UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20192020
Or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________to ___________
Commission File Number: 0-50275
BCB Bancorp, Inc.
(Exact name of registrant as specified in its charter)
New Jersey | 26-0065262 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer I.D. No.) | |
104-110 Avenue C Bayonne, New Jersey | 07002 | |
(Address of principal executive offices) | (Zip Code) | |
(201) 823-0700
(Registrant’s telephone number, including area code)
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 “accelerated filer, larger accelerated filer, non-accelerated filer, smaller reporting company, or 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 November 1, 2019,2020, BCB Bancorp, Inc., had 16,478,73517,081,191 shares of common stock, no par value, outstanding.
BCB BANCORP INC. AND SUBSIDIARIES
INDEX
Page | |||||||
1 | |||||||
2 | |||||||
3 | |||||||
4 | |||||||
6 | |||||||
7 | |||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 | ||||||
| 45 | ||||||
45 | |||||||
45 | |||||||
45 | |||||||
46 | |||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 46 | ||||||
46 | |||||||
46 | |||||||
46 | |||||||
47 | |||||||
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)
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| September 30, |
| December 31, | September 30, | December 31, | |||||
| 2019 |
| 2018 | 2020 | 2019 | |||||
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ASSETS |
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Cash and amounts due from depository institutions | $ | 27,625 |
| $ | 18,970 | $ | 18,938 | $ | 24,985 | |
Interest-earning deposits |
| 348,986 |
|
| 176,294 | 141,613 | 525,368 | |||
Total cash and cash equivalents |
| 376,611 |
|
| 195,264 | 160,551 | 550,353 | |||
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Interest-earning time deposits |
| 735 |
| 735 | 735 | 735 | ||||
Debt securities available for sale |
| 98,218 |
| 119,335 | 119,643 | 91,613 | ||||
Equity investments |
| 5,857 |
| 7,672 | 14,501 | 2,500 | ||||
Loans held for sale |
| 3,195 |
| 1,153 | 1,510 | 917 | ||||
Loans receivable, net of allowance for loan losses |
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of $24,691 and $22,359 respectively |
| 2,253,699 |
| 2,278,492 | ||||||
of $31,760 and $23,734 respectively | 2,391,990 | 2,178,407 | ||||||||
Federal Home Loan Bank of New York stock, at cost |
| 15,171 |
| 13,405 | 13,160 | 13,821 | ||||
Premises and equipment, net |
| 20,315 |
| 20,293 | 15,968 | 19,920 | ||||
Accrued interest receivable |
| 8,959 |
| 8,378 | 17,746 | 8,318 | ||||
Other real estate owned |
| - |
| 1,333 | 1,623 | 1,623 | ||||
Deferred income taxes |
| 13,445 |
| 13,601 | 12,184 | 11,180 | ||||
Goodwill and other intangibles |
| 5,570 |
| 5,604 | 5,503 | 5,552 | ||||
Operating lease right-of-use assets |
| 13,951 |
| - | 15,798 | 13,246 | ||||
Bank-owned life insurance ("BOLI") | 60,385 | - | ||||||||
Other assets |
| 9,773 |
|
| 9,466 | 11,022 | 9,283 | |||
Total Assets | $ | 2,825,499 |
| $ | 2,674,731 | $ | 2,842,319 | $ | 2,907,468 | |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES |
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Non-interest bearing deposits | $ | 276,235 |
| $ | 263,960 | |||||
Non-interest -bearing deposits | $ | 395,630 | $ | 271,702 | ||||||
Interest bearing deposits |
| 1,987,222 |
|
| 1,916,764 | 1,877,708 | 2,090,361 | |||
Total deposits |
| 2,263,457 |
|
| 2,180,724 | 2,273,338 | 2,362,063 | |||
FHLB advances |
| 275,800 |
| 245,800 | 259,600 | 245,800 | ||||
Subordinated debt |
| 36,752 |
| 36,577 | ||||||
Subordinated debentures | 36,984 | 36,810 | ||||||||
Operating lease liability |
| 14,054 |
| - | 16,004 | 13,380 | ||||
Other liabilities and accrued interest payable |
| 11,717 |
|
| 11,415 | |||||
Other liabilities | 13,706 | 9,942 | ||||||||
Total Liabilities |
| 2,601,780 |
|
| 2,474,516 | 2,599,632 | 2,667,995 | |||
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STOCKHOLDERS' EQUITY |
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Preferred stock: $0.01 par value, 10,000,000 shares authorized; |
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issued and outstanding 8,340 shares of series C 6%, series D 4.5%, series G 6%, (liquidation value $10,000 per share) |
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and series F 6% (liquidation value $1,000 per share) noncumulative perpetual preferred stock |
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at September 30, 2019 and 7,807 shares of series C 6%, series D 4.5%, (liquidation value $10,000 per share) |
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and series F 6% (liquidation value $1,000 per share) noncumulative perpetual preferred stock at December 31, 2018 |
| - |
| - | ||||||
Preferred stock: $0.01 par value, 10,000,000 shares authorized; issued and outstanding 2,371 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 September 30, 2020 and 8,340 shares of Series C 6%, Series D 4.5%, Series G 6% (liquidation value $10,000 per share) and Series F 6% (liquidation value $1,000 per share) noncumulative perpetual preferred stock at December 31, 2019 | - | - | ||||||||
Additional paid-in capital preferred stock |
| 25,016 |
| 19,706 | 23,481 | 25,016 | ||||
Common stock: no par value; 40,000,000 shares authorized; issued 18,444,453 and 18,352,748 |
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at September 30, 2019 and December 31, 2018, respectively, outstanding 16,477,235 shares and |
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15,889,306 shares, at September 30, 2019 and December 31, 2018, respectively |
| - |
| - | ||||||
Common stock: 0 par value; 40,000,000 shares authorized; issued 19,548,409 and 19,484,046 at September 30, 2020 and December 31, 2019, respectively, outstanding 17,081,191 shares and 17,516,828 shares, at September 30, 2020 and December 31, 2019, respectively | - | - | ||||||||
Additional paid-in capital common stock |
| 177,253 |
| 175,500 | 191,755 | 190,294 | ||||
Retained earnings |
| 45,947 |
| 38,405 | 53,742 | 48,429 | ||||
Accumulated other comprehensive (loss) |
| (2,449) |
| (5,076) | ||||||
Treasury stock, at cost, 1,967,218 and 2,463,442 shares at September 30, 2019 and December 31, 2018, respectively |
| (22,048) |
|
| (28,320) | |||||
Accumulated other comprehensive income (loss) | 627 | (2,218) | ||||||||
Treasury stock, at cost, 2,467,218 and 1,967,218 shares at September 30, 2020 and December 31, 2019, respectively | (26,918) | (22,048) | ||||||||
Total Stockholders' Equity |
| 223,719 |
|
| 200,215 | 242,687 | 239,473 | |||
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Total Liabilities and Stockholders' Equity | $ | 2,825,499 |
| $ | 2,674,731 | $ | 2,842,319 | $ | 2,907,468 | |
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See accompanying notes to unaudited consolidated financial statements. | ||||||||||
See accompanying notes to unaudited consolidated financial statements
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, Except for Per Share Amounts, Unaudited)
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| Three Months Ended September 30, |
| Nine Months Ended September 30, | |||||||||||||||||||
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| 2019 |
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| 2018 |
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| 2019 |
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| 2018 | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
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| 2020 | 2019 | 2020 | 2019 | |||||||
Interest and dividend income: |
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Loans, including fees | $ | 28,860 |
| $ | 26,019 |
| $ | 85,727 |
| $ | 69,588 | $ | 27,126 | $ | 28,860 | $ | 80,063 | $ | 85,727 | |||
Mortgage-backed securities |
| 652 |
| 827 |
|
| 2,160 |
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| 2,363 | 393 | 652 | 1,450 | 2,160 | ||||||||
Other investment securities |
| 107 |
| 116 |
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| 432 |
|
| 416 | 693 | 107 | 947 | 432 | ||||||||
FHLB stock and other interest earning assets |
| 1,750 |
|
| 1,009 |
|
| 4,270 |
|
| 2,242 | 254 | 1,750 | 2,631 | 4,270 | |||||||
Total interest income |
| 31,369 |
|
| 27,971 |
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| 92,589 |
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| 74,609 | 28,466 | 31,369 | 85,091 | 92,589 | |||||||
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Interest expense: |
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Deposits: |
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Demand |
| 1,898 |
| 1,130 |
|
| 5,224 |
|
| 2,902 | 1,157 | 1,898 | 4,927 | 5,224 | ||||||||
Savings and club |
| 102 |
| 116 |
|
| 325 |
|
| 318 | 113 | 102 | 324 | 325 | ||||||||
Certificates of deposit |
| 6,603 |
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| 4,591 |
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| 18,690 |
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| 10,726 | 4,531 | 6,603 | 16,658 | 18,690 | |||||||
|
| 8,603 |
|
| 5,837 |
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| 24,239 |
|
| 13,946 | 5,801 | 8,603 | 21,909 | 24,239 | |||||||
Borrowings |
| 2,006 |
|
| 2,054 |
|
| 5,823 |
|
| 4,153 | 1,775 | 2,006 | 5,523 | 5,823 | |||||||
Total interest expense |
| 10,609 |
|
| 7,891 |
|
| 30,062 |
|
| 18,099 | 7,576 | 10,609 | 27,432 | 30,062 | |||||||
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Net interest income |
| 20,760 |
| 20,080 |
|
| 62,527 |
|
| 56,510 | 20,890 | 20,760 | 57,659 | 62,527 | ||||||||
Provision for loan losses |
| 900 |
|
| 907 |
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| 2,544 |
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| 4,309 | 2,726 | 900 | 7,526 | 2,544 | |||||||
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Net interest income after provision for loan losses |
| 19,860 |
|
| 19,173 |
|
| 59,983 |
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| 52,201 | 18,164 | 19,860 | 50,133 | 59,983 | |||||||
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Non-interest income: |
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Fees and service charges |
| 855 |
| 1,092 |
|
| 2,540 |
|
| 2,773 | 875 | 855 | 2,138 | 2,540 | ||||||||
Gain on sales of loans |
| 89 |
| 738 |
|
| 844 |
|
| 1,897 | 174 | 89 | 292 | 844 | ||||||||
Gain (loss) on bulk sale of impaired loans held in portfolio |
| - |
| - |
|
| 107 |
|
| (24) | ||||||||||||
Gain on bulk sale of impaired loans held in portfolio | - | - | - | 107 | ||||||||||||||||||
Gain on sales of other real estate owned |
| 124 |
| 14 |
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| 177 |
|
| 4 | - | 124 | - | 177 | ||||||||
Gain on sale of investment securities |
| 283 |
| - |
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| 304 |
|
| - | 306 | 283 | 306 | 304 | ||||||||
Unrealized (loss) gain on equity investments |
| (45) |
| (82) |
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| 220 |
|
| (242) | ||||||||||||
Gain on sale of premises | 4,378 | - | 4,378 | - | ||||||||||||||||||
BOLI income | 385 | - | 385 | - | ||||||||||||||||||
Realized and unrealized gain (loss) on equity investments | 778 | (45) | 820 | 220 | ||||||||||||||||||
Other |
| 77 |
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| 90 |
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| 179 |
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| 2,393 | 59 | 77 | 427 | 179 | |||||||
Total non-interest income |
| 1,383 |
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| 1,852 |
|
| 4,371 |
|
| 6,801 | 6,955 | 1,383 | 8,746 | 4,371 | |||||||
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Non-interest expense: |
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Salaries and employee benefits |
| 7,294 |
| 7,156 |
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| 21,127 |
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| 20,548 | 6,385 | 7,294 | 19,456 | 21,127 | ||||||||
Occupancy and equipment |
| 2,647 |
| 2,490 |
|
| 7,926 |
|
| 7,028 | 2,996 | 2,647 | 8,730 | 7,926 | ||||||||
Data processing and service fees |
| 776 |
| 942 |
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| 2,128 |
|
| 2,499 | 937 | 776 | 2,826 | 2,128 | ||||||||
Professional fees |
| 368 |
| 437 |
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| 1,474 |
|
| 1,475 | 421 | 368 | 1,289 | 1,474 | ||||||||
Director fees |
| 356 |
| 192 |
|
| 990 |
|
| 594 | 471 | 356 | 1,194 | 990 | ||||||||
Regulatory assessments |
| (91) |
| 419 |
|
| 783 |
|
| 948 | ||||||||||||
Regulatory assessments (credits) | 311 | (91) | 883 | 783 | ||||||||||||||||||
Advertising and promotional |
| 64 |
| 129 |
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| 260 |
|
| 314 | 18 | 64 | 105 | 260 | ||||||||
Other real estate owned, net |
| (31) |
| 22 |
|
| 77 |
|
| 213 | 11 | (31) | 58 | 77 | ||||||||
Merger related costs |
| - |
| 119 |
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| - |
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| 2,303 | ||||||||||||
Loss from extinguishment of debt | 313 | - | 313 | - | ||||||||||||||||||
Other |
| 2,269 |
|
| 2,485 |
|
| 6,558 |
|
| 6,460 | 1,479 | 2,269 | 4,804 | 6,558 | |||||||
Total non-interest expense |
| 13,652 |
|
| 14,391 |
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| 41,323 |
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| 42,382 | 13,342 | 13,652 | 39,658 | 41,323 | |||||||
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Income before income tax provision |
| 7,591 |
| 6,634 |
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| 23,031 |
|
| 16,620 | 11,777 | 7,591 | 19,221 | 23,031 | ||||||||
Income tax provision |
| 2,359 |
|
| 2,040 |
|
| 7,121 |
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| 5,081 | 3,465 | 2,359 | 5,662 | 7,121 | |||||||
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Net Income | $ | 5,232 |
| $ | 4,594 |
| $ | 15,910 |
| $ | 11,539 | $ | 8,312 | $ | 5,232 | $ | 13,559 | $ | 15,910 | |||
Preferred stock dividends |
| 342 |
|
| 263 |
|
| 1,002 |
|
| 691 | 332 | 342 | 1,014 | 1,002 | |||||||
Net Income available to common stockholders | $ | 4,890 |
| $ | 4,331 |
| $ | 14,908 |
| $ | 10,848 | $ | 7,980 | $ | 4,890 | $ | 12,545 | $ | 14,908 | |||
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Net Income per common share-basic and diluted |
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Basic | $ | 0.30 |
| $ | 0.27 |
| $ | 0.91 |
| $ | 0.70 | $ | 0.47 | $ | 0.30 | $ | 0.73 | $ | 0.91 | |||
Diluted | $ | 0.30 |
| $ | 0.27 |
| $ | 0.91 |
| $ | 0.69 | $ | 0.47 | $ | 0.30 | $ | 0.73 | $ | 0.91 | |||
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Weighted average number of common shares outstanding |
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Basic |
| 16,468 |
|
| 15,789 |
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| 16,320 |
|
| 15,482 | 17,069 | 16,468 | 17,250 | 16,320 | |||||||
Diluted |
| 16,523 |
|
| 15,896 |
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| 16,369 |
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| 15,609 | 17,069 | 16,523 | 17,268 | 16,369 | |||||||
See accompanying notes to unaudited consolidated financial statements.
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands, Unaudited)
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| Three Months Ended September 30, |
| Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2019 |
| 2018 |
| 2019 |
| 2018 | 2020 | 2019 | 2020 | 2019 | |||||||||||
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Net Income | $ | 5,232 |
| $ | 4,594 |
| $ | 15,910 |
| $ | 11,539 | $ | 8,312 | $ | 5,232 | $ | 13,559 | $ | 15,910 | |||
Other comprehensive income (loss), net of tax: |
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Other comprehensive (loss) income, net of tax: | ||||||||||||||||||||||
Unrealized (losses) gains on available-for-sale debt securities: |
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Unrealized holding (losses) gains arising during the period |
| (713) |
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| (845) |
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| 3,488 |
|
| (4,189) | (129) | (713) | 3,783 | 3,488 | |||||||
Tax Effect |
| 193 |
|
| 155 |
|
| (861) |
|
| 967 | 32 | 193 | (938) | (861) | |||||||
Net of Tax Effect |
| (520) |
|
| (690) |
|
| 2,627 |
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| (3,222) | |||||||||||
Other comprehensive (loss) income |
| (520) |
|
| (690) |
|
| 2,627 |
|
| (3,222) | (97) | (520) | 2,845 | 2,627 | |||||||
Comprehensive income | $ | 4,712 |
| $ | 3,904 |
| $ | 18,537 |
| $ | 8,317 | $ | 8,215 | $ | 4,712 | $ | 16,404 | $ | 18,537 | |||
See accompanying notes to unaudited consolidated financial statements.
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity
(In thousands, Except Share and Per Share Data, Unaudited)
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| Preferred Stock |
| Common Stock |
| Additional Paid-In Capital |
| Retained Earnings |
| Treasury Stock |
| Accumulated Other Comprehensive Income (Loss) |
| Total | |||||||
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Balance at December 31, 2018 | $ | - |
| $ | - |
| $ | 195,206 |
| $ | 38,405 |
| $ | (28,320) |
| $ | (5,076) |
| $ | 200,215 |
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Issuance of common stock |
| - |
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| - |
|
| 6,239 |
|
| - |
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| - |
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| - |
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| 6,239 |
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|
|
|
|
Issuance of Series G Preferred Stock |
| - |
|
| - |
|
| 5,310 |
|
| - |
|
| - |
|
| - |
|
| 5,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
| - |
|
| - |
|
| 688 |
|
| - |
|
| - |
|
| - |
|
| 688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock allocated to Common Stock issuance |
| - |
|
| - |
|
| (5,707) |
|
| (565) |
|
| 6,272 |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock |
| - |
|
| - |
|
| - |
|
| (1,002) |
|
| - |
|
| - |
|
| (1,002) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends on common stock ($0.14 per share declared) |
| - |
|
| - |
|
| - |
|
| (6,516) |
|
| - |
|
| - |
|
| (6,516) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Reinvestment Plan |
| - |
|
| - |
|
| 285 |
|
| (285) |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan |
| - |
|
| - |
|
| 248 |
|
| - |
|
| - |
|
| - |
|
| 248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| - |
|
| - |
|
| - |
|
| 15,910 |
|
| - |
|
| - |
|
| 15,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 2,627 |
|
| 2,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 | $ | - |
| $ | - |
| $ | 202,269 |
| $ | 45,947 |
| $ | (22,048) |
| $ | (2,449) |
| $ | 223,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred Stock |
| Common Stock |
| Additional Paid-In Capital |
| Retained Earnings |
| Treasury Stock |
| Accumulated Other Comprehensive Income (Loss) |
| Total | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019 | $ | - |
| $ | - |
| $ | 201,783 |
| $ | 43,347 |
| $ | (22,048) |
| $ | (1,929) |
| $ | 221,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
| - |
|
| - |
|
| 291 |
|
| - |
|
| - |
|
| - |
|
| 291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock |
| - |
|
| - |
|
| - |
|
| (343) |
|
| - |
|
| - |
|
| (343) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends on common stock ($0.14 per share declared) |
| - |
|
| - |
|
| - |
|
| (2,190) |
|
| - |
|
| - |
|
| (2,190) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Reinvestment Plan |
| - |
|
| - |
|
| 99 |
|
| (99) |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan |
| - |
|
| - |
|
| 96 |
|
| - |
|
| - |
|
|
|
|
| 96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| - |
|
| - |
|
| - |
|
| 5,232 |
|
| - |
|
| - |
|
| 5,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (520) |
|
| (520) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 | $ | - |
| $ | - |
| $ | 202,269 |
| $ | 45,947 |
| $ | (22,048) |
| $ | (2,449) |
| $ | 223,719 |
Preferred | Common | Additional | Retained | Treasury | Accumulated | Total | ||||||||||||||
Balance at December 31,2019 | $ | - | $ | - | $ | 215,310 | $ | 48,429 | $ | (22,048) | $ | (2,218) | $ | 239,473 | ||||||
Net income | - | - | - | 13,559 | - | - | 13,559 | |||||||||||||
Other comprehensive income | - | - | - | - | - | 2,845 | 2,845 | |||||||||||||
Costs for issuance of common stock | - | - | (126) | - | - | - | (126) | |||||||||||||
Issuance of Series H preferred stock | - | - | 8,950 | - | - | - | 8,950 | |||||||||||||
Redemption of Series C, D, and F preferred stock | - | - | (10,485) | - | - | - | (10,485) | |||||||||||||
Exercise of stock options (500 shares) | - | - | 5 | - | - | - | 5 | |||||||||||||
Stock-based compensation expense | - | - | 944 | - | - | - | 944 | |||||||||||||
Treasury stock purchases (500,000 shares) | - | - | - | - | (4,870) | - | (4,870) | |||||||||||||
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 | - | - | - | (1,014) | - | - | (1,014) | |||||||||||||
Cash dividends on common stock ($0.14 per share declared) | - | - | - | (6,915) | - | - | (6,915) | |||||||||||||
Dividend reinvestment plan | - | - | 317 | (317) | - | - | - | |||||||||||||
Stock purchase plan | - | - | 321 | - | - | - | 321 | |||||||||||||
Balance at September 30, 2020 | $ | - | $ | - | $ | 215,236 | $ | 53,742 | $ | (26,918) | $ | 627 | $ | 242,687 | ||||||
Preferred | Common | Additional | Retained | Treasury | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||
Balance at June 30, 2020 | $ | - | $ | - | $ | 219,116 | $ | 48,097 | $ | (26,918) | $ | 724 | $ | 241,019 | ||||||
Net income | - | - | - | 8,312 | - | - | 8,312 | |||||||||||||
Other comprehensive loss | - | - | - | - | - | (97) | (97) | |||||||||||||
Issuance of Series H preferred stock | - | - | 5,870 | - | - | - | 5,870 | |||||||||||||
Redemption of Series C and F preferred stock | - | - | (10,345) | - | - | - | (10,345) | |||||||||||||
Stock-based compensation expense | - | - | 385 | - | - | - | 385 | |||||||||||||
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 | - | - | - | (332) | - | - | (332) | |||||||||||||
Cash dividends on common stock ($0.14 per share declared) | - | - | - | (2,227) | - | - | (2,227) | |||||||||||||
Dividend reinvestment plan | - | - | 108 | (108) | - | - | - | |||||||||||||
Stock purchase plan | - | - | 102 | - | - | - | 102 | |||||||||||||
Balance at September 30, 2020 | $ | - | $ | - | $ | 215,236 | $ | 53,742 | $ | (26,918) | $ | 627 | $ | 242,687 | ||||||
See accompanying notes to unaudited consolidated financial statements.
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders’ Equity (Continued)
(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 December 31, 2017 | $ | - |
| $ | - |
| $ | 177,471 |
| $ | 31,241 |
| $ | (29,116) |
| $ | (3,142) |
| $ | 176,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of IA Bancorp |
| - |
|
| - |
|
| 17,405 |
|
| - |
|
| - |
|
| - |
|
| 17,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of Stock Options |
| - |
|
| - |
|
| 2 |
|
| - |
|
| - |
|
| - |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based Compensation Expense |
| - |
|
| - |
|
| 230 |
|
| - |
|
| - |
|
| - |
|
| 230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on Series C 6%, Series D 4.5%, Series E 6%, and Series F 6% noncumulative perpetual preferred stock |
| - |
|
| - |
|
| - |
|
| (691) |
|
| - |
|
| - |
|
| (691) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends on common stock ($0.14 per share declared) |
| - |
|
| - |
|
| - |
|
| (6,275) |
|
| - |
|
| - |
|
| (6,275) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Reinvestment Plan |
| - |
|
| - |
|
| 247 |
|
| (247) |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan |
| - |
|
| - |
|
| 321 |
|
| - |
|
| - |
|
| - |
|
| 321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| - |
|
| - |
|
| - |
|
| 11,539 |
|
| - |
|
| - |
|
| 11,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of unrealized gains on AFS equity securities |
| - |
|
| - |
|
| - |
|
| 126 |
|
| - |
|
| (126) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (3,222) |
|
| (3,222) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018 | $ | - |
| $ | - |
| $ | 195,676 |
| $ | 35,693 |
| $ | (29,116) |
| $ | (6,490) |
| $ | 195,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred Stock |
| Common Stock |
| Additional Paid-In Capital |
| Retained Earnings |
| Treasury Stock |
| Accumulated Other Comprehensive Income (Loss) |
| Total | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018 | $ | - |
| $ | - |
| $ | 195,422 |
| $ | 33,571 |
| $ | (29,116) |
| $ | (5,800) |
| $ | 194,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of IA Bancorp |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
| - |
|
| - |
|
| 66 |
|
| - |
|
| - |
|
| - |
|
| 66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends payable on Series C 6%, Series D 4.5%, Series E 6%, and Series F 6% noncumulative perpetual preferred stock |
| - |
|
| - |
|
| - |
|
| (263) |
|
| - |
|
| - |
|
| (263) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends on common stock ($0.14 per share declared) |
| - |
|
| - |
|
| - |
|
| (2,125) |
|
| - |
|
| - |
|
| (2,125) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Reinvestment Plan |
| - |
|
| - |
|
| 84 |
|
| (84) |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan |
| - |
|
| - |
|
| 104 |
|
| - |
|
| - |
|
|
|
|
| 104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| - |
|
| - |
|
| - |
|
| 4,594 |
|
| - |
|
| - |
|
| 4,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (690) |
|
| (690) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018 | $ | - |
| $ | - |
| $ | 195,676 |
| $ | 35,693 |
| $ | (29,116) |
| $ | (6,490) |
| $ | 195,763 |
Preferred | Common | Additional | Retained | Treasury | Accumulated | Total | ||||||||||||||
Balance at December 31, 2018 | $ | - | $ | - | $ | 195,206 | $ | 38,405 | $ | (28,320) | $ | (5,076) | $ | 200,215 | ||||||
Net income | - | - | - | 15,910 | - | - | 15,910 | |||||||||||||
Other comprehensive income | - | - | - | - | - | 2,627 | 2,627 | |||||||||||||
Issuance of common stock | - | - | 6,239 | - | - | - | 6,239 | |||||||||||||
Issuance of Series G Preferred Stock | - | - | 5,310 | - | - | - | 5,310 | |||||||||||||
Stock-based compensation expense | - | - | 688 | - | - | - | 688 | |||||||||||||
Treasury stock allocated to Common Stock issuance | - | - | (5,707) | (565) | 6,272 | - | - | |||||||||||||
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock | - | - | - | (1,002) | - | - | (1,002) | |||||||||||||
Cash dividends on common stock ($0.14 per share declared) | - | - | - | (6,516) | - | - | (6,516) | |||||||||||||
Dividend reinvestment plan | - | - | 285 | (285) | - | - | - | |||||||||||||
Stock purchase plan | - | - | 248 | - | - | - | 248 | |||||||||||||
Balance at September 30, 2019 | $ | - | $ | - | $ | 202,269 | $ | 45,947 | $ | (22,048) | $ | (2,449) | $ | 223,719 | ||||||
Preferred | Common | Additional | Retained | Treasury | Accumulated | Total | ||||||||||||||
Balance at June 30, 2019 | $ | - | $ | - | $ | 201,783 | $ | 43,347 | $ | (22,048) | $ | (1,929) | $ | 221,153 | ||||||
Net income | - | - | - | 5,232 | - | - | 5,232 | |||||||||||||
Other comprehensive loss | - | - | - | - | - | (520) | (520) | |||||||||||||
Stock-based compensation expense | - | - | 291 | - | - | - | 291 | |||||||||||||
Dividends payable on Series C 6%, Series D 4.5%, Series F 6%, and Series G 6% noncumulative perpetual preferred stock | - | - | - | (343) | - | - | (343) | |||||||||||||
Cash dividends on common stock ($0.14 per share declared) | - | - | - | (2,190) | - | - | (2,190) | |||||||||||||
Dividend reinvestment plan | - | - | 99 | (99) | - | - | - | |||||||||||||
Stock purchase plan | - | - | 96 | - | - | - | 96 | |||||||||||||
Balance at September 30, 2019 | $ | - | $ | - | $ | 202,269 | $ | 45,947 | $ | (22,048) | $ | (2,449) | $ | 223,719 | ||||||
See accompanying notes to unaudited consolidated financial statements.
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands, Unaudited)
Nine Months Ended September 30, | |||||
2020 | 2019 | ||||
Cash Flows from Operating Activities : | |||||
Net Income | $ | 13,559 | $ | 15,910 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation of premises and equipment | 2,216 | 2,146 | |||
Amortization and accretion, net | (1,864) | (2,206) | |||
Provision for loan losses | 7,526 | 2,544 | |||
Deferred income tax benefit | (1,942) | (859) | |||
Loans originated for sale | (13,112) | (15,065) | |||
Proceeds from sales of loans | 12,811 | 13,867 | |||
Gain on sales of loans originated for sale | (292) | (844) | |||
Gain on sales of other real estate owned | - | (177) | |||
Gain on sales of securities available for sale | (306) | (304) | |||
Gain on sale of premises | (4,378) | - | |||
Realized and unrealized gain on equity investments | (820) | (220) | |||
Gain on bulk sale of impaired loans held in portfolio | - | (107) | |||
Stock-based compensation expense | 944 | 688 | |||
BOLI income | (385) | - | |||
Increase in interest receivable | (9,428) | (581) | |||
Increase in other assets | (1,739) | (307) | |||
Decrease in accrued interest payable | (1,223) | (331) | |||
Increase in other liabilities | 4,987 | 831 | |||
Net Cash Provided by Operating Activities | 6,554 | 14,985 | |||
Cash flows from investing activities: | |||||
Proceeds from repayments, calls, and maturities on securities available for sale | 24,663 | 13,691 | |||
Purchases of securities | (70,561) | (1,153) | |||
Proceeds from sales of other real estate owned | - | 2,417 | |||
Proceeds from bulk sale of impaired loans held | - | 402 | |||
Proceeds from sales of securities | 10,419 | 14,234 | |||
Purchase of loans | (48,360) | - | |||
Net (increase) decrease in loans receivable | (170,233) | 23,693 | |||
Purchases of BOLI | (60,000) | - | |||
Additions to premises and equipment | (1,305) | (2,168) | |||
Proceeds from the sale of fixed assets and premises | 7,419 | - | |||
Redemption (Purchase) of Federal Home Loan Bank of New York stock | 661 | (1,766) | |||
Net Cash (Used In) Provided by Investing Activities | (307,297) | 49,350 | |||
Cash flows from financing activities: | |||||
Net (decrease) increase in deposits | (88,725) | 82,733 | |||
Proceeds from Federal Home Loan Bank of New York advances | 48,800 | 40,000 | |||
Repayments of Federal Home Loan Bank of New York advances | (35,000) | (10,000) | |||
Purchases of treasury stock | (4,870) | - | |||
Cash dividends paid on common stock | (6,915) | (6,516) | |||
Cash dividends paid on preferred stock | (1,014) | (1,002) | |||
Net proceeds from issuance of common stock | 195 | 6,487 | |||
Net proceeds from issuance of preferred stock | 8,950 | 5,310 | |||
Net payment on redemption of preferred stock | (10,485) | - | |||
Exercise of stock options | 5 | - | |||
Net Cash (Used In) Provided by Financing Activities | (89,059) | 117,012 | |||
Net (Decrease) Increase in Cash and Cash Equivalents | (389,802) | 181,347 | |||
Cash and Cash Equivalents-Beginning | 550,353 | 195,264 | |||
Cash and Cash Equivalents-Ending | $ | 160,551 | $ | 376,611 | |
Supplementary Cash Flow Information: | |||||
Cash paid during the year for: | |||||
Income taxes | $ | 10,554 | $ | 8,492 | |
Interest | 28,656 | 30,393 | |||
Non-cash items: | |||||
Transfer of loans to other real estate owned | $ | - | $ | 907 | |
|
|
|
|
|
|
| Nine Months Ended September 30, | ||||
| 2019 |
| 2018 | ||
Cash Flows from Operating Activities : |
|
|
|
|
|
Net Income | $ | 15,910 |
| $ | 11,539 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation of premises and equipment |
| 2,146 |
|
| 2,039 |
Amortization and accretion, net |
| (2,206) |
|
| (2,191) |
Provision for loan losses |
| 2,544 |
|
| 4,309 |
Deferred income tax (benefit) |
| (859) |
|
| (284) |
Loans originated for sale |
| (15,065) |
|
| (17,320) |
Proceeds from sales of loans |
| 13,867 |
|
| 18,740 |
Gain on sales of loans originated for sale |
| (844) |
|
| (1,897) |
Gain on sales of other real estate owned |
| (177) |
|
| (4) |
Gains on sales of securities available for sale |
| (304) |
|
| - |
Fair value adjustment of OREO |
| - |
|
| 101 |
Unrealized (gain) loss on equity investments |
| (220) |
|
| 242 |
(Gain) loss on bulk sale of impaired loans held in portfolio |
| (107) |
|
| 24 |
Stock-based compensation expense |
| 688 |
|
| 230 |
(Increase) in interest receivable |
| (581) |
|
| (1,870) |
(Increase) in other assets |
| (307) |
|
| (2,637) |
(Decrease) increase in accrued interest payable |
| (331) |
|
| 1,132 |
Increase in other liabilities |
| 831 |
|
| 1,376 |
Net Cash Provided by Operating Activities |
| 14,985 |
|
| 13,529 |
Cash flows from investing activities: |
|
|
|
|
|
Proceeds from repayments, calls, and maturities on securities available for sale |
| 13,691 |
|
| 20,286 |
Purchases of securities available for sale |
| (1,153) |
|
| (16,353) |
Proceeds from sales of other real estate owned |
| 2,417 |
|
| 502 |
Proceeds from bulk sale of impaired loans held |
| 402 |
|
| 250 |
Proceeds from sales of securities available for sale |
| 14,234 |
|
| - |
Net decrease (increase) in loans receivable |
| 23,693 |
|
| (401,888) |
Additions to premises and equipment |
| (2,168) |
|
| (829) |
(Purchase) of Federal Home Loan Bank of New York stock |
| (1,766) |
|
| (3,381) |
Cash acquired in acquisition |
| - |
|
| 7,597 |
Cash paid in acquisition |
| - |
|
| (2,550) |
Net Cash Provided by (Used In) Investing Activities |
| 49,350 |
|
| (396,366) |
Cash flows from financing activities: |
|
|
|
|
|
Net increase in deposits |
| 82,733 |
|
| 368,818 |
Proceeds from Federal Home Loan Bank of New York advances |
| 40,000 |
|
| 175,800 |
Repayments of Federal Home Loan Bank of New York advances |
| (10,000) |
|
| (105,000) |
Cash dividends paid on common stock |
| (6,516) |
|
| (6,275) |
Cash dividends paid on preferred stock |
| (1,002) |
|
| (691) |
Net proceeds from issuance of common stock |
| 6,487 |
|
| 321 |
Net proceeds from issuance of preferred stock |
| 5,310 |
|
| - |
Net proceeds from issuance of subordinated debt |
| - |
|
| 32,337 |
Exercise of stock options |
| - |
|
| 2 |
Net Cash Provided by Financing Activities |
| 117,012 |
|
| 465,312 |
|
|
|
|
|
|
Net Increase In Cash and Cash Equivalents |
| 181,347 |
|
| 82,475 |
Cash and Cash Equivalents-Beginning |
| 195,264 |
|
| 124,235 |
|
|
|
|
|
|
Cash and Cash Equivalents-Ending | $ | 376,611 |
| $ | 206,710 |
|
|
|
|
|
|
Supplementary Cash Flow Information: |
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
Income taxes | $ | 8,492 |
| $ | 6,706 |
Interest |
| 30,393 |
|
| 16,968 |
Non-cash items: |
|
|
|
|
|
Transfer of loans to other real estate owned | $ | 907 |
| $ | 972 |
See accompanying notes to unaudited consolidated financial statements
BCB Bancorp Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 1 – Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of BCB Bancorp, Inc. (the “Company”) and the Company’s wholly owned subsidiaries, BCB Community Bank (the “Bank”), BCB Holding Company Investment Company, BCB New York Asset Management, Inc.,Corporation, Pamrapo Service Corporation, REO Special Asset REO I, LLC., and REO 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, 20192020 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, 2018,2019, 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 September 30,December 31, 2019 and the date these consolidated financial statements were issued.
Risks and Uncertainties - We are subject to risks and uncertainties as a result of the 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. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic.
The severity of the impact of the 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, 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 FebruaryJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which superseded the lease requirements in Topic 840. The ASU requires lessees to recognize a right of use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of income. Previously, leases were classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows is generally consistent with the prior guidance. The new guidance became effective for the Company in 2019. The standard has been applied using a modified retrospective transition method. The right-of-use asset and lease liability are reported on the Company’s consolidated statement of financial condition. The adoption of the provisions of this update did not have a significant impact to our consolidated statements of income. At September 30, 2019, the Company had $14.0 million in capitalized lease right-of-use assets and $14.1 million in related lease liabilities.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. 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 2020. On October 16, 2019, the FASB approved changes to the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. The proposal will delay the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company, the delay is applicable to the Company.2023. The Company ishas 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.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance amends existing guidance to improve accounting standards for financial instruments including clarification and simplification of accounting and disclosure requirements and the requirement for public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company recordedhas created a cumulative effect adjustment toCurrent 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 balance sheet asprovisions of January 1, 2018ASU 2016-13 and is in the amountprocess of $126,000, representingimplementing the unrealized gain of $175,000 at December 31, 2017 net of taxes of $49,000. The Company recorded a lossnew guidance, which includes, but is not limited to: (1) identifying segments and gainsub-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 income statement in the amounts of $45,000 and $220,000, respectively,for the three and nine months ended September 30, 2019 and losses of $82,000 and $242,000 for the three and nine months ended September 30, 2018.
In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). The main objective of this ASU is to simplify the accounting for goodwill impairment by requiring impairment charges be based upon the first step in the current two-step impairment test under Accounting Standards Codification (ASC) 350. Currently, if the fair value of a reporting unit is lower than its carrying amount (Step 1), an entity calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). This ASU’s objective is to simplify how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017.model. The Company is currently evaluating the impact of the pending adoptioneffect this guidance may have on its consolidatedoperating results and/or financial statements.position, including assessing any potential impact on its capital.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic(Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as a result of a broader disclosure project. The Update amends the disclosure requirements for fair value measurements to improve the effectiveness of the disclosure. The Update removes and modifies certain disclosure requirements, as well as adds requirements for public business entities. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of the Update and delay adoption of the additional disclosures until their effective date. This ASU will affectonly affected the Company’s disclosures only and willdid not have a financial statement impact.
7
Note 3 – Reclassification
Certain amounts as of December 31, 20182019 and for the threethree-month and nine monthnine-month periods ended September 30, 20182019 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 – Pension and Equity Incentive Plans
Pension PlanEquity Incentive Plans
The Company, assumed, throughunder the merger with Pamrapo Bancorp, Inc., a non-contributory defined benefit pension plan covering all eligible employees of Pamrapo Savings Bank. Effective January 1, 2010, the defined benefit pension planapproved by its shareholders on April 28, 2011 (“Pension2011 Stock Plan”), was frozen by Pamrapo Savings Bank. All benefits forauthorized 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 participants accruedto participate in the Pension Plan to2011 Stock Plan. All stock options will be granted in the freeze dateform of either "incentive" stock options or "non-qualified" stock options. Incentive stock options have been retained. Accordingly, nocertain tax advantages that must comply with the requirements of Section 422 of the Internal Revenue Code. Only employees are permitted to commence participation in the Pension Plan and future salary increases and future years of service are not considered when computing an employee’s benefits under the Pension Plan. The Pension Plan is funded in conformity with the funding requirements of applicable government regulations. The Company also acquired through the merger with Pamrapo Bancorp, Inc. a supplemental executive retirement plan (“SERP”) in which certain former employees of Pamrapo Savings Bank are covered. A SERP is an unfunded non-qualified deferred retirement plan. Participants who retire at the age of 65 (the “Normal Retirement Age”), are entitled to an annual retirement benefit equal to 75% of compensation reduced by their retirement plan annual benefits. Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.incentive stock options.
Net periodic pension cost for the three and nine months ended September 30, 2019 and September 30, 2018 was $63,000, $146,000, $10,000, and $30,000, respectively. Net periodic postretirement cost for the SERP plan for each of the three and nine months ended September 30, 2019 and September 30, 2018 was $3,000, $9,000, $3,000, and $9,000, respectively.
Equity Incentive Plans
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 June 14, 2019, a grant of 68,750 options was declared for members of the Board of Directors of the Bank and the Company which vest at a rate of 50% per year, over two years, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on June 14, 2019. On June 14, 2019, a grant of 30,125 options was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. The exercise price was recorded as of the close of business on June 14, 2019. On June 14, 2019, an award of 33,110 shares of restricted stock was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On June 14, 2019, an award of 14,508 shares of restricted stock was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.
On December 14, 2018, a grant of 300,000 options was declared for members of the Board of Directors of the Bank and the Company which vest at a rate of 50% per year, over two years, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on December 14, 2018. On December 14, 2018, an award of 54,000 shares of restricted stock was declared for members of the Board of Directors of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. On December 14, 2018, an award of 13,321 shares of restricted stock was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.
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. On September 13, 2017,June 14, 2019, a grant of 275,00068,750 options was declared for certain members of the Board of Directors of the Bank and the Company which vest at a rate of 10%50% per year, over tentwo years, commencing on the first anniversary of the grant date. The exercise price was recorded as of close of business on June 14, 2019. On June 14, 2019, a grant of 30,125 options was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date. The exercise price was recorded as of the close of business on September 13, 2017. There were 75,000June 14, 2019. On June 14, 2019, an award of 33,110 shares of restricted stock options granted to employees inwas declared for members of the fourth quarterBoard of 2017Directors of the Bank and the Company, which vests atvest over a rate2-year period, commencing on the anniversary of 20% per year.the award date. On June 14, 2019, an award of 14,508 shares of restricted stock was declared for certain executive officers of the Bank and the Company, which vest over a 2-year period, commencing on the anniversary of the award date.
Note 4 – Pension and Equity Incentive Plans (continued)(Continued)
The following table presents a summary of the status of the Company’s restricted shares as of September 30, 2020 and 2019.
|
|
|
| ||||
| Number of Shares Awarded |
| Weighted Average Grant Date Fair Value | Number of Shares Awarded | Weighted Average Grant Date Fair Value | ||
Non-vested at December 31, 2018 | 67,321 | $ | 11.26 | ||||
Non-vested at January 1, 2020 | 81,278 | $ | 11.96 | ||||
Granted | 47,618 |
| 12.46 | - | - | ||
Vested | - |
|
| (25,232) | 12.40 | ||
Forfeited | - |
|
| (2,332) | 11.97 | ||
Non-vested at September 30, 2019 | 114,939 | $ | 11.86 | ||||
Non-vested at September 30, 2020 | 53,714 | $ | 11.78 | ||||
Number of Shares Awarded | Weighted Average Grant Date Fair Value | |||
Non-vested at January 1, 2019 | 67,321 | $ | 11.26 | |
Granted | 47,618 | 12.46 | ||
Vested | - | - | ||
Forfeited | - | - | ||
Non-vested at September 30, 2019 | 114,939 | $ | 11.86 |
Expected future expenses relating to the non-vested restricted shares outstanding as of September 30, 20192020 was approximately $930,000$279,000 over a weighted average period of 1.21 years.0.45 years.
The following tables present a summary of the status of the Company’s outstanding stock option awards as of September 30, 20192020 and September 30, 2018.2019.
|
|
|
|
|
|
| ||||||||||
|
| Number of Option Shares |
|
| Range of Exercise Prices |
|
| Weighted Average Exercise Price |
| Number of Option Shares | Range of Exercise Prices | Weighted Average Exercise Price | ||||
|
|
|
|
|
|
|
|
| ||||||||
Outstanding at December 31, 2018 |
| 1,104,600 |
| $ | 8.93 - 13.32 |
| $ | 11.36 | ||||||||
Outstanding at January 1, 2020 | 1,200,975 | $ | 8.93 - 13.32 | $ | 11.45 | |||||||||||
|
|
|
|
|
|
| ||||||||||
Options granted |
| 98,875 |
|
| 12.46 |
|
| 12.46 | - | - | - | |||||
Options exercised |
| - |
|
|
|
| (500) | 10.55 | 10.55 | |||||||
Options forfeited |
| (1,000) |
| 10.55 |
| 10.55 | (8,127) | 11.26-12.46 | 11.68 | |||||||
Options expired |
| - |
|
|
|
| - | - | - | |||||||
|
|
|
|
|
|
| ||||||||||
Outstanding at September 30, 2019 |
| 1,202,475 |
| $ | 8.93 - 13.32 |
| $ | 11.45 | ||||||||
Outstanding at September 30, 2020 | 1,192,348 | $ | 8.93 - 13.32 | $ | 11.45 | |||||||||||
As of September 30, 2019,2020, stock options which were granted and were exercisable totaled 268,633660,736 stock options.
It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 866,775531,612 shares of unvested options outstanding as of September, 30, 20192020 was $1.6$1.0 million over a weighted average period of 4.714.80years.
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
| ||||||||||
|
| Number of Option Shares |
|
| Range of Exercise Prices |
|
| Weighted Average Exercise Price |
| Number of Option Shares | Range of Exercise Prices | Weighted Average Exercise Price | ||||
|
|
|
|
|
|
|
|
| ||||||||
Outstanding at December 31, 2017 |
| 889,300 |
| $ | 8.93-13.32 |
| $ | 11.42 | ||||||||
Outstanding at January 1, 2019 | 1,104,600 | $ | 8.93-13.32 | $ | 11.36 | |||||||||||
|
|
|
|
|
|
| ||||||||||
Options granted |
| - |
|
| - |
|
| - | 98,875 | 12.46 | 12.46 | |||||
Options exercised |
| (12,200) |
| 9.03-13.32 |
| 10.91 | - | - | - | |||||||
Options forfeited |
| (53,000) |
| 9.03-13.32 |
| 11.69 | (1,000) | 10.55 | 10.55 | |||||||
Options expired |
| - |
| - |
| - | - | - | - | |||||||
|
|
|
|
|
|
| ||||||||||
Outstanding at September 30, 2018 |
| 824,100 |
| $ | 8.93-13.32 |
| $ | 11.41 | ||||||||
Outstanding at September 30, 2019 | 1,202,475 | $ | 8.93-13.32 | $ | 11.45 | |||||||||||
As of September 30, 2018,2019, stock options which were granted and were exercisable totaled 242,033268,633 stock options.
It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to 582,067 shares of unvested options outstanding as of September 30, 2018 was $1.1 million over a weighted average period of 6.75 years.
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 and nine months ended September 30, 20192020 and 2018,2019, 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 September 30, 20192020 and 20182019, the weighted average number of outstanding options considered to be anti-dilutive were 42,9580 and 3,66542,958, respectively. For the nine months ended September 30, 20192020 and 2018,2019, the weighted average number of outstanding options considered to be anti-dilutive were 0and 32,054, and 1,896, respectively. At September 30, 2019, the Company has 6,465 shares of its Series F 6% noncumulative perpetual preferred stock (“Series F shares”) issued and outstanding, which are convertible into the Company’s common stock. The conversion of Series F shares to common shares was not included in the computation of diluted earnings per share as they would be anti-dilutive.respectively
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:
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| For the Three Months Ended September 30, | ||||||||||||||
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| 2019 |
| 2018 | ||||||||||||
|
|
| Income |
| Shares |
|
| Per Share |
|
| Income |
| Shares |
|
| Per Share |
|
|
| (Numerator) |
| (Denominator) |
|
| Amount |
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| (Numerator) |
| (Denominator) |
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| Amount |
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| (In Thousands, except per share data) | ||||||||||||||
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|
|
Net income available to common stockholders |
| $ | 4,890 |
|
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|
|
| $ | 4,331 |
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Basic earnings per share- |
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Income available to |
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Common stockholders |
| $ | 4,890 |
| 16,468 |
| $ | 0.30 |
| $ | 4,331 |
| 15,789 |
| $ | 0.27 |
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Effect of dilutive securities: |
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|
| �� |
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|
|
Stock options |
|
| - |
| 55 |
|
|
|
|
| - |
| 107 |
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Diluted earnings per share- |
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Income available to |
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Common stockholders |
| $ | 4,890 |
| 16,523 |
| $ | 0.30 |
| $ | 4,331 |
| 15,896 |
| $ | 0.27 |
For the Three Months Ended September 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
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 | $ | 7,980 | $ | 4,890 | ||||||||||||
Basic earnings per share: | ||||||||||||||||
Income available to common stockholders | $ | 7,980 | 17,069 | $ | 0.47 | $ | 4,890 | 16,468 | $ | 0.30 | ||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options | - | - | - | 55 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||
Income available to common stockholders | $ | 7,980 | 17,069 | $ | 0.47 | $ | 4,890 | 16,523 | $ | 0.30 | ||||||
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| For the Nine Months Ended September 30, | ||||||||||||||
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| 2019 |
| 2018 | ||||||||||||
|
|
| Income |
| Shares |
|
| Per Share |
|
| Income |
| Shares |
|
| Per Share |
|
|
| (Numerator) |
| (Denominator) |
|
| Amount |
|
| (Numerator) |
| (Denominator) |
|
| Amount |
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| (In Thousands, except per share data) | ||||||||||||||
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|
|
Net income available to common stockholders |
| $ | 14,908 |
|
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|
|
| $ | 10,848 |
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Basic earnings per share- |
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Income available to |
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Common stockholders |
| $ | 14,908 |
| 16,320 |
| $ | 0.91 |
| $ | 10,848 |
| 15,482 |
| $ | 0.70 |
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Effect of dilutive securities: |
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Stock options |
|
| - |
| 49 |
|
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|
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| - |
| 127 |
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Diluted earnings per share- |
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Income available to |
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Common stockholders |
| $ | 14,908 |
| 16,369 |
| $ | 0.91 |
| $ | 10,848 |
| 15,609 |
| $ | 0.69 |
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For the Nine Months Ended September 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
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 | $ | 12,545 | $ | 14,908 | ||||||||||||
Basic earnings per share: | ||||||||||||||||
Income available to common stockholders | $ | 12,545 | 17,250 | $ | 0.73 | $ | 14,908 | 16,320 | $ | 0.91 | ||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options | - | 18 | - | 49 | ||||||||||||
Diluted earnings per share: | ||||||||||||||||
Income available to common stockholders | $ | 12,545 | 17,268 | $ | 0.73 | $ | 14,908 | 16,369 | $ | 0.91 | ||||||
Note 6 –Debt- 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 and nine months ended September 30, 2020 and 2019:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
(In Thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Net gains (losses) recognized during the period on equity securities | $ | 778 | $ | (45) | $ | 780 | $ | 199 | ||||
Less: Net gains recognized during the period on equity securities sold during the period | - | - | 40 | 21 | ||||||||
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date | $ | 778 | $ | (45) | $ | 820 | $ | 220 | ||||
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 September 30, 20192020 and December 31, 2018:2019:
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| September 30, 2019 | ||||||||||
|
|
|
| Gross |
| Gross |
|
| |||
| Amortized |
| Unrealized |
| Unrealized |
|
|
| |||
| Cost |
| Gains |
| Losses |
| Fair Value | ||||
| (In Thousands) | ||||||||||
Mortgage-backed securities: |
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|
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Due after one year through five years | $ | 3,482 |
| $ | 19 |
| $ | 66 |
| $ | 3,435 |
Due after five years through ten years |
| 1,669 |
|
| 34 |
|
| - |
|
| 1,703 |
Due after ten years |
| 93,486 |
|
| 605 |
|
| 1,011 |
|
| 93,080 |
| $ | 98,637 |
| $ | 658 |
| $ | 1,077 |
| $ | 98,218 |
September 30, 2020 | |||||||||||
| Gross |
| Gross |
| |||||||
Amortized | Unrealized | Unrealized | |||||||||
Cost | Gains | Losses | Fair Value | ||||||||
(In Thousands) | |||||||||||
Residential Mortgage-backed securities: |
|
|
| ||||||||
More than one to five years | $ | 3,265 | $ | 20 | $ | 61 | $ | 3,224 | |||
More than five to ten years | 5,271 |
| 317 |
| - |
| 5,588 | ||||
More than ten years | 61,916 | 1,698 | 52 | 63,562 | |||||||
70,452 | 2,035 | 113 | 72,374 | ||||||||
Corporate Debt securities: | |||||||||||
More than five to ten years | 29,779 | 1,004 | 9 | 30,774 | |||||||
Municipal obligations: | |||||||||||
Less than one year | 12,048 | - | - | 12,048 | |||||||
More than ten years | 4,235 | 212 | - |
| 4,447 | ||||||
16,283 | 212 | - | 16,495 | ||||||||
Total securities | $ | 116,514 |
| $ | 3,251 |
| $ | 122 |
| $ | 119,643 |
December 31, 2019 | |||||||||||
| Gross |
| Gross |
| |||||||
Amortized | Unrealized | Unrealized | |||||||||
Cost | Gains | Losses | Fair Value | ||||||||
(In Thousands) | |||||||||||
Residential Mortgage-backed securities: |
|
|
| ||||||||
More than one to five years | $ | 3,431 | $ | 8 | $ | 72 | $ | 3,367 | |||
More than five to ten years | 1,566 | 33 | - | 1,599 | |||||||
More than ten years | 87,269 | 574 | 1,196 | 86,647 | |||||||
$ | 92,266 | $ | 615 | $ | 1,268 | $ | 91,613 | ||||
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|
| December 31, 2018 | ||||||||||
|
|
|
| Gross |
| Gross |
|
| |||
| Amortized |
| Unrealized |
| Unrealized |
|
|
| |||
| Cost |
| Gains |
| Losses |
| Fair Value | ||||
| (In thousands) | ||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Due after one year through five years | $ | 5,613 |
| $ | 10 |
| $ | 124 |
| $ | 5,499 |
Due after five years through ten years |
| 3,246 |
|
| 2 |
|
| 1 |
|
| 3,247 |
Due after ten years |
| 110,710 |
|
| 52 |
|
| 3,868 |
|
| 106,894 |
|
|
|
|
|
|
|
|
|
|
|
|
Municipal obligations: |
|
|
|
|
|
|
|
|
|
|
|
Due within one year |
| 495 |
|
| - |
|
| - |
|
| 495 |
Due after one year through five years |
| 917 |
|
| 10 |
|
| - |
|
| 927 |
Due after five years through ten years |
| 1,225 |
|
| 13 |
|
| 1 |
|
| 1,237 |
Due after ten years |
| 1,036 |
|
| - |
|
| - |
|
| 1,036 |
| $ | 123,242 |
| $ | 87 |
| $ | 3,994 |
| $ | 119,335 |
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:
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| 12 Months or Less |
| More than 12 Months |
| Total | ||||||||||||
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
| (In Thousands) | ||||||||||||||||
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities | $ | 12,361 |
| $ | 525 |
| $ | 27,797 |
| $ | 552 |
| $ | 40,158 |
| $ | 1,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities | $ | 39,289 |
| $ | 879 |
| $ | 62,860 |
| $ | 3,114 |
| $ | 102,149 |
| $ | 3,993 |
Municipal obligations |
| 1,879 |
|
| 1 |
|
| - |
|
| - |
|
| 1,879 |
|
| 1 |
| $ | 41,168 |
| $ | 880 |
| $ | 62,860 |
| $ | 3,114 |
| $ | 104,028 |
| $ | 3,994 |
12 Months or Less |
| More than 12 Months |
| Total | |||||||||||||
Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | |||||||
Value | Losses | Value | Losses | Value | Losses | ||||||||||||
(In Thousands) | |||||||||||||||||
September 30, 2020 |
|
|
|
|
| ||||||||||||
Residential mortgage-backed securities | $ | 8,829 |
| $ | 57 |
| $ | 1,767 |
| $ | 65 |
| $ | 10,596 |
| $ | 122 |
December 31, 2019 |
|
|
|
|
| ||||||||||||
Residential mortgage-backed securities | $ | 13,073 |
| $ | 656 |
| $ | 23,212 |
| $ | 612 |
| $ | 36,285 |
| $ | 1,268 |
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 September 30, 20192020 and December 31, 2018,2019, 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 September 30, 20192020 and December 31, 2018,2019, to be temporary.
Note 7 - Loans Receivable and Allowance for Loan Losses
The following tables present the recorded investment in loans receivable as of September 30, 20192020 and December 31, 20182019 by segment and class:
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| |||||
|
|
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|
|
| |||||
| September 30, 2019 |
| December 31, 2018 | September 30, 2020 | December 31, 2019 | |||||
|
| (In Thousands) | (In Thousands) | |||||||
Residential one-to-four family | $ | 252,971 |
| $ | 258,085 | $ | 241,796 | $ | 248,381 | |
Commercial and multi-family |
| 1,668,982 |
|
| 1,697,837 | 1,677,668 | 1,606,976 | |||
Construction |
| 131,697 |
|
| 107,783 | 134,769 | 104,996 | |||
Commercial business(1) |
| 161,649 |
|
| 165,193 | 311,204 | 177,642 | |||
Home equity(2) |
| 63,645 |
|
| 72,895 | 60,973 | 64,638 | |||
Consumer |
| 728 |
|
| 809 | 770 | 682 | |||
|
| 2,279,672 |
|
| 2,302,602 | 2,427,180 | 2,203,315 | |||
|
|
|
|
|
| |||||
Less: |
|
|
|
|
| |||||
Deferred loan fees, net |
| (1,282) |
|
| (1,751) | (3,430) | (1,174) | |||
Allowance for loan losses |
| (24,691) |
|
| (22,359) | (31,760) | (23,734) | |||
Sub-total |
| (25,973) |
|
| (24,110) | (35,190) | (24,908) | |||
|
|
|
|
|
| |||||
Total Loans, net | $ | 2,253,699 |
| $ | 2,278,492 | $ | 2,391,990 | $ | 2,178,407 | |
(1) Includes business lines of credit and Paycheck Protection Program (“PPP”) loans | ||||||||||
(2) Includes home equity lines of credit. | ||||||||||
Note 7 -– Loans Receivable and Allowance for Loan Losses (Continued)
Purchased Credit Impaired Loans
The carrying value of loans acquired in the IAB acquisition and accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $5.7 million at September 30, 2019, which was $1.6 million less than the balance at December 31, 2018. Under ASC Subtopic 310-30, these loans, referred to as purchased credit impaired (“PCI”) loans, may be aggregated and accounted for as pools of loans if the loans being aggregated have common risk characteristics. The Company elected to account for the loans with evidence of credit deterioration individually rather than aggregate them into pools. The difference between the undiscounted cash flows expected at acquisition and the investment in the acquired loans, or the “accretable yield,” is recognized as interest income utilizing the level-yield method over the life of each loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition, or the “non- accretable difference,” are not recognized as a yield adjustment, as a loss accrual or as a valuation allowance.
Increases in expected cash flows subsequent to the acquisition are recognized prospectively through an adjustment of the yield on the loans over the remaining life, while decreases in expected cash flows are recognized as impairments through a loss provision and an increase in the allowance for loan and lease losses. Valuation allowances (recognized in the allowance for loan and lease losses) on these impaired loans reflect only losses incurred after the acquisition (representing all cash flows that were expected at acquisition but currently are not expected to be received).
The following table presents changes in the accretable discount on loans acquired with deteriorated credit quality for which the Company applies the provisions of ASC 310-30 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, 2019 |
| Three months ended September 30, 2018 |
|
| Nine months ended September 30, 2019 |
| Nine months ended September 30, 2018 |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Balance, beginning of Period | $ | 2,229 | $ | 1,191 |
| $ | 2,704 | $ | - |
Additions from acquisition of IAB |
| - |
| - |
|
| - |
| 1,399 |
Accretion recorded to interest income |
| (229) |
| (180) |
|
| (704) |
| (388) |
Balance, end of Period | $ | 2,000 | $ | 1,011 |
| $ | 2,000 | $ | 1,011 |
The following table presents the unpaid principal balance and the related recorded investment of acquired loans included in the Company’s Consolidated Statements of Financial Condition. (In thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
| 2019 |
| 2018 | ||
|
|
|
|
|
|
Unpaid principal balance | $ | 247,207 |
| $ | 301,357 |
Recorded investment |
| 208,564 |
|
| 250,486 |
13
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:
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|
|
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 basesestablishes the loan loss provision accordingly.
The loan portfolio is segmented into the following loan classes,segments, where the risk level for each class is analyzed when determining the allowance for loan losses:
Residential singleone-to-four family real estate loans involve certain risks such as interest rate risk and risk of non-repayment. Adjustable-rate residential family real estate loans decrease the interest rate risk to the 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 mostmany 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.
Other 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 effectedaffected by job loss, divorce, illness and personal bankruptcy. In mostmany 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.
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 September 30, 2020, and the related portion of the allowances for loan losses that is allocated to each loan class, as of September 30, 2020 (in thousands):
Residential | Commercial & Multi-family | Construction | Commercial Business (1) | Home Equity (2) | Consumer | Unallocated | Total | ||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||
Originated Loans: | $ | 2,649 | $ | 16,697 | $ | 1,334 | $ | 3,158 | $ | 680 | $ | 6 | $ | 2,489 | $ | 27,013 | |||||||
Acquired loans initially recorded at fair value: | 391 | 226 | - | 1,110 | - | - | - | 1,727 | |||||||||||||||
Acquired loans with deteriorated credit: | 36 | 19 | - | 43 | 4 | - | - | 102 | |||||||||||||||
Beginning Balance, June 30, 2020 | 3,076 | 16,942 | 1,334 | 4,311 | 684 | 6 | 2,489 | 28,842 | |||||||||||||||
Recoveries: | |||||||||||||||||||||||
Originated Loans: | - | - | - | 187 | - | - | 187 | ||||||||||||||||
Acquired loans initially recorded at fair value: | - | - | - | 3 | 2 | - | - | 5 | |||||||||||||||
Sub-total: | - | - | - | 190 | 2 | - | - | 192 | |||||||||||||||
Provisions: | |||||||||||||||||||||||
Originated Loans: | 33 | 1,148 | 395 | 2,759 | (60) | 6 | (2,292) | 1,989 | |||||||||||||||
Acquired loans initially recorded at fair value: | 28 | 583 | - | 134 | (2) | - | - | 743 | |||||||||||||||
Acquired loans with deteriorated credit: | (3) | - | - | (2) | (1) | - | - | (6) | |||||||||||||||
Sub-total: | 58 | 1,731 | 395 | 2,891 | (63) | 6 | (2,292) | 2,726 | |||||||||||||||
Totals: | |||||||||||||||||||||||
Originated Loans: | 2,682 | 17,845 | 1,729 | 6,104 | 620 | 12 | 197 | 29,189 | |||||||||||||||
Acquired loans initially recorded at fair value: | 419 | 809 | - | 1,247 | - | - | - | 2,475 | |||||||||||||||
Acquired loans with deteriorated credit: | 33 | 19 | - | 41 | 3 | - | - | 96 | |||||||||||||||
Ending Balance, September 30, 2020 | $ | 3,134 | $ | 18,673 | $ | 1,729 | $ | 7,392 | $ | 623 | $ | 12 | $ | 197 | $ | 31,760 | |||||||
Ending allowance attributable to loans: | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 385 | $ | 313 | $ | - | $ | 3,128 | $ | 27 | $ | - | $ | - | $ | 3,853 | |||||||
Collectively evaluated for impairment | 2,749 | 18,360 | 1,729 | 4,264 | 596 | 12 | 197 | 27,907 | |||||||||||||||
Total allowance: | $ | 3,134 | $ | 18,673 | $ | 1,729 | $ | 7,392 | $ | 623 | $ | 12 | $ | 197 | $ | 31,760 | |||||||
Ending loan balances: | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 8,533 | $ | 13,980 | $ | - | $ | 7,163 | $ | 1,642 | $ | - | $ | - | $ | 31,318 | |||||||
Collectively evaluated for impairment | 233,263 | 1,663,688 | 134,769 | 304,041 | 59,331 | 770 | 2,395,862 | ||||||||||||||||
Total Gross Loans: | $ | 241,796 | $ | 1,677,668 | $ | 134,769 | $ | 311,204 | $ | 60,973 | $ | 770 | $ | - | $ | 2,427,180 | |||||||
(1) Includes business lines of credit and PPP loans. | |||||||||||||||||||||||
(2) Includes home equity lines of credit. | |||||||||||||||||||||||
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the activity in the Company’s allowance for loan losses for the nine months ended September 30, 2020 (in thousands):
Residential | Commercial & Multi-family | Construction | Commercial Business (1) | Home Equity (2) | Consumer | Unallocated | Total | |||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Originated Loans: | $ | 2,422 | $ | 15,235 | $ | 1,244 | $ | 2,945 | $ | 330 | $ | - | $ | 273 | $ | 22,449 | ||||||||
Acquired loans initially recorded at fair value: | 261 | 58 | - | 803 | - | - | - | 1,122 | ||||||||||||||||
Acquired loans with deteriorated credit: | 39 | 79 | - | 42 | 3 | - | - | 163 | ||||||||||||||||
Beginning Balance, December 31, 2019 | 2,722 | 15,372 | 1,244 | 3,790 | 333 | - | 273 | 23,734 | ||||||||||||||||
Charge-offs: | ||||||||||||||||||||||||
Acquired loans initially recorded at fair value: | 4 | - | - | - | - | - | - | 4 | ||||||||||||||||
Sub-total: | 4 | - | - | - | - | - | - | 4 | ||||||||||||||||
Recoveries: | ||||||||||||||||||||||||
Originated Loans: | - | - | - | 489 | - | 4 | - | 493 | ||||||||||||||||
Acquired loans initially recorded at fair value: | - | - | - | 3 | 8 | - | - | 11 | ||||||||||||||||
Sub-total: | - | - | - | 492 | 8 | 4 | - | 504 | ||||||||||||||||
Provisions: | ||||||||||||||||||||||||
Originated Loans: | 260 | 2,610 | 485 | 2,670 | 290 | 8 | (76) | 6,247 | ||||||||||||||||
Acquired loans initially recorded at fair value: | 162 | 751 | - | 441 | (8) | - | - | 1,346 | ||||||||||||||||
Acquired loans with deteriorated credit: | (6) | (60) | - | (1) | - | - | (67) | |||||||||||||||||
Sub-total: | 416 | 3,301 | 485 | 3,110 | 282 | 8 | (76) | 7,526 | ||||||||||||||||
Totals: | ||||||||||||||||||||||||
Originated Loans: | 2,682 | 17,845 | 1,729 | 6,104 | 620 | 12 | 197 | 29,189 | ||||||||||||||||
Acquired loans initially recorded at fair value: | 419 | 809 | - | 1,247 | - | - | - | 2,475 | ||||||||||||||||
Acquired loans with deteriorated credit: | 33 | 19 | - | 41 | 3 | - | - | 96 | ||||||||||||||||
Ending Balance, September 30, 2020 | $ | 3,134 | $ | 18,673 | $ | 1,729 | $ | 7,392 | $ | 623 | $ | 12 | $ | 197 | $ | 31,760 | ||||||||
_____________________________ | ||||||||||||||||||||||||
(1) Includes business lines of credit and PPP loans. | ||||||||||||||||||||||||
(2) Includes home equity lines of credit. | ||||||||||||||||||||||||
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended September 30, 2019 and the related portion of the allowances for loan losses that is allocated to each loan class, as of September 30, 2019 (in thousands):.
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| Residential |
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| Commercial & Multi-family |
| Construction |
| Commercial Business (1) |
| Home Equity (2) |
| Consumer |
| Unallocated |
| Total | Residential | Commercial & Multi-family | Construction | Commercial Business (1) | Home Equity (2) | Consumer | Unallocated | Total | |||||||||||||||||||||||
Allowance for loan losses: |
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Originated Loans: | $ | 2,580 |
| $ | 14,251 |
| $ | 1,454 |
| $ | 3,995 |
| $ | 274 |
| $ | 1 |
| $ | 150 |
| $ | 22,705 | $ | 2,580 | $ | 14,251 | $ | 1,454 | $ | 3,995 | $ | 274 | $ | 1 | $ | 150 | $ | 22,705 | ||||||||
Acquired loans initially recorded at fair value: |
| 731 |
| - |
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| - |
| - |
| - |
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| - |
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| - |
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| 731 | 731 | - | - | - | - | - | - | 731 | |||||||||||||||||||
Acquired loans with deteriorated credit: |
| 146 |
|
| 137 |
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| - |
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| 67 |
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| 3 |
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| - |
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| - |
|
| 353 | 146 | 137 | - | 67 | 3 | - | - | 353 | ||||||||||||||||
Beginning Balance, June 30, 2019 |
| 3,457 |
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| 14,388 |
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| 1,454 |
|
| 4,062 |
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| 277 |
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| 1 |
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| 150 |
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| 23,789 | 3,457 | 14,388 | 1,454 | 4,062 | 277 | 1 | 150 | 23,789 | ||||||||||||||||
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Charge-offs: |
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Originated Loans: |
| 1 |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| 1 | 1 | 1 | ||||||||||||||||||||||
Sub-total: |
| 1 |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| 1 | 1 | - | - | - | - | - | - | 1 | ||||||||||||||||
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Recoveries: |
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Originated Loans: | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
Acquired loans initially recorded at fair value: |
| - |
| - |
|
| - |
| - |
| 3 |
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| - |
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| - |
| 3 | - | - | - | - | 3 | - | - | 3 | ||||||||||||||||||||
Sub-total: |
| - |
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| - |
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| - |
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| - |
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| 3 |
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| - |
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| - |
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| 3 | - | - | - | - | 3 | - | - | 3 | ||||||||||||||||
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Provisions: |
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Originated Loans: |
| (145) |
| 421 |
|
| 83 |
| (29) |
| 15 |
|
| (1) |
|
| 208 |
| 552 | (145) | 421 | 83 | (29) | 15 | (1) | 208 | 552 | ||||||||||||||||||||
Acquired loans initially recorded at fair value: |
| (316) |
| 112 |
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| - |
| 627 |
| 9 |
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| - |
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| - |
| 432 | (316) | 112 | 627 | 9 | - | - | 432 | |||||||||||||||||||||
Acquired loans with deteriorated credit: |
| (106) |
|
| 23 |
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| - |
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| (1) |
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| - |
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| - |
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| - |
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| (84) | (106) | 23 | - | (1) | - | - | - | (84) | ||||||||||||||||
Sub-total: |
| (567) |
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| 556 |
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| 83 |
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| 597 |
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| 24 |
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| (1) |
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| 208 |
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| 900 | (567) | 556 | 83 | 597 | 24 | (1) | 208 | 900 | ||||||||||||||||
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Totals: |
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Originated Loans: |
| 2,434 |
| 14,672 |
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| 1,537 |
| 3,966 |
| 289 |
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| - |
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| 358 |
| 23,256 | 2,434 | 14,672 | 1,537 | 3,966 | 289 | - | 358 | 23,256 | ||||||||||||||||||||
Acquired loans initially recorded at fair value: |
| 415 |
| 112 |
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| - |
| 627 |
| 12 |
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| - |
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| - |
| 1,166 | 415 | 112 | 627 | 12 | - | - | 1,166 | |||||||||||||||||||||
Acquired loans with deteriorated credit: |
| 40 |
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| 160 |
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| - |
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| 66 |
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| 3 |
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| - |
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| - |
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| 269 | 40 | 160 | - | 66 | 3 | - | - | 269 | ||||||||||||||||
Ending Balance, September 30, 2019 | $ | 2,889 |
| $ | 14,944 |
| $ | 1,537 |
| $ | 4,659 |
| $ | 304 |
| $ | - |
| $ | 358 |
| $ | 24,691 | $ | 2,889 | $ | 14,944 | $ | 1,537 | $ | 4,659 | $ | 304 | $ | - | $ | 358 | $ | 24,691 | ||||||||
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Loans Receivable: |
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Ending Balance Originated Loans: | $ | 213,266 |
| $ | 1,536,792 |
| $ | 131,697 |
| $ | 140,162 |
| $ | 48,498 |
| $ | 693 |
| $ | - |
| $ | 2,071,108 | ||||||||||||||||||||||||
Ending Balance Acquired loans initially recorded at fair value: |
| 38,345 |
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| 127,030 |
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| - |
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| 20,531 |
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| 14,908 |
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| 35 |
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| - |
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| 200,849 | ||||||||||||||||||||||||
Ending Balance Acquired loans with deteriorated credit: |
| 1,360 |
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| 5,160 |
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| - |
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| 956 |
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| 239 |
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| - |
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| - |
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| 7,715 | ||||||||||||||||||||||||
Total Gross Loans: | $ | 252,971 |
| $ | 1,668,982 |
| $ | 131,697 |
| $ | 161,649 |
| $ | 63,645 |
| $ | 728 |
| $ | - |
| $ | 2,279,672 | ||||||||||||||||||||||||
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Ending Balance: Loans individually |
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evaluated for impairment: |
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Ending Balance Originated Loans: | $ | 3,868 |
| $ | 6,044 |
| $ | - |
| $ | 1,951 |
| $ | 973 |
| $ | - |
| $ | - |
| $ | 12,836 | ||||||||||||||||||||||||
Ending Balance Acquired loans initially recorded at fair value: |
| 5,179 |
|
| 4,733 |
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| - |
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| 564 |
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| 292 |
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| - |
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| - |
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| 10,768 | ||||||||||||||||||||||||
Ending Balance Acquired loans with deteriorated credit: |
| 1,360 |
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| 4,964 |
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| - |
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| 889 |
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| 39 |
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| - |
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| - |
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| 7,252 | ||||||||||||||||||||||||
Ending Balance Loans individually |
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evaluated for impairment: | $ | 10,407 |
| $ | 15,741 |
| $ | - |
| $ | 3,404 |
| $ | 1,304 |
| $ | - |
| $ | - |
| $ | 30,856 | ||||||||||||||||||||||||
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Ending Balance: Loans collectively |
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evaluated for impairment: |
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Ending Balance Originated Loans: | $ | 209,398 |
| $ | 1,530,748 |
| $ | 131,697 |
| $ | 138,211 |
| $ | 47,525 |
| $ | 693 |
| $ | - |
| $ | 2,058,272 | ||||||||||||||||||||||||
Ending Balance Acquired loans initially recorded at fair value: |
| 33,166 |
|
| 122,297 |
|
| - |
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| 19,967 |
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| 14,616 |
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| 35 |
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| - |
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| 190,081 | ||||||||||||||||||||||||
Ending Balance Acquired loans with deteriorated credit: |
| - |
|
| 196 |
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| - |
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| 67 |
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| 200 |
|
| - |
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| - |
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| 463 | ||||||||||||||||||||||||
Ending Balance Loans collectively |
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evaluated for impairment: | $ | 242,564 |
| $ | 1,653,241 |
| $ | 131,697 |
| $ | 158,245 |
| $ | 62,341 |
| $ | 728 |
| $ | - |
| $ | 2,248,816 | ||||||||||||||||||||||||
_____________________________ |
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(1) Includes business lines of credit. |
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(2) Includes home equity lines of credit. |
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| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
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 nine months ended September 30, 2019 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Residential |
|
| Commercial & Multi-family |
| Construction |
| Commercial Business (1) |
|
| Home Equity (2) |
| Consumer |
| Unallocated |
| Total | Residential | Commercial & Multi-family | Construction | Commercial Business (1) | Home Equity (2) | Consumer | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Originated Loans: |
| $ | 2,374 |
| $ | 14,000 |
| $ | 1,003 |
| $ | 3,869 |
| $ | 313 |
| $ | 2 |
| $ | 189 |
| $ | 21,750 | $ | 2,374 | $ | 14,000 | $ | 1,003 | $ | 3,869 | $ | 313 | $ | 2 | $ | 189 | $ | 21,750 | ||||||||
Acquired loans initially recorded at fair value: |
|
| 335 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 335 | 335 | - | - | - | - | - | - | 335 | ||||||||||||||||
Acquired loans with deteriorated credit: |
|
| 39 |
|
| 168 |
|
| - |
|
| 64 |
|
| 3 |
|
| - |
|
| - |
|
| 274 | 39 | 168 | - | 64 | 3 | - | - | 274 | ||||||||||||||||
Beginning Balance, December 31, 2018 |
|
| 2,748 |
|
| 14,168 |
|
| 1,003 |
|
| 3,933 |
|
| 316 |
|
| 2 |
|
| 189 |
|
| 22,359 | 2,748 | 14,168 | 1,003 | 3,933 | 316 | 2 | 189 | 22,359 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Originated Loans: |
|
| 1 |
|
| 111 |
|
| - |
|
| 145 |
|
| - |
|
| - |
|
| - |
|
| 257 | 1 | 111 | - | 145 | - | - | - | 257 | ||||||||||||||||
Sub-total: |
|
| 1 |
|
| 111 |
|
| - |
|
| 145 |
|
| - |
|
| - |
|
| - |
|
| 257 | 1 | 111 | - | 145 | - | - | - | 257 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Originated Loans: |
|
| - |
|
| - |
|
| - |
|
| 15 |
|
| - |
|
| - |
|
| - |
| 15 | - | - | - | 15 | - | - | - | 15 | |||||||||||||||||
Acquired loans initially recorded at fair value: |
|
| 3 |
|
| 10 |
|
| - |
|
| 3 |
|
| 14 |
|
| - |
|
| - |
|
| 30 | ||||||||||||||||||||||||
Acquired loans recorded at fair value: | 3 | 10 | - | 3 | 14 | - | - | 30 | ||||||||||||||||||||||||||||||||||||||||
Sub-total: |
|
| 3 |
|
| 10 |
|
| - |
|
| 18 |
|
| 14 |
|
| - |
|
| - |
|
| 45 | 3 | 10 | - | 18 | 14 | - | - | 45 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Provisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Originated Loans: |
|
| 61 |
|
| 783 |
|
| 534 |
|
| 227 |
|
| (24) |
|
| (2) |
|
| 169 |
| 1,748 | 61 | 783 | 534 | 227 | (24) | (2) | 169 | 1,748 | |||||||||||||||||
Acquired loans initially recorded at fair value: |
|
| 77 |
|
| 102 |
|
| - |
|
| 624 |
|
| (2) |
|
| - |
|
| - |
| 801 | 77 | 102 | - | 624 | (2) | - | - | 801 | |||||||||||||||||
Acquired loans with deteriorated credit: |
|
| 1 |
|
| (8) |
|
| - |
|
| 2 |
|
| - |
|
| - |
|
| - |
|
| (5) | 1 | (8) | - | 2 | - | - | - | (5) | ||||||||||||||||
Sub-total: |
|
| 139 |
|
| 877 |
|
| 534 |
|
| 853 |
|
| (26) |
|
| (2) |
|
| 169 |
|
| 2,544 | 139 | 877 | 534 | 853 | (26) | (2) | 169 | 2,544 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Totals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Originated Loans: |
|
| 2,434 |
|
| 14,672 |
|
| 1,537 |
|
| 3,966 |
|
| 289 |
|
| - |
|
| 358 |
| 23,256 | 2,434 | 14,672 | 1,537 | 3,966 | 289 | - | 358 | 23,256 | |||||||||||||||||
Acquired loans initially recorded at fair value: |
|
| 415 |
|
| 112 |
|
| - |
|
| 627 |
|
| 12 |
|
| - |
|
| - |
| 1,166 | 415 | 112 | - | 627 | 12 | - | - | 1,166 | |||||||||||||||||
Acquired loans with deteriorated credit: |
|
| 40 |
|
| 160 |
|
| - |
|
| 66 |
|
| 3 |
|
| - |
|
| - |
|
| 269 | 40 | 160 | - | 66 | 3 | - | - | 269 | ||||||||||||||||
Ending Balance, September 30, 2019 |
| $ | 2,889 |
| $ | 14,944 |
| $ | 1,537 |
| $ | 4,659 |
| $ | 304 |
| $ | - |
| $ | 358 |
| $ | 24,691 | $ | 2,889 | $ | 14,944 | $ | 1,537 | $ | 4,659 | $ | 304 | $ | - | $ | 358 | $ | 24,691 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
_____________________________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(1) Includes business lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(2) Includes home equity lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the activity in the Company’s allowance for loan losses for the three months ended September 30, 2018 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Commercial & Multi-family |
| Construction |
| Commercial Business (1) |
| Home Equity (2) |
| Consumer |
| Unallocated |
| Total | |||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
| $ | 2,249 |
| $ | 13,084 |
| $ | 516 |
| $ | 3,400 |
| $ | 447 |
| $ | 41 |
| $ | 288 |
| $ | 20,025 |
Acquired loans initially recorded at fair value: |
|
| 418 |
|
| 92 |
|
| - |
|
| 40 |
|
| - |
|
| - |
|
| - |
|
| 550 |
Acquired loans with deteriorated credit: |
|
| 53 |
|
| 12 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 65 |
Beginning Balance, June 30, 2018 |
|
| 2,720 |
|
| 13,188 |
|
| 516 |
|
| 3,440 |
|
| 447 |
|
| 41 |
|
| 288 |
|
| 20,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| - |
|
| - |
|
| - |
|
| 10 |
|
| 9 |
|
| 42 |
|
| - |
|
| 61 |
Sub-total: |
|
| - |
|
| - |
|
| - |
|
| 10 |
|
| 9 |
|
| 42 |
|
| - |
|
| 61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired loans initially recorded at fair value: |
|
| - |
|
| - |
|
| - |
|
| 15 |
|
| 3 |
|
| - |
|
| - |
|
| 18 |
Sub-total: |
|
| - |
|
| - |
|
| - |
|
| 15 |
|
| 3 |
|
| - |
|
| - |
|
| 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 137 |
|
| 1,199 |
|
| 136 |
|
| (179) |
|
| (125) |
|
| 1 |
|
| (269) |
|
| 900 |
Acquired loans initially recorded at fair value: |
|
| (138) |
|
| (92) |
|
| - |
|
| (55) |
|
| (3) |
|
| - |
|
| - |
|
| (288) |
Acquired loans with deteriorated credit: |
|
| (15) |
|
| 241 |
|
| - |
|
| 63 |
|
| 6 |
|
| - |
|
| - |
|
| 295 |
Sub-total: |
|
| (16) |
|
| 1,348 |
|
| 136 |
|
| (171) |
|
| (122) |
|
| 1 |
|
| (269) |
|
| 907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 2,386 |
|
| 14,283 |
|
| 652 |
|
| 3,211 |
|
| 313 |
|
| - |
|
| 19 |
|
| 20,864 |
Acquired loans initially recorded at fair value: |
|
| 280 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 280 |
Acquired loans with deteriorated credit: |
|
| 38 |
|
| 253 |
|
| - |
|
| 63 |
|
| 6 |
|
| - |
|
| - |
|
| 360 |
Ending Balance, September 30, 2018 |
| $ | 2,704 |
| $ | 14,536 |
| $ | 652 |
| $ | 3,274 |
| $ | 319 |
| $ | - |
| $ | 19 |
| $ | 21,504 |
_____________________________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes business lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Includes home equity lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
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 nine months ended September 30, 2018 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Commercial & Multi-family |
| Construction |
| Commercial Business (1) |
|
| Home Equity (2) |
| Consumer |
| Unallocated |
| Total | ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
| $ | 2,368 |
| $ | 11,656 |
| $ | 518 |
| $ | 2,018 |
| $ | 338 |
| $ | 6 |
| $ | 177 |
| $ | 17,081 |
Acquired loans initially recorded at fair value: |
|
| 242 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 242 |
Acquired loans with deteriorated credit: |
|
| 40 |
|
| 12 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 52 |
Beginning Balance, December 31, 2017 |
|
| 2,650 |
|
| 11,668 |
|
| 518 |
|
| 2,018 |
|
| 338 |
|
| 6 |
|
| 177 |
|
| 17,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 302 |
|
| - |
|
| - |
|
| 15 |
|
| 9 |
|
| 42 |
|
| - |
|
| 368 |
Acquired loans initially recorded at fair value: |
|
| 72 |
|
| - |
|
| - |
|
| - |
|
| 6 |
|
| - |
|
| - |
|
| 78 |
Sub-total: |
|
| 374 |
|
| - |
|
| - |
|
| 15 |
|
| 15 |
|
| 42 |
|
| - |
|
| 446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 1 |
|
| - |
|
| - |
|
| 6 |
|
| - |
|
| - |
|
| - |
|
| 7 |
Acquired loans recorded at fair value: |
|
| 85 |
|
| - |
|
| - |
|
| 27 |
|
| 3 |
|
| - |
|
| - |
|
| 115 |
Acquired loans with deteriorated credit: |
|
| - |
|
| - |
|
| - |
|
| 143 |
|
| 1 |
|
| - |
|
| - |
|
| 144 |
Sub-total: |
|
| 86 |
|
| - |
|
| - |
|
| 176 |
|
| 4 |
|
| - |
|
| - |
|
| 266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 319 |
|
| 2,627 |
|
| 134 |
|
| 1,202 |
|
| (16) |
|
| 36 |
|
| (158) |
|
| 4,144 |
Acquired loans initially recorded at fair value: |
|
| 25 |
|
| - |
|
| - |
|
| (27) |
|
| 3 |
|
| - |
|
| - |
|
| 1 |
Acquired loans with deteriorated credit: |
|
| (2) |
|
| 241 |
|
| - |
|
| (80) |
|
| 5 |
|
| - |
|
| - |
|
| 164 |
Sub-total: |
|
| 342 |
|
| 2,868 |
|
| 134 |
|
| 1,095 |
|
| (8) |
|
| 36 |
|
| (158) |
|
| 4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 2,386 |
|
| 14,283 |
|
| 652 |
|
| 3,211 |
|
| 313 |
|
| - |
|
| 19 |
|
| 20,864 |
Acquired loans initially recorded at fair value: |
|
| 280 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 280 |
Acquired loans with deteriorated credit: |
|
| 38 |
|
| 253 |
| �� | - |
|
| 63 |
|
| 6 |
|
| - |
|
| - |
|
| 360 |
Ending Balance, September 30, 2018 |
| $ | 2,704 |
| $ | 14,536 |
| $ | 652 |
| $ | 3,274 |
| $ | 319 |
| $ | - |
| $ | 19 |
| $ | 21,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
_____________________________ |
|
|
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|
|
|
|
|
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|
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|
|
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|
|
|
|
(1) Includes business lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Includes home equity lines of credit. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
18
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the amount recorded in loans receivable at December 31, 2018.2019. 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).
|
|
|
|
|
|
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|
|
|
|
| Residential |
|
| Commercial & Multi-family |
|
| Construction |
|
| Commercial Business (1) |
|
| Home Equity (2) |
|
| Consumer |
|
| Unallocated |
|
| Total |
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
| $ | 2,368 |
| $ | 11,656 |
| $ | 518 |
| $ | 2,018 |
| $ | 338 |
| $ | 6 |
| $ | 177 |
| $ | 17,081 |
Acquired loans initially recorded at fair value: |
|
| 242 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 242 |
Acquired loans with deteriorated credit: |
|
| 40 |
|
| 12 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 52 |
Beginning Balance, January 1, 2018 |
|
| 2,650 |
|
| 11,668 |
|
| 518 |
|
| 2,018 |
|
| 338 |
|
| 6 |
|
| 177 |
|
| 17,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 302 |
|
| - |
|
| - |
|
| 15 |
|
| 9 |
|
| 42 |
|
| - |
|
| 368 |
Acquired loans initially recorded at fair value: |
|
| 72 |
|
| - |
|
| - |
|
| - |
|
| 6 |
|
| - |
|
| - |
|
| 78 |
Acquired loans with deteriorated credit: |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Sub-total: |
|
| 374 |
|
| - |
|
| - |
|
| 15 |
|
| 15 |
|
| 42 |
|
| - |
|
| 446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 1 |
|
| - |
|
| - |
|
| 14 |
|
| - |
|
| 2 |
|
| - |
|
| 17 |
Acquired loans recorded at fair value: |
|
| 85 |
|
| - |
|
| - |
|
| 48 |
|
| 6 |
|
| - |
|
| - |
|
| 139 |
Acquired loans with deteriorated credit: |
|
| - |
|
| - |
|
| - |
|
| 143 |
|
| 1 |
|
| - |
|
| - |
|
| 144 |
Sub-total: |
|
| 86 |
|
| - |
|
| - |
|
| 205 |
|
| 7 |
|
| 2 |
|
| - |
|
| 300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 307 |
|
| 2,344 |
|
| 485 |
|
| 1,852 |
|
| (16) |
|
| 36 |
|
| 12 |
|
| 5,020 |
Acquired loans initially recorded at fair value: |
|
| 80 |
|
| - |
|
|
|
|
| (48) |
|
| - |
|
| - |
|
| - |
|
| 32 |
Acquired loans with deteriorated credit: |
|
| (1) |
|
| 156 |
|
| - |
|
| (79) |
|
| 2 |
|
| - |
|
| - |
|
| 78 |
Sub-total: |
|
| 386 |
|
| 2,500 |
|
| 485 |
|
| 1,725 |
|
| (14) |
|
| 36 |
|
| 12 |
|
| 5,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated Loans: |
|
| 2,374 |
|
| 14,000 |
|
| 1,003 |
|
| 3,869 |
|
| 313 |
|
| 2 |
|
| 189 |
|
| 21,750 |
Acquired loans initially recorded at fair value: |
|
| 335 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 335 |
Acquired loans with deteriorated credit: |
|
| 39 |
|
| 168 |
|
| - |
|
| 64 |
|
| 3 |
|
| - |
|
| - |
|
| 274 |
Ending Balance, December 31, 2018 |
| $ | 2,748 |
| $ | 14,168 |
| $ | 1,003 |
| $ | 3,933 |
| $ | 316 |
| $ | 2 |
| $ | 189 |
| $ | 22,359 |
Loans Receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance Originated Loans: |
| $ | 213,200 |
| $ | 1,540,766 |
| $ | 106,187 |
| $ | 136,966 |
| $ | 54,271 |
| $ | 726 |
| $ | - |
| $ | 2,052,116 |
Ending Balance Acquired Loans: |
|
| 43,495 |
|
| 150,239 |
|
| 1,596 |
|
| 27,373 |
|
| 18,376 |
|
| 83 |
|
| - |
|
| 241,162 |
Ending Balance Acquired loans with deteriorated credit: |
|
| 1,390 |
|
| 6,832 |
|
| - |
|
| 854 |
|
| 248 |
|
| - |
|
| - |
|
| 9,324 |
Total Gross Loans: |
| $ | 258,085 |
| $ | 1,697,837 |
| $ | 107,783 |
| $ | 165,193 |
| $ | 72,895 |
| $ | 809 |
| $ | - |
| $ | 2,302,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance: Loans individually |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance Originated Loans: |
| $ | 6,043 |
| $ | 12,822 |
| $ | - |
| $ | 2,372 |
| $ | 915 |
| $ | - |
| $ | - |
| $ | 22,152 |
Ending Balance Acquired Loans: |
|
| 6,139 |
|
| 4,881 |
|
| - |
|
| 53 |
|
| 306 |
|
| - |
|
| - |
|
| 11,379 |
Ending Balance Acquired loans with deteriorated credit: |
|
| 1,390 |
|
| 6,628 |
|
| - |
|
| 810 |
|
| 49 |
|
| - |
|
| - |
|
| 8,877 |
Ending Balance Loans individually evaluated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for impairment: |
| $ | 13,572 |
| $ | 24,331 |
| $ | - |
| $ | 3,235 |
| $ | 1,270 |
| $ | - |
| $ | - |
| $ | 42,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance: Loans collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance Originated Loans: |
| $ | 207,157 |
| $ | 1,527,944 |
| $ | 106,187 |
| $ | 134,594 |
| $ | 53,356 |
| $ | 726 |
| $ | - |
| $ | 2,029,964 |
Ending Balance Acquired Loans: |
|
| 37,356 |
|
| 145,358 |
|
| 1,596 |
|
| 27,320 |
|
| 18,070 |
|
| 83 |
|
| - |
|
| 229,783 |
Ending Balance Acquired loans with deteriorated credit: |
|
| - |
|
| 204 |
|
| - |
|
| 44 |
|
| 199 |
|
| - |
|
| - |
|
| 447 |
Ending Balance Loans collectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
evaluated for impairment: |
| $ | 244,513 |
| $ | 1,673,506 |
| $ | 107,783 |
| $ | 161,958 |
| $ | 71,625 |
| $ | 809 |
| $ | - |
| $ | 2,260,194 |
Residential | Commercial & Multi-family | Construction | Commercial Business (1) | Home Equity (2) | Consumer | Unallocated | Total | ||||||||||||||||
Allowance for credit losses: | |||||||||||||||||||||||
Originated Loans: | 2,422 | 15,235 | 1,244 | 2,945 | 330 | - | 273 | 22,449 | |||||||||||||||
Acquired loans initially recorded at fair value: | 261 | 58 | - | 803 | - | - | - | 1,122 | |||||||||||||||
Acquired loans with deteriorated credit: | 39 | 79 | - | 42 | 3 | - | - | 163 | |||||||||||||||
Ending Balance, December 31, 2019 | $ | 2,722 | $ | 15,372 | $ | 1,244 | $ | 3,790 | $ | 333 | $ | - | $ | 273 | $ | 23,734 | |||||||
Ending Balance attributable to loans: | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 8,455 | $ | 13,231 | $ | - | $ | 3,938 | $ | 1,288 | $ | - | $ | - | $ | 26,912 | |||||||
Collectively evaluated for impairment | 239,926 | 1,593,745 | 104,996 | 173,704 | 63,350 | 682 | - | 2,176,403 | |||||||||||||||
Total Gross Loans: | $ | 248,381 | $ | 1,606,976 | $ | 104,996 | $ | 177,642 | $ | 64,638 | $ | 682 | $ | - | $ | 2,203,315 | |||||||
Ending ALLL Attributed to loans individually evaluated for impairment | $ | 380 | $ | 342 | $ | - | $ | 2,518 | $ | 24 | $ | - | $ | - | $ | 3,264 | |||||||
Ending ALLL Attributed to loans collectively evaluated for impairment | 2,342 | 15,030 | 1,244 | 1,272 | 309 | - | 273 | 20,470 | |||||||||||||||
Total Ending ALLL: | $ | 2,722 | $ | 15,372 | $ | 1,244 | $ | 3,790 | $ | 333 | $ | - | $ | 273 | $ | 23,734 |
(1) Includes business lines of credit. |
(2) Includes home equity lines of credit. |
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 Company’s loan portfolio as of September 30, 2019 and December 31, 2018. 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 September 30, 2019 and December 31, 2018, total non-accrual loans differed from the amount of total loans past due greater than 90 days due to troubled debt restructuring of loans which are maintained on non-accrual status for a minimum of six months and until the borrower has demonstrated its ability to satisfy the terms of the restructured loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
|
| (In Thousands) |
|
| (In Thousands) |
Non-Accruing Loans: |
|
|
|
|
|
|
|
|
|
|
|
Originated loans: |
|
|
|
|
|
Residential one-to-four family | $ | 814 |
| $ | 1,160 |
Commercial and multi-family |
| 1,584 |
|
| 2,568 |
Commercial business(1) |
| 887 |
|
| 356 |
Home equity(2) |
| 350 |
|
| 277 |
|
|
|
|
|
|
Sub-total: |
| 3,635 |
|
| 4,361 |
|
|
|
|
|
|
Acquired loans initially recorded at fair value: |
|
|
|
|
|
Residential one-to-four family |
| 1,046 |
|
| 2,165 |
Commercial and multi-family |
| - |
|
| 605 |
Commercial business(1) |
| 378 |
|
| 48 |
Home equity(2) |
| 15 |
|
| 42 |
|
|
|
|
|
|
Sub-total: |
| 1,439 |
|
| 2,860 |
|
|
|
|
|
|
Total | $ | 5,074 |
| $ | 7,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.
Nonaccrual loans in the preceding table do not include loans acquired with deteriorated credit quality which were recorded at their fair value at acquisition and totaled $5.5 million at September 30, 2019, and $7.0 million at December 31, 2018.
20
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 and nine months ended September 30, 20192020 and 20182019 (In thousands):
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| |||||||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 | 2020 | 2020 | 2019 | 2019 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
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| ||||||||||||||||||||||||||
|
| Average |
|
| Interest |
|
| Average |
|
| Interest |
|
| Average |
|
| Interest |
|
| Average |
|
| Interest | Average | Interest | Average | Interest | Average | Interest | Average | Interest | |||||||||||||||
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income | Recorded | Income | Recorded | Income | Recorded | Income | Recorded | Income | |||||||||||||||
Originated loans |
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized | |||||||||||||||
with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Residential one-to-four family | $ | 2,179 |
| $ | 20 |
| $ | 1,921 |
| $ | 7 |
| $ | 2,627 |
| $ | 66 |
| $ | 1,910 |
| $ | 22 | $ | 2,125 | $ | 11 | $ | 2,179 | $ | 20 | $ | 2,076 | $ | 51 | $ | 2,627 | $ | 66 | |||||||
Commercial and Multi-family |
| 8,655 |
| 56 |
| 12,345 |
| 86 |
|
| 9,680 |
|
| 310 |
|
| 12,090 |
|
| 257 | 5,867 | 8 | 8,655 | 56 | 5,211 | 98 | 9,680 | 310 | ||||||||||||||||||
Commercial business(1) |
| 1,131 |
| 43 |
| 1,074 |
| 43 |
|
| 1,138 |
|
| 126 |
|
| 910 |
|
| 130 | 3,516 | 32 | 1,131 | 43 | 2,677 | 183 | 1,138 | 126 | ||||||||||||||||||
Home equity(2) |
| 598 |
|
| 6 |
|
| 912 |
|
| 7 |
|
| 649 |
|
| 18 |
|
| 910 |
|
| 22 | 966 | 6 | 598 | 6 | 855 | 19 | 649 | 18 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total: | $ | 12,563 |
| $ | 125 |
| $ | 16,252 |
| $ | 143 |
| $ | 14,094 |
| $ | 520 |
| $ | 15,820 |
| $ | 431 | $ | 12,474 | $ | 57 | $ | 12,563 | $ | 125 | $ | 10,819 | $ | 351 | $ | 14,094 | $ | 520 | |||||||
|
|
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|
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|
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| |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Acquired loans initially recorded at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
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|
| ||||||||||||||||||||||||||
Residential one-to-four family | $ | 1,931 |
| $ | 23 |
| $ | 3,349 |
| $ | 16 |
| $ | 2,081 |
| $ | 73 |
| $ | 3,443 |
| $ | 76 | $ | 1,555 | $ | 5 | $ | 1,931 | $ | 23 | $ | 1,647 | $ | 41 | $ | 2,081 | $ | 73 | |||||||
Commercial and Multi-family |
| 3,882 |
| 55 |
| 3,733 |
| 53 |
|
| 3,898 |
|
| 165 |
|
| 3,760 |
|
| 168 | 4,060 | 19 | 3,882 | 55 | 4,053 | 113 | 3,898 | 165 | ||||||||||||||||||
Commercial business(1) |
| 119 |
| 12 |
| 51 |
| 1 |
|
| 96 |
|
| 14 |
|
| 34 |
|
| 2 | - | - | 119 | 12 | - | - | 96 | 14 | ||||||||||||||||||
Home equity(2) |
| 311 |
| 3 |
| 223 |
| 3 |
|
| 294 |
|
| 9 |
|
| 230 |
|
| 10 | 221 | - | 311 | 3 | 214 | 6 | 294 | 9 | ||||||||||||||||||
Consumer |
| - |
|
| - |
|
| 11 |
|
| - |
|
| - |
|
| - |
|
| 7 |
|
| - | - | - | - | - | - | - | - | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total | $ | 6,243 |
| $ | 93 |
| $ | 7,367 |
| $ | 73 |
| $ | 6,369 |
| $ | 261 |
| $ | 7,474 |
| $ | 256 | $ | 5,836 | $ | 24 | $ | 6,243 | $ | 93 | $ | 5,914 | $ | 160 | $ | 6,369 | $ | 261 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Acquired loans with deteriorated credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Residential one-to-four family(3) | $ | 839 |
| $ | 14 |
| $ | 1,030 |
| $ | 16 |
| $ | 898 |
| $ | 44 |
| $ | 1,032 |
| $ | 48 | $ | 984 | $ | - | $ | 839 | $ | 14 | $ | 929 | $ | 28 | $ | 898 | $ | 44 | |||||||
Commercial and Multi-family(3) |
| 4,264 |
| 7 |
| 10,980 |
| 7 |
|
| 4,666 |
|
| 20 |
|
| 7,490 |
|
| 20 | 705 | 9 | 4,264 | 7 | 710 | 23 | 4,666 | 20 | ||||||||||||||||||
Construction(3) |
| - |
| - |
| 1,335 |
| - |
|
| - |
|
| - |
|
| 890 |
|
| - | ||||||||||||||||||||||||||
Commercial business(1)(3) |
| 894 |
| - |
| 922 |
| - |
|
| 849 |
|
| - |
|
| 614 |
|
| - | 864 | 21 | 894 | - | 864 | 25 | 849 | - | ||||||||||||||||||
Home equity(2)(3) |
| 41 |
| - |
| 226 |
| - |
|
| 43 |
|
| - |
|
| 151 |
|
| - | 17 | - | 41 | - | 22 | 43 | - | |||||||||||||||||||
Consumer(3) |
| - |
|
| - |
|
| 27 |
|
| - |
|
| - |
|
| - |
|
| 18 |
|
| - | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total: | $ | 6,038 |
| $ | 21 |
| $ | 14,520 |
| $ | 23 |
| $ | 6,456 |
| $ | 64 |
| $ | 10,195 |
| $ | 68 | $ | 2,570 | $ | 30 | $ | 6,038 | $ | 21 | $ | 2,525 | $ | 76 | $ | 6,456 | $ | 64 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total Impaired Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
with no related allowance recorded: | $ | 24,844 |
| $ | 239 |
| $ | 38,139 |
| $ | 239 |
| $ | 26,919 |
| $ | 845 |
| $ | 33,489 |
| $ | 755 | $ | 20,880 | $ | 111 | $ | 24,844 | $ | 239 | $ | 19,258 | $ | 587 | $ | 26,919 | $ | 845 | |||||||
__________
(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.
|
|
|
|
|
21
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table summarizes the average recorded investment and interest income recognized on impaired loans with allowance recorded by portfolio class for the three and nine months ended September 30, 20192020 and 2018.2019. (In thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2019 |
|
| 2019 |
|
| 2018 |
|
| 2018 | 2020 | 2020 | 2019 | 2019 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| Average |
|
| Interest |
|
| Average |
|
| Interest |
|
| Average |
|
| Interest |
|
| Average |
|
| Interest | Average | Interest | Average | Interest | Average | Interest | Average | Interest | |||||||||||||||
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income | Recorded | Income | Recorded | Income | Recorded | Income | Recorded | Income | |||||||||||||||
Originated loans |
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized | Investment | Recognized | |||||||||||||||
with an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Residential one-to-four family | $ | 2,032 |
| $ | 18 |
| $ | 4,310 |
| $ | 47 |
| $ | 2,175 |
| $ | 67 |
| $ | 4,601 |
| $ | 141 | $ | 908 | $ | - | $ | 2,032 | $ | 18 | $ | 910 | $ | 10 | $ | 2,175 | $ | 67 | |||||||
Commercial and Multi-family |
| - |
| - |
| 485 |
| - |
|
| - |
|
| - |
|
| 485 |
|
| - | - | - | - | - | - | - | - | - | ||||||||||||||||||
Commercial business(1) |
| 822 |
| 3 |
| 1,266 |
| 22 |
|
| 658 |
|
| 57 |
|
| 1,199 |
|
| 65 | 1,427 | 65 | 822 | 3 | 1,314 | 93 | 658 | 57 | ||||||||||||||||||
Home equity(2) |
| 268 |
| 1 |
| 155 |
| 2 |
|
| 229 |
|
| 5 |
|
| 155 |
|
| 5 | 321 | 1 | 268 | 1 | 339 | 6 | 229 | 5 | ||||||||||||||||||
Consumer |
| - |
|
| - |
|
| 21 |
|
| - |
|
| - |
|
| - |
|
| 14 |
|
| - | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total: | $ | 3,122 |
| $ | 22 |
| $ | 6,237 |
| $ | 71 |
| $ | 3,062 |
| $ | 129 |
| $ | 6,454 |
| $ | 211 | $ | 2,656 | $ | 66 | $ | 3,122 | $ | 22 | $ | 2,563 | $ | 109 | $ | 3,062 | $ | 129 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Acquired loans initially recorded at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
with an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Residential one-to-four family | $ | 3,291 |
| $ | 30 |
| $ | 3,210 |
| $ | 24 |
| $ | 3,286 |
| $ | 82 |
| $ | 3,384 |
| $ | 73 | $ | 2,472 | $ | 3 | $ | 3,291 | $ | 30 | $ | 2,404 | $ | 33 | $ | 3,286 | $ | 82 | |||||||
Commercial and Multi-family |
| 881 |
| 14 |
| 916 |
| 4 |
|
| 889 |
|
| 22 |
|
| 919 |
|
| 13 | 1,221 | - | 881 | 14 | 1,225 | 20 | 889 | 22 | ||||||||||||||||||
Commercial business(1) |
| 377 |
| - |
| 124 |
| - |
|
| 251 |
|
| - |
|
| 82 |
|
| - | 1,403 | 17 | 377 | - | 1,106 | 47 | 251 | - | ||||||||||||||||||
Home equity(2) |
| 84 |
|
| 1 |
|
| 85 |
|
| 1 |
|
| 84 |
|
| 4 |
|
| 85 |
|
| 4 | 110 | 1 | 84 | 1 | 101 | 2 | 84 | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total | $ | 4,633 |
| $ | 45 |
| $ | 4,335 |
| $ | 29 |
| $ | 4,510 |
| $ | 108 |
| $ | 4,470 |
| $ | 90 | |||||||||||||||||||||||
Sub-total: | $ | 5,206 | $ | 21 | $ | 4,633 | $ | 45 | $ | 4,836 | $ | 102 | $ | 4,510 | $ | 108 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Acquired loans with deteriorated credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
with an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Residential one-to-four family(3) | $ | 527 |
| $ | 7 |
| $ | 369 |
| $ | 5 |
| $ | 473 |
| $ | 19 |
| $ | 369 |
| $ | 10 | $ | 340 | $ | - | $ | 527 | $ | 7 | $ | 400 | $ | 7 | $ | 473 | $ | 19 | |||||||
Commercial and Multi-family |
| 943 |
|
| - |
|
| - |
|
| - |
|
| 629 |
|
| - |
|
| - |
|
| - | 943 | - | - | 629 | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Sub-total: | $ | 1,470 |
| $ | 7 |
| $ | 369 |
| $ | 5 |
| $ | 1,102 |
| $ | 19 |
| $ | 369 |
| $ | 10 | $ | 340 | $ | - | $ | 1,470 | $ | 7 | $ | 400 | $ | 7 | $ | 1,102 | $ | 19 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total Impaired Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
with an allowance recorded: | $ | 9,225 |
| $ | 74 |
| $ | 10,941 |
| $ | 105 |
| $ | 8,674 |
| $ | 256 |
| $ | 11,293 |
| $ | 311 | $ | 8,202 | $ | 87 | $ | 9,225 | $ | 74 | $ | 7,799 | $ | 218 | $ | 8,674 | $ | 256 | |||||||
__________
(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.
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table summarizes the recorded investment and unpaid principal balances where there is no related allowance on impaired loans by portfolio class at
September 30, 20192020 and December 31, 2018.2019. (In thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| As of September 30, 2019 |
|
| As of December 31, 2018 | As of September 30, 2020 | As of December 31, 2019 | |||||||||||||||||||||||||||
|
| Recorded |
| Unpaid Principal |
| Related |
|
| Recorded |
| Unpaid Principal |
| Related | Recorded | Unpaid Principal | Related | Recorded | Unpaid Principal | Related | |||||||||||||||
Originated loans |
| Investment |
|
| Balance |
|
| Allowance |
|
| Investment |
|
| Balance |
|
| Allowance | Investment | Balance | Allowance | Investment | Balance | Allowance | |||||||||||
with no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Residential one-to-four family | $ | 2,246 |
| $ | 2,342 |
| $ | - |
| $ | 2,623 |
| $ | 2,689 |
| $ | - | $ | 2,278 | $ | 2,381 | $ | - | $ | 2,010 | $ | 2,098 | $ | - | |||||
Commercial and multi-family |
| 6,044 |
| 6,297 |
| - |
| 12,711 |
| 13,308 |
| - | 7,842 | 7,891 | - | 4,469 | 4,527 | - | ||||||||||||||||
Commercial business(1) |
| 1,124 |
| 3,695 |
| - |
| 974 |
| 3,411 |
| - | 3,144 | 5,289 | - | 1,108 | 4,069 | - | ||||||||||||||||
Home equity(2) |
| 589 |
|
| 600 |
|
| - |
|
| 762 |
|
| 779 |
|
| - | 938 | 940 | - | 584 | 593 | - | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total: | $ | 10,003 |
| $ | 12,934 |
| $ | - |
| $ | 17,070 |
| $ | 20,187 |
| $ | - | $ | 14,202 | $ | 16,501 | $ | - | $ | 8,171 | $ | 11,287 | $ | - | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Acquired loans initially recorded at fair |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
value with no related allowance |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Residential one-to-four family | $ | 1,812 |
| $ | 1,918 |
| $ | - |
| $ | 3,123 |
| $ | 3,254 |
| $ | - | $ | 1,562 | $ | 1,660 | $ | - | $ | 1,843 | $ | 1,950 | $ | - | |||||
Commercial and Multi-family |
| 3,861 |
| 3,861 |
| - |
| 3,961 |
| 3,961 |
| - | 4,227 | 4,227 | - | 4,401 | 4,402 | - | ||||||||||||||||
Commercial business(1) |
| 187 |
| 602 |
| - |
| 53 |
| 53 |
| - | - | - | 183 | 589 | - | |||||||||||||||||
Home equity(2) |
| 209 |
|
| 210 |
|
| - |
|
| 222 |
|
| 222 |
|
| - | 194 | 196 | - | 205 | 206 | - | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total: | $ | 6,069 |
| $ | 6,591 |
| $ | - |
| $ | 7,359 |
| $ | 7,490 |
| $ | - | $ | 5,983 | $ | 6,083 | $ | - | $ | 6,632 | $ | 7,147 | $ | - | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Acquired loans with deteriorated |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
credit with no related allowance |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Residential one-to-four family | $ | 834 |
| $ | 1,391 |
| $ | - |
| $ | 1,023 |
| $ | 1,579 |
| $ | - | $ | 1,158 | $ | 1,762 | $ | - | $ | 827 | $ | 1,383 | $ | - | |||||
Commercial and Multi-family |
| 3,078 |
| 4,175 |
| - |
| 6,628 |
| 7,957 |
| - | 695 | 1,749 | - | 3,113 | 4,166 | - | ||||||||||||||||
Commercial business(1) |
| 889 |
| 5,936 |
| - |
| 810 |
| 6,253 |
| - | 865 | 5,122 | - | 867 | 5,052 | - | ||||||||||||||||
Home equity(2) |
| 39 |
|
| 49 |
|
| - |
|
| 49 |
|
| 57 |
|
| - | - | - | - | 37 | 47 | - | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total: | $ | 4,840 |
| $ | 11,551 |
| $ | - |
| $ | 8,510 |
| $ | 15,846 |
| $ | - | $ | 2,718 | $ | 8,633 | $ | - | $ | 4,844 | $ | 10,648 | $ | - | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Impaired Loans |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
with no related allowance recorded: | $ | 20,912 |
| $ | 31,076 |
| $ | - |
| $ | 32,939 |
| $ | 43,523 |
| $ | - | $ | 22,903 | $ | 31,217 | $ | - | $ | 19,647 | $ | 29,082 | $ | - | |||||
__________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table summarizes the recorded investment, unpaid principal balance, and the related allowance on impaired loans by portfolio class at September 30, 20192020 and December 31, 2018.2019. (In thousands):
|
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| |||||||||||||||||||||
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| |||||||||||||||||||||
|
| As of September 30, 2019 |
|
| As of December 31, 2018 | As of September, 2020 | As of December 31, 2019 | |||||||||||||||||||||||||||
|
| Recorded |
| Unpaid Principal |
| Related |
|
| Recorded |
| Unpaid Principal |
| Related | Recorded | Unpaid Principal | Related | Recorded | Unpaid Principal | Related | |||||||||||||||
Originated loans |
| Investment |
|
| Balance |
|
| Allowance |
|
| Investment |
|
| Balance |
|
| Allowance | Investment | Balance | Allowance | Investment | Balance | Allowance | |||||||||||
with an allowance recorded: |
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| |||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||
Residential one-to-four family | $ | 1,622 |
| $ | 1,622 |
| $ | 81 |
| $ | 3,420 |
| $ | 3,420 |
| $ | 229 | $ | 904 | $ | 906 | $ | 37 | $ | 973 | $ | 973 | $ | 48 | |||||
Commercial and Multi-family |
| - |
| - |
| - |
|
| 111 |
| 153 |
| 111 | |||||||||||||||||||||
Commercial business(1) |
| 827 |
| 1,943 |
| 800 |
|
| 1,398 |
| 1,549 |
| 905 | 1,829 | 4,614 | 1,448 | 1,403 | 3,037 | 1,029 | |||||||||||||||
Home equity(2) |
| 384 |
|
| 384 |
|
| 22 |
|
| 153 |
|
| 153 |
|
| 21 | 372 | 379 | 24 | 379 | 382 | 20 | |||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total: | $ | 2,833 |
| $ | 3,949 |
| $ | 903 |
| $ | 5,082 |
| $ | 5,275 |
| $ | 1,266 | $ | 3,105 | $ | 5,899 | $ | 1,509 | $ | 2,755 | $ | 4,392 | $ | 1,097 | |||||
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|
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|
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|
|
|
| |||||||||||||||||
Acquired loans initially recorded at fair |
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| |||||||||||||||||||||
value with an allowance |
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||
recorded: |
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Residential one-to-four family | $ | 3,367 |
| $ | 3,532 |
| $ | 484 |
| $ | 3,016 |
| $ | 3,166 |
| $ | 532 | $ | 2,470 | $ | 2,504 | $ | 347 | $ | 2,278 | $ | 2,293 | $ | 325 | |||||
Commercial and Multi-family |
| 872 |
| 1,064 |
| 302 |
|
| 920 |
| 1,094 |
| 369 | 1,216 | 1,417 | 313 | 1,248 | 1,442 | 342 | |||||||||||||||
Commercial business(1) |
| 377 |
| 1,489 |
| 1,117 |
|
| - |
| - |
| - | 1,325 | 2,695 | 1,680 | 377 | 1,489 | 1,489 | |||||||||||||||
Home equity(2) |
| 83 |
|
| 83 |
|
| 4 |
|
| 84 |
|
| 84 |
|
| 5 | 138 | 139 | 3 | 83 | 83 | 4 | |||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total | $ | 4,699 |
| $ | 6,168 |
| $ | 1,907 |
| $ | 4,020 |
| $ | 4,344 |
| $ | 906 | $ | 5,149 | $ | 6,755 | $ | 2,343 | $ | 3,986 | $ | 5,307 | $ | 2,160 | |||||
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| |||||||||||||||||
Acquired loans with deteriorated |
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| |||||||||||||||||||||
credit with an allowance |
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| |||||||||||||||||||||
recorded: |
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|
|
|
|
|
|
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| |||||||||||||||||
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|
| |||||||||||||||||
Residential one-to-four family | $ | 526 |
| $ | 573 |
| $ | 9 |
| $ | 367 |
| $ | 414 |
| $ | 9 | $ | 161 | $ | 161 | $ | 1 | $ | 524 | $ | 571 | $ | 7 | |||||
Commercial and Multi-family |
| 1,886 |
|
| 1,895 |
|
| 34 |
|
| - |
|
| - |
|
| - | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Sub-total: | $ | 2,412 |
| $ | 2,468 |
| $ | 43 |
| $ | 367 |
| $ | 414 |
| $ | 9 | $ | 161 | $ | 161 | $ | 1 | $ | 524 | $ | 571 | $ | 7 | |||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Impaired Loans |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
with an allowance recorded: | $ | 9,944 |
| $ | 12,585 |
| $ | 2,853 |
| $ | 9,469 |
| $ | 10,033 |
| $ | 2,181 | $ | 8,415 | $ | 12,815 | $ | 3,853 | $ | 7,265 | $ | 10,270 | $ | 3,264 | |||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Impaired Loans |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
with no related allowance recorded: | $ | 20,912 |
| $ | 31,076 |
| $ | - |
| $ | 32,939 |
| $ | 43,523 |
| $ | - | $ | 22,903 | $ | 31,217 | $ | - | $ | 19,647 | $ | 29,082 | $ | - | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Impaired Loans: | $ | 30,856 |
| $ | 43,661 |
| $ | 2,853 |
| $ | 42,408 |
| $ | 53,556 |
| $ | 2,181 | $ | 31,318 | $ | 44,032 | $ | 3,853 | $ | 26,912 | $ | 39,352 | $ | 3,264 | |||||
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|
|
|
|
|
| |||||||||||||||||
__________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.
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 September 30, 2019 |
|
| At December 31, 2018 | At September 30, 2020 | At December 31, 2019 | |||
|
| (In thousands) | (In thousands) | |||||||
Recorded investment in TDRs: |
|
|
|
| ||||||
Accrual status | $ | 16,489 |
| $ | 22,477 | $ | 16,436 | $ | 17,030 | |
Non-accrual status |
| 1,890 |
|
| 4,136 | 1,145 | 702 | |||
Total recorded investment in TDRs | $ | 18,379 |
| $ | 26,613 | $ | 17,581 | $ | 17,732 | |
TDRs restructuredThe Company originated 5 TDR loans totaling $458,181 and 3 TDR loans totaling $415,652 for the three months ended September 30, 2019 totaled $415,652 for three contracts,2020 and no new TDRs were originated for the three months ended September 30, 2018.2019, respectively.
TDRs restructuredThe Company originated 6 TDR loans totaling $674,283and 6 TDR loans totaling $1.8 million for the nine months ended September 30, 2020 and September 30, 2019, totaled $1.8 million for six contracts and $640,000 for one contract duringrespectively.
For the ninethree months ended September 30, 2018.
2020 and September 30, 2019, TDRs, for which there was a payment default within twelve months of restructuring, totaled $602,274 for 2 loans and $105,000 duringfor 1 loan, respectively.
For the threenine months ended September 30, 20192020 and $640,000 for one contract during the three months ended September 30, 2018.
2019, TDRs, for which there was a payment default within twelve months of restructuring, totaled $602,274 for 2 loans and $105,000 during the nine months ended September 30, 2019 and $640,000 for one contract during the nine months ended September 30, 2018. 1 loan, respectively.
25
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the delinquency status of total loans receivable as of September 30, 2019:2020:
|
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|
|
|
|
|
|
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|
|
|
| ||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| Loans Receivable | Loans Receivable | |||||||||||||||||||||||||
| 30-59 Days |
| 60-90 Days |
| Greater Than |
| Total Past |
|
|
| Total Loans |
| >90 Days | 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 | Past Due | Past Due | 90 Days | Due | Current | Receivable | and Accruing | ||||||||||||||||||||
|
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||||||||
Originated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | 1,288 |
| $ | - |
| $ | - |
| $ | 1,288 |
| $ | 211,978 |
| $ | 213,266 |
| $ | - | $ | 1,393 | $ | 256 | $ | 670 | $ | 2,319 | $ | 239,477 | $ | 241,796 | $ | 159 | ||||||
Commercial and multi-family |
| 2,910 |
|
| 1,012 |
|
| - |
|
| 3,922 |
|
| 1,532,870 |
|
| 1,536,792 |
| - | 1,773 | 613 | 2,594 | 4,980 | 1,672,688 | 1,677,668 | 1,416 | ||||||||||||||
Construction |
| - |
|
| - |
|
| - |
|
| - |
|
| 131,697 |
|
| 131,697 |
| - | - | - | - | - | 134,769 | 134,769 | - | ||||||||||||||
Commercial business(1) |
| 57 |
|
| 529 |
|
| 932 |
|
| 1,518 |
|
| 138,644 |
|
| 140,162 |
| 45 | 516 | 63 | 2,488 | 3,067 | 308,137 | 311,204 | 149 | ||||||||||||||
Home equity(2) |
| 196 |
|
| - |
|
| 27 |
|
| 223 |
|
| 48,275 |
|
| 48,498 |
| 27 | 242 | - | 427 | 669 | 60,304 | 60,973 | - | ||||||||||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - |
|
| 693 |
|
| 693 |
|
| - | - | - | - | - | 770 | 770 | - | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Sub-total: | $ | 4,451 |
| $ | 1,541 |
| $ | 959 |
| $ | 6,951 |
| $ | 2,064,157 |
| $ | 2,071,108 |
| $ | 72 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Acquired loans initially recorded at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | 274 |
| $ | - |
| $ | 1,213 |
| $ | 1,487 |
| $ | 36,858 |
|
| 38,345 |
| $ | 167 | ||||||||||||||||||||
Commercial and multi-family |
| 201 |
|
| 77 |
|
| 153 |
|
| 431 |
|
| 126,599 |
|
| 127,030 |
| 153 | |||||||||||||||||||||
Construction |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
| - | |||||||||||||||||||||
Commercial business(1) |
| 437 |
|
| - |
|
| 516 |
|
| 953 |
|
| 19,578 |
|
| 20,531 |
| 138 | |||||||||||||||||||||
Home equity(2) |
| 69 |
|
| - |
|
| - |
|
| 69 |
|
| 14,839 |
|
| 14,908 |
| - | |||||||||||||||||||||
Consumer |
| - |
|
| - |
|
|
|
|
| - |
|
| 35 |
|
| 35 |
|
| - | ||||||||||||||||||||
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Sub-total: | $ | 981 |
| $ | 77 |
| $ | 1,882 |
| $ | 2,940 |
| $ | 197,909 |
| $ | 200,849 |
| $ | 458 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Acquired loans with deteriorated credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 1,360 |
|
| 1,360 |
| $ | - | ||||||||||||||||||||
Commercial and multi-family |
| - |
|
| - |
|
| 4,386 |
|
| 4,386 |
|
| 774 |
|
| 5,160 |
| - | |||||||||||||||||||||
Commercial business(1) |
| - |
|
| - |
|
| 891 |
|
| 891 |
|
| 65 |
|
| 956 |
| - | |||||||||||||||||||||
Home equity(2) |
| 239 |
|
| - |
|
| - |
|
| 239 |
|
| - |
|
| 239 |
|
| - | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| ||||||||||||||||||||
Sub-total: | $ | 239 |
| $ | - |
| $ | 5,277 |
| $ | 5,516 |
| $ | 2,199 |
| $ | 7,715 |
| $ | - | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total | $ | 5,671 |
| $ | 1,618 |
| $ | 8,118 |
| $ | 15,407 |
| $ | 2,264,265 |
| $ | 2,279,672 |
| $ | 530 | $ | 3,924 | $ | 932 | $ | 6,179 | $ | 11,035 | $ | 2,416,145 | $ | 2,427,180 | $ | 1,724 | ||||||
_________
(1) Includes business lines of credit.credit and PPP loans.
(2) Includes home equity lines of credit.
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 September 30, 2020 and December 31, 2019, 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 September 30, 2020, and December 31, 2019, 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 $3.7 million at September 30, 2020 and $1.6 million at December 31, 2019 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 $1.1 million at September 30, 2020, and $3.5 million at December 31, 2019. Loans subject to COVID-19-related modifications are not be reported as non-accrual, in accordance with regulatory guidance.
As of September 30, 2020 | As of December 31, 2019 | ||||
(In Thousands) | (In Thousands) | ||||
Non-Accruing Loans: | |||||
Originated loans: | |||||
Residential one-to-four family | $ | 847 | $ | 590 | |
Commercial and multi-family | 457 | 761 | |||
Commercial business(1) | 3,252 | 1,428 | |||
Home equity(2) | 604 | 347 | |||
Sub-total: | 5,160 | 3,126 | |||
Acquired loans initially recorded at fair value: | |||||
Residential one-to-four family | 565 | 291 | |||
Commercial and multi-family | 979 | 217 | |||
Commercial business(1) | 378 | 513 | |||
Home equity(2) | 69 | 13 | |||
Sub-total: | 1,991 | 1,034 | |||
Total | $ | 7,151 | $ | 4,160 | |
_________
(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 nine months ended September 30, 2020 and December 31, 2019 would have been approximately $673,000 and $967,000, respectively. Interest income recognized on loans returned to accrual status was approximately $520,000 and $1.1 million, respectively. The Bank has not committed to lend additional funds to the borrowers whose loans have been placed on nonaccrual status. At September 30, 2020 and December 31, 2019, there were $1.7 million and $795,000, respectively, of loans which were more than ninety days past due and still accruing interest.
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table sets forth the delinquency status of total loans receivable at December 31, 2018:2019:
|
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| ||||||||||||||||||||||||||
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|
|
| Loans Receivable | Loans Receivable | |||||||||||||||||||||||||
| 30-59 Days |
| 60-90 Days |
| Greater Than |
| Total Past |
|
|
| Total Loans |
| >90 Days | 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 | Past Due | Past Due | 90 Days | Due | Current | Receivable | and Accruing | ||||||||||||||||||||
|
| (In thousands) | (In Thousands) | |||||||||||||||||||||||||||||||||||||
Originated loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | 980 |
| $ | 1,014 |
| $ | 1,452 |
| $ | 3,446 |
| $ | 209,754 |
| $ | 213,200 |
| $ | 545 | $ | 1,087 | $ | 401 | $ | - | $ | 1,488 | $ | 210,532 | $ | 212,020 | $ | - | ||||||
Commercial and multi-family |
| 7,074 |
|
| 299 |
|
| 988 |
|
| 8,361 |
|
| 1,532,405 |
|
| 1,540,766 |
| 877 | 1,290 | 940 | 616 | 2,846 | 1,482,440 | 1,485,286 | - | ||||||||||||||
Construction |
| - |
|
| - |
|
| - |
|
| - |
|
| 106,187 |
|
| 106,187 |
| - | - | - | - | - | 104,996 | 104,996 | - | ||||||||||||||
Commercial business(1) |
| 1,331 |
|
| - |
|
| 349 |
|
| 1,680 |
|
| 135,286 |
|
| 136,966 |
| - | 1,874 | 278 | 1,265 | 3,417 | 153,996 | 157,413 | 142 | ||||||||||||||
Home equity(2) |
| 498 |
|
| 87 |
|
| - |
|
| 585 |
|
| 53,686 |
|
| 54,271 |
| - | 161 | 63 | 116 | 340 | 49,760 | 50,100 | - | ||||||||||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - |
|
| 726 |
|
| 726 |
|
| - | - | - | - | - | 674 | 674 | - | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Sub-total: | $ | 9,883 |
| $ | 1,400 |
| $ | 2,789 |
| $ | 14,072 |
| $ | 2,038,044 |
| $ | 2,052,116 |
| $ | 1,422 | $ | 4,412 | $ | 1,682 | $ | 1,997 | $ | 8,091 | $ | 2,002,398 | $ | 2,010,489 | $ | 142 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Acquired loans initially recorded at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | 1,117 |
| $ | 520 |
| $ | 1,917 |
| $ | 3,554 |
| $ | 39,941 |
|
| 43,495 |
| $ | - | $ | 265 | $ | 217 | $ | 330 | $ | 812 | $ | 34,198 | 35,010 | $ | 97 | |||||||
Commercial and multi-family |
| 1,480 |
|
| 78 |
|
| - |
|
| 1,558 |
|
| 148,681 |
|
| 150,239 |
| - | 318 | - | 631 | 949 | 117,628 | 118,577 | 556 | ||||||||||||||
Construction |
| 594 |
|
| - |
|
| - |
|
| 594 |
|
| 1,002 |
|
| 1,596 |
| - | - | - | - | - | - | - | - | ||||||||||||||
Commercial business(1) |
| 1,876 |
|
| - |
|
| 46 |
|
| 1,922 |
|
| 25,451 |
|
| 27,373 |
| - | 300 | - | 513 | 813 | 18,506 | 19,319 | - | ||||||||||||||
Home equity(2) |
| 682 |
|
| 22 |
|
| 42 |
|
| 746 |
|
| 17,630 |
|
| 18,376 |
| - | 190 | 75 | - | 265 | 14,037 | 14,302 | - | ||||||||||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - |
|
| 83 |
|
| 83 |
|
| - | - | - | - | - | 8 | 8 | - | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Sub-total: | $ | 5,749 |
| $ | 620 |
| $ | 2,005 |
| $ | 8,374 |
| $ | 232,788 |
| $ | 241,162 |
| $ | - | $ | 1,073 | $ | 292 | $ | 1,474 | $ | 2,839 | $ | 184,377 | $ | 187,216 | $ | 653 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Acquired loans with deteriorated credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential one-to-four family | $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 1,390 |
| $ | 1,390 |
| $ | - | $ | - | $ | - | $ | - | $ | - | $ | 1,351 | $ | 1,351 | $ | - | ||||||
Commercial and multi-family |
| - |
|
| - |
|
| 6,012 |
|
| 6,012 |
|
| 820 |
|
| 6,832 |
| - | - | - | 2,500 | 2,500 | 613 | 3,113 | - | ||||||||||||||
Construction |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
| - | - | - | - | - | - | - | - | ||||||||||||||
Commercial business(1) |
| - |
|
| - |
|
| 806 |
|
| 806 |
|
| 48 |
|
| 854 |
| - | - | - | 856 | 856 | 54 | 910 | - | ||||||||||||||
Home equity(2) |
| - |
|
| - |
|
| 48 |
|
| 48 |
|
| 200 |
|
| 248 |
| - | 37 | 199 | - | 236 | - | 236 | - | ||||||||||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - | - | - | - | - | - | - | - | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Sub-total: | $ | - |
| $ | - |
| $ | 6,866 |
| $ | 6,866 |
| $ | 2,458 |
| $ | 9,324 |
| $ | - | $ | 37 | $ | 199 | $ | 3,356 | $ | 3,592 | $ | 2,018 | $ | 5,610 | $ | - | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total | $ | 15,632 |
| $ | 2,020 |
| $ | 11,660 |
| $ | 29,312 |
| $ | 2,273,290 |
| $ | 2,302,602 |
| $ | 1,422 | $ | 5,522 | $ | 2,173 | $ | 6,827 | $ | 14,522 | $ | 2,188,793 | $ | 2,203,315 | $ | 795 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
Criticized and Classified Assets.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. As of September 30, 2019,2020, we had $0 in assets classified as losses, and $16.0$18.1 million in assets classified as substandard, of which $16.0$18.1 million were classified as impaired. 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 substandard, doubtful, and losssubstandard within the Company’s internal risk rating system as of September 30, 2019. (In2020 (in thousands):. As of September 30, 2020, the Company had no loans with the classified rating of doubtful or loss.
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
| Pass |
| Special Mention |
| Substandard |
| Total | Pass | Special Mention | Substandard | Total | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Originated loans: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 210,463 |
| $ | 1,989 |
| $ | 814 |
| $ | 213,266 | $ | 206,900 | $ | 1,040 | $ | 1,103 | $ | 209,043 | |||
Commercial and multi-family |
| 1,530,755 |
|
| 2,189 |
|
| 3,848 |
|
| 1,536,792 | 1,568,159 | 2,147 | 5,152 | 1,575,458 | |||||||
Construction |
| 130,352 |
|
| 1,345 |
|
| - |
|
| 131,697 | 134,769 | - | - | 134,769 | |||||||
Commercial business(1) |
| 136,702 |
|
| 2,013 |
|
| 1,447 |
|
| 140,162 | 286,650 | 1,426 | 4,633 | 292,709 | |||||||
Home equity(2) |
| 48,148 |
|
| - |
|
| 350 |
|
| 48,498 | 49,386 | - | 711 | 50,097 | |||||||
Consumer |
| 688 |
|
| 5 |
|
| - |
|
| 693 | 768 | - | - | 768 | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-total: | $ | 2,057,108 |
| $ | 7,541 |
| $ | 6,459 |
| $ | 2,071,108 | $ | 2,246,632 | $ | 4,613 | $ | 11,599 | $ | 2,262,844 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired loans initially recorded at fair value: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 37,203 |
| $ | - |
| $ | 1,142 |
| $ | 38,345 | $ | 30,777 | $ | - | $ | 657 | $ | 31,434 | |||
Commercial and multi-family |
| 123,782 |
|
| 1,140 |
|
| 2,108 |
|
| 127,030 | 97,894 | 205 | 3,416 | 101,515 | |||||||
Construction |
| - |
|
| - |
|
| - |
|
| - | |||||||||||
Commercial business(1) |
| 18,829 |
|
| 1,187 |
|
| 515 |
|
| 20,531 | 16,132 | 132 | 1,325 | 17,589 | |||||||
Home equity(2) |
| 14,873 |
|
| - |
|
| 35 |
|
| 14,908 | 10,577 | - | 69 | 10,646 | |||||||
Consumer |
| 35 |
|
| - |
|
| - |
|
| 35 | 2 | - | - | 2 | |||||||
Sub-total: | $ | 194,722 |
| $ | 2,327 |
| $ | 3,800 |
| $ | 200,849 | $ | 155,382 | $ | 337 | $ | 5,467 | $ | 161,186 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired loans with deteriorated credit: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 794 |
| $ | 250 |
| $ | 316 |
| $ | 1,360 | $ | 768 | $ | 544 | $ | 7 | $ | 1,319 | |||
Commercial and multi-family |
| 196 |
|
| 495 |
|
| 4,469 |
|
| 5,160 | 487 | - | 208 | 695 | |||||||
Construction |
| - |
|
| - |
|
| - |
|
| - | |||||||||||
Commercial business(1) |
| - |
|
| 41 |
|
| 915 |
|
| 956 | - | 49 | 857 | 906 | |||||||
Home equity(2) |
| 200 |
|
| - |
|
| 39 |
|
| 239 | 230 | - | - | 230 | |||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-total: | $ | 1,190 |
| $ | 786 |
| $ | 5,739 |
| $ | 7,715 | $ | 1,485 | $ | 593 | $ | 1,072 | $ | 3,150 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Gross Loans | $ | 2,253,020 |
| $ | 10,654 |
| $ | 15,998 |
| $ | 2,279,672 | $ | 2,403,499 | $ | 5,543 | $ | 18,138 | $ | 2,427,180 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
_________
(1) Includes business lines of credit.credit and PPP loans.
(2) Includes home equity lines of credit.
Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)
The following table presents the loan portfolio types summarized by the aggregate pass rating and the classified ratings of special mention substandard, doubtful, and losssubstandard within the Company’s internal risk rating system as of December 31, 2018.2019. (In thousands):. As of December 31, 2019, the Company had no loans with the classified rating of doubtful or loss.
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| Pass |
| Special Mention |
| Substandard |
| Total | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Pass | Special Mention | Substandard | Total | |||||||
Originated loans: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 207,991 |
| $ | 2,400 |
| $ | 2,809 |
| $ | 213,200 | $ | 210,094 | $ | 1,336 | $ | 590 | $ | 212,020 | |||
Commercial and multi-family |
| 1,526,591 |
|
| 3,608 |
|
| 10,567 |
|
| 1,540,766 | 1,478,472 | 4,043 | 2,771 | 1,485,286 | |||||||
Construction |
| 105,886 |
|
| 301 |
|
| - |
|
| 106,187 | 104,996 | - | - | 104,996 | |||||||
Commercial business(1) |
| 133,054 |
|
| 1,923 |
|
| 1,989 |
|
| 136,966 | 153,464 | 1,796 | 2,153 | 157,413 | |||||||
Home equity(2) |
| 53,903 |
|
| 91 |
|
| 277 |
|
| 54,271 | 49,753 | - | 347 | 50,100 | |||||||
Consumer |
| 719 |
|
| 7 |
|
| - |
|
| 726 | 670 | 4 | - | 674 | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-total: | $ | 2,028,144 |
| $ | 8,330 |
| $ | 15,642 |
| $ | 2,052,116 | $ | 1,997,449 | $ | 7,179 | $ | 5,861 | $ | 2,010,489 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired loans initially recorded at fair value: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 41,009 |
| $ | 1 |
| $ | 2,485 |
|
| 43,495 | $ | 34,624 | $ | - | $ | 386 | 35,010 | ||||
Commercial and multi-family |
| 146,701 |
|
| 2,618 |
|
| 920 |
|
| 150,239 | 115,130 | 583 | 2,864 | 118,577 | |||||||
Construction |
| 1,596 |
|
| - |
|
| - |
|
| 1,596 | |||||||||||
Commercial business(1) |
| 26,199 |
|
| 1,128 |
|
| 46 |
|
| 27,373 | 17,648 | 1,159 | 512 | 19,319 | |||||||
Home equity(2) |
| 18,309 |
|
| - |
|
| 67 |
|
| 18,376 | 14,270 | - | 32 | 14,302 | |||||||
Consumer |
| 83 |
|
| - |
|
| - |
|
| 83 | 8 | - | - | 8 | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-total: | $ | 233,897 |
| $ | 3,747 |
| $ | 3,518 |
| $ | 241,162 | $ | 181,680 | $ | 1,742 | $ | 3,794 | $ | 187,216 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquired loans with deteriorated credit: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential one-to-four family | $ | 812 |
| $ | 562 |
| $ | 16 |
|
| 1,390 | $ | 788 | $ | 248 | $ | 315 | 1,351 | ||||
Commercial and multi-family |
| 204 |
|
| 502 |
|
| 6,126 |
|
| 6,832 | - | 493 | 2,620 | 3,113 | |||||||
Construction |
| - |
|
| - |
|
| - |
|
| - | |||||||||||
Commercial business(1) |
| (4) |
|
| 48 |
|
| 810 |
|
| 854 | - | 54 | 856 | 910 | |||||||
Home equity(2) |
| 199 |
|
| - |
|
| 49 |
|
| 248 | 199 | - | 37 | 236 | |||||||
Consumer |
| - |
|
| - |
|
| - |
|
| - | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Sub-total: | $ | 1,211 |
| $ | 1,112 |
| $ | 7,001 |
| $ | 9,324 | $ | 987 | $ | 795 | $ | 3,828 | $ | 5,610 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Gross Loans | $ | 2,263,252 |
| $ | 13,189 |
| $ | 26,161 |
| $ | 2,302,602 | $ | 2,180,116 | $ | 9,716 | $ | 13,483 | $ | 2,203,315 | |||
________
(1) Includes business lines of credit.
(2) Includes home equity lines of credit.
Note 8 – Stockholders’ Equity
On April 17, 2018, the Company issued 631,896 shares of its common stock, 438,889 shares of series E 6%non-cumulative convertible preferred stockand 6,465 shares of series F 6% non-cumulative convertible preferred stock in connection with its acquisition of IA Bancorp, Inc. The series E 6% non-cumulative convertible preferred stock was converted, at the shareholders’ discretion, on July 10, 2018. The series F 6% non-cumulative perpetual convertible preferred stock is convertible at the shareholder’s discretion.
On May 16, 2018, the Company issued 82,950 shares of its common stock in connection with the conversion of the 438,889 shares of Series E preferred stock issued in connection with the acquisition of IA Bancorp, Inc.
On January 30, 2019,September 1, 2020, the Company closed a private placement of its Series G 6.0%H 3.5% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $5,330,000$5.9 million for 533590 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.
On December 30, 2019, the Company closed a public offering of 1,020,408 shares of its common stock. The offering resulted in gross proceeds of $12.5 million to the Company.
On February 25, 2019, the Company closed a private placement offering of 496,224 shares of its common stock, of which directors and officers of the Company purchased 286,244 shares (the “Offering”).shares. The Offeringoffering resulted in gross proceeds of $6.272$6.3 million to the Company.
On January 30, 2019, the Company closed a private placement of Series G 6.0% Noncumulative Perpetual Preferred Stock, resulting in gross proceeds of $5.3 million for 533 shares.
Note 9 – Bank Owned Life Insurance
The Bank purchased $60 million of bank owned life insurance (“BOLI”) in August, 2020. 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 September 30, 2020, the Bank had $60.4 million in BOLI. Income earned on BOLI was $385,000 through September 30, 2020. 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.
We believeThe Company believes that the fair values of our goodwill and other intangible assets were in excess of their carrying amounts and therefore there was no0 impairment to intangible assets at September 30, 2019. 2020.
Amortization expense of the core deposit intangibles was $16,000 and $49,000 for the three and nine months ended September 30, 2020, respectively, and $18,000 and $54,000 for the three and nine months ended September 30, 2019, respectively, and $19,000 and $39,000 for the three and nine months ended September 30, 2018, respectively. The unamortized balance of the core deposit intangibles and the amount of goodwill at September 30, 2020 were $250,000 and $5.2 million, respectively, and at September 30, 2019 were $317,000 and $5.3 million, respectively,respectively.
The temporary COVID-19 pandemic has clearly caused disruption to the global economy, but the extent and duration of the disruption is uncertain at this time. Accordingly, and in consideration of the relatively recent decline of the stock price below carrying value, management feels that it is not more likely than not that this circumstance indicates that the fair value of the Company is less than its carrying amount, including goodwill, as of September 30, 2018 were $391,0002020. Management will continue to monitor the activity for loan deferment requests and $5.2 million, respectively.delinquencies on a regular basis, and will perform the annual goodwill impairment testing in the fourth quarter of 2020.
Note 1011 – 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 September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage backed securities |
| $ | 98,218 |
| $ | - |
| $ | 98,218 |
| $ | - |
Total Debt Securities Available for Sale |
| $ | 98,218 |
| $ | - |
| $ | 98,218 |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
| $ | 5,857 |
| $ | 5,857 |
| $ | - |
| $ | - |
Total Equity Investments |
| $ | 5,857 |
| $ | 5,857 |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage backed securities |
| $ | 115,640 |
| $ | - |
| $ | 115,640 |
| $ | - |
Municipal obligations |
|
| 3,695 |
|
| - |
|
| 3,695 |
|
| - |
Total Debt Securities Available for Sale |
| $ | 119,335 |
| $ | - |
| $ | 119,335 |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
| $ | 7,672 |
| $ | 7,672 |
| $ | - |
| $ | - |
Total Equity Investments |
| $ | 7,672 |
| $ | 7,672 |
| $ | - |
| $ | - |
| (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 September 30, 2020: |
|
|
| |||||||||
Securities |
|
|
| |||||||||
Debt Securities Available for Sale | $ | 119,643 | $ | - | $ | 119,643 | $ | - | ||||
Marketable Equities | $ | 14,501 | $ | 14,501 | $ | - | $ | - | ||||
Total Securities | $ | 134,144 | $ | 14,501 | $ | 119,643 | $ | - | ||||
As of December 31, 2019: |
|
|
| |||||||||
Securities |
|
| ||||||||||
Debt Securities Available for Sale | $ | 91,613 | $ | - | $ | 91,613 | $ | - | ||||
Marketable Equities | $ | 2,500 | $ | 2,500 | $ | - | $ | - | ||||
Total Securities | $ | 94,113 | $ | 2,500 | $ | 91,613 | $ | - | ||||
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 no0 transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three or nine months ended September 30, 20192020 and 2018.2019.
The only assets or liabilities that the Company measured at fair value on a nonrecurring basis were as follows. (In thousands):
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| ||||||||||||||||
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| ||||||||||||||||
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| ||||||||||||||||
|
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| (Level 1) |
| (Level 2) |
|
|
|
| (Level 1) |
| (Level 2) |
| ||||||||||
|
|
|
| Quoted Prices in |
| Significant |
| (Level 3) | Quoted Prices in | Significant | (Level 3) | |||||||||||||
|
|
|
| Active Markets |
| Other |
| Significant | Active Markets | Other | Significant | |||||||||||||
|
|
|
| for Identical |
| Observable |
| Unobservable | for Identical | Observable | Unobservable | |||||||||||||
Description |
| Total |
| Assets |
| Inputs |
| Inputs | Total | Assets | Inputs | Inputs | ||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Impaired Loans |
| $ | 7,091 |
| $ | - |
| $ | - |
| $ | 7,091 | ||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of December 31, 2018: |
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|
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|
|
|
|
|
|
|
| |||||||||||||
As of September 30, 2020 |
|
|
| |||||||||||||||||||||
Impaired Loans |
| $ | 7,288 |
| $ | - |
| $ | - |
| $ | 7,288 | $ | 4,562 |
| $ | - |
| $ | - |
| $ | 4,562 | |
Other real estate owned |
| $ | 1,333 |
| $ | - |
| $ | - |
| $ | 1,333 | $ | 1,623 |
| $ | - |
| $ | - |
| $ | 1,623 | |
As of December 31, 2019: |
|
|
| |||||||||||||||||||||
Impaired Loans | $ | 4,001 | $ | - | $ | - | $ | 4,001 | ||||||||||||||||
Other real estate owned | $ | 1,623 |
| $ | - |
| $ | - |
| $ | 1,623 | |||||||||||||
Note 1011 – Fair Values of Financial Instruments (Continued)
The following tables present additional quantitative information as of September 30, 20192020 and December 31, 20182019 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 | ||
September 30, | |||||
Impaired Loans | $ |
| Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10% |
Other real estate owned | $ | 1,623 | |||
|
|
| |||
|
|
|
| ||
| |||||
|
|
| Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10% |
Fair Value | Valuation | Unobservable | |||
Estimate | Techniques | Input | Range | ||
December 31, 2019: | |||||
Impaired Loans | $ | 4,001 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10% |
Other real estate owned | $ |
| Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10% |
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|
|
(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 September 30, 20192020 and December 31, 2018.2019.
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 theirthe lower of cost as of September 30, 2019 and December 31, 2018.or fair value.
Loans Receivable (Carried at Cost)
The fair valuevalues of loans, except for certain impaired loans, are estimated using discounted cash flow analyses, using market rates at the balance sheet 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.
Note 1011 – Fair Values of Financial Instruments (Continued)
Impaired Loans (Generally Carried at Fair Value)
A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impaired loans are those for which the Company has measured and recorded an impairment generally based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, at the loans observable market price or the fair value of the loan’s collateral, if the loan is collateral dependent.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 September 30, 20192020 and December 31, 20182019 consisted of the loan balances of $9.9 million and $9.5$8.4 million net of a valuation allowance of $2.9$3.8 million and $2.2$7.3 million net of a valuation of loan allowance of $3.3 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.
Note 1011 – Fair Values of Financial Instruments (Continued)
The carrying values and estimated fair values of financial instruments were as follows as of September 30, 20192020 and December 31, 2018:2019:
|
|
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|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
| As of September 30, 2019 | As of September 30, 2020 | ||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
| Quoted Prices in Active |
| Significant |
| Significant | Quoted Prices in Active | Significant | Significant | ||||||||||||||||
|
| Carrying |
|
|
|
| Markets for Identical Assets |
| Other Observable Inputs |
| Unobservable Inputs | Carrying | Markets for Identical Assets | Other Observable Inputs | Unobservable Inputs | |||||||||||||||
|
| Value |
| Fair Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cash and cash equivalents |
| $ | 376,611 |
| $ | 376,611 |
| $ | 376,611 |
| $ | - |
| $ | - | $ | 160,551 | $ | 160,551 |
| $ | 160,551 |
| $ | - | $ | - | |||
Interest-earning time deposits |
|
| 735 |
| 735 |
|
| 735 |
|
| - |
| - | 735 | 735 |
| - |
| 735 | - | ||||||||||
Debt securities available for sale |
|
| 98,218 |
| 98,218 |
| - |
| 98,218 |
| - | 119,643 | 119,643 | - | 119,643 | - | ||||||||||||||
Equity investments |
|
| 5,857 |
| 5,857 |
|
| 5,857 |
|
| - |
| - | 14,501 | 14,501 |
| 14,501 |
| - | - | ||||||||||
Loans held for sale |
|
| 3,195 |
| 3,195 |
|
| - |
|
| 3,195 |
| - | 1,510 | 1,510 |
| - |
| 1,510 | - | ||||||||||
Loans receivable, net |
|
| 2,253,699 |
| 2,264,676 |
|
| - |
|
| - |
| 2,264,676 | 2,391,990 | 2,426,106 |
| - |
| - | 2,426,106 | ||||||||||
FHLB of New York stock, at cost |
|
| 15,171 |
| 15,171 |
|
| - |
|
| 15,171 |
| - | 13,160 | 13,160 |
| - |
| 13,160 | - | ||||||||||
Accrued interest receivable |
|
| 8,959 |
| 8,959 |
|
| - |
|
| 8,959 |
| - | 17,746 | 17,746 |
| - |
| 17,746 | - | ||||||||||
Other Real Estate Owned |
|
| - |
| - |
|
| - |
|
| - |
| - | 1,623 | 1,623 |
| - |
| - | 1,623 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Deposits |
|
| 2,263,457 |
| 2,275,038 |
|
| 1,148,516 |
|
| 1,126,522 |
| - | 2,273,338 | 2,280,198 |
| 1,497,649 |
| 782,549 | - | ||||||||||
Borrowings |
|
| 275,800 |
| 277,344 |
|
| - |
|
| 277,344 |
| - | 259,600 | 262,270 |
| - |
| 262,270 | - | ||||||||||
Subordinated debentures |
|
| 36,752 |
| 36,958 |
| - |
| 36,958 |
| - | 36,984 | 37,364 | - | 37,364 | - | ||||||||||||||
Accrued interest payable |
|
| 2,231 |
| 2,231 |
|
| - |
|
| 2,231 |
| - | 1,485 | 1,485 |
| - |
| 1,485 | - | ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
| As of December 31, 2018 | As of December 31, 2019 | ||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
| Quoted Prices in Active |
| Significant |
| Significant | Quoted Prices in Active | Significant | Significant | ||||||||||||||||
|
| Carrying |
|
|
|
| Markets for Identical Assets |
| Other Observable Inputs |
| Unobservable Inputs | Carrying | Markets for Identical Assets | Other Observable Inputs | Unobservable Inputs | |||||||||||||||
|
| Value |
| Fair Value |
| (Level 1) |
| (Level 2) |
| (Level 3) | Value | Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| (In thousands) | (In Thousands) | |||||||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cash and cash equivalents |
| $ | 195,264 |
| $ | 195,264 |
| $ | 195,264 |
| $ | - |
| $ | - | $ | 550,353 | $ | 550,353 |
| $ | 550,353 |
| $ | - | $ | - | |||
Interest-earning time deposits |
|
| 735 |
| 735 |
|
| 735 |
|
| - |
| - | 735 | 735 |
| - |
| 735 | - | ||||||||||
Debt securities available for sale |
|
| 119,335 |
| 119,335 |
| - |
| 119,335 |
| - | 91,613 | 91,613 | - | 91,613 | - | ||||||||||||||
Equity investments |
|
| 7,672 |
| 7,672 |
|
| 7,672 |
|
| - |
| - | 2,500 | 2,500 |
| 2,500 |
| - | - | ||||||||||
Loans held for sale |
|
| 1,153 |
| 1,153 |
|
| - |
|
| 1,153 |
| - | 917 | 917 |
| - |
| 917 | - | ||||||||||
Loans receivable, net |
|
| 2,278,492 |
| 2,245,150 |
|
| - |
|
| - |
| 2,245,150 | 2,178,407 | 2,199,497 |
| - |
| - | 2,199,497 | ||||||||||
FHLB of New York stock, at cost |
|
| 13,405 |
| 13,405 |
|
| - |
|
| 13,405 |
| - | 13,821 | 13,821 |
| - |
| 13,821 | - | ||||||||||
Accrued interest receivable |
|
| 8,378 |
| 8,378 |
|
| - |
|
| 8,378 |
| - | 8,318 | 8,318 |
| - |
| 8,318 | - | ||||||||||
Other Real Estate Owned |
|
| 1,333 |
| 1,333 |
|
| - |
|
| - |
| 1,333 | 1,623 | 1,623 |
| - |
| - | 1,623 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Deposits |
|
| 2,180,724 |
| 2,189,404 |
|
| 1,075,539 |
|
| 1,113,865 |
| - | 2,362,063 | 2,375,089 |
| 1,231,658 |
| 1,143,431 | - | ||||||||||
Borrowings |
|
| 245,800 |
| 244,049 |
|
| - |
|
| 244,049 |
| - | 245,800 | 245,176 |
| - |
| 245,176 | - | ||||||||||
Subordinated debentures |
|
| 36,577 |
| 36,316 |
| - |
| 36,316 |
| - | 36,810 | 36,947 | - | 36,947 | - | ||||||||||||||
Accrued interest payable |
|
| 2,561 |
| 2,561 |
|
| - |
|
| 2,561 |
| - | 2,708 | 2,708 |
| - |
| 2,708 | - | ||||||||||
Note 1112 – Subordinated debt
On July 30, 2018, the Company issued $33.5 million of fixed-to-floating rate subordinated debentures (the “Notes”) in a private placement. The Notes have a ten-year term and bear interest at a fixed annual rate of 5.625% for the first five years of the term (the "Fixed Interest Rate Period"). From and including August 1, 2023, the interest rate will adjust to a floating rate based on the three-month LIBOR plus 2.72% until redemption or maturity (the "Floating Interest Rate Period"). The Notes are scheduled to mature on August 1, 2028. Subject to limited exceptions, the Company cannot redeem the Notes for the first five years of the term. The Company will pay interest in arrears semi-annually during the Fixed Interest Rate Period and quarterly during the Floating Interest Rate Period during the term of the Notes. The Notes constitute an unsecured and subordinated obligation of the Company and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors. The Notes qualify as Tier 2 capital for the Company for regulatory purposes, when applicable, and the portion that the Company contributes to the Bank will qualify as Tier 1 capital for the Bank. The additional capital will be used for general corporate purposes including organic growth initiatives. Subordinated debt includes associated deferred costs of $872,000$640,000 and $814,000 at September 30, 2019.2020 and December 31, 2019, respectively.
The Company also has $4,124,000 of mandatory redeemable Trust Preferredtrust preferred securities. The interest rate on these floating rate junior subordinated debentures adjusts quarterly, equal to the three-month LIBOR and 2.65%.
As it is anticipated that LIBOR will be discontinued after 2021, the Company is reviewing the agreements for the above debentures to determine alternative reference rates, and does not anticipate there will be a significant financial statement impact.
Note 1213 – Lease Obligations
In February 2016, FASB issued ASU 2016-02, Leases, which requires a lessee to recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a right-of-use (“ROU”) asset.The Company adopted this standard in the first quarter of 2019 using the option to apply the transition provisions of the new standard at the adoption date instead of the earliest period presented as provided in ASU 2018-11.
The Company leases 28 of our offices under various operating lease agreements. The leases have remaining terms of 1one year to 1312 years.The leases contain provisions for the payment by the Company of its pro-rata share of real estate taxes, insurance, common area maintenance and other variable expenses. The Company will allocate payments made under such leases between lease and non-lease components. Some leases contain renewal options and options to purchase the assets.
The Company evaluates its contracts and service agreements in order to determine if there is an asset imbedded in such contracts and agreements. Such determination is based upon whether there is a specific asset covered by the agreement, whether the Company is entitled to all of the economic benefits to the asset over the term of the agreement, and whether the Company has full control and use of the asset over the term of the agreement without substitution rights or direction of use of the asset by the lessor.
The Company includes in its determination of its lease liability and concurrent right of use asset those renewal or purchase options for which it is reasonably certain it will exercise. Currently, the Company does not expect to exercise such options and, accordingly, they are excluded in the determination of the lease liabilities and the concurrent right of use assets.
The Company has elected not to recognize a lease liability and a right of use asset for leases with a lease term of 12 or fewer months.
To calculate its lease liabilities, the Company uses a discount rate based upon the applicable borrowing rates of the Federal Home Loan Bank for maturities corresponding to the termination dates of the specific leases.
The following tables present certain information related to the Company’s adoption of ASU 2016-02leases (in thousands):
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| Nine Months Ended September 30, 2019 | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||
Operating lease cost | $ | 812 |
| $ | 2,374 | $ | 850 | $ | 812 | $ | 2,559 | $ | 2,374 |
Variable lease cost-operating leases | $ | 132 |
| $ | 440 | $ | 201 | $ | 132 | $ | 599 | $ | 440 |
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Operating Leases |
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Operating lease right-of-use assets | $ | 13,951 |
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Current liabilities | $ | 2,631 |
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| $ | 3,054 | $ | 2,590 | ||||
Operating lease liabilities (noncurrent portion) |
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| 12,950 | 10,790 | ||||||
Total operating lease liabilities | $ | 14,054 |
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| $ | 16,004 | $ | 13,380 |
The following tables summarize the Company’s weighted average remaining lease termsterm for operating leases at September 30, 2020 and December 31, 2019 was 6.68 years and 6.69 years, respectively. The weighted average discount rates:rate for operating leases at September 30, 2020 and December 31, 2019 was 2.67 percent and 3.16 percent, respectively.
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Note 12 – Lease Obligations (continued)
The following table summarizes the Company’s maturity of lease obligations for operating and finance leases at September 30, 2020 and December 31, 2019 (in thousands):
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At September 30, 2020 | At December 31, 2019 | ||||
Operating Leases | Operating Leases | ||||
One year or less | $ | 3,054 | $ | 2,590 | |
Over one year through three years | 5,131 | 4,713 | |||
Over three years through five years | 3,341 | 2,736 | |||
Over five years | 4,478 | 3,341 | |||
Total | $ | 16,004 | $ | 13,380 | |
Note 1314 – Subsequent Events
On October 9, 2019,22, 2020, the Company announced that its Board of Directors approved the adoption of a new stock repurchase program to be effective at a to-be-determined time. The Company’s Board of Directors plans to consult with its financial advisors and determine the total number of shares to be repurchased under the program. The Company did not repurchase any shares of its common stock during the three month period ended September 30, 2020.
On October 14, 2020, the Board of Directors of the Company declared a common stock dividend of $0.14 per share to shareholders of record on November 8, 20196, 2020 with a payment date of November 22, 2019.20, 2020.
The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business. While the Company did not incur significant disruptions during the three and nine months ended September 30, 2020 from the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows for future periods due to numerous uncertainties.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report on Form 10-Q contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, or the PSLRA. Such forward-looking statements, in addition to historical information, involve risk and uncertainties, and are based on the beliefs, assumptions and expectations of our management team. Words such as “expects,” “believes,” “should,” “plans,” “anticipates,” “will,” “potential,” “could,” “intend,” “may,” “outlook,” “predict,” “project,” “would,” “estimated,” “assumes,” “likely,” and variation of such similar expressions are intended to identify such forward-looking statements. Forward-looking statements speak only as of the date they are made. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.
Factors that could cause future results to vary from current management expectations as reflected in our forward lookingforward-looking statements include, but are not limited to:
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unfavorable economic conditions in the United States generally and particularly in our primary market area;
the effects of declines in housing markets and real estate values that may adversely impact the collateral underlying our loans;
increase in unemployment levels and slowdowns in economic growth;
our level of non-performing assets and the costs associated with resolving any problem loans including litigation and other costs;
the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of our loan and investment securities portfolios;
the credit risk associated with our loan portfolio;
changes in the quality and composition of the Bank’s loan and investment portfolios;
changes in our ability to access cost-effective funding;
deposit flows;
legislative and regulatory changes, including increases in Federal Deposit Insurance Corporation, or FDIC, insurance rates;
monetary and fiscal policies of the federal and state governments;
changes in tax policies, rates and regulations of federal, state and local tax authorities;
inflation;
demands for our loan products;
demand for financial services;
competition;
changes in the securities or secondary mortgage markets;
changes in management’s business strategies;
our ability to enter new markets successfully;
our ability to successfully integrate acquired businesses;
changes in consumer spending;
our ability to retain key employees;
the effects of any reputational, credit, interest rate, market, operational, legal, liquidity, or regulatory risk;
expanded regulatory requirements as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which could adversely affect operating results;
civil unrest in the communities that we serve;
the global spread of the Coronavirus Disease 2019 (“COVID-19”) and the impact that it is having on the United States, in general, and New Jersey and New York, in particular (see Item 1.A. Risk Factors); and
other factors discussed elsewhere in this report, and in other reports we filed with the SEC, including under “Risk Factors” in Part I, Item 1A of our annual Report on Form 10-K, in Part II, Item 1A of our quarterly reports on Form 10-Q, and our other periodic reports that we file with the SEC.
You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Form 10-Q. We do not assume any obligation to revise forward-looking statements except as may be required by law.
BCB Bancorp, Inc. is a New Jersey corporation, and is the holding company parent of BCB Community Bank, or the Bank. The Company has not engaged in any significant business activity other than owning all of the outstanding common stock of BCB Community Bank. Our executive office is located at 104-110 Avenue C, Bayonne, New Jersey 07002. At September 30, 2019,2020, we had approximately $2.825$2.842 billion in consolidated assets, $2.263$2.273 billion in deposits and $223.7$242.7 million in consolidated stockholders’ equity.
BCB Community Bank opened for business on November 1, 2000 as Bayonne Community Bank, a New Jersey chartered commercial bank. The Bank changed its name from Bayonne Community Bank to BCB Community Bank in April 2007. At September 30, 20192020 the Bank operated through thirty31 branches in Bayonne, Carteret, Colonia, Edison, Jersey City, Hoboken, Fairfield, Holmdel, Lodi, Lyndhurst, Maplewood, Monroe Township, Newark, Parsippany, Plainsboro, River Edge, Rutherford, South
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Orange, Union, and Woodbridge, New Jersey, as well as three branches in Hicksville and Staten Island, NY, and through executive offices located at 104-110 Avenue C and an administrative office located at 591-595 Avenue C, Bayonne, New Jersey 07002. The Bank’s deposit accounts are insured by the FDIC, and the Bank is a member of the Federal Home Loan Bank System.
We are a community-oriented financial institution. Our business is to offer FDIC-insured deposit products and to invest funds held in deposit accounts at the Bank, together with funds generated from operations, in loans and investment securities. We offer our customers:
loans, including commercial and multi-family real estate loans, one- to four-family mortgage loans, home equity loans, construction loans, consumer loans and commercial business loans. In recent years the primary growth in our loan portfolio has been in loans secured by commercial real estate and multi-family properties;
FDIC-insured deposit products, including savings and club accounts, interest and non-interest bearing demand accounts, money market accounts, certificates of deposit and individual retirement accounts; and
retail and commercial banking services including wire transfers, money orders, safe deposit boxes, a night depository, debit cards, online banking, mobile banking, gift cards, fraud detection (positive pay), and automated teller services.
Critical Accounting Policies
The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loan losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2019,2020, it is reasonably possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.
See further discussion of these critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 20182019 and Note 1, Basis of Presentation, to the unaudited Consolidated Financial Statements. There has been no change in critical accounting policies since the Company’s last annual report on Form 10-K.
COVID-19 Overview
With the global outbreak of COVID-19, the Company remains focused on protecting the health and wellbeing of its employees and the communities in which it operates while assuring the continuity of its business operations.
The Company activated its dedicated pandemic team that proactively implemented its business continuity plans and has taken a variety of measures to ensure the ongoing availability of services, while taking health and safety measures, including enhanced cleaning and hygiene protocols in all of its facilities and remote work policies, where possible. To date, as a result of these business continuity measures, the Company has not experienced significant disruptions in its operations.
As of September 30, 2020, the Company had over $160 million of cash on hand and available wholesale borrowing capacity of over $700 million.
COVID-19 Response
Operational Initiatives
oThe pandemic response team meets on a biweekly basis and actively monitors guidance released by regulators, and banking associations.
oIn-person meetings are closely managed and are held on an as needed basis only.
oSome employees are working remotely, temporarily relocated or are working alternate days to increase social distancing.
oBarriers have been installed in branches and back offices to provide protection.
oBranch and operational offices are cleaned and sanitized weekly. This practice will continue until further notice. Employees have access to masks, gloves and disinfectant.
oMasks are required for entry and social distancing is strictly enforced.
oManagement provides updates to employees on a regular basis.
oThe Call Center is open seven days a week to assist with customer inquiries.
Allowance for Loan Losses (“ALLL”)
oAlthough several of the Company’s asset quality metrics have not been adversely affected in a significant manner during the first nine months of 2020, management determined it is prudent to increase its loan loss reserves through the addition of $2.7 million and $7.5 million in loan loss provisions for the three and nine-month periods ended September 30, 2020, respectively, due primarily to the economic downturn as a result of the COVID-19 pandemic. This compares to $900,000 and $2.5 million in loan loss provisions for the three and nine-month periods ended September 30, 2019, respectively. The loan loss reserve to total loans ratio was 1.31 percent at September 30, 2020, compared to 1.08 percent at September 30, 2019. The increased reserve includes provisions taken in response to changes in risks associated with loan classification assignments and a declining economy in New Jersey and New York.
oThe Bank considered qualitative factors, such as changes in underwriting policies, current economic conditions, delinquency statistics, the adequacy of the underlying collateral and the financial strength of borrowers in arriving at its loan loss provision. All of these factors are likely to be affected by the COVID-19 pandemic. Individual deferred loans were stress tested to assess potential credit risks. The impact of COVID-19 is likely to be felt over the next several quarters. Adjustments to the ALLL may be required as the full impact of COVID-19 on the borrowers’ capacity to make payments and the value of the underlying collateral becomes known.
Loan Deferments
oThe Bank, like other financial institutions, has received a significant number of requests to defer principal and/or interest payments, and has agreed to such deferrals or is in the process of doing so on a case by case basis. The banking regulatory agencies, through an Interagency Statement dated April 7, 2020, are encouraging financial institutions to work prudently with borrowers who request loan modifications or deferrals as a result of COVID-19.
oThe Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 that were modified or deferred due to COVID-19 will be considered current. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. These loans are accruing interest and the Bank is considering the loans within the overall allowance for loan loss analysis.
COVID-19 Response (Continued)
oThe Bank began receiving requests for loan deferments on March 13, 2020. The forbearance period provided by the Bank is generally three months with the Bank retaining the sole option to extend the forbearance period for an additional three months. Payments received upon the expiration of the forbearance period will first be applied to interest accrued, then towards escrow advances, and any remaining amount towards principal.
The following is a summary of deferment requests by loan type as of September 30, 2020 and October 16, 2020 (dollars in thousands):
September 30, 2020 | October 16, 2020 | ||||||||||||||
Number of Loans | Principal Balance | Weighted Average Interest Rate | Number of Loans | Principal Balance | Weighted Average Interest Rate | ||||||||||
Residential one-to-four family | 2 | $ | 789 | 5.0 | % | - | $ | - | - | % | |||||
Commercial and multi-family | 45 | 54,708 | 4.5 | 10 | 4,023 | 4.7 | |||||||||
Construction | - | - | - | - | - | - | |||||||||
Commercial business(1) | 9 | 3,856 | 5.6 | 1 | 1,149 | 6.0 | |||||||||
Home equity(2) | 2 | 299 | 5.1 | - | - | - | |||||||||
58 | $ | 59,652 | 4.6 | % | 11 | $ | 5,172 | 5.0 | % | ||||||
(1) Includes business lines of credit. | |||||||||||||||
(2) Includes home equity lines of credit. | |||||||||||||||
Loan deferments peaked at $730.1 million in mid-June 2020. The Bank has worked diligently with our customers by reaching out to them as the end of the three-month deferral term was approaching, and to understand the need for any prudent requests of an extension of the deferral period. The Bank has been encouraged with the results as we have experienced a 99% decline in loan deferment balances through October 16, 2020 since the peak in mid-June.
Loan deferment maturities for the remainder of the year are as follows (in thousands):
October | November | December | January 2021 | Total | ||||||||||
1st Deferment | $ | - | $ | - | $ | 1,432 | $ | 495 | $ | 1,927 | ||||
2nd Deferment | - | - | 2,155 | 1,090 | 3,245 | |||||||||
Total Deferments | $ | - | $ | - | $ | 3,587 | $ | 1,585 | $ | 5,172 |
Management continues to perform detail stress testing of loan deferments related to various loan to value and cash flow scenarios. The ALLL reserves allocated to these stress tests are deemed to be adequate and will continue to be analyzed as the economic conditions progress.
Paycheck Protection Program (PPP)
oAs a qualified SBA lender, the Bank was automatically authorized to originate PPP loans.
oThrough September 30, 2020, the Bank had closed and funded approximately $129 million for almost 1,100 PPP loans.
oThe Company had received approximately $4.7 million of processing fees from the SBA through September 30, 2020. These fees, net of direct costs relating to the origination of these loans, have been deferred and are being amortized over the life of the loans. The amount of net deferred fees recorded to interest income through September 30, 2020 was approximately $640,000. The Company anticipates recognizing $375,000 of net deferred fee income in the fourth quarter of 2020, excluding any amounts resulting from loan forgiveness.
Main Street lending Program
oThe Main Street Lending Program is a program announced on April 9, 2020, under which the Federal Reserve will purchase loans that banks give to small and mid-sized businesses. The Federal Reserve will purchase 95% of each loan.
oThe program is designed to keep credit flowing to small and mid-sized businesses that were in good financial standing before the onset of the COVID-19 crisis, but which are now under extreme stress due to stay-at-home and business closure orders from state and local governments. The Bank has been approved as an eligible lender, and has received inquiries since the program became operational on July 8, 2020. As of September 30, 2020, the Bank has not sold any loans to the Federal Reserve under this program.
Industry Exposure
oThe Company has identified various industries that may be particularly adversely impacted by the COVID-19 pandemic. Though the hotspots may change through the progression of the pandemic, the following sectors are currently being disproportionately impacted: Strip Retail, Hospitality/Hotels, Golf Courses and Banquet Halls, Restaurants and Retail.
The following table summarizes the Bank’s portfolio and deferment balances for these industries, as a percentage of the total loan portfolio, at September 30, 2020. At October 16, 2020, the Bank only had $400,000 in deferment balances for these industries.
Description | Portfolio Balance ($000s) | Percentage of Loan Portfolio | Deferment Balance ($000s) | Percentage of Loan Portfolio | |||||||
Strip Retail | $ | 119,505 | 5.0% | $ | 10,649 | 0.4% | |||||
Hospitality/Hotel | 66,390 | 2.8% | 1,937 | 0.1% | |||||||
Golf Courses and Banquet Halls | 45,646 | 1.9% | 11,121 | 0.5% | |||||||
Restaurant (standalone) | 36,226 | 1.5% | 234 | 0.0% | |||||||
Retail (one-to-three units) | 66,778 | 2.8% | 401 | 0.0% | |||||||
$ | 334,545 | 14.0% | $ | 24,342 | 1.0% | ||||||
COVID-19 Response (Continued)
IT Changes
oTo protect the well-being of our staff and customers, the Company has set up resources for some employees to work from home. To facilitate the move, we allocated laptop computers to staff and enhanced our ability to access the network offsite.
Liquidity and Capital Resources
oThe Company was well positioned with adequate levels of cash and liquid assets as of September 30, 2020, as well as wholesale borrowing capacity of over $700 million, to cover the lack of payments for COVID-19 loan deferments. At September 30, 2020, the Company’s equity to assets ratio was 8.5% and the Bank’s capital was in excess of regulatory requirements. The Company called $10.5 million of its then-outstanding preferred stock in the third quarter, which included all of its Series C 6.0% and Series F 6.0% preferred stock. The Company issued $5.9 million of Series H 3.5% preferred stock in the third quarter of 2020. Total Series H 3.5% preferred stock issued was $9.0 million at September 30, 2020. In September, 2020 the Board of Directors of the Company, extended the issuance of Series H 3.5% preferred stock program through December 31, 2020. The Company had $4.9 million of common stock repurchases for the first six months of 2020, and the program concluded in May 2020. The Company will continue to monitor the effects of COVID-19 in determining future cash dividends and any requirement for additional capital each quarter.
Financial Condition
Total assets increaseddecreased by $150.8$65.1 million, or 5.62.2 percent, to $2.825$2.842 billion at September 30, 20192020 from $2.675$2.907 billion at December 31, 2018.2019. The increasedecrease in total assets was primarily the result of an increasemainly related to decreases in total cash and cash equivalents, aspartly offset by increases in loans receivable, a resultpurchase of new deposit relationships, proceeds$60.0 million of BOLI, and purchases of investment securities.
Total cash and cash equivalents decreased by $389.8 million, or 70.8 percent, to $160.6 million at September 30, 2020 from FHLB borrowings,$550.4 million at December 31, 2019. This decrease was mainly related to increases in loans receivable and the inclusioninvestment securities, a purchase of operating leases on the balance sheet due to accounting standards changes as mandated$60.0 million of BOLI, and a decrease in deposits, partly offset by the Financial Accounting Standards Board’s Accounting Standards Update - Leases Topic 842.an increase in borrowings.
Loans receivable, decreasednet increased by $24.8$213.6 million, or 1.19.8 percent, to $2.254$2.392 billion at September 30, 20192020 from $2.278$2.178 billion at December 31, 2018. After a significant growth2019. The increase in loans included $48.4 million of purchased loans and $127.0 million from the Company’s participation in 2018, management focused on repositioning the balance sheet, which included curtailingfederal PPP loan growth and strengthening our capital position. The change in loans overprogram. Total loan increases for the first nine months of 2019 represented decreases of $28.92020 included $133.6 million in commercial business loans, which included PPP loans, $70.7 million in commercial real estate and multi-family loans, $9.2$29.8 million in home equityconstruction loans, $5.1and $88,000 in consumer loans, partly offset by decreases of $6.6 million in residential one-to-four family loans $3.5and $3.7 million in commercial business loans, $81,000 in consumer loans, partly offset by an increase of $23.9 million in constructionhome equity loans. The allowance for loan losses was $24.7increased $8.0 million to $31.8 million, or 486.6444.1 percent of non-accruing loans and 1.31 percent of gross loans, at September 30, 2020 as compared to an allowance for loan losses of $23.7 million, or 570.5 percent of non-accruing loans and 1.08 percent of gross loans, at September 30, 2019 as compared to an allowance for loan losses of $22.4December 31, 2019.
Total investment securities increased by $40.0 million, or 309.6 percent of non-accruing loans and 0.97 percent of gross loans, at December 31, 2018.
Total cash and cash equivalents increased by $181.3 million, or 92.942.5 percent, to $376.6$134.1 million at September 30, 20192020 from $195.3$94.1 million at December 31, 2018. The Company’s level2019, representing purchases of cash$70.6 million in securities, partly offset by repayments, calls and cash equivalents is a part of the Company’s strategy to maintain strong levels of liquidity.maturities.
Total investment securitiesDeposit liabilities decreased by $22.9 million, or 18.1 percent, to $104.0 million at September 30, 2019 from $127.0 million at December 31, 2018, representing normal repayments, calls, maturities, and the sale of $13.9 million of securities.
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2016-02 - Leases, requiring on-balance sheet reporting for all operating leases. Adoption of the Standard resulted in the recording of $14.0 million in operating lease right-of-use assets and a corresponding $14.1 million in operating lease liabilities at September 30, 2019.
Deposit liabilities increased by $82.7$88.7 million, or 3.8 percent, to $2.263$2.273 billion at September 30, 20192020 from $2.181$2.362 billion at December 31, 2018. Increases over2019. The decrease in deposit liabilities mainly related to the maturity of certain high-rate, promotional certificate of deposit accounts in the third quarter. Some of these matured deposits went into other forms of deposits and others were withdrawn from the Bank. Total decreases for the first nine months of 20192020 included $50.2 million in money market checking accounts, $12.2 million in non-interest bearing deposits, $13.9 million in transaction accounts, and $10.4$355.7 million in certificates of deposit, partly offset by decreases of $4.0 million in savings and club accounts. The Company usesincluding listing service and brokered deposit accounts. Listing service and brokered reciprocal certificates of deposit, which were used as additional sources of deposit liquidity whichto fund loan growth, totaled $10.9$2.2 million and $0,$10.0 million, respectively, at September 30, 2019,2020. The decreases in total deposit liabilities was partly offset by increases of $123.9 million in non-interest-bearing deposit accounts, $110.8 million in NOW deposit accounts, $27.0 million in savings and $36.9club accounts, and $5.3 million and $248.0 million, respectively, at December 31, 2018.in money market checking accounts.
Debt obligations increased by $30.2$14.0 million, or 10.74.9 percent, to $312.6$296.6 million at September 30, 20192020 from $282.4$282.6 million at December 31, 2018 and consisted of both Federal Home Loan Bank (“FHLB”) borrowings and subordinated debt balances. The increase in FHLB borrowings for the year to date related to replacing $40 million in advance of the maturity dates in the next quarter that were secured at favorable interest rates. FHLB borrowings reflect the use of long-term advances to augment deposits as the Company’s funding source for originating loans and investing in investment securities.2019. The weighted average interest rate of FHLB advances was 2.151.99 percent at September 30, 20192020 and 2.182.16 percent at December 31, 2018. The issuance of subordinated debt was to maintain adequate capital ratios for further growth.2019. The fixed interest rate of subordinated debt balances was 5.625 percent at September 30, 20192020 and December 31, 2018. 2019. During the three months ended September 30, 2020, the Company opted to extinguish a $15.0 million FHLB advance which held a rate of 2.68% and was originally set to mature in June, 2021. The effect of the extinguishment of the debt reduced the weighted average cost of FHLB borrowings by approximately four basis points on an annualized basis. The related non-recurring expense for the extinguishment of this debt is included in noninterest expense.
Stockholders’ equity increased by $23.5$3.2 million, or 11.71.3 percent, to $223.7$242.7 million at September 30, 20192020 from $200.2$239.5 million at December 31, 2018. The increase in stockholders’ equity was primarily attributable to the Company’s issuance of $6.3 million of common stock in a private placement which closed in February, 2019 and the issuance of $5.3 million of preferred series G stock in a private placement, which was issued in January, 2019. Retained earnings increased by $7.5$5.3 million, or 11.0 percent, to $45.9$53.7 million at September 30, 20192020 from $38.4$48.4 million at December 31, 2018, due primarily2019, related to the increase innet effect of net income netless dividends paid and for the first nine months of dividends paid.the year. Accumulated other comprehensive loss decreased $2.6income increased $2.8 million to $2.4$627,000 at September 30, 2020 from a loss of $2.2 million at December 31, 2019, related to significant improvements in the value of available-for-sale securities, as a result of the general decrease in market interest rates. Additional paid-in-capital for preferred stock decreased by $1.5 million to $23.5 million at September 30, 20192020 from $5.0$25.0 million at December 31, 2018,2019, primarily related to market improvements lowering the unrealized loss on available-for-sale securities.redemption of $10.5 million of the Company’s then-outstanding preferred stock, which included the Company’s Series C 6% and Series F 6% preferred stock, partly offset by the issuance of $9.0 million of Series H 3.5% preferred stock. Treasury stock increased $4.9 million to $26.9 million at September 30, 2020 from $22.0 million at December 31, 2019, related to the repurchase of Company common shares.
Net Interest Income Analysis
Net interest income represents the difference between income earned on our interest-earning assets and the expense incurred on our interest-bearing liabilities, and is analyzed and monitored by the Company on a regular basis. The following tables set forth average balance sheets, yields, and costs. The yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or expense.
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| Average Yield/Rate (3) | Average Balance | Interest Earned/Paid | Average Yield/Rate (3) | Average Balance | Interest Earned/Paid | Average Yield/Rate (3) | ||||||||||||||||
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| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Loans Receivable | $ | 2,309,703 |
| $ | 28,860 |
| 5.00% |
| $ | 2,183,872 |
| $ | 26,019 |
| 4.77% | $ | 2,394,997 | $ | 27,126 | 4.53% | $ | 2,309,703 | $ | 28,860 | 5.00% | ||||||||||
Investment Securities |
| 111,551 |
| 759 |
| 2.72% |
| 148,540 |
| 943 |
| 2.54% | 138,736 | 1,086 | 3.13% | 111,551 | 759 | 2.72% | |||||||||||||||||
Interest-earning deposits |
| 289,080 |
|
| 1,750 |
| 2.42% |
|
| 164,944 |
|
| 1,009 |
| 2.45% | 273,620 | 254 | 0.37% | 289,080 | 1,750 | 2.42% | ||||||||||||||
Total Interest-earning assets |
| 2,710,334 |
|
| 31,369 |
| 4.63% |
|
| 2,497,356 |
|
| 27,971 |
| 4.48% | 2,807,353 | 28,466 | 4.06% | 2,710,334 | 31,369 | 4.63% | ||||||||||||||
Non-interest-earning assets |
| 75,904 |
|
|
|
|
|
| 63,729 |
|
|
|
| 94,623 | 75,904 | ||||||||||||||||||||
Total assets | $ | 2,786,238 |
|
|
|
|
| $ | 2,561,085 |
|
|
|
| $ | 2,901,976 | $ | 2,786,238 | ||||||||||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 344,439 |
| $ | 661 |
| 0.77% |
| $ | 336,373 |
| $ | 504 |
| 0.60% | $ | 498,287 | $ | 650 | 0.52% | $ | 344,439 | $ | 661 | 0.77% | ||||||||||
Money market accounts |
| 269,775 |
| 1,237 |
| 1.84% |
| 195,436 |
| 626 |
| 1.28% | 315,658 | 508 | 0.64% | 269,775 | 1,237 | 1.84% | |||||||||||||||||
Savings accounts |
| 257,392 |
| 102 |
| 0.16% |
| 265,610 |
| 116 |
| 0.17% | 283,684 | 113 | 0.16% | 257,392 | 102 | 0.16% | |||||||||||||||||
Certificates of Deposit |
| 1,095,481 |
|
| 6,603 |
| 2.41% |
|
| 969,475 |
|
| 4,591 |
| 1.89% | 875,497 | 4,530 | 2.07% | 1,095,481 | 6,603 | 2.41% | ||||||||||||||
Total interest-bearing deposits |
| 1,967,087 |
|
| 8,603 |
| 1.75% |
|
| 1,766,894 |
|
| 5,837 |
| 1.32% | 1,973,126 | 5,801 | 1.18% | 1,967,087 | 8,603 | 1.75% | ||||||||||||||
Borrowed funds |
| 298,152 |
|
| 2,006 |
| 2.69% |
|
| 324,767 |
|
| 2,054 |
| 2.53% | 274,144 | 1,775 | 2.59% | 298,152 | 2,006 | 2.69% | ||||||||||||||
Total interest-bearing liabilities |
| 2,265,239 |
|
| 10,609 |
| 1.87% |
|
| 2,091,661 |
|
| 7,891 |
| 1.51% | 2,247,270 | 7,576 | 1.35% | 2,265,239 | 10,609 | 1.87% | ||||||||||||||
Non-interest-bearing liabilities |
| 299,230 |
|
|
|
|
|
| 274,850 |
|
|
|
| 418,184 | 299,230 | ||||||||||||||||||||
Total liabilities |
| 2,564,469 |
|
|
|
|
|
| 2,366,511 |
|
|
|
| 2,665,454 | 2,564,469 | ||||||||||||||||||||
Stockholders' equity |
| 221,769 |
|
|
|
|
|
| 194,574 |
|
|
|
| 236,522 | 221,769 | ||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 2,786,238 |
|
|
|
|
| $ | 2,561,085 |
|
|
|
| $ | 2,901,976 | $ | 2,786,238 | ||||||||||||||||||
Net interest income |
|
|
| $ | 20,760 |
|
|
|
|
|
| $ | 20,080 |
|
| $ | 20,890 | $ | 20,760 | ||||||||||||||||
Net interest rate spread(1) |
|
|
|
|
|
| 2.76% |
|
|
|
|
|
| 2.97% | 2.71% | 2.76% | |||||||||||||||||||
Net interest margin(2) |
|
|
|
|
| 3.06% |
|
|
|
|
| 3.22% | 2.98% | 3.06% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(1)Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities. (2)Net interest margin represents net interest income divided by average total interest-earning assets. (3)Annualized. |
|
|
|
|
Net Interest Income Analysis (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 | 2020 | 2019 | ||||||||||||||||||||||||||||
|
| Average Balance |
| Interest Earned/Paid |
| Average Yield/Rate (3) |
|
| Average Balance |
| Interest Earned/Paid |
| Average Yield/Rate (3) | Average Balance | Interest Earned/Paid | Average Yield/Rate (3) | Average Balance | Interest Earned/Paid | Average Yield/Rate (3) | ||||||||||||||||
|
| (Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Loans Receivable | $ | 2,318,047 |
| $ | 85,727 |
| 4.93% |
| $ | 1,983,562 |
| $ | 69,588 |
| 4.68% | $ | 2,285,854 | $ | 80,063 | 4.67% | $ | 2,318,047 | $ | 85,727 | 4.93% | ||||||||||
Investment Securities |
| 120,560 |
| 2,592 |
| 2.87% |
| 142,712 |
| 2,779 |
| 2.60% | 115,910 | 2,397 | 2.76% | 120,560 | 2,592 | 2.87% | |||||||||||||||||
Interest-earning deposits |
| 220,318 |
|
| 4,270 |
| 2.58% |
|
| 127,977 |
|
| 2,242 |
| 2.34% | 480,221 | 2,631 | 0.73% | 220,318 | 4,270 | 2.58% | ||||||||||||||
Total Interest-earning assets |
| 2,658,925 |
|
| 92,589 |
| 4.64% |
|
| 2,254,251 |
|
| 74,609 |
| 4.41% | 2,881,985 | 85,091 | 3.94% | 2,658,925 | 92,589 | 4.64% | ||||||||||||||
Non-interest-earning assets |
| 72,718 |
|
|
|
|
|
| 53,375 |
|
|
|
| 68,397 | 72,718 | ||||||||||||||||||||
Total assets | $ | 2,731,643 |
|
|
|
|
| $ | 2,307,626 |
|
|
|
| $ | 2,950,382 | $ | 2,731,643 | ||||||||||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 342,515 |
| $ | 1,913 |
| 0.74% |
| $ | 328,908 |
| $ | 1,402 |
| 0.57% | $ | 457,546 | $ | 2,305 | 0.67% | $ | 342,515 | $ | 1,913 | 0.74% | ||||||||||
Money market accounts |
| 253,593 |
| 3,311 |
| 1.74% |
| 179,290 |
| 1,500 |
| 1.12% | 321,453 | 2,623 | 1.09% | 253,593 | 3,311 | 1.74% | |||||||||||||||||
Savings accounts |
| 259,093 |
| 325 |
| 0.17% |
| 263,156 |
| 318 |
| 0.16% | 270,948 | 324 | 0.16% | 259,093 | 325 | 0.17% | |||||||||||||||||
Certificates of Deposit |
| 1,079,090 |
|
| 18,690 |
| 2.31% |
|
| 859,949 |
|
| 10,726 |
| 1.66% | 1,007,796 | 16,657 | 2.20% | 1,079,090 | 18,690 | 2.31% | ||||||||||||||
Total interest-bearing deposits |
| 1,934,291 |
|
| 24,239 |
| 1.67% |
|
| 1,631,303 |
|
| 13,946 |
| 1.14% | 2,057,743 | 21,909 | 1.42% | 1,934,291 | 24,239 | 1.67% | ||||||||||||||
Borrowed funds |
| 288,399 |
|
| 5,823 |
| 2.69% |
|
| 245,567 |
|
| 4,153 |
| 2.26% | 281,574 | 5,523 | 2.62% | 288,399 | 5,823 | 2.69% | ||||||||||||||
Total interest-bearing liabilities |
| 2,222,690 |
|
| 30,062 |
| 1.80% |
|
| 1,876,870 |
|
| 18,099 |
| 1.29% | 2,339,317 | 27,432 | 1.56% | 2,222,690 | 30,062 | 1.80% | ||||||||||||||
Non-interest-bearing liabilities |
| 293,557 |
|
|
|
|
|
| 243,973 |
|
|
|
| 372,976 | 293,557 | ||||||||||||||||||||
Total liabilities |
| 2,516,247 |
|
|
|
|
|
| 2,120,843 |
|
|
|
| 2,712,293 | 2,516,247 | ||||||||||||||||||||
Stockholders' equity |
| 215,396 |
|
|
|
|
|
| 186,783 |
|
|
|
| 238,089 | 215,396 | ||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 2,731,643 |
|
|
|
|
| $ | 2,307,626 |
|
|
|
| $ | 2,950,382 | $ | 2,731,643 | ||||||||||||||||||
Net interest income |
|
|
| $ | 62,527 |
|
|
|
|
|
| $ | 56,510 |
|
| $ | 57,659 | $ | 62,527 | ||||||||||||||||
Net interest rate spread(1) |
|
|
|
|
|
| 2.84% |
|
|
|
|
|
| 3.13% | 2.38% | 2.84% | |||||||||||||||||||
Net interest margin(2) |
|
|
|
|
| 3.14% |
|
|
|
|
| 3.34% | 2.67% | 3.14% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
(1)Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities. (2)Net interest margin represents net interest income divided by average total interest-earning assets. (3)Annualized.
|
|
|
|
|
|
|
Results of Operations comparison for the Three Months Ended September 30, 20192020 and 20182019
Net income increased $638,000,by $3.1 million, or 13.958.9 percent, to $8.3 million for the three months ended September 30, 2020 from $5.2 million for the three months ended September 30, 2019, compared with $4.6 million for the three months ended September 30, 2018.2019. The increase in net income was primarily related to an increase in noninterest income, a decrease in total interest expense, and a decrease in total noninterest expense, partly offset by a decrease total interest income, and decreasesan increase in the provision for loan losses, and non-interest expense, partly offset by an increase in interest expense, a decrease in total non-interest income, and a higherthe income tax provision for the three months ended September 30, 20192020 as compared towith the three months ended September 30, 2018.2019.
Net interest income increased by $680,000,$130,000, or 3.40.6 percent, to $20.9 million for the three months ended September 30, 2020 from $20.8 million for the three months ended September 30, 2019 from $20.1 million for the three months ended September 30, 2018.2019. The increase in net interest income resulted primarily from a $3.0 million decrease in interest expense related to a decrease in the average rate on interest-bearing liabilities of 52 basis points to 1.35 percent for the three months ended September 30, 2020 from 1.87 percent for the three months ended September 30, 2019, as well as a decrease in the average balance of interest-bearing liabilities of $18.0 million, or 0.8 percent, to $2.247 billion for the three months ended September 30, 2020 from $2.265 billion for the three months ended September 30, 2019. Interest income was $2.9 million lower than the prior year, related to a decrease in the average yield on interest-earning assets of 57 basis points to 4.06 percent for the three months ended September 30, 2020 from 4.63 percent for the three months ended September 30, 2019, partly offset by an increase in the average balance of interest-earning assets of $213.0$97.0 million, or 8.53.6 percent, to $2.807 billion for the three months ended September 30, 2020 from $2.710 billion for the three months ended September 30, 2019. The lower rates for interest income and interest expense were driven by the reduction of the federal funds rate by 175 basis points from October, 2019 from $2.497 billionthrough September, 2020.
Interest income on loans receivable decreased by $1.7 million, or 6.0 percent, to $27.1 million for the three months ended September 30, 2018. There2020 from $28.8 million for the three months ended September 30, 2019. The decrease was also an increaseprimarily attributable to a decrease in the average yield on interest-earning assetsloans of 1547 basis points to 4.634.53 percent for the three months ended September 30, 2020 from 5.00 percent for the three months ended September 30, 2019, from 4.48 percent for the three months ended September 30, 2018, partly offsetting the increase in interest income was an increase in the average balance of interest-bearing liabilities of $173.6 million, or 8.3 percent, to $2.265 billion for the three months ended September 30, 2019 from $2.092 billion for the three months ended September 30, 2018, and there was an increase in the average rate on interest-bearing liabilities of 36 basis points to 1.87 percent for the three months ended September 30, 2019 from 1.51 percent for the three months ended September 30, 2018.
Interest income on loans receivable increasedoffset by $2.8 million, or 10.9 percent, to $28.9 million for the three months ended September 30, 2019 from $26.1 million for the three months ended September 30, 2018. The increase was primarily attributable to an increase in the average balance of loans receivable of $125.8$85.3 million, or 5.83.7 percent, to $2.395 billion for the three months ended September 30, 2020 from $2.310 billion for the three months ended September 30, 2019. The decrease in the average yield on loans followed the declining interest rate environment. The Company curtailed loan growth in the second half of 2019 from $2.184 billionand in the first three months of 2020. In the second quarter of 2020, the Company purchased $48.4 million in loans and originated $127.0 million in PPP loans, which increased the average balance of loans receivable for the three months ended September 30, 2018, as well as an increase in the average yield on loans of 23 basis points2020, compared to 5.00 percent for the three months ended September 30, 2019 from 4.77 percent for the three months ended September 30, 2018. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included growing the Bank’s geographic footprint vis-à-vis our organic branching strategy. 2019. Interest income on loans also included $505,000$230,000 of amortization of purchase credit fair value adjustments related to the acquisition of IAB for the three months ended September 30, 2019,2020 related to the Company’s April 2018 acquisition of IA Bancorp, Inc. (“IAB”), which added approximately seventhree basis points to the average yield on interest earning assets on an annualized basis.assets.
Interest income on securities decreasedincreased by $184,000,$327,000 or 19.543.1 percent, to $1.1 million for the three months ended September 30, 2020 from $759,000 for the three months ended September 30, 2019 from $943,000 for the three months ended September 30, 2018. This decrease was primarily due to a decrease in the average balance of securities of $37.0 million, or 24.9 percent, to $111.6 million for the three months ended September 30, 2019 from $148.6 million for the three months ended September 30, 2018, partly offset by an increase in the average yield on securities of 18 basis points to 2.72 percent for the three months ended September 30, 2019 from 2.54 percent for the three months ended September 30, 2018. The decrease in the average balance of securities related to repayments, calls, maturities, and the sale of $13.9 million of securities.
Interest income on other interest-earning assets increased by $741,000, or 73.4 percent, to $1.8 million for the three months ended September 30, 2019 from $1.0 million for the three months ended September 30, 2018.2019. This increase was primarily due to an increase in the average balance of securities of $27.2 million, or 24.4 percent, to $138.7 million for the three months ended September 30, 2020 from $111.5 million for the three months ended September 30, 2019, as well as an increase in the average yield on securities of 41 basis points to 3.13 percent for the three months ended September 30, 2020 from 2.72 percent for the three months ended September 30, 2019. The increase in the average balance of securities resulted from purchases of new securities, partly offset by faster prepayment speeds, repayments, calls, and maturities, while the increase in the average yield on securities came as a result of the mix of purchases of new securities.
Interest income on other interest-earning assets decreased by $1.5 million, or 85.5 percent to $254,000 for the three months ended September 30, 2020 from $1.7 million for the three months ended September 30, 2019. This decrease was primarily due to a decrease in the average yield on other interest-earning assets of 205 basis points to 0.37 percent for the three months ended September 30, 2020 from 2.42 percent for the three months ended September 30, 2019, as well as a decrease in the average balance of other interest earning assets of $124.1$15.5 million, or 75.35.3 percent, to $273.6 million for the three months ended September 30, 2020 from $289.1 million for the three months ended September 30, 2019 from $165.02019. The decrease in the average yield on other interest-earning assets correlated to the decreases in the Fed funds rate. The decrease in the average balance of other interest-earning assets related to the Company’s current deleveraging strategy and the resulting decrease in cash attributable to decreases in average certificate of deposit balances, average FHLB borrowing balances, and an increase in the average balance of loans receivable.
Total interest expense decreased by $3.0 million, or 28.6 percent, to $7.6 million for the three months ended September 30, 2018 with only a slight decline of three basis points in the average rate. The increase in the average balance of other interest-earning assets was consistent with the Company’s strategy of maintaining strong levels of liquidity.
Total interest expense increased by $2.7 million, or 34.4 percent, to2020 from $10.6 million for the three months ended September 30, 2019 from $7.9 million for the three months ended September 30, 2018.2019. This increasedecrease resulted primarily from an increase in the average balance of interest-bearing liabilities of $173.6 million, or 8.3 percent, to $2.265 billion for the three months ended September 30, 2019 from $2.092 billion for the three months ended September 30, 2018, as well as an increasea decrease in the average rate on interest-bearing liabilities of 3652 basis points to 1.35 percent for the three months ended September 30, 2020 from 1.87 percent for the three months ended September 30, 2019, from 1.51 percent for the three months ended
39
September 30, 2018. The increaseas well as a decrease in the average balance of interest-bearing liabilities wasof $18.0 million, or 0.8 percent, to $2.247 billion for the three months ended September 30, 2020 from $2.265 billion for the three months ended September 30, 2019. The decreases in line with the average cost of funds and the average balance of interest-bearing liabilities primarily resulted from the declining interest rate environment and the Company’s strategy of maintaining strong controls over interest expense as it continues its deleveraging strategy.
Total deposit interest expense decreased by $2.8 million, or 32.6 percent, to $5.8 million for the three months ended September 30, 2020 from $8.6 million for the three months ended September 30, 2019. This decrease resulted primarily from a decrease in the average rate on deposits of 57 basis points to 1.18 percent for the three months ended September 30, 2020 from 1.75 percent for the three months ended September 30, 2019, partly offset by a slight increase in the average balance of interest-earning assets.deposits of 6.0 million, or 0.3 percent, to $1.973 billion for the three months ended September 30, 2020 from $1.967 billion for the three months ended September 30, 2019. The increasedecrease in the average rate paid on deposits was primarily due to repricing our deposit base to align with the recent Fed rate reductions. The Company has been aggressively managing the cost of funds primarily related to higher rates offered on our deposits, resulting from both market competition and it anticipates the increasesopportunity for further reductions. Approximately $445.5 million of certificates of deposit, with a weighted average rate of 2.04%, will mature in the Fed Fundsnext six months and is projected to be replaced at significantly lower rates.
NetTotal borrowing interest margin was 3.06expense decreased by $231,000, or 11.5 percent, to $1.8 million for the three-month periodthree months ended September 30, 2019 and 3.22 percent2020 from $2.0 million for the three-month periodthree months ended September 30, 2018.2019. The decrease inaverage balance of borrowings decreased by $24.0 million, or 8.1 percent, to $274.1 million for the net interest margin was the result of a competitively higher interest rate environment, with the increase in the cost of funds outpacing the return on interest earning assetsthree months ended September 30, 2020 from $298.1 million for the three months ended September 30, 2019, as comparedwell as a decrease in the average rate on borrowings of 10 basis points to 2.59 percent for the three months ended September 30, 2018.2020 from 2.69 percent for the three months ended September 30, 2019. During the three months ended September 30, 2020, the Company opted to extinguish a $15.0 million FHLB advance which held a rate of 2.68% and was originally set to mature in June, 2021. The extinguishment of this debt decreased both the average balance of borrowings and the average rate on borrowings for the three months ended September 30, 2020. The effect of the extinguishment of the debt reduced the weighted average cost of FHLB borrowings by approximately four basis points on an annualized basis. The related non-recurring expense for the extinguishment of this debt is included in noninterest expense.
Net interest margin was 2.98 percent for the third quarter of 2020, compared to 3.06 percent for the third quarter of 2019. The decrease in the net interest margin compared to the third quarter of 2019 was the result of the current volatile financial markets attributable to the COVID-19 pandemic and the low interest rate environment. The Company’s average yield on interest-earning assets decreased by 57 basis points to 4.06 percent for the third quarter of 2020 compared to 4.63 percent for the third quarter of 2019, highlighting the impact market volatility surrounding the pandemic has had on rates. Management has been proactive in managing its cost of funds and decreased the average cost on total interest-costing liabilities by 52 basis points to 1.35 percent for the third quarter of 2020 compared to 1.87 percent for the third quarter of 2019.
The provision for loan losses remained relatively flat atincreased by $1.8 million, to $2.7 million for the three months ended September 30, 2020 from $900,000 for the three months ended September 30, 2019, as comparedprimarily due to $907,000 for the three months ended September 30, 2018.COVID-19 related factors. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. The higher provision for loan losses for the three months ended September 30, 2020 was significantly influenced by the impact of COVID-19 on economic conditions and the increased risk of loan defaults. During the three months ended September 30, 2019,2020, the Company recognized $2,000experienced $192,000 in net recoveries compared to $43,000
$2,000 in net charge-offsrecoveries for the three months ended September 30, 2018.2019. The Bank had non-accrual loans totaling $7.1 million, or 0.29 percent, of gross loans at September 30, 2020 as compared to $5.1 million, or 0.22 percent, of gross loans at September 30, 2019 as compared to $7.22019. The allowance for loan losses was $31.8 million, or 0.311.31 percent of gross loans at December 31, 2018. The allowance for loan losses wasSeptember 30, 2020, and $24.7 million, or 1.08 percent of gross loans at September 30, 2019, and $22.4 million, or 0.97 percent, of gross loans at December 31, 2018 and $21.5 million, or 0.96 percent, of gross loans at September 30, 2018. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at September 30, 2019 and December 31, 2018.
Total non-interest income decreased by $469,000, or 25.3 percent, to $1.4 million for the three months ended September 30, 2019 from $1.9 million for the three months ended September 30, 2018. The decrease in total non-interest income was mainly related to lower income from fees and service charges as well as lower gains on sale of loans, partly offset by higher gains on sale of other real estate owned properties and gains on sale of investment securities. Fees and service charges decreased $237,000, or 21.7 percent to $855,000 for the three months ended September 30, 2019 from $1.1 million for the three months ended September 30, 2018, mainly related to less mortgage servicing fee income with less sales of loans. Gain on sales of loans decreased by $649,000, or 87.9 percent, to $89,000 for the three months ended September 30, 2019 from $738,000 for the three months ended September 30, 2018. Factors included when deciding to sell loans include market conditions, demand, and the loan portfolio. Gains on sale of other real estate owned properties increased by $110,000, to $124,000 for the three months ended September 30, 2019 from a gain of $14,000 for the three months ended September 30, 2018. Gain on sale of investment securities was $283,000 for the three months ended September 30, 2019, with no comparable sales for the three months ended September 30, 2018.
Total non-interest expense decreased by $739,000, or 5.1 percent, to $13.7 million for the three months ended September 30, 2019 from $14.4 million for the three months ended September 30, 2018.
Regulatory fees associated with FDIC assessments decreased by $510,000 for the three months ended September 30, 2019 from $419,000 for the three months ended September 30, 2018. The decrease was primarily due to a decrease in the assessment rate, a credit that related to the receipt of an FDIC Small Bank Assessment Credit, which came as a result of the FDIC exceeding its stated Deposit Fund Reserve Ratio, partly offset by an increase in the assessment base.
Data processing expense decreased by $166,000, or 17.6 percent, to $776,000 for the three months ended September 30, 2019 from $942,000 for the three months ended September 30, 2018, primarily attributable to non-recurring charges in the third quarter of 2018 related to the merger with IAB.
Merger-related expenses decreased $119,000, which was the amount incurred in the three months ended September 30, 2018 with no comparable figure for the three months ended September 30, 2019.
Salaries and employee benefits expense increased by $138,000, or 1.9 percent, to $7.3 million for the three months ended September 30, 2019 from $7.2 million for the three months ended September 30, 2018. The increase in salaries and employee benefits related in part to normal salary increases partly offset a reduction in full-time equivalent employees, from 356 at September 30, 2018 to 352 at September 30, 2019, as part of management’s continued initiative to manage headcount throughout the organization.
Occupancy expense increased by $157,000, or 6.3 percent, to $2.6 million for the three months ended September 30, 2019 from $2.5 million for the three months ended September 30, 2018, largely related to the opening of three new branches in 2019.
Director fee expense increased by $164,000, or 85.4 percent, to $356,000 for the three months ended September 30, 2019 from $192,000 for the three months ended September 30, 2018, primarily related to the awarding of stock options and restricted stock under the 2018 Equity Incentive Plan, during the second quarter of 2019 as well as in the fourth quarter of 2018.
There were also less significant variances in professional fees, advertising and promotional, other real estate owned, and other expenses, which netted to a reduction of expenses of $403,000 from the prior year. Other non-interest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses.
The income tax provision increased by $319,000, or 15.6 percent, to $2.4 million for the three months ended September 30, 2019 from $2.0 million for the three months ended September 30, 2018. The increase in the income tax provision was a result of higher taxable income for the three months ended September 30, 2019 as compared to that same period for 2018. The consolidated effective tax rate for the three months ended September 30, 2019 was 31.1 percent compared to 30.8 percent for the three months ended September 30, 2018.
Results of Operations comparison for the Nine Months Ended September 30, 2019 and 2018
Net income increased $4.4 million, or 37.9 percent, to $15.9 million for the nine months ended September 30, 2019, compared with $11.5 million for the nine months ended September 30, 2018. The increase in net income was primarily related to an increase in total interest income, a decrease in the provision for loan losses and a decrease in non-interest expense, partly offset by an increase in interest expense, a decrease in total non-interest income, and a higher income tax provision for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
Net interest income increased by $6.0 million, or 10.6 percent, to $62.5 million for the nine months ended September 30, 2019 from $56.5 million for the nine months ended September 30, 2018. The increase in net interest income resulted primarily from an increase in the average balance of interest-earning assets of $404.7 million, or 18.0 percent, to $2.659 billion for the nine months ended September 30, 2019 from $2.254 billion for the nine months ended September 30, 2018. There was also an increase in the average yield on interest-earning assets of 23 basis points to 4.64 percent for the nine months ended September 30, 2019 from 4.41 percent for the nine months ended September 30, 2018. Offsetting the increase in interest income was an increase in the average balance of interest-bearing liabilities of $345.8 million, or 18.4 percent, to $2.223 billion for the nine months ended September 30, 2019 from $1.877 billion for the nine months ended September 30, 2018, and an increase in the
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average rate on interest-bearing liabilities of 51 basis points to 1.80 percent for the nine months ended September 30, 2019 from 1.29 percent for the nine months ended September 30, 2018.
Interest income on loans receivable increased by $16.1 million, or 23.2 percent, to $85.7 million for the nine months ended September 30, 2019 from $69.6 million for the nine months ended September 30, 2018. The increase was primarily attributable to an increase in the average balance of loans receivable of $334.5 million, or 16.9 percent, to $2.318 billion for the nine months ended September 30, 2019 from $1.984 billion for the nine months ended September 30, 2018, as well as an increase in the average yield on loans of 25 basis points to 4.93 percent for the nine months ended September 30, 2019 from 4.68 percent for the nine months ended September 30, 2018. The increase in the average balance of loans receivable was in accordance with the Company’s growth strategy, which included growing the Bank’s geographic footprint vis-à-vis our organic branching strategy and the acquisition of IAB, which was completed in the second quarter of 2018, while the increase in the average yield on loans related to the comparable higher interest rate environment in the current year period. Interest income on loans also included $1.5 million of amortization of purchase credit fair value adjustments related to the acquisition of IAB for the nine months ended September 30, 2019, which added approximately eight basis points to the average yield on interest earning assets on an annualized basis.
Interest income on securities decreased by $187,000 to $2.6 million for the nine months ended September 30, 2019, compared to $2.8 million for the nine months ended September 30, 2018. This decrease was primarily due to a decrease in the average balance of securities of $22.2 million, or 15.5 percent, to $120.6 million for the nine months ended September 30, 2019 from $142.8 million for the nine months ended September 30, 2018, partly offset by an increase in the average yield on securities of 27 basis points to 2.87 percent for the nine months ended September 30, 2019 from 2.60 percent for the nine months ended September 30, 2018. The decrease in the average balance of securities related to repayments, calls, maturities, and the sale of $13.9 million of securities.
Interest income on other interest-earning assets increased by $2.0 million, or 90.5 percent, to $4.3 million for the nine months ended September 30, 2019 from $2.3 million for the nine months ended September 30, 2018. This increase was primarily due to an increase in the average balance of other interest earning assets of $92.3 million, or 72.2 percent, to $220.3 million for the nine months ended September 30, 2019 from $128.0 million for the nine months ended September 30, 2018 as well as an increase in the average yield on other interest-earning assets of 24 basis points to 2.58 percent for the nine months ended September 30, 2019 from 2.34 percent for the nine months ended September 30, 2018. The increase in the average balance of other interest-earning assets was consistent with the Company’s strategy of maintaining strong levels of liquidity. The increase in the average yield on other interest-earning assets correlates to the increases in the Fed Funds rate.
Total interest expense increased by $12.0 million, or 66.1 percent, to $30.1 million for the nine months ended September 30, 2019 from $18.1 million for the nine months ended September 30, 2018. This increase resulted primarily from an increase in the average balance of interest-bearing liabilities of $345.8 million, or 18.4 percent, to $2.223 billion for the nine months ended September 30, 2019 from $1.877 billion for the nine months ended September 30, 2018, as well as an increase in the average rate on interest-bearing liabilities of 51 basis points to 1.80 percent for the nine months ended September 30, 2019 from 1.29 percent for the nine months ended September 30, 2018. The increase in the average balance of interest-bearing liabilities was in line with the increase in the average balance of interest-earning assets. The increase in the cost of funds primarily related to higher rates offered on our deposits resulting from both market competition and the increases in the Fed Funds rates.
Net interest margin was 3.14 percent for the nine-month period ended September 30, 2019 and 3.34 percent for the nine-month period ended September 30, 2018. The decrease in the net interest margin was the result of a comparatively higher interest rate environment, with the increase in the cost of funds outpacing the return on interest earning assets for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
The provision for loan losses decreased by $1.8 million, to $2.5 million for the nine months ended September 30, 2019 from $4.3 million for the nine months ended September 30, 2018. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. During the nine months ended September 30, 2019, the Company experienced $212,000 in net charge-offs compared to $180,000 in net charge-offs for the nine months ended September 30, 2018. The Bank had non-accrual loans totaling $5.1 million, or 0.22 percent, of gross loans at September 30, 2019 as compared to $7.2 million, or 0.31 percent, of gross loans at December 31, 2018. The allowance for loan losses was $24.7 million, or 1.08 percent, of gross loans at September 30, 2019, and $22.4 million, or 0.97 percent, of gross loans at December 31, 2018 and $21.5 million, or 0.96 percent, of gross loans at September 30, 2018. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at September 30, 20192020 and December 31, 2018.September 30, 2019.
Total non-interestnoninterest income decreasedincreased by $2.4$5.6 million, or 35.7402.9 percent, to $4.4$7.0 million for the ninethree months ended September 30, 2020 from $1.4 million for the three months ended September 30, 2019. The increase in total noninterest income was mainly related to a gain on sale of premises of $4.4 million, an increase in the unrealized gain of equity securities of $823,000, and BOLI income of $385,000. The gain on sale of premises relates to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The unrealized gains or losses on equity securities are based on market conditions. The increase in BOLI income relates to an initial purchase of $60.0 million of BOLI product in the third quarter of 2020.
Total noninterest expense decreased by $310,000, or 2.3 percent, to $13.3 million for the three months ended September 30, 2020 from $13.6 million for the three months ended September 30, 2019.
Salaries and employee benefits expense decreased by $909,000, or 12.5 percent, to $6.4 million for the three months ended September 30, 2020 from $7.3 million for the three months ended September 30, 2019, from $6.8 millionprimarily related to fewer full-time equivalent employees and $200,000 of costs deferred for PPP loans, partly offset by normal compensation increases. The costs deferred represent current period salaries and benefit costs associated with direct PPP loan origination costs, which are amortized over the life of the loans. The number of full-time equivalent employees for the ninethree months ended September 30, 2018. The decrease2020 was 303, as compared with 352 for the same period in total non-interest income mainly related to a decrease in the amount of other non-interest income of $2.2 million,2019.
Occupancy and equipment expense increased by $349,000, or 92.513.2 percent, to $179,000$3.0 million for the ninethree months ended September 30, 2020 from $2.6 million for the three months ended September 30, 2019, from $2.4 millionlargely related to building sanitization costs associated with the COVID-19 pandemic and the relocation of one of our existing branches during 2019.
Data processing and service fees increased by $161,000, or 20.7 percent, to $937,000 for the ninethree months ended September 30, 2018. The decrease in other non-interest income was the result of $2.2 million in proceeds2020 from a legal settlement recognized in the first quarter of 2018. The decrease in total non-interest income also related to a decrease in the gain on sale of loans of $1.1 million, or 55.5 percent, to $844,000$776,000 for the ninethree months ended September 30, 2019 from $1.9 million2019. The increase was largely attributable to additional branches and system applications.
Regulatory assessments increased by $402,000 to $311,000 for the ninethree months ended September 30, 2018. Factors included when deciding to sell loans include market conditions, demand, and the loan portfolio. Fees and service charges also decreased $233,000, or 8.4 percent, to $2.5 million2020 from a credit of $91,000 for the ninethree months ended September 30, 2019 from $2.8 million for the nine months ended September 30, 2018, mainly related to less mortgage servicing fee income with less sales of loans.2019. The decrease in total non-interest incomeincrease was partly offset by an increase in unrealized gains on equity securities of $462,000, with a gain of $220,000 for the nine months ended September 30, 2019 as compared to a loss on equity securities of $242,000 for the nine months ended September 30, 2018. There was an increase in the gain on sales of investment securities of $304,000 for the nine months ended September 30, 2019 with no comparable figure for the nine months ended September 30, 2018. There was an increase in gains on other real estate owned properties of $173,000, with a gain of $177,000 for the nine months ended September 30, 2019 as compared to a gain of $4,000 for the nine months ended September 30, 2018. There was an increase in gains on the sale of impaired loans of $131,000, with a gain of $107,000 for the nine months ended September 30, 2019 as compared to a loss of $24,000 for the nine months ended September 30, 2018.
Total non-interest expense decreased by $1.1 million or 2.5 percent, to $41.3 million for the nine months ended September 30, 2019 from $42.4 million for the nine months ended September 30, 2018.
Merger-related expenses decreased $2.3 million, which was the amount incurred in the nine months ended September 30, 2018 with no comparable figure for the nine months ended September 30, 2019.
Data processing expense decreased by $271,000, or 10.8 percent, to $2.2 million for the nine months ended September 30, 2019 from $2.5 million for the nine months ended September 30, 2018, primarily attributable to non-recurring charges in the second quarter of 2018 upon the merger with IAB.
Regulatory fees associated with FDIC assessments decreased by $165,000, or 17.4 percent, to $783,000 for the nine months ended September 30, 2019 from $948,000 for the nine months ended September 30, 2018. The decrease was primarily due to a decrease in the assessment rate, a credit that related to the receipt of an FDIC Small Bank Assessment Credit which came as a result of the FDIC exceeding its stated Deposit Fund Reserve Ratio, partly offset by an increase in the assessment base.
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Salaries and employee benefits expense increased by $579,000, or 2.8 percent, to $21.1 million for the ninethree months ended September 30, 2019, from $20.5 millionand increases in the FDIC assessment rate and in the FDIC assessment base.
The Company recognized a non-recurring expense of $313,000 for a loss on extinguishment of debt, related to the prepayment of higher-cost FHLB borrowings, for the ninethree months ended September 30, 2018. The increase in salaries and employee benefits related in part to the inclusion of IAB employees after the merger was completed in April, 2018, as well as normal salary increases. These increases were partly offset2020.
Other noninterest expense decreased by a reduction in full-time equivalent employees, to 352 at September 30, 2019 to 356 at September 30, 2018, as part of management’s continued initiative to manage headcount throughout the organization.
Occupancy expense increased by $898,000,$790,000, or 12.834.8 percent, to $7.9$1.5 million for the ninethree months ended September 30, 20192020 from $7.0$2.3 million for the ninethree months ended September 30, 2018, largely related to the opening of three new branches in 2019.
Director fees increased by $396,000, or 66.7 percent, to $990,000 for the nine months ended September 30, 2019 from $594,000 for the nine months ended September 30, 2018, primarily related to the awarding of stock options and restricted stock under the 2018 Equity Incentive Plan during the second quarter of 2019 and the end of the fourth quarter of 2018.
There were also less significant variances in professional fees, advertising and promotional, other real estate owned, net and other expenses, which netted to a reduction in expenses of $193,000 from the prior year. Other non-interestnoninterest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses.The decrease in the current period was primarily related to a reduction of business development and loan-related expenses, largely attributable to the current pandemic condition.
There were also less significant variances in professional fee expense, advertising expense, other real estate owned expense, and directors’ fees, which netted to an increase in expenses of $164,000 for the three months ended September 30, 2020, as compared to the three months ended September 30, 2019.
The income tax provision increased by $2.0$1.1 million, or 40.146.9 percent, to $7.1$3.5 million for the ninethree months ended September 30, 20192020 from $5.1$2.4 million for the ninethree months ended September 30, 2018.2019. The increase in the income tax provision was a result of higher taxable income for the three months ended September 30, 2020 as compared with that same period for 2019. The consolidated effective tax rate for the three months ended September 30, 2020 was 29.4 percent compared to 31.1 percent for the three months ended September 30, 2019. The lower rate in the current period related primarily to non-taxable BOLI income and lower non-deductible costs in the current year period.
Results of Operations comparison for the Nine Months Ended September 30, 2020 and 2019
Net income decreased by $2.3 million, or 14.8 percent, to $13.6 million for the nine months ended September 30, 2020 from $15.9 million for the nine months ended September 30, 2019. The decrease in net income was primarily related to a decrease in total interest income and an increase in the provision for loan losses, partly offset by an increase in total noninterest income, a decrease in total interest expense, a decrease in total noninterest expense, and a decrease in the income tax provision for the nine months ended September 30, 2020 as compared with the nine months ended September 30, 2019.
Net interest income decreased by $4.9 million, or 7.8 percent, to $57.7 million for the nine months ended September 30, 2020 from $62.6 million for the nine months ended September 30, 2019. The decrease in net interest income resulted primarily from a decrease in the average yield on interest-earning assets of 70 basis points to 3.94 percent for the nine months ended September 30, 2020 from 4.64 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of interest-earning assets of $223.1 million, or 8.4 percent, to $2.882 billion for the nine months ended September 30, 2020 from $2.659 billion for the nine months ended September 30, 2019. Interest expense decreased related to a decrease in the average rate on interest-bearing liabilities of 24 basis points to 1.56 percent for the nine months ended September 30, 2020 from 1.80 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of interest-bearing liabilities of $116.6 million, or 5.2 percent, to $2.339 billion for the nine months ended September 30, 2020 from $2.223 billion for the nine months ended September 30, 2019. The lower rates for interest income and interest expense were driven by the reduction of the federal funds rate by 175 basis points from October, 2019 through September, 2020.
Interest income on loans receivable decreased by $5.7 million, or 6.6 percent, to $80.1 million for the nine months ended September 30, 2020 from $85.8 million for the nine months ended September 30, 2019. The decrease was primarily attributable to a decrease in the average yield on loans of 26 basis points to 4.67 percent for the nine months ended September 30, 2020 from 4.93 percent for the nine months ended September 30, 2019 as well as a decrease in the average balance of loans receivable of $32.2 million, or 1.4 percent, to $2.286 billion for the nine months ended September 30, 2020 from $2.318 billion for the nine months ended September 30, 2019. The Company curtailed loan growth in the second half of 2019 and in the first three months of 2020. In the second quarter of 2020, the Company purchased $48.4 million in loans and originated $127.0 million in PPP loans, which increased the average balance of loans receivable for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The decrease in the average yield on loans followed the declining interest rate environment. Interest income on loans also included $967,000 of amortization of purchase credit fair value adjustments for the nine months ended September 30, 2020 related to the April 2018 acquisition of IAB for the nine months ended September 30, 2020, which added approximately four basis points to the average yield on interest earning assets.
Interest income on securities decreased by $195,000 or 7.5 percent, to $2.4 million for the nine months ended September 30, 2020 from $2.6 million for the nine months ended September 30, 2019. This decrease was primarily due to a decrease in the average balance of securities of $4.7 million, or 3.9 percent, to $115.9 million for the nine months ended September 30, 2020 from $120.6 million for the nine months ended September 30, 2019, as well as a decrease in the average yield on securities of 11 basis points to 2.76 percent for the nine months ended September 30, 2020 from 2.87 percent for the nine months ended September 30, 2019. The decrease in the average balance of securities resulted from faster prepayment speeds, repayments, calls, and maturities, partly offset by purchases of new securities, while the decrease in the average yield on securities also followed current market lower interest rate conditions.
Interest income on other interest-earning assets decreased by $1.6 million, or 38.4 percent to $2.6 million for the nine months ended September 30, 2020 from $4.2 million for the nine months ended September 30, 2019. This decrease was primarily due to a decrease in the average yield on other interest-earning assets of 185 basis points to 0.73 percent for the nine months ended September 30, 2020, from 2.58 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of other interest earning assets of $259.9 million, or 118.0 percent, to $480.2 million for the nine months ended September 30, 2020 from $220.3 million for the nine months ended September 30, 2019. The decrease in the average yield on other interest-earning assets correlated to the decreases in the Fed funds rate. The increase in the average balance of other interest-earning assets related to the curtailment of loan growth beginning in 2019, high levels of loan prepayments, an increase in deposits, and the Company’s strategy of maintaining strong levels of liquidity.
Total interest expense decreased by $2.6 million, or 8.7 percent, to $27.4 million for the nine months ended September 30, 2020 from $30.1 million for the nine months ended September 30, 2019. This decrease resulted primarily from a decrease in the average rate on interest-bearing liabilities of 24 basis points to 1.56 percent for the nine months ended September 30, 2020 from 1.80 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of interest-bearing liabilities of $116.6 million, or 5.2 percent, to $2.339 billion for the nine months ended September 30, 2020 from $2.223 billion for the nine months ended September 30, 2019. The decrease in the average cost of funds related to the declining interest rate environment. The increase in the average balance of interest-bearing liabilities primarily resulted from increased deposits, including those from new branches opened over the last few years.
Total deposit interest expense decreased by $2.3 million, or 9.6 percent, to $21.9 million for the nine months ended September 30, 2020 from $24.2 million for the nine months ended September 30, 2019. This decrease resulted primarily from a decrease in the average rate on deposits of 25 basis points to 1.42 percent for the nine months ended September 30, 2020 from 1.67 percent for the nine months ended September 30, 2019, partly offset by an increase in the average balance of deposits of $123.5 million, or 6.4 percent, to $2.058 billion for the nine months ended September 30, 2020 from $1.934 billion for the nine months ended September 30, 2019. The decrease in the average rate paid on deposits was primarily due to repricing our deposit base to align with the recent Fed rate reductions. The increase in the average balance of interest-bearing liabilities primarily resulted from increased deposits, including those from new branches opened over the last few years.
Total borrowing interest expense decreased by $300,000, or 5.2 percent, to $5.5 million for the nine months ended September 30, 2020 from $5.8 million for the nine months ended September 30, 2019. The average balance of borrowings decreased by $6.8 million, or 2.4 percent, to $281.6 million for the nine months ended September 30, 2020 from $288.4 million for the nine months ended September 30, 2019, as well as a decrease in the average rate on borrowings of 7 basis points to 2.62 percent for the nine months ended September 30, 2020 from 2.69 percent for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, the Company opted to extinguish a $15.0 million FHLB advance which held a rate of 2.68% and was originally set to mature in June, 2021. The extinguishment of this debt decreased both the average balance of borrowings and the average rate on borrowings for the nine months ended September 30, 2020. The effect of the extinguishment of the debt reduced the weighted average cost of FHLB borrowings by approximately four basis points on an annualized basis. The related non-recurring expense for the extinguishment of this debt is included in noninterest expense.
Net interest margin was 2.67 percent for the nine months ended September 30, 2020 and 3.14 percent for the nine months ended September 30, 2019. The decrease in the net interest margin was the result of the current volatile financial market attributable to the COVID-19 pandemic and the low interest rate environment.
The provision for loan losses increased by $5.0 million to $7.5 million for the nine months ended September 30, 2020 from $2.5 million for the nine months ended September 30, 2019, primarily due to factors related to the COVID-19 pandemic. The provision for loan losses is established based upon management’s review of the Company’s loans and consideration of a variety of factors, including but not limited to: (1) the risk characteristics of the loan portfolio; (2) current economic conditions; (3) actual losses previously experienced; (4) the dynamic activity and fluctuating balance of loans receivable; and (5) the existing level of reserves for loan losses that are probable and estimable. The higher provision for loan losses for the nine months ended September 30, 2020 was significantly influenced by the impact of COVID-19 on economic conditions and the increased risk of loan defaults. During the nine months ended September 30, 2020, the Company experienced $500,000 in net recoveries compared to $212,000 in net charge-offs for the nine months ended September 30, 2019. The Bank had non-accrual loans totaling $7.1 million, or 0.29 percent, of gross loans at September 30, 2020 as compared to $5.1 million, or 0.22 percent, of gross loans at September 30, 2019. The allowance for loan losses was $31.8 million, or 1.31 percent of gross loans at September 30, 2020, and $24.7 million, or 1.08 percent of gross loans at September 30, 2019. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in the aforementioned criteria. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Company to recognize additional provisions based on their judgment of information available to them at the time of their examination. Management believes that the allowance for loan losses was adequate at September 30, 2020 and September 30, 2019.
Total noninterest income increased by $4.4 million, or 100.1 percent, to $8.8 million for the nine months ended September 30, 2020 from $4.4 million for the nine months ended September 30, 2019. The increase in total noninterest income was mainly related to a gain on sale of premises of $4.4 million, an increase in the unrealized gain of equity securities of $560,000, BOLI income of $385,000 and an increase in other noninterest income of $248,000, partly offset by a decrease of $552,000 in gains on the sale of loans, a decrease in fees and service charges of $402,000, a decrease in gains on the sale of other real estate owned properties of $177,000, and a decrease in the gains on the sale of impaired loans of $107,000. The gain on sale of premises relates to the completion of a sale/leaseback of certain offices that the Company sold to a private investor group in September, 2020. The unrealized gains or losses on equity securities are based on market conditions. The BOLI income relates to an initial purchase of $60.0 million of BOLI product in the third quarter of 2020. The increase in other noninterest income related primarily to the reversal of certain liabilities previously recorded for IAB acquired loans that paid off in the first nine months of 2020. The lower level of loan sales was attributable to the curtailment of loan growth, while the decline in fees and service charges related in part to the pandemic condition as well as lower servicing fee income resulting from fewer loan sales.
Total noninterest expense decreased by $1.7 million, or 4.0 percent, to $39.7 million for the nine months ended September 30, 2020 from $41.4 million for the nine months ended September 30, 2019.
Salaries and employee benefits expense decreased by $1.7 million, or 7.9 percent, to $19.5 million for the nine months ended September 30, 2020 from $21.2 million for the nine months ended September 30, 2019, primarily related to $1.3 million of costs deferred for PPP loans and fewer full-time equivalent employees, partly offset by normal compensation increases. The costs deferred represent current period salaries and benefit costs associated with direct PPP loan origination costs, which are amortized over the life of the loan. The number of full-time equivalent employees for the nine months ended September 30, 2020 was 338, as compared with 359 for the same period in 2019.
Occupancy and equipment expense increased by $804,000, or 10.1 percent, to $8.7 million for the nine months ended September 30, 2020 from $7.9 million for the nine months ended September 30, 2019, largely related to building sanitization costs associated with the COVID-19 pandemic and the relocation of one of our existing branches during 2019.
Data processing and service fees increased by $598,000, or 26.8 percent, to $2.8 million for the nine months ended September 30, 2020 from $2.2 million for the nine months ended September 30, 2019, largely attributable to additional branches and system applications.
Regulatory assessments increased by $100,000, or 12.8 percent, to $883,000 for the nine months ended September 30, 2020 from $783,000 for the nine months ended September 30, 2019. The increase was primarily related to the receipt of an FDIC Small Bank Assessment Credit in the nine months ended September 30, 2019, and increases in the assessment rate and in the assessment base.
The Company recognized a non-recurring expense of $313,000 for a loss on extinguishment of debt, related to the prepayment of higher-cost FHLB borrowings, for the nine months ended September 30, 2020.
Other noninterest expense decreased by $1.8 million, or 26.7 percent, to $4.8 million for the nine months ended September 30, 2020 from $6.6 million for the nine months ended September 30, 2019. Other noninterest expense consisted of loan expense, business development, office supplies, correspondent bank fees, telephone and communication and miscellaneous fees and expenses. The decrease in the current period was primarily related to a reduction of business development and loan-related expenses, largely attributable to the current pandemic condition.
There were also less significant variances in professional fee expense, advertising expense, other real estate owned expense, and directors’ fees, which netted to a decrease in expenses of $55,000 for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019.
The income tax provision decreased by $1.5 million, or 20.5 percent, to $5.7 million for the nine months ended September 30, 2020 from $7.2 million for the nine months ended September 30, 2019. The decrease in the income tax provision was a result of lower taxable income for the nine months ended September 30, 2020 as compared to that same period for 2018.2019. The consolidated effective tax rate for the nine months ended September 30, 20192020 was 30.929.5 percent compared to 30.630.9 percent for the nine months ended September 30, 2018.2019. The lower rate in the current period related primarily to non-taxable BOLI income and lower non-deductible costs in the current year period.
Liquidity and Capital Resources
Liquidity
The overall objective of our liquidity management practices is to ensure the availability of sufficient funds to meet financial commitments and to take advantage of lending and investment opportunities. The Company manages liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings and other obligations as they mature, and to fund loan and investment portfolio opportunities as they arise.
The Company’s primary sources of funds to satisfy its objectives are net growth in deposits (primarily retail), principal and interest payments on loans and investment securities, proceeds from the sale of originated loans and FHLB and other borrowings. The scheduled amortization of loans is a predictable source of funds. Deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company has other sources of liquidity if a need for additional funds arises, including unsecured overnight lines of credit and other collateralized borrowings from the FHLB and other correspondent banks.
At September 30, 2020 and December 31, 2019, the Company had $25.0 million in overnight borrowings outstanding with the FHLB. The Company utilizes overnight borrowings from time to time to fund short-term liquidity needs. The Company had total borrowings of $312.5$296.6 million at September 30, 20192020 and $282.4$282.6 million at December 31, 2018.2019. The average rate of FHLB advances was 2.151.99 percent at September 30, 20192020 and 2.182.16 percent at December 31, 2018.2019. The subordinated debentures have a ten-year term and will bear interest at a fixed annual rate of 5.625% for the first five years of the term. From and including August 1, 2023, the interest rate will adjust to a floating rate based on the LIBOR plus 2.72% until redemption or maturity. The Notes are scheduled to mature on August 1, 2028.
As it is anticipated that LIBOR will be discontinued after 2021, the Company is reviewing the agreements for the above debentures to determine alternative reference rates, and does not anticipate there will be a significant financial statement impact.
The Company had the ability at September 30, 20192020 to obtain additional funding from the FHLB of up to $235.2$175.3 million, utilizing unencumbered loan collateral. The Company expects to have sufficient funds available to meet current loan commitments in the normal course of business through typical sources of liquidity. Time deposits scheduled to mature in one year or less totaled $784.8$671.8 million at September 30, 2019.2020. Based upon historical experience, management estimates that a significant portion of such deposits will remain with the Company.
Capital ResourcesThe Company was well positioned with adequate levels of cash and liquid assets as of September 30, 2020, as well as wholesale borrowing capacity of over $700 million, to cover the decrease in cash flow resulting from COVID-19 loan deferments.
At September 30, 2019,2020 and December 31, 2018, BCB Community2019, the capital ratios of the Bank exceeded all of its regulatory capital requirements to which it was subject. The following table sets forth the regulatoryquantitative capital ratios required for BCB Community Bank as well as regulatory capital requirements for the periods presented.an institution to be considered “well-capitalized” under applicable banking regulations.
Capital Resources
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
In July 2013,On September 17, 2019, the FDIC and the other federal bank regulatory agencies issuedpassed a final rule that revised their leverage and risk-based capital requirements andproviding qualifying community banking organizations the method for calculating risk-weighted assetsability to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishedopt-in to a common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.
The final rule also requires unrealized gains and losses on certain available-for-sale securities holdings and defined benefit plan obligations to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. The Bank exercised the opt-out election. The rule limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
The final rule became effective for the Bank on January 1, 2015. The capital conservation buffer was phased in starting at 0.625% in 2016 and increasing by 0.625% annually until it reached 2.5% in 2019.The Bank currently complies with the minimum capital requirements set forth in the final rule and operates under the 2.5% capital conservation buffer.
Notwithstanding the foregoing, pursuant to recent regulatory reform, the FDIC finalized a rule that establishes anew community bank leverage ratio (tier 1 capital to average consolidated assets) at(“CBLR”) framework, with a minimum requirement of 9% for institutions under $10 billion in assetsassets. Such institutions meeting that such institutionsrequirement may elect to utilize the CBLR in lieu of the general applicable risk-based capital requirements under Basel III. Such institutions that meet the community bank leverage ratioCBLR and certain other qualifying criteria will automatically be deemed to be well-capitalized. Management is currently evaluating whetherThe Bank decided to opt-in to the new CBLR, effective for the quarter ended March 31, 2020. Pursuant to the CARES Act, the federal banking regulators in April, 2020 issued interim final rules to set the CBLR at 8.0% beginning in the second quarter of 2020 through the end of 2020. Beginning in 2021, the CBLR will increase to 8.5% for the calendar year. Community banks will have until January 1, 2022 before the CBLR requirement will return to 9%.
At September 30, 2020 and December 31, 2019, BCB Community Bank Leverage Ratioexceeded all of its regulatory capital requirements to which it was subject. The following table sets forth the regulatory capital ratios for BCB Community Bank as well as regulatory capital requirements for the periods presented.
| Actual | For Capital Adequacy Purposes | For Well Capitalized Under Prompt Corrective Action | ||||||||||||
Dollars in Thousands | |||||||||||||||
As of September 30, 2020: | |||||||||||||||
Bank | |||||||||||||||
Community Bank Leverage Ratio | $ | 270,942 | 9.37 | % | $ | 202,468 | 7.00 | % | $ | 231,392 | 8.00 | % | |||
As of December 31, 2019: | |||||||||||||||
Bank | |||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | $ | 295,298 | 13.84 | % | $ | 170,750 | 8.00 | % | $ | 213,437 | 10.00 | % | |||
Tier 1 capital (to risk-weighted assets) | 271,564 | 12.72 | 128,062 | 6.00 | 170,750 | 8.00 | |||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | 271,564 | 12.72 | 96,047 | 4.50 | 138,734 | 6.50 | |||||||||
Tier 1 capital (to average assets) | 271,564 | 9.51 | 114,174 | 4.00 | 142,718 | 5.00 | |||||||||
The Company will continue to monitor the effects of COVID-19 in determining future cash dividends and any requirement for additional capital each quarter. The Company had no stock repurchases for the third quarter of 2020. The Company repurchased the maximum number of shares that may be elected. repurchased under the program in the second quarter of 2020 and the program is now closed.
Capital Resources (continued)
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As of September 30, 2019: |
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Total capital (to risk-weighted assets) | $ | 279,043 | 13.03 | % | $ | 171,276 | 8.00 | % | $ | 214,096 | 10.00 | % |
Tier 1 capital (to risk-weighted assets) |
| 254,352 | 11.88 |
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| 128,457 | 6.00 |
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| 171,276 | 8.00 |
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Common Equity Tier 1 Capital (to risk-weighted assets) |
| 254,352 | 11.88 |
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| 96,343 | 4.50 |
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| 139,162 | 6.50 |
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Tier 1 capital (to average assets) |
| 254,352 | 9.16 |
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| 111,097 | 4.00 |
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| 138,871 | 5.00 |
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As of December 31, 2018: |
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Common Equity Tier 1 Capital (to risk-weighted assets) | $ | 255,631 | 12.01 | % | $ | 170,222 | 8.00 | % | $ | 212,777 | 10.00 | % |
Tier 1 capital (to risk-weighted assets) |
| 233,272 | 10.96 |
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| 127,666 | 6.00 |
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| 170,222 | 8.00 |
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Common Equity Tier 1 Capital (to risk-weighted assets) |
| 233,272 | 10.96 |
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| 95,750 | 4.50 |
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| 138,305 | 6.50 |
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Tier 1 capital (to average assets) |
| 233,272 | 8.72 |
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| 106,999 | 4.00 |
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| 133,749 | 5.00 |
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Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature. Consequently, one of our most significant forms of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee, which consists of senior management and outside directors operating under a policy adopted by the Board of Directors, meets quarterly to review our asset/liability policies and interest rate risk position.
The following table presents the Company’s net portfolio value (“NPV”). These calculations were based upon assumptions believed to be fundamentally sound, although they may vary from assumptions utilized by other financial institutions. The information set forth below is based on data that included all financial instruments as of September 30, 2019.2020. Assumptions have been made by the Company relating to interest rates, loan prepayment rates, core deposit duration, and the market values of certain assets and liabilities under the various interest rate scenarios. Actual maturity dates were used for fixed rate loans and certificate accounts. Investment securities were scheduled at either the maturity date or the next scheduled call date based upon management’s judgment of whether the particular security would be called in the current interest rate environment and under assumed interest rate scenarios. Variable rate loans were scheduled as of their next scheduled interest rate repricing date. Additional assumptions made in the preparation of the NPV table include prepayment rates on loans and mortgage-backed securities, core deposits without stated maturity dates were scheduled with an assumed term of 48 months, and money market and non-interest bearing accounts were scheduled with an assumed term of 24 months. The NPV at “PAR” represents the difference between the Company’s estimated value of assets and estimated value of liabilities assuming no change in interest rates. The NPV for a decrease of 200 to 300 basis points has been excluded since it would not be meaningful in the interest rate environment as of September 30, 2019.2020.
The following table sets forth the Company’s NPV as of that date (dollars in thousands).
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Change in Calculation |
| Net Portfolio Value |
| $ Change from PAR |
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| NPV Ratio |
| Change |
| Net Portfolio Value | $ Change from PAR | % Change from PAR | NPV Ratio | Change | ||||||||||||||
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+300bp |
| $ | 177,445 |
| $ | (62,868) |
| (26.16) | % |
| 6.71 | % |
| (179) | bps |
| $ | 253,613 |
| $ | (18,593) | (6.83) | % | 9.36 | % | (11) | bp | |||
+200bp |
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| 200,141 |
| (40,172) |
| (16.72) |
| 7.40 |
| (110) | bps |
| 261,657 | (10,549) | (3.88) | 9.47 | - | bp | |||||||||||
+100bp |
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| 223,493 |
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| (16,821) |
| (7.00) |
| 8.08 |
| (42) | bps |
| 263,022 |
| (9,184) | (3.37) | 9.36 | (11) | bp | |||||||||
PAR |
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| 240,313 |
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| - |
| - |
| 8.50 |
| - | bps |
| 272,206 |
| - | - | 9.47 | - | bp | |||||||||
-100bp |
| 254,576 |
| 14,262 |
| 5.93 |
| 8.80 |
| 31 | bps | 318,014 | 45,808 | 16.83 | 10.77 | 130 | bp | |||||||||||||
bp – basis points
The table above indicates that as of September 30, 2019,2020, in the event of a 100 basis point increase in interest rates, we would experience a decrease to 8.08%9.36% in NPV.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in NPV require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the NPV table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income, and will differ from actual results.
43
Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of business. As of September 30, 2019,2020, we were not involved in any material legal proceedings the outcome of which, if determined in a manner adverse to the Company, would have a material adverse effect on our financial condition or results of operations.
The performance ofIn addition to the Bank's New York multifamilyother information contained in this Quarterly Report on Form 10-Q, the following risk factor represents material updates and mixed-use loans could be adversely impacted by recent legislation.
There have been no changesadditions to the risk factors set forth under the 1.A. Risk Factors as set forthpreviously disclosed in the Company’s annual reportour Annual Report on Form 10-K for the year ended December 31, 20182019 as supplementedfiled with the SEC. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition, or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.
The ongoing COVID-19 pandemic and measures intended to prevent its spread could adverselyaffect our business activities, financial condition, and results of operations and such effects will depend on future developments, which are highly uncertain and difficult to predict.
The COVID-19 outbreak and related government actions taken to reduce the spread of the virus have had a significant impact on the global economy, the United States economy, and the economy in our New Jersey and New York market area. The full fallout from the pandemic and its long-term impact on economies, markets, industries and financial institutions is not known at this time, and it may take years to fully determine COVID-19’s economic impact.
The occurrence of events which adversely affect the global, national and regional economies may have a negative impact on our business. Like other financial institutions, our business relies upon the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions. A strong and stable economy at each of the local, federal and global levels is often a critical component of consumer confidence and typically correlates positively with our customers’ ability and willingness to transact certain types of business with us. Local and global events outside of our control which disrupt the New Jersey, New York, United States and/or global economy may therefore negatively impact our business and financial condition. A public health crisis such as the COVID-19 pandemic is no exception, and the adverse health and economic effects of this pandemic may adversely impact our business and financial condition.
The COVID-19 outbreak has led to federal, state and local governments enacting various restrictions in an attempt to limit the spread of the virus, including restricting the operations of certain businesses; limitations on social or public gatherings and other social distancing measures; and travel restrictions and quarantines. Such measures have significantly contributed to the sudden increase in the unemployment rate and changes in consumer and business spending, borrowing needs and saving habits. The full extent of the actions which governmental authorities will take to contain the spread of COVID-19 and address both the health and economic impact of COVID-19 is not, and cannot be, fully known at this time. The current volatile environment caused by the Company’s quarterly reportsCOVID-19 pandemic could potentially lead to the introduction of new laws and regulations impacting many industries, including the financial industry. For example, new laws and regulations may be passed relating to lending and funding practices and capital and liquidity standards. Furthermore, regulators could revise standards or the interpretation of standards applicable to our business in response to the economic impact of COVID-19. Any new or revised laws or standards adopted in the future may require us to maintain additional capital, rebalance our assets, liabilities and equity (including the classes of equity issued by us) or otherwise revise our business strategy. We may face regulatory, economic and operational challenges in taking necessary measures in response to these new laws or standards, which could in turn have a material adverse effect on Form 10-Q.our business, financial condition and opportunities for future growth.
Additionally, the COVID-19 pandemic significantly affected the financial markets and resulted in a number of Federal Reserve Bank actions. Market interest rates have declined significantly. In March 2020, the Federal Reserve reduced the target federal funds rate and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. In addition, the Federal Reserve reduced the interest that it pays on excess reserves. The Company expects that these reductions in interest rates, especially if prolonged, could adversely affect net interest income, margins and profitability.
If the outbreak and its effects continue to adversely affect the economy and if state and local government restrictions on businesses continue or increase, we could be subject to any of the following consequences, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:
demand for our products and services may decline;
loan delinquencies, problem assets, and foreclosures may increase;
collateral for loans, especially real estate, may decline in value;
a work stoppage, forced quarantine, or other interruption of our business may occur
our allowance for loan losses may have to be increased, especially if we believe an increase in our qualitative factors is warranted;
future borrowing power of our clients may be reduced;
Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs;
the value of our securities portfolio may decline;
increase cyber and payment fraud risk, given increased online and remote activity;
the fair value of the Company may be less than its carrying amount, including goodwill; and
the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
Moreover, our future success and profitability is substantially dependent upon the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.
Any one or a combination of the factors identified above could negatively impact our business, financial condition, results of operations and prospects.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.On October 22, 2020, the Company announced that its Board of Directors approved the adoption of a new stock repurchase program to be effective at a to-be-determined time. The Company’s Board of Directors plans to consult with its financial advisors and determine the total number of shares to be repurchased under the program. The Company did not repurchase any shares of its common stock during the three-month period ended September 30, 2020.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFTEY DISCLOSURES
Not applicable
None.
ITEM 6. EXHIBITS
Exhibit 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 31.2 | |
Exhibit 32 | Officers’ Certification filed pursuant to section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 101.INS | XBRL Instance Document |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation LinkBase |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition LinkBase |
Exhibit 101.LAB | XBRL Taxonomy Extension Label LinkBase |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation LinkBase |
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
BCB BANCORP, INC. | ||||
Date: November | By: | /s/ Thomas Coughlin | ||
Thomas Coughlin | ||||
| ||||
President and Chief Executive Officer (Principal Executive Officer) | ||||
Date: November | By: | /s/ Thomas P. Keating | ||
Thomas P. Keating Senior Vice President and Chief Financial Officer | ||||
(Principal Accounting and Financial Officer) | ||||