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ALLOWANCE FOR LOAN LOSSES
 3 Months Ended
Mar. 31, 2017
ALLOWANCE FOR LOAN LOSSES [Abstract]  
ALLOWANCE FOR LOAN LOSSES
8.
ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses may consist of specific and general components.  At March 31, 2017, the Bank’s periodic evaluation of its allowance for loan losses (specific or general) was comprised of two primary components: (1) impaired loans and (2) pass graded loans. Within these components, the Company has identified the following portfolio segments for purposes of assessing its allowance for loan losses: (1) real estate loans; (2) C&I loans; and (3) consumer loans.  Within these segments, the Bank analyzes the allowance for loan losses based upon the underlying collateral type (classes). Due to their small homogeneous balances, consumer loans were not individually evaluated for impairment as of either March 31, 2017 or December 31, 2016.

Impaired Loan Component

All multifamily residential, mixed use, commercial real estate, and C&I 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 some 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.  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 in measuring impairment (whichever is deemed most appropriate under the circumstances). If a TDR has re-defaulted, the likely realizable net proceeds from either a note sale or the liquidation of the collateral are generally considered when measuring impairment.  While measured impairment is generally charged off immediately, impairment attributed to a reduction in the present value of expected cash flows of a performing TDR is generally reflected as an allocated reserve within the allowance for loan losses. At March 31, 2017 and December 31, 2016, there were no allocated reserves related to TDRs within the allowance for loan losses.
 
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 Loan Component

During the three month period ended June 30, 2016, the Bank refined the calculation of the allowance for loan losses associated with non-impaired loans using third party software purchased by the Bank. The software model is substantially similar to the previous model used by the Bank whereby the primary drivers of the calculation are historical charge-offs by loan type and certain qualitative elements. The historical loss look-back period for Substandard and Special Mention non-impaired loans was expanded from the previous twelve month period to a forty-eight month period, which is aligned with the same historical loss look-back period used for all Pass-graded loans.  Management has evaluated the impact of these changes and concluded that they are not material to the overall allowance for non-impaired loans.

The Bank initially looks to the underlying collateral type when determining the allowance for loan losses associated with non-impaired real estate loans.  The following underlying collateral types are analyzed separately: 1) one- to four family residential and condominium or cooperative apartment; 2) multifamily residential and residential mixed use; 3) commercial mixed use real estate, 4) commercial real estate; 5) C&I and 6) 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 non-impaired 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 non-impaired loan portfolio are segmented by significant common characteristics, against which historical loss rates are applied to reflect probable incurred loss percentages.  The Bank also reviews and considers the charge-off experience of peer banks in its lending marketplace in order to determine whether probable incurred losses that could take a longer period to flow through its allowance for loan losses possibly exist.

(ii)  Economic conditions - The Bank assigned a loss allocation to its entire non-impaired 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.

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 at March 31, 2017.
 
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 tables present data regarding the allowance for loan losses activity for the periods indicated:

  
At or for the Three Months Ended March 31, 2017
 
  
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
  
Total
Real Estate
   
C&I
 
Beginning balance
 
$
145
  
$
16,555
  
$
1,698
  
$
2,118
  
$
20,516
  
$
-
  
$
20
 
Provision (credit) for loan losses
  
(4
)
  
134
   
(109
)
  
(23
)
  
(2
)
  
453
   
(1
)
Charge-offs
  
(13
)
  
(69
)
  
-
   
-
   
(82
)
  
-
   
-
 
Recoveries
  
1
   
45
   
-
   
4
   
50
   
-
   
-
 
Ending balance
 
$
129
  
$
16,665
  
$
1,589
  
$
2,099
  
$
20,482
  
$
453
  
$
19
 

  
At or for the Three Months Ended March 31, 2016
 
  
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
  
Total
Real Estate
 
Beginning balance
 
$
263
  
$
14,118
  
$
1,652
  
$
2,461
  
$
18,494
  
$
20
 
Provision (credit) for loan losses
  
(142
)
  
324
   
(99
)
  
(103
)
  
(20
)
  
(1
)
Charge-offs
  
(23
)
  
(17
)
  
(1
)
  
-
   
(41
)
  
-
 
Recoveries
  
1
   
37
   
-
   
23
   
61
   
-
 
Ending balance
 
$
99
  
$
14,462
  
$
1,552
  
$
2,381
  
$
18,494
  
$
19
 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment evaluation method as of the periods indicated:

  
At or for the Three Months Ended March 31, 2017
 
  
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
  
Total
Real Estate
   
C&I
 
Allowance for loan losses:
                      
Individually evaluated for impairment
 
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
 
Collectively evaluated for impairment
  
129
   
16,665
   
1,589
   
2,099
   
20,482
   
453
   
19
 
Total ending allowance balance
 
$
129
  
$
16,665
  
$
1,589
  
$
2,099
  
$
20,482
  
$
453
  
$
19
 
                             
Loans:
                            
Individually evaluated for impairment
 
$
402
  
$
3,272
  
$
4,735
  
$
3,347
  
$
11,756
  
$
-
  
$
-
 
Collectively evaluated for impairment
  
74,729
   
4,692,926
   
394,284
   
547,292
   
5,709,231
   
30,189
   
973
 
Total ending loans balance
 
$
75,131
  
$
4,696,198
  
$
399,019
  
$
550,639
  
$
5,720,987
  
$
30,189
  
$
973
 
 
  
At or for the Year Ended December 31, 2016
 
  
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
  
Total
Real Estate
   
C&I
 
Allowance for loan losses:
                      
Individually evaluated for impairment
 
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
 
Collectively evaluated for impairment
  
145
   
16,555
   
1,698
   
2,118
   
20,516
   
-
   
20
 
Total ending allowance balance
 
$
145
  
$
16,555
  
$
1,698
  
$
2,118
  
$
20,516
  
$
-
  
$
20
 
                             
Loans:
                            
Individually evaluated for impairment
 
$
407
  
$
3,333
  
$
4,810
  
$
3,363
  
$
11,913
  
$
-
  
$
-
 
Collectively evaluated for impairment
  
73,615
   
4,597,193
   
399,329
   
550,957
   
5,621,094
   
2,058
   
1,357
 
Total ending loans balance
 
$
74,022
  
$
4,600,526
  
$
404,139
  
$
554,320
  
$
5,633,007
  
$
2,058
  
$
1,357
 

There were no impaired real estate loans with a related allowance recorded for the periods ended March 31, 2017 or December 31, 2016.  The following tables summarize impaired real estate loans with no related allowance recorded as of the periods indicated (by collateral type within the real estate loan segment):

  
At March 31, 2017
  
At December 31, 2016
 
  
Unpaid
Principal
Balance
  
Recorded
Investment(1)
  
Related
Allowance
  
Unpaid
Principal
Balance
  
Recorded
Investment(1)
  
Related
Allowance
 
                   
With no related allowance recorded:
                  
One- to Four Family Residential, Including Condominium and Cooperative Apartment
 
$
402
  
$
402
  
$
-
  
$
407
  
$
407
  
$
-
 
Multifamily Residential and Residential Mixed Use
  
3,272
   
3,272
   
-
   
3,333
   
3,333
   
-
 
Commercial Mixed Use Real Estate
  
4,735
   
4,735
   
-
   
4,810
   
4,810
   
-
 
Commercial Real Estate
  
3,347
   
3,347
   
-
   
3,363
   
3,363
   
-
 
Total with no related allowance recorded
 
$
11,756
  
$
11,756
  
$
-
  
$
11,913
  
$
11,913
  
$
-
 
(1)
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.

The following table presents information for impaired loans for the periods indicated:

  
Three Months Ended
March 31, 2017
  
Three Months Ended
March 31, 2016
 
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
  
Average
Recorded
Investment(1)
  
Interest
Income
Recognized
 
             
With no related allowance recorded:
            
One- to Four Family Residential, Including Condominium and Cooperative Apartment
 
$
404
  
$
7
  
$
491
  
$
35
 
Multifamily Residential and Residential Mixed Use
  
3,302
   
46
   
978
   
12
 
Commercial Mixed Use Real Estate
  
4,773
   
45
   
4,361
   
44
 
Commercial Real Estate
  
3,355
   
34
   
3,523
   
34
 
Ending balance
 
$
11,834
  
$
132
  
$
9,353
  
$
125
 
(1)
The recorded investment excludes accrued interest receivable and loan origination fees, net, due to immateriality.