Edgar Filing: BCB BANCORP INC

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form10q-118756_bcb.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011.

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-50275

BCB Bancorp, Inc.

(Exact name of registrant as specified in its charter)


New Jersey		26-0065262
(State or other jurisdiction of incorporation or organization)		(IRS Employer I.D. No.)

104-110 Avenue C Bayonne, New Jersey		07002
(Address of principal executive offices)		(Zip Code)

(201) 823-0700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). o Yes x No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 16, 2011, BCB Bancorp, Inc., had 9,831,384 shares of common stock, no par value, outstanding.

BCB BANCORP INC. AND SUBSIDIARIES

INDEX


	Page
PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Statements of Financial Condition as of September 30, 2011 and December 31, 2010 (unaudited)		1

Consolidated Statements of Income for the three and nine months ended September 30, 2011 and September 30, 2010 (unaudited)		2

Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2011 (unaudited)		3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and September 30, 2010 (unaudited)		4

Notes to Unaudited Consolidated Financial Statements		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

Item 3. Quantitative and Qualitative Disclosures about Market Risk		36

Item 4T. Controls and Procedures		36

PART II. OTHER INFORMATION		37

Item 1. Legal Proceedings		37

Item 1A. Risk Factors		37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37

Item 3. Defaults Upon Senior Securities		37

Item 4. Removed and Reserved		37

Item 5. Other Information		37

Item 6. Exhibits		37

Index

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In Thousands, Except Share and Per Share Data, Unaudited)


	September 30, 2011		December 31, 2010

ASSETS
Cash and amounts due from depository institutions	$	27,988	$	22,065
Interest-earning deposits		57,902		99,062

Total Cash and Cash equivalents		85,890		121,127


Securities available for sale		1,114		1,098
Securities held to maturity, fair value $207,530 and $166,785; respectively		199,795		165,572
Loans held for sale		3,275		5,572
Loans receivable, net of allowance for loan losses of $9,040 and $8,417; respectively		749,329		773,101
Premises and equipment		12,677		11,359
Property held for sale		1,017		1,017
Federal Home Loan Bank of New York stock		6,678		6,723
Interest receivable		4,956		5,203
Other real estate owned		4,857		3,602
Deferred income taxes		5,595		5,785
Other assets		4,559		6,729

Total Assets	$	1,079,742	$	1,106,888


LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Non-interest bearing deposits	$	68,061	$	69,471
Interest bearing deposits		791,519		816,817

Total deposits		859,580		886,288

Long-term debt		114,124		114,124
Other Liabilities		7,142		7,502

Total Liabilities		980,846		1,007,914


STOCKHOLDERS’ EQUITY
Preferred stock: 10,000,000 shares authorized; none issued and outstanding		-		-
Common stock; $0.064; stated value; 20,000,000 shares authorized, 10,172,967 and 10,144,830 shares respectively, issued; 9,224,784 shares and 9,383,695 shares, respectively, outstanding		650		649
Additional paid-in capital		85,557		85,327
Treasury stock, at cost, 948,183 and 761,135 shares, respectively		(12,774)		(10,760	)
Retained Earnings		25,449		23,753
Accumulated other comprehensive income, net of taxes		14		5

Total Stockholders’ equity		98,896		98,974


Total Liabilities and Stockholders’ equity	$	1,079,742	$	1,106,888

See accompanying notes to consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In Thousands, except for per share amounts, Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010

Interest income:
Loans	$	10,664		$	10,549	$	33,015		$	23,355
Investments, taxable		2,039			1,400		5,922			4,232
Investment, non-taxable		12			10		37			10
Other interest-earning assets		13			34		59			74

Total interest income		12,728			11,993		39,033			27,671


Interest expense:
Deposits:
Demand		215			311		662			699
Savings and club		260			514		804			1,024
Certificates of deposit		1,613			1,558		4,918			4,451

		2,088			2,383		6,384			6,174

Borrowed money		1,246			1,505		3,701			3,959


Total interest expense		3,334			3,888		10,085			10,133


Net interest income		9,394			8,105		28,948			17,538
Provision for loan losses		800			800		1,600			1,550


Net interest income after provision for loan losses		8,594			7,305		27,348			15,988


Non-interest income:
Fees and service charges		76			310		538			710
Gain on sales of loans originated for sale		190			67		594			195
Loss on sale of real estate owned		(121	)		-		(257	)		(14	)
Gain on sale of securities		-			-		18			-
Gain on bargain purchase		-			12,582		-			12,582
Other		37			17		195			34

Total non-interest income		182			12,976		1,088			13,507


Non-interest expense:
Salaries and employee benefits		3,229			4,760		9,136			7,530
Occupancy expense of premises		743			755		2,245			1,315
Equipment		1,061			1,113		3,152			2,203
Professional Fees		594			252		1,056			445
Directors Fees		180			131		479			345
Regulatory Assessments		122			383		915			745
Advertising		115			100		293			238
Merger related expenses		81			288		337			632
Other		623			856		2,346			1,619

Total non-interest expense		6,748			8,638		19,959			15,072

Income before income tax provision		2,028		11,643			8,477		14,423
Income tax provision (benefit)		840		(299	)		3,416		841


Net Income	$	1,188	$	11,942		$	5,061	$	13,582


Net Income per common share:
Basic	$	0.13	$	1.28		$	0.54	$	2.19

Diluted	$	0.13	$	1.28		$	0.54	$	2.18


Weighted average number of common shares outstanding:
Basic		9,245		9,300			9,333		6,208

Diluted		9,259		9,315			9,350		6,223

See accompanying notes to consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In Thousands, except share and per share data, Unaudited)

	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income		Total
Beginning Balance at December 31, 2010	$	649	$	85,327	$	(10,760	)	$	23,753		$	5	$	$98,974


Exercise of Stock Options (28,137 shares)		1		230		—			—			—		231

Treasury Stock Purchases (187,048 shares)		—		—		(2,014	)		—			—		(2,014	)

Cash dividends ($0.36 per share) declared		—		—		—			(3,365	)		—		(3,365	)

Net income for the nine months ended September 30, 2011		—		—		—			5,061			—		5,061

Unrealized gain on securities, available for sale, net of deferred income tax of $(7)		—		—		—			—			9		9

Total Comprehensive income		—		—		—			—			—		5,070


Ending Balance at September 30, 2011	$	650	$	85,557	$	(12,774	)	$	25,449		$	14	$	98,896

See accompanying notes to consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)


	Nine Months Ended September 30,
	2011		2010
Cash flows from operating activities:
Net Income	$	5,061	$	13,582
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of premises and equipment		758		448
Amortization and accretion, net		963		1,278
Provision for loan losses		1,600		1,550
Deferred income tax benefit		183		(300)
Loans originated for sale		(14,375)		(18,019)
Proceeds from sale of loans originated for sale		15,597		14,416
Gain on sales of loans originated for sale		(594)		(195)
Loss on sale of real estate owned		257		14
Gain on bargain purchase		-		(12,582)
Gain on sales of securities held to maturity		(18)		-
Decrease (increase) in interest receivable		247		(525)
Decrease in other assets		2,170		860
(Decrease) in accrued interest payable		(38)		(241)
(Decrease) in other liabilities		(322)		(2,651)

Net cash provided by (used in) operating activities		11,489		(2,365)


Cash flows from investing activities:
Redemption of Federal Home Loan Bank of New York stock		45		1,857
Proceeds from calls of securities held to maturity		29,822		106,615
Purchases of securities held to maturity		(92,964)		(62,412)
Proceeds from repayments on securities held to maturity		25,360		14,136
Proceeds from sales of securities held to maturity		2,438		-
Proceeds from sales of participation interest in loans		3,876		-
Proceeds from sales of real estate owned		1,450		480
Purchases of loans		(2,279)		-
Net decrease in loans receivable		19,563		15,385
Cash acquired in acquisition		-		22,979
Improvements to other real estate owned		(105)		(20)
Additions to premises and equipment		(2,076)		(360)

Net cash (used in) provided by investing activities		(14,870)		98,660

Cash flows from financing activities:
Net (Decrease) increase in deposits		(26,708)		7,824
Net change in short-term borrowings		-		(43,815)
Purchases of treasury stock		(2,014)		(123)
Cash dividend paid		(3,365)		(2,268)
Exercise of stock options		231		73

Net cash (used in) financing activities		(31,856)		(38,309)

Net (Decrease) increase in cash and cash equivalents		(35,237)		57,986
Cash and cash equivalents-beginning		121,127		67,347


Cash and cash equivalents-ending	$	85,890	$	125,333


Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes	$	3,454	$	2,220
Interest	$	10,123	$	10,374

Non-cash items:
Assets acquired; net of cash and cash equivalents	$	-	$	514,523
Liabilities assumed	$	-	$	486,275
Transfer of loans to other real estate owned	$	3,799	$	2,678
Loans to facilitate sale of other real estate owned	$	942	$	-
Reclassification of loans originated for sale to held to maturity	$	1,669	$	4,741

See accompanying notes to consolidated financial statements.

Index

BCB Bancorp Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Company, and Pamrapo Service Corporation. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and, therefore, do not necessarily include all information that would be included in audited financial statements. The information furnished reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of consolidated financial condition and results of operations. All such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2011 or any other future interim period. Included in income before taxes is an adjustment relating to prior periods of approximately $800,000 pertaining to the reversal of interest capitalized on impaired loans of $420,000, late fee income of $171,000, and loan expenses of approximately $209,000, net of income taxes. The impact of these adjustments reduced net income by approximately $479,000. These adjustments were deemed by management to be immaterial to the consolidated financial statements for the current and prior periods and therefore required no prior period adjustment. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from these estimates.

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2010, which are included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

In preparing these consolidated financial statements, BCB Bancorp, Inc., evaluated the events and transactions that occurred between September 30, 2011, and the date these consolidated financial statements were issued.

On July 6, 2010, the Company acquired all of the outstanding common shares of Pamrapo Bancorp, Inc. in a business combination. ASC 805 “Business Combinations”, permits the use of provisional amounts for the assets acquired and liabilities assumed when the information at the acquisition date is incomplete. During the measurement period, amounts provisionally assigned to the acquisition accounting may be adjusted based on new information obtained during the measurement period.

The adjustments relate to the carrying amount of property and equipment as of September 30, 2010, which increased by $1,563,000. This adjustment is measured as the fair value adjustment at the acquisition date less the additional depreciation that would have been recognized had the property and equipment’s fair value at the acquisition date been known at that date.

The carrying value of loans as of September 30, 2010 was increased by $1,042,000 for an adjustment to the fair value of loans acquired. This adjustment represents the fair value adjustment to the loans acquired.

Depreciation expense as of September 30, 2010 is increased by $60,000.

Income tax expense is decreased by $24,000.

The following table presents changes to the Consolidated Income Statement for the 2010 comparative information resulting from the fair value adjustments:


	For the Nine Months Ended
	September 30, 2010		September 30, 2010
	(As previously reported)		(Adjusted)
	(In thousands)
Gain on bargain purchase	$	10,210	$	12,582
Total non-interest income		11,135		13,507
Occupancy and equipment		1,255		1,315
Total non-interest expense		15,012		15,072
Income tax expense		865		841
Net Income		11,246		13,582

Net income per common share
Basic	$	1.81	$	2.19
Diluted	$	1.81	$	2.18

Index

The following table presents changes to the Consolidated Statement of Cash Flows for the 2010 comparative information resulting from the fair value adjustments:

	For the Nine Months Ended
	September 30, 2010		September 30, 2010
	(As previously reported)		(Adjusted)
	(In thousands)

Net income	$	11,246	$	13,582
Depreciation of premises and equipment		388		448
Gain on bargain purchase		10,210		12,582
(Decrease) in other liabilities		2,627		2,651
Assets acquired; net of cash and cash equivalents		512,420		514,523
Liabilities assumed		486,544		486,275

Note 2 – Acquisition of Allegiance Bancorp, Inc.

As of the close of business on October 14, 2011, the Company acquired all of the outstanding common shares of Allegiance Bancorp, Inc. (“Allegiance”), the parent company of Allegiance Savings Bank, and thereby acquired all of Allegiance Savings Bank’s 2 branch locations. Under the terms of the merger agreement, Allegiance stockholders received 0.35 of a share of BCB Bancorp, Inc. common stock at a price of $9.57 per share in exchange for each share of Allegiance common stock, resulting in BCB Bancorp, Inc. issuing 644,434 common shares of BCB Bancorp, Inc. common stock with an acquisition date fair value of $6.2 million.

In connection with the merger, the consideration paid and the net assets acquired were recorded at the estimated fair value on the date of acquisition, as summarized in the following table, (in thousands).


Consideration paid
BCB Community Bancorp, Inc. common stock issued	$	6,168

Estimated amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	5,883
Investment securities		35,476
Loans receivable		88,397
Federal Home Loan Bank of New York stock		819
Premises and equipment		1,686
Interest Receivable		483
Deferred income taxes		453
Other assets		536
Deposits		(111,365	)
Borrowings		(15,458	)
Other liabilities		(306	)

Total identifiable net assets		6,604

Gain on bargain purchase to be recognized in non-interest income	$	436

The amounts above are all preliminary estimates only. We are currently in the process of finalizing the fair market values for the above categories which may have a direct impact on the gain on bargain purchase.

Direct costs related to the acquisition were expensed as incurred. During the nine months ended September 30, 2011, we incurred $337,000 in merger related expenses related to the transaction, including $332,000 in professional services and $5,000 in other non-interest expenses.

Index

Note 3 – Pension and Other Postretirement Plans

The Company acquired, through the merger with Pamrapo Bancorp, Inc., a non-contributory defined benefit pension plan covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the defined benefit pension plan (“Pension Plan”), was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the “Pension Plan” to the freeze date have been retained. Accordingly, no employees are permitted to commence participation in the Pension Plan and future salary increases and future years of credited service are not considered when computing an employee’s benefits under the Pension Plan. The Pension Plan is funded in conformity with the funding requirements of applicable government regulations. The Company also acquired through the merger with Pamrapo Bancorp, Inc. a supplemental executive retirement plan (“SERP”) in which certain former employees of Pamrapo Savings Bank are covered. A SERP is an unfunded non-qualified deferred retirement plan. Participants who retire at the age of 65 ( the “Normal Retirement Age”), are entitled to an annual retirement benefit equal to 75% of compensation reduced by their retirement plan annual benefits. Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.

Periodic pension and SERP cost, which is recorded as part of salaries and employee benefits expense in our Consolidated Statements of Income, is comprised of the following, (In Thousands):


	Three months ended September 30						Nine Months ended September 30
	2011			2010			2011			2010

Pension plan:
Interest cost	$	117		$	123		$	351		$	123
Expected return on plan assets		(94	)		(91	)		(282	)		(91	)


Net periodic pension cost	$	23		$	32		$	69		$	32


SERP plan:
Interest cost	$	7		$	10		$	22		$	10


Net periodic postretirement cost	$	7		$	10		$	22		$	10

Stock-Based Compensation Plan

The Company, under the plan approved by its shareholders on April 28, 2011 (“2011 Stock Plan”), authorized the issuance of up to 900,000 shares of common stock of BCB Bancorp, Inc. pursuant to grants of stock options. Employees and directors of BCB Bancorp, Inc. and BCB Community Bank are eligible to participate in the 2011 Stock Plan. All stock options will be granted in the form of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have certain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to receive incentive stock options. On September 29, 2011, a grant of 60,000 options was declared for certain members of the Board of Directors. The exercise price was recorded as of the close of business on September 29, 2011 and a Form 4 was filed for each director as of that date with the Securities and Exchange Commission consistent with their filing requirements. No other declarations of stock options have been made for the three and nine months ended September 30, 2011.

Index

A summary of stock option activity, adjusted to retroactively reflect subsequent stock dividends, follows:	Number of Option Shares			Range of Exercise Prices		Weighted Average Exercise Price


Outstanding at December 31, 2009		279,500		$	5.29-$15.65		10.38


Options forfeited		(4,210	)	$	5.29-$11.84		7.72
Options exercised		(13,677	)		5.29		5.29
Options added through merger		28,000			18.41-29.25		24.22


Outstanding at December 31, 2010		289,613		$	5.29-$29.25	$	12.00

Options exercised		(28,137	)		5.29-9.34		8.24
Options granted		60,000			8.93		8.93


Outstanding at September 30, 2011		321,476		$	5.29-29.25	$	11.85

At September 30, 2011, 267,476 of the stock options outstanding were exercisable.

The key valuation assumptions and fair value of stock options granted during the quarter ended September 30, 2011 were:

Expected life	6.5 years
Risk-free interest rate		1.24	%
Volatility		20.83	%
Dividend yield		5.38	%
Fair value	$	2.27

Note 4 – Earnings Per Share

Basic net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding. The diluted net income per common share is computed by adjusting the weighted average number of shares of common stock outstanding to include the effects of outstanding stock options, if dilutive, using the treasury stock method. For the three and nine months ended September 30, 2011 and 2010, the weighted average of outstanding options considered to be anti-dilutive were 180,855 and 258,264, respectively, and were therefore, excluded from the diluted net income per common share calculation.

Index

Note 5 – Securities Available for Sale


	September 30, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)

Equity Securities-Financial Institutions	$	1,097	$	133	$	116	$	1,114


	December 31, 2010
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)

Equity Securities-Financial Institutions	$	1,097	$	32	$	31	$	1,098

There were no sales of securities available for sale for the nine months ended September 30, 2011 and 2010.

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related securities available for sale were as follows:

	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
September 30, 2011
Equity Securities-Financial Institutions	$	884	$	116	$	—	$	—	$	884	$	116


December 31, 2010
Equity Securities-Financial Institutions	$	65	$	31	$	—	$	—	$	65	$	31

At September 30, 2011, management concluded that the unrealized losses above (which relate to one financial equity issue) are temporary in nature and does not believe that any of the unrealized losses represented an other-than-temporary impairment as they were primarily related to market interest rates and not related to the underlying credit quality of the issuer of the security. Additionally, the Company has the ability, and management has the intent, to hold such securities for the time necessary to recover their cost and does not have the intent to sell the securities, and it is more likely than not that it would not have to sell the securities before recovery of their cost.

Index

Note 6 – Securities Held to Maturity


	September 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)

U.S. Government Agencies:
Due within one year	$	3,315	$	76	$	—	$	3,391
Due after ten years		13,000		92		—		13,092


		16,315		168		—		16,483


Residential mortgage-backed securities:
Due within one year	$	19	$	—	$	—	$	19
Due after one year through five years		958		37		1		994
Due after five years through ten years		40,813		515		35		41,293
Due after ten years		133,916		7,006		7		140,915


		175,706		7,558		43		183,221


Subordinated notes:
Due within one year	$	6,000	$	—	$	—	$	6,000
Municipal obligations:
Due after ten years		1,371		50		—		1,421
Trust originated preferred security:
Due after ten years		403		2		—		405


	$	7,774	$	52	$	—	$	7,826


	$	199,795	$	7,778	$	43	$	207,530

Index

Note 6 – Securities Held to Maturity (Continued)


	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)

U.S. Government Agencies:
Due after one through five years	$	3,315	$	180	$	—	$	3,495
Due after ten years		27,523		14		62		27,475


		30,838		194		62		30,970


Residential mortgage-backed securities:
Due within one year	$	6	$	—	$	—	$	6
Due after one year through five years		775		24		1		798
Due after five years through ten years		54,629		374		357		54,646
Due after ten years		71,545		1,552		493		72,604


		126,955		1,950		851		128,054


Subordinated notes:
Due within one year	$	6,000	$	—	$	—	$	6,000
Municipal obligations:
Due after ten years		1,376		—		21		1,355
Trust originated preferred security:
Due after ten years		403		3		—		406

	$	165,572	$	2,147	$	934	$	166,785

The amortized cost and carrying values shown above are by contractual final maturity. Actual maturities will differ from contractual final maturities due to scheduled monthly payments related to mortgage–backed securities and due to the borrowers having the right to prepay obligations with or without prepayment penalties. At September 30, 2011 and December 31, 2010, all residential mortgage backed securities held in the portfolio were Government Sponsored Enterprise securities.

During the second quarter of 2011, management decided to sell its collateralized mortgage obligations that were issued by the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). While these securities were classified as held to maturity, ASC 320 (formerly FAS 115) allows sales of securities so designated, provided that a substantial portion (at least 85%) of the principal balance has been amortized prior to the sale. During the nine months ended September 30, 2011, proceeds from sales of securities held to maturity totaled approximately $2,438,000 and resulted in gross gains of approximately $25,000 and gross losses of approximately $7,000.

There were no sales of securities held to maturity for the nine months ended September 30, 2010.

Index

Note 6 – Securities Held to Maturity (Continued)

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related securities held to maturity were as follows:

	Less than 12 Months				More than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
September 30, 2011
U.S. Government Agencies	$	—	$	—	$	—	$	—	$	—	$	—
Residential mortgage-backed securities		4,750		10		6,538		33		11,288		43

	$	4,750	$	10	$	6,538	$	33	$	11,288	$	43

December 31, 2010
U.S. Government Agencies	$	20,328	$	62	$	—	$	—	$	20,328	$	62
Residential mortgage-backed securities		74,899		851		—		—		74,899		851
Municipal obligations		1,355		21		—		—		1,355		21

	$	96,582	$	934	$	—	$	—	$	96,582	$	934

Management does not believe that any of the unrealized losses at September 30, 2011, (which are related to thirteen residential mortgage-backed securities) represent an other-than-temporary impairment as they are primarily related to market interest rates and not related to the underlying credit quality of the issuers of the securities as all these securities were issued by U.S. Agencies. Additionally, the Company has the ability, and management has the intent, to hold such securities for the time necessary to recover cost and does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of their cost.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses

The following table presents the recorded investment in loans receivable at September 30, 2011 and December 31, 2010 by segment and class.


	September 30, 2011		December 31, 2010
	(In Thousands)
Real estate mortgage:
Residential	$	222,002