Item 1. Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in Thousands Except Per Share Amounts)
1. NATURE OF OPERATIONS
The Holding Company is a Delaware corporation and parent company of the Bank, a New York State chartered stock savings bank. The Holding Company's direct subsidiaries are the Bank, Dime Community Capital Trust 1 and 842 Manhattan Avenue Corp. The Bank's direct subsidiaries are Boulevard Funding Corp., Dime Insurance Agency Inc. (
f/k/a
Havemeyer Investments, Inc.), DSBW Preferred Funding Corporation, DSBW Residential Preferred Funding Corp., Dime Reinvestment Corp. and 195 Havemeyer Corp.
The Bank maintains its headquarters in the Williamsburg section of Brooklyn, New York and operates twenty-six full service retail banking offices located in the New York City ("NYC") boroughs of Brooklyn, Queens, and the Bronx, and in Nassau County, New York. The Bank's principal business is gathering deposits from customers within its market area and via the internet, and investing them primarily in multifamily residential, commercial real estate and mixed used loans, as well as mortgage-backed securities ("MBS"), obligations of the U.S. Government and Government Sponsored Enterprises ("GSEs"), and corporate debt and equity securities. All of the Bank's lending occurs in the greater NYC metropolitan area.
2. SUMMARY OF ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the Company's financial condition as of March 31, 2013 and December 31, 2012, the results of operations and statements of comprehensive income for the three-month periods ended March 31, 2013 and 2012, and the changes in stockholders' equity and cash flows for the three months ended March 31, 2013 and 2012. The results of operations for the three-month period ended March 31, 2013 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2013. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to the rules and regulations of the U. S. Securities and Exchange Commission ("SEC').
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Please see "Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" for a discussion of areas in the accompanying condensed consolidated financial statements utilizing significant estimates.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2012 and notes thereto.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02"), which seeks to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The provisions of ASU 2013-02 are applicable to all companies that report items of other comprehensive income, such as the Company. ASU 2013-02 requires a presentation (either on the face of the statement where net income is presented or in the notes to the financial statements) of the effects on the line items of net income of significant amounts that have been reclassified in their entirety and in accordance with GAAP from accumulated other comprehensive income to net income in the same reporting period. ASU 2013-02 additionally requires a cross-reference to any other disclosures currently required under GAAP related to other reclassification items that, under GAAP, are not required to be reclassified in their entirety from accumulated other comprehensive income to net income in the same reporting period. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the Company's financial statements. All information required to be presented or cross-referenced under ASU 2013-02 is currently required to be disclosed, in some capacity, in the financial statements under GAAP. The Company adopted ASU 2013-02 effective January 1, 2013. Adoption of ASU 2013-02 had no impact on the Company's consolidated financial condition or results of operations.
4. TREASURY STOCK
The Holding Company did not repurchase any of its common stock into treasury during the three months ended March 31, 2013 or 2012.
5. OTHER COMPREHENSIVE INCOME (LOSS)
The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in the line entitled net gain securitiesin the accompanying consolidated statements of operations.
|
|
Pre-tax
Amount
|
|
|
Tax Expense (Benefit)
|
|
|
After tax
Amount
|
|
Three Months Ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
Securities held-to maturity and transferred securities
|
|
|
|
|
|
|
|
|
|
Change in non-credit component of OTTI
|
|
$
|
8
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Change in unrealized loss on securities transferred to held to maturity
|
|
|
61
|
|
|
|
27
|
|
|
|
34
|
|
Total securities held-to-maturity and transferred securities
|
|
|
69
|
|
|
|
31
|
|
|
|
38
|
|
Securities available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for net gains included in net income
|
|
|
(110
|
)
|
|
|
(50
|
)
|
|
|
(60
|
)
|
Change in net unrealized gain during the period
|
|
|
437
|
|
|
|
196
|
|
|
|
241
|
|
Total securities available-for-sale
|
|
|
327
|
|
|
|
146
|
|
|
|
181
|
|
Total other comprehensive income
|
|
$
|
396
|
|
|
$
|
177
|
|
|
$
|
219
|
|
Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held-to maturity and transferred securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in non-credit component of OTTI
|
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Change in unrealized loss on securities transferred to held to maturity
|
|
|
46
|
|
|
|
21
|
|
|
|
25
|
|
Total securities held-to-maturity and transferred securities
|
|
|
50
|
|
|
|
23
|
|
|
|
27
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized gain during the period
|
|
|
62
|
|
|
|
27
|
|
|
|
35
|
|
Total securities available-for-sale
|
|
|
62
|
|
|
|
27
|
|
|
|
35
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the net actuarial gain or loss
|
|
|
568
|
|
|
|
256
|
|
|
|
312
|
|
Total defined benefit plans
|
|
|
568
|
|
|
|
256
|
|
|
|
312
|
|
Total other comprehensive income
|
|
$
|
680
|
|
|
$
|
306
|
|
|
$
|
374
|
|
Activity in accumulated other comprehensive gain (loss), net of tax, was as follows:
|
|
Securities Held-to-Maturity and Transferred Securities
|
|
|
Securities Available-for-Sale
|
|
|
Defined Benefit Plans
|
|
|
Total Accumlated Other Comprehensive Gain (Loss)
|
|
Balance as of January 1, 2013
|
|
$
|
(1,043
|
)
|
|
$
|
1,178
|
|
|
$
|
(9,775
|
)
|
|
$
|
(9,640
|
)
|
Other comprehensive income before reclassifications
|
|
|
38
|
|
|
|
241
|
|
|
|
-
|
|
|
|
279
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
|
|
(60
|
)
|
|
|
-
|
|
|
|
(60
|
)
|
Net other comprehensive income during the period
|
|
|
38
|
|
|
|
181
|
|
|
|
-
|
|
|
|
219
|
|
Balance as of March 31, 2013
|
|
$
|
(1,005
|
)
|
|
$
|
1,359
|
|
|
$
|
(9,775
|
)
|
|
$
|
(9,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2012
|
|
$
|
(1,316
|
)
|
|
$
|
3,078
|
|
|
$
|
(11,471
|
)
|
|
$
|
(9,709
|
)
|
Other comprehensive income before reclassifications
|
|
|
27
|
|
|
|
35
|
|
|
|
312
|
|
|
|
374
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net other comprehensive income during the period
|
|
|
27
|
|
|
|
35
|
|
|
|
312
|
|
|
|
374
|
|
Balance as of March 31, 2012
|
|
$
|
(1,289
|
)
|
|
$
|
3,113
|
|
|
$
|
(11,159
|
)
|
|
$
|
(9,335
|
)
|
6. EARNINGS PER SHARE ("EPS")
Basic EPS is computed by dividing income attributable to common stock by the weighted-average common shares outstanding during the reporting period. Diluted EPS is computed using the same method as basic EPS, but reflects the potential dilution that would occur if "in the money" stock options were exercised and converted into common stock. In determining the weighted average shares outstanding for basic and diluted EPS, treasury stock and unallocated ESOP shares are excluded. Vested restricted stock award shares are included in the calculation of the weighted average shares outstanding for basic and diluted EPS. Unvested restricted stock award shares are recognized as a special class of securities under ASC 260.
The following is a reconciliation of the numerators and denominators of basic EPS and diluted EPS for the periods presented:
|
|
Three Months Ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Net income per the Consolidated Statements of Operations
|
|
$
|
10,570
|
|
|
$
|
10,247
|
|
Less: Dividends paid and earnings allocated to participating securities
|
|
|
(46
|
)
|
|
|
(45
|
)
|
Income attributable to common stock
|
|
$
|
10,524
|
|
|
$
|
10,202
|
|
Weighted average common shares outstanding, including participating securities
|
|
|
34,823,296
|
|
|
|
34,045,677
|
|
Less: weighted average participating securities
|
|
|
(325
|
)
|
|
|
(324
|
)
|
Weighted average common shares outstanding
|
|
|
34,822,971
|
|
|
|
34,045,353
|
|
Basic EPS
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
Income attributable to common stock
|
|
$
|
10,524
|
|
|
$
|
10,202
|
|
Weighted average common shares outstanding
|
|
|
34,822,971
|
|
|
|
34,045,353
|
|
Weighted average common equivalent shares outstanding
|
|
|
56,268
|
|
|
|
96,222
|
|
Weighted average common and equivalent shares outstanding
|
|
|
34,879,239
|
|
|
|
34,141,575
|
|
Diluted EPS
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
Common equivalent shares resulting from the dilutive effect of "in-the-money" outstanding stock options are calculated based upon the excess of the average market value of the Holding Company's common stock over the exercise price of outstanding in-the-money
stock options during the period.
There were 1,300,035 and 1,282,607 weighted-average stock options outstanding for the three-month periods ended March 31, 2013 and 2012, respectively, that were not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period.
7. ACCOUNTING FOR STOCK BASED COMPENSATION
During the three months ended March 31, 2013 and 2012, the Holding Company and Bank maintained the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees and the 2004 Stock Incentive Plan (collectively the "Stock Plans"), which are discussed more fully in Note 15 to the Company's audited consolidated financial statements for the year ended December 31, 2012, and which are subject to the accounting requirements of ASC 505-50 and ASC 718. There were no grants of stock options during the three months ended March 31, 2013 or 2012.
Stock Option Awards
Combined activity related to stock options granted under the Stock Plans during the periods presented was as follows:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Options outstanding – beginning of period
|
|
|
2,456,137
|
|
|
|
2,893,760
|
|
Options granted
|
|
|
-
|
|
|
|
-
|
|
Options exercised
|
|
|
(157,670
|
)
|
|
|
(61,247
|
)
|
Options forfeited
|
|
|
(3,095
|
)
|
|
|
-
|
|
Options outstanding – end of period
|
|
|
2,295,372
|
|
|
|
2,832,513
|
|
Intrinsic value of options exercised
|
|
$
|
150
|
|
|
$
|
279
|
|
Compensation expense recognized
|
|
|
73
|
|
|
|
85
|
|
Remaining unrecognized compensation expense
|
|
|
261
|
|
|
|
459
|
|
Intrinsic value of outstanding options at period end
|
|
|
1,070
|
|
|
|
2,291
|
|
Intrinsic value of vested options at period end
|
|
|
841
|
|
|
|
1,856
|
|
Weighted average exercise price of vested options – end of period
|
|
|
15.98
|
|
|
|
15.43
|
|
Restricted Stock Awards
The Company, from time to time, issues restricted stock awards to outside directors and officers under the 2004 Stock Incentive Plan. Typically, awards to outside directors fully vest on the first anniversary of the grant date, while awards to officers vest in equal annual installments over a four-year period.
The following is a summary of activity related to the restricted stock awards granted under the 2004 Stock Incentive Plan during the periods indicated:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Unvested allocated shares – beginning of period
|
|
|
328,003
|
|
|
|
324,454
|
|
Shares granted
|
|
|
-
|
|
|
|
-
|
|
Shares vested
|
|
|
(6,855
|
)
|
|
|
-
|
|
Shares forfeited
|
|
|
-
|
|
|
|
-
|
|
Unvested allocated shares – end of period
|
|
|
321,148
|
|
|
|
324,454
|
|
Compensation recorded to expense
|
|
$
|
526
|
|
|
$
|
438
|
|
8. LOANS RECEIVABLE AND CREDIT QUALITY
Loans are reported at the principal amount outstanding, net of unearned fees or costs and the allowance for loan losses. Interest income on loans is recorded using the level yield method. Under this method, discount accretion and premium amortization are included in interest income. Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms.
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying them as to credit risk. This analysis includes all non-homogeneous loans, such as multifamily residential, mixed use residential (
i.e.,
loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the residential units), mixed use commercial real estate (
i.e.
,
loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the commercial units), commercial real estate and construction and land acquisition loans, as well as one-to four family residential and cooperative apartment loans with balances in excess of the Fannie Mae ("FNMA") conforming loan limits for high-cost areas such as the Bank's primary lending area ("FNMA Limits"). This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention.
Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank's credit position at some future date.
Substandard.
Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful.
Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of then existing facts, conditions, and values, highly questionable and improbable.
The Bank had no loans classified as Doubtful at both March 31, 2013 and December 31, 2012. All loans not classified as Special Mention or Substandard were deemed pass loans at both March 31, 2013 and December 31, 2012.
The following is a summary of the credit risk profile of real estate loans (including deferred costs) by internally assigned grade as of the dates indicated:
|
|
Balance at March 31, 2013
|
|
Grade
|
|
One- to Four-Family
Residential and
Cooperative Unit
|
|
|
Multifamily
Residential and Residential
Mixed Use
|
|
|
Mixed Use Commercial
Real Estate
|
|
|
Commercial Real Estate
|
|
|
Construction
|
|
|
Total
|
|
Pass
|
|
$
|
63,163
|
|
|
$
|
2,700,314
|
|
|
$
|
328,870
|
|
|
$
|
377,646
|
|
|
$
|
-
|
|
|
$
|
3,469,993
|
|
Special Mention
|
|
|
6,759
|
|
|
|
7,086
|
|
|
|
3,597
|
|
|
|
6,196
|
|
|
|
-
|
|
|
|
23,638
|
|
Substandard
|
|
|
2,429
|
|
|
|
3,524
|
|
|
|
8,590
|
|
|
|
22,136
|
|
|
|
416
|
|
|
|
37,095
|
|
Total real estate loans individually assigned
a credit grade
|
|
$
|
72,351
|
|
|
$
|
2,710,924
|
|
|
$
|
341,057
|
|
|
$
|
405,978
|
|
|
$
|
416
|
|
|
$
|
3,530,726
|
|
Real estate loans not individually assigned a
credit grade
(1)
|
|
$
|
13,661
|
|
|
‑
|
|
|
‑
|
|
|
‑
|
|
|
‑
|
|
|
$
|
13,661
|
|
(1)
Amount comprised of fully performing one- to four-family residential and cooperative unit loans with balances equal to or less than the FNMA Limits. The credit quality of these loans was instead evaluated based upon payment activity.
|
|
Balance at December 31, 2012
|
|
Grade
|
|
One- to Four-Family
Residential and
Cooperative Unit
|
|
|
Multifamily
Residential and Residential
Mixed Use
|
|
|
Mixed Use Commercial
Real Estate
|
|
|
Commercial Real Estate
|
|
|
Construction
|
|
|
Total
|
|
Pass
|
|
$
|
66,415
|
|
|
$
|
2,665,410
|
|
|
$
|
326,053
|
|
|
$
|
363,299
|
|
|
$
|
-
|
|
|
$
|
3,421,177
|
|
Special Mention
|
|
|
6,333
|
|
|
|
7,711
|
|
|
|
5,547
|
|
|
|
2,639
|
|
|
|
-
|
|
|
|
22,230
|
|
Substandard
|
|
|
2,987
|
|
|
|
3,248
|
|
|
|
8,533
|
|
|
|
28,593
|
|
|
|
476
|
|
|
|
43,837
|
|
Total real estate loans individually assigned a
credit grade
|
|
$
|
75,735
|
|
|
$
|
2,676,369
|
|
|
$
|
340,133
|
|
|
$
|
394,531
|
|
|
$
|
476
|
|
|
$
|
3,487,244
|
|
Real estate loans not individually assigned a
credit grade
(1)
|
|
$
|
16,141
|
|
|
‑
|
|
|
‑
|
|
|
‑
|
|
|
‑
|
|
|
$
|
16,141
|
|
(1)
Amount comprised of fully performing one- to four-family residential and cooperative unit loans with balances equal to or less than the FNMA Limits. The credit quality of these loans was instead evaluated based upon payment activity.
For consumer loans, the Company evaluates credit quality based on payment activity. Consumer loans that are 90 days or more past due are placed on non-accrual status, while all remaining consumer loans are classified and evaluated as performing.
The following is a summary of the credit risk profile of consumer loans by internally assigned grade:
Grade
|
|
Balance at
March 31, 2013
|
|
|
Balance at
December 31, 2012
|
|
Performing
|
|
$
|
1,960
|
|
|
$
|
2,415
|
|
Non-accrual
|
|
|
7
|
|
|
|
8
|
|
Total
|
|
$
|
1,967
|
|
|
$
|
2,423
|
|
The following is a breakdown of the past due status of the Company's investment in loans (excluding accrued interest and loans held for sale) as of the dates indicated:
At March 31, 2013
|
|
|
|
30 to 59 Days Past Due
|
|
|
60 to 89 Days Past Due
|
|
|
Loans 90 Days or More Past Due and Still Accruing Interest
|
|
|
Non-accrual
(1)
|
|
|
Total Past Due
|
|
|
Current
|
|
|
Total Loans
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
and cooperative unit
|
|
$
|
304
|
|
|
$
|
192
|
|
|
$
|
-
|
|
|
$
|
697
|
|
|
$
|
1,193
|
|
|
$
|
84,819
|
|
|
$
|
86,012
|
|
Multifamily residential and
residential mixed use
|
|
|
916
|
|
|
|
-
|
|
|
|
186
|
|
|
|
809
|
|
|
|
1,911
|
|
|
|
2,709,013
|
|
|
|
2,710,924
|
|
Mixed use commercial
real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,159
|
|
|
|
1,159
|
|
|
|
339,898
|
|
|
|
341,057
|
|
Commercial real estate
|
|
|
563
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,500
|
|
|
|
6,063
|
|
|
|
399,915
|
|
|
|
405,978
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
416
|
|
|
|
416
|
|
Total real estate
|
|
$
|
1,783
|
|
|
$
|
192
|
|
|
$
|
186
|
|
|
$
|
8,165
|
|
|
$
|
10,326
|
|
|
$
|
3,534,062
|
|
|
$
|
3,544,387
|
|
Consumer
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
-
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
$
|
1,950
|
|
|
$
|
1,967
|
|
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2013.
At December 31, 2012
|
|
|
|
30 to 59 Days Past Due
|
|
|
60 to 89 Days Past Due
|
|
|
Loans 90 Days or More Past Due and Still Accruing Interest
|
|
|
Non-accrual
(1)
|
|
|
Total Past Due
|
|
|
Current
|
|
|
Total Loans
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
and cooperative unit
|
|
$
|
336
|
|
|
$
|
155
|
|
|
$
|
-
|
|
|
$
|
938
|
|
|
$
|
1,429
|
|
|
$
|
90,447
|
|
|
$
|
91,876
|
|
Multifamily residential and
residential mixed use
|
|
|
6,451
|
|
|
|
-
|
|
|
|
190
|
|
|
|
507
|
|
|
|
7,148
|
|
|
|
2,669,221
|
|
|
|
2,676,369
|
|
Mixed use commercial real
estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,170
|
|
|
|
1,170
|
|
|
|
338,963
|
|
|
|
340,133
|
|
Commercial real estate
|
|
|
207
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,265
|
|
|
|
6,472
|
|
|
|
388,059
|
|
|
|
394,531
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
476
|
|
|
|
476
|
|
Total real estate
|
|
$
|
6,994
|
|
|
$
|
155
|
|
|
$
|
190
|
|
|
$
|
8,880
|
|
|
$
|
16,219
|
|
|
$
|
3,487,166
|
|
|
$
|
3,503,385
|
|
Consumer
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
-
|
|
|
$
|
8
|
|
|
$
|
15
|
|
|
$
|
2,408
|
|
|
$
|
2,423
|
|
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2012.
Accruing Loans 90 Days or More Past Due:
The Bank owned one real estate loan with an outstanding balance of $186 at March 31, 2013 and $190 at December 31, 2012, that was 90 days or more past due on its contractual balloon principal payment and continued to make monthly payments consistent with its initial contractual amortization schedule exclusive of the balloon payment. This loan, which is both well secured and expected to be refinanced during the year ending December 31, 2013, remained on accrual status at both March 31, 2013 and December 31, 2012, and was deemed a performing asset.
Troubled Debt Restructured Loans ("TDRs").
The following table summarizes outstanding TDRs by underlying collateral type as of the dates indicated:
|
|
As of March 31, 2013
|
|
|
As of December 31, 2012
|
|
|
|
No. of Loans
|
|
|
Balance
|
|
|
No. of Loans
|
|
|
Balance
|
|
One- to four-family residential and cooperative unit
|
|
|
3
|
|
|
$
|
944
|
|
|
|
3
|
|
|
$
|
948
|
|
Multifamily residential and residential mixed use
|
|
|
5
|
|
|
|
1,933
|
|
|
|
5
|
|
|
|
1,953
|
|
Mixed use commercial real estate
|
|
|
1
|
|
|
|
724
|
|
|
|
1
|
|
|
|
729
|
|
Commercial real estate
|
|
|
11
|
|
|
|
43,738
|
|
|
|
13
|
|
|
|
47,493
|
|
Total real estate
|
|
|
20
|
|
|
$
|
47,339
|
|
|
|
22
|
|
|
$
|
51,123
|
|
The following table summarizes outstanding TDRs by accrual status as of the dates indicated:
|
|
As of March 31, 2013
|
|
|
As of December 31, 2012
|
|
|
|
No. of Loans
|
|
|
Balance
|
|
|
No. of Loans
|
|
|
Balance
|
|
Outstanding principal balance at period end
|
|
|
20
|
|
|
$
|
47,339
|
|
|
|
22
|
|
|
$
|
51,123
|
|
TDRs on accrual status at period end
|
|
|
18
|
|
|
|
41,444
|
|
|
|
20
|
|
|
|
44,858
|
|
TDRs on non-accrual status at period end
|
|
|
2
|
|
|
|
5,895
|
|
|
|
2
|
|
|
|
6,265
|
|
Accrual status for TDRs is determined separately for each TDR in accordance with the Bank's policies for determining accrual or non-accrual status. At the time an agreement is entered into between the Bank and the borrower that results in the Bank's determination that a TDR has been created, the loan can be either on accrual or non-accrual status. If a loan is on non-accrual status at the time it is restructured, it continues to be classified as non-accrual until the borrower has demonstrated compliance with the modified loan terms for a period of at least six months. Conversely, if at the time of restructuring the loan is performing (and accruing), it will remain accruing throughout its restructured period, unless the loan subsequently meets any of the criteria for non-accrual status under either the Bank's policy and/or the criteria related to accrual of interest established by agency regulations.
The Company has not restructured troubled consumer loans, as its consumer loan portfolio has not experienced any problem issues warranting restructuring. Therefore, all TDRs were collateralized by real estate at both March 31, 2013 and December 31, 2012.
The following table summarizes activity related to TDRs for the periods indicated:
|
|
For the Three Months Ended
March 31, 2013
|
|
|
For the Three Months Ended
March 31, 2012
|
|
|
|
Number of Loans
|
|
|
Pre-Modification
Outstanding Recorded Investment
|
|
|
Post-Modification Outstanding Recorded Investment
|
|
|
Number of Loans
|
|
|
Pre-Modification
Outstanding Recorded Investment
|
|
|
Post-Modification Outstanding Recorded Investment
|
|
Loan modifications during the period
that met the definition of a TDR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily residential and residential
mixed use
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
$
|
459
|
|
|
$
|
459
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
4,430
|
|
|
|
4,430
|
|
TOTAL
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
$
|
4,889
|
|
|
$
|
4,889
|
|
During the three months ended March 31, 2012, the Company made modifications to other existing loans that were deemed both insignificant and sufficiently temporary in nature, thus not warranting classification as TDRs. Such activity was immaterial.
The Bank's allowance for loan losses at March 31, 2013 reflected $490 of allocated reserve associated with TDRs. The Bank's allowance for loan losses at December 31, 2012 reflected $520 of allocated reserve associated with TDRs. Activity related to reserves associated with TDRs was immaterial during the three months ended March 31, 2013. During the three months ended March 31, 2012, allocated reserves totaling $1,013 associated with nine TDRs were removed, as improvement in the underlying conditions of these loans resulted in the determination that the allocated reserve was no longer warranted. In addition, during the three months ended March 31, 2012 $154, of reserves were charged-off upon the disposal of two TDRs.
As of March 31, 2013 and December 31, 2012, the Bank had no loan commitments to borrowers with outstanding TDRs.
A TDR is considered to be in payment default once it is 90 days contractually past due under the modified terms. All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.
There were no TDRs which defaulted within twelve months following the modification during the three months ended March 31, 2013 and 2012 (thus no significant impact to the allowance for loan losses during those periods).
Impaired Loans
A loan is considered impaired when, based on current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired. Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Generally, the Bank considers TDRs and non-accrual multifamily residential and commercial real estate loans, along with non-accrual one- to four-family loans in excess of the FNMA Limits, to be impaired. Non-accrual one-to four-family loans equal to or less than the FNMA Limits, as well as all consumer loans, are considered homogeneous loan pools and are not required to be evaluated individually for impairment unless considered a TDR.
Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected solely from liquidation of the collateral; or 3) the present value of estimated future cash flows using the loan's existing rate. If a TDR is substantially performing in accordance with its restructured terms, management will look to either the present value of the expected cash flows from the debt service or the potential net liquidation proceeds of the underlying collateral property in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of the collateral is considered when measuring impairment. Measured impairment is either charged off immediately or, in limited instances, recognized as an allocated reserve within the allowance for loan losses.
Please refer to Note 9 for tabular information related to impaired loans.
Delinquent Serviced Loans Subject to a Recourse Obligation
As of March 31, 2013 and December 31, 2012, the Bank serviced a pool of multifamily loans sold to FNMA, and retained an obligation (off-balance sheet contingent liability) to absorb a portion of any losses (as defined in the seller/servicer agreement) incurred by FNMA in connection with the loans sold (the "First Loss Position").
Under the terms of its seller/servicer agreement with FNMA, the Bank is obligated to fund FNMA all monthly principal and interest payments under the original terms of the sold loans until the earlier of the following events: (i) the Bank re-acquires the loan from FNMA or it enters OREO status; (ii) the entire pool of loans sold to FNMA have either been fully satisfied or enter OREO status; or (iii) the First Loss Position is fully exhausted.
At March 31, 2013, within the pool of multifamily loans sold to FNMA, there was one $474 loan 90 days or more delinquent and one $228 loan delinquent between 30 and 89 days. At December 31, 2012, within the pool of multifamily loans sold to FNMA, there was one $474 loan 90 days or more delinquent and one $229 loan delinquent between 30 and 89 days.
9. ALLOWANCE FOR LOAN LOSSES AND LIABILITY FOR FIRST LOSS POSITION
The allowance for loan losses may consist of specific and general components. The Bank's periodic evaluation of its allowance for loan losses (specific or general) is comprised of four primary components: (1) impaired loans; (2) non-impaired substandard loans; (3) non-impaired special mention loans; and (4) pass graded loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses (specific or general): 1) real estate loans; and 2) consumer loans. Within the segments, the Bank analyzes the allowance based upon the underlying collateral type (classes). Consumer loans represent a nominal portion of the Company's loan portfolio, and were thus evaluated in aggregate as of both March 31, 2013 and December 31, 2012.
Impaired Loan Component
All multifamily residential, mixed use, commercial real estate and construction loans that are deemed to meet the definition of impaired are individually evaluated for impairment. In addition, all cooperative unit and one- to four-family residential real estate loans in excess of the FNMA Limits are individually evaluated for impairment. Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected solely from liquidation of the collateral; or 3) the present value of estimated future cash flows using the loan's existing rate. For impaired loans on non-accrual status, either of the initial two measurements is utilized.
All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any. If a TDR is substantially performing in accordance with its restructured terms, management will look to either the present value of the expected cash flows from the debt service or the potential net liquidation proceeds of the underlying collateral property in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, the likely realizable net proceeds from either a note sale or the liquidation of the collateral is generally considered when measuring impairment. While measured impairment is charged off immediately, impairment measured from a reduction in the present value of expected cash flows of a performing TDR was reflected as an allocated reserve within the allowance for loan losses at both March 31, 2013 and December 31, 2012.
Large groups of smaller balance homogeneous real estate loans, such as cooperative unit and one-to four-family residential real estate loans with balances equal to or less than the FNMA Limits, are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.
Non-Impaired Substandard Loan Component
At both March 31, 2013 and December 31, 2012, the reserve allocated within the allowance for loan losses associated with loans internally classified as Substandard (excluding impaired loans internally designated as Substandard) reflected expected loss percentages on the Bank's pool of such loans that were derived based upon an analysis of historical losses over a measurement timeframe. This reserve allocation was determined in a manner substantially similar to non-impaired Special Mention loans at both March 31, 2013 and December 31, 2012.
The portion of the allowance for loan losses attributable to non-impaired Substandard loans was $697 at March 31, 2013 and $795 at December 31, 2012. The decline resulted primarily from a reduction of $2,099 in the balance of such loans from December 31, 2012 to March 31, 2013.
All non-impaired Substandard loans were deemed sufficiently well secured and performing to have remained on accrual status both prior and subsequent to their downgrade to the Substandard internal loan grade.
Non-Impaired Special Mention Loan Component
At both March 31, 2013 and December 31, 2012, the reserve allocated within the allowance for loan losses associated with loans internally classified as Special Mention (excluding impaired loans internally designated as Special Mention) reflected an expected loss percentage on the Bank's pool of such loans that was derived based upon an analysis of historical losses over a measurement timeframe. The loss percentage resulting from this analysis was then applied to the aggregate pool of non-impaired Special Mention loans at March 31, 2013 and December 31, 2012. Based upon this methodology, increases or decreases in the amount of either non-impaired Special Mention loans or charge-offs associated with such loans, or a change in the measurement timeframe utilized to derive the expected loss percentage, would impact the level of reserves determined on non-impaired Special Mention loans. As a result, the allowance for loan losses associated with non-impaired Special Mention loans is subject to volatility.
The portion of the allowance for loan losses attributable to non-impaired Special Mention loans increased from $145 at December 31, 2012 to $242 at March 31, 2013, due primarily to an increase in the estimated loss percentage determined to be applied to such loans from December 31, 2012 to March 31, 2013.
Pass Graded Loan Component
The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with pass graded real estate loans. The following underlying collateral types are analyzed separately: 1) one- to four family residential and cooperative unit; 2) multifamily residential and residential mixed use; 3) mixed use commercial real estate, 4) commercial real estate; and 5) construction and land acquisition. Within the analysis of each underlying collateral type, the following elements are additionally considered and provided weighting in determining the allowance for loan losses for pass graded real estate loans:
(i)
|
Charge-off experience
|
(iii)
|
Underwriting standards or experience
|
The following is a brief synopsis of the manner in which each element is considered:
(i) Charge-off experience – Loans within the pass graded loan portfolio are segmented by significant common characteristics, against which historical loss rates are applied.
(ii) Economic conditions - At both March 31, 2013 and December 31, 2012, the Bank assigned a loss allocation to its entire pass graded real estate loan portfolio based, in part, upon a review of economic conditions affecting the local real estate market. Specifically, the Bank considered both the level of, and recent trends in: 1) the local and national unemployment rate, 2) residential and commercial vacancy rates, 3) real estate sales and pricing, and 4) delinquencies in the Bank's loan portfolio.
(iii) Underwriting standards or experience – Underwriting standards are reviewed to ensure that changes in the Bank's lending policies and practices are adequately evaluated for risk and reflected in its analysis of potential credit losses. Different loss expectations are then incorporated into the methodology.
(iv) Concentrations of credit – The Bank regularly reviews its loan concentrations (borrower, collateral type and location) in order to ensure that heightened risk has not evolved that has not been captured through other factors. The risk component of loan concentrations is regularly evaluated for reserve adequacy.
(v) Loan Seasoning – The Bank analyzes its charge-off history in order to determine whether loans that are over three years past their origination date (referred to as seasoned loans) have experienced lower loss levels, and would thus warrant a lower expected loss percentage. This element was given minimal consideration in the March 31, 2013 and December 31, 2012 evaluations. The minimal consideration resulted from an analysis of the loss experience recognized during the recent recessionary period, which concluded that the age or seasoning of a loan did not inversely correlate to the Bank's loss experience.
Consumer Loans
Due to their small individual balances, the Bank does not evaluate individual consumer loans for impairment. Loss percentages are applied to aggregate consumer loans based upon both their delinquency status and loan type. These loss percentages are derived from a combination of the Company's historical loss experience and/or nationally published loss data on such loans. Consumer loans in excess of 120 days delinquent are typically fully charged off against the allowance for loan losses.
The following table presents data regarding the allowance for loan losses and loans evaluated for impairment by class of loan within the real estate loan segment as well as for the aggregate consumer loan segment:
At or for the Three Months Ended March 31, 2013
|
|
|
|
Real Estate Loans
|
|
|
Consumer Loans
|
|
|
|
One- to Four Family Residential
and
Cooperative
Unit
|
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
Mixed Use Commercial
Real Estate
|
|
|
Commercial Real Estate
|
|
|
Construction
|
|
|
Total Real Estate
|
|
|
|
|
Beginning balance
|
|
$
|
344
|
|
|
$
|
14,299
|
|
|
$
|
2,474
|
|
|
$
|
3,382
|
|
|
$
|
24
|
|
|
$
|
20,523
|
|
|
$
|
27
|
|
Provision (credit) for loan losses
|
|
|
92
|
|
|
|
(298
|
)
|
|
|
87
|
|
|
|
273
|
|
|
|
(2
|
)
|
|
|
152
|
|
|
|
5
|
|
Charge-offs
|
|
|
(88
|
)
|
|
|
(111
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
(203
|
)
|
|
|
(6
|
)
|
Recoveries
|
|
|
2
|
|
|
|
-
|
|
|
|
29
|
|
|
|
1
|
|
|
|
-
|
|
|
|
32
|
|
|
|
-
|
|
Ending balance
|
|
$
|
350
|
|
|
$
|
13,890
|
|
|
$
|
2,590
|
|
|
$
|
3,652
|
|
|
$
|
22
|
|
|
$
|
20,504
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance – loans individually
evaluated for impairment
|
|
$
|
1,209
|
|
|
$
|
2,347
|
|
|
$
|
1,882
|
|
|
$
|
43,739
|
|
|
$
|
-
|
|
|
$
|
49,177
|
|
|
$
|
-
|
|
Ending balance – loans collectively
evaluated for impairment
|
|
|
84,803
|
|
|
|
2,708,577
|
|
|
|
339,175
|
|
|
|
362,239
|
|
|
|
416
|
|
|
|
3,495,210
|
|
|
|
1,967
|
|
Allowance balance associated with loans
individually evaluated for impairment
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
483
|
|
|
|
-
|
|
|
|
490
|
|
|
|
-
|
|
Allowance balance associated with loans
collectivelly evaluated for impairment
|
|
|
343
|
|
|
|
13,890
|
|
|
|
2,590
|
|
|
|
3,169
|
|
|
|
22
|
|
|
|
20,014
|
|
|
|
26
|
|
At or for the Three Months Ended March 31, 2012
|
|
|
|
Real Estate Loans
|
|
|
Consumer Loans
|
|
|
|
One- to Four Family Residential
and
Cooperative
Unit
|
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
Mixed Use Commercial
Real Estate
|
|
|
Commercial Real Estate
|
|
|
Construction
|
|
|
Total Real Estate
|
|
|
|
|
Beginning balance
|
|
$
|
480
|
|
|
$
|
14,313
|
|
|
$
|
1,528
|
|
|
$
|
3,783
|
|
|
$
|
124
|
|
|
$
|
20,228
|
|
|
$
|
26
|
|
Provision (reduction)
|
|
|
363
|
|
|
|
399
|
|
|
|
1,251
|
|
|
|
(441
|
)
|
|
|
(121
|
)
|
|
|
1,451
|
|
|
|
6
|
|
Charge-offs
|
|
|
(531
|
)
|
|
|
(897
|
)
|
|
|
(526
|
)
|
|
|
(323
|
)
|
|
|
(3
|
)
|
|
|
(2,280
|
)
|
|
|
(8
|
)
|
Recoveries
|
|
|
1
|
|
|
|
23
|
|
|
|
-
|
|
|
|
1
|
|
|
‑
|
|
|
|
25
|
|
|
-
|
|
Transfer from (to) reserve for loan
commitments
|
|
-
|
|
|
|
33
|
|
|
|
(4
|
)
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
20
|
|
|
-
|
|
Ending balance
|
|
$
|
313
|
|
|
$
|
13,871
|
|
|
$
|
2,249
|
|
|
$
|
3,011
|
|
|
$
|
-
|
|
|
$
|
19,444
|
|
|
$
|
24
|
|
At December 31, 2012
|
|
Ending balance
|
|
$
|
344
|
|
|
$
|
14,299
|
|
|
$
|
2,474
|
|
|
$
|
3,382
|
|
|
$
|
24
|
|
|
$
|
20,523
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance – loans individually
evaluated for impairment
|
|
$
|
1,291
|
|
|
$
|
2,460
|
|
|
$
|
1,900
|
|
|
$
|
47,493
|
|
|
$
|
-
|
|
|
$
|
53,144
|
|
|
$
|
-
|
|
Ending balance – loans collectively
evaluated for impairment
|
|
|
90,585
|
|
|
|
2,673,909
|
|
|
|
338,233
|
|
|
|
347,038
|
|
|
|
476
|
|
|
|
3,450,241
|
|
|
|
2,423
|
|
Allowance balance associated
with loans individually evaluated
for impairment
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
513
|
|
|
|
-
|
|
|
|
520
|
|
|
|
-
|
|
Allowance balance associated with
loans collectivelly evaluated for
impairment
|
|
|
337
|
|
|
|
14,299
|
|
|
|
2,474
|
|
|
|
2,869
|
|
|
|
24
|
|
|
|
20,003
|
|
|
|
27
|
|
The following tables summarize impaired real estate loans as of or for the periods indicated (by collateral type within the real estate loan segment).
|
|
At March 31, 2013
|
|
|
|
Unpaid Principal Balance at Period End
|
|
|
Recorded Investment
at Period End(1)
|
|
|
Reserve Balance Allocated within the Allowance for Loan Losses at Period End
|
|
One- to Four Family Residential and Cooperative Unit
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
1,076
|
|
|
$
|
998
|
|
|
$
|
-
|
|
With an allocated reserve
|
|
|
257
|
|
|
|
211
|
|
|
|
7
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
2,347
|
|
|
|
2,347
|
|
|
|
-
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mixed Use Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
1,882
|
|
|
|
1,882
|
|
|
‑
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
29,646
|
|
|
|
28,532
|
|
|
‑
|
|
With an allocated reserve
|
|
|
15,207
|
|
|
|
15,207
|
|
|
|
483
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
34,951
|
|
|
$
|
33,759
|
|
|
$
|
-
|
|
With an allocated reserve
|
|
$
|
15,464
|
|
|
$
|
15,418
|
|
|
$
|
490
|
|
(1)
|
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.
|
|
|
At December 31, 2012
|
|
|
|
Unpaid Principal Balance at Period End
|
|
|
Recorded Investment
at Period End(1)
|
|
|
Reserve Balance Allocated within the Allowance for Loan Losses at Period End
|
|
One- to Four Family Residential and Cooperative Unit
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
1,079
|
|
|
$
|
1,079
|
|
|
$
|
-
|
|
With an allocated reserve
|
|
|
258
|
|
|
|
212
|
|
|
|
7
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
2,767
|
|
|
|
2,460
|
|
|
|
-
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mixed Use Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
1,900
|
|
|
|
1,900
|
|
|
‑
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
33,416
|
|
|
|
32,217
|
|
|
‑
|
|
With an allocated reserve
|
|
|
15,276
|
|
|
|
15,276
|
|
|
|
513
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
39,162
|
|
|
$
|
37,656
|
|
|
$
|
-
|
|
With an allocated reserve
|
|
$
|
15,534
|
|
|
$
|
15,488
|
|
|
$
|
520
|
|
(1)
|
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.
|
|
|
Three Months Ended
March 31, 2013
|
|
|
Three Months Ended
March 31, 2012
|
|
|
|
Average Recorded Investment
|
|
|
Interest
Income Recognized
|
|
|
Average Recorded Investment
|
|
|
Interest
Income Recognized
|
|
One- to Four Family Residential and Cooperative Unit
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
1,039
|
|
|
$
|
10
|
|
|
$
|
1,104
|
|
|
$
|
12
|
|
With an allocated reserve
|
|
|
211
|
|
|
|
5
|
|
|
|
706
|
|
|
‑
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
2,403
|
|
|
|
48
|
|
|
|
7,569
|
|
|
|
131
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
1,050
|
|
|
‑
|
|
Mixed Use Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
1,891
|
|
|
|
52
|
|
|
|
3,880
|
|
|
|
24
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
480
|
|
|
‑
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
30,375
|
|
|
|
398
|
|
|
|
23,701
|
|
|
|
498
|
|
With an allocated reserve
|
|
|
15,241
|
|
|
|
258
|
|
|
|
27,295
|
|
|
|
190
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
|
‑
|
|
With an allocated reserve
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no allocated reserve
|
|
$
|
35,708
|
|
|
$
|
508
|
|
|
$
|
36,254
|
|
|
$
|
665
|
|
With an allocated reserve
|
|
$
|
15,452
|
|
|
$
|
263
|
|
|
$
|
29,531
|
|
|
$
|
190
|
|
Reserve Liability for First Loss Position
At both March 31, 2013 and December 31, 2012, the Bank serviced a pool of loans that were sold to FNMA and were subject to the First Loss Position. The Bank maintains a reserve liability in relation to the First Loss Position that reflects estimated losses on this loan pool at each period end. For performing loans within the FNMA serviced pool, the reserve recognized is based upon the historical loss experience on this loan pool. For problem loans within the pool, the estimated losses are determined in a manner consistent with impaired loans within the Bank's loan portfolio.
The following is a summary of the aggregate balance of multifamily loans serviced for FNMA, the period-end First Loss Position associated with these loans, and activity in the related liability:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Outstanding balance of multifamily loans serviced for FNMA at period end
|
|
$
|
244,159
|
|
|
$
|
300,347
|
|
Total First Loss Position at end of period
|
|
|
15,428
|
|
|
|
16,356
|
|
Reserve Liability on the First Loss Position
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,383
|
|
|
$
|
2,993
|
|
Transfer of specific reserve for serviced loans re-acquired by the Bank
|
|
|
-
|
|
|
‑
|
|
Credit for losses on problem loans
(1)
|
|
|
(92
|
)
|
|
‑
|
|
Charge-offs and other net reductions in balance
|
|
|
-
|
|
|
|
(35
|
)
|
Balance at period end
|
|
$
|
1,291
|
|
|
$
|
2,958
|
|
(1)
Amount recognized as a component of mortgage banking income during the period.
|
|
|
|
|
|
|
|
|
10. INVESTMENT AND MORTGAGE-BACKED SECURITIES
The following is a summary of major categories of securities owned by the Company at March 31, 2013:
|
|
|
|
|
|
|
|
Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
Amortized / Historical Cost
|
|
|
Recorded Amortized/
Historical Cost
(1)
|
|
|
Non-Credit
OTTI
|
|
|
Unrealized
Gains
|
|
|
Unrealized Losses
|
|
|
Book Value
|
|
|
Other Unrecognized Losses
|
|
|
Fair
Value
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pooled bank trust preferred securities
("TRUPS")
|
|
$
|
16,524
|
|
|
$
|
7,578
|
|
|
$
|
(625
|
)
|
|
|
-
|
|
|
$
|
(1,207
|
)
(2)
|
|
$
|
5,746
|
|
|
$
|
(217
|
)
|
|
$
|
5,529
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
2,780
|
|
|
|
2,674
|
|
|
|
-
|
|
|
|
503
|
|
|
|
-
|
|
|
|
3,177
|
|
|
|
-
|
|
|
|
3,177
|
|
Agency notes
|
|
|
15,070
|
|
|
|
15,070
|
|
|
|
-
|
|
|
|
83
|
|
|
|
-
|
|
|
|
15,153
|
|
|
|
-
|
|
|
|
15,153
|
|
Pass-through MBS issued by GSEs
|
|
|
38,355
|
|
|
|
38,355
|
|
|
|
-
|
|
|
|
1,854
|
|
|
|
-
|
|
|
|
40,209
|
|
|
|
-
|
|
|
|
40,209
|
|
Collateralized mortgage obligations
("CMOs") issued by GSEs
|
|
|
1,515
|
|
|
|
1,515
|
|
|
|
-
|
|
|
|
16
|
|
|
|
-
|
|
|
|
1,531
|
|
|
|
-
|
|
|
|
1,531
|
|
Private issuer pass through MBS
|
|
|
812
|
|
|
|
812
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
822
|
|
|
|
-
|
|
|
|
822
|
|
Private issuer CMOs
|
|
|
813
|
|
|
|
813
|
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
821
|
|
|
|
-
|
|
|
|
821
|
|
(1) Amount represents the purchase amortized / historical cost less any credit-related OTTI charges recognized through earnings.
(2) Amount represents the unamortized portion of the unrealized loss that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity).
The following is a summary of major categories of securities owned by the Company at December 31, 2012:
|
|
|
|
|
|
|
|
Unrealized Gains or Losses Recognized in Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
Amortized / Historical Cost
|
|
|
Recorded Amortized/
Historical Cost
(1)
|
|
|
Non-Credit
OTTI
|
|
|
Unrealized
Gains
|
|
|
Unrealized Losses
|
|
|
Book Value
|
|
|
Other Unrecognized Gains
|
|
|
Fair
Value
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRUPS
|
|
$
|
16,773
|
|
|
$
|
7,828
|
|
|
$
|
(633
|
)
|
|
‑
|
|
|
$
|
(1,268
|
)
(2)
|
|
$
|
5,927
|
|
|
$
|
340
|
|
|
$
|
6,267
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
2,904
|
|
|
|
2,556
|
|
|
|
-
|
|
|
|
449
|
|
|
|
-
|
|
|
|
3,005
|
|
|
|
-
|
|
|
|
3,005
|
|
Agency notes
|
|
|
29,820
|
|
|
|
29,820
|
|
|
|
-
|
|
|
|
125
|
|
|
|
-
|
|
|
|
29,945
|
|
|
|
-
|
|
|
|
29,945
|
|
Pass-through MBS issued by GSEs
|
|
|
43,142
|
|
|
|
43,142
|
|
|
|
-
|
|
|
|
1,561
|
|
|
|
(25
|
)
|
|
|
44,678
|
|
|
|
-
|
|
|
|
44,678
|
|
CMOs issued by GSEs
|
|
|
2,436
|
|
|
|
2,436
|
|
|
|
-
|
|
|
|
26
|
|
|
|
-
|
|
|
|
2,462
|
|
|
|
-
|
|
|
|
2,462
|
|
Private issuer pass through MBS
|
|
|
962
|
|
|
|
962
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
955
|
|
|
|
-
|
|
|
|
955
|
|
Private issuer CMOs
|
|
|
908
|
|
|
|
908
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
|
|
926
|
|
|
|
-
|
|
|
|
926
|
|
(1) Amount represents the purchase amortized / historical cost less any credit-related OTTI charges recognized through earnings.
(2) Amount represents the unamortized portion of the unrealized loss that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from available-for-sale to held-to-maturity).
At March 31, 2013, the agency note investments in the table on the preceding page had contractual maturities as follows:
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
Due after one year through three years
|
|
$
|
15,000
|
|
|
$
|
15,083
|
|
Due after three years through five years
|
|
|
70
|
|
|
|
70
|
|
TOTAL
|
|
$
|
15,070
|
|
|
$
|
15,153
|
|
The held-to-maturity TRUPS had a weighted average term to maturity of 21.8 years at March 31, 2013. At March 31, 2013, MBS available-for-sale (which included pass-through MBS issued by GSEs, CMOs issued by GSEs, one private issuer pass through MBS and one private issuer CMO) possessed a weighted average contractual maturity of 17.1 years and a weighted average estimated duration of 1.2 years. There were no sales of investment securities either held-to-maturity or available-for-sale or sales of MBS available-for-sale during the three-months ended March 31, 2013 or 2012.
As of each reporting period through March 31, 2013, the Company has applied the protocol established by ASC 320-10-65 ("ASC 320-10-65") in order to determine whether OTTI existed for the TRUPS and/or to measure, for TRUPS that have been determined to be other than temporarily impaired, the credit related and non-credit related components of OTTI. As of March 31, 2013, six TRUPS were determined to meet the criteria for OTTI based upon this analysis. At March 31, 2013, these six securities had credit ratings ranging from "C" to "Caa3."
The following table provides a reconciliation of the pre-tax OTTI charges recognized on the Company's TRUPS:
|
At or for the Three Months Ended March 31, 2013
|
|
At or for the Three Months Ended March 31, 2012
|
|
Credit Related OTTI Recognized in Earnings
|
Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss
|
Total OTTI
|
|
Credit Related OTTI Recognized in Earnings
|
Non-Credit OTTI Recognized in Accumulated Other Comprehensive Loss
|
Total OTTI
|
Cumulative balance at the beginning of the period
|
$8,945
|
$634
|
$9,579
|
|
$8,974
|
$930
|
$9,904
|
OTTI recognized on securities with previous OTTI
|
-
|
-
|
-
|
|
181
|
6
|
187
|
Reductions and transfers to credit-related OTTI
|
-
|
-
|
-
|
|
‑
|
-
|
-
|
Amortization of previously recognized OTTI
|
1
|
(9)
|
(8)
|
|
‑
|
(10)
|
(10)
|
Cumulative balance at end of the period
|
$8,946
|
$625
|
$9,571
|
|
$9,155
|
$926
|
$10,081
|
The following table summarizes the gross unrealized losses and fair value of investment securities as of March 31, 2013, aggregated by investment category and the length of time the securities were in a continuous unrealized loss position:
|
Less than 12
Months Consecutive
Unrealized Losses
|
12 Months or More
Consecutive
Unrealized Losses
|
Total
|
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
TRUPS
(1)
|
$-
|
$-
|
$3,776
|
$1,411
|
$3,776
|
$1,411
|
(1)
At March 31, 2013, the recorded balance of these securities was $3,980. This balance reflected the remaining unrealized loss of $1,207 that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from
available-for-sale to held-to-maturity). In accordance with both ASC 320-10-35-17 and 320-10-65, these unrealized losses are currently being amortized over the remaining estimated life of these securities.
TRUPS That Have Maintained an Unrealized Holding Loss for 12 or More Consecutive Months
At March 31, 2013, impairment of two of the TRUPS, with an amortized cost of $5,187, was deemed temporary. These securities remained in an unrealized loss for 12 or more consecutive months, and their cumulative unrealized loss was $1,411 at March 31, 2013, reflecting both illiquidity in the marketplace and concerns over future bank failures. At March 31, 2013, both of these securities had ratings ranging from "BB-" to "Ba1." Despite both the significant decline in market value and the duration of their impairment, management believed that the unrealized losses on these securities at March 31, 2013 were temporary, and that the full value of the investments would be realized once the market dislocations have been removed, or as the securities continued to make their contractual payments of principal and interest. In making this determination, management considered the following:
·
|
Based upon an internal review of the collateral backing the TRUPS portfolio, which accounted for current and prospective deferrals, the securities could reasonably be expected to continue making all contractual payments
|
·
|
The Company had the intent and ability to hold these securities until they fully recover their impairment, evidenced by the election to reclassify them as held-to-maturity in 2008
|
·
|
There were no cash or working capital requirements nor contractual or regulatory obligations that would compel the Company to sell these securities prior to their forecasted recovery or maturity
|
·
|
Each security has a pool of underlying issuers comprised primarily of banks
|
·
|
Neither of the securities have exposure to real estate investment trust issued debt (which has experienced high default
|
rates)
·
|
Each security featured either a mandatory auction or a de-leveraging mechanism that could result in principal repayments to the Bank prior to the stated maturity of the security
|
·
|
Each security is characterized by some level of over-collateralization
|
The following summarizes the gross unrealized losses and fair value of investment securities and MBS as of December 31, 2012, aggregated by investment category and the length of time that the securities were in a continuous unrealized loss position:
|
Less than 12
Months Consecutive
Unrealized Losses
|
12 Months or More
Consecutive
Unrealized Losses
|
Total
|
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Fair Value
|
Gross Unrecognized/
Unrealized Losses
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
TRUPS
(1)
|
$-
|
$-
|
$3,705
|
$1,732
|
$3,705
|
$1,732
|
Available-for-Sale Securities:
|
|
|
|
|
|
|
Federal Home Loan Mortgage
Corporation pass-through certificates
|
$5,867
|
$25
|
$-
|
$-
|
$5,867
|
$25
|
Private label MBS
|
-
|
-
|
954
|
7
|
954
|
7
|
(1)
At December 31, 2012, the recorded balance of these securities was $4,170. This balance reflected the remaining unrealized loss of $1,268 that was recognized in accumulated other comprehensive loss on September 1, 2008 (the day on which these securities were transferred from
available-for-sale to held-to-maturity). In accordance with both ASC 320-10-35-17 and 320-10-65, these unrealized losses are currently being amortized over the remaining estimated life of these securities.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value hierarchy established under ASC 820-10 is summarized as follows:
Level 1 Inputs
– Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs
– Significant other observable inputs such as any of the following: (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, (3) inputs other than quoted prices that are observable for the asset or liability (
e.g.
, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates), or (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level 3 Inputs
– Significant unobservable inputs for the asset or liability. Significant unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Significant unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
The following tables present the assets that are reported on the consolidated statements of financial condition at fair value as of the date indicated by level within the fair value hierarchy. Financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Assets Measured at Fair Value on a Recurring Basis at March 31, 2013
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Description
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3 Inputs
|
|
Trading securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
1,031
|
|
|
$
|
1,031
|
|
|
$
|
-
|
|
|
$
|
-
|
|
International Equity Mutual Funds
|
|
|
132
|
|
|
|
132
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
3,815
|
|
|
|
3,815
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency notes
|
|
|
15,153
|
|
|
|
-
|
|
|
|
15,153
|
|
|
|
-
|
|
Registered Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
|
1,663
|
|
|
|
1,663
|
|
|
|
-
|
|
|
|
-
|
|
International Equity Mutual Funds
|
|
|
367
|
|
|
|
367
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
1,147
|
|
|
|
1,147
|
|
|
|
-
|
|
|
|
-
|
|
Pass-through MBS issued by GSEs
|
|
|
40,209
|
|
|
|
-
|
|
|
|
40,209
|
|
|
|
-
|
|
CMOs issued by GSEs
|
|
|
1,531
|
|
|
|
-
|
|
|
|
1,531
|
|
|
|
-
|
|
Private issuer pass through MBS
|
|
|
822
|
|
|
|
-
|
|
|
|
822
|
|
|
|
-
|
|
Private issuer CMOs
|
|
|
821
|
|
|
|
-
|
|
|
|
821
|
|
|
|
-
|
|
Assets Measured at Fair Value on a Recurring Basis at December 31, 2012
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Description
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3 Inputs
|
|
Trading securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
930
|
|
|
$
|
930
|
|
|
$
|
-
|
|
|
$
|
-
|
|
International Equity Mutual Funds
|
|
|
129
|
|
|
|
129
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
3,815
|
|
|
|
3,815
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency notes
|
|
|
29,945
|
|
|
|
-
|
|
|
|
29,945
|
|
|
|
-
|
|
Registered Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
|
1,502
|
|
|
|
1,502
|
|
|
|
-
|
|
|
|
-
|
|
International Equity Mutual Funds
|
|
|
358
|
|
|
|
358
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
1,145
|
|
|
|
1,145
|
|
|
|
-
|
|
|
|
-
|
|
Pass-through MBS issued by GSEs
|
|
|
44,678
|
|
|
|
-
|
|
|
|
44,678
|
|
|
|
-
|
|
CMOs issued by GSEs
|
|
|
2,462
|
|
|
|
-
|
|
|
|
2,462
|
|
|
|
-
|
|
Private issuer pass through MBS
|
|
|
955
|
|
|
|
-
|
|
|
|
955
|
|
|
|
-
|
|
Private issuer CMOs
|
|
|
926
|
|
|
|
-
|
|
|
|
926
|
|
|
|
-
|
|
The Company's available-for-sale investment securities and MBS are reported at fair value, which were determined utilizing prices obtained from independent parties. The valuations obtained are based upon market data, and often utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (obtained only from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Prioritization of inputs may vary on any given day based on market conditions.
The agency notes owned by the Company possessed the highest possible credit rating published by at least one established credit rating agency as of both March 31, 2013 and December 31, 2012. Obtaining market values as of March 31, 2013 and December 31, 2012 for these securities utilizing significant observable inputs was not difficult due to their continued marketplace demand. The pass-through MBS and CMOs issued by GSEs all possessed the highest possible credit rating published by at least one established credit rating agency as of both March 31, 2013 and December 31, 2012. Obtaining market values as of March 31, 2013 and December 31, 2012 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.
Assets Measured at Fair Value on a Non-Recurring Basis at March 31, 2013
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Description
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2 Inputs
|
|
|
Level 3 Inputs
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four Family Residential and Cooperative Unit
|
|
$
|
477
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
477
|
|
Commercial Real Estate
|
|
|
5,707
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,707
|
|
OREO
|
|
|
585
|
|
|
|
-
|
|
|
|
-
|
|
|
|
585
|
|
Assets Measured at Fair Value on a Non-Recurring Basis at December 31, 2012
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Description
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2 Inputs
|
|
|
Level 3 Inputs
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Residential and Residential Mixed Use Real Estate
|
|
$
|
450
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
450
|
|
Commercial Real Estate
|
|
|
6,472
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,472
|
|
Impaired Loans
- Loans with certain characteristics are evaluated individually for impairment. A loan is considered impaired under ASC 310-10-35 when, based upon existing information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. The Bank's impaired loans at March 31, 2013 and December 31, 2012 were collateralized by real estate and were thus carried at the lower of the outstanding principal balance or the estimated fair value of the collateral. Fair value is estimated through either a negotiated note sale value (Level 2 input), or, more commonly, a recent real estate appraisal (Level 3 input). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal
23
process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
An appraisal is generally ordered for all impaired multifamily residential, mixed use or commercial real estate loans for which the most recent appraisal is more than one year old. The Bank never adjusts independent appraisal data upward. Occasionally, management will adjust independent appraisal data downward based upon its own lending expertise and/or experience with the subject property, utilizing such factors as potential note sale values, or a more refined estimate of costs to repair and time to lease the property. Adjustments for potential disposal costs are also considered when determining the final appraised value.
As of March 31, 2013, impaired loans measured for impairment using the estimated fair value of the collateral had an aggregate principal balance of $6,184, and no valuation allowance within the allowance for loan losses. As of December 31, 2012, impaired loans measured for impairment using the estimated fair value of the collateral had an aggregate principal balance of $6,922, and no valuation allowance within the allowance for loan losses. Such loans had no impact upon the provision for loan losses during either the three months ended March 31, 2013 or the year ended December 31, 2012.
The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis at March 31, 2013:
Fair Value Derived
|
|
Valuation Technique Utilized
|
Significant Unobservable Input(s)
|
|
Range of Values
|
|
|
Weighted Average Value
|
|
$
|
207
|
|
Income approach only
|
Capitalization rate
|
|
|
N/A
|
*
|
|
|
7.5
|
%
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
N/A
|
*
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477
|
|
Blended income and sales comparison approaches
|
Reduction to the sales comparison value to reconcile differences between comparable sales
|
|
|
0.0%-6.0
|
%
|
|
|
3.8
|
%
|
|
|
|
|
Capitalization rate (income approach component)
|
|
|
7.3%-7.5
|
%
|
|
|
7.4
|
%
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
10.0%-25.0
|
%
|
|
|
15.6
|
%
|
|
5,500
|
|
Previously negotiated note sales
|
Discount to unpaid principal balance from likely realizable value of a note sale negotiated on terms deemed acceptable
|
|
|
N/A
|
*
|
|
|
17
|
%
|
*Only one loan in this population.
The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis at December 31, 2012:
Fair Value Derived
|
|
Valuation Technique Utilized
|
Significant Unobservable Input(s)
|
|
Range of Values
|
|
|
Weighted Average Value
|
|
$
|
207
|
|
Income approach only
|
Capitalization rate
|
|
|
N/A
|
*
|
|
|
7.5
|
%
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
N/A
|
*
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,215
|
|
Blended income and sales comparison approaches
|
Reduction to the sales comparison value to reconcile differences between comparable sales
|
|
|
0.0%-6.0
|
%
|
|
|
3.8
|
%
|
|
|
|
|
Capitalization rate (income approach component)
|
|
|
7.3%-7.5
|
%
|
|
|
7.4
|
%
|
|
|
|
|
Reduction for planned expedited disposal
|
|
|
10.0%-25.0
|
%
|
|
|
15.6
|
%
|
|
5,500
|
|
Previously negotiated note sales
|
Discount to unpaid principal balance from likely realizable value of a note sale negotiated on terms deemed acceptable
|
|
|
N/A
|
*
|
|
|
17
|
%
|
*Only one loan in this population.
OREO.
OREO represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure. OREO is carried, net of allowances for losses, at the lower of its recorded historical cost or the fair value of the property as adjusted for any estimated disposal costs. The fair value of OREO is estimated through current appraisals, by a licensed appraiser. Since OREO properties are actively marketed, estimated fair values could periodically be adjusted to reflect current market conditions and, as such, are classified as Level 3. There were no OREO properties held at December 31, 2012, and one OREO property held at March 31, 2013. Due to the immaterial nature of OREO, quantitative information about Level 3 fair value measurements for the OREO measured at fair value has not been disclosed.
The carrying amounts and estimated fair values of financial instruments at March 31, 2013 and December 31, 2012 were as follows:
|
|
|
|
|
Fair Value at March 31, 2013 Using
|
|
|
|
|
At March 31, 2013
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
141,656
|
|
|
$
|
141,656
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
141,656
|
|
Investment securities held to maturity (TRUPS)
|
|
|
5,746
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,528
|
|
|
|
5,528
|
|
Loans, net
|
|
|
3,525,824
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,649,573
|
|
|
|
3,649,573
|
|
Loans held for sale
|
|
|
469
|
|
|
|
-
|
|
|
|
469
|
|
|
|
-
|
|
|
|
469
|
|
Accrued interest receivable
|
|
|
12,897
|
|
|
|
21
|
|
|
|
251
|
|
|
|
12,625
|
|
|
|
12,897
|
|
Mortgage Servicing Rights ("MSR")
|
|
|
990
|
|
|
|
-
|
|
|
|
1,336
|
|
|
|
-
|
|
|
|
1,336
|
|
FHLBNY capital stock
|
|
|
40,736
|
|
|
|
N/
|
A
|
|
|
N/
|
A
|
|
|
N/
|
A
|
|
|
N/
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
$
|
1,721,985
|
|
|
$
|
1,721,985
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,721,985
|
|
Certificates of Deposit ("CDs")
|
|
|
879,330
|
|
|
|
-
|
|
|
|
893,435
|
|
|
|
-
|
|
|
|
893,435
|
|
Escrow and other deposits
|
|
|
119,452
|
|
|
|
119,452
|
|
|
|
-
|
|
|
|
-
|
|
|
|
119,452
|
|
FHLBNY Advances
|
|
|
747,500
|
|
|
|
-
|
|
|
|
786,765
|
|
|
|
-
|
|
|
|
786,765
|
|
Trust Preferred securities payable
|
|
|
70,680
|
|
|
|
-
|
|
|
|
70,680
|
|
|
|
-
|
|
|
|
70,680
|
|
Accrued interest payable
|
|
|
2,820
|
|
|
|
-
|
|
|
|
2,820
|
|
|
|
-
|
|
|
|
2,820
|
|
|
|
|
|
|
Fair Value at December 31, 2012 Using
|
|
|
|
|
At December 31, 2012
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
79,076
|
|
|
$
|
79,076
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
79,076
|
|
Investment securities held to maturity (TRUPS)
|
|
|
5,927
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,195
|
|
|
|
6,195
|
|
Loans, net
|
|
|
3,485,258
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,609,505
|
|
|
|
3,610,065
|
|
Loans held for sale
|
|
|
560
|
|
|
|
-
|
|
|
|
560
|
|
|
|
-
|
|
|
|
560
|
|
Accrued interest receivable
|
|
|
13,518
|
|
|
|
-
|
|
|
|
359
|
|
|
|
13,159
|
|
|
|
13,518
|
|
MSR
|
|
|
1,115
|
|
|
|
-
|
|
|
|
1,511
|
|
|
|
-
|
|
|
|
1,511
|
|
FHLBNY capital stock
|
|
|
45,011
|
|
|
|
N/
|
A
|
|
|
N/
|
A
|
|
|
N/
|
A
|
|
|
N/
|
A
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
$
|
1,587,454
|
|
|
$
|
1,587,454
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,587,454
|
|
CDs
|
|
|
891,975
|
|
|
|
-
|
|
|
|
907,657
|
|
|
|
-
|
|
|
|
907,657
|
|
Escrow and other deposits
|
|
|
82,753
|
|
|
|
82,753
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,753
|
|
FHLBNY Advances
|
|
|
842,500
|
|
|
|
-
|
|
|
|
885,774
|
|
|
|
-
|
|
|
|
885,774
|
|
Trust Preferred securities payable
|
|
|
70,680
|
|
|
|
-
|
|
|
|
70,680
|
|
|
|
-
|
|
|
|
70,680
|
|
Accrued interest payable
|
|
|
2,528
|
|
|
|
-
|
|
|
|
2,827
|
|
|
|
-
|
|
|
|
2,827
|
|
Methods and assumptions used to estimate fair values for financial assets and liabilities other than those previously discussed are summarized as follows:
Cash and Due From Banks -
The fair value is assumed to be equal to their carrying value as these amounts are due upon demand (deemed a Level 1 valuation).
Federal Funds Sold and Other Short Term Investments
– As a result of their short duration to maturity, the fair value of these assets, principally overnight deposits, is assumed to be equal to their carrying value due (deemed a Level 1 valuation).
TRUPS Held to Maturity
– At both March 31, 2013 and December 31, 2012, the Company owned seven TRUPS classified as held-to-maturity. Late in 2008, the market for these securities became illiquid, and continued to be deemed illiquid as of March 31, 2013. As a result, at both March 31, 2013 and December 31, 2012, their estimated fair value was obtained utilizing a blended valuation
approach (Level 3 pricing). Under the blended valuation approach, the Bank utilized the following valuation sources: 1) broker quotations, which were deemed to meet the criteria of "distressed sale" pricing under the guidance of ASC 820-10-65-4, were given a minor 10% weighting (deemed to be a Level 2 valuation); 2) an internally created cash flow valuation model that considered the creditworthiness of each individual issuer underlying the collateral pools, and utilized default, cash flow and discount rate assumptions determined by the Company's management (the "Internal Cash Flow Valuation"), was given a 45% weighting (deemed to be a Level 3 valuation); and 3) a minimum of two of three available independent cash flow valuation models were averaged and given a 45% weighting (deemed to be a Level 3 valuation for which the Company is not provided detailed information regarding the significant unobservable inputs utilized by the third party).
The major assumptions utilized in the Internal Cash Flow Valuation (each of which represents a significant unobservable input as defined by ASC 820-10) were as folows:
(i) Discount Rate - Pursuant to ASC 320-10-65, the Company utilized two different discount rates for discounting the cash flows for each of the seven TRUPS, as follows:
(1)
|
Purchase discount rate – the rate used to determine the "credit" based valuation of the security. The purchase discount rates utilized to compute fair value as of March 31, 2013 ranged from 1.7% to 2.5%, with a weighted average value of 2.2%.
|
(2) Current discount rate - the current discount rate utilized was derived from the Bloomberg fair market value curve for debt offerings of similar credit rating. In the event that a security had a split credit rating, separate cash flow valuations were made utilizing the appropriate discount rate and were averaged in order to determine the Internal Cash Flow Valuation. In addition, the discount rate was interpolated from the Bloomberg fair market value curve for securities possessing a credit rating below "B." The existing discount rates utilized to compute fair value as of March 31, 2013 ranged from 5.4% to 6.2%, with a weighted average value of 5.8%.
(ii) Defaults – The Company utilized the most recently published measures of capital adequacy and/or problematic assets to estimate potential defaults in the collateral pool of performing issuers underlying the seven securities. In instances where problematic assets equaled or exceeded the issuer's regulatory capital, or the issuer's capital level fell below the limits established by the regulatory agencies, defaults were deemed propable to occur. Based upon the application of this methodology, the computed default rates utilized in the determination of the fair value of the TRUPS as of March 31, 2013 ranged from 0% to 6.2% of the performing security pool balance, with a weighted average rate of 1.9%. The Company additionally utilized a standard default rate of 1.2% every three years, which was applied uniformly.
(iii) Cash Flows - The expected payments for the tranche of each security owned by the Company, as adjusted to assume that all estimated defaults occur immediately. The cash flows further assumed an estimated recovery rate of 10% per annum to occur one year after initial default, which was applied uniformly.
As discussed above, in addition to the Internal Cash Flow Valuation and broker quotations, at March 31, 2013 and December 31, 2012, the Company utilized a minimum of two additional cash flow valuation models in order to estimate the fair value of TRUPS. Two of the three independent cash flow valuation models utilized a methodology similar to the Internal Cash Flow Valuation, differing only in the underlying assumptions deriving estimated cash flows, individual bank defaults and discount rate. At December 31, 2012, a third independent cash flow valuation model was utilized which was derived from a different methodology in which the actual cash flow estimate based upon the underlying collateral of the securities (including default estimates) was not considered. Instead, this cash flow valuation model utilized a discount rate determined from the Bloomberg fair market value curve for similar assets that continued to trade actively, with adjustments made for the illiquidity of the TRUPS market. This valuation model was not utilized as of March 31, 2013 as it was deemed too anomalous. Because of the significant judgment underlying each of the pricing assumptions, management elected to recognize each of the independent valuations and apply a weighting system to all of the valuations, including the Internal Cash Flow Valuation, as all of these valuations were determined utilizing a valid and objective pricing methodology.
Loans, Net
- The fair value of impaired loans that are measured at fair value is determined in the manner described commencing on page 25. The fair value of all remaining loans receivable is determined by discounting anticipated future cash flows of the loans, net of anticipated prepayments, using a discount rate reflecting current market rates for loans with similar terms to borrowers of similar credit quality. For adjustable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The valuation method used for loans does not necessarily represent an exit price valuation methodology as defined under ASC 820. However, since the valuation methodology is deemed to be akin to a Level 3 valuation methodology, the fair value of loans receivable other than impaired loans measured at fair value, is shown under the Level 3 valuation column.
Loans Held For Sale
- The fair value of held-for-sale loans is primarily determined utilizing quoted market prices for securities backed by similar types of loans. Changes in the fair value of loans held for sale result primarily from changes in interest rates subsequent to funding but prior to sale, and changes in the fair value of the associated servicing of the loan. Loans held for sale are deemed a Level 2 valuation.
Accrued Interest Receivable -
The estimated fair value of accrued interest receivable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial asset.
MSR
- On a quarterly basis, the aggregate balance of the MSR is evaluated for impairment based upon the fair value of the rights as compared to their carrying amount. If the aggregate carrying amount of the MSR exceeds fair value, impairment is recorded on the MSR so that they are carried at fair value. Fair value is determined based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2 input).
FHLBNY Capital Stock
– It is not practicable to determine the fair value of FHLBNY capital stock due to restrictions placed on transferability.
Deposits
- The fair value of savings, money market, and checking accounts is, by definition, equal to the amount payable on demand at the reporting date (
i.e
., their carrying amount), which has been deemed a Level 1 valuation. The fair value of CDs is based upon the present value of contractual cash flows using current interest rates for instruments of the same remaining maturity (deemed a Level 2 valuation).
Escrow and Other Deposits –
The fair value of escrow and other deposits is, by definition, equal to the amount payable on demand at the reporting date
(i.e.
, their carrying amount), which has been deemed a Level 1 valuation.
FHLBNY Advances –
The fair value of FHLBNY advances is measured by the discounted anticipated cash flows through contractual maturity or next interest repricing date, or an earlier call date if, as of the valuation date, the borrowing is expected to be called (deemed a Level 2 valuation). The carrying amount of accrued interest payable on FHLBNY advances is its fair value.
Trust Preferred Securities Payable
- The fair value of trust preferred securities payable is estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements (deemed a Level 2 valuation), and is provided to the Company quarterly independently by a market maker in the underlying security.
Accrued Interest Payable -
The estimated fair value of accrued interest payable approximates its carrying amount, and is deemed to be valued at an input level comparable to its underlying financial liability.
Commitments to Extend Credit
- Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. The fair value of commitments is not material.
12. RETIREMENT AND POSTRETIREMENT PLANS
The Holding Company or the Bank maintains the Retirement Plan of The Dime Savings Bank of Williamsburgh (the "Employee Retirement Plan"), the Retirement Plan for Board Members of Dime Community Bancshares, Inc. (the "Outside Director Retirement Plan"), the BMP, and the Postretirement Welfare Plan of The Dime Savings Bank of Williamsburgh ("Postretirement Plan"). Net expenses associated with these plans were comprised of the following components:
|
|
Three Months Ended
March 31, 2013
|
|
|
Three Months Ended
March 31, 2012
|
|
|
|
BMP,
Employee and Outside Director
Retirement Plans
|
|
|
Postretirement Plan
|
|
|
BMP,
Employee and Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
-
|
|
|
$
|
15
|
|
|
$‑
|
|
|
$
|
39
|
|
Interest cost
|
|
|
290
|
|
|
|
57
|
|
|
|
306
|
|
|
|
90
|
|
Actuarial adjustment to prior period
interest cost and amortization
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
|
‑
|
|
Expected return on assets
|
|
|
(380
|
)
|
|
|
-
|
|
|
|
(363
|
)
|
|
‑
|
|
Unrecognized past service liability
|
|
|
-
|
|
|
|
-
|
|
|
‑
|
|
|
‑
|
|
Amortization of unrealized loss
|
|
|
587
|
|
|
|
12
|
|
|
|
541
|
|
|
|
75
|
|
Net periodic cost
|
|
$
|
497
|
|
|
$
|
84
|
|
|
$
|
484
|
|
|
$
|
204
|
|
The Company disclosed in its consolidated financial statements for the year ended December 31, 2012 that it expected to make contributions to, or benefit payments on behalf of, benefit plans during 2013 as follows: Employee Retirement Plan - $53, BMP - $483, Outside Director Retirement Plan - $186, and Postretirement Plan - $187. The Company made contributions of $13 to the
Employee Retirement Plan during the three months ended March 31, 2013, and expects to make the remainder of the estimated $53 of net contributions during 2013. The Company made benefit payments of $45 on behalf of the Outside Director Retirement Plan during the three months ended March 31, 2013, and expects to make the remainder of the estimated $186 of net contributions or benefit payments during 2013. The Company made net benefit payments totaling $29 on behalf of the Postretirement Plan during the three months ended March 31, 2013, and expects to make the remainder of the estimated $187 of net contributions or benefit payments during 2013. The Company did not make any defined benefit contributions to, or benefit payments on behalf of, the BMP during the three months ended March 31, 2013, and does not currently expect to make the $483 of benefit payments on behalf of the BMP during 2013, since anticipated retirements that formed the basis for these expected benefit payments in 2013 are presently not expected to occur.
13. INCOME TAXES
During the three months ended March 31, 2013 and 2012, the Company's consolidated effective tax rates were 40.4% and 40.8%, respectively. There were no significant unusual income tax items during the three months ended March 31, 2013 and 2012.
14. NET MORTGAGE BANKING INCOME
Net mortgage banking income presented in the condensed consolidated statements of operations was comprised of the following items:
|
|
Three Months Ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Gain on the sale of loans originated for sale
|
|
$
|
12
|
|
|
$
|
1
|
|
Credit to the liability for First Loss Position
|
|
|
92
|
|
|
‑
|
|
Mortgage banking fees
|
|
|
57
|
|
|
|
120
|
|
Net mortgage banking income
|
|
$
|
161
|
|
|
$
|
121
|
|