UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2013

Or

 

£	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.   S   Yes    £   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.

 

Large Accelerated Filer	o	Accelerated Filer	ý
Non-Accelerated Filer	o	Smaller Reporting Company	o

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    £  Yes    S  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).    S  Yes    £   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 August 1, 2013, BCB Bancorp, Inc., had 8,373,966 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 June 30, 2013 and December 31, 2012 (unaudited)	1
Consolidated Statements of Income (loss) for the three and six months ended June 30, 2013 and June 30, 2012 (unaudited)	2
Consolidated Statements of Comprehensive Income (loss) for the three and six months ended June 30, 2013 and June 30, 2012 (unaudited)	3
Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2013 (unaudited)	4
Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and June 30, 2012 (unaudited)	5
Notes to Unaudited Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3. Quantitative and Qualitative Disclosures about Market Risk	50
Item 4. Controls and Procedures	51
PART II. OTHER INFORMATION	52
Item 1. Legal Proceedings	52
Item 1A. Risk Factors	52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3. Defaults Upon Senior Securities	53
Item 4. Mine Safety Disclosures	53
Item 5. Other Information	53
Item 6. Exhibits	53

 

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)

  

		June 30,				December 31,
		2013				2012
ASSETS
Cash and amounts due from depository institutions		$	6,134			$	6,242
Interest-earning deposits			45,082				27,905
Total cash and cash equivalents			51,216				34,147
Interest-earning time deposits			986				986
Securities available for sale			662				1,240
Securities held to maturity, fair value $129,692 and $171,603,
respectively			127,834				164,648
Loans held for sale			1,668				1,602
Loans receivable, net of allowance for loan losses of $13,673 and
$12,363, respectively			942,090				922,301
Premises and equipment, net			14,104				13,568
Federal Home Loan Bank of New York stock, at cost			7,030				7,698
Interest receivable			4,214				4,063
Other real estate owned			3,475				3,274
Deferred income taxes			10,405				10,053
Other assets			3,675				7,778
Total Assets		$	1,167,359			$	1,171,358
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Non-interest bearing deposits		$	102,917			$	85,950
Interest bearing deposits			849,076				854,836
Total deposits			951,993				940,786
Short-term Borrowings			—				17,000
Long-term Debt			114,124				114,124
Other Liabilities			7,940				7,867
Total Liabilities			1,074,057				1,079,777
STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized,
issued and outstanding 865 shares of series A 6% noncumulative perpetual
preferred stock (liquidation preference value $10,000 per share, liquidation value $8.65 million)			—				—
Additional paid-in capital preferred stock			8,570				8,570
Common stock; $0.064 stated value; 20,000,000 shares authorized,
10,842,479 and 10,841,079 shares, respectively, issued;
8,373,966 shares and 8,496,508 shares, respectively oustanding			694				694
Additional paid-in capital common stock			91,875				91,846
Treasury stock, at cost, 2,468,513 and 2,344,571 shares, respectively			(28,434	)			(27,177	)
Retained earnings			21,561				18,883
Accumulated other comprehensive loss			(964	)			(1,235	)
Total Stockholders' equity			93,302				91,581
Total Liabilities and Stockholders' equity		$	1,167,359			$	1,171,358

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income (loss)

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

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Interest income:
Loans		$	13,246			$	11,756			$	26,239			$	23,729
Investments, taxable			928				1,519				1,989				3,052
Investments, non-taxable			12				12				25				25
Other interest-earning assets			13				34				24				65
Total interest income			14,199				13,321				28,277				26,871
Interest expense:
Deposits:
Demand			107				160				210				354
Savings and club			91				135				177				302
Certificates of deposit			1,192				1,542				2,441				3,111
			1,390				1,837				2,828				3,767
Borrowed money			1,241				1,236				2,464				2,559
Total interest expense			2,631				3,073				5,292				6,326
Net interest income			11,568				10,248				22,985				20,545
Provision for loan losses			600				1,200				1,800				1,800
Net interest income after provision for loan losses			10,968				9,048				21,185				18,745
Non interest income:
Fees and service charges			479				608				903				1,098
Gain on sales of loans originated for sale			227				316				346				669
Gain on sale of loans acquired			—				—				—				286
Loss on bulk sale of impaired loans held in portfolio			—				(7,342	)			—				(7,342	)
Gain on sale of securities held to maturity			135				66				360				193
Other			40				41				56				66
Total non interest income			881				(6,311	)			1,665				(5,030	)
Non interest expense:
Salaries and employee benefits			3,719				3,891				7,186				7,823
Occupancy expense of premises			866				887				1,679				1,732
Equipment			1,282				1,151				2,448				2,599
Professional fees			568				595				1,027				1,026
Director fees			168				182				336				392
Regulatory assessments			278				295				543				606
Advertising			178				129				280				246
Other real estate owned			(32	)			16				(116	)			261
Other			562				853				1,109				1,696
Total non interest expense			7,589				7,999				14,492				16,381
Income (loss) before income tax provision			4,260				(5,262	)			8,358				(2,666	)
Income tax provision			1,707				(1,900	)			3,395				(892	)
Net Income (loss)		$	2,553			$	(3,362	)		$	4,963			$	(1,774	)
Preferred stock dividends			130				—				260				—
Net Income (loss) available to common stockholders		$	2,423			$	(3,362	)		$	4,703			$	(1,774	)
Net Income (loss) per common share-basic and diluted
Basic		$	0.29			$	(0.37	)		$	0.56			$	(0.19	)
Diluted		$	0.29			$	(0.37	)		$	0.56			$	(0.19	)
Weighted average number of common shares outstanding
Basic			8,411				9,142				8,446				9,289
Diluted			8,417				9,142				8,450				9,289

BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(In Thousands, Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net Income (loss)		$	2,553			$	(3,362	)		$	4,963			$	(1,774	)
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period (a)			142				24				249				111
Less: reclassification adjustment for gains included in net income (b) (d)			—				—				—				—
Benefit plans (c)			11				34				22				34
Other comprehensive income			153				58				271				145
Comprehensive income (loss)		$	2,706			$	(3,304	)		$	5,234			$	(1,629	)

 

(a)

Represents the net change of the unrealized gain on available-for-sale securities. Represents unrealized gains of $239,000, $40,000, $421,000 and $185,000, respectively, less deferred taxes of $98,000, $16,000, $172,000 and $74,000, respectively.

(b)

No sales of available-for-sale securities occurred during the three and six months ended June 30, 2013 and 2012.

(c)

Represents the net change of unrecognized loss included in net periodic pension cost. Represents a gross change of $18,000, $56,000, $36,000 and $56,000, respectively, less deferred taxes of $7,000, $22,000, $14,000 and $22,000, respectively. The Statements of Income line items impacted by these amounts are salaries and employee benefits and income tax provision.

(d)

During the second quarter of 2013, one available for sale security was called at par for $1.0 million.

 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

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

 

		Preferred Stock				Common Stock				Additional  Paid-In  Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Loss				Total
Beginning Balance at January 1, 2013		$	—			$	694			$	100,416			$	(27,177	)		$	18,883			$	(1,235	)		$	91,581
Exercise of Stock Options (1,400 shares)			—				—				12				—				—				—				12
Stock-based compensation expense			—				—				17				—				—				—				17
Treasury Stock Purchases (123,942 shares)			—				—				—				(1,257	)			—				—				(1,257	)
Dividends payable on Series A 6% noncumulative perpetual preferred stock			—				—				—				—				(260	)			—				(260	)
Cash dividends on common stock ($0.24 per share) declared			—				—				—				—				(2,025	)			—				(2,025	)
Net income			—				—				—				—				4,963				—				4,963
Other comprehensive income			—				—				—				—				—				271				271
Ending Balance at June 30, 2013		$	—			$	694			$	100,445			$	(28,434	)		$	21,561			$	(964	)		$	93,302

 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)

 

		Six Months Ended June 30,
		2013				2012
Cash Flows from Operating Activities :
Net Income (loss)		$	4,963			$	(1,774	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of premises and equipment			645				560
Amortization and accretion, net			604				856
Provision for loan losses			1,800				1,800
Deferred income tax (benefit)			(538	)			(238	)
Loans originated for sale			(11,909	)			(26,533	)
Proceeds from sale of loans originated for sale			9,314				27,916
Gain on sales of loans originated for sale			(346	)			(669	)
(Gain) loss on sales of other real estate owned			(123	)			99
Fair value adjustment of other real estate owned			(110	)			(193	)
Gain on sales of securities held to maturity			(360	)			(286	)
Loss on bulk sale of impaired loans held in portfolio			—				7,342
Stock compensation expense			17				4
(Increase) decrease in interest receivable			(151	)			757
(Decrease) increase in other assets			3,939				(2,018	)
(Decrease) increase in accrued interest payable			(54	)			1
Increase in other liabilities			326				1,555
Net Cash Provided by Operating Activities			8,017				9,179
Cash flows from investing activities:
Proceeds from repayments and calls on securities held to maturity			29,012				33,693
Proceeds from call on securities available for sale			1,000				—
Purchases of securities held to maturity			(1,359	)			(47,924	)
Proceeds from sales of securities held to maturity			8,591				20,018
Proceeds from sale of loans acquired			—				10,836
Proceeds from sales of other real estate owned			3,042				2,835
Proceeds from bulk sale of impaired loans held in portfolio			—				10,235
Proceeds from sale of participation loans held in portfolio			24,224				—
Participation loans sold held in portfolio			(24,224	)			—
Purchases of loans			(2,334	)			(2,267	)
Net (Increase) decrease in loans receivable			(19,194	)			(12,423	)
Improvements to other real estate owned			—				(59	)
Additions to premises and equipment			(1,181	)			(826	)
Purchase of Federal Home Loan Bank of New York stock			(3,297	)			—
Redemption of Federal Home Loan Bank of New York stock			3,965				565
Net Cash Provided By Investing Activities			18,245				14,683
Cash flows from financing activities:
Net increase (decrease) in deposits			11,207				(12,793	)
Repayment of long-term debt			—				(15,407	)
Repayment of short-term debt			(17,000	)			—
Purchases of treasury stock			(1,257	)			(7,393	)
Cash dividend paid common stock			(2,025	)			(2,244	)
Cash dividend paid preferred stock			(130	)			—
Exercise of stock options			12				55
Net Cash Used In Financing Activities			(9,193	)			(37,782	)
Net Increase (Decrease) In Cash and Cash Equivalents			17,069				(13,920	)
Cash and Cash Equivalents-Begininng			34,147				117,087
Cash and Cash Equivalents-Ending		$	51,216			$	103,167
Supplementary Cash Flow Information:
Cash paid during the year for:
Income taxes		$	27			$	1,929
Interest		$	5,346			$	6,325
Non-cash items:
Transfer of loans to other real estate owned		$	3,010			$	2,373
Loans to facilitate sale of othe real estate owned			—				616
Reclassification of loans originated for sale to held to maturity		$	2,875			$	2,146

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, BCB New York Asset Management, Inc. 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. These results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013 or any other future period. 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 as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those 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, 2012, 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 June 30, 2013, and the date these consolidated financial statements were issued.

 

Significant Event

 

On October 29^th and 30^th, 2012, Hurricane Sandy struck the Northeast section of the country. The Company’s market area has been significantly impacted by the storm which resulted in widespread flooding, wind damage and power outages. The storm temporarily disrupted our branch network and our ability to service our customers, however within one week, all of our offices were fully functional. The Company conducted in 2012 a quantitative analysis identifying 122 loans with outstanding principal loan balances totaling approximately $38.0 million. At June 30, 2013, borrowers of $25.0 million of the loans have either fully completed the restoration process or have paid the loan in full. The remaining $13.0 million are at various stages of completion and are continually monitored by the Company. Based on this updated, current analysis, the Company which had initially established an additional Hurricane Sandy related provision for loan losses totaling $500,000 to mitigate any potential losses has reduced this provision to $149,000 at June 30, 2013. The Company will continue to monitor the ongoing status of the Hurricane Sandy impacted loans to determine if the established provision needs adjustment.

 

New Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) has issued has issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets.

 

This ASU applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company does not believe this pronouncement, when adopted, will have a material impact on operations or financial position.

 

The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  This ASU is intended to improve the reporting of reclassifications out of accumulated other comprehensive income.  The ASU requires an entity to report, either on the face of the statement where net income is presented or in the notes to the financial statements, the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in their entirety to net income.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts.  The amendments in this ASU apply to all entities that issue financial statements that are presented in conformity with U.S. GAAP and that report items of other comprehensive income.  For public entities, the amendments in this ASU are effective prospectively for reporting periods beginning after December 15, 2012.  The Company adopted this ASU on January 1, 2013 by including the required disclosures in the notes included on the consolidated statements of comprehensive income. The adoption of ASU 2013-02 did not have an impact on the Company's financial condition, results of operations, or cash flows.

 

Note 2 – Reclassification

 

Certain amounts as of December 31, 2012 and the period ended June 30, 2012 have been reclassified to conform to the current period’s presentation. These changes had no effect on the Company’s results of operations or financial position.

Note 3 – Pension and Other Postretirement Plans

 

The Company assumed, 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 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 June 30,								Six months ended June 30,
		2013				2012				2013				2012
Pension plan:
Interest cost		$	98			$	111			$	196			$	222
Expected return on plan assets			(137	)			(100	)			(274	)			(200	)
Amortization of unrecognized loss			18				56				36				56
Net periodic pension cost			(21	)			67				(42	)			78
SERP plan:
Interest cost		$	4			$	5			$	8			$	10
Net periodic postretirement cost		$	4			$	5			$	8			$	10

Note 3 – Pension and Other Postretirement Plans (Continued)

 

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 January 17, 2013, a grant of 130,000 options was declared for certain members of the Board of Directors which vest at a rate of 10% per year, over ten years commencing on the first anniversary of the grant date. The exercise price was recorded as of the close of business on January 17, 2013 and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with their filing requirements. During the first quarter of 2013, there were 130,000 stock options granted and there were no stock options granted during the three months ended June 30, 2013.

 

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, 2012			274,296			$	8.93-29.25			$	11.97
Options granted			130,000				9.03				9.03
Options exercised			(1,400	)			8.93-9.34				9.05
Options forfeited			(3,125	)			11.84				11.84
Options expired			(5,431	)			18.41				18.41
Outstanding at June 30, 2013			394,340			$	8.93-29.25			$	10.92

 

As of June 30, 2013, stock options which are granted and were exercisable totaled 214,840 stock options.

 

The key valuation assumptions and fair value of stock options granted during the three months ended March 31, 2013 were:

 

Expected life			7.75 years
Risk-free interest rate			1.44	%
Volatility			30.56	%
Dividend yield			4.57	%
Fair value		$	1.59

 

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 179,500 shares underlying unexercised options outstanding as of June 30, 2013 is $265,332 over a weighted average period of 9.22 years.

Note 4 – Earnings Per Share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. The diluted net income (loss) 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. Dilution is not applicable in periods of net loss. For the three and six months ended June 30, 2013, the weighted average of outstanding options considered to be anti-dilutive were 343,252 and were therefore excluded from the diluted net income per common share calculation.

 

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations: 

 

		For the Three Months Ended June 30,
		2013												2012
		Income				Shares				Per Share				Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
		(In Thousands, Except per share data)
Net income available to common stockholders		$	2,423											$	(3,362	)
Basic earnings per share-
Income available to
Common stockholders		$	2,423				8,411			$	0.29			$	(3,362	)			9,142			$	(0.37	)
Effect of dilutive securities:
Stock options			—				6								—				—
Diluted earnings per share-
Income available to
Common stockholders		$	2,423				8,417			$	0.29			$	(3,362	)			9,142			$	(0.37	)

 

		For the Six Months Ended June 30,
		2013												2012
		Income				Shares				Per Share				Income				Shares				Per Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
		(In Thousands, Except per share data)
Net income available to common stockholders		$	4,703											$	(1,774	)
Basic earnings per share-
Income available to
Common stockholders		$	4,703				8,446			$	0.56			$	(1,774	)			9,289			$	(0.19	)
Effect of dilutive securities:
Stock options			—				4								—				—
Diluted earnings per share-
Income available to
Common stockholders		$	4,703				8,450			$	0.56			$	(1,774	)			9,289			$	(0.19	)

Note 5 – Securities Available for Sale

 

The following tables presents the cost and gross unrealized gains and losses on securities available for sale as of June 30, 2013 and December 31, 2012.

 

		June 30, 2013
						Gross				Gross
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Equity Securities-Financial Institutions		$	97			$	565			$	—			$	662

 

		December 31, 2012
						Gross				Gross
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Equity Securities-Financial Institutions		$	1,097			$	143			$	—			$	1,240

Note 6 – Securities Held to Maturity

 

The following table presents by maturity the amortized cost and gross unrealized gains and losses on securities held to maturity as of June 30, 2013.

 

		June 30, 2013
						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
		(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years		$	18			$	1			$	—			$	19
Due after five years through ten years			5,059				2				(135	)			4,926
Due after ten years			121,021				2,701				(766	)			122,956
			126,098				2,704				(901	)			127,901
Municipal obligations:
Due after five to ten years			968				36				—				1,004
Due after ten years			392				13				—				405
			1,360				49				—				1,409
Trust originated preferred security:
Due after ten years			376				6				—				382
		$	127,834			$	2,759			$	(901	)		$	129,692

 

The following table presents by maturity the amortized cost and gross unrealized gains and losses on securities held to maturity as of December 31, 2012.

 

		December 31, 2012
						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
		(In Thousands)
Residential mortgage-backed securities:
Due within one year		$	—			$	—			$	—			$	—
Due after one year through five years			4				—				—				4
Due after five years through ten years			9,480				171				(18	)			9,633
Due after ten years			153,425				6,747				(38	)			160,134
			162,909				6,918				(56	)			169,771
Municipal obligations:
Due after five to ten years			388				28				—				416
Due after ten years			975				65				—				1,040
			1,363				93				—				1,456
Trust originated preferred security:
Due after ten years			376				—				—				376
		$	164,648			$	7,011			$	(56	)		$	171,603

 

The amortized cost and carrying values shown above are categorized 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. As of June 30, 2013 and December 31, 2012, all residential mortgage backed securities held in the portfolio were Government Sponsored Enterprise securities.

Management has periodically decided to sell certain mortgage-backed securities 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 with the intent to hold until 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 six months ended June 30, 2013, proceeds from sales of securities held to maturity totaled approximately $8.59 million and resulted in gross gains of approximately $375,000 and gross losses of approximately $15,000.

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				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
		(In Thousands)
June 30, 2013
Residential mortgage-backed securities		$	45,493			$	899			$	465			$	2			$	45,958			$	901
		$	45,493			$	899			$	465			$	2			$	45,958			$	901
December 31, 2012
Residential mortgage-backed securities		$	14,093			$	56			$	—			$	—			$	14,093			$	56
		$	14,093			$	56			$	—			$	—			$	14,093			$	56

 

Management does not believe that any of the unrealized losses as of June 30, 2013, (which are related to twenty-five residential mortgage-backed securities including two that have been in an unrealized loss position for more than twelve months) 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, including FNMA, FHLMC and GNMA. 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.

Note 7 - Loans Receivable and Allowance for Loan Losses

The following table presents the recorded investment in loans receivable as of June 30, 2013 and December 31, 2012 by segment and class.

 

		June 30, 2013				December 31, 2012
		(In Thousands)
Originated loans:
Residential one-to-four family		$	86,153			$	78,007
Commercial and multi-family			478,277				435,371
Construction			26,078				22,267
Commercial business(1)			47,078				47,250
Home equity(2)			25,755				25,964
Consumer			438				565
Sub-total			663,779				609,424
Acquired loans recorded at fair value:
Residential one-to-four family			109,853				121,983
Commercial and multi-family			140,211				149,454
Construction			334				1,043
Commercial business(1)			7,409				12,177
Home equity(2)			30,450				34,289
Consumer			999				1,069
Sub-total			289,256				320,015
Acquired loans with deteriorated credit:
Residential one-to-four family			2,154				2,936
Commercial and multi-family			2,071				3,443
Construction			—				—
Commercial business(1)			324				241
Home equity(2)			92				140
Consumer			—				—
Sub-total			4,641				6,760
Total Loans			957,676				936,199
Less:
Deferred loan fees, net			(1,913	)			(1,535	)
Allowance for loan losses			(13,673	)			(12,363	)
			(15,586	)			(13,898	)
Total Loans, net		$	942,090			$	922,301

 

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

 

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

 

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses.  The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements.  These elements include a general allocated reserve for impaired loans, a specific reserve for impaired loans and an unallocated portion.  

 

The Company consistently applies the following comprehensive methodology.  During the quarterly review of the allowance for loan losses, the Company considers a variety of factors that include:

 

·

General economic conditions.

 

·

Trends in charge-offs.

 

·

Trends and levels of delinquent loans.

 

·

Trends and levels of non-performing loans, including loans over 90 days delinquent.

 

·

Trends in volume and terms of loans.

 

·

Levels of allowance for specific classified loans.

 

·

Credit concentrations.

 

The methodology includes the segregation of the loan portfolio by loans that are performing and loans that are impaired. Loans which are performing are evaluated collectively by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience, including consideration of peer loss analysis, with an adjustment for qualitative factors due to economic conditions in the Company’s market. Impaired loans are loans which are 90 days or more delinquent or troubled debt restructured. These loans are individually evaluated for impairment either by current appraisal or net present value of expected cash flows. Management reviews the overall estimate of this allowance for reasonableness and bases the loan loss provision accordingly.

 

The portfolio of performing loans is segmented into the following loan classes, where the risk level for each class is analyzed when determining the allowance for these loans:

 

Residential single family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential family real estate loans decrease the interest rate risk to the Company that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk can additionally be affected by job loss, divorce, illness and personal bankruptcy of the borrower.

 

Commercial and multi-family real estate lending entails significant additional risks as compared with residential family property lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience on such loans is typically dependent on the successful operation of the real estate project. The success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate as well as economic conditions generally.

 

Construction lending is generally considered to involve a high degree of risk due to the concentration of principal in a limited number of loans and borrowers and the effects of the general economic conditions on developers and builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both a property’s value at completion of the project and the total cost (including interest charges to completion) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. Additionally, speculative construction loans to a builder are not ordinarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

 

Commercial business lending is generally considered high risk due to the concentration of principal in a limited number of loans and borrowers and the impact changing general economic conditions have on the business. Commercial business loans and lines of credit are primarily secured by inventories and other business assets. In most cases, any repossessed collateral for a defaulted commercial business loans will not provide an adequate source of repayment of the outstanding loan balance.

 

Home equity lending entails certain risks such as interest rate risk and risk of non-repayment. The marketability of the underlying property may be adversely affected by higher interest rates, decreasing the value of collateral securing the loan. Repayment risk can be affected by job loss, divorce, illness and personal bankruptcy of the borrower.

 

Home equity line of credit lending entails securing an equity interest in the borrower’s home. The principle risk associated with this type of lending is that the marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk can additionally be affected by job loss, divorce, illness and personal bankruptcy of the borrower. This type of lending is often priced on an adjustable rate basis with the rate set at or above a predefined index. Adjustable-rate loans decrease the interest rate risk to the Company that is associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, thereby increasing the potential for default.

 

Consumer loans generally have more credit risk than loans secured by real estate because of the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans generally have shorter terms and higher interest rates than other lending. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely effected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

 

Acquired Loans added to portfolio via our purchase of Banks are recorded at fair value with no carryover of a related allowance for loan losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

We have acquired loans in two separate acquisitions.(Pamrapo Savings Bank in 2010 “Pamrapo” and Allegiance Community Bank in 2011 “Allegiance”) For each acquisition, we reviewed all acquired loans and considered the following factors as indicators that such an acquired loan had evidence of deterioration in credit quality and was therefore in the scope of Accounting Standards Codification (“ASC”) 310-30: 

·

Loans that were 90 days or more past due,

·

Loans that had an internal risk rating of substandard or worse. Substandard is consistent with regulatory definitions and is defined as having a well defined weakness that jeopardizes liquidation of the loan,

·

Loans that were classified as nonaccrual by the acquired bank at the time of acquisition, or,

·

Loans that had been previously modified in a troubled debt restructuring.

 

Any acquired loans that were not individually in the scope of ASC 310-30 because they did not meet the criteria above were accounted for under ASC 310-20 (Nonrefundable fees and other costs.) Charge-offs of the principal amount on acquired loans accounted for under ASC 310-20 would be charged off against the allowance for loan losses.

 

Acquired loans accounted for under ASC 310-30

 

We performed a fair market valuation on each of the loans and each loan was recorded at a discount which includes the establishment of an associated “Credit Mark” reducing the carrying value of that loan to its fair value at the time of acquisition. We determined that at least part of the discount on the acquired loans was attributable to credit quality by reference to the valuation model used to estimate the fair value of the loan. The valuation model incorporated lifetime expected credit losses into the loans’ fair valuation in consideration of factors such as evidence of credit deterioration since origination and the amounts of contractually required principal and interest that we did not expect to collect as of the acquisition date.

 

The excess of expected cash flows from acquired loans over the estimated fair value of acquired loans at acquisition is referred to as the accretable discount and is recognized into interest income over the remaining life of the acquired loans using the interest method. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount represents estimated future credit losses expected to be incurred over the life of the acquired loans.

 

Subsequent decreases to the expected cash flows require us to evaluate the need for an addition to the allowance for loan losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable discount which we then reclassify as accreteble discount that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect takes into account actual credit performance of the acquired loans to date and our best estimates for the expected lifetime credit performance of the loans using currently available information. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable discount portion of the fair value adjustment. To the extent that we experience a deterioration in credit quality in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.

 

In accordance with ASC 310-30, recognition of income is dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected.  We perform such an evaluation on a quarterly basis on our acquired loans individually accounted for under ASC 310-30. Cash flows for acquired loans individually accounted for under ASC 310-30 are estimated on a quarterly basis.  Based on this evaluation, a determination is made as to whether or not we have a reasonable expectation about the timing and amount of cash flows.  Such an expectation includes cash flows from normal customer repayment, foreclosure or other collection efforts. To the extent that we cannot reasonably estimate cash flows, interest income recognition is discontinued.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The Company also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates lack some element of precision.  Management must make estimates using assumptions and information that is often subjective and changing rapidly. In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation will periodically review the allowance for loan losses and may require us to adjust the allowance based on their analysis of information available to it at the time of its examination.

 

Classified Assets. The Company’s policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” “loss” or “special mention.” An asset is considered substandard if it is inadequately protected by its current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that “some loss” will be sustained if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weakness present makes “collection or liquidation in full” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as loss are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted, and the loan, or a portion thereof, is charged-off. Assets may be designated special mention because of potential weaknesses that do not currently warrant classification in one of the aforementioned categories.

When the Company classifies problem loans, it may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. A portion of general loss allowances established to cover possible losses related to assets classified as substandard or doubtful may be included in determining our regulatory capital. Specific valuation allowances for loan losses generally do not qualify as regulatory capital. As of June 30, 2013, we had $8.4 million in loans classified as doubtful, $15.5 million in loans classified as substandard, and $15.8 million in loans classified as special mention. The loans classified as substandard represent primarily commercial loans secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily because either updated financial information has not been provided timely, or the collateral underlying the loan is in the process of being revalued.

The Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies.  The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list (risk ratings 1-4) are treated as “pass” for grading purposes:

 

5 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.

 

6 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. The loan needs special and corrective attention.

 

7 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.

 

8 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.

The current methodology for this calculation is determined with the Company’s specific Historical Loss Percentage (“HLP”) for each loan type, using two years of prior Company data (or eight quarters). The relative weights of prior quarters are decayed logarithmically and are further adjusted based on the trend of the historical loss percentage at the time. Also, instead of applying consistent percentages to each of the credit risk grades, the current methodology applies a higher factor to classified loans based on a delinquency risk trend and concentration risk trend by using the past due and non-accrual as a percentage of the specific loan category.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended June 30, 2013 and recorded investment in loans receivable at June 30, 2013. The table also details the amount of total loans receivable, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class. (In Thousands):

 

						Commercial  &								Commercial				Home
		Residential				Multi-family				Construction				Business (1)				Equity (2)				Consumer				Unallocated				Total
Allowance for credit losses:
Originated Loans:		$	1,416			$	6,957			$	659			$	1,332			$	325			$	48			$	183			$	10,920
Acquired loans recorded at fair value:			622				1,323				101				43				218				5				—				2,312
Acquired loans with deteriorated credit:			112				—				—				—				—				—				—				112
Beginning Balance, March 31, 2013		$	2,150			$	8,280			$	760			$	1,375			$	543			$	53			$	183			$	13,344
Charge-offs:
Originated Loans:			—				—				—				—				—				—				—				—
Acquired loans recorded at fair value:			—				85				—				—				237				—				—				322
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				85				—				—				237				—				—				322
Recoveries:
Originated Loans:			35				—				—				—				—				—				—				35
Acquired loans recorded at fair value:			—				—				—				16				—				—				—				16
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			35				—				—				16				—				—				—				51
Provisions:
Originated Loans:			210				(92	)			406				225				(26	)			(31	)			205				897
Acquired loans recorded at fair value:			(57	)			(372	)			33				(42	)			207				32				—				(199	)
Acquired loans with deteriorated credit:			(98	)			—				—				—				—				—				—				(98	)
Sub-total:			55				(464	)			439				183				181				1				205				600
Totals:
Originated Loans:			1,661				6,865				1,065				1,557				299				17				388				11,852
Acquired loans recorded at fair value:			565				866				134				17				188				37				—				1,807
Acquired loans with deteriorated credit:			14				—				—				—				—				—				—				14
Ending Balance, June 30, 2013		$	2,240			$	7,731			$	1,199			$	1,574			$	487			$	54			$	388			$	13,673
Loans Receivable:
Ending Balance Originated Loans:			86,153				478,277				26,078				47,078				25,755				438				—				663,779
Ending Balance Acquired loans recorded at fair value:			109,853				140,211				334				7,409				30,450				999				—				289,256
Ending Balance Acquired loans with deteriorated credit:			2,154				2,071				—				324				92				—				—				4,641
Total Gross Loans:		$	198,160			$	620,559			$	26,412			$	54,811			$	56,297			$	1,437			$	—			$	957,676
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:			1,995				12,660				—				3,412				784				29				—				18,880
Ending Balance Acquired loans recorded at fair value:			10,708				15,412				130				1,014				1,087				3				—				28,354
Ending Balance Acquired loans with deteriorated credit:			2,154				1,801				—				324				92				—				—				4,371
Ending Balance Loans individually evaluated
for impairment:		$	14,857			$	29,873			$	130			$	4,750			$	1,963			$	32			$	—			$	51,605
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:			84,158				465,617				26,078				43,666				24,971				409				—				644,899
Ending Balance Acquired loans recorded at fair value:			99,145				124,799				204				6,395				29,363				996				—				260,902
Ending Balance Acquired loans with deteriorated credit:			—				270				—				—				—				—				—				270
Ending Balance Loans collectively evaluated
for impairment:		$	183,303			$	590,686			$	26,282			$	50,061			$	54,334			$	1,405			$	—			$	906,071

 

_________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the activity in the Company’s allowance for loan losses for the six months ended June 30, 2013. (In Thousands):

 

						Commercial  &								Commercial				Home
		Residential				Multi-family				Construction				Business (1)				Equity (2)				Consumer				Unallocated				Total
Allowance for credit losses:
Originated Loans:		$	1,143			$	7,088			$	866			$	576			$	284			$	41			$	32			$	10,030
Acquired loans recorded at fair value:			719				963				93				244				191				18				—				2,228
Acquired loans with deteriorated credit:			105				—				—				—				—				—				—				105
Beginning Balance, December 31, 2012		$	1,967			$	8,051			$	959			$	820			$	475			$	59			$	32			$	12,363
Charge-offs:
Originated Loans:			—				—				—				223				—				—				—				223
Acquired loans recorded at fair value:			—				85				—				—				237				—				—				322
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				85				—				223				237				—				—				545
Recoveries:
Originated Loans:			35				—				3				—				—				—				—				38
Acquired loans recorded at fair value:			—				—				—				17				—				—				—				17
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			35				—				3				17				—				—				—				55
Provisions:
Originated Loans:			483				(223	)			196				1,204				15				(24	)			356				2,007
Acquired loans recorded at fair value:			(154	)			(12	)			41				(244	)			234				19				—				(116	)
Acquired loans with deteriorated credit:			(91	)			—				—				—				—				—				—				(91	)
Sub-total:			238				(235	)			237				960				249				(5	)			356				1,800
Totals:
Originated Loans:			1,661				6,865				1,065				1,557				299				17				388				11,852
Acquired loans recorded at fair value:			565				866				134				17				188				37				—				1,807
Acquired loans with deteriorated credit:			14				—				—				—				—				—				—				14
Ending Balance, June 30, 2013		$	2,240			$	7,731			$	1,199			$	1,574			$	487			$	54			$	388			$	13,673

 

_________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

 

The following table sets forth the activity in the Company’s allowance for loan losses for the year ended December 31, 2012 and recorded investment in loans receivable at December 31, 2012. The table also details the amount of total loans receivable, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan class. (In Thousands):

 

						Commercial  &								Commercial				Home
		Residential				Multi-family				Construction				Business (1)				Equity (2)				Consumer				Unallocated				Total
Allowance for credit losses:
Originated Loans:		$	1,086			$	4,769			$	183			$	795			$	329			$	10			$	—			$	7,172
Acquired loans recorded at fair value:			1,012				559				6				92				315				—				—				1,984
Acquired loans with deteriorated credit:			581				470				115				154				33				—				—				1,353
Beginning Balance, December 31, 2011		$	2,679			$	5,798			$	304			$	1,041			$	677			$	10			$	—			$	10,509
Charge-offs:
Originated Loans:			253				468				4				541				5				—				—				1,271
Acquired loans recorded at fair value:			540				867				288				96				19				—				—				1,810
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			793				1,335				292				637				24				—				—				3,081
Recoveries:
Originated Loans:			—				35				—				—				—				—				—				35
Acquired loans recorded at fair value:			—				—				—				—				—				—				—				—
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				35				—				—				—				—				—				35
Provisions:
Originated Loans:			310				2,752				687				322				(40	)			31				32				4,094
Acquired loans recorded at fair value:			247				1,271				375				248				(105	)			18				—				2,054
Acquired loans with deteriorated credit:			(476	)			(470	)			(115	)			(154	)			(33	)			—				—				(1,248	)
Sub-total:			81				3,553				947				416				(178	)			49				32				4,900
Totals:
Originated Loans:			1,143				7,088				866				576				284				41				32				10,030
Acquired loans recorded at fair value:			719				963				93				244				191				18				—				2,228
Acquired loans with deteriorated credit:			105				—				—				—				—				—				—				105
Ending Balance, December 31, 2012