Loans

Loans are reported at their principal outstanding balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Interest on loans is recognized on the accrual basis. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of

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

days delinquent. Subsequent cash payments received on non-accrual loans that do not bring the loan to less than

days delinquent are recorded on a cash basis. Subsequent cash payments can also be applied

first

as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.

The Company maintains an allowance for loan losses at an amount, which, in management’s judgment, is adequate to absorb probable estimated losses inherent in the loan portfolio. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectability of loans. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. The allowance is established through a provision for loan losses based on management’s evaluation of the risk inherent in the various components of the loan portfolio and other factors, including historical loan loss experience (which is updated quarterly), current economic conditions, delinquency and non-accrual trends, classified loan levels, risk in the portfolio and volumes and trends in loan types, recent trends in charge-offs, changes in underwriting standards, experience, ability and depth of the Company’s lenders, collection policies and experience, internal loan review function and other external factors. The Company segregated its loans into

two

portfolios based on year of origination. One portfolio was reviewed for loans originated after

December

31,

2009

and a

second

portfolio for loans originated prior to

January

2010.

Our decision to segregate the portfolio based upon origination dates was based on changes made in our underwriting standards during

2009.

By the end of

2009,

all loans were being underwritten based on revised and tightened underwriting standards. Loans originated prior to

2010

have a higher delinquency rate and loss history. Each of the years in the portfolio for loans originated prior to

2010

has a similar delinquency rate. The determination of the amount of the allowance for loan losses includes estimates that are susceptible to significant changes due to changes in appraisal values of collateral, national and local economic conditions and other factors. We review our loan portfolio by separate categories with similar risk and collateral characteristics. Impaired loans are segregated and reviewed separately. All non-accrual loans are classified as impaired loans. The Company’s Board of Directors reviews and approves management’s evaluation of the adequacy of the allowance for loan losses on a quarterly basis.

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

The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due

days or more, are classified as non-accrual unless there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Appraisals are obtained and/or updated internal evaluations are prepared as soon as practical, and before the loan becomes

days delinquent. The loan balances of collateral dependent impaired loans are compared to the property’s updated fair value. The Company considers fair value of collateral dependent loans to be

85%

of the appraised or internally estimated value of the property, except for taxi medallion loans. The fair value of the underlying collateral of taxi medallion loans is the value of the underlying medallion based upon the most recently reported arm’s length transaction. The balance which exceeds fair value is generally charged-off. In addition, taxi medallion loans on accrual status with a loan-to-value greater than

100%

are classified as impaired and allocated a portion of the ALLL in the amount of the excess of the loan-to-value over the loan’s principal balance. The

85%

is based on the actual net proceeds the Bank has received from the sale of other real estate owned (“OREO”) as a percentage of OREO’s appraised value.

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

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

The Company evaluates the underlying collateral through a

third

party appraisal, or when a

third

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

In preparing internal evaluations of property values, the Company seeks to obtain current data on the subject property from various sources, including:

(1)

the borrower;

(2)

copies of existing leases;

(3)

local real estate brokers and appraisers;

(4)

public records (such as for real estate taxes and water and sewer charges);

(5)

comparable sales and rental data in the market;

(6)

an inspection of the property and

(7)

interviews with

tenants.

These internal evaluations primarily focus on the income approach and comparable sales data to value the property.

As of

March

31,

2017,

we utilized recent

third

party appraisals of the collateral to measure impairment for

$44.3

million, or

82.3%,

of collateral dependent impaired loans, and used internal evaluations of the property’s value for

$9.5

million, or

17.7%,

of collateral dependent impaired loans.

The Company

may

restructure a loan to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. This restructure

may

include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as Troubled Debt Restructured (“TDR”).

These restructurings have not included a reduction of principal balance. The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. 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.

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,

2017,

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 Company did not modify and classify any loans as TDR during the

three

months ended

March

31,

2017

and

2016.

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, 2017				December 31, 2016
(Dollars in thousands)	Number of contracts		Recorded investment		Number of contracts		Recorded investment

Multi-family residential		9	$	2,557		9	$	2,572
Commercial real estate		2		2,049		2		2,062
One-to-four family - mixed-use property		5		1,791		5		1,800
One-to-four family - residential		3		586		3		591
Taxi medallion		12		9,660		12		9,735
Commercial business and other		2		621		2		675

Total performing troubled debt restructured		33	$	17,264		33	$	17,435

During the

three

months ended

March

31,

2017

and

2016,

there were no TDR loans transferred to non-performing 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, 2017				December 31, 2016
(Dollars in thousands)	Number of contracts		Recorded investment		Number of contracts		Recorded investment

Multi-family residential		1	$	384		1	$	396

Total troubled debt restructurings that subsequently defaulted		1	$	384		1		396

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

(In thousands)	March 31, 2017		December 31, 2016

Loans ninety days or more past due and still accruing:
Commercial real estate	$	75	$	-
One-to-four family - mixed-use property		-		386
Construction		602		-
Total		677		386

Non-accrual mortgage loans:
Multi-family residential		1,354		1,837
Commercial real estate		1,462		1,148
One-to-four family - mixed-use property		3,328		4,025
One-to-four family - residential		7,847		8,241
Total		13,991		15,251

Non-accrual non-mortgage loans:
Small Business Administration		58		1,886
Taxi medallion		3,771		3,825
Commercial business and other		38		68
Total		3,867		5,779

Total non-accrual loans		17,858		21,030

Total non-performing loans	$	18,535	$	21,416

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,
	2017		2016
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	414	$	540
Less: Interest income included in the results of operations		127		123
Total foregone interest	$	287	$	417

The following tables show an age analysis of our recorded investment in loans, including performing loans past maturity, at the periods indicated:

	March 31, 2017
(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	$	5,465	$	479	$	1,354	$	7,298	$	2,254,648	$	2,261,946
Commercial real estate		2,194		876		1,537		4,607		1,264,163		1,268,770
One-to-four family - mixed-use property		5,519		636		3,328		9,483		551,872		561,355
One-to-four family - residential		1,379		1,350		7,655		10,385		173,816		184,201
Co-operative apartments		-		-		-		-		7,216		7,216
Construction loans		-		-		602		602		11,811		12,413
Small Business Administration		-		-		-		-		10,519		10,519
Taxi medallion		1,159		-		3,771		4,930		13,902		18,832
Commercial business and other		21		731		-		752		631,751		632,503
Total	$	15,737	$	4,072	$	18,247	$	38,057	$	4,919,698	$	4,957,755

	December 31, 2016
(In thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		than 90 Days		Total Past Due		Current		Total Loans


Multi-family residential	$	2,575	$	287	$	1,837	$	4,699	$	2,173,805	$	2,178,504
Commercial real estate		3,363		22		1,148		4,533		1,241,599		1,246,132
One-to-four family - mixed-use property		4,671		762		4,411		9,844		548,658		558,502
One-to-four family - residential		3,831		194		8,047		12,072		173,695		185,767
Co-operative apartments		-		-		-		-		7,418		7,418
Construction loans		-		-		-		-		11,495		11,495
Small Business Administration		13		-		1,814		1,827		13,371		15,198
Taxi medallion		-		-		3,825		3,825		15,171		18,996
Commercial business and other		22		1		-		23		597,099		597,122
Total	$	14,475	$	1,266	$	21,082	$	36,823	$	4,782,311	$	4,819,134

The following tables show the activity in the allowance for loan losses for the

three

month periods indicated:

March 31, 2017
(In thousands)	Multi-family residential			Commercial real estate			One-to-four family - mixed-use property			One-to-four family - residential			Construction loans		Small Business Administration			Taxi medallion			Commercial business and other			Unallocated		Total

Allowance for credit losses:
Beginning balance	$	5,923		$	4,487		$	2,903		$	1,015		$	92	$	481		$	2,243		$	4,492		$	593	$	22,229
Charge-off's		(14	)		-			(34	)		-			-		(65	)		(54	)		(12	)		-		(179	)
Recoveries		30			68			-			-			-		41			-			22			-		161
Provision (benefit)		(32	)		(70	)		(178	)		(36	)		2		(140	)		24			208			222		-
Ending balance	$	5,907		$	4,485		$	2,691		$	979		$	94	$	317		$	2,213		$	4,710		$	815	$	22,211

March 31, 2016
(In thousands)	Multi-family residential			Commercial real estate			One-to-four family - mixed-use property			One-to-four family - residential			Construction loans		Small Business Administration			Taxi medallion			Commercial business and other			Unallocated		Total

Allowance for credit losses:
Beginning balance	$	6,718		$	4,239		$	4,227		$	1,227		$	50	$	262		$	343		$	4,469		$	-	$	21,535
Charge-off's		(42	)		-			(14	)		(66	)		-		-			-			(25	)		-		(147	)
Recoveries		13			-			187			365			-		31			-			9			-		605
Provision (benefit)		(391	)		(38	)		(893	)		(484	)		5		(24	)		(8	)		138			1,695		-
Ending balance	$	6,298		$	4,201		$	3,507		$	1,042		$	55	$	269		$	335		$	4,591		$	1,695	$	21,993

The following tables show the manner in which loans were evaluated for impairment at the periods indicated:

At March 31, 2017
(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		Unallocated		Total
Financing Receivables:
Ending Balance	$	2,261,946	$	1,268,770	$	561,355	$	184,201	$	7,216	$	12,413	$	10,519	$	18,832	$	632,503	$	-	$	4,957,755
Ending balance: individually evaluated for impairment	$	5,299	$	9,409	$	7,311	$	10,566	$	-	$	602	$	170	$	18,832	$	2,647	$	-	$	54,836
Ending balance: collectively evaluated for impairment	$	2,256,647	$	1,259,361	$	554,044	$	173,635	$	7,216	$	11,811	$	10,349	$	-	$	629,856	$	-	$	4,902,919
Allowance for credit losses:
Ending balance: individually evaluated for impairment	$	227	$	168	$	240	$	59	$	-	$	-	$	-	$	2,213	$	10	$	-	$	2,917
Ending balance: collectively evaluated for impairment	$	5,681	$	4,317	$	2,451	$	920	$	-	$	94	$	316	$	-	$	4,700	$	815	$	19,294

At December 31, 2016
(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		Unallocated		Total
Financing Receivables:
Ending Balance	$	2,178,504	$	1,246,132	$	558,502	$	185,767	$	7,418	$	11,495	$	15,198	$	18,996	$	597,122	$	-	$	4,819,134
Ending balance: individually evaluated for impairment	$	5,923	$	6,551	$	8,809	$	9,989	$	-	$	-	$	1,937	$	16,282	$	2,492	$	-	$	51,983
Ending balance: collectively evaluated for impairment	$	2,172,581	$	1,239,581	$	549,693	$	175,778	$	7,418	$	11,495	$	13,261	$	2,714	$	594,630	$	-	$	4,767,151
Allowance for credit losses:
Ending balance: individually evaluated for impairment	$	232	$	179	$	417	$	60	$	-	$	-	$	90	$	2,236	$	12	$	-	$	3,226
Ending balance: collectively evaluated for impairment	$	5,691	$	4,308	$	2,486	$	955	$	-	$	92	$	391	$	7	$	4,480	$	593	$	19,003

The following table shows our recorded investment, unpaid principal balance and allocated allowance for loan losses for impaired loans at the periods indicated:

	March 31, 2017						December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	3,048	$	3,198	$	-	$	3,660	$	3,796	$	-
Commercial real estate		7,360		7,387		-		4,489		4,516		-
One-to-four family mixed-use property		5,660		6,098		-		6,435		6,872		-
One-to-four family residential		10,141		11,665		-		9,560		11,117		-
Construction		602		602		-		-		-		-
Non-mortgage loans:
Small Business Administration		170		711		-		416		509		-
Taxi medallion		4,958		5,155		-		2,334		2,476		-
Commercial business and other		2,246		2,615		-		2,072		2,443		-

Total loans with no related allowance recorded		34,185		37,431		-		28,966		31,729		-

With an allowance recorded:
Mortgage loans:
Multi-family residential		2,251		2,251		227		2,263		2,263		232
Commercial real estate		2,049		2,049		168		2,062		2,062		179
One-to-four family mixed-use property		1,651		1,654		240		2,374		2,376		417
One-to-four family residential		425		425		59		429		429		60
Non-mortgage loans:
Small Business Administration		-		-		-		1,521		1,909		90
Taxi medallion		13,874		13,874		2,213		13,948		13,948		2,236
Commercial business and other		401		401		10		420		420		12

Total loans with an allowance recorded		20,651		20,654		2,917		23,017		23,407		3,226

Total Impaired Loans:
Total mortgage loans	$	33,187	$	35,329	$	694	$	31,272	$	33,431	$	888

Total non-mortgage loans	$	21,649	$	22,756	$	2,223	$	20,711	$	21,705	$	2,338

The following table shows our average recorded investment and interest income recognized for impaired loans for the periods indicated:

	March 31, 2017				March 31, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	3,354	$	23	$	5,925	$	17
Commercial real estate		5,925		95		4,507		12
One-to-four family mixed-use property		6,048		37		9,418		33
One-to-four family residential		9,851		26		11,610		27
Construction		301		7		785		-
Non-mortgage loans:
Small Business Administration		293		2		264		3
Taxi Medallion		3,646		30		-		-
Commercial Business and other		2,159		44		2,528		46

Total loans with no related allowance recorded		31,577		264		35,037		138

With an allowance recorded:
Mortgage loans:
Multi-family residential		2,257		29		2,300		29
Commercial real estate		2,056		24		2,365		28
One-to-four family mixed-use property		2,013		18		2,739		38
One-to-four family residential		427		4		342		3
Non-mortgage loans:
Small Business Administration		761		-		92		2
Taxi Medallion		13,911		43		2,114		15
Commercial Business and other		411		6		2,013		25

Total loans with an allowance recorded		21,836		124		11,965		140

Total Impaired Loans:
Total mortgage loans	$	32,232	$	263	$	39,991	$	187

Total non-mortgage loans	$	21,181	$	125	$	7,011	$	91

In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does not fall within

one

of the previous mentioned categories, then the loan would be considered “Pass.” These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that jeopardizes the orderly liquidation of the debt. We designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as loss, as loans that are designated as Loss are charged-off. 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 tables set forth the recorded investment in loans designated as Criticized or Classified at the periods indicated:

	March 31, 2017
(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total

Multi-family residential	$	7,230	$	2,742	$	-	$	-	$	9,972
Commercial real estate		639		7,359		-		-		7,998
One-to-four family - mixed-use property		3,446		5,521		-		-		8,967
One-to-four family - residential		2,214		9,980		-		-		12,194
Construction loans		-		602		-		-		602
Small Business Administration		532		116		-		-		648
Taxi Medallion		-		18,832		-		-		18,832
Commercial business and other		9,108		2,647		-		-		11,755
Total loans	$	23,169	$	47,799	$	-	$	-	$	70,968

	December 31, 2016
(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total

Multi-family residential	$	7,133	$	3,351	$	-	$	-	$	10,484
Commercial real estate		2,941		4,489		-		-		7,430
One-to-four family - mixed-use property		4,197		7,009		-		-		11,206
One-to-four family - residential		1,205		9,399		-		-		10,604
Small Business Administration		540		436		-		-		976
Taxi Medallion		2,715		16,228		54		-		18,997
Commercial business and other		9,924		2,493		-		-		12,417
Total loans	$	28,655	$	43,405	$	54	$	-	$	72,114

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

$63.2

million and

$241.8

million, respectively, at

March

31,

2017.