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BCBP BCB Bancorp Inc (NJ)

Filed: 5 May 21, 2:01pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

(Mark One)

x

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

For the quarterly period ended March 31, 2021

Or

 

o

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

For the transition period from ___________ to ___________

Commission File Number: 0-50275

BCB Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

New Jersey

 

26-0065262

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

I.D. No.)

 

 

104-110 Avenue C Bayonne, New Jersey

 

07002

(Address of principal executive offices)

 

(Zip Code)

(201) 823-0700

(Registrant’s telephone number, including area code)

Not Applicable

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

Securities registered pursuant to section 12(b) of the Securities and Exchange Act of 1934:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

BCBP

The Nasdaq Stock Market, LLC

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    o   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    x   Yes    o   No

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

Large Accelerated Filer

o

Accelerated Filer

x

Non-Accelerated Filer

o

Smaller Reporting Company

x

Emerging Growth Company

o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    o  Yes    T  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 3, 2021, BCB Bancorp, Inc., had 17,121,319 shares of common stock, no par value, outstanding.



 

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

 

 


PART I. CONSOLIDATED FINANCIAL INFORMATION

ITEM I. CONSOLIDATED 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,

2021

2020

ASSETS

Cash and amounts due from depository institutions

$

24,796

$

23,201

Interest-earning deposits

272,142

238,028

Total cash and cash equivalents

296,938

261,229

Interest-earning time deposits

735

735 

Debt securities available for sale

93,582

99,756

Equity investments

18,278

17,717

Loans held for sale

1,147

3,530

Loans receivable, net of allowance for loan losses

of $35,477 and $33,639 respectively

2,296,434

2,295,021

Federal Home Loan Bank of New York stock, at cost

8,920

11,324

Premises and equipment, net

14,796

15,272

Accrued interest receivable

12,056

12,924

Other real estate owned

414

414

Deferred income taxes

13,239

12,574

Goodwill and other intangibles

5,472

5,488

Operating lease right-of-use assets

14,328

14,988

Bank-owned life insurance ("BOLI")

70,234

61,033

Other assets

5,887

9,011

Total Assets

$

2,852,460

$

2,821,016

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Non-interest -bearing deposits

$

454,061

$

402,100

Interest bearing deposits

1,950,074

1,915,950

Total deposits

2,404,135

2,318,050

FHLB advances

133,298

191,161

Subordinated debentures

37,101

37,042

Operating lease liability

14,589

15,224

Other liabilities

9,883

10,328

Total Liabilities

2,599,006

2,571,805

STOCKHOLDERS' EQUITY

Preferred stock: $0.01 par value, 10,000,000 shares authorized; issued and outstanding 2,596 shares of Series D 4.5%, Series G 6%, and Series H 3.5%, (liquidation value $10,000 per share) noncumulative perpetual preferred stock at March 31, 2021 and December 31, 2020

-

-

Additional paid-in capital preferred stock

25,723

25,723

Common stock: 0 par value; 40,000,000 shares authorized; issued 19,620,630 and 19,574,858 at March 31, 2021 and December 31, 2020, respectively, outstanding 17,121,319 shares and 17,107,640 shares, at March 31, 2021 and December 31, 2020, respectively

-

-

Additional paid-in capital common stock

192,633

192,276

Retained earnings

62,777

58,335

Accumulated other comprehensive loss

(349)

(205)

Treasury stock, at cost, 2,499,311 and 2,467,218 shares at March 31, 2021 and December 31, 2020, respectively

(27,330)

(26,918)

Total Stockholders' Equity

253,454

249,211

Total Liabilities and Stockholders' Equity

$

2,852,460

$

2,821,016

See accompanying notes to unaudited consolidated financial statements.


 

1


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, Except for Per Share Amounts, Unaudited)

Three Months Ended March 31,

2021

2020

Interest and dividend income:

Loans, including fees

$

26,863 

$

26,814 

Mortgage-backed securities

206 

563 

Other investment securities

784 

FHLB stock and other interest earning assets

222 

2,034 

Total interest income

28,075 

29,419 

Interest expense:

Deposits:

Demand

1,198 

2,208 

Savings and club

118 

105 

Certificates of deposit

1,992 

6,432 

3,308 

8,745 

Borrowings

1,205 

1,896 

Total interest expense

4,513 

10,641 

Net interest income

23,562 

18,778 

Provision for loan losses

1,865 

1,500 

Net interest income after provision for loan losses

21,697 

17,278 

Non-interest income:

Fees and service charges

1,111 

726 

Bank-owned Life Insurance ("BOLI") income

701 

-

Gain on sales of loans

274 

61 

Realized and unrealized loss on equity investments

(196)

(440)

Other

60 

336 

Total non-interest income

1,950 

683 

Non-interest expense:

Salaries and employee benefits

6,545 

7,389 

Occupancy and equipment

2,953 

2,824 

Data processing and service fees

1,008 

938 

Professional fees

412 

470 

Director fees

247 

358 

Regulatory assessments

376 

321 

Advertising and promotional

12 

61 

Other real estate owned, net

26 

Loss from extinguishment of debt

540 

-

Other

1,486 

1,977 

Total non-interest expense

13,583 

14,364 

Income before income tax provision

10,064 

3,597 

Income tax provision

2,947 

1,076 

Net Income

$

7,117 

$

2,521 

Preferred stock dividends

283 

342 

Net Income available to common stockholders

$

6,834 

$

2,179 

Net Income per common share-basic and diluted

Basic

$

0.40 

$

0.12 

Diluted

$

0.40 

$

0.12 

Weighted average number of common shares outstanding

Basic

17,115 

17,502 

Diluted

17,232

17,551 

See accompanying notes to unaudited consolidated financial statements.

 

2


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands, Unaudited)

Three Months Ended March 31,

2021

2020

Net Income

$

7,117

$

2,521 

Other comprehensive (loss) income, net of tax:

Unrealized (losses) gains on available-for-sale debt securities:

Unrealized holding (losses) gains arising during the period

(192)

3,309 

Tax Effect

48

(820)

Other comprehensive (loss) income

(144)

2,489 

Comprehensive income

$

6,973

$

5,010 

See accompanying notes to unaudited consolidated financial statements.

 

 

3


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
Income
(Loss)

Total

Balance at January 1, 2021

$

-

$

-

$

217,999 

$

58,335 

$

(26,918)

$

(205)

$

249,211 

Net income

-

-

-

7,117 

-

-

7,117 

Other comprehensive loss

-

-

-

-

-

(144)

(144)

Stock-based compensation expense

-

-

135 

-

-

-

135 

Treasury stock purchases (32,093 shares)

-

-

-

-

(412)

-

(412)

Dividends payable on Series D 4.5%, Series G 6%, and Series H 3.5% noncumulative perpetual preferred stock

-

-

-

(283)

-

-

(283)

Cash dividends on common stock ($0.14 per share declared)

-

-

-

(2,281)

-

-

(2,281)

Dividend reinvestment plan

-

-

111 

(111)

-

-

-

Stock purchase plan

-

-

111 

-

-

-

111 

Balance at March 31, 2021

$

-

$

-

$

218,356 

$

62,777 

$

(27,330)

$

(349)

$

253,454 

Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total

Balance at January 1, 2020

$

-

$

-

$

215,310 

$

48,429 

$

(22,048)

$

(2,218)

$

239,473 

Net income

-

-

-

2,521 

-

-

2,521 

Other comprehensive income

-

-

-

-

-

2,489 

2,489 

Cost for Issuance of common stock

-

-

(126)

-

-

-

(126)

Redemption of Series D Preferred Stock

-

-

(140)

-

-

-

(140)

Exercise Stock Option Expense (500 shares)

-

-

-

-

-

Stock-based compensation expense

-

-

279 

-

-

-

279 

Treasury stock purchases (127,058 shares)

-

-

-

-

(1,287)

-

(1,287)

Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, Series G 6%, and Series H 3.5% noncumulative perpetual preferred stock

-

-

-

(342)

-

-

(342)

Cash dividends on common stock ($0.14 per share declared)

-

-

-

(2,336)

-

-

(2,336)

Dividend reinvestment plan

-

-

104 

(104)

-

-

-

Stock purchase plan

-

-

102 

-

-

-

102 

Balance at March 31, 2020

$

-

$

-

$

215,534 

$

48,168 

$

(23,335)

$

271 

$

240,638 

See accompanying notes to unaudited consolidated financial statements.

 

4


BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands, Unaudited)

Three Months Ended March 31,

2021

2020

Cash Flows from Operating Activities :

Net Income

$

7,117 

$

2,521 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of premises and equipment

634 

734 

Amortization and accretion, net

(191)

(579)

Provision for loan losses

1,865 

1,500 

Deferred income tax benefit

(617)

(293)

Loans originated for sale

(10,074)

(3,868)

Proceeds from sales of loans

12,731 

4,008 

Gain on sales of loans originated for sale

(274)

(61)

Realized and unrealized loss on equity investments

196 

440 

Stock-based compensation expense

135 

279 

BOLI income

(701)

-

Decrease (increase) in interest receivable

868 

(618)

Decrease (increase) in other assets

3,124 

(186)

Decrease in accrued interest payable

(656)

(516)

Increase in other liabilities

211 

2,304 

Net Cash Provided by Operating Activities

14,368 

5,665 

Cash flows from investing activities:

Proceeds from repayments, calls, and maturities on securities available for sale

5,843 

7,413 

Purchases of securities

(757)

(7,502)

Proceeds from bulk sale of impaired loans

180 

-

Net (increase) decrease in loans receivable

(2,891)

13,594 

Purchases of BOLI

(8,500)

-

Additions to premises and equipment

(158)

(106)

Redemption (Purchase) of Federal Home Loan Bank of New York stock

2,404 

(765)

Net Cash (Used In) Provided by Investing Activities

(3,879)

12,634 

Cash flows from financing activities:

Net increase in deposits

86,085 

13,658 

Proceeds from Federal Home Loan Bank of New York advances

10,000 

27,000 

Repayments of Federal Home Loan Bank of New York advances

(68,000)

(10,000)

Purchases of treasury stock

(412)

(1,287)

Cash dividends paid on common stock

(2,281)

(2,336)

Cash dividends paid on preferred stock

(283)

(342)

Net proceeds (costs) from issuance of common stock

111 

(24)

Net payment on redemption of preferred stock

-

(140)

Exercise of stock options

-

Net Cash Provided by Financing Activities

25,220 

26,534 

Net Increase in Cash and Cash Equivalents

35,709 

44,833 

Cash and Cash Equivalents-Beginning

261,229 

550,353 

Cash and Cash Equivalents-Ending

$

296,938 

$

595,186 

Supplementary Cash Flow Information:

Cash paid during the year for:

Income taxes

$

375 

$

279 

Interest

5,169 

11,157 

See accompanying notes to unaudited consolidated financial statements


 

5


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 Corporation, Special Asset REO I, LLC., and Special Asset REO II, LLC. 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 consolidated 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, 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, 2020, 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, the Company evaluated the events and transactions that occurred between December 31, 2020 and the date these consolidated financial statements were issued.

Risks and Uncertainties - We are subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict.

The severity of the impact of the ongoing COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and any government or governmental responses thereto, including legislative or regulatory changes as well as the distribution and effectiveness of COVID-19 vaccines, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

 

Note 2 - Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses ASU 2016-13, and related guidance, requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the consolidated financial statements. The amendments are effective for the Company in 2023. The Company has begun evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations. The effect of this change cannot be ascertained at this point, and will depend upon factors including asset components, asset quality and market conditions at the adoption date. The Company has created a Current Expected Credit Loss (“CECL”) task group comprised of members of its finance, credit administration, lending, internal audit, loan operations, compliance, and information systems units. The CECL task group has become familiar with the provisions of ASU 2016-13 and is in the process of implementing the new guidance, which includes, but is not limited to: (1) identifying segments and sub-segments within the loan portfolio that have similar risk characteristics; (2) determining the appropriate methodology for each segment; (3) implementing changes that are necessary to its core operating system and interfaces to be able to capture appropriate data requirements; and (4) evaluating qualitative and economic factors to develop appropriate forecasts for integration into the model. The Company is currently evaluating the effect this guidance may have on its operating results and/or financial position, including assessing any potential impact on its capital.

 

Note 3 – Reclassification

Certain amounts as of December 31, 2020 and for the three-month period March 31, 2020 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 4 – Equity Incentive Plans

Equity Incentive Plans

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 the Company pursuant to grants of stock options. Employees and directors of the Company and the 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.

The Company, under the plan approved by its shareholders on April 26, 2018 (“2018 Equity Incentive Plan”), authorized the issuance of up to 1,000,000 shares of common stock of the Company pursuant to grants of stock options and restricted stock units. Employees and directors of the Company and the Bank are eligible to participate in the 2018 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 February 10, 2021, grants of 66,000 options, in aggregate, were declared for members of the Board of Directors of the Bank and the Company which vest over a 5-year period, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on February 10, 2021. On February 10, 2021, awards of 26,400 shares of restricted stock, in aggregate, were declared for members of the Board of Directors of the Bank and the Company, which vest over a 4-year period, commencing on the anniversary of the award date. On February 19, 2021, an award of 300 shares of restricted stock was declared for an officer of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.


 

6


Note 4 – Equity Incentive Plans (Continued)

The following table presents a summary of the status of the Company’s restricted shares as of March 31, 2021 and 2020.

Number of Shares Awarded

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2021

22,304

$

12.46

Granted

26,700

12.89

Vested

-

-

Forfeited

-

-

Non-vested at March 31, 2021

49,004

$

12.70

Number of Shares Awarded

Weighted Average Grant Date Fair Value

Non-vested at January 1, 2020

81,278

$

11.96

Granted

-

-

Vested

-

-

Forfeited

-

-

Non-vested at March 31, 2020

81,278

$

11.96

Expected future expenses relating to the non-vested restricted shares outstanding as of March 31, 2021 was approximately $361,000 over a weighted average period of 3.28 years.

The following tables present a summary of the status of the Company’s outstanding stock option awards as of March 31, 2021 and 2020.

  

Number of Option Shares

Range of Exercise Prices

Weighted Average Exercise Price

Outstanding at January 1, 2021

1,192,348

$

8.93 - 13.32

$

11.45

Options granted

66,000

12.93

12.93

Options exercised

(7,000)

9.39

9.39

Options forfeited

-

-

-

Options expired

-

-

-

Outstanding at March 31, 2021

1,251,348

$

8.93 - 13.32

$

11.54

As of March 31, 2021, stock options which were granted and were exercisable totaled 824,536 stock options.

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 426,812 shares of unvested options outstanding as of March 31, 2021 was $713,000 over a weighted average period of 4.99 years.

  

Number of Option Shares

Range of Exercise Prices

Weighted Average Exercise Price

Outstanding at January 1, 2020

1,200,975

$

8.93-13.32

$

11.45

Options granted

-

-

-

Options exercised

(500)

10.55

10.55

Options forfeited

-

-

-

Options expired

-

-

-

Outstanding at March 31, 2020

1,200,475

$

8.93-13.32

$

11.45

As of March 31, 2020, stock options which were granted and were exercisable totaled 515,800 stock options.

 


 

7


Note 5 – 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, 2021 and 2020, 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, 2021 and 2020, the weighted average number of outstanding options considered to be anti-dilutive were 0 and 687, 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,

2021

2020

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

$

6,834

$

2,179

Basic earnings per share:

Income available to common stockholders

$

6,834

17,115

$

0.40

$

2,179

17,502

$

0.12

Effect of dilutive securities:

Stock options

-

117

-

49

Diluted earnings per share:

Income available to common stockholders

$

6,834

17,232

$

0.40

$

2,179

17,551

$

0.12

 

Note 6 - Securities

Equity Securities

Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interest in entities at fixed or determinable prices.

The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three-months ended March 31, 2021 and 2020:

For the three months ended March 31,

(In Thousands)

2021

2020

Net losses recognized during the period on equity securities

$

(196)

$

(440)

Less: Net gains recognized during the period on equity securities sold during the period

-

-

Unrealized losses recognized during the reporting period on equity securities still held at the reporting date

$

(196)

$

(440)

Debt Securities Available for Sale

The following tables present by maturity the amortized cost, gross unrealized gains and losses on, and fair value of, securities available for sale as of March 31, 2021 and December 31, 2020:

March 31, 2021

  

Gross

  

Gross

  

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

(In Thousands)

Residential Mortgage-backed securities:

  

  

  

More than one to five years

$

3,157

$

2

$

72

$

3,087

More than five to ten years

4,429

  

139

  

22

  

4,546

More than ten years

34,995

622

398

35,219

42,581

763

492

42,852

Corporate Debt securities:

More than five to ten years

32,280

2,077

25

34,332

Municipal obligations:

Less than one year

12,048

-

-

12,048

More than ten years

4,183

167

-

  

4,350

16,231

167

-

16,398

Total securities

$

91,092

  

$

3,007

  

$

517

  

$

93,582


 

8


December 31, 2020

  

Gross

  

Gross

  

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

(In Thousands)

Residential Mortgage-backed securities:

  

  

  

More than one to five years

$

3,208 

$

10 

$

67 

$

3,151 

More than five to ten years

4,799 

163 

-

4,962 

More than ten years

40,531 

741 

60 

41,212 

Sub-total:

48,538 

914 

127 

49,325 

Corporate Debt securities:

More than five to ten years

32,279 

1,719 

13 

33,985 

Sub-total:

32,279 

1,719 

13 

33,985 

Municipal obligations:

Due within one year

12,048 

-

-

12,048 

Due after ten years

4,209 

189 

-

4,398 

Sub-total:

16,257 

189 

-

16,446 

Total Debt Securities Available

$

97,074 

$

2,822 

$

140 

$

99,756 

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

12 Months or Less

  

More than 12 Months

  

Total

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

Value

Losses

Value

Losses

Value

Losses

(In Thousands)

March 31, 2021

  

  

  

  

  

Residential mortgage-backed securities

$

12,221 

  

$

420

  

$

1,263 

  

$

72 

  

$

13,484 

  

$

492

Corporate Debt securities

975 

25 

-

-

975 

25 

$

13,196 

  

$

445

  

$

1,263 

  

$

72 

  

$

14,459 

  

$

517

December 31, 2020

  

  

  

  

  

Residential mortgage-backed securities

$

6,126 

  

$

60 

  

$

1,278 

  

$

67 

  

$

7,404 

  

$

127 

Corporate Debt Securities

5,487 

13 

-

-

5,487 

13 

$

11,613 

  

$

73 

  

$

1,278 

  

$

67 

  

$

12,891 

  

$

140 

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Company intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery. At March 31, 2021 and December 31, 2020, management performed an assessment for possible OTTI of the Company’s residential mortgage-backed securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Company’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of these securities, at March 31, 2021 and December 31, 2020, to be temporary.

Note 7 - Loans Receivable and Allowance for Loan Losses

The following tables present the recorded investment in loans receivable as of March 31, 2021 and December 31, 2020 by segment and class:

March 31, 2021

December 31, 2020

(In Thousands)

Residential one-to-four family

$

234,375

$

244,369

Commercial and multi-family

1,700,113

1,690,836

Construction

167,224

155,967

Commercial business(1)

177,340

184,357

Home equity(2)

53,360

53,667

Consumer

851

822

2,333,263

2,330,018

Less:

Deferred loan fees, net

(1,352)

(1,358)

Allowance for loan losses

(35,477)

(33,639)

Sub-total

(36,829)

(34,997)

Total Loans, net

$

2,296,434

$

2,295,021

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

-


 

9


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

Allowance for Loan Losses

The allowance for loan loss is evaluated regularly by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. 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 performing 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 qualitative factors that include:

Lending Policies and Procedures

Personnel responsible for the particular portfolio - relative to experience and ability of staff

Trend for past due, criticized and classified loans

Relevant economic factors

Quality of the loan review system

Value of collateral for collateral dependent loans

The effect of any concentrations of credit and the changes in the level of such concentrations

Other external factors

The methodology includes the segregation of the loan portfolio into two divisions. Loans that are performing and loans that are impaired. Loans which are performing are evaluated by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience with an adjustment for qualitative factors referred to above. Impaired loans are loans which are more than 90 days delinquent, troubled debt restructured, or adversely classified. These loans are individually evaluated for loan loss either by current appraisal, or net present value. Management reviews the overall estimate for feasibility and establishes the loan loss provision accordingly. Loan categories for specific business types were stressed due to rising delinquencies within those market sectors (hospitality, restaurants, office space, and commercial condos) to determine the potential for collateral shortfalls.

The loan portfolio is segmented into the following loan segments, where the risk level for each class is analyzed when determining the allowance for loan losses:

Residential one-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential real estate loans decrease the interest rate risk to the Bank 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 properties may be adversely affected by higher interest rates. Repayment risk may be affected by a number of factors including, but not necessarily limited to, job loss, divorce, illness and personal bankruptcy of the borrower.

Commercial and multi-family real estate lending entails 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 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 estimated cost (including interest) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to a builder are not necessarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

Commercial business lending, including lines of credit, is generally considered higher risk due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on the business. Commercial business loans are primarily secured by inventories and other business assets. In many 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 collateral value 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. In many cases, the Bank’s position in these loans is as a junior lien holder to another institution’s superior lien. 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 Bank 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 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 affected by job loss, divorce, illness, and personal bankruptcy. In many cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

An unallocated component is maintained to cover uncertainties that could affect management’s estimates of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.


 

10


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, 2021, and the related portion of the allowances for loan losses that is allocated to each loan class, as of March 31, 2021 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, January 1, 2021

$

3,293 

$

21,772 

$

1,977 

$

6,306 

$

286 

$

-

$

$

33,639 

Charge-offs:

(57)

-

-

-

-

-

-

(57)

Recovery:

27 

-

-

-

-

-

30 

Provisions:

(426)

1,347 

25 

275 

-

640 

1,865 

Ending Balance, March 31, 2021:

2,837 

23,119 

2,002 

6,581 

293 

-

645 

35,477 

Ending Balance attributable to loans:

Individually evaluated for impairment

302 

381 

-

4,601 

23 

-

-

5,307 

Collectively evaluated for impairment

2,535 

22,738 

2,002 

1,980 

270 

-

645 

30,170 

Ending Balance, March 31, 2021

2,837 

23,119 

2,002 

6,581 

293 

-

645 

35,477 

Loans Receivables:

Individually evaluated for impairment

5,509 

44,086 

2,787 

13,269 

1,693 

-

-

67,344 

Collectively evaluated for impairment

228,866 

1,656,027 

164,437 

164,071 

51,667 

851 

-

2,265,919 

Total Gross Loans:

$

234,375 

$

1,700,113 

$

167,224 

$

177,340 

$

53,360 

$

851 

$

-

$

2,333,263 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended March 31, 2020 (in thousands):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for loan losses:

Beginning Balance, January 1, 2020

$

2,722 

$

15,372 

$

1,244 

$

3,790 

$

333 

-

$

-

$

273 

$

23,734 

Charge-offs:

(4)

-

-

-

-

-

-

(4)

Recovery:

-

-

-

302 

-

-

304 

Provisions:

413 

(423)

(139)

(135)

290 

1,489 

1,500 

Ending Balance March 31, 2020

3,131 

14,949 

1,105 

3,957 

625 

1,762 

25,534 

Ending Balance attributable to loans:

Individually evaluated for impairment

354 

332 

-

2,524 

22 

-

-

3,232 

Collectively evaluated for impairment

2,777 

14,617 

1,105 

1,433 

603 

1,762 

22,302 

Ending Balance March 31, 2020

3,131 

14,949 

1,105 

3,957 

625 

1,762 

25,534 

Loans Receivables:

Individually evaluated for impairment

8,335 

9,895 

-

3,466 

1,326 

-

-

23,022 

Collectively evaluated for impairment

259,802 

1,567,921 

101,692 

173,680 

63,531 

1,029 

-

2,167,655 

Total Gross Loans:

$

268,137 

$

1,577,816 

$

101,692 

$

177,146 

$

64,857 

$

1,029 

$

-

$

2,190,677 

_____________________________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


 

11


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

The following table sets forth the amount recorded in loans receivable at December 31, 2020. 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):

Residential

Commercial & Multi-family

Construction

Commercial Business (1)

Home Equity (2)

Consumer

Unallocated

Total

Allowance for credit losses:

Ending Balance attributable to loans:

Individually evaluated for impairment

$

416 

$

378 

$

-

$

3,640 

$

27 

$

-

$

-

$

4,461 

Collectively evaluated for impairment

2,877 

21,394 

1,977 

2,666 

259 

-

29,178 

Ending Balance, December 31, 2020

$

3,293 

$

21,772 

$

1,977 

$

6,306 

$

286 

$

-

$

$

33,639 

Loans Receivables:

-

Individually evaluated for impairment

$

7,281 

$

61,854 

$

-

$

12,492 

$

1,574 

$

-

$

-

$

83,201 

Collectively evaluated for impairment

237,088 

1,628,982 

155,967 

171,865 

52,093 

822 

-

2,246,817 

Total Gross Loans:

$

244,369 

$

1,690,836 

$

155,967 

$

184,357 

$

53,667 

$

822 

$

-

$

2,330,018 

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


 

12


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, 2021 and 2020 (in thousands):

Three Months Ended March 31,

2021

2021

2020

2020

Average

Interest

Average

Interest

Recorded

Income

Recorded

Income

Investment

Recognized

Investment

Recognized

Loans with no related allowance recorded:

Residential one-to-four family

$

3,453 

$

34 

$

4,656 

$

52 

Commercial and Multi-family

44,958 

282 

10,322 

99 

Construction

1,394 

36 

-

-

Commercial business(1)

5,171 

13 

2,013 

43 

Home equity(2)

1,196 

10 

848 

Total Impaired Loans with no allowance recorded:

$

56,172

$

375

$

17,839

$

203

Loans with an allowance recorded:

Residential one-to-four family

$

2,943 

$

32 

$

3,741 

$

41 

Commercial and Multi-family

8,013 

129 

1,241 

20 

Commercial business(1)

7,710 

93 

1,690 

Home equity(2)

438 

460 

Consumer

-

-

-

-

Total Impaired Loans with an allowance recorded:

$

19,104

$

256

$

7,132

$

68

Total Impaired Loans:

$

75,276

$

631

$

24,971

$

271

__________

(1)Includes business lines of credit.

(2)Includes home equity lines of credit.

(3)Does not include accretable yield on loans acquired with deteriorated credit.

The following table summarizes the recorded investment by portfolio class at March 31, 2021 and December 31, 2020. (in thousands):

As of March 31, 2021

As of December 31, 2020

Recorded

Unpaid Principal

Related

Recorded

Unpaid Principal

Related

Investment

Balance

Allowance

Investment

Balance

Allowance

Loans with no related allowance recorded:

Residential one-to-four family

$

2,821 

$

3,210 

$

-

$

4,084 

$

4,660 

$

-

Commercial and multi-family

32,357 

33,761 

-

57,558 

58,739 

-

Construction

2,787 

2,787 

-

-

-

-

Commercial business(1)

4,498 

12,573 

-

5,844 

17,687 

-

Home equity(2)

1,268 

1,270 

-

1,124 

1,126 

-

Total Impaired Loans with no related allowance recorded:

$

43,731 

$

53,601 

$

-

$

68,610 

$

82,212 

$

-

Loans with an allowance recorded:

Residential one-to-four family

$

2,688 

$

2,723 

$

302 

$

3,197 

$

3,252 

$

416 

Commercial and Multi-family

11,729 

15,584 

381 

4,296 

4,501 

378 

Commercial business(1)

8,771 

20,662 

4,601 

6,648 

12,511 

3,640 

Home equity(2)

425 

425 

23 

450 

458 

27 

Total Impaired Loans with an allowance recorded:

$

23,613 

$

39,394 

$

5,307 

$

14,591 

$

20,722 

$

4,461 

Total Impaired Loans:

$

67,344 

$

92,995 

$

5,307 

$

83,201 

$

102,934 

$

4,461 

__________

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


 

13


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

A troubled debt restructured loan (“TDR”) is a loan that has been modified whereby the Company has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Company to maximize the ultimate recovery of a loan. A TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a concession that would otherwise not be granted to the borrower. Pursuant to the CARES Act, a loan that was current at December 31, 2019 and modified due to the COVID-19 pandemic is not considered a TDR. The types of concessions granted generally include, but are not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. All TDRs were considered impaired and therefore were individually evaluated for impairment in the calculation of the allowance for loan losses. Prior to their classification as TDRs, certain of these loans had been collectively evaluated for impairment in the calculation of the allowance for loan losses.

At March 31,2021

At December 31, 2020

(In thousands)

Recorded investment in TDRs:

Accrual status

$

13,474

$

13,760

Non-accrual status

1,074

2,303

Total recorded investment in TDRs

$

14,548

$

16,063

The Company originated 1 TDR loan totaling $96,532 and 1 TDR loan totaling $216,102 for the three months ended March 31, 2021 and March 31, 2020, respectively.

For the three months ended March 31, 2021 and March 31, 2020, TDRs, for which there was a payment default within twelve months of restructuring, totaled $127,449 for 1 loan and $0, respectively.

The following table sets forth the delinquency status of total loans receivable as of March 31, 2021:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Residential one-to-four family

$

936

$

-

$

227

$

1,163

$

233,212

$

234,375

$

-

Commercial and multi-family

13,148

4,410

2,447

20,005

1,680,108

1,700,113

-

Construction

2,787

-

-

2,787

164,437

167,224

-

Commercial business(1)

457

1,153

4,796

6,406

170,934

177,340

-

Home equity(2)

235

39

427

701

52,659

53,360

-

Consumer

-

-

-

-

851

851

-

Total

$

17,563

$

5,602

$

7,897

$

31,062

$

2,302,201

$

2,333,263

$

0

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The following table sets forth the delinquency status of total loans receivable at December 31, 2020:

Loans Receivable

30-59 Days

60-90 Days

Greater Than

Total Past

Total Loans

>90 Days

Past Due

Past Due

90 Days

Due

Current

Receivable

and Accruing

(In Thousands)

Originated loans:

Residential one-to-four family

$

507

$

266

$

664

$

1,437

$

242,932

$

244,369

$

125

Commercial and multi-family

15,910

2,996

1,334

20,240

1,670,596

1,690,836

-

Construction

-

-

-

-

155,967

155,967

-

Commercial business(1)

3,889

904

3,354

8,147

176,210

184,357

133

Home equity(2)

541

12

502

1,055

52,612

53,667

75

Consumer

-

-

-

-

822

822

-

Total

$

20,847

$

4,178

$

5,854

$

30,879

$

2,299,139

$

2,330,018

$

333

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

 

14


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

The table below sets forth the amounts and types of non-accrual loans in the Bank’s loan portfolio at March 31, 2021 and December 31, 2020, respectively. 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, 2021, and December 31, 2020, non-accrual loans differed from the amount of total loans past due greater than 90 days due to 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. There were $7.3 million at March 31, 2021 and $11.9 million at December 31, 2020 in nonaccrual loans that were less than ninety days past due. Nonaccrual loans do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $884,000 at March 31, 2021 and $1.1 million at December 31, 2020.

As of March 31, 2021

As of December 31, 2020

(In Thousands)

(In Thousands)

Non-Accruing Loans:

Originated loans:

Residential one-to-four family

$

701

$

1,736 

Commercial and multi-family

7,962

8,721 

Commercial business(1)

5,307

5,383 

Home equity(2)

435

556 

Total

$

14,405

$

16,396 

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Had non-accrual loans been performing in accordance with their original terms, the interest income recognized for the three months ended March 31, 2021 and December 31, 2020 would have been approximately $343,000 and $1.5 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on nonaccrual status. At March 31, 2021 and December 31, 2020, there were $0 and $333,000, respectively, of loans which were more than ninety days past due and still accruing interest.


 

15


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

Criticized and Classified Assets

Company policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” or “loss.”

When the Company classifies problem assets, the Company 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. The loans classified as substandard are secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily due to payment status, because updated financial information has not been timely provided, 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 1-5) are treated as “pass” for grading purposes. The “criticized” risk rating (6) and the “classified” risk ratings (7-9) are detailed below:

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

7 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. Loans on “nonaccrual” status. The loan needs special and corrective attention.

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

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

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of March 31, 2021 (in thousands). As of March 31, 2021, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Residential one-to-four family

$

232,669 

$

724 

$

982 

$

234,375 

Commercial and multi-family

1,622,917 

38,464 

38,732 

1,700,113 

Construction

164,437 

-

2,787 

167,224 

Commercial business(1)

162,408 

1,998 

12,934 

177,340 

Home equity(2)

52,617 

-

743 

53,360 

Consumer

851 

-

-

851 

Total Gross Loans

$

2,235,899 

$

41,186 

$

56,178 

$

2,333,263 

_________

(1) Includes business lines of credit and PPP loans.

(2) Includes home equity lines of credit.

 

16


Note 7 - Loans Receivable and Allowance for Loan Losses

The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention and substandard within the Company’s internal risk rating system as of December 31, 2020 (In thousands). As of December 31, 2020, the Company had no loans with the classified rating of doubtful or loss.

Pass

Special Mention

Substandard

Total

Residential one-to-four family

$

241,237 

$

1,087 

$

2,045 

$

244,369 

Commercial and multi-family

1,631,838 

2,152 

56,846 

1,690,836 

Construction

155,967 

-

-

155,967 

Commercial business(1)

173,833 

1,497 

9,027 

184,357 

Home equity(2)

53,005 

-

662 

53,667 

Consumer

822 

-

-

822 

Total Gross Loans

$

2,256,702 

$

4,736 

$

68,580 

$

2,330,018 

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.


 

17


Note 8 – Stockholders’ Equity

On December 15, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $2,250,000 for 225 shares.

On September 1, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $5.9 million for 590 shares.

On August 31, 2020, the Company redeemed all 6,465 outstanding shares of its Series F 6.0% Noncumulative Perpetual Preferred Stock, at their face value of $1,000 per share, for a total redemption amount of $6.5 million.

On August 10, 2020, the Company redeemed all 388 outstanding shares of its Series C 6.0% Noncumulative Perpetual Preferred Stock, at their face value of $10,000 per share, for a total redemption amount of $3.9 million.

On July 13, 2020, the Company closed a private placement of its Series H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $3.1 million for 308 shares, effective June 29, 2020.

Note 9 – Bank Owned Life Insurance

The Bank purchased $60 million of bank owned life insurance (“BOLI”) in August, 2020 and an additional $8.5 million in January, 2021. BOLI involves life insurance purchased by the Bank on a chosen group of employees, and the Bank is owner and beneficiary of the policies. At March 31, 2021, the Bank had $70.2 million in BOLI. BOLI is accounted for using the cash surrender value method and is recorded at its net realizable value.

Note 10 – Goodwill and Other Intangible Assets

The Company’s intangible assets consist of goodwill and core deposit intangibles in connection with the acquisition of IA Bancorp, Inc. as of April 17, 2018. The initial recording of goodwill and other intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets and assumed liabilities. Goodwill is not amortized but is subject to annual tests for impairment or more often if events or circumstances indicate it may be impaired.

The Company’s core deposit intangibles are amortized on an accelerated basis using an estimated life of 10 years and in accordance with U.S. GAAP are evaluated annually for impairment. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

The Company believes that the fair values of our goodwill and other intangible assets were in excess of their carrying amounts and there was 0 impairment at March 31, 2021.

Amortization expense of the core deposit intangibles was $16,000 and $18,000 for the three months ended March 31, 2021 and 2020 respectively. The unamortized balance of the core deposit intangibles and the amount of goodwill at March 31, 2021 was $219,000 and $5.2 million, respectively. The unamortized balance of the core-deposit intangibles and the amount of goodwill at March 31, 2020 was $281,000 and $5.2 million, respectively.

 

18


Note 11 – Fair Values of Financial Instruments

Guidance on fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

The only assets or liabilities that the Company measured at fair value on a recurring basis were as follows. (In thousands):

 

  

(Level 1)

  

(Level 2)

  

Quoted Prices in

Significant

(Level 3)

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Description

Total

Assets

Inputs

Inputs

As of March 31, 2021:

  

  

  

Securities

  

  

  

Debt Securities Available for Sale

$

93,582

$

-

$

93,582

$

-

Marketable Equities

$

18,278

$

18,278

$

-

$

-

Total Securities

$

111,860

$

18,278

$

93,582

$

-

As of December 31, 2020:

  

  

  

Securities

  

  

Debt Securities Available for Sale

$

99,756

$

-

$

99,756

$

-

Marketable Equities

$

17,717

$

17,717

$

-

$

-

Total Securities

$

117,473

$

17,717

$

99,756

$

-

The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were 0 transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended March 31, 2021 and 2020.

The only assets or liabilities that the Company measured at fair value on a nonrecurring basis were as follows. (In thousands):

 

  

(Level 1)

  

(Level 2)

  

Quoted Prices in

Significant

(Level 3)

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Description

Total

Assets

Inputs

Inputs

As of March 31, 2021

  

  

  

Impaired Loans

$

18,306

  

$

-

  

$

-

  

$

18,306

Other real estate owned

$

414

  

$

-

  

$

-

  

$

414

As of December 31, 2020:

  

  

  

Impaired Loans

$

10,130

$

-

$

-

$

10,130

Other real estate owned

$

414

  

$

-

  

$

-

  

$

414


 

19


Note 11 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of March 31, 2021 and December 31, 2020 about assets measured at fair value on a nonrecurring basis and for which the Company has utilized adjusted Level 3 inputs to determine fair value. (Dollars in thousands):

Quantitative Information about Level 3 Fair Value Measurements

Fair Value

Valuation

Unobservable

Estimate

Techniques

Input

Range

March 31, 2021:

Impaired Loans

$

18,306

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Other real estate owned

$

414

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Fair Value

Valuation

Unobservable

Estimate

Techniques

Input

Range

December 31, 2020:

Impaired Loans

$

10,130

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

Other real estate owned

$

414

Appraisal of collateral (1)

Appraisal adjustments (2)

0%-10%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not objectively determinable.

(2)Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments as of March 31, 2021 and December 31, 2020.

Cash and Cash Equivalents and Interest-Earning Time Deposits (Carried at Cost)

The carrying amounts reported in the consolidated statements of financial condition for cash and short-term instruments approximate fair values.

Securities Available for Sale

The fair value of securities available for sale (carried at fair value) are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Equity Securities

The fair values of available-for-sale securities are based on quoted market prices (Level 1).

Loans Held for Sale (Carried at Lower of Cost or Fair Value)

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for specific attributes of that loan. Loans held for sale are carried at the lower of cost or fair value.

Loans Receivable (Carried at Cost)

The fair values of loans, except for certain impaired loans, are estimated using discounted cash flow analyses, using market rates at the date of the Statement of Financial Condition that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

 

20


Note 11 – Fair Values of Financial Instruments (Continued)

Impaired Loans (Generally Carried at Fair Value)

Impaired loans are those for which the Company has measured and recorded an impairment generally based on the fair value of the loan’s collateral, less estimated costs to sell. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value at March 31, 2021 and December 31, 2020 consisted of the loan balances of $23.6 million net of a valuation allowance of $5.3 million and $14.6 million net of a valuation of loan allowance of $4.4 million, respectively.

Other Real Estate Owned (Generally Carried at Lower of Cost or Fair Value)

Real Estate Owned is generally carried at fair value less estimated costs to sell which is determined based upon independent third-party appraisals of the properties or based upon the expected proceeds from a pending sale. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

FHLB of New York Stock (Carried at Cost)

The carrying amount of restricted investment in bank stock approximates fair value and considers the limited marketability of such securities.

Interest Receivable and Payable (Carried at Cost)

The carrying amount of interest receivable and interest payable approximates its fair value.

Deposits (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Borrowings and Subordinated Debt (Carried at Cost)

Fair values are estimated using discounted cash flow analysis, based on quoted prices for new long-term debt with similar credit risk characteristics, terms and remaining maturity. Prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments (Carried at Cost)

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and unused lines of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these commitments was deemed immaterial and is not presented in the accompanying table.

 


 

21


Note 11 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of March 31, 2021 and December 31, 2020:

 

As of March 31, 2021

Quoted Prices in Active

Significant

Significant

Carrying

Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

Value

Fair Value

(Level 1)

(Level 2)

(Level 3)

  

(In Thousands)

Financial assets:

  

  

  

Cash and cash equivalents

$

296,938

$

296,938

  

$

296,938

  

$

-

$

-

Interest-earning time deposits

735

735

  

-

  

735

-

Debt securities available for sale

93,582

93,582

-

93,582

-

Equity investments

18,278

18,278

  

18,278

  

-

-

Loans held for sale

1,147

1,147

  

-

  

1,147

-

Loans receivable, net

2,296,434

2,294,631

  

-

  

-

2,294,631

FHLB of New York stock, at cost

8,920

8,920

  

-

  

8,920

-

Accrued interest receivable

12,056

12,056

  

-

  

12,056

-

Other Real Estate Owned

414

414

  

-

  

-

414

Financial liabilities:

  

  

Deposits

2,404,135

2,408,469

  

1,719,149

  

689,320

-

Borrowings

133,298

131,806

  

-

  

131,806

-

Subordinated debentures

37,101

36,686

-

36,686

-

Accrued interest payable

807

807

  

-

  

80