LOANS RECEIVABLE AND CREDIT QUALITY

3 Months Ended

Mar. 31, 2012

LOANS RECEIVABLE AND CREDIT QUALITY [Abstract]

LOANS RECEIVABLE AND CREDIT QUALITY

8.   LOANS RECEIVABLE AND CREDIT QUALITY

Loans are reported at the principal amount outstanding, net of unearned fees or costs and the allowance for loan losses.  Interest income on loans is recorded using the level yield method.  Under this method, discount accretion and premium amortization are included in interest income.  Loan origination fees and certain direct loan origination costs are deferred and amortized as yield adjustments over the contractual loan terms.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying them as to credit risk.  This analysis includes all non-homogeneous loans, such as multifamily residential, mixed use residential (i.e., loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the residential units), mixed use commercial (i.e.,loans in which the aggregate rental income of the underlying collateral property is generated from both residential and commercial units, but the majority of such income is generated from the commercial units), commercial real estate and construction and land acquisition loans, as well as one-to four family residential and cooperative apartment loans in excess of the Fannie Mae ("FNMA") conforming loan limits for high-cost areas such as the Bank's primary lending area (the "FNMA Limits").  This analysis is performed on a quarterly basis.  The Company uses the following definitions for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank's credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of then existing facts, conditions, and values, highly questionable and improbable.

All loans not classified as Special Mention, Substandard or Doubtful were deemed pass loans at both March 31, 2012 and December 31, 2011.

The Bank had no loans classified as Doubtful at March 31, 2012 or December 31, 2011.

10

The following is a summary of the credit risk profile of  real estate loans (including deferred costs) by internally assigned grade as of the date indicated:

	Balance at March 31, 2012
Grade	One- to Four-Family Residential and Cooperative Unit		Multifamily Residential and Residential Mixed Use		Mixed Use Commercial Real Estate		Commercial Real Estate		Construction		Total
Pass	$	71,601	$	2,569,536	$	321,766	$	351,737	$	-	$	3,314,640
Special Mention		1,357		10,261		10,789		8,379		-		30,786
Substandard		1,846		4,713		2,394		43,100		592		52,645
Total real estate loans individually assigned    a credit grade	$	74,804	$	2,584,510	$	334,949	$	403,216	$	592	$	3,398,071
Real estate loans not individually assigned    a credit grade (1)	$	19,601		-		-		-		-	$	19,601

(1) Amount comprised of fully performing one- to four-family residential and cooperative unit loans with balances equal to or less than the FNMA Limits.  The credit quality of these loans was instead evaluated based upon payment activity.

	Balance at December 31, 2011
Grade	One- to Four-Family Residential and Cooperative Unit		Multifamily Residential and Residential Mixed Use		Mixed Use Commercial Real Estate		Commercial Real Estate		Construction		Total
Pass	$	66,949	$	2,587,573	$	320,556	$	364,462	$	-	$	3,339,540
Special Mention		1,133		7,101		10,562		9,244		2,576		30,616
Substandard		2,635		8,245		7,152		39,610		623		58,265
Total real estate loans individually assigned    a credit grade	$	70,717	$	2,602,919	$	338,270	$	413,316	$	3,199	$	3,428,421
Real estate loans not individually assigned a    a credit grade (1)	$	29,995		-		-		-		-	$	29,995

(1) Amount comprised of fully performing one- to four-family residential and cooperative unit loans with balances equal to or less than the FNMA Limits.  The credit quality of these loans was instead evaluated based upon payment activity.

For consumer loans, the Company evaluates credit quality based on payment activity.  Consumer loans that are 90 days or more past due are placed on non-accrual status, while all remaining consumer loans are classified and evaluated as performing.

The following is a summary of the credit risk profile of consumer loans by internally assigned grade:

Grade	Balance at March 31, 2012		Balance at December 31, 2011
Pass	$	2,060	$	2,445
Substandard (non-accrual)		3		4
Total	$	2,063	$	2,449

11

The following is a breakdown of the past due status of the Company's investment in loans (excluding accrued interest and loans held for sale) as of the dates indicated:

At March 31, 2012
	30 to 59 Days Past Due	60 to 89 Days Past Due	Loans 90 Days or More Past Due and Still Accruing Interest	Non-accrual (1)	Total Past Due	Current	Total Loans
Real Estate:
One- to four-family residential and cooperative unit	$201	$-	-	$1,206	$1,407	$92,998	$94,405
Multifamily residential and residential mixed use	1,742	-	$501	4,253	6,496	2,578,014	2,584,510
Mixed use commercial real estate	3,681	-	-	840	4,521	330,428	334,949
Commercial real estate	100	-	5,317	8,506	13,923	389,293	403,216
Construction	-	-	-	-	-	592	592
Total real estate	$5,724	-	$5,818	$14,805	$26,347	3,391,325	$3,417,672
Consumer	$2	$1	-	$3	$6	$2,057	$2,063

(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of March 31, 2012.

At December 31, 2011
	30 to 59 Days Past Due	60 to 89 Days Past Due	Loans 90 Days or More Past Due and Still Accruing Interest	Non-accrual (1)	Total Past Due	Current	Total Loans
Real Estate:
One- to four-family residential and cooperative unit	$1,221	$-	-	$2,205	$3,426	$97,286	$100,712
Multifamily residential and residential mixed use	2,589	-	$946	7,069	10,604	2,592,315	2,602,919
Mixed use commercial real estate	4,976	-	-	5,591	10,567	327,703	338,270
Commercial real estate	478	-	2,874	11,083	14,435	398,881	413,316
Construction	-	-	-	-	-	3,199	3,199
Total real estate	$9,264	-	$3,820	$25,948	$39,032	$3,419,384	$3,458,416
Consumer	$12	$5	-	$4	$21	$2,428	$2,449

(1) Includes all loans on non-accrual status regardless of the number of days such loans were delinquent as of December 31, 2011.

Accruing Loans 90 Days or More Past Due:

At March 31, 2012, the Bank owned four real estate loans totaling $5,818 that were 90 days or more past due on their contractual balloon principal payment that continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payment.  In April 2012, the Company formally extended the maturity on one of these loans with an outstanding balance of $2,872.  The loan-to-value ratio on the remaining loans totaling $2,944 was estimated to be below 60% as of March 31, 2012, and management expects that each of these loans will either be satisfied or formally re-financed in the future.  As a result, these loans remained on accrual status at March 31, 2012 and were deemed performing assets.  At December 31, 2011, the Bank owned five real estate loans totaling $3,820 that were 90 days or more past due on their contractual balloon principal payment that continued to make monthly payments consistent with their initial contractual amortization schedule exclusive of the balloon payment.  These loans remained on accrual status at December 31, 2011 and were deemed performing assets.  With the exception of one loan with an outstanding balance of $2,872, the remaining four loans were either fully re-financed or satisfied during the three months ended March 31, 2012, or are expected to execute a re-financing agreement during the three months ending June 30, 2012.

12

Troubled Debt Restructured Loans ("TDRs").

At March 31, 2012, the Bank had twenty-three loans totaling $52,060 with terms that were modified in a manner that met the criteria for a TDR.  Thirteen of these TDRs totaling $47,839 were commercial real estate loans, two loans totaling $1,140 were mixed-use commercial real estate loans, six loans totaling $2,457 were multifamily residential and residential mixed-use real estate loans and the remaining two loans totaling $623 were mixed use loans with four units or less.  At December 31, 2011, the Bank had twenty-two loans totaling $48,753 with terms that were modified in a manner that met the criteria for a TDR.  Twelve of these TDRs totaling $44,458 were commercial real estate loans, three loans totaling $1,657 were mixed-use commercial real estate loans, five loans totaling $2,013 were multifamily residential and residential mixed-use real estate loans and the remaining two loans totaling $625 were mixed use loans with four units or less.  (See "Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset Quality - TDRs" for a discussion of the criteria assessed in determining whether a loan modification has resulted a TDR).

The following table summarizes outstanding TDRs as of the dates indicated:

	As of March 31, 2012		As of December 31, 2011
	No. of Loans	Balance	No. of Loans	Balance
Outstanding principal balance at period end	23	$52,060	22	$48,753
TDRs that re-defaulted subsequent to being modified (at period end):	2	6,310	4	7,853
TDRs on accrual status at period end	20	44,194	17	40,688
TDRs on non-accrual status at period end	3	7,866	5	8,065

The Company has not restructured troubled consumer loans, as its consumer loan portfolio has not had any problem issues warranting restructuring.  Therefore, all TDRs were collateralized by real estate at both March 31, 2012 and December 31, 2011.  The following table summarizes activity related to TDRs for the period indicated:

For the Three Months Ended March 31, 2012
	Number of Loans	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Loan modifications during the period that met the definition of a TDR:
Multifamily residential and residential mixed use	1	$459	$459
Commercial real estate	2	4,430	4,430
Concessions granted:
Temporary deferral of principal payments	1	1,556	1,556
Temporary deferral of interest payments	1	1,556	1,556
Reduction in interest rate for the remainder of the term of the loan	1	1,556	1,556
Extension of maturity	2	3,334	3,334
TOTAL	3	$4,889	$4,889

For the Three Months Ended March 31, 2011
	Number of Loans	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Loan modifications during the period that met the definition of a TDR:
Multifamily residential and residential mixed use	1	$364	$364
Concessions granted:
Temporary deferral of principal payments	-	-	-
Temporary deferral of interest payments	-	-	-
Reduction in interest rate for the remainder of the term of the loan	1	364	364
Extension of maturity	-	-	-
TOTAL	1	$364	$364

The Bank's allowance for loan losses at March 31, 2012 reflected $603 of allocated reserve associated with modifications identified as TDRs.  The Bank's allowance for loan losses at December 31, 2011 reflected $1,851 of allocated reserve associated with modifications identified as TDRs as of December 31, 2011.  The reduction in the aggregate balance of allocated reserve associated with TDRs from December 31, 2011 to March 31, 2012 reflected both the removal $1,013 of such reserve on nine TDRs, as the improvement

13

in the underlying conditions of these loans resulted in the determination that the allocated reserve was no longer warranted, as well as $154 of reserves that were charged-off upon the disposal of two TDRs during the three months ended March 31, 2012.  Otherwise, there was no impact on the Bank's allowance for loan losses related to TDRs as of March 31, 2012 and December 31, 2011.

As of March 31, 2012, the Bank had no loan commitments to borrowers with outstanding TDRs.

A TDR is considered to be in payment default once it is 90 days contractually past due under the modified terms.   The following table presents, as of March 31, 2012, TDRs by collateral type for which there was a payment default within twelve months following their respective modification date:

	At or for the Three Months Ended March 31, 2012
TDRs that Subsequently Defaulted Within 12 Months of Modification:	No. of Loans	Recorded Investment
Commercial real estate	2	$6,310
Total real estate (including loans held for sale)	2	$6,310

All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.  There were no principal charge-offs recognized against the allowance for loan losses on loans described in the above table during the three months ended March 31, 2012.  Aggregate principal charge-offs of $413 were recognized against the allowance for loan losses on the loans described in the above table during the three months ended March 31, 2011.

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that all contractual amounts due will not be collected in accordance with the terms of the loan.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays or shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Generally, the Bank considers non-accrual and TDR multifamily residential and commercial real estate loans, along with non-accrual one- to four-family loans in excess of the FNMA Limits to be impaired. Non-accrual one-to four-family loans equal to or less than the FNMA Limits, as well as all consumer loans, are considered homogeneous loan pools and are not required to be evaluated individually for impairment.

Impairment is typically measured using the difference between the outstanding loan principal balance and either: 1) the likely realizable value of a note sale; 2) the fair value of the underlying collateral, net of likely disposal costs, if repayment is expected solely from liquidation of the collateral; or 3) the present value of estimated future cash flows using the loan's existing rate.  If a TDR is substantially performing in accordance with its restructured terms, management will look to either the present value of the expected cash flows from the debt service or the potential net liquidation proceeds of the underlying collateral property in measuring impairment (whichever is deemed most appropriate under the circumstances).  If a TDR has re-defaulted, generally the likely realizable net proceeds from either a note sale or the liquidation of collateral is considered when measuring impairment.  While measured impairment on TDRs is typically charged off immediately, an allocated reserve within the allowance for loan losses can be recognized in limited instances.

At March 31, 2012, the Bank had forty-one loans totaling $61,186 deemed impaired, compared to fifty loans totaling $70,384 as of December 31, 2011.  The Bank disposed of twelve impaired loans with a recorded balance totaling $12,194 during the three months ended March 31, 2012, and received full repayment on two additional impaired loans totaling $548.  Additionally during the three months ended March 31, 2012, one impaired loan with a recorded balance of $1,129 remained current on all contractual amounts owed for a time period deemed sufficient to warrant its removal from impaired status, two impaired loans totaling $1,000 were transferred to held for sale, principal charge-offs totaling $1,034 were recognized on six impaired loans, and one impaired loan with a recoded balance of $210 executed a re-finance agreement which warranted its removal from impaired status.  Partially offsetting these declines were nine loans totaling $6,958 that were added to impaired status during the three months ended March 31, 2012.  The Bank disposed of six impaired loans with a recorded balance totaling $5,100, and recognized write-downs of principal totaling $886 on impaired loans during the three months ended March 31, 2011.

At March 31, 2012, an aggregate balance of $603 was allocated within the allowance for loan losses for probable losses on impaired loans.  At December 31, 2011, an aggregate balance of $2,175 was allocated within the allowance for loan losses for probable losses on impaired loans.

At March 31, 2012 and December 31, 2011, loans totaling $47,139 and $44,508, respectively, while on accrual status, were deemed impaired.  These loans were comprised of one of the following as of the respective dates: I) accruing TDRs; 2) loans past due

14

90 days or more but still accruing; or 3) loans with sufficient weakness to warrant impaired designation but possessing payment history and collateralization sufficient to maintain accrual status.

Net interest income recognized on impaired loans totaled $846 and $454 during the three months ended March 31, 2012 and 2011, respectively.

At March 31, 2012 and December 31, 2011, approximately $757 and $75, respectively, of one- to four-family residential and cooperative apartment loans with a balance equal to or less than the FNMA Limits, and consumer loans were on non-accrual status, but were not included in the category of impaired loans, as these loans are considered homogeneous loan pools not individually analyzed for impairment.

Delinquent Serviced Loans Subject to the First Loss Position

As of March 31, 2012 and December 31, 2011, the Bank serviced a pool of multifamily loans sold to FNMA, and retained an obligation (off-balance sheet contingent liability) to absorb a portion of any losses (as defined in the agreement) incurred by FNMA in connection with these loans (the "First Loss Position").

Under the terms of its seller/servicer agreement with FNMA, the Bank is obligated to fund FNMA all monthly principal and interest payments under the original terms of the sold loans until the earlier of the following events: (1) the loans have been fully satisfied or enter OREO status; or (2) the First Loss Position is fully exhausted.

At March 31, 2012, within the pool of multifamily loans sold to FNMA, no loans were delinquent between 30 and 89 days, and one $1,338 loan was 90 days or more delinquent.  At December 31, 2011, within the pool of multifamily loans sold to FNMA, one $1,342 loan was delinquent between 30 and 89 days, and one $757 loan was 90 days or more delinquent.