UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2014

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.   T   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		¨		Accelerated Filer	ý
Non-Accelerated Filer		¨		Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    ¨  Yes    ý  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).    ý   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 May 5, 2014, BCB Bancorp, Inc., had 8,343,432 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 March 31, 2014 and December 31, 2013 (unaudited)	1
Consolidated Statements of Income for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	2
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	3
Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2014 (unaudited)	4
Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	5
Notes to Unaudited Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3. Quantitative and Qualitative Disclosures about Market Risk	42
Item 4. Controls and Procedures	43
PART II. OTHER INFORMATION	44
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3. Defaults Upon Senior Securities	45
Item 4. Mine Safety Disclosures	45
Item 5. Other Information	45
Item 6. Exhibits	45

 

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)

 

		March 31,				December 31,
		2014				2013
ASSETS
Cash and amounts due from depository institutions		$	10,071			$	10,847
Interest-earning deposits			17,158				18,997
Total cash and cash equivalents			27,229				29,844
Interest-earning time deposits			990				990
Securities available for sale			1,316				1,104
Securities held to maturity, fair value $112,457 and $115,158,
respectively			110,732				114,216
Loans held for sale			2,289				1,663
Loans receivable, net of allowance for loan losses of $14,646 and
$14,342, respectively			1,060,855				1,020,344
Federal Home Loan Bank of New York stock, at cost			8,380				7,840
Premises and equipment, net			13,615				13,853
Accrued interest receivable			4,102				4,157
Other real estate owned			2,745				2,227
Deferred income taxes			9,855				9,942
Other assets			2,385				1,779
Total Assets		$	1,244,493			$	1,207,959
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Non-interest bearing deposits		$	118,957			$	107,613
Interest bearing deposits			873,048				861,057
Total deposits			992,005				968,670
Short-term Debt			30,000				18,000
Long-term Debt			110,000				110,000
Subordinated Debentures			4,124				4,124
Other Liabilities			6,239				7,105
Total Liabilities			1,142,368				1,107,899
STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized,
issued and outstanding 1,343 shares of series A and B 6% noncumulative perpetual
preferred stock (liquidation preference value $10,000 per share, liquidation value $13,430,000)			—				—
Additional paid-in capital preferred stock			13,326				12,556
Common stock; $0.064 stated value; 20,000,000 shares authorized,
8,343,432 shares and 8,331,750 shares, respectively, issued and outstanding			695				694
Additional paid-in capital common stock			92,197				92,064
Retained earnings			24,751				23,710
Accumulated other comprehensive income			255				129
Treasury stock, at cost, 2,529,655 and 2,529,379 shares, respectively			(29,099	)			(29,093	)
Total Stockholders' Equity			102,125				100,060
Total Liabilities and Stockholders' Equity		$	1,244,493			$	1,207,959

 

See accompanying notes to unaudited consolidated financial statements.

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

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

 

		Three Months Ended March 31,
		2014				2013
Interest income:
Loans, including fees		$	13,681			$	12,992
Investments, taxable			915				1,062
Investments, non-taxable			12				12
Other interest-earning assets			13				11
Total interest income			14,621				14,077
Interest expense:
Deposits:
Demand			121				103
Savings and club			91				86
Certificates of deposit			1,092				1,248
			1,304				1,437
Borrowed money			1,253				1,223
Total interest expense			2,557				2,660
Net interest income			12,064				11,417
Provision for loan losses			1,000				1,200
Net interest income after provision for loan losses			11,064				10,217
Non-interest income:
Fees and service charges			504				424
Gain on sales of loans originated for sale			777				119
Gain on sale of securities held to maturity			—				224
Other			19				17
Total non-interest income			1,300				784
Non-interest expense:
Salaries and employee benefits			4,461				3,466
Occupancy expense of premises			980				812
Equipment			1,357				1,166
Professional fees			490				459
Director fees			168				168
Regulatory assessments			252				265
Advertising			174				102
Other real estate owned, net			8				(84	)
Other			666				550
Total non-interest expense			8,556				6,904
Income before income tax provision			3,808				4,097
Income tax provision			1,573				1,687
Net Income		$	2,235			$	2,410
Preferred stock dividends			193				130
Net Income available to common stockholders		$	2,042			$	2,280
Net Income per common share-basic and diluted
Basic		$	0.24			$	0.27
Diluted		$	0.24			$	0.27
Weighted average number of common shares outstanding
Basic			8,340				8,492
Diluted			8,342				8,494

 

See accompanying notes to unaudited consolidated financial statements.

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

 

		Three Months Ended March 31,
		2014				2013
Net Income		$	2,235			$	2,410
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period (a)			126				107
Less: reclassification adjustment for gains included in net income (b)			—				—
Benefit plans (c)			—				11
Other comprehensive income			126				118
Comprehensive income		$	2,361			$	2,528

 

 

(a)

Represents the net change of the unrealized gain on available-for-sale securities. Represents unrealized gains of $213,000 and $178,000, respectively, less deferred taxes of $87,000 and $71,000, respectively.

(b)

No sales of available-for-sale securities occurred during the three months ended March 31, 2014 and 2013.

(c)

Represents the net change of unrecognized loss included in net periodic pension cost. Represents a gross change of $18,000, less deferred taxes of $7,000, for the three months ended March 31, 2013. The Statements of Income line items impacted by these amounts are salaries and employee benefits and income tax provision.

 

See accompanying notes to unaudited consolidated financial statements.

 

 

 

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				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total
Beginning Balance at January 1, 2014		$	—			$	694			$	104,620			$	23,710			$	(29,093	)		$	129			$	100,060
Proceeds from issuance of Series B preferred stock			—				—				771				—				—				—				771
Exercise of Stock Options (12,092 shares)			—				1				132				—				—				—				133
Stock-based compensation expense			—				—				—				—				—				—				—
Treasury Stock Purchases (410 shares)			—				—				—				—				(6	)			—				(6	)
Dividends payable on Series A and Series B 6% noncumulative perpetual preferred stock			—				—				—				(193	)			—				—				(193	)
Cash dividends on common stock ($0.12 per share) declared			—				—				—				(1,001	)			—				—				(1,001	)
Net income			—				—				—				2,235				—				—				2,235
Other comprehensive income			—				—				—				—				—				126				126
Ending Balance at March 31, 2014		$	—			$	695			$	105,523			$	24,751			$	(29,099	)		$	255			$	102,125

 

See accompanying notes to unaudited consolidated financial statements.

 

 

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)

 

		Three Months Ended March 31,
		2014				2013
Cash Flows from Operating Activities :
Net Income		$	2,235			$	2,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment			357				299
Amortization and accretion, net			(174	)			429
Provision for loan losses			1,000				1,200
Deferred income tax (benefit)			—				(347	)
Loans originated for sale			(5,512	)			(5,505	)
Proceeds from sale of loans originated for sale			5,203				3,309
Gain on sales of loans originated for sale			(777	)			(119	)
Gain on sales of other real estate owned			—				(21	)
Fair value adjustment of other real estate owned			—				(110	)
Gain on sales of securities held to maturity			—				(224	)
Stock compensation expense			—				17
Decrease (increase) in interest receivable			55				(212	)
(Increase) decrease in other assets			(606	)			2,072
(Decrease) in accrued interest payable			(27	)			(18	)
(Decrease) in other liabilities			(839	)			(435	)
Net Cash Provided by Operating Activities			915				2,745
Cash flows from investing activities:
Proceeds from repayments and calls on securities held to maturity			4,410				17,107
Purchases of securities held to maturity			(1,066	)			(1,359	)
Proceeds from sales of securities held to maturity			—				6,327
Proceeds from sales of other real estate owned			—				806
Purchases of loans			—				(227	)
Net (Increase) in loans receivable			(41,254	)			(7,948	)
Additions to premises and equipment			(119	)			(87	)
Purchase/Redemption of Federal Home Loan Bank of New York stock			(540	)			765
Net Cash (Used in) Provided By Investing Activities			(38,569	)			15,384
Cash flows from financing activities:
Net increase in deposits			23,335				3,010
Net change in short-term debt			12,000				(17,000	)
Purchases of treasury stock			(6	)			(247	)
Cash dividend paid on common stock			(1,001	)			(1,017	)
Cash dividend paid on preferred stock			(193	)			—
Net proceeds from Issuance of common stock			132				—
Net proceeds from Issuance of preferred stock			771				—
Exercise of stock options			1				12
Net Cash Provided by (Used in) Financing Activities			35,039				(15,242	)
Net (Decrease) Increase In Cash and Cash Equivalents			(2,615	)			2,887
Cash and Cash Equivalents-Beginning			29,844				34,147
Cash and Cash Equivalents-Ending		$	27,229			$	37,034
Supplementary Cash Flow Information:
Cash paid during the year for:
Income taxes		$	2,375			$	1
Interest		$	2,583			$	2,678
Non-cash items:
Transfer of loans to other real estate owned		$	518			$	1,740
Loans to facilitate sale of other real estate owned			—				—
Reclassification of loans originated for sale to held to maturity		$	460			$	2,589

 

See accompanying notes to unaudited consolidated financial statements.

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, 2014 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, 2013, 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 December 31, 2013, and the date these consolidated financial statements were issued.

 

 

New Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2014-04, Receivable-Troubled Debt Restructurings by Creditors (Sub-Topic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this ASU are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. They clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure, or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2014. Early adoption is permitted. Retrospective application is permitted. The Company does not believe this pronouncement, when adopted, will have a material impact on the Company’s results of operations or financial position.

 

The Financial Accounting Standards Board (“FASB”) 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. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of ASU 2013-11 did not have a significant impact on the Company’s financial condition, results of operations, or cash flows.

 

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 a significant impact on the Company's financial condition, results of operations, or cash flows.

Note 2 – Reclassification

 

Certain amounts as of December 31, 2013 and the three month period ended March 31, 2013 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 March 31,
		2014				2013
Pension plan:
Interest cost		$	100			$	98
Expected return on plan assets			(154	)			(137	)
Amortization of unrecognized loss			—				18
Net periodic pension cost		$	(54	)		$	(21	)
SERP plan:
Interest cost		$	5			$	4
Net periodic postretirement cost		$	5			$	4

 

 

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 second quarter of 2013, there were no stock options granted. During the third quarter of 2013, there were 29,928 stock options granted which vest immediately. The exercise price was recorded as of the close of business on August 7, 2013.

 

A summary of stock option activity, adjusted to retroactively reflect stock dividends, follows:

 

		Number of Option Shares				Range of Exercise Prices				Weighted Average Exercise Price
Outstanding at December 31, 2013			344,128			$	8.93-18.41			$	11.09
Options granted			—				—				—
Options exercised			(12,092	)			8.93-11.84				11.01
Options forfeited			—				—				—
Options expired			—				—				—
Outstanding at March 31, 2014			332,036			$	8.93-18.41			$	11.09

 

As of March 31, 2014, stock options which are granted and were exercisable totaled 158,036 stock options.

 

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 174,000 shares underlying unexercised options outstanding as of March 31, 2014 is $258,046 over a weighted average period of 8.96 years.

Note 4 – Net Income per Common Share

 

Basic net income per common share is computed by dividing net income less dividends on preferred stock 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. Dilution is not applicable in periods of net loss. For the three months ended March 31, 2014 and 2013, the difference in the weighted average number of basic and diluted common shares was due solely to the effects of outstanding stock options. No adjustments to net income were necessary in calculating basic and diluted net income per share. For the three months ended March 31, 2014 and 2013, the weighted average number of outstanding options considered to be anti-dilutive were 213,482, and 350,072, respectively.

 

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

 

		For the Three Months Ended March 31,
		2014												2013
		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		$	2,042											$	2,280
Basic earnings per share-
Income available to
Common stockholders		$	2,042				8,340			$	0.24			$	2,280				8,492			$	0.27
Effect of dilutive securities:
Stock options			—				2								—				2
Diluted earnings per share-
Income available to
Common stockholders		$	2,042				8,342			$	0.24			$	2,280				8,494			$	0.27

 

Note 5 – Securities Available for Sale

 

The following tables present the cost and gross unrealized gains and losses on securities available for sale as of March 31, 2014 and December 31, 2013:

 

		March 31, 2014
						Gross				Gross
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Equity Securities-Financial Institutions		$	97			$	1,219			$	—			$	1,316

 

		December 31, 2013
						Gross				Gross
						Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
		(In Thousands)
Equity Securities-Financial Institutions		$	97			$	1,007			$	—			$	1,104

 

 

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 March 31, 2014 and

December 31, 2013:

 

		March 31, 2014
						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
		(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years		$	944			$	—			$	(4	)		$	940
Due after five years through ten years			3,563				14				(110	)			3,467
Due after ten years			104,870				2,618				(840	)			106,648
			109,377				2,632				(954	)			111,055
Municipal obligations:
Due after five to ten years			1,355				47				—				1,402
			1,355				47				—				1,402
Due after ten years			—				—				—				—
		$	110,732			$	2,679			$	(954	)		$	112,457

 

 

		December 31, 2013
						Gross				Gross
		Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
		(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years		$	998			$	—			$	(2	)		$	996
Due after five years through ten years			3,163				—				(135	)			3,028
Due after ten years			108,698				2,239				(1,192	)			109,745
			112,859				2,239				(1,329	)			113,769
Municipal obligations:
Due after five to ten years			1,357				32				—				1,389
			1,357				32				—				1,389
		$	114,216			$	2,271			$	(1,329	)		$	115,158

 

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 March 31, 2014 and December 31, 2013, all residential mortgage backed securities held in the portfolio were Government Sponsored Enterprise securities.

 

In 2013, management 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 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 purchased has been amortized prior to the sale. During the three months ended March 31, 2014, there were no sales of securities held to maturity. During the year ended December 31, 2013, proceeds from sales of securities held to maturity meeting the 85% threshold totaled approximately $9.5 million, and resulted in gross gains of approximately $401,000, and gross losses of approximately $23,000. There were no sales of held to maturity securities that did not meet the 85% threshold. 

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)
March 31, 2014
Residential mortgage-backed securities		$	37,265			$	(710	)		$	4,431			$	(244	)		$	41,696			$	(954	)
		$	37,265			$	(710	)		$	4,431			$	(244	)		$	41,696			$	(954	)
December 31, 2013
Residential mortgage-backed securities		$	42,894			$	(1,329	)		$	—			$	—			$	42,894			$	(1,329	)
		$	42,894			$	(1,329	)		$	—			$	—			$	42,894			$	(1,329	)

 

Management does not believe that any of the unrealized losses as of March 31, 2014, (which are related to twenty-five 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, 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 March 31, 2014 and December 31, 2013 by segment and class:

 

		March 31, 2014				December 31, 2013
		(In Thousands)
Originated loans:
Residential one-to-four family		$	99,324			$	97,581
Commercial and multi-family			601,104				549,918
Construction			35,186				37,307
Commercial business(1)			55,841				52,659
Home equity(2)			28,164				28,660
Consumer			705				533
Sub-total			820,324				766,658
Acquired loans recorded at fair value:
Residential one-to-four family			96,946				100,612
Commercial and multi-family			120,066				126,123
Construction			2				200
Commercial business(1)			8,889				10,478
Home equity(2)			27,036				27,313
Consumer			830				919
Sub-total			253,769				265,645
Acquired loans with deteriorated credit:
Residential one-to-four family			1,619				2,141
Commercial and multi-family			1,874				2,081
Construction			—				—
Commercial business(1)			371				371
Home equity(2)			89				90
Consumer			—				—
Sub-total			3,953				4,683
Total Loans			1,078,046				1,036,986
Less:
Deferred loan fees, net			(2,545	)			(2,300	)
Allowance for loan losses			(14,646	)			(14,342	)
			(17,191	)			(16,642	)
Total Loans, net		$	1,060,855			$	1,020,344

 

__________

(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 specific reserve for impaired loans, a general allocated reserve for all remaining 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.

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

 

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 accretable 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 March 31, 2014, we had $2.5 million in loans classified as doubtful, $28.7 million in loans classified as substandard, $12.2 million in loans classified as special mention and no loans classified as loss. 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 March 31, 2014 and recorded investment in loans receivable at March 31, 2014. 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 loan losses:
Originated Loans:		$	1,729			$	7,419			$	700			$	1,295			$	363			$	3			$	83			$	11,592
Acquired loans recorded at fair value:			832				1,744				1				44				129				—				—				2,750
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Beginning Balance, December 31, 2013			2,561				9,163				701				1,339				492				3				83				14,342
Charge-offs:
Originated Loans:			—				52				—				126				27				—				—				205
Acquired loans recorded at fair value:			—				489				—				—				—				2				—				491
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				541				—				126				27				2				—				696
Recoveries:
Originated Loans:			—				—				—				—				—				—				—				—
Acquired loans recorded at fair value:			—				—				—				—				—				—				—				—
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				—				—				—				—				—				—				—
Provisions:
Originated Loans:			(102	)			1,154				(45	)			83				34				135				64				1,323
Acquired loans recorded at fair value:			(125	)			(476	)			(1	)			(44	)			(1	)			17				—				(630	)
Acquired loans with deteriorated credit:			69				81				—				154				3				—				—				307
Sub-total:			(158	)			759				(46	)			193				36				152				64				1,000
Totals:
Originated Loans:			1,627				8,521				655				1,252				370				138				147				12,710
Acquired loans recorded at fair value:			707				779				—				—				128				15				—				1,629
Acquired loans with deteriorated credit:			69				81				—				154				3				—				—				307
Ending Balance, March 31, 2014		$	2,403			$	9,381			$	655			$	1,406			$	501			$	153			$	147			$	14,646
Loans Receivable:
Ending Balance Originated Loans:			99,324				601,104				35,186				55,841				28,164				705				—				820,324
Ending Balance Acquired loans recorded at fair value:			96,946				120,066				2				8,889				27,036				830				—				253,769
Ending Balance Acquired loans with deteriorated credit:			1,619				1,874				—				371				89				—				—				3,953
Total Gross Loans:		$	197,889			$	723,044			$	35,188			$	65,101			$	55,289			$	1,535			$	—			$	1,078,046
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:			3,100				8,157				—				4,397				1,097				126				—				16,877
Ending Balance Acquired loans recorded at fair value:			9,902				14,230				—				—				1,499				2				—				25,633
Ending Balance Acquired loans with deteriorated credit:			1,619				1,612				—				371				89				—				—				3,691
Ending Balance Loans individually evaluated
for impairment:		$	14,621			$	23,999			$	—			$	4,768			$	2,685			$	128			$	—			$	46,201
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:			96,224				592,947				35,186				51,444				27,067				579				—				803,447
Ending Balance Acquired loans recorded at fair value:			87,044				105,836				2				8,889				25,537				828				—				228,136
Ending Balance Acquired loans with deteriorated credit:			—				262				—				—				—				—				—				262
Ending Balance Loans collectively evaluated
for impairment:		$	183,268			$	699,045			$	35,188			$	60,333			$	52,604			$	1,407			$	—			$	1,031,845

 

_________

(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, 2013 and recorded investment in loans receivable at December 31, 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 loan 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:			6				27				—				233				1				—				—				267
Acquired loans recorded at fair value:			23				89				132				141				301				—				—				686
Acquired loans with deteriorated credit:			11				7				—				—				—				—				—				18
Sub-total:			40				123				132				374				302				—				—				971
Recoveries:
Originated Loans:			42				—				3				—				6				—				—				51
Acquired loans recorded at fair value:			—				95				—				31				—				—				—				126
Acquired loans with deteriorated credit:			4				1				—				16				2				—				—				23
Sub-total:			46				96				3				47				8				—				—				200
Provisions:
Originated Loans:			550				358				(169	)			952				74				(38	)			51				1,778
Acquired loans recorded at fair value:			136				775				40				(90	)			239				(18	)			—				1,082
Acquired loans with deteriorated credit:			(98	)			6				—				(16	)			(2	)			—				—				(110	)
Sub-total:			588				1,139				(129	)			846				311				(56	)			51				2,750
Totals:
Originated Loans:			1,729				7,419				700				1,295				363				3				83				11,592
Acquired loans recorded at fair value:			832				1,744				1				44				129				—				—				2,750
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Ending Balance, December 31, 2013		$	2,561			$	9,163			$	701			$	1,339			$	492			$	3			$	83			$	14,342
Loans Receivables:
Ending Balance Originated Loans:			97,581				549,918				37,307				52,659				28,660				533				—				766,658
Ending Balance Acquired Loans:			100,612				126,123				200				10,478				27,313				919				—				265,645
Ending Balance Acquired loans with deteriorated credit:			2,141				2,081				—				371				90				—				—				4,683
Total Gross Loans:		$	200,334			$	678,122			$	37,507			$	63,508			$	56,063			$	1,452			$	—			$	1,036,986
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:			1,840				8,638				—				3,870				833				—				—				15,181
Ending Balance Acquired Loans:			9,930				13,434				—				—				1,460				5				—				24,829
Ending Balance Acquired loans with deteriorated credit:			2,141				1,815				—				371				90				—				—				4,417
Ending Balance Loans individually evaluated
for impairment:		$	13,911			$	23,887			$	—			$	4,241			$	2,383			$	5			$	—			$	44,427
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:			95,741				541,280				37,307				48,789				27,827				533				—				751,477
Ending Balance Acquired Loans:			90,682				112,689				200				10,478				25,853				914				—				240,816
Ending Balance Acquired loans with deteriorated credit:			—				266				—				—				—				—				—				266
Ending Balance Loans collectively evaluated
for impairment:		$	186,423			$	654,235			$	37,507			$	59,267			$	53,680			$	1,447			$	—			$	992,559

__________

(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 three months ended March 31, 2013. (In Thousands):

 

						Commercial  &								Commercial				Home
		Residential				Multi-family				Construction				Business (1)				Equity (2)				Consumer				Unallocated				Total
Allowance for loan 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, 2013			1,967				8,051				959				820				475				59				32				12,363
Charge-offs:
Originated Loans:			—				—				—				223				—				—				—				223
Acquired loans recorded at fair value:			—				—				—				—				—				—				—				—
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				—				—				223				—				—				—				223
Recoveries:
Originated Loans:			—				—				3				—				—				—				—				3
Acquired loans recorded at fair value:			—				—				—				1				—				—				—				1
Acquired loans with deteriorated credit:			—				—				—				—				—				—				—				—
Sub-total:			—				—				3				1				—				—				—				4
Provisions:
Originated Loans:			273				(131	)			(210	)			979				41				7				151				1,110
Acquired loans recorded at fair value:			(97	)			360				8				(202	)			27				(13	)			—				83
Acquired loans with deteriorated credit:			7				—				—				—				—				—				—				7
Sub-total:			183				229				(202	)			777				68				(6	)			151				1,200
Totals:
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
Ending Balance, March 31, 2013		$	2,150			$	8,280			$	760			$	1,375			$	543			$	53			$	183			$	13,344
Loans Receivable:
Ending Balance Originated Loans:			82,647				464,523				17,206				42,675				26,208				407				—				633,666
Ending Balance Acquired loans recorded at fair value:			116,706				146,861				734				8,118				32,681				980				—				306,080
Ending Balance Acquired loans with deteriorated credit:			2,161				2,798				—				326				96				—				—				5,381
Total Gross Loans:		$	201,514			$	614,182			$	17,940			$	51,119			$	58,985			$	1,387			$	—			$	945,127
Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:			1,373				9,449				—				3,144				389				—				—				14,355
Ending Balance Acquired loans recorded at fair value:			10,530				13,836				332				361				2,806				3				—				27,868
Ending Balance Acquired loans with deteriorated credit:			2,160				2,798				—				326				93				—				—				5,377
Ending Balance Loans individually evaluated
for impairment:		$	14,063			$	26,083			$	332			$	3,831			$	3,288			$	3			$	—			$	47,600
Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:			81,274				455,074				17,206				39,531				25,819				407				—				619,311
Ending Balance Acquired loans recorded at fair value:			106,176				133,025				402				7,757				29,875				977				—				278,212
Ending Balance Acquired loans with deteriorated credit:			1				—				—				—				—				—				—				1
Ending Balance Loans collectively evaluated
for impairment:		$	187,451			$	588,099			$	17,608			$	47,288			$	55,694			$	1,384			$	—			$	897,524

 

__________

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

 

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

The tables below sets forth the amounts and types of non-accrual loans in the Company’s loan portfolio as of March 31, 2014 and December 31, 2013. Loans are placed on non-accrual status when they become more than 90 days delinquent, or when the collection of principal and/or interest become doubtful. As of March 31, 2014 and December 31, 2013, total non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans which are maintained on non-accrual status for a minimum of six months until the borrower has demonstrated its ability to satisfy the terms of the restructured loan.

 

		As of March 31, 2014				As of December 31, 2013
		(In Thousands)				(In Thousands)
Non-Accruing Loans:
Originated loans:
Residential one-to-four family		$	144			$	144
Commercial and multi-family			7,008				5,158
Construction			—				521
Commercial business(1)			2,459				2,279
Home equity(2)			276				309
Consumer			—				—
Sub-total:		$	9,887			$	8,411
Acquired loans recorded at fair value:
Residential one-to-four family		$	4,434			$	4,685
Commercial and multi-family			9,626				6,575
Construction			—				—
Commercial business(1)			—				—
Home equity(2)			1,121				757
Consumer			—				—
Sub-total:		$	15,181			$	12,017
Acquired loans with deteriorated credit:
Residential one-to-four family		$	1,128			$	—
Commercial and multi-family			—				—
Construction			—				—
Commercial business(1)			—				—
Home equity(2)			89				137
Consumer			—				—
Sub-total:		$	1,217			$	137
Total		$	26,285			$	20,565

 

__________

(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 summarizes the average recorded investment and interest income recognized on impaired loans with no related allowance recorded by portfolio class for the three months ended March 31, 2014 and 2013. (In Thousands):

 

		Three Months Ended March 31,
		2014				2014				2013				2013
		Average				Interest				Average				Interest
		Recorded				Income				Recorded				Income
Originated loans		Investment				Recognized				Investment				Recognized
with no related allowance recorded:
Residential one-to-four family		$	745			$	14			$	452			$	8
Commercial and multi-family			3,844				13				4,782				47
Construction			—				—				—				—
Commercial business(1)			2,873				5				1,931				10
Home equity(2)			423				2				305				5
Consumer			—				—				5				—
Sub-total:		$	7,885			$	34			$	7,475			$	70
Acquired loans recorded at fair value
with no related allowance recorded:
Residential one-to-four family		$	4,474			$	15			$	3,371			$	47
Commercial and Multi-family			6,404				47				6,122				31
Construction			—				—				33				2
Commercial business(1)			—				—				114				1
Home equity(2)			905				1				1,526				8
Consumer			4				—				—				—
Sub-total:		$	11,787			$	63			$	11,166			$	89
Acquired loans with deteriorated
credit with no related allowance
recorded:
Residential one-to-four family		$	1,834			$	5			$	1,698			$	31
Commercial and Multi-family			1,714				29				2,588				22
Construction			—				—				—				—
Commercial business(1)			186				2				327				4
Home equity(2)			90				—				93				2
Consumer			—				—				—				—
Sub-total:		$	3,824			$	36			$	4,706			$	59
Total Impaired Loans
with no related allowance recorded:		$	23,496			$	133			$	23,347			$	218

 

 

__________

(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 summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three months ended March 31, 2014 and 2013. (In Thousands):

 

		Three Months Ended March 31,
		2014				2014				2013				2013
		Average				Interest				Average				Interest
		Recorded				Income				Recorded				Income
Originated loans		Investment				Recognized				Investment				Recognized
with an allowance recorded:
Residential one-to-four family		$	1,725			$	28			$	871			$	10
Commercial and Multi-family			4,554				—				5,108				43
Construction			—				—				—				—
Commercial business(1)			1,261				18				881				32
Home equity(2)			542				10				154				7
Consumer			63				—				—				—
Sub-total:		$	8,145			$	56			$	7,014			$	92
Acquired loans recorded at fair value
with an allowance recorded:
Residential one-to-four family		$	5,442			$	55			$	6,434			$	73
Commercial and Multi-family			7,429				16				8,249				103
Construction			—				—				130				—
Commercial business(1)			—				—				365				—
Home equity(2)			575				3				565				7
Consumer			—				—				1				—
Sub-total		$	13,446			$	74			$	15,744			$	183
Acquired loans with deteriorated credit
with an allowance recorded:
Residential one-to-four family		$	46			$	1			$	477			$	1
Commercial and Multi-family			—				1				—				—
Construction			—				—				—				—
Commercial business(1)			186				3				—				—
Home equity(2)			—				—				—				—
Consumer			—				—				—				—
Sub-total:		$	232			$	5			$	477			$	1
Total Impaired Loans
with an allowance recorded:		$	21,823			$	135			$	23,235			$	276

 

 

__________

(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 summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at

March 31, 2014 and December 31, 2013. (In Thousands):

 

 

		As of March 31, 2014												As of December 31, 2013
		Recorded				Unpaid Principal				Related				Recorded				Unpaid Principal				Related
Originated loans		Investment				Balance				Allowance				Investment				Balance				Allowance
with no related allowance recorded:
Residential one-to-four family		$	1,073			$	1,073			$	—			$	417			$	444			$	—
Commercial and multi-family			4,300				4,455				—				3,388				3,394				—
Construction			—				—				—				—				—				—
Commercial business(1)			2,979				2,989				—				2,766				2,776				—
Home equity(2)			444				447				—				402				402				—
Consumer			—				—				—				—				—				—
Sub-total:		$	8,796			$	8,964			$	—			$	6,973			$	7,016			$	—
Acquired loans recorded at fair
value with no related allowance
recorded:
Residential one-to-four family		$	4,485			$	4,533			$	—			$	4,463			$	4,489			$	—
Commercial and Multi-family			9,743				10,190				—				3,064				3,098				—
Construction			—				—				—				—				—				—
Commercial business(1)			—				—				—				—				—				—
Home equity(2)			975				994				—				835				922				—
Consumer			2				2				—				5				5				—
Sub-total:		$	15,205			$	15,719			$	—			$	8,367			$	8,514			$	—
Acquired loans with deteriorated
credit with no related allowance
recorded:
Residential one-to-four family		$	1,527			$	2,157			$	—			$	2,141			$	2,879			$	—
Commercial and Multi-family			1,612				1,981				—				1,815				2,312				—
Construction			—				—				—				—				—				—
Commercial business(1)			—				278				—				371				652				—
Home equity(2)			89				138				—				90				138				—
Consumer			—				—				—				—				—				—
Sub-total:		$	3,228			$	4,554			$	—			$	4,417			$	5,981			$	—
Total Impaired Loans
with no related allowance recorded:		$	27,229			$	29,237			$	—			$	19,757			$	21,511			$	—

 

__________

(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 summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at March 31, 2014 and December 31, 2013. (In Thousands):

 

		As of March 31, 2014												As of December 31, 2013
		Recorded				Unpaid Principal				Related				Recorded				Unpaid Principal				Related
Originated loans		Investment				Balance				Allowance				Investment				Balance				Allowance
with an allowance recorded:
Residential one-to-four family		$	2,027			$	2,027			$	166			$	1,423			$	1,423			$	159
Commercial and Multi-family			3,857				3,865				324				5,250				5,328				298
Construction			—				—				—				—				—				—
Commercial business(1)			1,418				1,418				413				1,104				1,104				498
Home equity(2)			653				653				3				431				431				6
Consumer			126				126				126				—				—				—
Sub-total:		$	8,081			$	8,089			$	1,032			$	8,208			$	8,286			$	961
Acquired loans recorded at fair
value with an allowance
recorded:
Residential one-to-four family		$	5,417			$	5,437			$	263			$	5,467			$	5,477			$	331
Commercial and Multi-family			4,487				4,519				366				10,370				10,418				1,276
Construction			—				—				—				—				—				—
Commercial business(1)			—				—				—				—				—				—
Home equity(2)			524				524				38				625				625				64
Consumer			—				—				—				—				—				—
Sub-total		$	10,428			$	10,480			$	667			$	16,462			$	16,520			$	1,671
Acquired loans with deteriorated
credit with an allowance
recorded:
Residential one-to-four family		$	92			$	107			$	14			$	—			$	—			$	—
Commercial and Multi-family			—				120				44				—				—				—
Construction			—				—				—				—				—				—
Commercial business(1)			371				371				137				—				—				—
Home equity(2)			—				—				—				—				—				—
Consumer			—				—				—				—				—				—
Sub-total:		$	463			$	598			$	195			$	—			$	—			$	—
Total Impaired Loans
with an allowance recorded:		$	18,972			$	19,167			$	1,894			$	24,670			$	24,806			$	2,632
Total Impaired Loans
with no related allowance recorded:		$	27,229			$	29,237			$	—			$	19,757			$	21,511			$	—
Total Impaired Loans:		$	46,201			$	48,404			$	1,894			$	44,427			$	46,317			$	2,632

 

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

The following table presents the total troubled debt restructured loans at March 31, 2014, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

 

		Accrual								Non-accrual								Total
March 31, 2014		# of Loans				Amount				# of Loans				Amount				# of Loans				Amount
			(Actual)				(In Thousands)				(Actual)				(In Thousands)				(Actual)				(In Thousands)
Originated loans:
Residential one-to-four family			7			$	1,981				1			$	27				8			$	2,008
Commercial and multi-family			5				3,467				8				3,982				13				7,449
Construction			—				—				—				—				—				—
Commercial business(1)			3				1,583				—				—				3				1,583
Home equity(2)			3				570				—				—				3				570
Consumer			—				—				—				—				—				—
Sub-total:			18			$	7,601				9			$	4,009				27			$	11,610
Acquired loans recorded at fair value:
Residential one-to-four family			27			$	5,714				4			$	1,719				31			$	7,433
Commercial and Multi-family			19				8,647				1				730				20				9,377
Construction			—				—				—				—				—				—
Commercial business(1)			4				649				—				—				4				649
Home equity(2)			4				465				1				138				5				603
Consumer			—				—				—				—				—				—
Sub-total:			54			$	15,475				6			$	2,587				60			$	18,062
Acquired loans with deteriorated credit:
Residential one-to-four family			2			$	1,425				4			$	838				6			$	2,263
Commercial and Multi-family			—				—				5				2,425				5				2,425
Construction			—				—				—				—				—				—
Commercial business(1)			—				—				4				649				4				649
Home equity(2)			1				138				—				—				1				138
Consumer			—				—				—				—				—				—
Sub-total:			3			$	1,563				13			$	3,912				16			$	5,475
Total			75			$	24,639				28			$	10,508				103			$	35,147

 

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

The following table presents the total troubled debt restructured loans at December 31, 2013. (Dollars In Thousands):

 

		Accrual								Non-accrual								Total
December 31, 2013		# of Loans				Amount				# of Loans				Amount				# of Loans				Amount
		(Actual)				(In Thousands)				(Actual)				(In Thousands)				(Actual)				(In Thousands)
Originated loans:
Residential one-to-four family			7			$	1,988				1			$	27				8			$	2,015
Commercial and multi-family			4				3,052				8				4,139				12				7,191
Construction			—				—				—				—				—				—
Commercial business(1)			3				1,591				—				—				3				1,591
Home equity(2)			3				571				—				—				3				571
Consumer			—				—				—				—				—				—
Sub-total:			17			$	7,202				9			$	4,166				26			$	11,368
Acquired loans recorded at fair value:
Residential one-to-four family			25			$	5,673				8			$	2,564				33			$	8,237
Commercial and Multi-family			15				6,545				9				3,606				24				10,151
Construction			—				—				—				—				—				—
Commercial business(1)			—				—				—				—				—				—
Home equity(2)			6				704				—				—				6				704
Consumer			—				—				—				—				—				—
Sub-total:			46			$	12,922