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Note 5 - Loans

6 Months Ended

Jun. 30, 2013

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

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 the Company’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 the Company’s 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 dependent impaired loans are compared to the loan’s updated fair value. The balance which exceeds fair value is generally charged-off.

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. The Company considers fair value of collateral dependent loans to be 85% of the appraised or internally estimated value of the property. 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 June 30, 2013, the Company utilized recent third party appraisals of the collateral to measure impairment for $78.4 million, or 73.6%, of collateral dependent impaired loans and used internal evaluations of the property’s value for $28.6 million, or 26.4%, 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 June 30, 2013, there were no commitments to lend additional funds to borrowers whose loans were modified as TDRs. 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 June 30, 2013 and 2012:

	For the three months ended June 30, 2013					For the three months ended June 30, 2012
(Dollars in thousands)	Number		Balance		Modification description	Number		Balance		Modification description


Commercial real estate		1	$	488	Received a below market interest rate, loan amortization term extended and loan term extended		1	$	3,920	Received a below market interest rate, loan amortization term extended and loan term extended
One-to-four family - mixed-use property		1		390	Received a below market interest rate, loan amortization term extended and loan term extended		2		759	Received a below market interest rate
Total		2	$	878			3	$	4,679

The following table shows loans modified and classified as TDR during the six months ended June 30, 2013 and 2012:

	For the six months ended June 30, 2013					For the six months ended June 30, 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		2		761	Received a below market interest rate and the loan amortization was extended		3		5,307	Received a below market interest rate, loan amortization term extended and loan term extended
One-to-four family - mixed-use property		1		390	Received a below market interest rate and the loan amortization was extended		3		1,222	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		5	$	2,179			6	$	6,529

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:

	June 30, 2013				December 31, 2012
(Dollars in thousands)	Number of contracts		Recorded investment		Number of contracts		Recorded investment

Multi-family residential		11	$	2,822		8	$	2,347
Commercial real estate		7		9,327		5		8,499
One-to-four family - mixed-use property		8		2,712		7		2,336
One-to-four family - residential		1		369		1		374
Construction		1		1,916		1		3,805
Commercial business and other		3		3,109		2		2,540

Total performing troubled debt restructured		31	$	20,255		24	$	19,901

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:

	June 30, 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		2,899		2		3,075
One-to-four family - mixed-use property		1		340		2		816
Construction		1		7,296		1		7,368

Total troubled debt restructurings that subsequently defaulted		4	$	10,535		7	$	11,582

During the six months ended June 30, 2013, there were no loans classified as performing TDR transferred to non-performing TDR not accruing interest.

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

(Dollars in thousands)	June 30, 2013		December 31, 2012

Loans ninety days or more past due and still accruing:
One-to-four family - residential	$	15	$	-
Commercial Business and other		558		644
Total		573		644

Non-accrual mortgage loans:
Multi-family residential		19,273		13,095
Commercial real estate		12,676		15,640
One-to-four family - mixed-use property		10,937		16,553
One-to-four family - residential		12,158		13,726
Co-operative apartments		160		234
Construction		7,326		7,695
Total		62,530		66,943

Non-accrual non-mortgage loans:
Small Business Administration		445		283
Commercial Business and other		9,999		16,860
Total		10,444		17,143

Total non-accrual loans		72,974		84,086


Total non-accrual loans and loans ninety days or more past due and still accruing	$	73,547	$	84,730

The table above does not include $0.3 million and $5.3 million of Substandard loans held for sale at June 30, 2013 and December 31, 2012, respectively.

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 June 30,				For the six months ended June 30,
	2013		2012		2013		2012
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	1,697	$	2,295	$	3,510	$	4,733
Less: Interest income included in the results of operations		220		218		496		492
Total foregone interest	$	1,477	$	2,077	$	3,014	$	4,241

The following table shows an aged analysis of our recorded investment in loans at June 30, 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	$	17,221	$	1,739	$	19,273	$	38,233	$	1,568,857	$	1,607,090
Commercial real estate		6,693		686		12,676		20,055		506,008		526,063
One-to-four family - mixed-use property		19,345		2,499		11,447		33,291		571,963		605,254
One-to-four family - residential		3,568		1,564		11,945		17,077		179,241		196,318
Co-operative apartments		-		-		160		160		9,175		9,335
Construction loans		-		-		7,326		7,326		4,124		11,450
Small Business Administration		114		-		445		559		8,006		8,565
Taxi medallion		-		-		-		-		5,114		5,114
Commercial business and other		1		501		8,775		9,277		297,620		306,897
Total	$	46,942	$	6,989	$	72,047	$	125,978	$	3,150,108	$	3,276,086

The following table shows an aged 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 six months ended June 30, 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		2,749		734		3,135		691		74		304		337		-		864		8,888
Recoveries		65		293		111		106		4		-		60		-		-		639
Provision		2,641		620		3,498		685		123		434		269		-		1,230		9,500
Ending balance	$	12,958	$	5,884	$	6,434	$	2,099	$	99	$	196	$	497	$	7	$	4,181	$	32,355
Ending balance: individually evaluated for impairment	$	272	$	290	$	693	$	60	$	-	$	34	$	-	$	-	$	377	$	1,726
Ending balance: collectively evaluated for impairment	$	12,080	$	5,549	$	6,121	$	2,117	$	141	$	163	$	463	$	7	$	3,911	$	30,552

Financing Receivables:
Ending balance	$	1,607,090	$	526,063	$	605,254	$	196,318	$	9,335	$	11,450	$	8,565	$	5,114	$	306,897	$	3,276,086
Ending balance: individually evaluated for impairment	$	26,012	$	34,895	$	19,146	$	14,530	$	266	$	9,710	$	483	$	-	$	7,551	$	112,593
Ending balance: collectively evaluated for impairment	$	1,581,078	$	491,168	$	586,108	$	181,788	$	9,069	$	1,740	$	8,082	$	5,114	$	299,346	$	3,163,493

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 six month period ended June 30, 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	$	22,976	$	26,127	$	-	$	23,307	$	43
Commercial real estate		26,950		27,728		-		22,913		203
One-to-four family mixed-use property		14,529		17,301		-		14,852		82
One-to-four family residential		14,161		18,272		-		14,669		49
Co-operative apartments		266		384		-		267		4
Construction		7,794		12,518		-		7,815		-
Non-mortgage loans:
Small Business Administration		483		554		-		494		1
Taxi Medallion		-		-		-		-		-
Commercial Business and other		2,547		4,008		-		7,991		21

Total loans with no related allowance recorded		89,706		106,892		-		92,308		403

With an allowance recorded:
Mortgage loans:
Multi-family residential		3,036		3,037		272		2,747		84
Commercial real estate		7,945		8,011		290		7,308		174
One-to-four family mixed-use property		4,617		4,616		693		4,102		115
One-to-four family residential		369		369		60		371		7
Co-operative apartments		-		-		-		-		-
Construction		1,916		1,916		34		2,527		32
Non-mortgage loans:
Small Business Administration		-		-		-		-		-
Taxi Medallion		-		-		-		-		-
Commercial Business and other		5,004		5,004		377		4,720		127

Total loans with an allowance recorded		22,887		22,953		1,726		21,775		539

Total Impaired Loans:
Total mortgage loans	$	104,559	$	120,279	$	1,349	$	100,878	$	793

Total non-mortgage loans	$	8,034	$	9,566	$	377	$	13,205	$	149

	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 is 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 as 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 June 30, 2013:

(In thousands)	Special Mention		Substandard (1)		Doubtful		Loss		Total

Multi-family residential	$	10,523	$	23,600	$	-	$	-	$	34,123
Commercial real estate		7,578		24,638		-		-		32,216
One-to-four family - mixed-use property		10,829		17,089		-		-		27,918
One-to-four family - residential		2,133		14,161		-		-		16,294
Co-operative apartments		-		266		-		-		266
Construction loans		1,916		7,794		-		-		9,710
Small Business Administration		323		108		-		-		431
Commercial business and other		2,206		15,093		425		-		17,724
Total loans	$	35,508	$	102,749	$	425	$	-	$	138,682

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 $0.3 million and $5.3 million of Substandard loans held for sale at June 30, 2013 and December 31, 2012, respectively.

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

	For the six months ended June 30
(In thousands)	2013			2012

Balance, beginning of period	$	31,104		$	30,344
Provision for loan losses		9,500			11,000
Charge-off's		(8,888	)		(10,883	)
Recoveries		639			438

Balance, end of period	$	32,355		$	30,899

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

	Three Months Ended					Six Months Ended
(In thousands)	June 30, 2013			June 30, 2012		June 30, 2013		June 30, 2012
Multi-family residential	$	1,207		$	1,078	$	2,684	$	2,082
Commercial real estate		(160	)		387		441		2,097
One-to-four family – mixed-use property		471			838		3,024		2,250
One-to-four family – residential		(75	)		44		585		869
Co-operative apartments		(4	)		1		70		43
Construction		70			2,207		304		2,441
Small Business Administration		103			138		277		242
Commercial business and other		560			26		864		421
Total net loan charge-offs	$	2,172		$	4,719	$	8,249	$	10,445

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 $50.2 million and $227.4 million, respectively, at June 30, 2013.

- 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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