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ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR FIRST LOSS POSITION
 12 Months Ended
Dec. 31, 2015
ALLOWANCE FOR LOAN LOSSES [Abstract]  
ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR FIRST LOSS POSITION
6.   ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR FIRST LOSS POSITION

The allowance for loan losses may consist of specific and general components.  The Bank's periodic evaluation of its allowance for loan losses (specific or general) is comprised of four primary components: (1) impaired loans; (2) non-impaired substandard loans; (3) non-impaired special mention loans; and (4) pass graded loans.  Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses (specific or general): (1) real estate loans; and (2) consumer loans.  Consumer loans were evaluated in aggregate as of both December 31, 2015 and December 31, 2014.

Impaired Loan Component

All multifamily residential, mixed use, commercial real estate and construction loans that are deemed to meet the definition of impaired are individually evaluated for impairment.  In addition, all condominium or cooperative apartment and one- to four-family residential real estate loans in excess of the FNMA Limits are individually evaluated 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 to come from liquidation of the collateral; or (3) the present value of estimated future cash flows (using the loan's pre-modification rate in the case of certain performing TDRs).  For impaired loans on non-accrual status, either of the initial two measurements is utilized.

All TDRs are considered impaired loans and are evaluated individually for measurable impairment, if any.  While measured impairment is generally charged off immediately, impairment attributed to either a shortfall in the underlying collateral (for collateral dependent TDRs) or a reduction in the present value of expected cash flows of a non-collateral dependent TDR was reflected as an allocated reserve within the allowance for loan losses at December 31, 2014.

Smaller balance homogeneous real estate loans, such as condominium or cooperative apartment and one-to four-family residential real estate loans with balances equal to or less than the FNMA Limits, are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

Non-Impaired Substandard Loan Component

At both December 31, 2015 and December 31, 2014, the reserve allocated within the allowance for loan losses associated with non-impaired loans internally classified as Substandard reflected expected loss percentages on the Bank's pool of such loans that were derived based upon an analysis of historical losses over a measurement timeframe.  The loss percentage resulting from this analysis was then applied to the aggregate pool of non-impaired Substandard loans at December 31, 2015 and December 31, 2014.  Based upon this methodology, increases or decreases in the amount of either non-impaired Substandard loans or charge-offs associated with such loans, or a change in the measurement timeframe utilized to derive the expected loss percentage, would impact the level of reserves determined on non-impaired Substandard loans.  As a result, the allowance for loan losses associated with non-impaired Substandard loans is subject to volatility.

The portion of the allowance for loan losses attributable to non-impaired Substandard loans was $348 at December 31, 2015 and $371 at December 31, 2014.  The decline resulted from both a reduction of $970 in the balance of such loans from December 31, 2014 to December 31, 2015, as well as a lower average loss expectation derived as of December 31, 2015 compared to December 31, 2014.

All non-impaired Substandard loans were deemed sufficiently well secured and performing to have remained on accrual status both prior and subsequent to their downgrade to the Substandard internal loan grade.

Non-Impaired Special Mention Loan Component

At both December 31, 2015 and December 31, 2014, the reserve allocated within the allowance for loan losses associated with non-impaired loans internally classified as Special Mention reflected an expected loss percentage on the Bank's pool of such loans that was derived based upon an analysis of historical losses over a measurement timeframe.  The loss percentage resulting from this analysis was then applied to the aggregate pool of non-impaired Special Mention loans at December 31, 2015 and December 31, 2014.  Based upon this methodology, increases or decreases in the amount of either non-impaired Special Mention loans or charge-offs associated with such loans, or a change in the measurement timeframe utilized to derive the expected loss percentage, would impact the level of reserves determined on non-impaired Special Mention loans.  As a result, the allowance for loan losses associated with non-impaired Special Mention loans is subject to volatility.

The portion of the allowance for loan losses attributable to non-impaired Special Mention loans was $88 at December 31, 2015, compared to $228 at December 31, 2014. This decline reflected both a reduction of $16,300 in the balance of such loans and a lower expected loss percentage applied to such loans at December 31, 2015 compared to December 31, 2014 under the methodology employed.

Pass Graded Loan Component

The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with pass graded real estate loans.  The following underlying collateral types are analyzed separately: 1) one- to four family residential and condominium or cooperative apartments; 2) multifamily residential and residential mixed use; 3) commercial mixed use real estate, 4) commercial real estate; and 5) construction and land acquisition.  Within the analysis of each underlying collateral type, the following elements are additionally considered and provided weighting in determining the allowance for loan losses for pass graded real estate loans:

(i)
Charge-off experience (including peer charge-off experience)
(ii)
Economic conditions
(iii)
Underwriting standards or experience
(iv)
Loan concentrations
(v)
Regulatory climate
(vi)
Nature and volume of the portfolio
(vii)
Changes in the quality and scope of the loan review function

The following is a brief synopsis of the manner in which each element is considered:

(i)  Charge-off experience - Loans within the pass graded loan portfolio are segmented by significant common characteristics, against which historical loss rates are applied.  The Bank also reviews and considers the charge-off experience of peer banks in its lending marketplace in order to determine the existence of potential losses that could take a longer period to flow through its allowance for loan losses.

(ii) Economic conditions - At both December 31, 2015 and December 31, 2014, the Bank assigned a loss allocation to its entire pass graded real estate loan portfolio based, in part, upon a review of economic conditions affecting the local real estate market. Specifically, the Bank considered both the level of, and recent trends in: 1) the local and national unemployment rate, 2) residential and commercial vacancy rates, 3) real estate sales and pricing, and 4) delinquencies in the Bank's loan portfolio.

(iii) Underwriting standards or experience - Underwriting standards are reviewed to ensure that changes in the Bank's lending policies and practices are adequately evaluated for risk and reflected in its analysis of potential credit losses.  Loss expectations associated with changes in the Bank's lending policies and practices, if any, are then incorporated into the methodology.

(iv) Loan concentrations - The Bank regularly reviews its loan concentrations (borrower, collateral type and location) in order to ensure that heightened risk has not evolved that has not been captured through other factors.  The risk component of loan concentrations is regularly evaluated for reserve adequacy.

(v) Regulatory climate – Consideration is given to public statements made by the banking regulatory agencies that have a potential impact on the Bank's loan portfolio and allowance for loan losses.

(vi) Nature and volume of the portfolio – The Bank considers any significant changes in the overall nature and volume of its loan portfolio.

(vii) Changes in the quality and scope of the loan review function – The Bank considers the potential impact upon its allowance for loan losses of any adverse change in the quality and scope of the loan review function.

Consumer Loans

Due to their small individual balances, the Bank does not evaluate individual consumer loans for impairment.  Loss percentages are applied to aggregate consumer loans based upon both their delinquency status and loan type.  These loss percentages are derived from a combination of the Company's historical loss experience and/or nationally published loss data on such loans.  Consumer loans in excess of 120 days delinquent are typically fully charged off against the allowance for loan losses.

The following table presents data regarding the allowance for loan losses and loans evaluated for impairment by class of loan within the real estate loan segment as well as for the aggregate consumer loan segment:

At or for the Year Ended December 31, 2015
 
 
 
Real Estate Loans
  
Consumer Loans
 
 
 
One- to Four Family Residential,
Including Condominium and
Cooperative
Apartment
  
Multifamily Residential and Residential Mixed Use
  
Commercial
Mixed Use Real Estate
  
Commercial Real Estate
  
Construction
  
Total Real Estate
  
 
Beginning balance
 
$
150
  
$
13,852
  
$
1,644
  
$
2,823
  
$
-
  
$
18,469
  
$
24
 
Provision (credit) for loan losses
  
222
   
309
   
21
   
(1,880
)
  
-
   
(1,328
)
  
(2
)
Charge-offs
  
(115
)
  
(48
)
  
(37
)
  
(7
)
  
-
   
(207
)
  
(2
)
Recoveries
  
6
   
5
   
24
   
1,525
   
-
   
1,560
   
-
 
Ending balance
 
$
263
  
$
14,118
  
$
1,652
  
$
2,461
  
$
-
  
$
18,494
  
$
20
 
                             
Ending balance – loans individually evaluated for impairment
 
$
598
  
$
983
  
$
4,345
  
$
3,635
  
$
-
  
$
9,561
  
$
-
 
Ending balance – loans collectively evaluated for impairment
  
71,497
   
3,758,924
   
372,930
   
482,274
   
-
   
4,685 625
   
1,590
 
Allowance balance associated with loans individually evaluated for impairment
  
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Allowance balance associated with loans collectively evaluated for impairment
  
263
   
14,118
   
1,652
   
2,461
   
-
   
18,494
   
20
 
 

 
At or for the Year Ended December 31, 2014
 
 
 
Real Estate Loans
  
Consumer Loans
 
 
 
One- to Four Family Residential,
Including Condominium and
Cooperative
Apartment
  
Multifamily Residential and Residential Mixed Use
  
Commercial
Mixed Use Real Estate
  
Commercial Real Estate
  
Construction
  
Total Real Estate
  
 
Beginning balance
 
$
236
  
$
13,840
  
$
3,003
  
$
3,047
  
$
3
  
$
20,129
  
$
24
 
Provision (credit) for loan losses
  
(164
)
  
(76
)
  
(1,710
)
  
72
   
(3
)
  
(1,881
)
  
9
 
Charge-offs
  
(46
)
  
(87
)
  
(30
)
  
(306
)
  
-
   
(469
)
  
(9
)
Recoveries
  
124
   
175
   
381
   
10
   
-
   
690
   
-
 
Ending balance
 
$
150
  
$
13,852
  
$
1,644
  
$
2,823
  
$
-
  
$
18,469
  
$
24
 
                             
Ending balance – loans individually evaluated for impairment
 
$
605
  
$
1,272
  
$
4,400
  
$
13,707
  
$
-
  
$
19,984
  
$
-
 
Ending balance – loans collectively evaluated for impairment
  
72,895
   
3,297,176
   
324,267
   
403,089
   
-
   
4,097,427
   
1,829
 
Allowance balance associated with loans individually evaluated for impairment
  
-
   
-
   
-
   
19
   
-
   
19
   
-
 
Allowance balance associated with loans collectively evaluated for impairment
  
150
   
13,852
   
1,644
   
2,804
   
-
   
18,450
   
24
 

At or for the Year Ended December 31, 2013
 
 
 
Real Estate Loans
  
Consumer Loans
 
 
 
One- to Four Family Residential,
Including Condominium and
Cooperative
Apartment
  
Multifamily Residential and Residential Mixed Use
  
Commercial Mixed Use
Real Estate
  
Commercial Real Estate
  
Construction
  
Total Real Estate
  
 
Beginning balance
 
$
344
  
$
14,299
  
$
2,474
  
$
3,382
  
$
24
  
$
20,523
  
$
27
 
Provision (credit) for loan losses
  
(187
)
  
10
   
891
   
(342
)
  
(21
)
  
351
   
18
 
Charge-offs
  
(117
)
  
(504
)
  
(391
)
  
(9
)
  
-
   
(1,021
)
  
(21
)
Recoveries
  
196
   
35
   
29
   
16
   
-
   
276
   
-
 
Ending balance
 
$
236
  
$
13,840
  
$
3,003
  
$
3,047
  
$
3
  
$
20,129
  
$
24
 
                             
Ending balance – loans individually evaluated for impairment
 
$
1,199
  
$
2,345
  
$
4,400
  
$
22,245
  
$
-
  
$
30,189
  
$
-
 
Ending balance – loans collectively evaluated for impairment
  
72,757
   
2,920,205
   
371,510
   
302,451
   
268
   
3,667,191
   
2,139
 
Allowance balance associated with loans individually evaluated for impairment
  
-
   
-
   
1,320
   
451
   
-
   
1,771
   
-
 
Allowance balance associated with loans collectively evaluated for impairment
  
236
   
13,840
   
1,683
   
2,596
   
3
   
18,358
   
24
 


The following tables summarize impaired real estate loans as of and for the periods indicated (by collateral type within the real estate loan segment):

  
At December 31, 2015
  
For the Year Ended
December 31, 2015
 
  
Unpaid Principal Balance at Period End
  
Recorded Investment
at Period End(1)
  
Reserve Balance Allocated within the Allowance for Loan Losses at Period End
  
Average Recorded Investment(1)
  
Interest
Income Recognized
 
One- to Four Family Residential, Including
   Condominium and Cooperative Apartment
          
   With no allocated reserve
 
$
635
  
$
598
  
$
-
  
$
601
  
$
44
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Multifamily Residential and Residential Mixed Use
                    
   With no allocated reserve
  
983
   
983
   
-
   
1,095
   
71
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Commercial Mixed Use Real Estate
                    
   With no allocated reserve
  
4,345
   
4,345
   
-
   
4,379
   
176
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Commercial Real Estate
                    
   With no allocated reserve
  
3,642
   
3,635
   
-
   
5,470
   
140
 
   With an allocated reserve
  
-
   
-
   
-
   
1,100
   
97
 
Construction
                    
   With no allocated reserve
  
-
   
-
   
-
   
-
   
-
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Total
                    
   With no allocated reserve
 
$
9,605
  
$
9,561
  
$
-
  
$
11,545
  
$
431
 
   With an allocated reserve
 
$
-
  
$
-
  
$
-
  
$
1,100
  
$
97
 
(1)
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

  
At December 31, 2014
  
For the Year Ended
December 31, 2014
 
  
Unpaid Principal Balance at Period End
  
Recorded Investment
at Period End(1)
  
Reserve Balance Allocated within the Allowance for Loan Losses at Period End
  
Average Recorded Investment(1)
  
Interest
Income Recognized
 
One- to Four Family Residential, Including Condominium and Cooperative Apartment
          
   With no allocated reserve
 
$
646
  
$
605
  
$
-
  
$
747
  
$
58
 
   With an allocated reserve
  
-
   
-
   
-
   
41
   
-
 
Multifamily Residential and Residential Mixed Use
                    
   With no allocated reserve
  
1,272
   
1,272
   
-
   
2,147
   
87
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Commercial Mixed Use Real Estate
                    
   With no allocated reserve
  
4,425
   
4,400
   
-
   
2,640
   
237
 
   With an allocated reserve
  
-
   
-
   
-
   
1,760
   
-
 
Commercial Real Estate
                    
   With no allocated reserve
  
10,306
   
8,207
   
-
   
7,470
   
148
 
   With an allocated reserve
  
5,500
   
5,500
   
19
   
9,317
   
495
 
Construction
                    
   With no allocated reserve
  
-
   
-
   
-
   
-
   
-
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Total
                    
   With no allocated reserve
 
$
16,649
  
$
14,484
  
$
-
  
$
13,004
  
$
530
 
   With an allocated reserve
 
$
5,500
  
$
5,500
  
$
19
  
$
11,118
  
$
495
 
(1) The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.


  
At December 31, 2013
  
For the Year Ended
December 31, 2013
 
  
Unpaid Principal Balance at Period End
  
Recorded Investment
at Period End(1)
  
Reserve Balance Allocated within the Allowance for Loan Losses at Period End
  
Average Recorded Investment(1)
  
Interest
Income Recognized
 
One- to Four Family Residential, Including Condominium and Cooperative Apartment
          
   With no allocated reserve
 
$
1,066
  
$
987
  
$
-
  
$
1,010
  
$
42
 
   With an allocated reserve
  
255
   
212
   
-
   
211
   
14
 
Multifamily Residential and Residential Mixed Use
                    
   With no allocated reserve
  
2,494
   
2,345
   
-
   
2,851
   
163
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Commercial Mixed Use Real Estate
                    
   With no allocated reserve
  
-
   
-
   
-
   
1,272
   
200
 
   With an allocated reserve
  
4,500
   
4,400
   
1,320
   
880
   
-
 
Commercial Real Estate
                    
   With no allocated reserve
  
8,316
   
7,203
   
-
   
22,787
   
1,100
 
   With an allocated reserve
  
15,042
   
15,042
   
451
   
15,168
   
857
 
Construction
                    
   With no allocated reserve
  
-
   
-
   
-
   
-
   
-
 
   With an allocated reserve
  
-
   
-
   
-
   
-
   
-
 
Total
                    
   With no allocated reserve
 
$
11,876
  
$
10,535
  
$
-
  
$
27,920
  
$
1,505
 
   With an allocated reserve
 
$
19,797
  
$
19,654
  
$
1,771
  
$
16,259
  
$
871
 
(1) The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.


Reserve Liability for First Loss Position

Until February 20, 2014, the Bank serviced a pool of loans that it sold to FNMA and was subject to the First Loss Position.  The Bank maintained a reserve liability in relation to the First Loss Position that reflected estimated losses on this loan pool.  On February 20, 2014, the Bank repurchased the remaining loans within this pool and extinguished both the First Loss Position and related reserve liability.

The following is a summary of the aggregate balance of multifamily loans serviced for FNMA, the period-end First Loss Position associated with these loans and activity in the related liability:

  
At or for the Year Ended December 31,
 
  
2015
  
2014
  
2013
 
Outstanding balance of multifamily loans serviced for FNMA at period end
 
$
-
  
$
-
  
$
208,375
 
Total First Loss Position at end of period
  
-
   
-
   
15,428
 
Reserve Liability on the First Loss Position
            
Balance at beginning of period
 
$
-
  
$
1,040
  
$
1,383
 
Credit for losses on problem loans(1)
  
-
   
(1,040
)
  
(305
)
Charge-offs and other net reductions in balance
  
-
   
-
   
(38
)
Balance at period end
 
$
-
  
$
-
  
$
1,040
 
(1) Amount recognized as a portion of mortgage banking income during the period.