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Note 5 - Loans
3 Months Ended
Mar. 31, 2013
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, 2013, the Company utilized recent third party appraisals of the collateral to measure impairment for $86.1 million, or 78.1%, of collateral dependent impaired loans and used internal evaluations of the property’s value for $24.5 million, or 21.9%, 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 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, 2013, 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 three months ended March 31, 2013 and 2012:

   
For the three months ended
March 31, 2013
 
For the three months ended
March 31, 2012
(Dollars in thousands)
 
Number
   
Balance
 
Modification description
 
Number
   
Balance
 
Modification description
                             
                             
Multi-family residential
    1     $ 413  
 Received a below market interest rate and the loan amortization was extended
    -     $ -    
Commercial real estate
    1       273  
 Received a below market interest rate and the loan amortization was extended
    1       1,388  
 Received a below market interest rate, loan amortization term extended and loan term extended
One-to-four family - mixed-use property
    -       -         2       462  
 Received a below market interest rate
Commercial business and other
    1       615  
 Received a below market interest rate and the loan term was extended
    -       -    
Total
    3     $ 1,301         3     $ 1,850    

The recorded investment of each of the loans modified and classified to a TDR, presented in the table above, was unchanged as there was no principal forgiven in any of these modifications.

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, 2013
   
December 31, 2012
 
(Dollars in thousands)
 
Number
of contracts
   
Recorded
investment
   
Number
of contracts
   
Recorded
investment
 
                         
Multi-family residential
    9     $ 2,816       8     $ 2,347  
Commercial real estate
    6       8,698       5       8,499  
One-to-four family - mixed-use property
    7       2,326       7       2,336  
One-to-four family - residential
    1       372       1       374  
Construction
    1       3,137       1       3,805  
Commercial business and other
    3       3,135       2       2,540  
Total performing troubled debt restructured
    27     $ 20,484       24     $ 19,901  

During the three months ended March 31, 2013, there were no loans classified as TDR transferred to non-accrual status.

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, 2013
   
December 31, 2012
 
(Dollars in thousands)
 
Number
of contracts
   
Recorded
investment
   
Number
of contracts
   
Recorded
investment
 
                         
Multi-family residential
    -     $ -       2     $ 323  
Commercial real estate
    2       2,987       2       3,075  
One-to-four family - mixed-use property
    2       688       2       816  
Construction
    1       7,296       1       7,368  
Total troubled debt restructurings that subsequently defaulted
    5     $ 10,971       7     $ 11,582  

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

(Dollars in thousands)
 
March 31,
2013
   
December 31,
2012
 
             
Loans ninety days or more past due and still accruing:
           
Multi-family residential
  $ 1,073     $ -  
Co-operative apartment
    103       -  
Commercial Business and other
    602       644  
Total
    1,778       644  
                 
Non-accrual mortgage loans:
               
Multi-family residential
    18,569       13,095  
Commercial real estate
    13,811       15,640  
One-to-four family - mixed-use property
    10,523       16,553  
One-to-four family - residential
    13,547       13,726  
Co-operative apartments
    160       234  
Construction
    7,396       7,695  
Total
    64,006       66,943  
                 
Non-accrual non-mortgage loans:
               
Small Business Administration
    458       283  
Commercial Business and other
    12,640       16,860  
Total
    13,098       17,143  
                 
Total non-accrual loans
    77,104       84,086  
                 
                 
Total non-accrual loans and loans ninety days or more past due and still accruing
  $ 78,882     $ 84,730  

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,
 
   
2013
   
2012
 
   
(In thousands)
 
Interest income that would have been recognized had the loans performed in accordance with their original terms
  $ 2,202     $ 2,646  
Less:  Interest income included in the results of operations
    243       147  
Total foregone interest
  $ 1,959     $ 2,499  

The following table shows an age analysis of our recorded investment in loans at March 31, 2013:

(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
  $ 14,669     $ 2,879     $ 18,688     $ 36,236     $ 1,492,117     $ 1,528,353  
Commercial real estate
    11,067       1,309       13,812       26,188       481,744       507,932  
One-to-four family - mixed-use property
    22,994       2,293       10,135       35,422       580,239       615,661  
One-to-four family - residential
    4,067       705       13,209       17,981       179,287       197,268  
Co-operative apartments
    -       -       161       161       8,060       8,221  
Construction loans
    -       -       7,396       7,396       3,556       10,952  
Small Business Administration
    31       -       458       489       8,323       8,812  
Taxi medallion
    -       -       -       -       8,777       8,777  
Commercial business and other
    62       1       11,451       11,514       291,212       302,726  
Total
  $ 52,890     $ 7,187     $ 75,310     $ 135,387     $ 3,053,315     $ 3,188,702  

The following table shows an age analysis of our recorded investment in loans at December 31, 2012:
(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
  $ 24,059     $ 4,828     $ 13,095     $ 41,982     $ 1,492,456     $ 1,534,438  
Commercial real estate
    9,764       3,622       15,639       29,025       486,413       515,438  
One-to-four family - mixed-use property
    21,012       3,368       16,554       40,934       596,419       637,353  
One-to-four family - residential
    3,407       2,010       13,602       19,019       179,949       198,968  
Co-operative apartments
    -       -       234       234       6,069       6,303  
Construction loans
    2,462       -       7,695       10,157       4,224       14,381  
Small Business Administration
    404       -       283       687       8,809       9,496  
Taxi medallion
    -       -       -       -       9,922       9,922  
Commercial business and other
    2       5       15,601       15,608       279,468       295,076  
Total
  $ 61,110     $ 13,833     $ 82,703     $ 157,646     $ 3,063,729     $ 3,221,375  

The following table shows the activity in the allowance for loan losses for the three months ended March 31, 2013:

(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
  $ 13,001     $ 5,705     $ 5,960     $ 1,999     $ 46     $ 66     $ 505     $ 7     $ 3,815     $ 31,104  
Charge-off's
    1,488       681       2,606       691       74       234       204       -       304       6,282  
Recoveries
    11       80       53       31       -       -       30       -       -       205  
Provision
    871       556       2,933       738       116       235       140       -       411       6,000  
Ending balance
  $ 12,395     $ 5,660     $ 6,340     $ 2,077     $ 88     $ 67     $ 471     $ 7     $ 3,922     $ 31,027  
Ending balance: individually evaluated for impairment
  $ 209     $ 320     $ 592     $ 60     $ -     $ 37     $ -     $ -     $ 180       1,398  
Ending balance: collectively evaluated for impairment
  $ 12,186     $ 5,340     $ 5,748     $ 2,017     $ 88     $ 30     $ 471     $ 7     $ 3,742     $ 29,629  
                                                                                 
Financing Receivables:
                                                                               
Ending balance
  $ 1,528,353     $ 507,932     $ 615,661     $ 197,268     $ 8,221     $ 10,952     $ 8,812     $ 8,777     $ 302,726     $ 3,188,702  
Ending balance: individually evaluated for impairment
  $ 26,094     $ 25,545     $ 18,762     $ 15,548     $ 267     $ 10,229     $ 505     $ -     $ 18,613     $ 115,563  
Ending balance: collectively evaluated for impairment
  $ 1,502,259     $ 482,387     $ 596,899     $ 181,720     $ 7,954     $ 723     $ 8,307     $ 8,777     $ 284,113     $ 3,073,139  

The following table shows the activity in the allowance for loan losses for the year ended December 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
    6,016       2,746       4,286       1,583       62       4,591       324       -       1,661       21,269  
Recoveries
    144       307       358       29       -       -       87       -       104       1,029  
Provision
    7,606       2,934       4,574       1,904       28       3,989       (245 )     (34 )     244       21,000  
Ending balance
  $ 13,001     $ 5,705     $ 5,960     $ 1,999     $ 46     $ 66     $ 505     $ 7     $ 3,815     $ 31,104  
Ending balance: individually evaluated for impairment
  $ 183     $ 359     $ 571     $ 94     $ -     $ 38     $ -     $ -     $ 249     $ 1,494  
Ending balance: collectively evaluated for impairment
  $ 12,818     $ 5,346     $ 5,389     $ 1,905     $ 46     $ 28     $ 505     $ 7     $ 3,566     $ 29,610  
                                                                                 
Financing Receivables:
                                                                               
Ending balance
  $ 1,534,438     $ 515,438     $ 637,353     $ 198,968     $ 6,303     $ 14,381     $ 9,496     $ 9,922     $ 295,076     $ 3,221,375  
Ending balance: individually evaluated for impairment
  $ 21,675     $ 23,525     $ 26,368     $ 15,702     $ 237     $ 14,232     $ 850     $ -     $ 26,021     $ 128,610  
Ending balance: collectively evaluated for impairment
  $ 1,512,763     $ 491,913     $ 610,985     $ 183,266     $ 6,066     $ 149     $ 8,646     $ 9,922     $ 269,055     $ 3,092,765  

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, 2013:

   
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
  $ 23,637     $ 26,895     $ -     $ 21,695     $ 47  
Commercial real estate
    18,875       19,644       -       26,774       78  
One-to-four family mixed-use property
    15,175       17,537               19,115       63  
One-to-four family residential
    15,176       19,226       -       15,252       20  
Co-operative apartments
    267       403       -       252       2  
Construction
    7,835       12,488       -       9,217       -  
Non-mortgage loans:
                    -                  
Small Business Administration
    505       621       -       678       1  
Taxi Medallion
    -       -       -       -          
Commercial Business and other
    13,434       15,442       -       8,913       15  
Total loans with no related allowance recorded
    94,904       112,256       -       101,896       226  
                                         
With an allowance recorded:
                                       
Mortgage loans:
                                       
Multi-family residential
    2,457       2,458       209       2,190       36  
Commercial real estate
    6,670       6,736       320       7,222       69  
One-to-four family mixed-use property
    3,587       3,586       592       3,451       55  
One-to-four family residential
    372       372       60       373       4  
Co-operative apartments
    -       -       -       -          
Construction
    3,137       3,137       37       3,471       28  
Non-mortgage loans:
                                       
Small Business Administration
    -       -       -       -          
Taxi Medallion
    -       -       -       -          
Commercial Business and other
    4,436       4,436       180       3,488       52  
Total loans with an allowance recorded
    20,659       20,725       1,398       20,195       244  
                                         
Total Impaired Loans:
                                       
Total mortgage loans
  $ 97,188     $ 112,482     $ 1,218     $ 109,012     $ 402  
                                         
Total non-mortgage loans
  $ 18,375     $ 20,499     $ 180     $ 13,079     $ 68  

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, 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
  $ 19,753     $ 22,889     $ -     $ 27,720     $ 429  
Commercial real estate
    34,672       38,594       -       43,976       536  
One-to-four family mixed-use property
    23,054       25,825       -       27,018       485  
One-to-four family residential
    15,328       18,995       -       15,047       186  
Co-operative apartments
    237       299       -       174       2  
Construction
    10,598       15,182       -       14,689       173  
Non-mortgage loans:
                                       
Small Business Administration
    850       1,075       -       1,042       25  
Taxi Medallion
    -       -       -       -       -  
Commercial Business and other
    4,391       5,741       -       5,102       53  
Total loans with no related allowance recorded
    108,883       128,600       -       134,768       1,889  
                                         
With an allowance recorded:
                                       
Mortgage loans:
                                       
Multi-family residential
    1,922       1,937       183       3,174       124  
Commercial real estate
    7,773       7,839       359       6,530       400  
One-to-four family mixed-use property
    3,314       3,313       571       4,385       205  
One-to-four family residential
    374       374       94       188       19  
Co-operative apartments
    -       -       -       101       -  
Construction
    3,805       3,805       38       4,275       140  
Non-mortgage loans:
                                       
Small Business Administration
    -       -       -       -       -  
Taxi Medallion
    -       -       -       -       -  
Commercial Business and other
    2,539       2,540       249       2,273       116  
Total loans with an allowance recorded
    19,727       19,808       1,494       20,926       1,004  
                                         
Total Impaired Loans:
                                       
Total mortgage loans
  $ 120,830     $ 139,052     $ 1,245     $ 147,277     $ 2,699  
                                         
Total non-mortgage loans
  $ 7,780     $ 9,356     $ 249     $ 8,417     $ 194  

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, 2013:

(In thousands)
 
Special Mention
   
Substandard (1)
   
Doubtful
   
Loss
   
Total
 
                               
Multi-family residential
  $ 11,153     $ 23,690     $ -     $ -     $ 34,843  
Commercial real estate
    8,600       25,545       -       -       34,145  
One-to-four family - mixed-use property
    11,813       17,039       -       -       28,852  
One-to-four family - residential
    2,842       15,176       -       -       18,018  
Co-operative apartments
    -       267       -       -       267  
Construction loans
    3,137       7,834       -       -       10,971  
Small Business Administration
    226       141       -       -       367  
Commercial business and other
    2,228       14,792       1,080       -       18,100  
Total loans
  $ 39,999     $ 104,484     $ 1,080     $ -     $ 145,563  

The following table sets forth the recorded investment in loans designated as Criticized or Classified at December 31, 2012:

(In thousands)
 
Special Mention
   
Substandard (1)
   
Doubtful
   
Loss
   
Total
 
                               
Multi-family residential
  $ 16,345     $ 19,327     $ -     $ -     $ 35,672  
Commercial real estate
    11,097       27,877       -       -       38,974  
One-to-four family - mixed-use property
    13,104       24,635       -       -       37,739  
One-to-four family - residential
    5,223       15,328       -       -       20,551  
Co-operative apartments
    103       237       -       -       340  
Construction loans
    3,805       10,598       -       -       14,403  
Small Business Administration
    323       212       244       -       779  
Commercial business and other
    3,044       18,419       1,080       -       22,543  
Total loans
  $ 53,044     $ 116,633     $ 1,324     $ -     $ 171,001  

(1)  
The tables above do not include $9.9 million and $5.3 million of Substandard loans held for sale at March 31, 2013 and December 31, 2012, respectively.

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)
 
2013
   
2012
 
             
Balance, beginning of period
  $ 31,104     $ 30,344  
Provision for loan losses
    6,000       6,000  
Charge-off's
    (6,282 )     (6,019 )
Recoveries
    205       293  
Balance, end of period
  $ 31,027     $ 30,618  

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

   
Three Months Ended
 
(In thousands)
 
March 31,
2013
   
March 31,
2012
 
Multi-family residential
  $ 1,477     $ 1,004  
Commercial real estate
    601       1,710  
One-to-four family – mixed-use property
    2,553       1,412  
One-to-four family – residential
    660       825  
Co-operative apartments
    74       42  
Construction
    234       234  
Small Business Administration
    174       104  
Commercial business and other
    304       395  
Total net loan charge-offs
  $ 6,077     $ 5,726  

Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business line of credit) amounted to $54.7 million and $138.9 million, respectively, at March 31, 2013.