NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Per Share Amounts)
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, 842 Manhattan Avenue Corp., and Dime Community Capital Trust 1. The Bank's direct subsidiaries are Boulevard Funding Corp., Dime Insurance Agency Inc., DSBW Preferred Funding Corporation, DSBW Residential Preferred Funding Corp., Dime Reinvestment Corp., 195 Havemeyer Corp. and DSB Holdings NY, LLC.
Effective August 1, 2016, the Bank changed its name from The Dime Savings Bank of Williamsburgh to Dime Community Bank. The new name more accurately reflects the Bank’s evolving business model and emphasizes its broader geographic and business reach while retaining the Bank’s mission to be in and of the communities it serves, including the virtual online community. The Company maintains its corporate headquarters in the Brooklyn Heights section of Brooklyn, New York and operates twenty-seven 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, including the Bank’s principal office in the Williamsburg section of Brooklyn. 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, mixed use, and C&I loans, as well as MBS, obligations of the U.S. Government and Government Sponsored Enterprises ("GSEs"), and corporate debt and equity securities. Substantially 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, 2017 and December 31, 2016, the results of operations and statements of comprehensive income for the three-month periods ended March 31, 2017 and 2016, and the changes in stockholders' equity and cash flows for the three-month periods ended March 31, 2017 and 2016. The results of operations for the three-month period ended March 31, 2017 are not necessarily indicative of the results of operations for the remainder of the year ending December 31, 2017. 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 condensed 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 unaudited 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, 2016 and notes thereto.
3.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU 2014-09 impacts any entity that either enters into contracts with customers to transfer goods or services, or that enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (
e.g.,
insurance or lease contracts). Under ASU 2014-09, an entity is required to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, as well as qualitative and quantitative disclosure related to contracts with certain customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In March 2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Consideration - Reporting Revenue Gross Versus Net
. The objective of the ASU is to align the recognition of revenue with the transfer of promised goods or services provided to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this ASU affect the guidance in ASU 2014-09, which is not yet effective. Both ASU 2014-09 and the amendment are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is evaluating the potential impact of ASU 2014-09 and the amendment on its consolidated financial statements, however, it is not presently expected to have a material impact.
In January 2016, the FASB issued ASU 2016-01, an amendment to
Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)
. The objectives of the ASU are to: (1) require equity investments to be measured at fair value, with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values, (3) eliminate the requirement to disclose methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost on the balance sheet, (4) require the use of the exit price notion when measuring the fair value of financial instruments, and (5) clarify the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is evaluating the potential impact of ASU 2016-01 on its consolidated financial statements, however, it is not presently expected to have a material impact.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires companies that lease valuable assets to recognize on their balance sheets the assets and liabilities generated by contracts longer than a year. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, however, early adoption is permitted. The Company is evaluating the potential impact of ASU 2016-02 on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments – Credit Losses (Topic 326)
, which requires that the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current condition, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This guidance also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this guidance is effective for fiscal years and interim periods beginning after December 31, 2019. The Company has established a committee that is assessing system requirements, gathering data, and evaluating the impact of the ASU on its consolidated financial statements. The Company expects to recognize a one-time cumulative effect increase to the allowance for loan losses as of the beginning of the reporting period in which the ASU takes effect, however, cannot yet determine the magnitude of the impact on the consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07,
Compensation – Retirement Benefits (Topic 715)
. ASU 2017-07 requires companies that offer employee defined pension plans, other postretirement benefit plans, or other types of benefit plans accounted for under Topic 715 to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, however, early adoption is permitted. The adoption of ASU 2017-07 will not have a material impact on the Company’s consolidated financial statements.
In March 2017, the FASB issued ASU 2017-08,
Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
. ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, however, early adoption is permitted. The Company is evaluating the potential impact of ASU 2017-08 on its consolidated financial statements, however, it is not presently expected to have a material impact.
4.
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
Activity in accumulated other comprehensive income (loss), net of tax, was as follows:
|
|
Securities Held-
to-Maturity and
Transferred
Securities
|
|
|
Securities
Available-for-
Sale
|
|
|
Defined Benefit
Plans
|
|
|
Derivative
Asset
|
|
|
Total
Accumulated
Other
Comprehensive
Gain (Loss)
|
|
Balance as of January 1, 2017
|
|
$
|
(713
|
)
|
|
$
|
(92
|
)
|
|
$
|
(6,910
|
)
|
|
$
|
1,776
|
|
|
$
|
(5,939
|
)
|
Other comprehensive income before reclassifications
|
|
|
18
|
|
|
|
65
|
|
|
|
-
|
|
|
|
124
|
|
|
|
207
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
171
|
|
|
|
47
|
|
|
|
218
|
|
Net other comprehensive income during the period
|
|
|
18
|
|
|
|
65
|
|
|
|
171
|
|
|
|
171
|
|
|
|
425
|
|
Balance as of March 31, 2017
|
|
$
|
(695
|
)
|
|
$
|
(27
|
)
|
|
$
|
(6,739
|
)
|
|
$
|
1,947
|
|
|
$
|
(5,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
$
|
(760
|
)
|
|
$
|
(122
|
)
|
|
$
|
(7,919
|
)
|
|
$
|
-
|
|
|
$
|
(8,801
|
)
|
Other comprehensive income before reclassifications
|
|
|
10
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
234
|
|
|
|
-
|
|
|
|
234
|
|
Net other comprehensive income during the period
|
|
|
10
|
|
|
|
8
|
|
|
|
234
|
|
|
|
-
|
|
|
|
252
|
|
Balance as of March 31, 2016
|
|
$
|
(750
|
)
|
|
$
|
(114
|
)
|
|
$
|
(7,685
|
)
|
|
$
|
-
|
|
|
$
|
(8,549
|
)
|
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 (loss) on securities and other assets
in the accompanying condensed consolidated statements of income. Reclassification adjustments related to the defined benefit plan are included in the line entitled salaries and employee benefits.
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Change in unrealized holding loss on securities held-to-maturity and transferred securities:
|
|
|
|
|
|
|
Accretion of previously recognized non-credit component of OTTI
|
|
$
|
9
|
|
|
$
|
8
|
|
Change in unrealized loss on securities transferred to held-to-maturity
|
|
|
25
|
|
|
|
11
|
|
Net change
|
|
|
34
|
|
|
|
19
|
|
Tax expense
|
|
|
16
|
|
|
|
9
|
|
Net change in unrealized holding loss on securities held-to-maturity and transferred securities
|
|
|
18
|
|
|
|
10
|
|
Change in unrealized holding gain on securities available-for-sale:
|
|
|
|
|
|
|
|
|
Change in net unrealized gain during the period
|
|
|
120
|
|
|
|
15
|
|
Tax expense
|
|
|
55
|
|
|
|
7
|
|
Net change in unrealized holding gain on securities available-for-sale
|
|
|
65
|
|
|
|
8
|
|
Change in pension and other postretirement obligations:
|
|
|
|
|
|
|
|
|
Reclassification adjustment for expense included in salaries and employee benefits expense
|
|
|
302
|
|
|
|
425
|
|
Tax expense
|
|
|
131
|
|
|
|
191
|
|
Net change in pension and other postretirement obligations
|
|
|
171
|
|
|
|
234
|
|
Change in unrealized loss on derivative liability:
|
|
|
|
|
|
|
|
|
Change in net unrealized loss during the period
|
|
|
228
|
|
|
|
-
|
|
Reclassification adjustment for expense included in interest expense
|
|
|
87
|
|
|
|
-
|
|
Net change
|
|
|
315
|
|
|
|
-
|
|
Tax expense
|
|
|
144
|
|
|
|
-
|
|
Net change in unrealized loss on derivative liability
|
|
|
171
|
|
|
|
-
|
|
Other comprehensive income
|
|
$
|
425
|
|
|
$
|
252
|
|
5.
|
EARNINGS PER SHARE ("EPS")
|
Basic EPS is computed by dividing net income 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, and likely aggregate Long-term Incentive Plan (“LTIP”) share payout. In determining the weighted average shares outstanding for basic and diluted EPS, treasury shares, and (until the period ended September 30, 2016) 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 and LTIP shares not yet awarded are recognized as a special class of participating securities under ASC 260.
The following is a reconciliation of the numerators and denominators of basic and diluted EPS for the periods presented:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Net income per the Consolidated Statements of Income
|
|
$
|
11,157
|
|
|
$
|
50,037
|
|
Less: Dividends paid and earnings allocated to participating securities
|
|
|
(25
|
)
|
|
|
(31
|
)
|
Income attributable to common stock
|
|
$
|
11,132
|
|
|
$
|
50,006
|
|
Weighted average common shares outstanding, including participating securities
|
|
|
37,603,628
|
|
|
|
36,813,347
|
|
Less: weighted average participating securities
|
|
|
(150,423
|
)
|
|
|
(223,605
|
)
|
Weighted average common shares outstanding
|
|
|
37,453,205
|
|
|
|
36,589,742
|
|
Basic EPS
|
|
$
|
0.30
|
|
|
$
|
1.37
|
|
Income attributable to common stock
|
|
$
|
11,132
|
|
|
$
|
50,006
|
|
Weighted average common shares outstanding
|
|
|
37,453,205
|
|
|
|
36,589,742
|
|
Weighted average common equivalent shares outstanding
|
|
|
96,371
|
|
|
|
73,209
|
|
Weighted average common and equivalent shares outstanding
|
|
|
37,549,576
|
|
|
|
36,662,951
|
|
Diluted EPS
|
|
$
|
0.30
|
|
|
$
|
1.36
|
|
Common and 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 common stock over the exercise price of outstanding in-the-money
stock options during the period.
There were no “out-of-the-money” stock options during the three-month period ended March 31, 2017. There were 124,622 weighted-average stock options outstanding for the three-month period ended March 31, 2016 which were not considered in the calculation of diluted EPS since their exercise prices exceeded the average market price during the period.
For information about the calculation of likely aggregate LTIP share payout, see Note 6.
6.
|
ACCOUNTING FOR STOCK BASED COMPENSATION
|
During the three-month periods ended March 31, 2017 and 2016, the Company maintained the Dime Community Bancshares, Inc. 2001 Stock Option Plan for Outside Directors, Officers and Employees, the 2004 Stock Incentive Plan and the 2013 Equity and Incentive Plan (“2013 Equity 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, 2016, and which are subject to the accounting requirements of ASC 505-50 and ASC 718.
Stock Option Awards
The following table presents a summary of activity related to stock options granted under the Stock Plans, and changes during the three-month period then ended:
|
|
Number of
Options
|
|
|
Weighted-Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Years
|
|
|
Aggregate
Intrinsic Value
|
|
Options outstanding at January 1, 2017
|
|
|
209,254
|
|
|
$
|
15.48
|
|
|
|
|
|
|
|
Options granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(42,062
|
)
|
|
|
14.87
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2017
|
|
|
167,192
|
|
|
$
|
15.64
|
|
|
|
2.3
|
|
|
$
|
779
|
|
Options vested and exercisable at March 31, 2017
|
|
|
167,192
|
|
|
$
|
15.64
|
|
|
|
2.3
|
|
|
$
|
779
|
|
Information related to stock options during each period is as follows:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash received for option exercise cost
|
|
$
|
624
|
|
|
$
|
-
|
|
Income tax benefit recognized on stock option exercises
(1)
|
|
|
69
|
|
|
|
-
|
|
Intrinsic value of options exercised
|
|
|
275
|
|
|
|
-
|
|
(1)
|
Effective January 1, 2017, income tax benefits were recognized as discrete items in income tax expense in accordance to ASU 2016-09. Prior to January, 1, 2017, income tax benefits were recognized through additional paid in capital.
|
There were no grants of stock options during the three-month periods ended March 31, 2017 or 2016. All stock options are fully vested as of March 31, 2017 and 2016.
Restricted Stock Awards
The Company has made restricted stock award grants to outside Directors and certain officers under the 2004 Stock Incentive Plan or 2013 Equity and 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 table presents a summary of activity related to the restricted stock awards granted, and changes during the three-month period then ended:
|
|
Number of Shares
|
|
|
Weighted-Average
Grant-Date Fair
Value
|
|
Unvested allocated shares outstanding at January 1, 2017
|
|
|
152,409
|
|
|
$
|
16.56
|
|
Shares granted
|
|
|
17,316
|
|
|
|
20.50
|
|
Shares vested
|
|
|
(1,840
|
)
|
|
|
18.11
|
|
Shares forfeited
|
|
|
(13,591
|
)
|
|
|
16.84
|
|
Unvested allocated shares at March 31, 2017
|
|
|
154,294
|
|
|
$
|
16.96
|
|
All awards were made at the fair value of the Holding Company’s common stock (
i.e.
, the closing price on the NASDAQ market as of the close of business) on the award date. Compensation expense is based upon the fair value of the shares on the respective dates of the grant.
Information related to restricted stock awards during each period is as follows:
|
|
At or for the Three Months
Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Compensation expense recognized
|
|
$
|
297
|
|
|
$
|
438
|
|
Income tax benefit recognized on vesting of restricted stock awards
(1)
|
|
|
2
|
|
|
|
-
|
|
(1)
|
Effective January 1, 2017, income tax benefits were recognized as discrete items in income tax expense in accordance to ASU 2016-09. Prior to January, 1, 2017, income tax benefits were recognized through additional paid in capital.
|
As of March 31, 2017, unrecognized compensation cost relating to unvested restricted shares totaled $1,389. This amount will be recognized over a remaining weighted average period of 1.6 years.
Performance Based Equity Awards
The Company established the LTIP, a long term incentive award program for certain officers, that meets the criteria for equity-based accounting. For each award, threshold (50% of target), target (100% of target) and maximum (150% of target) opportunities are eligible to be earned over a three-year performance period based on the Company's relative performance on certain goals that were established at the onset of the performance period and cannot be altered subsequently. Shares of the Holding Company’s common stock are issued on the grant date and held as unvested stock awards until the end of the performance period. They are issued at the maximum opportunity in order to ensure that an adequate number of shares are allocated for shares expected to vest at the end of the performance period.
The following table presents a summary of activity related to performance based equity awards, and changes during the three-month period then ended:
|
|
Number of
Shares
|
|
|
Weighted-
Average Grant-
Date Fair Value
|
|
Maximum aggregate share payout at January 1, 2017
|
|
|
24,730
|
|
|
$
|
17.35
|
|
Shares granted
|
|
|
71,976
|
|
|
|
19.75
|
|
Shares forfeited
|
|
|
(4,268
|
)
|
|
|
17.35
|
|
Maximum aggregate share payout at March 31, 2017
|
|
|
92,438
|
|
|
$
|
19.22
|
|
Minimum aggregate share payout
|
|
|
-
|
|
|
|
-
|
|
Likely aggregate share payout
|
|
|
79,657
|
|
|
$
|
19.52
|
|
Compensation expense recorded for performance based equity awards was $97 and $27 for the three-month periods ended March 31, 2017 and 2016, respectively.
7.
|
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:
On a quarterly basis, 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 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), and commercial real estate loans, C&I loans, as well as one-to four family residential and cooperative and condominium apartment loans. Prior to April 1, 2016, the analysis of one-to-four family residential and cooperative and condominium apartment loans included only 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”) that were deemed to meet the definition of impaired. Prior to December 31, 2016, the analysis of C&I loans was included in the consumer loan credit quality analysis, which is based on payment activity due to the nature and volume of the C&I loan balance.
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 as of March 31, 2017 or December 31, 2016. All real estate and C&I loans not classified as Special Mention or Substandard were deemed pass loans at both March 31, 2017 and December 31, 2016.
The following is a summary of the credit risk profile of real estate and C&I loans (including deferred costs) by internally assigned grade as of the dates indicated:
|
|
Balance at March 31, 2017
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential, including condominium and cooperative apartment
|
|
$
|
73,777
|
|
|
$
|
210
|
|
|
$
|
1,144
|
|
|
$
|
-
|
|
|
$
|
75,131
|
|
Multifamily residential and residential mixed use
|
|
|
4,685,627
|
|
|
|
3,460
|
|
|
|
7,111
|
|
|
|
-
|
|
|
|
4,696,198
|
|
Commercial mixed use real estate
|
|
|
393,101
|
|
|
|
532
|
|
|
|
5,386
|
|
|
|
-
|
|
|
|
399,019
|
|
Commercial real estate
|
|
|
543,613
|
|
|
|
522
|
|
|
|
6,504
|
|
|
|
-
|
|
|
|
550,639
|
|
Total real estate
|
|
|
5,696,118
|
|
|
|
4,724
|
|
|
|
20,145
|
|
|
|
-
|
|
|
|
5,720,987
|
|
C&I
|
|
|
30,189
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,189
|
|
Total
|
|
$
|
5,726,307
|
|
|
$
|
4,724
|
|
|
$
|
20,145
|
|
|
$
|
-
|
|
|
$
|
5,751,176
|
|
|
|
Balance at December 31, 2016
|
|
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential, including condominium and cooperative apartment
|
|
$
|
72,325
|
|
|
$
|
212
|
|
|
$
|
1,485
|
|
|
$
|
-
|
|
|
$
|
74,022
|
|
Multifamily residential and residential mixed use
|
|
|
4,589,838
|
|
|
|
3,488
|
|
|
|
7,200
|
|
|
|
-
|
|
|
|
4,600,526
|
|
Commercial mixed use real estate
|
|
|
398,139
|
|
|
|
535
|
|
|
|
5,465
|
|
|
|
-
|
|
|
|
404,139
|
|
Commercial real estate
|
|
|
546,568
|
|
|
|
525
|
|
|
|
7,227
|
|
|
|
-
|
|
|
|
554,320
|
|
Total Real Estate
|
|
$
|
5,606,870
|
|
|
$
|
4,760
|
|
|
$
|
21,377
|
|
|
$
|
-
|
|
|
$
|
5,633,007
|
|
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,
2017
|
|
|
Balance at
December 31,
2016
(1)
|
|
Performing
|
|
$
|
968
|
|
|
$
|
3,414
|
|
Non-accrual
|
|
|
5
|
|
|
|
1
|
|
Total
|
|
$
|
973
|
|
|
$
|
3,415
|
|
(1)
|
Included in the balance of consumer loans at December 31, 2016 are $2,058 of C&I loans. As of March 31, 2017, C&I loans were evaluated based on risk ratings and included in the preceding credit risk profile table.
|
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, 2017
|
|
|
|
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, including condominium and cooperative apartment
|
|
$
|
173
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
678
|
|
|
$
|
851
|
|
|
$
|
74,280
|
|
|
$
|
75,131
|
|
Multifamily residential and residential mixed use
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
|
|
2,623
|
|
|
|
2,728
|
|
|
|
4,693,470
|
|
|
|
4,696,198
|
|
Commercial mixed use real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
614
|
|
|
|
495
|
|
|
|
1,109
|
|
|
|
397,910
|
|
|
|
399,019
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
550,639
|
|
|
|
550,639
|
|
Total real estate
|
|
$
|
173
|
|
|
$
|
-
|
|
|
$
|
719
|
|
|
$
|
3,796
|
|
|
$
|
4,688
|
|
|
$
|
5,716,299
|
|
|
$
|
5,720,987
|
|
C&I
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
30,189
|
|
|
$
|
30,189
|
|
Consumer
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
968
|
|
|
$
|
973
|
|
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2017.
|
|
At December 31, 2016
|
|
|
|
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, including condominium and cooperative apartment
|
|
$
|
188
|
|
|
$
|
-
|
|
|
$
|
1,513
|
|
|
$
|
1,012
|
|
|
$
|
2,712
|
|
|
$
|
71,309
|
|
|
$
|
74,022
|
|
Multifamily residential and residential mixed use
|
|
|
-
|
|
|
|
-
|
|
|
|
1,557
|
|
|
|
2,675
|
|
|
|
4,232
|
|
|
|
4,596,294
|
|
|
|
4,600526
|
|
Commercial mixed use real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
549
|
|
|
|
549
|
|
|
|
403,590
|
|
|
|
404,139
|
|
Commercial real estate
|
|
|
1,732
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,732
|
|
|
|
552,588
|
|
|
|
554,320
|
|
Total real estate
|
|
$
|
1,920
|
|
|
$
|
-
|
|
|
$
|
3,070
|
|
|
$
|
4,236
|
|
|
$
|
9,226
|
|
|
$
|
5,623,781
|
|
|
$
|
5,633,007
|
|
C&I
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,058
|
|
|
$
|
2,058
|
|
Consumer
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1,356
|
|
|
$
|
1,357
|
|
(1)
Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2016.
Accruing Loans 90 Days or More Past Due
The Bank continued accruing interest on three real estate loans with an aggregate outstanding balance of $719 at March 31, 2017, and four real estate loans with an aggregate outstanding balance of $3,070 at December 31, 2016, all of which were 90 days or more past due on their respective contractual maturity dates. These loans continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payments due at maturity. These loans were well secured and were expected to be refinanced, and, therefore, remained on accrual status and were deemed performing assets at the dates indicated above.
Troubled Debt Restructurings ("TDRs")
The following table summarizes outstanding TDRs by underlying collateral types as of the dates indicated:
|
|
As of March 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
No. of Loans
|
|
|
Balance
|
|
|
No. of Loans
|
|
|
Balance
|
|
One- to four-family residential, including condominium and cooperative apartment
|
|
|
2
|
|
|
$
|
402
|
|
|
|
2
|
|
|
$
|
407
|
|
Multifamily residential and residential mixed use
|
|
|
3
|
|
|
|
649
|
|
|
|
3
|
|
|
|
658
|
|
Commercial mixed use real estate
|
|
|
1
|
|
|
|
4,240
|
|
|
|
1
|
|
|
|
4,261
|
|
Commercial real estate
|
|
|
1
|
|
|
|
3,347
|
|
|
|
1
|
|
|
|
3,363
|
|
Total real estate
|
|
|
7
|
|
|
$
|
8,638
|
|
|
|
7
|
|
|
$
|
8,689
|
|
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 on either 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 the Bank’s policy and agency regulations. There were no TDRs on non-accrual status at March 31, 2017 or December 31, 2016.
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, 2017 and December 31, 2016.
There were no loans modified in a manner that met the criteria of a TDR during the three-month periods ended March 31, 2017 or 2016.
The Bank's allowance for loan losses at March 31, 2017 and December 31, 2016 did not reflect any allocated reserve associated with TDRs.
As of March 31, 2017 and December 31, 2016, 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-month periods ended March 31, 2017 or 2016 (thus no impact to the allowance for loan losses during those periods).
Impaired Loans
A loan is considered impaired when, based on then 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.
The Bank considers TDRs and non-accrual multifamily residential, commercial real estate, and C&I 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 to come from liquidation of the collateral; or 3) the present value of estimated future cash flows (using the loan’s pre-modification rate for some of the performing TDRs). If a TDR is substantially performing in accordance with its restructured terms, management will look to either the potential net liquidation proceeds of the underlying collateral or the present value of the expected cash flows from the debt service 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 8 for tabular information related to impaired loans.
8.
|
ALLOWANCE FOR LOAN LOSSES
|
The allowance for loan losses may consist of specific and general components. At March 31, 2017, the Bank’s periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) impaired loans and (2) pass graded loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses: (1) real estate loans; (2) C&I loans; and (3) consumer loans. Within these segments, the Bank analyzes the allowance for loan losses based upon the underlying collateral type (classes). Due to their small homogeneous balances, consumer loans were not individually evaluated for impairment as of either March 31, 2017 or December 31, 2016.
Impaired Loan Component
All multifamily residential, mixed use, commercial real estate, and C&I loans that are deemed to meet the definition of impaired are individually evaluated for impairment. In addition, all condominium or cooperative apartment 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 to come from liquidation of the collateral; or (3) the present value of estimated future cash flows (using the loan's pre-modification rate in the case of some performing TDRs). 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 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 are generally considered when measuring impairment. While measured impairment is generally charged off immediately, impairment attributed to a reduction in the present value of expected cash flows of a performing TDR is generally reflected as an allocated reserve within the allowance for loan losses. At March 31, 2017 and December 31, 2016, there were no allocated reserves related to TDRs within the allowance for loan losses.
Smaller balance homogeneous real estate loans, such as condominium or cooperative apartment 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 Loan Component
During the three month period ended June 30, 2016, the Bank refined the calculation of the allowance for loan losses associated with non-impaired loans using third party software purchased by the Bank. The software model is substantially similar to the previous model used by the Bank whereby the primary drivers of the calculation are historical charge-offs by loan type and certain qualitative elements.
The historical loss look-back period for Substandard and Special Mention non-impaired loans was expanded from the previous twelve month period to a forty-eight month period, which is aligned with the same historical loss look-back period used for all Pass-graded loans. Management has evaluated the impact of these changes and concluded that they are not material to the overall allowance for non-impaired loans.
The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with non-impaired real estate loans. The following underlying collateral types are analyzed separately: 1) one- to four family residential and condominium or cooperative apartment; 2) multifamily residential and residential mixed use; 3) commercial mixed use real estate, 4) commercial real estate; 5) C&I and 6) 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 non-impaired real estate loans:
|
(i)
|
Charge-off experience (including peer charge-off experience)
|
|
(iii)
|
Underwriting standards or experience
|
|
(vi)
|
Nature and volume of the portfolio
|
|
(vii)
|
Changes in the quality and scope of the loan review function
|
The following is a brief synopsis of the manner in which each element is considered:
(i) Charge-off experience - Loans within the non-impaired loan portfolio are segmented by significant common characteristics, against which historical loss rates are applied to reflect probable incurred loss percentages. The Bank also reviews and considers the charge-off experience of peer banks in its lending marketplace in order to determine whether probable incurred losses that could take a longer period to flow through its allowance for loan losses possibly exist.
(ii) Economic conditions - The Bank assigned a loss allocation to its entire non-impaired 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. Loss expectations associated with changes in the Bank’s lending policies and practices, if any, are then incorporated into the methodology.
(iv) Loan concentrations - 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) Regulatory climate – Consideration is given to public statements made by the banking regulatory agencies that have a potential impact on the Bank’s loan portfolio and allowance for loan losses.
(vi) Nature and volume of the portfolio – The Bank considers any significant changes in the overall nature and volume of its loan portfolio.
(vii) Changes in the quality and scope of the loan review function – The Bank considers the potential impact upon its allowance for loan losses of any adverse change in the quality and scope of the loan review function.
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 at March 31, 2017.
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 tables present data regarding the allowance for loan losses activity for the periods indicated:
|
|
At or for the Three Months Ended March 31, 2017
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
Consumer
Loans
|
|
|
|
One- to Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
|
|
|
Multifamily
Residential and
Residential
Mixed Use
|
|
|
Commercial
Mixed Use Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Total
Real Estate
|
|
|
|
C&I
|
|
Beginning balance
|
|
$
|
145
|
|
|
$
|
16,555
|
|
|
$
|
1,698
|
|
|
$
|
2,118
|
|
|
$
|
20,516
|
|
|
$
|
-
|
|
|
$
|
20
|
|
Provision (credit) for loan losses
|
|
|
(4
|
)
|
|
|
134
|
|
|
|
(109
|
)
|
|
|
(23
|
)
|
|
|
(2
|
)
|
|
|
453
|
|
|
|
(1
|
)
|
Charge-offs
|
|
|
(13
|
)
|
|
|
(69
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
-
|
|
Recoveries
|
|
|
1
|
|
|
|
45
|
|
|
|
-
|
|
|
|
4
|
|
|
|
50
|
|
|
|
-
|
|
|
|
-
|
|
Ending balance
|
|
$
|
129
|
|
|
$
|
16,665
|
|
|
$
|
1,589
|
|
|
$
|
2,099
|
|
|
$
|
20,482
|
|
|
$
|
453
|
|
|
$
|
19
|
|
|
|
At or for the Three Months Ended March 31, 2016
|
|
|
|
Real Estate Loans
|
|
|
Consumer
Loans
|
|
|
|
One- to Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
|
|
|
Multifamily
Residential and
Residential
Mixed Use
|
|
|
Commercial
Mixed Use Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Total
Real Estate
|
|
Beginning balance
|
|
$
|
263
|
|
|
$
|
14,118
|
|
|
$
|
1,652
|
|
|
$
|
2,461
|
|
|
$
|
18,494
|
|
|
$
|
20
|
|
Provision (credit) for loan losses
|
|
|
(142
|
)
|
|
|
324
|
|
|
|
(99
|
)
|
|
|
(103
|
)
|
|
|
(20
|
)
|
|
|
(1
|
)
|
Charge-offs
|
|
|
(23
|
)
|
|
|
(17
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(41
|
)
|
|
|
-
|
|
Recoveries
|
|
|
1
|
|
|
|
37
|
|
|
|
-
|
|
|
|
23
|
|
|
|
61
|
|
|
|
-
|
|
Ending balance
|
|
$
|
99
|
|
|
$
|
14,462
|
|
|
$
|
1,552
|
|
|
$
|
2,381
|
|
|
$
|
18,494
|
|
|
$
|
19
|
|
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment evaluation method as of the periods indicated:
|
|
At or for the Three Months Ended March 31, 2017
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
Consumer
Loans
|
|
|
|
One- to Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
|
|
|
Multifamily
Residential and
Residential
Mixed Use
|
|
|
Commercial
Mixed Use Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Total
Real Estate
|
|
|
|
C&I
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively evaluated for impairment
|
|
|
129
|
|
|
|
16,665
|
|
|
|
1,589
|
|
|
|
2,099
|
|
|
|
20,482
|
|
|
|
453
|
|
|
|
19
|
|
Total ending allowance balance
|
|
$
|
129
|
|
|
$
|
16,665
|
|
|
$
|
1,589
|
|
|
$
|
2,099
|
|
|
$
|
20,482
|
|
|
$
|
453
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
402
|
|
|
$
|
3,272
|
|
|
$
|
4,735
|
|
|
$
|
3,347
|
|
|
$
|
11,756
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively evaluated for impairment
|
|
|
74,729
|
|
|
|
4,692,926
|
|
|
|
394,284
|
|
|
|
547,292
|
|
|
|
5,709,231
|
|
|
|
30,189
|
|
|
|
973
|
|
Total ending loans balance
|
|
$
|
75,131
|
|
|
$
|
4,696,198
|
|
|
$
|
399,019
|
|
|
$
|
550,639
|
|
|
$
|
5,720,987
|
|
|
$
|
30,189
|
|
|
$
|
973
|
|
|
|
At or for the Year Ended December 31, 2016
|
|
|
|
Real Estate Loans
|
|
|
|
|
|
Consumer
Loans
|
|
|
|
One- to Four Family
Residential,
Including
Condominium and
Cooperative
Apartment
|
|
|
Multifamily
Residential and
Residential
Mixed Use
|
|
|
Commercial
Mixed Use Real
Estate
|
|
|
Commercial
Real Estate
|
|
|
Total
Real Estate
|
|
|
|
C&I
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively evaluated for impairment
|
|
|
145
|
|
|
|
16,555
|
|
|
|
1,698
|
|
|
|
2,118
|
|
|
|
20,516
|
|
|
|
-
|
|
|
|
20
|
|
Total ending allowance balance
|
|
$
|
145
|
|
|
$
|
16,555
|
|
|
$
|
1,698
|
|
|
$
|
2,118
|
|
|
$
|
20,516
|
|
|
$
|
-
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
407
|
|
|
$
|
3,333
|
|
|
$
|
4,810
|
|
|
$
|
3,363
|
|
|
$
|
11,913
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Collectively evaluated for impairment
|
|
|
73,615
|
|
|
|
4,597,193
|
|
|
|
399,329
|
|
|
|
550,957
|
|
|
|
5,621,094
|
|
|
|
2,058
|
|
|
|
1,357
|
|
Total ending loans balance
|
|
$
|
74,022
|
|
|
$
|
4,600,526
|
|
|
$
|
404,139
|
|
|
$
|
554,320
|
|
|
$
|
5,633,007
|
|
|
$
|
2,058
|
|
|
$
|
1,357
|
|
There were no impaired real estate loans with a related allowance recorded for the periods ended March 31, 2017 or December 31, 2016. The following tables summarize impaired real estate loans with no related allowance recorded as of the periods indicated (by collateral type within the real estate loan segment):
|
|
At March 31, 2017
|
|
|
At December 31, 2016
|
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
(1)
|
|
|
Related
Allowance
|
|
|
Unpaid
Principal
Balance
|
|
|
Recorded
Investment
(1)
|
|
|
Related
Allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four Family Residential, Including Condominium and Cooperative Apartment
|
|
$
|
402
|
|
|
$
|
402
|
|
|
$
|
-
|
|
|
$
|
407
|
|
|
$
|
407
|
|
|
$
|
-
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
3,272
|
|
|
|
3,272
|
|
|
|
-
|
|
|
|
3,333
|
|
|
|
3,333
|
|
|
|
-
|
|
Commercial Mixed Use Real Estate
|
|
|
4,735
|
|
|
|
4,735
|
|
|
|
-
|
|
|
|
4,810
|
|
|
|
4,810
|
|
|
|
-
|
|
Commercial Real Estate
|
|
|
3,347
|
|
|
|
3,347
|
|
|
|
-
|
|
|
|
3,363
|
|
|
|
3,363
|
|
|
|
-
|
|
Total with no related allowance recorded
|
|
$
|
11,756
|
|
|
$
|
11,756
|
|
|
$
|
-
|
|
|
$
|
11,913
|
|
|
$
|
11,913
|
|
|
$
|
-
|
|
|
(1)
|
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.
|
The following table presents information for impaired loans for the periods indicated:
|
|
Three Months Ended
March 31, 2017
|
|
|
Three Months Ended
March 31, 2016
|
|
|
|
Average
Recorded
Investment
(1)
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
(1)
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to Four Family Residential, Including Condominium and Cooperative Apartment
|
|
$
|
404
|
|
|
$
|
7
|
|
|
$
|
491
|
|
|
$
|
35
|
|
Multifamily Residential and Residential Mixed Use
|
|
|
3,302
|
|
|
|
46
|
|
|
|
978
|
|
|
|
12
|
|
Commercial Mixed Use Real Estate
|
|
|
4,773
|
|
|
|
45
|
|
|
|
4,361
|
|
|
|
44
|
|
Commercial Real Estate
|
|
|
3,355
|
|
|
|
34
|
|
|
|
3,523
|
|
|
|
34
|
|
Ending balance
|
|
$
|
11,834
|
|
|
$
|
132
|
|
|
$
|
9,353
|
|
|
$
|
125
|
|
|
(1)
|
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.
|
9.
|
INVESTMENT AND MORTGAGE-BACKED SECURITIES
|
The following tables summarize the major categories of securities owned by the Company (excluding trading securities) for the periods indicated:
|
|
At March 31, 2017
|
|
|
|
Amortized
Cost
(1)
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pooled bank trust preferred securities (“TRUP CDOs”)
|
|
$
|
5,332
|
|
|
$
|
2,873
|
|
|
$
|
(157
|
)
|
|
$
|
8,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
3,992
|
|
|
|
139
|
|
|
|
(130
|
)
|
|
|
4,001
|
|
Pass-through MBS issued by GSEs
|
|
|
346
|
|
|
|
11
|
|
|
|
-
|
|
|
|
357
|
|
Agency Collateralized Mortgage Obligation (“CMO”)
|
|
|
3,228
|
|
|
|
-
|
|
|
|
(65
|
)
|
|
|
3,163
|
|
Total investment securities available-for-sale
|
|
|
7,566
|
|
|
|
150
|
|
|
|
(195
|
)
|
|
|
7,521
|
|
Total investment securities
|
|
$
|
12,898
|
|
|
$
|
3,023
|
|
|
$
|
(352
|
)
|
|
$
|
15,569
|
|
(1)
Amount represents the purchase amortized / historical cost less any OTTI charges (credit or non-credit related) previously recognized. For the TRUP CDOs, amount is also net of the $729 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 December 31, 2016
|
|
|
|
Amortized
Cost
(1)
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
TRUP CDOs
|
|
$
|
5,378
|
|
|
$
|
2,221
|
|
|
$
|
(303
|
)
|
|
$
|
7,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
4,011
|
|
|
|
62
|
|
|
|
(178
|
)
|
|
|
3,895
|
|
Pass-through MBS issued by GSEs
|
|
|
360
|
|
|
|
12
|
|
|
|
-
|
|
|
|
372
|
|
CMO
|
|
|
3,247
|
|
|
|
-
|
|
|
|
(61
|
)
|
|
|
3,186
|
|
Total investment securities available-for-sale
|
|
|
7,618
|
|
|
|
74
|
|
|
|
(239
|
)
|
|
|
7,453
|
|
Total investment securities
|
|
$
|
12,996
|
|
|
$
|
2,295
|
|
|
$
|
(542
|
)
|
|
$
|
14,749
|
|
(1)
Amount represents the purchase amortized / historical cost less any OTTI charges (credit or non-credit related) previously recognized. For the TRUP CDOs, amount is also net of the $755 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 held-to-maturity TRUP CDOs had a weighted average term to maturity of 17.8 years at
March 31, 2017
.
At March 31, 2017
, available-for-sale pass-through MBS issued by GSEs possessed a weighted average contractual maturity of 10.8 years and a weighted average estimated duration of 1.0 year. As of
March 31, 2017
, the available-for-sale agency CMO security had a weighted average term to maturity of 2.8 years. All of the pass-through MBS securities issued by GSEs possess an annual interest rate adjustment.
During the three-month period ended March 31, 2017, gross proceeds from the sales of registered mutual funds totaled $35. There were no gains or losses recognized on these sales. There were no sales of registered mutual funds or pass-through MBS issued by GSEs during the three-month period ended March 31, 2016.
There were no sales of trading securities during the three-month periods ended March 31, 2017 or 2016. The entire gain/loss on securities shown in the unaudited condensed consolidated statements of income during those periods resulted from market valuation changes or sales of trading securities.
The following table summarizes the gross unrealized losses and fair value of investment securities aggregated by investment category and the length of time the securities were in a continuous unrealized loss position for the periods indicated:
|
|
March 31, 2017
|
|
|
|
Less than 12
Consecutive Months
|
|
|
12 Consecutive
Months or Longer
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRUP CDOs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,511
|
|
|
$
|
157
|
|
|
$
|
2,511
|
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
1,104
|
|
|
|
33
|
|
|
|
1,773
|
|
|
|
97
|
|
|
|
2,877
|
|
|
|
130
|
|
Agency CMO
|
|
|
3,163
|
|
|
|
65
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,163
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Less than 12
Consecutive Months
|
|
|
12 Consecutive
Months or Longer
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
Investment securities held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRUP CDOs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,439
|
|
|
$
|
303
|
|
|
$
|
2,439
|
|
|
$
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds
|
|
|
1,308
|
|
|
|
47
|
|
|
|
1,747
|
|
|
|
131
|
|
|
|
3,055
|
|
|
|
178
|
|
Agency CMO
|
|
|
3,186
|
|
|
|
61
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,186
|
|
|
|
61
|
|
TRUP CDOs That Maintained an Unrealized Holding Loss for 12 or More Consecutive Months
At March 31
,
2017, there were two TRUP CDOs with unrealized holding losses for 12 or more consecutive months. The impairment of one of those TRUP CDOs was deemed temporary, as management believed that the full recorded balance of the investments would be realized. In making this determination, management considered the following:
|
·
|
Based upon an internal review of the collateral backing the TRUP CDOs portfolio, which accounted for current and prospective deferrals, the securities could reasonably be expected to continue making all contractual payments
|
|
·
|
The Company does not intend to sell these securities prior to full recovery of their impairment
|
|
·
|
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
|
|
·
|
The securities have a pool of underlying issuers comprised primarily of banks
|
|
·
|
None of the securities have exposure to real estate investment trust issued debt (which has experienced high default rates)
|
|
·
|
The securities feature 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
|
|
·
|
The securities are adequately collateralized
|
The unrealized loss on the second TRUP with unrealized holding losses for 12 or more consecutive months was considered to be other than temporary. See below for a discussion of other than temporary impairment.
TRUP CDOs with Other than Temporary Impairment
As of each reporting period through March 31, 2017, the Company applied the protocol established by ASC 320-10-65 in order to determine whether OTTI existed for its TRUPS and/or to measure, for TRUP CDOs that were determined to be other than temporarily impaired, the credit related and non-credit related components of OTTI. As of March 31, 2017, five TRUP CDOs were determined to meet the criteria for OTTI based upon this analysis, and no additional OTTI charges were recognized.
The following table provides a reconciliation of the pre-tax OTTI charges recognized on the Company's TRUP CDOs, for which a portion of the impairment loss (non-credit factors) was recognized in other comprehensive income for the period ended:
|
|
Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Credit
Related
OTTI
Recognized
in Earnings
|
|
|
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
OTTI
Charge
|
|
|
Credit
Related
OTTI
Recognized
in
Earnings
|
|
|
Non-Credit
OTTI
Recognized in
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
OTTI
Charge
|
|
Cumulative pre-tax balance at the beginning of the period
|
|
$
|
8,613
|
|
|
$
|
544
|
|
|
$
|
9,157
|
|
|
$
|
8,717
|
|
|
$
|
578
|
|
|
$
|
9,295
|
|
Amortization of previously recognized OTTI
|
|
|
(26
|
)
|
|
|
(8
|
)
|
|
|
(34
|
)
|
|
|
(26
|
)
|
|
|
(8
|
)
|
|
|
(34
|
)
|
Cumulative pre-tax balance at end of the period
|
|
$
|
8,587
|
|
|
$
|
536
|
|
|
$
|
9,123
|
|
|
$
|
8,691
|
|
|
$
|
570
|
|
|
$
|
9,261
|
|
10.
|
DERIVATIVES AND HEDGING ACTIVITIES
|
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2017, such derivatives were used to hedge the variability in cash flows associated with wholesale borrowings,
i.e.
, FHLBNY advances. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended March 31, 2017 the Company did not record any hedge ineffectiveness. The Company did not have any derivatives outstanding prior to the quarter ended June 30, 2016.
Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are paid on the Company’s liabilities.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Financial Condition:
|
|
At March 31, 2017
|
|
|
At December 31, 2016
|
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair Value
Assets
|
|
|
Fair Value
Liabilities
|
|
|
Count
|
|
|
Notional
Amount
|
|
|
Fair Value
Assets
|
|
|
Fair Value
Liabilities
|
|
Included in other assets/(liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps related to FHLBNY advances
|
|
|
6
|
|
|
$
|
115,000
|
|
|
$
|
3,576
|
|
|
$
|
-
|
|
|
|
4
|
|
|
$
|
90,000
|
|
|
$
|
3,228
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average pay rates
|
|
|
|
|
|
|
1.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.24
|
%
|
|
|
|
|
|
|
|
|
Weighted average receive rates
|
|
|
|
|
|
|
1.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.95
|
%
|
|
|
|
|
|
|
|
|
Weighted average maturity
|
|
|
|
|
|
5.03 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.32 years
|
|
|
|
|
|
|
|
|
|
The table below presents the effect of the Company’s derivative financial instruments as the amount of gain or (loss) on the Consolidated Statements of Income as of March 31, 2017:
|
|
At or for the Three Months
Ended March 31, 2017
|
|
|
|
Amount of Gain or (Loss)
Recognized in Other
Comprehensive Income
(Effective Portion)
|
|
|
Amount of Gain or (Loss)
Reclassified from Other
Comprehensive Income into
Interest Expense
(Effective Portion)
|
|
|
Amount of Gain or (Loss)
Recognized in Other
Non-Interest Expense
(Ineffective Portion)
|
|
Interest Rate Products
|
|
$
|
3,500
|
|
|
$
|
(43
|
)
|
|
$
|
-
|
|
The Company’s agreements with each of its derivative counterparties state that if the Company defaults on any of its indebtedness, it could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty.
The Company’s agreements with certain of its derivative counterparties state that if the Bank fails to maintain its status as a well-capitalized institution, the Bank could be required to terminate its derivative positions with the counterparty.
As of March 31, 2017, the termination value of derivatives in a net asset position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $3,533. If the Company had breached any of the above provisions at March 31, 2017, it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. There were no provisions breached for the period ended March 31, 2017.
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 and liabilities measured at fair value on a recurring basis as of the dates indicated, segmented by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
Fair Value Measurements at
March 31, 2017 Using
|
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
955
|
|
|
$
|
955
|
|
|
$
|
-
|
|
|
$
|
-
|
|
International Equity Mutual Funds
|
|
|
241
|
|
|
|
241
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
5,957
|
|
|
|
5,957
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
|
1,422
|
|
|
|
1,422
|
|
|
|
-
|
|
|
|
-
|
|
International Equity Mutual Funds
|
|
|
407
|
|
|
|
407
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
2,172
|
|
|
|
2,172
|
|
|
|
-
|
|
|
|
-
|
|
Pass-through MBS issued by GSEs
|
|
|
357
|
|
|
|
-
|
|
|
|
357
|
|
|
|
-
|
|
Agency CMOs
|
|
|
3,163
|
|
|
|
-
|
|
|
|
3,163
|
|
|
|
-
|
|
Derivative – interest rate product
|
|
|
3,576
|
|
|
|
-
|
|
|
|
3,576
|
|
|
|
-
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2016 Using
|
|
|
|
Total
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities (Registered Mutual Funds):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
$
|
873
|
|
|
$
|
873
|
|
|
$
|
-
|
|
|
$
|
-
|
|
International Equity Mutual Funds
|
|
|
213
|
|
|
|
213
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
5,867
|
|
|
|
5,867
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Equity Mutual Funds
|
|
|
1,356
|
|
|
|
1,356
|
|
|
|
-
|
|
|
|
-
|
|
International Equity Mutual Funds
|
|
|
377
|
|
|
|
377
|
|
|
|
-
|
|
|
|
-
|
|
Fixed Income Mutual Funds
|
|
|
2,162
|
|
|
|
2,162
|
|
|
|
-
|
|
|
|
-
|
|
Pass-through MBS issued by GSEs
|
|
|
372
|
|
|
|
-
|
|
|
|
372
|
|
|
|
-
|
|
Agency CMOs
|
|
|
3,186
|
|
|
|
-
|
|
|
|
3,186
|
|
|
|
-
|
|
Derivative – interest rate product
|
|
|
3,228
|
|
|
|
-
|
|
|
|
3,228
|
|
|
|
-
|
|
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 pass-through MBS issued by GSEs all possessed the highest possible credit rating published by at least one established credit rating agency as of March 31, 2017 and December 31, 2016. Obtaining market values as of March 31, 2017 and December 31, 2016 for these securities utilizing significant observable inputs was not difficult due to their considerable demand.
Derivatives represent interest rate swaps and estimated fair values are based on valuation models using observable market data as of the measurement date.
There were no assets measured at fair value on a non-recurring basis as of March 31, 2017 or December 31, 2016.
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, 2017 and December 31, 2016 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 price (Level 3 input), or, more commonly, a recent real estate appraisal (Level 3 input). The 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 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 and 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, 2017 and December 31, 2016, there were no impaired loans measured at fair value.
The carrying amounts and estimated fair values of financial instruments other than those measured at fair value on either a recurring or non-recurring basis at March 31, 2017 and December 31, 2016 were as follows:
|
|
|
|
|
Fair Value Measurements
at March 31, 2017 Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
87,834
|
|
|
$
|
87,834
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
87,834
|
|
Investment securities held to maturity
(TRUP CDOs)
|
|
|
5,332
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,048
|
|
|
|
8,048
|
|
Loans, net
|
|
|
5,731,195
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,717,743
|
|
|
|
5,717,743
|
|
Accrued interest receivable
|
|
|
15,114
|
|
|
|
-
|
|
|
|
11
|
|
|
|
15,103
|
|
|
|
15,114
|
|
FHLBNY capital stock
|
|
|
41,411
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
|
3,538,368
|
|
|
|
3,538,368
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,538,368
|
|
Certificates of Deposits (“CDs”)
|
|
|
970,114
|
|
|
|
-
|
|
|
|
973,533
|
|
|
|
-
|
|
|
|
973,533
|
|
Escrow and other deposits
|
|
|
135,817
|
|
|
|
135,817
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,817
|
|
FHLBNY Advances
|
|
|
763,725
|
|
|
|
-
|
|
|
|
763,641
|
|
|
|
-
|
|
|
|
763,641
|
|
Trust Preferred securities payable
|
|
|
70,680
|
|
|
|
-
|
|
|
|
70,327
|
|
|
|
-
|
|
|
|
70,327
|
|
Accrued interest payable
|
|
|
2,097
|
|
|
|
-
|
|
|
|
2,097
|
|
|
|
-
|
|
|
|
2,097
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2016 Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
|
Total
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
113,503
|
|
|
$
|
113,503
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
113,503
|
|
Investment securities held to maturity
(TRUP CDOs)
|
|
|
5,378
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,296
|
|
|
|
7,296
|
|
Loans, net
|
|
|
5,615,886
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,609,034
|
|
|
|
5,609,034
|
|
Accrued interest receivable
|
|
|
15,647
|
|
|
|
-
|
|
|
|
11
|
|
|
|
15,636
|
|
|
|
15,647
|
|
FHLBNY capital stock
|
|
|
44,444
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, money market and checking accounts
|
|
|
3,346,961
|
|
|
|
3,346,961
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,346,961
|
|
CDs
|
|
|
1,048,465
|
|
|
|
-
|
|
|
|
1,054,131
|
|
|
|
-
|
|
|
|
1,054,131
|
|
Escrow and other deposits
|
|
|
103,001
|
|
|
|
103,001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,001
|
|
FHLBNY Advances
|
|
|
831,125
|
|
|
|
-
|
|
|
|
831,951
|
|
|
|
-
|
|
|
|
831,951
|
|
Trust Preferred securities payable
|
|
|
70,680
|
|
|
|
-
|
|
|
|
69,973
|
|
|
|
-
|
|
|
|
69,973
|
|
Accrued interest payable
|
|
|
2,080
|
|
|
|
-
|
|
|
|
2,080
|
|
|
|
-
|
|
|
|
2,080
|
|
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).
TRUP CDOs Held to Maturity
– At both March 31, 2017 and December 31, 2016 the Company owned seven TRUP CDOs classified as held-to-maturity. As a result of improved marketplace stability and enhanced trading activity, broker quotations became the sole valuation source utilized to estimate the fair value of TRUP CDOs as of March 31, 2017 and December 31, 2016. Despite improvement in the overall marketplace conditions, unobservable data was still deemed to have been utilized in the broker quotation pricing, warranting a determination of Level 3 valuation for these securities at March 31, 2017 and December 31, 2016.
Loans, Net (Excluding Impaired Loans Carried at Fair Value)
– For adjustable rate loans repricing monthly or quarterly, and with no significant change in credit risk, fair values are based on carrying values. 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. 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 comparable to a Level 3 input, the fair value of loans receivable other than impaired loans measured at fair value, is shown under the Level 3 valuation column.
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.
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 and is deemed a Level 2 valuation.
Trust Preferred Securities Payable
– The fair value of trust preferred securities payable is estimated using discounted cash flow analyses based on then 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.
12.
|
RETIREMENT AND POSTRETIREMENT PLANS
|
The Holding Company or the Bank maintains the Retirement Plan of Dime Community Bank (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 Dime Community Bank (the "Postretirement Plan"). Net expenses associated with these plans were comprised of the following components:
|
|
Three Months Ended
March 31, 2017
|
|
|
Three Months Ended
March 31, 2016
|
|
|
|
BMP,
Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
BMP,
Employee and
Outside Director
Retirement Plans
|
|
|
Postretirement
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest cost
|
|
|
329
|
|
|
|
14
|
|
|
|
343
|
|
|
|
16
|
|
Expected return on assets
|
|
|
(395
|
)
|
|
|
-
|
|
|
|
(383
|
)
|
|
|
-
|
|
Unrecognized past service liability
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
Amortization of unrealized loss (gain)
|
|
|
359
|
|
|
|
(1
|
)
|
|
|
428
|
|
|
|
(1
|
)
|
Net periodic cost
|
|
$
|
293
|
|
|
$
|
11
|
|
|
$
|
388
|
|
|
$
|
13
|
|
The Company disclosed in its consolidated financial statements for the year ended December 31, 2016 that it expected to make contributions to, or benefit payments on behalf of, benefit plans during 2017 as follows: Employee Retirement Plan - $15, Outside Director Retirement Plan - $208, Postretirement Plan - $113, and BMP - $725. The Company made contributions of $4 to the Employee Retirement Plan during the three months ended March 31, 2017, and expects to make the remainder of the anticipated contributions during 2017. The Company made benefit payments of $41 on behalf of the Outside Director Retirement Plan during the three months ended March 31, 2017, and expects to make the remainder of the estimated benefit payments during 2017. The Company made benefit payments totaling $35 on behalf of the Postretirement Plan during the three months ended March 31, 2017, and expects to make the remainder of the anticipated contributions or benefit payments during 2017. The Company made benefit payments totaling $35 on behalf of the BMP during the three month period ended March 31, 2017, and expects to make the remainder of the anticipated benefit payments during 2017.
During the three months ended March 31, 2017 and 2016, the Company's consolidated effective tax rates were 38.2% and 42.2%, respectively. The higher consolidated tax rate in period ended March 31, 2016 was the result of a $68.2 million gain on sale of real estate transaction during the period. There were no other significant unusual income tax items during the three-month periods ended either March 31, 2017 or 2016.
14.
|
PREMISES HELD FOR SALE
|
On March 16, 2016, the Bank completed the sale of premises held for sale with an aggregate recorded balance of $
8,799 at December 31, 2015. A gain of $68,187 was recognized on this sale.
During the three months ended March 31, 2016, the Bank re-classified certain real estate utilized as a retail branch and principal office of the Company and the Bank to premises held for sale. The aggregate recorded balance of the premises held for sale was $1,379 at March 31, 2017, the outstanding balance upon transfer. On April 14, 2016, a Purchase and Sale Agreement was executed for the property, for a sale price of $12,300. The sale is expected to close in September 2017.