four family - mixed-use property		23,475		28,429
One-to-four family - residential		12,337		12,766
Co-operative apartments		110		152
Construction		11,944		14,721
Total		98,728		95,909
Non-accrual non-mortgage loans:
Small Business Administration		592		493
Commercial Business and other		20,478		14,660
Total		21,070		15,153
Total non-accrual loans		119,798		111,062
Total non-accrual loans and loans ninety days or more past due and still accruing	$	119,906	$	117,441

The interest foregone on non-accrual loans and loans classified as TDR totaled $2.5 million and $2.7 million for the three months ended March 31, 2012 and March 31, 2011, respectively.

The following table shows an age analysis of our recorded investment in loans at March 31, 2012:

(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	$	26,466	$	10,474	$	19,165	$	56,105	$	1,362,149	$	1,418,254
Commercial real estate		10,241		2,463		23,862		36,566		521,122		557,688
One-to-four family - mixed-use property		15,336		5,539		22,997		43,872		637,517		681,389
One-to-four family - residential		4,476		1,488		12,338		18,302		195,861		214,163
Co-operative apartments		-		-		110		110		5,299		5,409
Construction loans		-		-		12,052		12,052		30,603		42,655
Small Business Administration		15		227		453		695		12,970		13,665
Taxi medallion		-		-		-		-		49,391		49,391
Commercial business and other		2,771		85		19,423		22,279		209,395		231,674
Total	$	59,305	$	20,276	$	110,400	$	189,981	$	3,024,307	$	3,214,288

The following table shows an age analysis of our recorded investment in loans at December 31, 2011:

(in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans
					(in thousands)
Multi-family residential	$	20,083	$	6,341	$	26,233	$	52,657	$	1,338,564	$	1,391,221
Commercial real estate		10,804		1,797		19,987		32,588		548,195		580,783
One-to-four family - mixed-use property		20,480		3,027		27,950		51,457		642,475		693,932
One-to-four family - residential		4,699		1,769		12,766		19,234		201,197		220,431
Co-operative apartments		-		-		152		152		5,353		5,505
Construction loans		5,065		-		14,721		19,786		27,354		47,140
Small Business Administration		16		41		452		509		13,530		14,039
Taxi medallion		71		-		-		71		54,257		54,328
Commercial business and other		5,476		966		10,241		16,683		189,931		206,614
Total	$	66,694	$	13,941	$	112,502	$	193,137	$	3,020,856	$	3,213,993

The following table shows the activity in the allowance for loan losses for the three months ended March 31, 2012:

(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	$	11,267	$	5,210	$	5,314	$	1,649	$	80	$	668	$	987		$	41		$	5,128		$	30,344
Charge-off's		1,061		1,780		1,468		826		42		234		113			-			495			6,019
Recoveries		57		70		56		1		-		-		9			-			100			293
Provision		1,798		2,490		1,685		1,026		54		119		(30	)		(4	)		(1,138	)		6,000
Ending balance	$	12,061	$	5,990	$	5,587	$	1,850	$	92	$	553	$	853		$	37		$	3,595		$	30,618
Ending balance: individually evaluated for impairment	$	110	$	185	$	542	$	-	$	58	$	71	$	-		$	-		$	59		$	1,025
Ending balance: collectively evaluated for impairment	$	11,951	$	5,805	$	5,045	$	1,850	$	34	$	482	$	853		$	37		$	3,536		$	29,593
Financing Receivables:
Ending balance	$	1,418,254	$	557,688	$	681,389	$	214,163	$	5,409	$	42,655	$	13,665		$	49,391		$	231,674		$	3,214,288
Ending balance: individually evaluated for impairment	$	39,308	$	41,754	$	36,386	$	14,877	$	313	$	25,311	$	678		$	-		$	30,904		$	189,531
Ending balance: collectively evaluated for impairment	$	1,378,946	$	515,934	$	645,003	$	199,286	$	5,096	$	17,344	$	12,987		$	49,391		$	200,770		$	3,024,757

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 three month period ended March 31, 2012:

	Recorded Investment		Unpaid Principal Balance			Related Allowance		Average Recorded Investment		Interest Income Recognized
					(Dollars in thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	34,613	$	38,251		$	-	$	33,830	$	109
Commercial real estate		60,327		65,427			-		49,538		344
One-to-four family mixed-use property		30,616		34,677			-		32,224		96
One-to-four family residential		14,877		17,935			-		14,610		33
Co-operative apartments		111		153			-		132		-
Construction		19,999		20,226			-		15,497		156
Non-mortgage loans:
Small Business Administration		678		1,030			-		477		1
Taxi Medallion		-		-			-		-		-
Commercial Business and other		5,670		6,402			-		8,415		3
Total loans with no related allowance recorded		166,891		184,101			-		154,723		742
With an allowance recorded:
Mortgage loans:
Multi-family residential		4,695		4,759			110		8,871		72
Commercial real estate		4,661		4,661			185		3,840		40
One-to-four family mixed-use property		5,770		5,851			542		5,941		95
One-to-four family residential		-		-			-		-		-
Co-operative apartments		202		202			58		203		3
Construction		5,312		5,312			71		11,437		50
Non-mortgage loans:
Small Business Administration		-		-			-		98		-
Taxi Medallion		-		-			-		-		-
Commercial Business and other		2,000		2,000			59		4,810		20
Total loans with an allowance recorded		22,640		22,785			1,025		35,200		280
Total Impaired Loans:
Total mortgage loans	$	181,183	$	197,454		$	966	$	176,123	$	998
Total non-mortgage loans	$	8,348	$	9,432		$	59	$	13,800	$	24

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 year ended December 31, 2010:

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	18,403	$	19,200	$	-	$	16,930	$	838
Commercial real estate		12,474		12,547		-		10,008		443
One-to-four family mixed-use property		7,107		7,455		-		6,976		104
One-to-four family residential		8,394		8,394		-		6,556		97
Co-operative apartments		-		-		-		20		-
Construction		30,589		32,340		-		22,258		1,116
Non-mortgage loans:
Small Business Administration		-		-		-		-		-
Taxi Medallion		-		-		-		-		-
Commercial Business and other		8,745		8,825		-		4,271		558
Total loans with no related allowance recorded		85,712		88,761		-		67,019		3,156
With an allowance recorded:
Mortgage loans:
Multi-family residential		33,223		37,649		5,290		27,507		396
Commercial real estate		19,646		22,443		3,100		14,799		401
One-to-four family mixed-use property		26,432		28,622		3,960		23,551		290
One-to-four family residential		2,480		2,681		290		2,041		-
Co-operative apartments		-		-		-		-		-
Construction		-		-		-		1,750		-
Non-mortgage loans:
Small Business Administration		1,432		1,432		768		1,233		82
Taxi Medallion		-		-		-		-		-
Commercial Business and other		6,121		6,842		2,449		4,739		193
Total loans with an allowance recorded		89,334		99,669		15,857		75,620		1,362
Total Impaired Loans:
Total mortgage loans	$	158,748	$	171,331	$	12,640	$	132,396	$	3,685
Total non-mortgage loans	$	16,298	$	17,099	$	3,217	$	10,243	$	833

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 March 31, 2012:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	14,592	$	36,369	$	-	$	-	$	50,961
Commercial real estate		11,999		39,473		-		-		51,472
One-to-four family - mixed-use property		15,727		30,195		-		-		45,922
One-to-four family - residential		3,494		14,877		-		-		18,371
Co-operative apartments		202		111		-		-		313
Construction loans		2,462		25,311		-		-		27,773
Small Business Administration		758		294		250		-		1,302
Commercial business and other		5,317		29,735		1,169		-		36,221
Total loans	$	54,551	$	176,365	$	1,419	$	-	$	232,335

The following table sets forth the recorded investment in loans designated as Criticized or Classified at December 31, 2011:

(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	17,135	$	41,393	$	-	$	-	$	58,528
Commercial real estate		12,264		41,247		-		-		53,511
One-to-four family - mixed-use property		17,393		33,831		-		-		51,224
One-to-four family - residential		3,127		14,343		-		-		17,470
Co-operative apartments		203		153		-		-		356
Construction loans		2,570		28,555		-		-		31,125
Small Business Administration		666		256		214		-		1,136
Commercial business and other		13,585		17,613		1,169		-		32,367
Total loans	$	66,943	$	177,391	$	1,383	$	-	$	245,717

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)	2012			2011
Balance, beginning of period	$	30,344		$	27,699
Provision for loan losses		6,000			5,000
Charge-off's		(6,019	)		(5,320	)
Recoveries		293			51
Balance, end of period	$	30,618		$	27,430

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

	Three Months Ended
(In thousands)	March 31, 2012		March 31, 2011
Multi-family residential	$	1,004	$	917
Commercial real estate		1,710		1,950
One-to-four family – mixed-use property		1,412		173
One-to-four family – residential		825		1,474
Co-operative apartments		42		-
Construction		234		-
Small Business Administration		104		323
Commercial business and other		395		432
Total net loan charge-offs	$	5,726	$	5,269