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Note 5 - Loans

9 Months Ended

Sep. 30, 2019

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. 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.

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. Payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. 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.

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 90 days or more, are classified as non-accrual unless the loan is well secured and there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Prior to a real estate secured loan becoming 90 days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.

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. All non-accrual loans are considered impaired.

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 may at times be maintained to cover uncertainties that could affect management's estimate of probable losses. When necessary an unallocated component of the allowance will reflect 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 charges to earnings in the form of 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. 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 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. In the second quarter of 2019, we changed our methodology for reviewing our loan portfolio to further segregate the commercial business and other portfolio into two separate categories. The decision to separate was based on the risk characteristics and loss history being different between the two categories. Impaired loans are segregated and reviewed separately.

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 through the sale of the loan or by foreclosure and sale of the property.

The Company considers fair value of collateral dependent loans to be 85% of the appraised or internally estimated value of the property. 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. For collateral dependent taxi medallion loans, the Company considers fair value to be the value of the underlying medallion based upon the most recently reported arm’s length sales transaction. When there is no recent sale activity, the fair value is calculated using capitalization rates. For both collateral dependent mortgage loans and taxi medallion loans, the amount by which the loan’s book value exceeds fair value is charged-off.

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.

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”).

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-accrual performing TDR loans until they have made timely payments for six consecutive months. These restructurings have not included a reduction of principal balance.

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 loan which is collateral dependent, the fair value of the collateral. At September 30, 2019, 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 loan modifications and classified as TDR during the periods indicated.

	For the three and nine months ended
	September 30, 2019					September 30, 2018
(Dollars in thousands)	Number		Balance		Modification description	Number		Balance		Modification description


Commercial business and other		3	$	951	Amortization extensions		1	$	1,620	Amortization extension
Total		3	$	951			1	$	1,620

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

	September 30, 2019				December 31, 2018
	Number		Recorded		Number		Recorded
(Dollars in thousands)	of contracts		investment		of contracts		investment

Multi-family residential		7	$	1,883		7	$	1,916
One-to-four family - mixed-use property		4		1,497		5		1,692
One-to-four family - residential		3		536		3		552
Taxi medallion ⁽¹⁾		8		2,161		15		3,926
Commercial business and other		3		951		1		279
Total performing troubled debt restructured		25	$	7,028		31	$	8,365

⁽¹⁾Taxi medallion loans in the table above continue to pay as agreed, however the company records interest received on a cash basis.

During the three and nine months ended September 30, 2019 and 2018, there were no defaults of TDR loans within 12 months of their modification date. During the three and nine months ended September 30, 2019, we sold one multi-family TDR loan totaling $0.3 million, for a gain of $0.2 million. During the nine months ended September 30, 2018, we sold one commercial real estate TDR loan totaling $1.8 million, for a loss of $0.3 million and foreclosed on one taxi medallion TDR loan of $35,000, which is included in “Other Assets”.

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:

	September 30, 2019				December 31, 2018
	Number		Recorded		Number		Recorded
(Dollars in thousands)	of contracts		investment		of contracts		investment

Multi-family residential		-	$	-		1	$	388
Taxi medallion		3		767		-		-
Commercial business and other		2		279		1		1,397
Total troubled debt restructurings that subsequently defaulted		5	$	1,046		2	$	1,785

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

	September 30,		December 31,
(In thousands)	2019		2018

Loans ninety days or more past due and still accruing:
Multi-family residential	$	445	$	-
Total		445		-

Non-accrual mortgage loans:
Multi-family residential		3,132		2,410
Commercial real estate		872		1,379
One-to-four family - mixed-use property		683		928
One-to-four family - residential		5,050		6,144
Total		9,737		10,861

Non-accrual non-mortgage loans:
Small Business Administration		1,151		1,267
Taxi medallion ⁽¹⁾		1,352		613
Commercial business and other ⁽¹⁾		2,020		3,512
Total		4,523		5,392

Total non-accrual loans		14,260		16,253

Total non-performing loans	$	14,705	$	16,253

1.	Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $2.2 million and $3.9 million at September 30, 2019 and December 31, 2018, respectively and non-accrual performing TDR commercial business loans totaling $1.0 million at September 30, 2019.

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				For the nine months ended
	September 30,				September 30,
	2019		2018		2019		2018
	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	416	$	398	$	1,224	$	1,194
Less: Interest income included in the results of operations		89		173		330		487
Total foregone interest	$	327	$	225	$	894	$	707

The following tables show by delinquency an analysis of our recorded investment in loans at the periods indicated:

	September 30, 2019
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans


Multi-family residential	$	1,112	$	1,401	$	3,577	$	6,090	$	2,226,215	$	2,232,305
Commercial real estate		5,944		940		872		7,756		1,551,825		1,559,581
One-to-four family - mixed-use property		1,458		869		408		2,735		584,365		587,100
One-to-four family - residential		1,020		243		5,050		6,313		178,119		184,432
Co-operative apartments		-		-		-		-		9,089		9,089
Construction loans		-		-		-		-		64,234		64,234
Small Business Administration		1,849		-		1,151		3,000		10,982		13,982
Taxi medallion		-		-		766		766		2,747		3,513
Commercial business and other		3		100		2,020		2,123		1,094,041		1,096,164
Total	$	11,386	$	3,553	$	13,844	$	28,783	$	5,721,617	$	5,750,400

	December 31, 2018
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans


Multi-family residential	$	1,887	$	339	$	2,410	$	4,636	$	2,264,412	$	2,269,048
Commercial real estate		379		-		1,379		1,758		1,540,789		1,542,547
One-to-four family - mixed-use property		1,003		322		928		2,253		575,488		577,741
One-to-four family - residential		1,564		-		6,144		7,708		182,642		190,350
Co-operative apartments		-		-		-		-		8,498		8,498
Construction loans		-		730		-		730		49,870		50,600
Small Business Administration		774		68		1,267		2,109		13,101		15,210
Taxi medallion		-		-		-		-		4,539		4,539
Commercial business and other		1,306		281		2,216		3,803		873,960		877,763
Total	$	6,913	$	1,740	$	14,344	$	22,997	$	5,513,299	$	5,536,296

The following tables show the activity in the allowance for loan losses for the three month periods indicated:

September 30, 2019
(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			Total

Allowance for credit losses:
Beginning balance	$	5,506		$	4,265	$	1,786		$	746		$	381	$	382		$	-	$	8,444		$	21,510
Charge-off's		(189	)		-		-			-			-		-			-		(242	)		(431	)
Recoveries		6			-		140			3			-		32			-		92			273
Provision (Benefit)		54			99		(120	)		(4	)		37		(57	)		-		674			683
Ending balance	$	5,377		$	4,364	$	1,806		$	745		$	418	$	357		$	-	$	8,968		$	22,035

September 30, 2018
(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	$	5,538		$	4,726		$	2,297		$	1,003		$	264		$	549		$	-		$	5,832		$	11	$	20,220
Charge-off's		(18	)		-			(3	)		-			-			(144	)		(40	)		(15	)		-		(220	)
Recoveries		-			-			39			258			-			10			-			2			-		309
Provision (Benefit)		37			(650	)		(407	)		(382	)		(2	)		138			40			1,186			40		-
Ending balance	$	5,557		$	4,076		$	1,926		$	879		$	262		$	553		$	-		$	7,005		$	51	$	20,309

The following tables show the activity in the allowance for loan losses for the nine month periods indicated:

September 30, 2019
(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			Total

Allowance for credit losses:
Beginning balance	$	5,676		$	4,315	$	1,867		$	749		$	329	$	418		$	-		$	7,591		$	20,945
Charge-off's		(190	)		-		(1	)		(113	)		-		-			-			(2,379	)		(2,683	)
Recoveries		30			7		228			10			-		52			134			183			644
Provision (Benefit)		(139	)		42		(288	)		99			89		(113	)		(134	)		3,573			3,129
Ending balance	$	5,377		$	4,364	$	1,806		$	745		$	418	$	357		$	-		$	8,968		$	22,035

September 30, 2018
(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	$	5,823		$	4,643		$	2,545		$	1,082		$	68	$	669		$	-		$	5,521		$	-	$	20,351
Charge-off's		(99	)		-			(3	)		(1	)		-		(196	)		(393	)		(29	)		-		(721	)
Recoveries		2			-			118			370			-		25			-			11			-		526
Provision (Benefit)		(169	)		(567	)		(734	)		(572	)		194		55			393			1,502			51		153
Ending balance	$	5,557		$	4,076		$	1,926		$	879		$	262	$	553		$	-		$	7,005		$	51	$	20,309

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

September 30, 2019
(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

Financing Receivables:
Ending Balance	$	2,232,305	$	1,559,581	$	587,100	$	184,432	$	9,089	$	64,234	$	13,982	$	3,513	$	1,096,164	$	5,750,400
Ending balance: individually evaluated for impairment	$	5,195	$	949	$	2,192	$	5,841	$	-	$	-	$	1,151	$	3,513	$	2,970	$	21,811
Ending balance: collectively evaluated for impairment	$	2,227,110	$	1,558,632	$	584,908	$	178,591	$	9,089	$	64,234	$	12,831	$	-	$	1,093,194	$	5,728,589

Allowance for credit losses:
Ending balance: individually evaluated for impairment	$	94	$	-	$	51	$	48	$	-	$	-	$	-	$	-	$	116	$	309
Ending balance: collectively evaluated for impairment	$	5,283	$	4,364	$	1,755	$	697	$	-	$	418	$	357	$	-	$	8,852	$	21,726

December 31, 2018
(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

Financing Receivables:
Ending Balance	$	2,269,048	$	1,542,547	$	577,741	$	190,350	$	8,498	$	50,600	$	15,210	$	4,539	$	877,763	$	5,536,296
Ending balance: individually evaluated for impairment	$	4,500	$	1,435	$	3,098	$	6,889	$	-	$	-	$	1,267	$	4,539	$	3,791	$	25,519
Ending balance: collectively evaluated for impairment	$	2,264,548	$	1,541,112	$	574,643	$	183,461	$	8,498	$	50,600	$	13,943	$	-	$	873,972	$	5,510,777

Allowance for credit losses:
Ending balance: individually evaluated for impairment	$	100	$	-	$	143	$	51	$	-	$	-	$	-	$	-	$	866	$	1,160
Ending balance: collectively evaluated for impairment	$	5,576	$	4,315	$	1,724	$	698	$	-	$	329	$	418	$	-	$	6,725	$	19,785

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

	September 30, 2019						December 31, 2018
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance

	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	3,939	$	4,438	$	-	$	3,225	$	3,568	$	-
Commercial real estate		949		949		-		1,435		1,435		-
One-to-four family mixed-use property		1,345		1,347		-		1,913		2,113		-
One-to-four family residential		5,454		5,512		-		6,490		6,643		-
Non-mortgage loans:
Small Business Administration		1,151		1,421		-		1,267		1,609		-
Taxi medallion		3,513		9,731		-		4,539		12,788		-
Commercial business and other		2,019		4,060		-		-		-		-

Total loans with no related allowance recorded		18,370		27,458		-		18,869		28,156		-

With an allowance recorded:
Mortgage loans:
Multi-family residential		1,256		1,256		94		1,275		1,275		100
One-to-four family mixed-use property		847		847		51		1,185		1,185		143
One-to-four family residential		387		387		48		399		399		51
Non-mortgage loans:
Commercial business and other		951		951		116		3,791		3,791		866

Total loans with an allowance recorded		3,441		3,441		309		6,650		6,650		1,160

Total Impaired Loans:
Total mortgage loans	$	14,177	$	14,736	$	193	$	15,922	$	16,618	$	294

Total non-mortgage loans	$	7,634	$	16,163	$	116	$	9,597	$	18,188	$	866

The following table shows our average recorded investment and interest income recognized for impaired loans for the three months ended:

	September 30, 2019				September 30, 2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	3,398	$	9	$	4,013	$	31
Commercial real estate		1,252		-		4,587		50
One-to-four family mixed-use property		1,889		17		3,452		28
One-to-four family residential		5,607		1		7,742		7
Construction		-		-		365		-
Non-mortgage loans:
Small Business Administration		1,188		-		739		31
Taxi medallion		3,534		32		6,152		84
Commercial business and other		1,912		-		20,301		482

Total loans with no related allowance recorded		18,780		59		47,351		713

With an allowance recorded:
Mortgage loans:
Multi-family residential		1,260		18		1,740		19
One-to-four family mixed-use property		922		8		1,201		15
One-to-four family residential		389		4		405		4
Non-mortgage loans:
Commercial business and other		803		-		297		4

Total loans with an allowance recorded		3,374		30		3,643		42

Total Impaired Loans:
Total mortgage loans	$	14,717	$	57	$	23,505	$	154

Total non-mortgage loans	$	7,437	$	32	$	27,489	$	601

The following table shows our average recorded investment and interest income recognized for impaired loans for the nine months ended:

	September 30, 2019				September 30, 2018
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

	(In thousands)
With no related allowance recorded:
Mortgage loans:
Multi-family residential	$	3,214	$	27	$	4,201	$	67
Commercial real estate		1,259		15		5,300		176
One-to-four family mixed-use property		1,919		51		3,759		108
One-to-four family residential		5,943		5		7,974		32
Construction		238		-		243		10
Non-mortgage loans:
Small Business Administration		1,217		-		526		33
Taxi medallion		3,875		138		6,307		252
Commercial business and other		1,261		-		13,560		792

Total loans with no related allowance recorded		18,926		236		41,870		1,470

With an allowance recorded:
Mortgage loans:
Multi-family residential		1,266		54		1,896		78
Commercial real estate		-		-		1,206		39
One-to-four family mixed-use property		1,008		28		407		12
One-to-four family residential		393		12		-		-
Non-mortgage loans:
Commercial business and other		1,572		-		307		13

Total loans with an allowance recorded		4,239		94		3,816		142

Total Impaired Loans:
Total mortgage loans	$	15,240	$	192	$	24,986	$	522

Total non-mortgage loans	$	7,925	$	138	$	20,700	$	1,090

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.” Loans that are non-accrual are designated as Substandard, Doubtful or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that may jeopardize 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 to the Allowance for Loan Losses. 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 the periods indicated:

	September 30, 2019
(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total

Multi-family residential	$	1,954	$	3,756	$	-	$	-	$	5,710
Commercial real estate		8,999		1,539		-		-		10,538
One-to-four family - mixed-use property		1,789		1,215		-		-		3,004
One-to-four family - residential		295		5,768		-		-		6,063
Construction		-		-		-		-		-
Small Business Administration		55		85		-		-		140
Taxi medallion		-		3,513		-		-		3,513
Commercial business and other		4,398		14,733		441		-		19,572
Total loans	$	17,490	$	30,609	$	441	$	-	$	48,540

	December 31, 2018
(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total

Multi-family residential	$	2,498	$	4,166	$	-	$	-	$	6,664
Commercial real estate		381		4,051		-		-		4,432
One-to-four family - mixed-use property		1,199		2,034		-		-		3,233
One-to-four family - residential		557		6,665		-		-		7,222
Construction		730		-		-		-		730
Small Business Administration		481		139		-		-		620
Taxi medallion		-		4,539		-		-		4,539
Commercial business and other		730		21,348		3,512		-		25,590
Total loans	$	6,576	$	42,942	$	3,512	$	-	$	53,030

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 $67.3 million and $228.5 million, respectively, at September 30, 2019.