CLIFTON BANCORP INC. AND SUBSIDIARIES
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Clifton Bancorp Inc. (the “Company”), the Company’s wholly-owned subsidiary, Clifton Savings Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Botany Inc. (“Botany”). The Company’s principal business is the ownership and operation of the Bank. Botany’s business consists solely of holding investment and mortgage-backed securities, and Botany is treated under New Jersey tax law as a New Jersey Investment Company. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, or cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three month period ended June 30, 2016 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended March 31, 2016, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on June 8, 2016.
The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of June 30, 2016 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.
2. EARNINGS PER SHARE (EPS)
Basic EPS is based on the weighted average number of common shares actually outstanding, and is adjusted for employee stock ownership plan shares not yet committed to be released and deferred compensation obligations required to be settled in shares of Company stock. Unvested restricted stock awards, which contain rights to non-forfeitable dividends, are considered participating securities and the two-class method of computing basic and diluted EPS is applied. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as outstanding stock options, were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted EPS is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable (such as stock options) or which could be converted into common stock, if dilutive, using the treasury stock method. Basic and diluted EPS have been determined based on the adjusted numbers of weighted average shares. The calculation of diluted EPS for the three months ended June 30, 2016 and 2015 includes incremental shares related to outstanding stock options of 59,768 and 72,568, respectively. Shares issued or retired during any period are weighted for the portion of the period they were outstanding. During the three months ended June 30, 2016 and 2015, the average number of options which were antidilutive were 1,060,953 and 11,030, respectively.
3. STOCK REPURCHASE AND STOCK BASED COMPENSATION
On March 11, 2015, the Company announced that the Board of Directors authorized a stock repurchase plan, that became effective on April 2, 2015, to acquire up to 2,731,000 shares, or 10%, of the Company’s outstanding common stock. On October 28, 2015, the Company announced that the Board of Directors authorized an extension of the stock repurchase plan to acquire an additional 2,569,000 shares, or 10%, of the Company’s outstanding common stock.
During the three months ended June 30, 2016 and 2015, approximately 404,500 and 1,478,000 shares were repurchased, respectively, under the repurchase plan at an aggregate cost of approximately $6.0 million, or $14.90 per share, and $20.4 million, or $13.78 per share, respectively.
- 8 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. STOCK REPURCHASE AND STOCK BASED COMPENSATION (CONT’D)
At the Company’s annual meeting of stockholders held on August 6, 2015, stockholders of the Company approved the Clifton Bancorp Inc. 2015 Equity Incentive Plan (“the Plan”). Under the Plan, the Company may grant options to purchase up to 1,705,944 of Company common stock and may grant up to 682,377 shares of common stock as restricted stock awards.
On September 2, 2015, 511,784 shares of restricted stock were awarded, with a grant date fair value of $13.84 per share. To fund the grants of restricted common stock, the Company issued 511,784 shares from authorized shares. All shares of restricted stock granted on this date vest in equal installments over a five-year period beginning one year from the date of grant.
On April 6, 2016, 8,000 shares of restricted stock were awarded, with a grant date fair value of $14.89 per share. To fund the grants of restricted common stock, the Company issued 8,000 shares from authorized shares. All shares of restricted stock granted on this date vest one year from the date of grant.
Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period. During the three months ended June 30, 2016 and 2015, $317,000 and $10,000, respectively, in expense was recognized in regard to these restricted stock awards. The Company recognized approximately $130,000 and $4,000 of income tax benefits resulting from this expense for three months ended June 30, 2016 and 2015, respectively. The expected future compensation expense relating to the 487,067 non-vested restricted shares outstanding at June 30, 2016 is $5.6 million over a weighted average period of 4.1 years.
The following is summary of the status of the Company’s non-vested restricted shares:
|
|
Restricted
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Non-vested at March 31, 2015
|
|
|
7,628
|
|
|
$
|
10.02
|
|
Granted
|
|
|
511,784
|
|
|
|
13.84
|
|
Vested
|
|
|
(6,226
|
)
|
|
|
9.27
|
|
Forfeited
|
|
|
(6,824
|
)
|
|
|
13.84
|
|
Non-vested at March 31, 2016
|
|
|
506,362
|
|
|
|
13.84
|
|
Granted
|
|
|
8,000
|
|
|
|
14.89
|
|
Forfeited
|
|
|
(27,295
|
)
|
|
|
13.84
|
|
Non-vested at June 30, 2016
|
|
|
487,067
|
|
|
|
13.86
|
|
Under the 2015 Equity Incentive Plan, on September 2, 2015, stock options to purchase 1,108,868 shares of Company common stock were awarded, with a grant date fair value of $1.63 per share and an expiration date of September 2, 2025. All of these stock options granted vest in equal installments over a five-year period beginning one year from the date of grant. Stock options were granted at an exercise price of $13.84 equal to the fair value of the Company’s common stock on the grant date based on quoted market prices. The fair value of the stock options of $1.63 was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected life of 6.5 years, risk-free rate of return of 1.92%, volatility of 12.50% and a dividend yield of 1.73%.
Under the 2015 Equity Incentive Plan, on April 6, 2016, stock options to purchase 10,000 shares of Company common stock were awarded, with a grant date fair value of $1.79 per share and an expiration date of April 6, 2026. All of these stock options granted vest one year from the date of grant. Stock options were granted at an exercise price of $14.89 equal to the fair value of the Company’s common stock on the grant date based on quoted market prices. The fair value of the stock options was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected life of 5.5 years, risk-free rate of return of 1.28%, volatility of 14.92% and a dividend yield of 1.61%.
The expected option life was estimated as the mid-point between the vesting period and ten year life of the options. The risk-free rate of return was based on the rate on the grant date of a U.S. Treasury Note with a term equal to the expected option life. Expected volatility was based on the historical stock price activity of the Company over the year prior to the grant date. The dividend rate was based on the cash dividends paid by the Company over the year prior to the grant date on its common stock.
- 9 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. STOCK REPURCHASE AND STOCK BASED COMPENSATION (CONT’D)
Management recognizes expense for the fair value of these awards on a straight line basis over the requisite service period. During the three months ended June 30, 2016 and 2015, $76,000 and $4,000, respectively, in stock option expense was recorded net of income tax benefits of $21,000 and $1,000 respectively. The expected future compensation expense relating to the 1,195,013 non-vested options outstanding at June 30, 2016 is $1.4 million over the weighted average period of 4.1 years.
A summary of stock option activity follows:
|
|
Number of
Stock Options
|
|
|
Range
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at March 31, 2015
|
|
|
345,174
|
|
|
$9.03 - $13.32
|
|
$
|
9.93
|
|
|
2.79 Years
|
|
|
1,444,950
|
|
Granted
|
|
|
1,108,868
|
|
|
13.84
|
|
|
13.84
|
|
|
|
|
|
|
|
Exercised
|
|
|
(183,731
|
)
|
|
9.03 - 10.46
|
|
|
10.45
|
|
|
|
|
|
632,424
|
|
Forfeited
|
|
|
(17,060
|
)
|
|
13.84
|
|
|
13.84
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
1,253,251
|
|
|
9.03 - 13.84
|
|
|
13.26
|
|
|
8.78 Years
|
|
|
2,333,383
|
|
Granted
|
|
|
10,000
|
|
|
14.89
|
|
|
14.89
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(68,238
|
)
|
|
13.84
|
|
|
13.84
|
|
|
|
|
|
|
|
Outstanding at June 30, 2016
|
|
|
1,195,013
|
|
|
9.03 - 14.89
|
|
|
13.24
|
|
|
8.51 Years
|
|
|
2,188,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2016
|
|
|
152,619
|
|
|
9.03 - 13.32
|
|
|
9.09
|
|
|
3.98 Years
|
|
|
912,355
|
|
4. RETIREMENT PLAN-COMPONENTS OF NET PERIODIC PENSION COST
Periodic pension expense for the directors’ retirement plan and a former president’s post-retirement health care plan were as follows:
|
|
|
|
|
|
Three months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In Thousands)
|
|
Service cost
|
|
$
|
23
|
|
|
$
|
44
|
|
Interest cost
|
|
|
20
|
|
|
|
31
|
|
Amortization of unrecognized (gain) loss
|
|
|
(1
|
)
|
|
|
12
|
|
Amortization of past service cost
|
|
|
3
|
|
|
|
9
|
|
Settlement charge
|
|
|
37
|
|
|
|
—
|
|
Net periodic benefit cost
|
|
$
|
82
|
|
|
$
|
96
|
|
- 10 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SECURITIES
The amortized cost, gross unrealized gains and losses and estimated fair value of securities available for sale and held to maturity for the dates indicated are as follows:
|
|
June 30, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
5,349
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
5,422
|
|
Total available for sale securities
|
|
$
|
5,349
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
5,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
9,460
|
|
|
$
|
131
|
|
|
$
|
—
|
|
|
$
|
9,591
|
|
Total available for sale securities
|
|
$
|
9,460
|
|
|
$
|
131
|
|
|
$
|
—
|
|
|
$
|
9,591
|
|
- 11 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SECURITIES (CONT’D)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
24,950
|
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
25,059
|
|
Corporate bonds
|
|
|
35,032
|
|
|
|
758
|
|
|
|
—
|
|
|
|
35,790
|
|
Municipal bonds
|
|
|
8,196
|
|
|
|
160
|
|
|
|
—
|
|
|
|
8,356
|
|
|
|
|
68,178
|
|
|
|
1,027
|
|
|
|
—
|
|
|
|
69,205
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
56,217
|
|
|
|
1,927
|
|
|
|
—
|
|
|
|
58,144
|
|
Federal National Mortgage Association
|
|
|
195,895
|
|
|
|
7,219
|
|
|
|
81
|
|
|
|
203,033
|
|
Government National Mortgage Association
|
|
|
12,912
|
|
|
|
750
|
|
|
|
20
|
|
|
|
13,642
|
|
|
|
|
265,024
|
|
|
|
9,896
|
|
|
|
101
|
|
|
|
274,819
|
|
Total held to maturity securities
|
|
$
|
333,202
|
|
|
$
|
10,923
|
|
|
$
|
101
|
|
|
$
|
344,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
29,941
|
|
|
$
|
75
|
|
|
$
|
21
|
|
|
$
|
29,995
|
|
Corporate bonds
|
|
|
45,037
|
|
|
|
685
|
|
|
|
7
|
|
|
|
45,715
|
|
Municipal bonds
|
|
|
5,335
|
|
|
|
119
|
|
|
|
1
|
|
|
|
5,453
|
|
|
|
|
80,313
|
|
|
|
879
|
|
|
|
29
|
|
|
|
81,163
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
53,004
|
|
|
|
1,494
|
|
|
|
45
|
|
|
|
54,453
|
|
Federal National Mortgage Association
|
|
|
200,672
|
|
|
|
5,661
|
|
|
|
235
|
|
|
|
206,098
|
|
Government National Mortgage Association
|
|
|
13,882
|
|
|
|
754
|
|
|
|
30
|
|
|
|
14,606
|
|
|
|
|
267,558
|
|
|
|
7,909
|
|
|
|
310
|
|
|
|
275,157
|
|
Total held to maturity securities
|
|
$
|
347,871
|
|
|
$
|
8,788
|
|
|
$
|
339
|
|
|
$
|
356,320
|
|
- 12 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SECURITIES (CONT’D)
Contractual maturity data for securities are as follows:
|
|
June 30, 2016
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
Due after five through ten years
|
|
$
|
1,578
|
|
|
$
|
1,590
|
|
Due after ten years
|
|
|
3,771
|
|
|
|
3,832
|
|
Total available for sale securities
|
|
$
|
5,349
|
|
|
$
|
5,422
|
|
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
Due less than one year
|
|
$
|
23,521
|
|
|
$
|
23,547
|
|
Due after one through five years
|
|
|
22,249
|
|
|
|
22,420
|
|
Due after five through ten years
|
|
|
21,900
|
|
|
|
22,695
|
|
Due after ten years
|
|
|
508
|
|
|
|
543
|
|
|
|
|
68,178
|
|
|
|
69,205
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
Due after one through five years
|
|
|
15,012
|
|
|
|
15,189
|
|
Due after five through ten years
|
|
|
75,695
|
|
|
|
78,362
|
|
Due after ten years
|
|
|
174,317
|
|
|
|
181,268
|
|
|
|
|
265,024
|
|
|
|
274,819
|
|
Total held to maturity securities
|
|
$
|
333,202
|
|
|
$
|
344,024
|
|
The amortized cost and carrying values shown above are by contractual final maturity. Actual maturities will differ from contractual final maturities due to scheduled monthly payments related to mortgage-backed securities and due to the borrowers having the right to prepay obligations with or without prepayment penalties. The Company’s mortgage-backed securities are generally secured by residential mortgage loans with contractual maturities of 15 years or greater, and multi-family loans with maturities of five to 10 years. However, the effective lives of those securities are generally shorter than their contractual maturities due to principal amortization and prepayment of the loans within those securities. Investors in pass-through securities generally share in the receipt of principal repayments on a pro-rata basis as paid by the borrowers.
- 13 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SECURITIES (CONT’D)
The age of gross unrealized losses and the fair value of related securities at June 30 and March 31, 2016 were as follows:
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
June 30, 2016
|
|
Fair
Value
|
|
|
Losses
|
|
|
Fair
Value
|
|
|
Losses
|
|
|
Fair
Value
|
|
|
Losses
|
|
|
|
(In Thousands)
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,117
|
|
|
$
|
81
|
|
|
$
|
8,117
|
|
|
$
|
81
|
|
Government National Mortgage Association
|
|
|
—
|
|
|
|
—
|
|
|
|
1,247
|
|
|
|
20
|
|
|
|
1,247
|
|
|
|
20
|
|
Total held to maturity securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,364
|
|
|
$
|
101
|
|
|
$
|
9,364
|
|
|
$
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
Unrealized
|
|
March 31, 2016
|
|
Fair
Value
|
|
|
Losses
|
|
|
Fair
Value
|
|
|
Losses
|
|
|
Fair
Value
|
|
|
Losses
|
|
|
|
(In Thousands)
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government-sponsored enterprises
|
|
$
|
4,979
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,979
|
|
|
$
|
21
|
|
Corporate bonds
|
|
|
4,993
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,993
|
|
|
|
7
|
|
Municipal bonds
|
|
|
787
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
787
|
|
|
|
1
|
|
|
|
|
10,759
|
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,759
|
|
|
|
29
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation
|
|
|
—
|
|
|
|
—
|
|
|
|
3,925
|
|
|
|
45
|
|
|
|
3,925
|
|
|
|
45
|
|
Federal National Mortgage Association
|
|
|
2,116
|
|
|
|
9
|
|
|
|
15,913
|
|
|
|
226
|
|
|
|
18,029
|
|
|
|
235
|
|
Government National Mortgage Association
|
|
|
—
|
|
|
|
—
|
|
|
|
1,246
|
|
|
|
30
|
|
|
|
1,246
|
|
|
|
30
|
|
|
|
|
2,116
|
|
|
|
9
|
|
|
|
21,084
|
|
|
|
301
|
|
|
|
23,200
|
|
|
|
310
|
|
Total held to maturity securities
|
|
$
|
12,875
|
|
|
$
|
38
|
|
|
$
|
21,084
|
|
|
$
|
301
|
|
|
$
|
33,959
|
|
|
$
|
339
|
|
Management does not believe that any of the unrealized losses at June 30, 2016 (two corporate bonds and three municipal bonds included in debt securities with an unrealized loss totaling less than $1,000, and four FNMA mortgage-backed securities and one GNMA mortgage-backed security) represent an other-than-temporary impairment as they are primarily related to market interest rates and not related to the underlying credit quality of the issuers of the securities. Additionally, the Company and its subsidiaries have the ability, and management has the intent, to hold such securities for the time necessary to recover amortized cost and does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of their amortized cost.
During the three months ended June 30, 2016 and 2015, the proceeds from sales of securities available for sale totaled $3.7 million and $1.9 million, respectively, resulting in gross realized gains of $84,000 and $72,000, respectively.
- 14 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
The following is a summary of loans by segment and the classes within those segments:
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2016
|
|
|
|
(In Thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
614,475
|
|
|
$
|
617,694
|
|
Multi-family
|
|
|
86,156
|
|
|
|
56,244
|
|
Commercial
|
|
|
116,591
|
|
|
|
97,379
|
|
|
|
|
817,222
|
|
|
|
771,317
|
|
Commercial lines of credit
|
|
|
1,070
|
|
|
|
201
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Second mortgage
|
|
|
6,096
|
|
|
|
6,173
|
|
Passbook or certificate
|
|
|
619
|
|
|
|
600
|
|
Equity lines of credit
|
|
|
3,300
|
|
|
|
3,164
|
|
Other loans
|
|
|
70
|
|
|
|
70
|
|
|
|
|
10,085
|
|
|
|
10,007
|
|
Total Loans
|
|
|
828,377
|
|
|
|
781,525
|
|
Net purchase premiums, discounts, and deferred loan costs
|
|
|
3,027
|
|
|
|
3,064
|
|
Total Loans, Net
|
|
$
|
831,404
|
|
|
$
|
784,589
|
|
The allowance for loan losses consists of general and unallocated components. For loans that are classified as impaired, a valuation allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component of the allowance covers pools of loans by loan class not considered impaired, as well as smaller balance homogeneous loans, such as one- to four-family real estate, construction real estate, second mortgage loans, home equity lines of credit and passbook loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors to reflect current conditions. The qualitative risk factors include:
1.
|
Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.
|
2.
|
National, regional, and local economic and business conditions, including the value of underlying collateral for collateral dependent loans.
|
3.
|
Nature and volume of the portfolio and terms of loans.
|
4.
|
Experience, ability, and depth of lending management and staff.
|
5.
|
The quality of the Bank’s loan review system.
|
6.
|
Volume and severity of past due, classified and nonaccrual loans.
|
7.
|
Existence and effect of any concentrations of credit and changes in the level of such concentrations.
|
8.
|
Effect of external factors, such as competition and legal and regulatory requirements.
|
- 15 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR
LOAN LOSSES (CONT’D)
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.
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 losses in the portfolio.
The evaluation of the adequacy of the allowance is based on an analysis which categorizes the entire loan portfolio by certain risk characteristics. The loan portfolio segments are further disaggregated into the following loan classes, where the risk level for each type is analyzed when determining the allowance for loan losses.
Real Estate:
1. One- to Four-Family Loans - consists of loans secured by first liens on either owner occupied or investment properties. These loans can be affected by economic conditions and the value of the underlying properties. The risk is considered relatively low as the Bank has always had conservative underwriting standards and does not have sub-prime loans in its loan portfolio.
2. Multi-Family Loans - consists of loans secured by multi-family real estate which generally involve a greater degree of risk than one- to four-family residential mortgage loans. These loans can be affected by economic conditions and the value of the underlying properties.
3. Commercial Loans - consists of loans secured by commercial real estate which generally involve a greater degree of risk than one- to four-family residential mortgage loans. These loans can be affected by economic conditions and the value of the underlying properties. These loans are affected by economic conditions to a greater degree than one- to four-family and multi-family loans.
4. Construction Loans - consists primarily of the financing of construction of one- to four-family properties or construction/permanent loans for the construction of one- to four-family homes to be occupied by the borrower. Construction loans generally are considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate due to uncertainty of construction costs. Independent inspections are performed prior to disbursement of loan proceeds as construction progresses to mitigate these risks. These loans are also affected by economic conditions.
Commercial Lines of Credit:
Commercial lines of credit consist of a commercial line of credit that is either secured by commercial real estate or is unsecured. Commercial lines of credit are generally considered to involve a higher degree of risk of loss due to the concentration of principal in a limited number of loans and/or borrowers and the effects of general economic conditions on the business and/or the value of the underlying properties. Commercial lines of credit generally have shorter terms and higher interest rates than other forms of lending.
Consumer:
1. Second Mortgage and Equity Lines of Credit - consists of one- to four-family loans secured by first, second or third liens (when the Bank has the two other lien positions). These loans are affected by the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. The credit risk is considered slightly higher than one- to four-family first lien loans as these loans are also dependent on the value of underlying properties, but in many instances, have the added risk of a subordinate collateral position.
2. Passbook or Certificate and Other Loans - consists of loans secured by passbook accounts and certificates of deposits and unsecured loans. The passbook or certificate loans have low credit risk as they are fully secured by their collateral. Unsecured loans, included in other loans, are two loans in a New Jersey loan fund and they also are considered a low credit risk.
- 16 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)
The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Non-classified assets are rated as a pass or pass-watch. Pass-watch loans require current oversight or tracking by management generally due to incomplete documentation or monitoring due to previous delinquent status.
In addition, the Office of the Comptroller of the Currency (the “OCC”), as an integral part of its examination process, periodically reviews the Bank’s loan portfolio and the related allowance for loan losses. The OCC may require the allowance for loan losses to be increased based on its review of information available at the time of the examination.
The change in the allowance for loan losses for the three months ended June 30, 2016 and 2015 is as follows:
|
|
One-to-Four
Family
Real Estate
|
|
|
Multi-Family
Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Lines of
Credit
|
|
|
Second
Mortgage
and
Equity Lines
of Credit
|
|
|
Passbook
or Certificate
and Other
Loans
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
At March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for
loan losses
|
|
$
|
2,922
|
|
|
$
|
505
|
|
|
$
|
865
|
|
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
4,360
|
|
Charge-offs
|
|
|
(112
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(112
|
)
|
Recoveries
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Provision charged to
operations
|
|
|
91
|
|
|
|
269
|
|
|
|
171
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
526
|
|
At June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for
loan losses
|
|
$
|
2,902
|
|
|
$
|
774
|
|
|
$
|
1,036
|
|
|
$
|
11
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
4,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-Four
Family
Real Estate
|
|
|
Multi-Family
Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Construction
Real Estate
|
|
|
Second
Mortgage
and
Equity Lines
of Credit
|
|
|
Passbook
or Certificate
and Other
Loans
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
At March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for
loan losses
|
|
$
|
2,704
|
|
|
$
|
350
|
|
|
$
|
353
|
|
|
$
|
1
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
3,475
|
|
Charge-offs
|
|
|
(26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26
|
)
|
Recoveries
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
Provision charged to
operations
|
|
|
143
|
|
|
|
(50
|
)
|
|
|
(25
|
)
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
2
|
|
|
|
73
|
|
At June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for
loan losses
|
|
$
|
2,824
|
|
|
$
|
300
|
|
|
$
|
328
|
|
|
$
|
1
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
3,525
|
|
- 17 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)
The following table presents the allocation of the allowance for loan losses and related loans by loan class at June 30 and March 31, 2016.
June 30, 2016
|
|
One-to-Four
Family
Real Estate
|
|
|
Multi-Family
Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Lines of
Credit
|
|
|
Second
Mortgage
and
Equity Lines
of Credit
|
|
|
Passbook
or Certificate
and Other
Loans
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Allowance for loan
losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for
impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively
evaluated for
impairment
|
|
|
2,902
|
|
|
|
774
|
|
|
|
1,036
|
|
|
|
11
|
|
|
|
35
|
|
|
|
—
|
|
|
|
17
|
|
|
|
4,775
|
|
Total
|
|
$
|
2,902
|
|
|
$
|
774
|
|
|
$
|
1,036
|
|
|
$
|
11
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
4,775
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for
impairment
|
|
$
|
1,380
|
|
|
$
|
196
|
|
|
$
|
185
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,773
|
|
Collectively
evaluated for
impairment
|
|
|
613,095
|
|
|
|
85,960
|
|
|
|
116,406
|
|
|
|
1,070
|
|
|
|
9,384
|
|
|
|
689
|
|
|
|
—
|
|
|
|
826,604
|
|
Total
|
|
$
|
614,475
|
|
|
$
|
86,156
|
|
|
$
|
116,591
|
|
|
$
|
1,070
|
|
|
$
|
9,396
|
|
|
$
|
689
|
|
|
$
|
—
|
|
|
$
|
828,377
|
|
March 31, 2016
|
|
One-to-Four
Family
Real Estate
|
|
|
Multi-Family
Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Lines of
Credit
|
|
|
Second
Mortgage
and
Equity Lines
of Credit
|
|
|
Passbook
or Certificate
and Other
Loans
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated for
impairment
|
|
|
2,922
|
|
|
|
505
|
|
|
|
865
|
|
|
|
2
|
|
|
|
44
|
|
|
|
—
|
|
|
|
22
|
|
|
|
4,360
|
|
Total
|
|
$
|
2,922
|
|
|
$
|
505
|
|
|
$
|
865
|
|
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
4,360
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$
|
1,221
|
|
|
$
|
197
|
|
|
$
|
186
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,616
|
|
Collectively evaluated for
impairment
|
|
|
616,473
|
|
|
|
56,047
|
|
|
|
97,193
|
|
|
|
201
|
|
|
|
9,325
|
|
|
|
670
|
|
|
|
—
|
|
|
|
779,909
|
|
Total
|
|
$
|
617,694
|
|
|
$
|
56,244
|
|
|
$
|
97,379
|
|
|
$
|
201
|
|
|
$
|
9,337
|
|
|
$
|
670
|
|
|
$
|
—
|
|
|
$
|
781,525
|
|
- 18 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)
The aggregate amount of classified loan balances are as follows at June 30 and March 31, 2016:
June 30, 2016
|
|
One-to Four
-Family
Real Estate
|
|
|
Multi-family
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Lines of
Credit
|
|
|
Second
Mortgage and
Equity Lines
of Credit
|
|
|
Passbook or
Certificate
and Other
Loans
|
|
|
Total
Loans
|
|
|
|
(In Thousands)
|
|
Non-classified:
|
|
$
|
610,645
|
|
|
$
|
86,156
|
|
|
$
|
116,406
|
|
|
$
|
1,070
|
|
|
$
|
9,396
|
|
|
$
|
689
|
|
|
$
|
824,362
|
|
Classified:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special mention
|
|
|
374
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
374
|
|
Substandard
|
|
|
3,456
|
|
|
|
—
|
|
|
|
185
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,641
|
|
Doubtful
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans
|
|
$
|
614,475
|
|
|
$
|
86,156
|
|
|
$
|
116,591
|
|
|
$
|
1,070
|
|
|
$
|
9,396
|
|
|
$
|
689
|
|
|
$
|
828,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
One-to Four
-Family
Real Estate
|
|
|
Multi-family
Real Estate
|
|
|
Commercial
Real Estate
|
|
|
Commercial
Lines of
Credit
|
|
|
Second
Mortgage and
Equity Lines
of Credit
|
|
|
Passbook or
Certificate
and Other
Loans
|
|
|
Total
Loans
|
|
|
|
(In Thousands)
|
|
Non-classified:
|
|
$
|
613,559
|
|
|
$
|
56,244
|
|
|
$
|
97,193
|
|
|
$
|
201
|
|
|
$
|
9,277
|
|
|
$
|
670
|
|
|
$
|
777,144
|
|
Classified:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special mention
|
|
|
639
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
639
|
|
Substandard
|
|
|
3,496
|
|
|
|
—
|
|
|
|
186
|
|
|
|
—
|
|
|
|
60
|
|
|
|
—
|
|
|
|
3,742
|
|
Doubtful
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total loans
|
|
$
|
617,694
|
|
|
$
|
56,244
|
|
|
$
|
97,379
|
|
|
$
|
201
|
|
|
$
|
9,337
|
|
|
$
|
670
|
|
|
$
|
781,525
|
|
The following table provides information with respect to the Bank’s nonaccrual loans at June 30 and March 31, 2016. Loans are generally placed on nonaccrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. Nonaccrual loans differed from the amount of total loans past due greater than 90 days due to some previously delinquent loans that are currently not more than 90 days delinquent which are maintained on nonaccrual status for a minimum of six months until the borrower has demonstrated the ability to satisfy the loan terms. A loan is returned to accrual status when there is sustained period of repayment performance (generally six consecutive months) by the borrower in accordance with the contractual terms of the loan, or in some circumstances, when the factors indicating doubtful collectability no longer exist and the Bank expects repayment of the remaining contractual amounts due.
|
|
June 30,
2016
|
|
|
March 31,
2016
|
|
|
|
(In Thousands)
|
|
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
2,929
|
|
|
$
|
3,412
|
|
Commercial
|
|
|
185
|
|
|
|
186
|
|
Consumer and other loans:
|
|
|
|
|
|
|
|
|
Second mortgage
|
|
|
—
|
|
|
|
60
|
|
Total nonaccrual loans
|
|
$
|
3,114
|
|
|
$
|
3,658
|
|
- 19 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)
The following table provides information about delinquencies in the Bank’s loan portfolio at June 30 and March 31, 2016.
|
|
30-59
|
|
|
60-89
|
|
|
90 Days
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Days
|
|
|
Days
|
|
|
Or More
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
June 30, 2016
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Current
|
|
|
Loans
|
|
|
|
(In Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
$
|
3,587
|
|
|
$
|
246
|
|
|
$
|
2,476
|
|
|
$
|
6,309
|
|
|
$
|
608,166
|
|
|
$
|
614,475
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
86,156
|
|
|
|
86,156
|
|
Commercial
|
|
|
—
|
|
|
|
—
|
|
|
|
185
|
|
|
|
185
|
|
|
|
116,406
|
|
|
|
116,591
|
|
Commercial lines of credit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,070
|
|
|
|
1,070
|
|
Consumer and other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage and equity lines of credit
|
|
|
51
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51
|
|
|
|
9,345
|
|
|
|
9,396
|
|
Passbook or certificate and other loans
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|
686
|
|
|
|
689
|
|
Total
|
|
$
|
3,638
|
|
|
$
|
249
|
|
|
$
|
2,661
|
|
|
$
|
6,548
|
|
|
$
|
821,829
|
|
|
$
|
828,377
|
|
There were no loans that are past due greater than 90 days that were accruing as of June 30 and March 31, 2016.
We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure on an in-substance repossession. As of June 30, 2016, we hold three foreclosed residential real estate properties with a carrying value of $367,000 as a result of obtaining physical possession. In addition, as of June 30, 2016, we have four residential mortgage loans with a carrying value of $1.1 million collateralized by residential real estate property for which formal foreclosure proceedings are in process.
A loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement. The Company considers one- to four-family mortgage loans and consumer installment loans to be homogeneous and, therefore, does not generally evaluate them individually for impairment, unless they are considered troubled debt restructurings. All other loans are evaluated for impairment on an individual basis.
Impaired loans, none of which had a related allowance at or for the three months ending June 30, 2016 and 2015, and at or for the year ended March 31, 2016, were as follows:
|
|
|
|
|
|
Unpaid
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Recorded
|
|
|
Income
|
|
At or For The Three Months Ended June 30, 2016
|
|
Investment
|
|
|
Balance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
(In Thousands)
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
1,380
|
|
|
$
|
1,702
|
|
|
$
|
1,295
|
|
|
$
|
10
|
|
Multi-family
|
|
|
196
|
|
|
|
220
|
|
|
|
197
|
|
|
|
3
|
|
Commercial
|
|
|
185
|
|
|
|
185
|
|
|
|
185
|
|
|
|
2
|
|
Consumer and other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
|
—
|
|
Total impaired loans
|
|
$
|
1,773
|
|
|
$
|
2,119
|
|
|
$
|
1,689
|
|
|
$
|
15
|
|
- 20 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (CONT’D)
|
|
|
|
|
|
Unpaid
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Recorded
|
|
|
Income
|
|
At or For The Three Months Ended June 30, 2015
|
|
Investment
|
|
|
Balance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
(In Thousands)
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
1,088
|
|
|
$
|
1,260
|
|
|
$
|
1,005
|
|
|
$
|
7
|
|
Multi-family
|
|
|
776
|
|
|
|
801
|
|
|
|
779
|
|
|
|
15
|
|
Commercial
|
|
|
436
|
|
|
|
436
|
|
|
|
437
|
|
|
|
4
|
|
Consumer and other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
|
—
|
|
Total impaired loans
|
|
$
|
2,312
|
|
|
$
|
2,509
|
|
|
$
|
2,233
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Recorded
|
|
|
Income
|
|
At or For The Year Ended March 31, 2016
|
|
Investment
|
|
|
Balance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
(In Thousands)
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
1,221
|
|
|
$
|
1,412
|
|
|
$
|
1,091
|
|
|
$
|
41
|
|
Multi-family
|
|
|
197
|
|
|
|
222
|
|
|
|
683
|
|
|
|
46
|
|
Commercial
|
|
|
186
|
|
|
|
186
|
|
|
|
285
|
|
|
|
30
|
|
Consumer and other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second mortgage
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
|
1
|
|
Total impaired loans
|
|
$
|
1,616
|
|
|
$
|
1,832
|
|
|
$
|
2,071
|
|
|
$
|
118
|
|
The recorded investment in loans modified in a troubled debt restructuring totaled $1.4 million and $994,000, respectively, at June 30 and March 31, 2016, of which $195,000 and $0, respectively, were 90 days or more past due, and $17,000 and $213,000, respectively, were 30 to 59 days past due. The remaining loans modified were current at the time of the restructuring and have complied with the terms of their restructure agreements at June 30 and March 31, 2016. Loans that were modified in a troubled debt restructuring represent concessions made to borrowers experiencing financial difficulties. The Bank works with these borrowers to modify existing loan terms usually by extending maturities or reducing interest rates. The Bank records an impairment loss, if any, based on the present value of expected future cash flows discounted at the original loan’s effective interest rate. Subsequently, these loans are individually evaluated for impairment.
The following table presents troubled debt restructurings by class during the period indicated.
|
|
|
|
Pre-restructuring
|
|
|
Post-restructuring
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Charge-off
|
|
|
|
Number of
|
|
Recorded
|
|
|
Recorded
|
|
|
Recorded
Upon
|
|
|
|
Loans
|
|
Investment
|
|
|
Investment
|
|
|
Restructuring
|
|
|
|
|
|
(Dollar In Thousands)
|
|
Three Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four-Family Real Estate
|
|
2
|
|
$
|
468
|
|
|
$
|
411
|
|
|
$
|
—
|
|
Three Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four-Family Real Estate
|
|
1
|
|
$
|
86
|
|
|
$
|
99
|
|
|
$
|
—
|
|
There were no defaults that occurred within twelve months of restructuring during the three months ended June 30, 2016 and 2015.
- 21 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FAIR VALUE
Accounting guidance on fair value measurement establishes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted for similar assets or liabilities; quoted prices in markets that are not active; or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In addition, the guidance requires the Company to disclose the fair value for certain assets and liabilities on both a recurring and non-recurring basis.
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30 and March 31, 2016 are as follows:
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
Carrying
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
Description
|
|
Value
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
(In Thousands)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
5,422
|
|
|
$
|
—
|
|
|
$
|
5,422
|
|
|
$
|
—
|
|
Total securities available for sale
|
|
$
|
5,422
|
|
|
$
|
—
|
|
|
$
|
5,422
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Association
|
|
$
|
9,591
|
|
|
$
|
—
|
|
|
$
|
9,591
|
|
|
$
|
—
|
|
Total securities available for sale
|
|
$
|
9,591
|
|
|
$
|
—
|
|
|
$
|
9,591
|
|
|
$
|
—
|
|
- 22 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FAIR VALUE (CONT’D)
For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30 and March 31, 2016 are as follow:
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
(Level 3)
|
|
|
|
Carrying
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
Description
|
|
Value
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
(In Thousands)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33
|
|
Real estate owned
|
|
|
56
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
364
|
|
There were no liabilities measured at fair value on a recurring or non-recurring basis at June 30 and March 31, 2016.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value.
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
Range (Weighted
|
|
|
Estimate
|
|
|
Techniques
|
|
Input
|
|
Average)
|
|
|
(Dollars in Thousand)
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
33
|
|
|
Market valuation of underlying collateral (1)
|
|
Selling costs (2)
|
|
7% (7%)
|
Real estate owned
|
|
|
56
|
|
|
Market valuation of property (1)
|
|
Selling costs (2)
|
|
7% (7%)
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
364
|
|
|
Market valuation of underlying collateral (1)
|
|
Selling costs (2)
|
|
7% (7%)
|
(1)
|
Fair value is based on third party appraisals.
|
(2)
|
Includes estimated costs to sell.
|
The following information should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of certain of the Company’s assets and liabilities at June 30 and March 31, 2016:
Cash and Cash Equivalents, Interest Receivable, and Interest Payable (Carried at Cost)
The carrying amounts reported in the consolidated statements of financial condition for cash and cash equivalents, interest receivable, and interest payable approximate their fair values.
- 23 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FAIR VALUE (CONT’D)
Securities
The fair value of all securities, whether classified as available for sale (carried at fair value) or held to maturity (carried at cost), is determined by reference to quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Securities are measured on a recurring basis. The fair values of these securities are obtained from quotes received from an independent broker. The Company’s broker provides it with prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available. As the Company is responsible for the determination of fair value, it performs monthly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Company compares the prices received from the pricing service to a secondary pricing source. The Company’s internal price verification procedures and review of fair value methodology documentation provided by third-party pricing services has not historically resulted in adjustment in the prices obtained from the pricing service.
Loans Receivable (Carried at Cost)
Fair value is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, of such loans.
Impaired Loans (Carried based on Collateral Fair Value or Discounted Cash Flows)
Impaired loans are those accounted for under ASC Topic 310 “Accounting by Creditors for Impairment of a Loan” in which the Company has measured impairment generally based on either the fair value of the loan’s collateral or discounted cash flows. These assets are included as Level 3 assets.
Federal Home Loan Bank of New York Stock (Carried at Cost)
Fair value approximates cost basis as these instruments are redeemable only with the issuing agency at face value.
Deposits (Carried at Cost)
The fair value of non-interest-bearing demand, interest-bearing demand, and Savings and Club accounts is the amount payable on demand at the reporting date. For fixed-maturity certificates of deposit, fair value is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.
Advances from Federal Home Loan Bank of New York (Carried at Cost)
The fair value is estimated by discounting future cash flows using rates currently offered for liabilities of similar remaining maturities, or when available, quoted market prices.
Commitments to Extend Credit
The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.
As of June 30 and March 31, 2016, the fair value of the commitments to extend credit were not considered to be material.
- 24 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FAIR VALUE
(CONT’D)
The carrying amounts and fair values of financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices
|
|
|
(Level 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
June 30, 2016
|
|
Value
|
|
|
Fair Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
30,140
|
|
|
$
|
30,140
|
|
|
$
|
30,140
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities available for sale
|
|
|
5,422
|
|
|
|
5,422
|
|
|
|
—
|
|
|
|
5,422
|
|
|
|
—
|
|
Securities held to maturity
|
|
|
333,202
|
|
|
|
344,024
|
|
|
|
—
|
|
|
|
344,024
|
|
|
|
—
|
|
Net loans receivable
|
|
|
826,629
|
|
|
|
833,563
|
|
|
|
—
|
|
|
|
—
|
|
|
|
833,563
|
|
Federal Home Loan Bank of New York stock
|
|
|
12,302
|
|
|
|
12,302
|
|
|
|
—
|
|
|
|
12,302
|
|
|
|
—
|
|
Interest receivable
|
|
|
3,224
|
|
|
|
3,224
|
|
|
|
—
|
|
|
|
3,224
|
|
|
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
719,592
|
|
|
|
726,081
|
|
|
|
—
|
|
|
|
726,081
|
|
|
|
—
|
|
FHLB advances
|
|
|
244,000
|
|
|
|
247,066
|
|
|
|
—
|
|
|
|
247,066
|
|
|
|
—
|
|
Interest payable
|
|
|
428
|
|
|
|
428
|
|
|
|
—
|
|
|
|
428
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices
|
|
|
(Level 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
March 31, 2016
|
|
Value
|
|
|
Fair Value
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
31,069
|
|
|
$
|
31,069
|
|
|
$
|
31,069
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities available for sale
|
|
|
9,591
|
|
|
|
9,591
|
|
|
|
—
|
|
|
|
9,591
|
|
|
|
—
|
|
Securities held to maturity
|
|
|
347,871
|
|
|
|
356,320
|
|
|
|
—
|
|
|
|
356,320
|
|
|
|
—
|
|
Net loans receivable
|
|
|
780,229
|
|
|
|
781,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
781,820
|
|
Federal Home Loan Bank of New York stock
|
|
|
11,665
|
|
|
|
11,665
|
|
|
|
—
|
|
|
|
11,665
|
|
|
|
—
|
|
Interest receivable
|
|
|
3,112
|
|
|
|
3,112
|
|
|
|
—
|
|
|
|
3,112
|
|
|
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
694,662
|
|
|
|
700,372
|
|
|
|
—
|
|
|
|
700,372
|
|
|
|
—
|
|
FHLB advances
|
|
|
231,500
|
|
|
|
234,470
|
|
|
|
—
|
|
|
|
234,470
|
|
|
|
—
|
|
Interest payable
|
|
|
403
|
|
|
|
403
|
|
|
|
—
|
|
|
|
403
|
|
|
|
—
|
|
8. RECENT ACCOUNTING PRONOUNCEMENTS
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) issued their final standard on revenue from contracts with customers. The standard, issued as ASU 2014-09 by the FASB and as IFRS 152 by the IASB, and amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-12, outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The goals of the revenue recognition project are to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements while also providing “a more robust framework for addressing revenue issues.” The boards believe that the standard will improve the consistency of requirements, comparability of revenue recognition practices, and usefulness of disclosures. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of this standard effective April 1, 2018 is not expected to have a material impact on the Company’s consolidated financial statements.
- 25 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RECENT ACCOUNTING PRONOUNCEMENTS (CONT’D)
On January 5, 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which is intended to improve the recognition and measurement of financial instruments. The ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of this standard effective April 1, 2018 is not expected to have a material impact on the Company’s consolidated financial statements.
On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 includes a lessee accounting model that recognizes two types of leases - finance leases and operating leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. New disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases are also required. These disclosures include qualitative and quantitative requirements, providing information about the amounts recorded in the financial statements. For a public entity, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the standard’s impact, and the adoption of this standard, effective April 1, 2019, is not expected to have a material impact on the Company’s consolidated financial statements.
On March 30, 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The amendment simplifies several aspects of the accounting for employee share-based payment transactions including the following: Accounting for income taxes; Classification of excess tax benefits on the statement of cash flow; Forfeitures; Statutory tax withholding requirements; Classification of awards as either equity or liabilities; Classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The ASU is aimed at reducing the cost and complexity of accounting for share-based payments, that will likely result in significant changes to net income and earnings per share, including the effect of the exclusion of windfall tax benefits from the hypothetical proceeds used to calculate the repurchase of shares under the treasury stock method. For a public entity, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption will be permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company has adopted the standard effective April 1, 2016 on a prospective basis. Prior periods have not been retrospectively adjusted. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The ASU also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the ALLL. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. For a public entity, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. While the standard’s ultimate impact on the Company’s financial statements remains unknown today, we are preparing to implement this standard on April 1, 2020.
- 26 -
CLIFTON BANCORP INC. AND SUBSIDIARIES
ITEM 2: