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Section 1: 10-K (10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)





 

Annual Report Pursuant To Section 13 or 15(d) Of The Securities Exchange Act of 1934

For the fiscal year ended December 31, 2016.

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: 000-50275



BCB BANCORP, INC.

(Exact name of registrant as specified in its charter)





 

 

New Jersey

 

26-0065262

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)



 

 

104-110 Avenue C, Bayonne, New Jersey

 

07002

(Address of principal executive offices)

 

(Zip Code)



Registrant's telephone number, including area code:  (201) 823-0700



Securities registered pursuant to Section 12(b) of the Act: 





 

 

Title of each class

 

Name of each exchange on which registered

Common Stock, no par value

 

The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES      NO  



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES      NO  



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.

YES      NO  



Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the Registrant was required to submit and post such files).

YES      NO  



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





 

 

 

Large accelerated filer

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

(Do not check if a smaller reporting company)



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES      NO  



The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2016, as reported by the Nasdaq Global Market, was approximately $94.8 million.



As of March 6th, 2017, there were 11,289,403 shares of the Registrant’s Common Stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE:



(1) Proxy Statement for the 2017 Annual Meeting of Stockholders of the Registrant (Part III).



 

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TABLE OF CONTENTS





 

 

Item

 

Page Number

ITEM 1.

BUSINESS

1

ITEM 1A.

RISK FACTORS

22

ITEM 1B.

UNRESOLVED STAFF COMMENTS

25

ITEM 2.

PROPERTIES

26

ITEM 3.

LEGAL PROCEEDINGS

28

ITEM 4.

MINE SAFETY DISCLOSURES

28

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

29

ITEM 6.

SELECTED CONSOLIDATED FINANCIAL DATA

31

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

32

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

41

ITEM 8.

FINANICAL STATEMENTS AND SUPPLEMENTARY DATA

42

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

42

ITEM 9A.

CONTROLS AND PROCEDURES

43

ITEM 9B.

OTHER INFORMATION

44

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

45

ITEM 11.

EXECUTIVE COMPENSATION

45

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

45

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

45

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

45

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

45

ITEM 16.

FORM 10-K SUMMARY

46



 



 

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PART I



ITEM 1. BUSINESS



This report on Form 10-K contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of BCB Bancorp, Inc. and subsidiaries. This document may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “seek,” “strive,” “try,” or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. Although we believe that our plans, intentions and expectations, as reflected in these forward-looking statements are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or realized.  By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause our actual results and financial condition to differ from those indicated in the forward-looking statements include, among others, those discussed below and under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this report. We do not assume any obligation to revise forward-looking statements except as may be required by law.





BCB Bancorp, Inc.



BCB Bancorp, Inc. (the “Company”) is a New Jersey corporation established in 2003, and is the holding company parent of BCB Community Bank (the “Bank; collectively, “we” or “our”). 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. Our telephone number is (201) 823-0700 and our website is www.bcbcommunitybank.com. At December 31, 2016 we had approximately $1.708 billion in consolidated assets, $1.392 billion in deposits and $131.1 million in consolidated stockholders’ equity. The Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System.



BCB Community Bank



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 December 31, 2016, the Bank operated through 22 branches in Bayonne, Carteret, Colonia, Edison, Hoboken, Fairfield, Holmdel, Jersey City, Lodi, Lyndhurst, Monroe Township, Rutherford, South Orange, Union, and Woodbridge, New Jersey, and two branches in Staten Island, New York 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 Federal Deposit Insurance Corporation, (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.



Recent Events

    

On January 18, 2017, the Company declared a cash dividend of $0.14 per share and was paid to stockholders on February 15, 2017, with a record date of February 1, 2017.



On January 23, 2017, the Company launched a private offering issued a subscription agreement and private placement memorandum for up to 2,500 shares of Series D, 4.5% Non-Cumulative Perpetual Preferred Shares (“Series D Shares”). The Series D Shares when issued will be callable by the Company after January 1, 2020 at $10,000 per share (liquidation preference value). There is no ability to convert the Series D Shares to common shares. Dividends on the Series D Shares, if and when declared, will be paid quarterly in arrears



The Company has progressed on an organic branching initiative which is intended to mitigate the location risk of our strong Hudson County, New Jersey concentration, to develop our branch infrastructure in a manner more consistent with the expansion of lending markets and to fill in and grow our branch footprint in a more uniform and coherent fashion, which previously had grown predominately through merger activity.  To this end, the Company opened two branches in 2014, two branches in 2015, and seven branches in 2016.  The Company is looking to open an additional branch in the first half of 2017.



In December 2016, the Company opted to call its remaining Series A Noncumulative Perpetual Preferred Stock (“Series A Shares”) and all Series B Noncumulative Perpetual Preferred Stock (“Series B Shares”), effective January 2, 2017. This redemption will result in 694 shares of the Company’s Series A Shares to be redeemed at their value amount of $10,000 per share for an aggregate redemption price of $6,940,000 and 478 shares of the Company’s Series B Shares to be redeemed at their value amount of $10,000 per share for an aggregate redemption price of $4,780,000.



In January and February 2016, the Company opted to call a portion of its Series A Noncumulative Perpetual Preferred Stock (“Series A Shares”). This redemption resulted in 171 shares of the Company’s Series A Shares to be redeemed at their value amount of $10,000 per share for an aggregate redemption price of $1,710,000. Following the redemption of the 141 Series A Shares, 724 Series A Shares remain outstanding and subject to future redemption by the Company.





Business Strategy



Our business strategy is to operate as a well-capitalized, profitable and independent community-oriented financial institution dedicated to providing the highest quality customer service. Management’s and the Board of Directors’ extensive knowledge of the markets we serve helps to differentiate us from our competitors. Our business strategy incorporates the following elements: maintaining a community focus, focusing on profitability, strengthening our balance sheet, concentrating on real

 

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estate- based lending, capitalizing on market dynamics, providing attentive and personalized service, and attracting highly qualified and experienced personnel.  These attributes coupled with our desire to seek out under-served markets for banking products and services, facilitate our plan to grow our franchise footprint organically and synergistically.



Maintaining a community focus.  Our management and Board of Directors have strong ties to the communities we serve.  Many members of the management team are New Jersey natives and are active in the communities we serve through non-profit board membership, local business development organizations, and industry associations.  In addition, our board members are well-established professionals and business leaders in the communities we serve.  Management and the Board are interested in making a lasting contribution to these communities, and they have succeeded in attracting deposits and loans through attentive and personalized service.



Strengthening our balance sheet.  For the year ended December 31, 2016, our return on average equity was 6.11% and our return on average assets was 0.47%. Our earnings per diluted share was $0.63 for the year ended December 31, 2016 compared to $0.69 for the year ended December 31, 2015.  Earnings per share results were lower in 2016 primarily as a result of the Company’s robust organic growth initiative. Increases in staffing, occupancy, and equipment expenses related to retention of additional experienced business development and loan administration personnel, were utilized in order to ensure the success of this organic growth. Management remains committed to strengthening the Bank’s statements of financial condition and maintaining profitability by diversifying the products, pricing and services we offer. As a result of our efforts, total past due loans (greater than 90 days) have decreased from $14.8 million at December 31, 2012 to $11.5 million at December 31, 2016, while gross loans increased from $936.2 million at December 31, 2012 to $1.51 billion at December 31, 2016.



Concentrating on real estate-based lending.  A primary focus of our business strategy is to originate loans secured by commercial and multi-family properties.  Such loans generally provide higher returns than loans secured by one- to four-family properties.  As a result of our underwriting practices, including debt service requirements for commercial real estate and multi-family loans, management believes that such loans offer us an opportunity to obtain higher returns without a measurable increased level of risk.



Capitalizing on market dynamics. The consolidation of the banking industry in northeast New Jersey has provided a unique opportunity for a customer-focused banking institution, such as the Bank.  We believe our local roots and community focus provide the Bank with an opportunity to capitalize on the consolidation in our market area. This consolidation has moved decision making away from local, community-based banks to much larger banks headquartered outside of New Jersey. We believe our local roots and community focus provide the Bank with an opportunity to capitalize on the consolidation in our market area.



Providing attentive and personalized service.  Management believes that providing attentive and personalized service is the key to gaining deposit and loan relationships in the markets we serve and their surrounding communities.  Since we began operations, our branches have been open seven days a week.



Attracting highly experienced and qualified personnel.   An important part of our strategy is to hire bankers who have prior experience in the markets we serve, as well as pre-existing business relationships.  Our management team averages over 20 years of banking experience, while our lenders and branch personnel have significant experience at community banks and regional banks throughout the region.  Management believes that its knowledge of these markets has been a critical element in the success of the Bank.  Management’s extensive knowledge of the local communities has allowed us to develop and implement a highly focused and disciplined approach to lending, and has enabled the Bank to attract a high percentage of low cost deposits.



Our Market Area



We are located in Bayonne, Jersey City and Hoboken in Hudson County, Carteret, Colonia, Edison, Monroe Township and Woodbridge in Middlesex County, Lodi, Lyndhurst, and Rutherford in Bergen County and Fairfield and South Orange in Essex County, Holmdel in Monmouth County, and Union in Union County, New Jersey. The Bank also operates two branches in Staten Island, New York. The Bank’s locations are easily accessible and provide convenient services to businesses and individuals throughout our market area. These areas are all considered “bedroom” or “commuter” communities to Manhattan.  Our market area is well-served by a network of arterial roadways, including Route 440 and the New Jersey Turnpike.    



Our market area has a high level of commercial business activity.  Businesses are concentrated in the service sector and retail trade areas. Major employers in our market area include certain medical centers and local boards of education.



Competition



The banking industry in northeast New Jersey and New York City is extremely competitive. We compete for deposits and loans with existing New Jersey and out-of-state financial institutions that have longer operating histories, larger capital reserves and more established customer bases. Our competition includes large financial services companies and other entities, in addition to traditional banking institutions, such as savings and loan associations, savings banks, commercial banks and credit unions. Our larger competitors have a greater ability to finance wide-ranging advertising campaigns through greater capital resources. Our marketing efforts depend heavily upon referrals from officers, directors, stockholders, advertising in local media and through a social media presence. We compete for business principally on the basis of personal service to customers, customer access to our business development and other officers and directors, and competitive interest rates and fees.



In the financial services industry in recent years, intense market demands, technological and regulatory changes, and economic pressures have eroded industry classifications that were once clearly defined. Banks have diversified their services, competitively priced their deposit products and become more cost-effective as a result of competition with each other and with new types of financial service companies, including non-banking competitors. Some of these market dynamics have resulted in a number of new bank and non-bank competitors, increased merger activity, and increased customer awareness of product and service differences among competitors.



 

 

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Lending Activities



Analysis of Loan Portfolio. Set forth below is selected data relating to the composition of our loan portfolio by type of loan as a percentage of the respective portfolio.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

At December 31,

 



 

2016

 

 

2015

 

2014

 

 

2013

 

 

2012

 



 

Amount

 

Percent

 

 

Amount

 

Percent

 

 

Amount

 

Percent

 

 

Amount

 

Percent

 

Amount

 

Percent

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

(Dollars in Thousands)

 

Originated loans:

 

 

 

Residential one-to-four family

$  

142,081 

 

9.44 

%

$  

117,165 

 

8.13 

%

$  

124,642 

 

10.16 

%

$  

97,581 

 

9.41 

%

$  

78,007 

 

8.33 

%

Commercial and multi-family

 

1,056,806 

 

70.26 

 

 

982,828 

 

68.23 

 

 

732,791 

 

59.74 

 

 

549,918 

 

53.03 

 

 

435,371 

 

46.51 

 

Construction

 

70,867 

 

4.71 

 

 

64,008 

 

4.44 

 

 

73,497 

 

5.99 

 

 

37,307 

 

3.60 

 

 

22,267 

 

2.38 

 

Commercial business(1) 

 

63,444 

 

4.22 

 

 

70,340 

 

4.88 

 

 

54,244 

 

4.42 

 

 

52,659 

 

5.08 

 

 

47,250 

 

5.05 

 

Home equity(2) 

 

32,417 

 

2.15 

 

 

31,237 

 

2.17 

 

 

30,175 

 

2.46 

 

 

28,660 

 

2.76 

 

 

25,964 

 

2.77 

 

Consumer

 

1,269 

 

0.08 

 

 

2,365 

 

0.16 

 

 

2,178 

 

0.18 

 

 

553 

 

0.05 

 

 

565 

 

0.06 

 

Sub-total

 

1,366,884 

 

90.86 

 

 

1,267,943 

 

88.01 

 

 

1,017,527 

 

82.95 

 

 

766,678 

 

73.93 

 

 

609,424 

 

65.10 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans recorded at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

56,310 

 

3.74 

 

 

67,587 

 

4.69 

 

 

81,051 

 

6.61 

 

 

100,612 

 

9.71 

 

 

121,983 

 

13.03 

 

Commercial and multi-family

 

60,422 

 

4.02 

 

 

79,308 

 

5.51 

 

 

95,191 

 

7.76 

 

 

126,123 

 

12.16 

 

 

149,454 

 

15.97 

 

Construction

 

 -

 

 -

 

 

-

 

-

 

 

-

 

-

 

 

200 

 

0.02 

 

 

1,043 

 

0.11 

 

Commercial business(1) 

 

4,460 

 

0.30 

 

 

4,281 

 

0.30 

 

 

6,381 

 

0.52 

 

 

10,478 

 

1.01 

 

 

12,177 

 

1.30 

 

Home equity(2) 

 

13,877 

 

0.92 

 

 

18,851 

 

1.31 

 

 

22,698 

 

1.85 

 

 

27,313 

 

2.63 

 

 

34,289 

 

3.66 

 

Consumer

 

225 

 

0.01 

 

 

263 

 

0.02 

 

 

652 

 

0.05 

 

 

919 

 

0.09 

 

 

1,069 

 

0.11 

 

Sub-total

 

135,294 

 

8.99 

 

 

170,290 

 

11.83 

 

 

205,973 

 

16.79 

 

 

265,645 

 

25.62 

 

 

320,015 

 

34.18 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired loans with deteriorated credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential one-to-four family

 

1,443 

 

0.10 

 

 

1,474 

 

0.10 

 

 

1,595 

 

0.13 

 

 

2,141 

 

0.21 

 

 

2,936 

 

0.31 

 

Commercial and multi-family

 

753 

 

0.05 

 

 

669 

 

0.05 

 

 

1,130 

 

0.09 

 

 

2,081 

 

0.20 

 

 

3,443 

 

0.37 

 

Construction

 

 -

 

 -

 

 

-

 

-

 

 

-

 

-

 

 

-

 

 -

 

 

 -

 

 -

 

Commercial business(1) 

 

 -

 

 -

 

 

167 

 

0.01 

 

 

369 

 

0.03 

 

 

371 

 

0.03 

 

 

241 

 

0.03 

 

Home equity(2) 

 

 -

 

 -

 

 

71 

 

0.00 

 

 

82 

 

0.01 

 

 

90 

 

0.01 

 

 

140 

 

0.01 

 

Consumer

 

 -

 

 -

 

 

-

 

-

 

 

-

 

-

 

 

-

 

 -

 

 

 -

 

 -

 

Sub-total

 

2,196 

 

0.15 

 

 

2,381 

 

0.16 

 

 

3,176 

 

0.26 

 

 

4,683 

 

0.45 

 

 

6,760 

 

0.72 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Loans

 

1,504,374 

 

100.00 

%

 

1,440,614 

 

100.00 

%

 

1,226,676 

 

100.00 

%

 

1,037,006 

 

100.00 

%

 

936,199 

 

100.00 

%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred loan fees, net

 

2,006 

 

 

 

 

2,454 

 

 

 

 

2,675 

 

 

 

 

2,300 

 

 

 

 

1,535 

 

 

 

Allowance for loan losses

 

17,209 

 

 

 

 

18,042 

 

 

 

 

16,151 

 

 

 

 

14,342 

 

 

 

 

12,363 

 

 

 

   Total loans, net

$  

1,485,159 

 

 

 

$  

1,420,118 

 

 

 

$  

1,207,850 

 

 

 

$  

1,020,364 

 

 

 

$  

922,301 

 

 

 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



 

 

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Loan Maturities.  The following table sets forth the contractual maturity of our loan portfolio at December 31, 2016.  The amount shown represents outstanding principal balances.  Demand loans, loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as being due in one year or less.  Variable-rate loans are shown as due at the time of repricing.  The table does not include prepayments or scheduled principal repayments.











 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Due within 1 Year

 

Due after 1 through 5 Years

 

Due After 5 Years

 

Total



(In Thousands)

One- to four-family

$           

866 

$           

3,904 

$           

195,064 

$           

199,834 

Construction

 

32,323 

 

24,543 

 

14,001 

 

70,867 

Commercial business(1) 

 

14,944 

 

21,457 

 

31,502 

 

67,903 

Commercial and multi-family

 

17,516 

 

88,116 

 

1,012,349 

 

1,117,981 

Home equity(2) 

 

2,880 

 

11,853 

 

31,561 

 

46,294 

Consumer

 

1,033 

 

207 

 

254 

 

1,494 

Total amount due

$           

69,562 

$           

150,080 

$           

1,284,731 

$           

1,504,373 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.



Loans with Fixed or Floating or Adjustable Rates of Interest.  The following table sets forth the dollar amount of all loans at December 31, 2016 that are due after December 31, 2017, and have fixed interest rates and that have floating or adjustable interest rates.





 

 

 

 

 

 



 

 

 

 

 

 



 

Fixed Rates

 

Floating or Adjustable Rates

 

Total



 

(In Thousands)

One- to four-family

$  

115,593 

$  

83,375 

$  

198,968 

Construction

 

157,665 

 

927,993 

 

1,085,658 

Commercial business(1) 

 

24,275 

 

31,648 

 

55,923 

Commercial and multi-family

 

12,266 

 

38,122 

 

50,388 

Home equity(2) 

 

5,775 

 

14,639 

 

20,414 

Consumer

 

220 

 

241 

 

461 

Total amount due

$  

315,794 

$  

1,096,018 

$  

1,411,812 

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.





 

4


 

Table of Contents

 

Commercial and Multi-family Real Estate Loans. Commercial real estate loans are secured by improved property such as office buildings, mixed use buildings retail stores, shopping centers, warehouses, and other non-residential buildings. Loans secured by multi-family residential units are properties consisting of five or more residential units. The Bank offers fully amortizing loans on commercial and multi-family properties at loan amounts up to 75% of the appraised value of the property. Commercial and multi-family real estate loans are generally made at rates that adjust above the five year Federal Home Loan Bank of New York interest rate, with terms of up to 30 years.  The Bank also offers balloon loans with fixed interest rates which generally mature in three to five years with amortization periods up to 30 years. As of December 31, 2016, the Bank’s largest commercial real estate loan had an outstanding principal balance of $16.7 million. This loan is secured by a 49 unit Multi-family property located in New York City, NY. This loan is performing in accordance with its terms at December 31, 2016.  



Loans secured by commercial and multi-family real estate are generally larger and involve a greater degree of risk than one-to-four family residential mortgage loans. The borrower’s creditworthiness and the feasibility and cash flow potential of the project is of primary concern in commercial and multi-family real estate lending. Loans secured by owner occupied properties are generally larger and involve greater risks than one-to-four family residential and non-owner occupied commercial mortgage loans because payments on loans secured by owner occupied properties are often dependent on the successful operation or management of the business. The Bank intends to continue emphasizing the origination of loans secured by commercial real estate and multi-family properties.



Construction Loans.  The Bank offers loans to finance the construction of various types of commercial and residential properties. Construction loans to builders generally are offered with terms of up to thirty months and interest rates tied to the prime rate plus a margin. These loans generally are offered as adjustable rate loans.  The Bank will originate construction loans to customers provided all necessary plans and permits are in order. Construction loan funds are disbursed as the project progresses. The Bank also offers construction loans that convert to a permanent mortgage on the property upon completion of the construction and adherence to conditions established at the time the construction loan was first approved. Terms of such permanent mortgage loans are similar to other mortgage loans secured by similar properties, with the interest rate established at the time of conversion. As of December 31, 2016, the Bank’s largest construction loan has a borrowing capacity of $10.3 million, of which $3.5 million has been disbursed. This loan is performing in accordance with its’ terms at December 31, 2016.



Construction financing is generally considered to involve a higher degree of risk than commercial real estate loans or one-to-four family residential lending. To mitigate these risks the Bank will obtain a plan and cost review from a third party vendor to review the proposed construction budget in an effort to avoid cost overruns.  The Bank also obtains multiple appraised values based upon various possible outcomes of the project. These values include “As Is,” “As Completed, ”As a Rental,” “As Sellout,” and “As a Bulk Sale”.



Commercial Business Loans.  The Bank offers a variety of commercial business loans in forms of either lines of credit or term loans that are fully amortized.  Lines of credit are typically utilized for working capital purposes. These loans are either revolving or non-revolving and provide loan terms between one to three years.  The re-payment is generally interest only and the interest rate is adjustable based upon, the Prime Rate. Term loans are typically for purchasing a business or equipment for a business. Term loans have loan terms between five to twenty-five years and are fully amortizing. The interest rate is adjustable and tied to the five year Federal Home Loan Bank of New York rate. Commercial business loans are underwritten on the basis of the borrower’s ability to service such debt from income.  These loans are generally made to small and mid-sized companies located within the Bank’s primary and secondary lending areas. A commercial business loan may be secured by equipment, accounts receivable, inventory, chattel or other assets. As of December 31, 2016, the Bank’s largest commercial business loan is a revolving line of credit to school district in Hudson County, NJ secured by plant, equipment and accounts receivable. The borrowing capacity is $15.0 million, of which no dollars have been dispersed. This loan is performing in accordance with terms at December 31, 2016.



Commercial business loans generally have higher rates and shorter terms than one to four family residential loans, but they may also involve higher average balances and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business.



SBA Lending. The Bank offers qualifying business loans guaranteed by the U.S. Small Business Administration (“SBA”). To qualify the borrower may have low capitalization, inexperience in the industry, or a specialized industry or other unusual risks. As of December 31, 2016, the Bank’s largest SBA loan is secured by a 4-story hotel building located in Brooklyn, New York. The borrowing capacity is $6.0 million, of which $5.1 million has been dispersed. This loan is performing in accordance with its terms at December 31, 2016.



Residential Lending. Residential loans are secured by one-to-four family dwellings, condominiums and cooperative units. Residential mortgage loans are secured by properties located in our primary lending areas of Bergen, Essex, Middlesex, Hudson, Monmouth and Richmond Counties; adjoining counties are considered as our secondary lending areas. We generally originate residential mortgage loans up to 75% loan-to-value at a maximum loan amount of $3.0 million for primary residences. Loan-to-value is based on the lesser of the appraised value or the purchase price without the requirement of private mortgage insurance. We will originate loans with loan to value ratios up to 90%, provided the borrower obtains private mortgage insurance approval. We originate both fixed rate and adjustable rate residential loans with a term of up to 30 years. We offer 15, 20, and 30 year fixed, 15/30 year balloon and 3/1, 5/1, 7/1 and 10/1 adjustable rate loans with payments being calculated to include principal, interest, taxes and insurance. The 3/1 and 5/1 adjustable rate loans are qualified at 2% above the start rate; all other loans are qualified at the start rate. We have a number of correspondent relationships with third party lenders in which we deliver closed first mortgage loans. Our correspondent banking relationships allow us to offer customers competitive long term fixed rate and adjustable rate loans we could not otherwise originate, while providing the Bank a source of fee income.  During 2016, we originated for sale approximately $39.1 million in residential loans and recognized gains of approximately $988,000 from the sale of such loans.



Home Equity Loans and Home Equity Lines of Credit.  The Bank offers home equity loans and lines of credit that are secured by either the borrower’s primary residence, a secondary residence or an investment. Our home equity loans can be structured as loans that are disbursed in full at closing or as lines of credit. Home equity lines of credit are offered with terms up to 30 years. Virtually all of our home equity loans are originated with fixed rates of interest and home equity lines of credit are originated with adjustable interest rates tied to the prime rate.  Home equity loans and lines of credit are underwritten under the same criteria that we use to underwrite one to four family residential loans. Home equity lines of credit may be underwritten with a loan-to-value ratio of up to 80% in a first lien position. At December 31, 2016, the outstanding balances of home equity loans and lines of credit totaled $46.3 million, or 3.08% of total loans.



Consumer Loans.  The Bank makes secured Passbook, Automobile and occasionally unsecured consumer loans. Consumer loans generally have terms between one and five years. They generally are made on a fixed rate basis, fully-amortizing.



Loan Approval Authority and Underwriting. The Bank’s Lending Policy has established lending limits for executive management. The President or the Chief Lending Officer, together with two Credit Officers, have authority to approve loan requests up to $1.5 million. Loan requests in excess of $1.5 million shall be presented to the Bank’s Board of Directors Loan Committee, which shall be comprised of a quorum of the Bank’s Board of Directors. Loan requests in excess of $2.0 million must be ratified by the entire Bank Board of Directors.



Upon receipt of a completed loan application including all appropriate financial information from a prospective borrower, the Bank will conduct its due diligence analysis. Property valuations or appraisals are required for all real estate collateralized loans. Appraisals are prepared by a state certified independent appraiser approved by the Bank Board of Directors.



 

5


 

Table of Contents

 

Loan Commitments. Written commitments are given to prospective borrowers on all approved loans. Generally, we honor commitments for up to 60 days from the date of issuance. At December 31, 2016, our outstanding loan origination commitments totaled $62.0 million, standby letters of credit totaled $964,000, undisbursed construction funds totaled $41.2 million and undisbursed lines of credit funds totaled $60.6 million.



Loan Delinquencies.  Notices of nonpayment are generated to borrowers once the loan account(s) becomes either 10 or 15 days past due, as specified in the applicable promissory note. A nonresponsive borrower will receive collection calls and a site visit from a bank representative in addition to follow -up delinquency notices.  If such payment is not received after 60 days, a notice of right to cure default is sent to the borrower providing 30 additional days to bring the loan current before foreclosure or other remedies are commenced. The Bank utilizes various reporting tools to closely monitor the performance and asset quality of the loan portfolio. The Bank complies with all federal, state and local laws regarding collection of its delinquent accounts.



Non-Accrual Status.  Loans are placed on a non-accrual status when the loan becomes more than 90 days delinquent or when, in our opinion, the collection of payment is doubtful. Once placed on non-accrual status, the accrual of interest income is discontinued until the loan has been returned to normal accrual.  At December 31, 2016, the Bank had $15.7 million in non-accruing loans. The largest exposure of non-performing loans consisted of a combined borrowing relationship in which the loans are collateralized by multiple properties whose combined balance at December 31, 2016 was $2.3 million.



Impairment Status.  A loan is considered impaired when it is probable the borrower will not repay the loan according to the original contractual terms of the loan agreement. Impaired loans can be loans which are more than 90 days delinquent, troubled debt restructured, part of our special residential program, in the process of foreclosure, or a forced Bankruptcy plan. We have determined that first mortgage loans on one- to four-family properties and all consumer loans represent large groups of smaller-balance homogeneous loans that are collectively evaluated. Additionally, we have determined that an insignificant delay (less than 90 days) will not cause a loan to be classified as impaired if we expect to collect all amounts due including interest accrued at the contractual interest rate for the period of delay.  We independently evaluate all loans identified as impaired. We estimate credit losses on impaired loans based on the present value of expected cash flows or the fair value of the underlying collateral if the loan repayment will be derived from the sale or operation of such collateral. Impaired loans, or portions of such loans, are charged off when we determine a realized loss has occurred. Until such time, an allowance for loan losses is maintained for estimated losses. Cash receipts on impaired loans are applied first to accrued interest receivable unless otherwise required by the loan terms, except when an impaired loan is also a nonaccrual loan, in which case the portion of the receipts related to interest is applied to principal. At December 31, 2016, we had 163 loans with unpaid principal balances totaling $49.4 million which are classified as impaired and on which loan loss allowances totaling $3.5 million have been established. During 2016, interest income of $2.4 million was recognized on impaired loans during the time of impairment.



Troubled Debt Restructuring. A troubled debt restructuring (“TDR”) is a loan that has been modified whereby the Bank has agreed to make certain concessions to a borrower to meet the needs of both the borrower and the Bank to maximize the ultimate recovery of a loan. TDR occurs when a borrower is experiencing, or is expected to experience, financial difficulties and the loan is modified using a modification that would otherwise not be granted to the borrower. The types of concessions granted generally included, but not limited to, interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal. The total troubled debt restructured loans were $27.6 million and $28.5 million at December 31, 2016 and December 31, 2015, respectively.



The Bank had allocated $2.04 million and $1.7 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and December 31, 2015, respectively. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at December 31, 2016.



If management determines that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or charge-off to the allowance. This process is used, regardless of loan type, and for loans modified as TDRs that subsequently default on their modified terms.















 

6


 

Table of Contents

 

The following tables set forth delinquencies in our loan portfolio as of the dates indicated:



















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



At December 31, 2016

 

 

At December 31, 2015



60-90 Days

 

Greater than 90 Days

 

 

60-90 Days

 

Greater than 90 Days

 



Number

 

 

Principal

 

 

Number

 

 

Principal

 

 

Number

 

 

Principal

 

 

Number

 

 

Principal

 



of

 

 

Balance

 

 

of

 

 

Balance

 

 

of

 

 

Balance

 

 

of

 

 

Balance

 



Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 



(Dollars in Thousands)

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family residential

 

$

1,478 

 

 

19 

 

$

5,027 

 

 

 

$

1,097 

 

 

21 

 

$

5,089 

 

Construction

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

80 

 

 

 -

 

 

 -

 

Home equity

 

 

350 

 

 

 

 

280 

 

 

 

 

333 

 

 

 

 

816 

 

Commercial and multi-family

 

 

1,210 

 

 

 

 

5,919 

 

 

11 

 

 

4,675 

 

 

18 

 

 

7,760 

 

Total

12 

 

 

3,038 

 

 

37 

 

 

11,226 

 

 

20 

 

 

6,185 

 

 

48 

 

 

13,665 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

69 

 

 

 

 

315 

 

 

 -

 

 

 -

 

 

10 

 

 

851 

 

Consumer

 -

 

 

 -

 

 

 

 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Total delinquent loans

13 

 

$

3,107 

 

 

45 

 

$

11,547 

 

 

20 

 

$

6,185 

 

 

58 

 

$

14,516 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquent loans to total loans

 

 

 

0.21 

%

 

 

 

 

0.77 

%

 

 

 

 

0.43 

%

 

 

 

 

1.01 

%











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



At December 31, 2014

 

 

At December 31, 2013



60-90 Days

 

Greater than 90 Days

 

 

60-90 Days

 

Greater than 90 Days

 



Number

 

 

Principal

 

 

Number

 

 

Principal

 

 

Number

 

 

Principal

 

 

Number

 

 

Principal

 



of

 

 

Balance

 

 

of

 

 

Balance

 

 

of

 

 

Balance

 

 

of

 

 

Balance

 



Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 

 

Loans

 

 

of Loans

 



(Dollars in Thousands)

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to-four family residential

12 

 

$

4,096 

 

 

10 

 

$

2,303 

 

 

10 

 

$

2,787 

 

 

11 

 

$

2,148 

 

Construction

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Home equity

 

 

552 

 

 

 

 

216 

 

 

 

 

175 

 

 

 

 

176 

 

Commercial and multi-family

 

 

1,815 

 

 

 

 

3,712 

 

 

 

 

2,882 

 

 

12 

 

 

4,352 

 

Total

23 

 

 

6,463 

 

 

25 

 

 

6,231 

 

 

19 

 

 

5,844 

 

 

25 

 

 

6,676 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

748 

 

 

 

 

391 

 

 

 -

 

 

 -

 

 

 

 

290 

 

Consumer

 

 

 

 

 -

 

 

 -

 

 

 

 

 

 

-

 

 

-

 

Total delinquent loans

26 

 

$

7,220 

 

 

27 

 

$

6,622 

 

 

20 

 

$

5,846 

 

 

27 

 

$

6,966 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delinquent loans to total loans

 

 

 

0.59 

%

 

 

 

 

0.54 

%

 

 

 

 

0.56 

%

 

 

 

 

0.67 

%



 

7


 

Table of Contents

 





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



At December 31, 2012



60-90 Days

 

 

Greater Than 90 Days

 



 

 

 

Principal

 

 

 

 

 

Principal

 



Number

 

 

Balance

 

 

Number

 

 

Balance

 



of Loans

 

 

of Loans

 

 

of Loans

 

 

of Loans

 



(Dollars in Thousands)

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

One-to-four family residential

10 

 

$

1,941 

 

 

10 

 

$

2,348 

 

Construction

 

 

1,174 

 

 

 

 

130 

 

Home equity

 

 

717 

 

 

12 

 

 

1,516 

 

Commercial and multi-family

11 

 

 

5,245 

 

 

22 

 

 

9,275 

 

Total

29 

 

 

9,077 

 

 

45 

 

 

13,269 

 



 

 

 

 

 

 

 

 

 

 

 

Commercial business

 

 

152 

 

 

 

 

1,514 

 

Consumer

 -

 

 

 -

 

 

-

 

 

-

 

Total delinquent loans

31 

 

$

9,229 

 

 

54 

 

$

14,783 

 



 

 

 

 

 

 

 

 

 

 

 

Delinquent loans to total loans

 

 

 

0.99 

%

 

 

 

 

1.58 

%





 

8


 

Table of Contents

 

The table below sets forth the amounts and categories of non-performing assets in the Bank’s loan portfolio. Loans are placed on non-accrual status when delinquent more than 90 days or when the collection of principal and/or interest become doubtful. Foreclosed assets include assets acquired in settlement of loans. 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

At December 31,



 

 

2016

 

 

 

2015

 

 

 

2014

 

 

 

2013

 

 

 

2012

 



 

 

(Dollars in Thousands)

Non-accruing loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One-to four-family residential

 

7,122 

 

 

8,195 

 

 

7,679 

 

 

4,829 

 

 

2,163 

 

Construction

 

 

 -

 

 

 

-

 

 

 

-

 

 

 

521 

 

 

 

130 

 

Home equity

 

 

1,179 

 

 

 

1,560 

 

 

 

943 

 

 

 

1,203 

 

 

 

1,564 

 

Commercial and multi-family

 

 

6,619 

 

 

 

12,807 

 

 

 

10,355 

 

 

 

11,733 

 

 

 

13,043 

 

Commercial business

 

 

726 

 

 

 

885 

 

 

 

627 

 

 

 

2,279 

 

 

 

3,159 

 

Consumer

 

 

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

-

 

Total

 

 

15,652 

 

 

 

23,447 

 

 

 

19,604 

 

 

 

20,565 

 

 

 

20,059