Edgar Filing: BCB BANCORP INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

¨	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)

(Former name, former address and former fiscal year if changed since last report)

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 ¨ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	¨	Accelerated Filer	ý

Non-Accelerated Filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). ¨ Yes ý 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 for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ 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 May 5, 2014, BCB Bancorp, Inc., had 8,343,432 shares of common stock, no par value, outstanding.

BCB BANCORP INC. AND SUBSIDIARIES

INDEX

	Page
PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Statements of Financial Condition as of March 31, 2014 and December 31, 2013 (unaudited)	1

Consolidated Statements of Income for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	2

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	3

Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2014 (unaudited)	4

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and March 31, 2013 (unaudited)	5

Notes to Unaudited Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3. Quantitative and Qualitative Disclosures about Market Risk	42

Item 4. Controls and Procedures	43

PART II. OTHER INFORMATION	44

Item 1. Legal Proceedings	44

Item 1A. Risk Factors	44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3. Defaults Upon Senior Securities	45

Item 4. Mine Safety Disclosures	45

Item 5. Other Information	45

Item 6. Exhibits	45

Index

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In Thousands, Except Share and Per Share Data, Unaudited)

	March 31,			December 31,
	2014			2013

ASSETS
Cash and amounts due from depository institutions	$	10,071		$	10,847
Interest-earning deposits		17,158			18,997
Total cash and cash equivalents		27,229			29,844

Interest-earning time deposits		990			990
Securities available for sale		1,316			1,104
Securities held to maturity, fair value $112,457 and $115,158,
respectively		110,732			114,216
Loans held for sale		2,289			1,663
Loans receivable, net of allowance for loan losses of $14,646 and
$14,342, respectively		1,060,855			1,020,344
Federal Home Loan Bank of New York stock, at cost		8,380			7,840
Premises and equipment, net		13,615			13,853
Accrued interest receivable		4,102			4,157
Other real estate owned		2,745			2,227
Deferred income taxes		9,855			9,942
Other assets		2,385			1,779
Total Assets	$	1,244,493		$	1,207,959

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Non-interest bearing deposits	$	118,957		$	107,613
Interest bearing deposits		873,048			861,057
Total deposits		992,005			968,670
Short-term Debt		30,000			18,000
Long-term Debt		110,000			110,000
Subordinated Debentures		4,124			4,124
Other Liabilities		6,239			7,105
Total Liabilities		1,142,368			1,107,899

STOCKHOLDERS' EQUITY
Preferred stock: $0.01 par value, 10,000,000 shares authorized,
issued and outstanding 1,343 shares of series A and B 6% noncumulative perpetual
preferred stock (liquidation preference value $10,000 per share, liquidation value $13,430,000)		—			—
Additional paid-in capital preferred stock		13,326			12,556
Common stock; $0.064 stated value; 20,000,000 shares authorized,
8,343,432 shares and 8,331,750 shares, respectively, issued and outstanding		695			694
Additional paid-in capital common stock		92,197			92,064
Retained earnings		24,751			23,710
Accumulated other comprehensive income		255			129
Treasury stock, at cost, 2,529,655 and 2,529,379 shares, respectively		(29,099	)		(29,093	)
Total Stockholders' Equity		102,125			100,060

Total Liabilities and Stockholders' Equity	$	1,244,493		$	1,207,959

See accompanying notes to unaudited consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In Thousands, except for per share amounts, Unaudited)

	Three Months Ended March 31,
	2014		2013

Interest income:
Loans, including fees	$	13,681	$	12,992
Investments, taxable		915		1,062
Investments, non-taxable		12		12
Other interest-earning assets		13		11
Total interest income		14,621		14,077

Interest expense:
Deposits:
Demand		121		103
Savings and club		91		86
Certificates of deposit		1,092		1,248
		1,304		1,437
Borrowed money		1,253		1,223
Total interest expense		2,557		2,660

Net interest income		12,064		11,417
Provision for loan losses		1,000		1,200

Net interest income after provision for loan losses		11,064		10,217

Non-interest income:
Fees and service charges		504		424
Gain on sales of loans originated for sale		777		119
Gain on sale of securities held to maturity		—		224
Other		19		17
Total non-interest income		1,300		784

Non-interest expense:
Salaries and employee benefits		4,461		3,466
Occupancy expense of premises		980		812
Equipment		1,357		1,166
Professional fees		490		459
Director fees		168		168
Regulatory assessments		252		265
Advertising		174		102
Other real estate owned, net		8		(84	)
Other		666		550
Total non-interest expense		8,556		6,904

Income before income tax provision		3,808		4,097
Income tax provision		1,573		1,687

Net Income	$	2,235	$	2,410
Preferred stock dividends		193		130
Net Income available to common stockholders	$	2,042	$	2,280

Net Income per common share-basic and diluted
Basic	$	0.24	$	0.27
Diluted	$	0.24	$	0.27

Weighted average number of common shares outstanding
Basic		8,340		8,492
Diluted		8,342		8,494

See accompanying notes to unaudited consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In Thousands, Unaudited)

	Three Months Ended March 31,
	2014		2013


Net Income	$	2,235	$	2,410
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during the period (a)		126		107
Less: reclassification adjustment for gains included in net income (b)		—		—
Benefit plans (c)		—		11
Other comprehensive income		126		118
Comprehensive income	$	2,361	$	2,528

(a)

Represents the net change of the unrealized gain on available-for-sale securities. Represents unrealized gains of $213,000 and $178,000, respectively, less deferred taxes of $87,000 and $71,000, respectively.

(b)

No sales of available-for-sale securities occurred during the three months ended March 31, 2014 and 2013.

(c)

Represents the net change of unrecognized loss included in net periodic pension cost. Represents a gross change of $18,000, less deferred taxes of $7,000, for the three months ended March 31, 2013. The Statements of Income line items impacted by these amounts are salaries and employee benefits and income tax provision.

See accompanying notes to unaudited consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

(In Thousands, except share and per share data, Unaudited)

	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total

Beginning Balance at January 1, 2014	$	—	$	694	$	104,620	$	23,710		$	(29,093	)	$	129	$	100,060

Proceeds from issuance of Series B preferred stock		—		—		771		—			—			—		771

Exercise of Stock Options (12,092 shares)		—		1		132		—			—			—		133

Stock-based compensation expense		—		—		—		—			—			—		—

Treasury Stock Purchases (410 shares)		—		—		—		—			(6	)		—		(6	)

Dividends payable on Series A and Series B 6% noncumulative perpetual preferred stock		—		—		—		(193	)		—			—		(193	)

Cash dividends on common stock ($0.12 per share) declared		—		—		—		(1,001	)		—			—		(1,001	)

Net income		—		—		—		2,235			—			—		2,235

Other comprehensive income		—		—		—		—			—			126		126

Ending Balance at March 31, 2014	$	—	$	695	$	105,523	$	24,751		$	(29,099	)	$	255	$	102,125

See accompanying notes to unaudited consolidated financial statements.

Index

BCB BANCORP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands, Unaudited)

	Three Months Ended March 31,
	2014			2013
Cash Flows from Operating Activities :
Net Income	$	2,235		$	2,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment		357			299
Amortization and accretion, net		(174	)		429
Provision for loan losses		1,000			1,200
Deferred income tax (benefit)		—			(347	)
Loans originated for sale		(5,512	)		(5,505	)
Proceeds from sale of loans originated for sale		5,203			3,309
Gain on sales of loans originated for sale		(777	)		(119	)
Gain on sales of other real estate owned		—			(21	)
Fair value adjustment of other real estate owned		—			(110	)
Gain on sales of securities held to maturity		—			(224	)
Stock compensation expense		—			17
Decrease (increase) in interest receivable		55			(212	)
(Increase) decrease in other assets		(606	)		2,072
(Decrease) in accrued interest payable		(27	)		(18	)
(Decrease) in other liabilities		(839	)		(435	)

Net Cash Provided by Operating Activities		915			2,745

Cash flows from investing activities:
Proceeds from repayments and calls on securities held to maturity		4,410			17,107
Purchases of securities held to maturity		(1,066	)		(1,359	)
Proceeds from sales of securities held to maturity		—			6,327
Proceeds from sales of other real estate owned		—			806
Purchases of loans		—			(227	)
Net (Increase) in loans receivable		(41,254	)		(7,948	)
Additions to premises and equipment		(119	)		(87	)
Purchase/Redemption of Federal Home Loan Bank of New York stock		(540	)		765

Net Cash (Used in) Provided By Investing Activities		(38,569	)		15,384

Cash flows from financing activities:
Net increase in deposits		23,335			3,010
Net change in short-term debt		12,000			(17,000	)
Purchases of treasury stock		(6	)		(247	)
Cash dividend paid on common stock		(1,001	)		(1,017	)
Cash dividend paid on preferred stock		(193	)		—
Net proceeds from Issuance of common stock		132			—
Net proceeds from Issuance of preferred stock		771			—
Exercise of stock options		1			12

Net Cash Provided by (Used in) Financing Activities		35,039			(15,242	)

Net (Decrease) Increase In Cash and Cash Equivalents		(2,615	)		2,887
Cash and Cash Equivalents-Beginning		29,844			34,147

Cash and Cash Equivalents-Ending	$	27,229		$	37,034

Supplementary Cash Flow Information:
Cash paid during the year for:
Income taxes	$	2,375		$	1
Interest	$	2,583		$	2,678

Non-cash items:
Transfer of loans to other real estate owned	$	518		$	1,740
Loans to facilitate sale of other real estate owned		—			—
Reclassification of loans originated for sale to held to maturity	$	460		$	2,589

See accompanying notes to unaudited consolidated financial statements.

Index

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. and Pamrapo Service Corporation. 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 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, 2014 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, 2013, 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, BCB Bancorp, Inc., evaluated the events and transactions that occurred between December 31, 2013, and the date these consolidated financial statements were issued.

New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2014-04, Receivable-Troubled Debt Restructurings by Creditors (Sub-Topic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this ASU are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. They clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure, or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2014. Early adoption is permitted. Retrospective application is permitted. The Company does not believe this pronouncement, when adopted, will have a material impact on the Company’s results of operations or financial position.

The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This ASU applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of ASU 2013-11 did not have a significant impact on the Company’s financial condition, results of operations, or cash flows.

The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The ASU requires an entity to report, either on the face of the statement where net income is presented or in the notes to the financial statements, the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in their entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments in this ASU apply to all entities that issue financial statements that are presented in conformity with U.S. GAAP and that report items of other comprehensive income. For public entities, the amendments in this ASU are effective prospectively for reporting periods beginning after December 15, 2012. The Company adopted this ASU on January 1, 2013 by including the required disclosures in the notes included on the consolidated statements of comprehensive income. The adoption of ASU 2013-02 did not have a significant impact on the Company's financial condition, results of operations, or cash flows.

Index

Note 2 – Reclassification

Certain amounts as of December 31, 2013 and the three month period ended March 31, 2013 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 3 – Pension and Other Postretirement Plans

The Company assumed, through 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 plan (“Pension Plan”), was frozen by Pamrapo Savings Bank. All benefits for eligible participants accrued in the “Pension Plan” to the freeze date have been retained. Accordingly, no 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.

Periodic pension and SERP cost, which is recorded as part of salaries and employee benefits expense in our Consolidated Statements of Income, is comprised of the following. (In Thousands):

	Three months ended March 31,
	2014			2013

Pension plan:
Interest cost	$	100		$	98
Expected return on plan assets		(154	)		(137	)
Amortization of unrecognized loss		—			18

Net periodic pension cost	$	(54	)	$	(21	)

SERP plan:
Interest cost	$	5		$	4

Net periodic postretirement cost	$	5		$	4

Index

Note 3 – Pension and Other Postretirement Plans (Continued)

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 BCB Bancorp, Inc. pursuant to grants of stock options. Employees and directors of BCB Bancorp, Inc. and BCB Community 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 January 17, 2013, a grant of 130,000 options was declared for certain members of the Board of Directors which vest at a rate of 10% per year, over ten years commencing on the first anniversary of the grant date. The exercise price was recorded as of the close of business on January 17, 2013 and a Form 4 was filed for each Director who received a grant with the Securities and Exchange Commission consistent with their filing requirements. During the second quarter of 2013, there were no stock options granted. During the third quarter of 2013, there were 29,928 stock options granted which vest immediately. The exercise price was recorded as of the close of business on August 7, 2013.

A summary of stock option activity, adjusted to retroactively reflect stock dividends, follows:

	Number of Option Shares			Range of Exercise Prices		Weighted Average Exercise Price

Outstanding at December 31, 2013		344,128		$	8.93-18.41	$	11.09

Options granted		—			—		—
Options exercised		(12,092	)		8.93-11.84		11.01
Options forfeited		—			—		—
Options expired		—			—		—

Outstanding at March 31, 2014		332,036		$	8.93-18.41	$	11.09

As of March 31, 2014, stock options which are granted and were exercisable totaled 158,036 stock options.

It is Company policy to issue new shares upon share option exercise. Expected future compensation expense relating to the 174,000 shares underlying unexercised options outstanding as of March 31, 2014 is $258,046 over a weighted average period of 8.96 years.

Index

Note 4 – 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 months ended March 31, 2014 and 2013, 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 March 31, 2014 and 2013, the weighted average number of outstanding options considered to be anti-dilutive were 213,482, and 350,072, respectively.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:

	For the Three Months Ended March 31,
	2014						2013
	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	$	2,042					$	2,280

Basic earnings per share-
Income available to
Common stockholders	$	2,042		8,340	$	0.24	$	2,280		8,492	$	0.27


Effect of dilutive securities:
Stock options		—		2				—		2

Diluted earnings per share-
Income available to
Common stockholders	$	2,042		8,342	$	0.24	$	2,280		8,494	$	0.27

Index

Note 5 – Securities Available for Sale

The following tables present the cost and gross unrealized gains and losses on securities available for sale as of March 31, 2014 and December 31, 2013:

	March 31, 2014
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)

Equity Securities-Financial Institutions	$	97	$	1,219	$	—	$	1,316

	December 31, 2013
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In Thousands)

Equity Securities-Financial Institutions	$	97	$	1,007	$	—	$	1,104

Index

Note 6 – Securities Held to Maturity

The following table presents by maturity the amortized cost and gross unrealized gains and losses on securities held to maturity as of March 31, 2014 and

December 31, 2013:

	March 31, 2014
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years	$	944	$	—	$	(4	)	$	940
Due after five years through ten years		3,563		14		(110	)		3,467
Due after ten years		104,870		2,618		(840	)		106,648
		109,377		2,632		(954	)		111,055
Municipal obligations:
Due after five to ten years		1,355		47		—			1,402
		1,355		47		—			1,402


Due after ten years		—		—		—			—
	$	110,732	$	2,679	$	(954	)	$	112,457

	December 31, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
	(In Thousands)
Residential mortgage-backed securities:
Due after one year through five years	$	998	$	—	$	(2	)	$	996
Due after five years through ten years		3,163		—		(135	)		3,028
Due after ten years		108,698		2,239		(1,192	)		109,745
		112,859		2,239		(1,329	)		113,769
Municipal obligations:
Due after five to ten years		1,357		32		—			1,389
		1,357		32		—			1,389

	$	114,216	$	2,271	$	(1,329	)	$	115,158

The amortized cost and carrying values shown above are categorized by contractual final maturity. Actual maturities will differ from contractual final maturities due to scheduled monthly payments related to mortgage–backed securities and due to the borrowers having the right to prepay obligations with or without prepayment penalties. As of March 31, 2014 and December 31, 2013, all residential mortgage backed securities held in the portfolio were Government Sponsored Enterprise securities.

In 2013, management decided to sell certain mortgage-backed securities that were issued by the Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). While these securities were classified as held to maturity, with the intent to hold to maturity, ASC 320 (formerly FAS 115) allows sales of securities so designated, provided that a substantial portion (at least 85%) of the principal balance purchased has been amortized prior to the sale. During the three months ended March 31, 2014, there were no sales of securities held to maturity. During the year ended December 31, 2013, proceeds from sales of securities held to maturity meeting the 85% threshold totaled approximately $9.5 million, and resulted in gross gains of approximately $401,000, and gross losses of approximately $23,000. There were no sales of held to maturity securities that did not meet the 85% threshold.

Index

Note 6 – Securities Held to Maturity (Continued)

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related securities held to maturity were as follows:

	Less than 12 Months					More than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In Thousands)
March 31, 2014
Residential mortgage-backed securities	$	37,265	$	(710	)	$	4,431	$	(244	)	$	41,696	$	(954	)

	$	37,265	$	(710	)	$	4,431	$	(244	)	$	41,696	$	(954	)

December 31, 2013
Residential mortgage-backed securities	$	42,894	$	(1,329	)	$	—	$	—		$	42,894	$	(1,329	)

	$	42,894	$	(1,329	)	$	—	$	—		$	42,894	$	(1,329	)

Management does not believe that any of the unrealized losses as of March 31, 2014, (which are related to twenty-five residential mortgage-backed securities) represent an other-than-temporary impairment as they are primarily related to market interest rates and not related to the underlying credit quality of the issuers of the securities as all these securities were issued by U.S. Agencies, including FNMA, FHLMC and GNMA. Additionally, the Company has the ability, and management has the intent, to hold such securities for the time necessary to recover cost and does not have the intent to sell the securities, and it is more likely than not that it will not have to sell the securities before recovery of their cost.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses

The following table presents the recorded investment in loans receivable as of March 31, 2014 and December 31, 2013 by segment and class:

	March 31, 2014			December 31, 2013
	(In Thousands)
Originated loans:
Residential one-to-four family	$	99,324		$	97,581
Commercial and multi-family		601,104			549,918
Construction		35,186			37,307
Commercial business⁽¹⁾		55,841			52,659
Home equity⁽²⁾		28,164			28,660
Consumer		705			533

Sub-total		820,324			766,658

Acquired loans recorded at fair value:
Residential one-to-four family		96,946			100,612
Commercial and multi-family		120,066			126,123
Construction		2			200
Commercial business⁽¹⁾		8,889			10,478
Home equity⁽²⁾		27,036			27,313
Consumer		830			919

Sub-total		253,769			265,645

Acquired loans with deteriorated credit:
Residential one-to-four family		1,619			2,141
Commercial and multi-family		1,874			2,081
Construction		—			—
Commercial business⁽¹⁾		371			371
Home equity⁽²⁾		89			90
Consumer		—			—

Sub-total		3,953			4,683

Total Loans		1,078,046			1,036,986

Less:
Deferred loan fees, net		(2,545	)		(2,300	)
Allowance for loan losses		(14,646	)		(14,342	)

		(17,191	)		(16,642	)


Total Loans, net	$	1,060,855		$	1,020,344

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Allowance for Loan Losses

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses. The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements. These elements include a specific reserve for impaired loans, a general allocated reserve for all remaining 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 factors that include:

General economic conditions.

Trends in charge-offs.

Trends and levels of delinquent loans.

Trends and levels of non-performing loans, including loans over 90 days delinquent.

Trends in volume and terms of loans.

Levels of allowance for specific classified loans.

Credit concentrations.

The methodology includes the segregation of the loan portfolio by loans that are performing and loans that are impaired. Loans which are performing are evaluated collectively by loan class or loan type. The allowance for performing loans is evaluated based on historical loan loss experience, including consideration of peer loss analysis, with an adjustment for qualitative factors due to economic conditions in the Company’s market. Impaired loans are loans which are 90 days or more delinquent or troubled debt restructured. These loans are individually evaluated for impairment either by current appraisal or net present value of expected cash flows. Management reviews the overall estimate of this allowance for reasonableness and bases the loan loss provision accordingly.

The portfolio of performing loans is segmented into the following loan classes, where the risk level for each class is analyzed when determining the allowance for these loans:

Residential single 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 Company 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 property may be adversely affected by higher interest rates. Repayment risk can additionally be affected by job loss, divorce, illness and personal bankruptcy of the borrower.

Commercial and multi-family real estate lending entails significant 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 degree of 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 total cost (including interest charges to completion) of the project. The nature of these loans is such that they are generally difficult to evaluate and monitor. Additionally, speculative construction loans to a builder are not ordinarily pre-sold and thus pose a greater potential risk to the Bank than construction loans to individuals on their personal residence.

Commercial business lending is generally considered high risk due to the concentration of principal in a limited number of loans and borrowers and the impact changing general economic conditions have on the business. Commercial business loans and lines of credit are primarily secured by inventories and other business assets. In most 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 value of collateral 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. The principle risk associated with this type of lending is that the marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk can additionally be affected by job loss, divorce, illness and personal bankruptcy of the borrower. 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 Company 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.

Consumer loans generally have more credit risk than loans secured by real estate 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 effected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan.

Acquired Loans added to portfolio via our purchase of banks are recorded at fair value with no carryover of a related allowance for loan losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

We have acquired loans in two separate acquisitions.(Pamrapo Savings Bank in 2010 “Pamrapo” and Allegiance Community Bank in 2011 “Allegiance”) For each acquisition, we reviewed all acquired loans and considered the following factors as indicators that such an acquired loan had evidence of deterioration in credit quality and was therefore in the scope of Accounting Standards Codification (“ASC”) 310-30:

Loans that were 90 days or more past due,

Loans that had an internal risk rating of substandard or worse. Substandard is consistent with regulatory definitions and is defined as having a well defined weakness that jeopardizes liquidation of the loan,

Loans that were classified as nonaccrual by the acquired bank at the time of acquisition, or,

Loans that had been previously modified in a troubled debt restructuring.

Any acquired loans that were not individually in the scope of ASC 310-30 because they did not meet the criteria above were accounted for under ASC 310-20 (Nonrefundable fees and other costs.) Charge-offs of the principal amount on acquired loans accounted for under ASC 310-20 would be charged off against the allowance for loan losses.

Acquired loans accounted for under ASC 310-30

We performed a fair market valuation on each of the loans and each loan was recorded at a discount which includes the establishment of an associated “Credit Mark” reducing the carrying value of that loan to its fair value at the time of acquisition. We determined that at least part of the discount on the acquired loans was attributable to credit quality by reference to the valuation model used to estimate the fair value of the loan. The valuation model incorporated lifetime expected credit losses into the loans’ fair valuation in consideration of factors such as evidence of credit deterioration since origination and the amounts of contractually required principal and interest that we did not expect to collect as of the acquisition date. The excess of expected cash flows from acquired loans over the estimated fair value of acquired loans at acquisition is referred to as the accretable discount and is recognized into interest income over the remaining life of the acquired loans using the interest method. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount represents estimated future credit losses expected to be incurred over the life of the acquired loans.

Subsequent decreases to the expected cash flows require us to evaluate the need for an addition to the allowance for loan losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable discount which we then reclassify as accretable discount that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect takes into account actual credit performance of the acquired loans to date and our best estimates for the expected lifetime credit performance of the loans using currently available information. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable discount portion of the fair value adjustment. To the extent that we experience a deterioration in credit quality in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.

In accordance with ASC 310-30, recognition of income is dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected. We perform such an evaluation on a quarterly basis on our acquired loans individually accounted for under ASC 310-30. Cash flows for acquired loans individually accounted for under ASC 310-30 are estimated on a quarterly basis. Based on this evaluation, a determination is made as to whether or not we have a reasonable expectation about the timing and amount of cash flows. Such an expectation includes cash flows from normal customer repayment, foreclosure or other collection efforts. To the extent that we cannot reasonably estimate cash flows, interest income recognition is discontinued.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The Company also maintains an unallocated allowance. The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable. It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates lack some element of precision. Management must make estimates using assumptions and information that is often subjective and changing rapidly. In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation will periodically review the allowance for loan losses and may require us to adjust the allowance based on their analysis of information available to it at the time of its examination.

Classified Assets. The Company’s policies provide for a classification system for problem assets. Under this classification system, problem assets are classified as “substandard,” “doubtful,” “loss” or “special mention.” An asset is considered substandard if it is inadequately protected by its current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard assets include those characterized by the “distinct possibility” that “some loss” will be sustained if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weakness present makes “collection or liquidation in full” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as loss are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted, and the loan, or a portion thereof, is charged-off. Assets may be designated special mention because of potential weaknesses that do not currently warrant classification in one of the aforementioned categories.

When the Company classifies problem loans, it 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 March 31, 2014, we had $2.5 million in loans classified as doubtful, $28.7 million in loans classified as substandard, $12.2 million in loans classified as special mention and no loans classified as loss. The loans classified as substandard represent primarily commercial loans secured either by residential real estate, commercial real estate or heavy equipment. The loans that have been classified substandard were classified as such primarily because either updated financial information has not been provided timely, 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 1-4) are treated as “pass” for grading purposes:

5 – Special Mention- Loans currently performing but with potential weaknesses including adverse trends in borrower’s operations, credit quality, financial strength, or possible collateral deficiency.

6 – Substandard- Loans that are inadequately protected by current sound worth, paying capacity, and collateral support. The loan needs special and corrective attention.

7 – Doubtful- Weaknesses in credit quality and collateral support make full collection improbable, but pending reasonable factors remain sufficient to defer the loss status.

8 – Loss- Continuance as a bankable asset is not warranted. However, this does not preclude future attempts at partial recovery.

The current methodology for this calculation is determined with the Company’s specific Historical Loss Percentage (“HLP”) for each loan type, using two years of prior Company data (or eight quarters). The relative weights of prior quarters are decayed logarithmically and are further adjusted based on the trend of the historical loss percentage at the time. Also, instead of applying consistent percentages to each of the credit risk grades, the current methodology applies a higher factor to classified loans based on a delinquency risk trend and concentration risk trend by using the past due and non-accrual as a percentage of the specific loan category.

Index

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 March 31, 2014 and recorded investment in loans receivable at March 31, 2014. 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):

				Commercial &						Commercial			Home
	Residential			Multi-family			Construction			Business ⁽¹⁾			Equity ⁽²⁾			Consumer		Unallocated		Total
Allowance for loan losses:

Originated Loans:	$	1,729		$	7,419		$	700		$	1,295		$	363		$	3	$	83	$	11,592
Acquired loans recorded at fair value:		832			1,744			1			44			129			—		—		2,750
Acquired loans with deteriorated credit:		—			—			—			—			—			—		—		—
Beginning Balance, December 31, 2013		2,561			9,163			701			1,339			492			3		83		14,342

Charge-offs:
Originated Loans:		—			52			—			126			27			—		—		205
Acquired loans recorded at fair value:		—			489			—			—			—			2		—		491
Acquired loans with deteriorated credit:		—			—			—			—			—			—		—		—
Sub-total:		—			541			—			126			27			2		—		696

Recoveries:
Originated Loans:		—			—			—			—			—			—		—		—
Acquired loans recorded at fair value:		—			—			—			—			—			—		—		—
Acquired loans with deteriorated credit:		—			—			—			—			—			—		—		—
Sub-total:		—			—			—			—			—			—		—		—

Provisions:
Originated Loans:		(102	)		1,154			(45	)		83			34			135		64		1,323
Acquired loans recorded at fair value:		(125	)		(476	)		(1	)		(44	)		(1	)		17		—		(630	)
Acquired loans with deteriorated credit:		69			81			—			154			3			—		—		307
Sub-total:		(158	)		759			(46	)		193			36			152		64		1,000

Totals:
Originated Loans:		1,627			8,521			655			1,252			370			138		147		12,710
Acquired loans recorded at fair value:		707			779			—			—			128			15		—		1,629
Acquired loans with deteriorated credit:		69			81			—			154			3			—		—		307
Ending Balance, March 31, 2014	$	2,403		$	9,381		$	655		$	1,406		$	501		$	153	$	147	$	14,646

Loans Receivable:

Ending Balance Originated Loans:		99,324			601,104			35,186			55,841			28,164			705		—		820,324
Ending Balance Acquired loans recorded at fair value:		96,946			120,066			2			8,889			27,036			830		—		253,769
Ending Balance Acquired loans with deteriorated credit:		1,619			1,874			—			371			89			—		—		3,953
Total Gross Loans:	$	197,889		$	723,044		$	35,188		$	65,101		$	55,289		$	1,535	$	—	$	1,078,046

Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:		3,100			8,157			—			4,397			1,097			126		—		16,877
Ending Balance Acquired loans recorded at fair value:		9,902			14,230			—			—			1,499			2		—		25,633
Ending Balance Acquired loans with deteriorated credit:		1,619			1,612			—			371			89			—		—		3,691
Ending Balance Loans individually evaluated
for impairment:	$	14,621		$	23,999		$	—		$	4,768		$	2,685		$	128	$	—	$	46,201

Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:		96,224			592,947			35,186			51,444			27,067			579		—		803,447
Ending Balance Acquired loans recorded at fair value:		87,044			105,836			2			8,889			25,537			828		—		228,136
Ending Balance Acquired loans with deteriorated credit:		—			262			—			—			—			—		—		262
Ending Balance Loans collectively evaluated
for impairment:	$	183,268		$	699,045		$	35,188		$	60,333		$	52,604		$	1,407	$	—	$	1,031,845

_________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

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 year ended December 31, 2013 and recorded investment in loans receivable at December 31, 2013. 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):

				Commercial &					Commercial			Home
	Residential			Multi-family		Construction			Business ⁽¹⁾			equity ⁽²⁾			Consumer			Unallocated		Total
Allowance for loan losses:

Originated Loans:	$	1,143		$	7,088	$	866		$	576		$	284		$	41		$	32	$	10,030
Acquired loans recorded at fair value:		719			963		93			244			191			18			—		2,228
Acquired loans with deteriorated credit:		105			—		—			—			—			—			—		105
Beginning Balance, December 31, 2012		1,967			8,051		959			820			475			59			32		12,363

Charge-offs:
Originated Loans:		6			27		—			233			1			—			—		267
Acquired loans recorded at fair value:		23			89		132			141			301			—			—		686
Acquired loans with deteriorated credit:		11			7		—			—			—			—			—		18
Sub-total:		40			123		132			374			302			—			—		971

Recoveries:
Originated Loans:		42			—		3			—			6			—			—		51
Acquired loans recorded at fair value:		—			95		—			31			—			—			—		126
Acquired loans with deteriorated credit:		4			1		—			16			2			—			—		23
Sub-total:		46			96		3			47			8			—			—		200

Provisions:
Originated Loans:		550			358		(169	)		952			74			(38	)		51		1,778
Acquired loans recorded at fair value:		136			775		40			(90	)		239			(18	)		—		1,082
Acquired loans with deteriorated credit:		(98	)		6		—			(16	)		(2	)		—			—		(110	)
Sub-total:		588			1,139		(129	)		846			311			(56	)		51		2,750

Totals:
Originated Loans:		1,729			7,419		700			1,295			363			3			83		11,592
Acquired loans recorded at fair value:		832			1,744		1			44			129			—			—		2,750
Acquired loans with deteriorated credit:		—			—		—			—			—			—			—		—
Ending Balance, December 31, 2013	$	2,561		$	9,163	$	701		$	1,339		$	492		$	3		$	83	$	14,342

Loans Receivables:

Ending Balance Originated Loans:		97,581			549,918		37,307			52,659			28,660			533			—		766,658
Ending Balance Acquired Loans:		100,612			126,123		200			10,478			27,313			919			—		265,645
Ending Balance Acquired loans with deteriorated credit:		2,141			2,081		—			371			90			—			—		4,683
Total Gross Loans:	$	200,334		$	678,122	$	37,507		$	63,508		$	56,063		$	1,452		$	—	$	1,036,986

Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:		1,840			8,638		—			3,870			833			—			—		15,181
Ending Balance Acquired Loans:		9,930			13,434		—			—			1,460			5			—		24,829
Ending Balance Acquired loans with deteriorated credit:		2,141			1,815		—			371			90			—			—		4,417
Ending Balance Loans individually evaluated
for impairment:	$	13,911		$	23,887	$	—		$	4,241		$	2,383		$	5		$	—	$	44,427

Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:		95,741			541,280		37,307			48,789			27,827			533			—		751,477
Ending Balance Acquired Loans:		90,682			112,689		200			10,478			25,853			914			—		240,816
Ending Balance Acquired loans with deteriorated credit:		—			266		—			—			—			—			—		266
Ending Balance Loans collectively evaluated
for impairment:	$	186,423		$	654,235	$	37,507		$	59,267		$	53,680		$	1,447		$	—	$	992,559

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

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 March 31, 2013. (In Thousands):

				Commercial &						Commercial			Home
	Residential			Multi-family			Construction			Business ⁽¹⁾			Equity ⁽²⁾		Consumer			Unallocated		Total
Allowance for loan losses:

Originated Loans:	$	1,143		$	7,088		$	866		$	576		$	284	$	41		$	32	$	10,030
Acquired loans recorded at fair value:		719			963			93			244			191		18			—		2,228
Acquired loans with deteriorated credit:		105			—			—			—			—		—			—		105
Beginning Balance, December 31, 2013		1,967			8,051			959			820			475		59			32		12,363

Charge-offs:
Originated Loans:		—			—			—			223			—		—			—		223
Acquired loans recorded at fair value:		—			—			—			—			—		—			—		—
Acquired loans with deteriorated credit:		—			—			—			—			—		—			—		—
Sub-total:		—			—			—			223			—		—			—		223

Recoveries:
Originated Loans:		—			—			3			—			—		—			—		3
Acquired loans recorded at fair value:		—			—			—			1			—		—			—		1
Acquired loans with deteriorated credit:		—			—			—			—			—		—			—		—
Sub-total:		—			—			3			1			—		—			—		4

Provisions:
Originated Loans:		273			(131	)		(210	)		979			41		7			151		1,110
Acquired loans recorded at fair value:		(97	)		360			8			(202	)		27		(13	)		—		83
Acquired loans with deteriorated credit:		7			—			—			—			—		—			—		7
Sub-total:		183			229			(202	)		777			68		(6	)		151		1,200

Totals:
Originated Loans:		1,416			6,957			659			1,332			325		48			183		10,920
Acquired loans recorded at fair value:		622			1,323			101			43			218		5			—		2,312
Acquired loans with deteriorated credit:		112			—			—			—			—		—			—		112
Ending Balance, March 31, 2013	$	2,150		$	8,280		$	760		$	1,375		$	543	$	53		$	183	$	13,344

Loans Receivable:

Ending Balance Originated Loans:		82,647			464,523			17,206			42,675			26,208		407			—		633,666
Ending Balance Acquired loans recorded at fair value:		116,706			146,861			734			8,118			32,681		980			—		306,080
Ending Balance Acquired loans with deteriorated credit:		2,161			2,798			—			326			96		—			—		5,381
Total Gross Loans:	$	201,514		$	614,182		$	17,940		$	51,119		$	58,985	$	1,387		$	—	$	945,127

Ending Balance: Loans individually evaluated
for impairment:
Ending Balance Originated Loans:		1,373			9,449			—			3,144			389		—			—		14,355
Ending Balance Acquired loans recorded at fair value:		10,530			13,836			332			361			2,806		3			—		27,868
Ending Balance Acquired loans with deteriorated credit:		2,160			2,798			—			326			93		—			—		5,377
Ending Balance Loans individually evaluated
for impairment:	$	14,063		$	26,083		$	332		$	3,831		$	3,288	$	3		$	—	$	47,600

Ending Balance: Loans collectively evaluated
for impairment:
Ending Balance Originated Loans:		81,274			455,074			17,206			39,531			25,819		407			—		619,311
Ending Balance Acquired loans recorded at fair value:		106,176			133,025			402			7,757			29,875		977			—		278,212
Ending Balance Acquired loans with deteriorated credit:		1			—			—			—			—		—			—		1
Ending Balance Loans collectively evaluated
for impairment:	$	187,451		$	588,099		$	17,608		$	47,288		$	55,694	$	1,384		$	—	$	897,524

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The tables below sets forth the amounts and types of non-accrual loans in the Company’s loan portfolio as of March 31, 2014 and December 31, 2013. 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 March 31, 2014 and December 31, 2013, 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 until the borrower has demonstrated its ability to satisfy the terms of the restructured loan.

	As of March 31, 2014		As of December 31, 2013
	(In Thousands)		(In Thousands)
Non-Accruing Loans:

Originated loans:
Residential one-to-four family	$	144	$	144
Commercial and multi-family		7,008		5,158
Construction		—		521
Commercial business⁽¹⁾		2,459		2,279
Home equity⁽²⁾		276		309
Consumer		—		—

Sub-total:	$	9,887	$	8,411

Acquired loans recorded at fair value:
Residential one-to-four family	$	4,434	$	4,685
Commercial and multi-family		9,626		6,575
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		1,121		757
Consumer		—		—

Sub-total:	$	15,181	$	12,017

Acquired loans with deteriorated credit:
Residential one-to-four family	$	1,128	$	—
Commercial and multi-family		—		—
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		89		137
Consumer		—		—

Sub-total:	$	1,217	$	137

Total	$	26,285	$	20,565

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

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 months ended March 31, 2014 and 2013. (In Thousands):

	Three Months Ended March 31,
	2014		2014		2013		2013

	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Originated loans	Investment		Recognized		Investment		Recognized
with no related allowance recorded:

Residential one-to-four family	$	745	$	14	$	452	$	8
Commercial and multi-family		3,844		13		4,782		47
Construction		—		—		—		—
Commercial business⁽¹⁾		2,873		5		1,931		10
Home equity⁽²⁾		423		2		305		5
Consumer		—		—		5		—

Sub-total:	$	7,885	$	34	$	7,475	$	70

Acquired loans recorded at fair value
with no related allowance recorded:

Residential one-to-four family	$	4,474	$	15	$	3,371	$	47
Commercial and Multi-family		6,404		47		6,122		31
Construction		—		—		33		2
Commercial business⁽¹⁾		—		—		114		1
Home equity⁽²⁾		905		1		1,526		8
Consumer		4		—		—		—

Sub-total:	$	11,787	$	63	$	11,166	$	89

Acquired loans with deteriorated
credit with no related allowance
recorded:

Residential one-to-four family	$	1,834	$	5	$	1,698	$	31
Commercial and Multi-family		1,714		29		2,588		22
Construction		—		—		—		—
Commercial business⁽¹⁾		186		2		327		4
Home equity⁽²⁾		90		—		93		2
Consumer		—		—		—		—

Sub-total:	$	3,824	$	36	$	4,706	$	59

Total Impaired Loans
with no related allowance recorded:	$	23,496	$	133	$	23,347	$	218

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

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 months ended March 31, 2014 and 2013. (In Thousands):

	Three Months Ended March 31,
	2014		2014		2013		2013

	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Originated loans	Investment		Recognized		Investment		Recognized
with an allowance recorded:

Residential one-to-four family	$	1,725	$	28	$	871	$	10
Commercial and Multi-family		4,554		—		5,108		43
Construction		—		—		—		—
Commercial business⁽¹⁾		1,261		18		881		32
Home equity⁽²⁾		542		10		154		7
Consumer		63		—		—		—

Sub-total:	$	8,145	$	56	$	7,014	$	92


Acquired loans recorded at fair value
with an allowance recorded:

Residential one-to-four family	$	5,442	$	55	$	6,434	$	73
Commercial and Multi-family		7,429		16		8,249		103
Construction		—		—		130		—
Commercial business⁽¹⁾		—		—		365		—
Home equity⁽²⁾		575		3		565		7
Consumer		—		—		1		—

Sub-total	$	13,446	$	74	$	15,744	$	183

Acquired loans with deteriorated credit
with an allowance recorded:

Residential one-to-four family	$	46	$	1	$	477	$	1
Commercial and Multi-family		—		1		—		—
Construction		—		—		—		—
Commercial business⁽¹⁾		186		3		—		—
Home equity⁽²⁾		—		—		—		—
Consumer		—		—		—		—

Sub-total:	$	232	$	5	$	477	$	1

Total Impaired Loans
with an allowance recorded:	$	21,823	$	135	$	23,235	$	276

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

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

March 31, 2014 and December 31, 2013. (In Thousands):

	As of March 31, 2014						As of December 31, 2013
	Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
Originated loans	Investment		Balance		Allowance		Investment		Balance		Allowance
with no related allowance recorded:

Residential one-to-four family	$	1,073	$	1,073	$	—	$	417	$	444	$	—
Commercial and multi-family		4,300		4,455		—		3,388		3,394		—
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		2,979		2,989		—		2,766		2,776		—
Home equity⁽²⁾		444		447		—		402		402		—
Consumer		—		—		—		—		—		—

Sub-total:	$	8,796	$	8,964	$	—	$	6,973	$	7,016	$	—

Acquired loans recorded at fair
value with no related allowance
recorded:

Residential one-to-four family	$	4,485	$	4,533	$	—	$	4,463	$	4,489	$	—
Commercial and Multi-family		9,743		10,190		—		3,064		3,098		—
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		—		—		—		—
Home equity⁽²⁾		975		994		—		835		922		—
Consumer		2		2		—		5		5		—

Sub-total:	$	15,205	$	15,719	$	—	$	8,367	$	8,514	$	—

Acquired loans with deteriorated
credit with no related allowance
recorded:

Residential one-to-four family	$	1,527	$	2,157	$	—	$	2,141	$	2,879	$	—
Commercial and Multi-family		1,612		1,981		—		1,815		2,312		—
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		278		—		371		652		—
Home equity⁽²⁾		89		138		—		90		138		—
Consumer		—		—		—		—		—		—

Sub-total:	$	3,228	$	4,554	$	—	$	4,417	$	5,981	$	—

Total Impaired Loans
with no related allowance recorded:	$	27,229	$	29,237	$	—	$	19,757	$	21,511	$	—

__________

(1) Includes business lines of credit.
(2) Includes home equity lines of credit.

Index

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 March 31, 2014 and December 31, 2013. (In Thousands):

	As of March 31, 2014						As of December 31, 2013
	Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
Originated loans	Investment		Balance		Allowance		Investment		Balance		Allowance
with an allowance recorded:

Residential one-to-four family	$	2,027	$	2,027	$	166	$	1,423	$	1,423	$	159
Commercial and Multi-family		3,857		3,865		324		5,250		5,328		298
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		1,418		1,418		413		1,104		1,104		498
Home equity⁽²⁾		653		653		3		431		431		6
Consumer		126		126		126		—		—		—

Sub-total:	$	8,081	$	8,089	$	1,032	$	8,208	$	8,286	$	961

Acquired loans recorded at fair
value with an allowance
recorded:

Residential one-to-four family	$	5,417	$	5,437	$	263	$	5,467	$	5,477	$	331
Commercial and Multi-family		4,487		4,519		366		10,370		10,418		1,276
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		—		—		—		—
Home equity⁽²⁾		524		524		38		625		625		64
Consumer		—		—		—		—		—		—

Sub-total	$	10,428	$	10,480	$	667	$	16,462	$	16,520	$	1,671

Acquired loans with deteriorated
credit with an allowance
recorded:

Residential one-to-four family	$	92	$	107	$	14	$	—	$	—	$	—
Commercial and Multi-family		—		120		44		—		—		—
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		371		371		137		—		—		—
Home equity⁽²⁾		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Sub-total:	$	463	$	598	$	195	$	—	$	—	$	—

Total Impaired Loans
with an allowance recorded:	$	18,972	$	19,167	$	1,894	$	24,670	$	24,806	$	2,632

Total Impaired Loans
with no related allowance recorded:	$	27,229	$	29,237	$	—	$	19,757	$	21,511	$	—

Total Impaired Loans:	$	46,201	$	48,404	$	1,894	$	44,427	$	46,317	$	2,632

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at March 31, 2014, excluding the purchase impairment mark on the acquired loans with deteriorated credit. (Dollars In Thousands):

	Accrual				Non-accrual				Total
March 31, 2014	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
		(Actual)		(In Thousands)		(Actual)		(In Thousands)		(Actual)		(In Thousands)
Originated loans:
Residential one-to-four family		7	$	1,981		1	$	27		8	$	2,008
Commercial and multi-family		5		3,467		8		3,982		13		7,449
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		3		1,583		—		—		3		1,583
Home equity⁽²⁾		3		570		—		—		3		570
Consumer		—		—		—		—		—		—

Sub-total:		18	$	7,601		9	$	4,009		27	$	11,610

Acquired loans recorded at fair value:
Residential one-to-four family		27	$	5,714		4	$	1,719		31	$	7,433
Commercial and Multi-family		19		8,647		1		730		20		9,377
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		4		649		—		—		4		649
Home equity⁽²⁾		4		465		1		138		5		603
Consumer		—		—		—		—		—		—

Sub-total:		54	$	15,475		6	$	2,587		60	$	18,062

Acquired loans with deteriorated credit:
Residential one-to-four family		2	$	1,425		4	$	838		6	$	2,263
Commercial and Multi-family		—		—		5		2,425		5		2,425
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		4		649		4		649
Home equity⁽²⁾		1		138		—		—		1		138
Consumer		—		—		—		—		—		—

Sub-total:		3	$	1,563		13	$	3,912		16	$	5,475

Total		75	$	24,639		28	$	10,508		103	$	35,147

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the total troubled debt restructured loans at December 31, 2013. (Dollars In Thousands):

	Accrual				Non-accrual				Total
December 31, 2013	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
	(Actual)		(In Thousands)		(Actual)		(In Thousands)		(Actual)		(In Thousands)
Originated loans:
Residential one-to-four family		7	$	1,988		1	$	27		8	$	2,015
Commercial and multi-family		4		3,052		8		4,139		12		7,191
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		3		1,591		—		—		3		1,591
Home equity⁽²⁾		3		571		—		—		3		571
Consumer		—		—		—		—		—		—

Sub-total:		17	$	7,202		9	$	4,166		26	$	11,368

Acquired loans recorded at fair value:
Residential one-to-four family		25	$	5,673		8	$	2,564		33	$	8,237
Commercial and Multi-family		15		6,545		9		3,606		24		10,151
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		—		—		—		—
Home equity⁽²⁾		6		704		—		—		6		704
Consumer		—		—		—		—		—		—

Sub-total:		46	$	12,922		17	$	6,170		63	$	19,092

Acquired loans with deteriorated credit:
Residential one-to-four family		7	$	1,795		—	$	—		7	$	1,795
Commercial and Multi-family		4		1,816		—		—		4		1,816
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		4		371		—		—		4		371
Home equity⁽²⁾		—		—		1		91		1		91
Consumer		—		—		—		—		—		—

Sub-total:		15	$	3,982		1	$	91		16	$	4,073

Total		78	$	24,106		27	$	10,427		105	$	34,533

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

A troubled debt restructuring (“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. 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 are generally included, but not limited to interest rate reductions, limitations on the accrued interest charged, term extensions, and deferment of principal.

The following table summarizes information in regards to troubled debt restructurings which occurred during the three months ended March 31, 2014. (Dollars In Thousands):

Three Months Ended March 31, 2014			Pre-Modification Outstanding		Post-Modification Outstanding
	Number of Contracts		Recorded Investments		Recorded Investments

Originated loans:
Residential one-to-four family		1	$	432	$	432
Commercial and multi-family		1		187		205
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		—		—		—
Consumer		—		—		—

Sub-total:		2	$	619	$	637

Acquired loans recorded at fair value:
Residential one-to-four family		—	$	—	$	—
Commercial and Multi-family		—		—		—
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		—		—		—
Consumer		—		—		—

Sub-total:		—	$	—	$	—

Acquired loans with deteriorated credit:
Residential one-to-four family		—	$	—	$	—
Commercial and Multi-family		—		—		—
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		—		—		—
Consumer		—		—		—

Sub-total:		—	$	—	$	—

Total		2	$	619	$	637

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

The loans included above are considered TDRs as a result of the Company implementing one or more of the following concessions: granting a material extension of time, issuing a forbearance agreement, adjusting the interest rate to a below market rate, accepting interest only for a period of time or a change in amortization period. 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.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings for which there was a payment default within twelve months of restructuring during the three months ended March 31, 2014. (In Thousands):

Three Months Ended March 31, 2014
	Number of Contracts		Recorded Investment

Originated loans:
Residential one-to-four family		—	$	—
Commercial and multi-family		—		—
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		—		—
Consumer		—		—

Sub-total:		—	$	—

Acquired loans recorded at fair value:
Residential one-to-four family		2	$	477
Commercial and Multi-family		1		653
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		—		—
Consumer		—		—

Sub-total:		3	$	1,130

Acquired loans with deteriorated credit:
Residential one-to-four family		—	$	—
Commercial and Multi-family		—		—
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		1		138
Consumer		—		—

Sub-total:		1	$	138

Total		4	$	1,268

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

Note 7-Loans Receivable and Allowance for Loan Losses (Continued)

The following table summarizes information in regards to troubled debt restructurings which occurred during the three months ended March 31, 2013. (In Thousands):

Three Months Ended March 31, 2013			Pre-Modification Outstanding		Post-Modification Outstanding
	Number of Contracts		Recorded Investments		Recorded Investments

Originated loans:
Residential one-to-four family		—	$	—	$	—
Commercial and multi-family		1		94		94
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		—		—		—
Consumer		—		—		—

Sub-total:		1	$	94	$	94

Acquired loans recorded at fair value:
Residential one-to-four family		—	$	—	$	—
Commercial and Multi-family		—		—		—
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		1		101		101
Consumer		—		—		—

Sub-total:		1	$	101	$	101

Acquired loans with deteriorated credit:
Residential one-to-four family		—	$	—	$	—
Commercial and Multi-family		—		—		—
Construction		—		—		—
Commercial business⁽¹⁾		—		—		—
Home equity⁽²⁾		—		—		—
Consumer		—		—		—

Sub-total:		—	$	—	$	—

Total		2	$	195	$	195

_________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

Three Months Ended March 31, 2013
	Number of Contracts		Recorded Investment

Originated loans:
Residential one-to-four family		—	$	—
Commercial and multi-family		1		451
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		—		—
Consumer		—		—

Sub-total:		1	$	451

Acquired loans recorded at fair value:
Residential one-to-four family		1	$	221
Commercial and Multi-family		—		—
Construction		—		—
Commercial business⁽¹⁾		2		922
Home equity⁽²⁾		1		56
Consumer		—		—

Sub-total:		4	$	1,199

Acquired loans with deteriorated credit:
Residential one-to-four family		—	$	—
Commercial and Multi-family		—		—
Construction		—		—
Commercial business⁽¹⁾		—		—
Home equity⁽²⁾		—		—
Consumer		—		—

Sub-total:		—	$	—

Total		5	$	1,650

__________
(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table sets forth the delinquency status of total loans receivable as of March 31, 2014. (In Thousands):

													Loans Receivable
	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
	(In Thousands)
Originated loans:
Residential one-to-four family	$	254	$	656	$	—	$	910	$	98,414	$	99,324	$	—
Commercial and multi-family		7,606		1,454		817		9,877		591,227		601,104		—
Construction		1,174		—		—		1,174		34,012		35,186		—
Commercial business⁽¹⁾		118		1,989		218		2,325		53,516		55,841		—
Home equity⁽²⁾		183		48		—		231		27,933		28,164		—
Consumer		—		—		—		—		705		705		—

Sub-total:	$	9,335	$	4,147	$	1,035	$	14,517	$	805,807	$	820,324	$	—

Acquired loans recorded at fair value:
Residential one-to-four family	$	3,889	$	1,181	$	1,551	$	6,621	$	90,325		96,946	$	—
Commercial and multi-family		5,051		2,057		3,958		11,066		109,000		120,066		—
Construction		—		—		—		—		2		2		—
Commercial business⁽¹⁾		—		—		—		—		8,889		8,889		—
Home equity⁽²⁾		1,137		174		149		1,460		25,576		27,036		—
Consumer		27		—		—		27		803		830		—

Sub-total:	$	10,104	$	3,412	$	5,658	$	19,174	$	234,595	$	253,769	$	—

Acquired loans with deteriorated credit:
Residential one-to-four family	$	—	$	—	$	—	$	—	$	1,619		1,619	$	—
Commercial and multi-family		—		—		—		—		1,874		1,874		—
Construction		—		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		—		—		371		371		—
Home equity⁽²⁾		89		—		—		89		—		89		—
Consumer		—		—		—		—		—		—		—

Sub-total:	$	89	$	—	$	—	$	89	$	3,864	$	3,953	$	—

Total	$	19,528	$	7,559	$	6,693	$	33,780	$	1,044,266	$	1,078,046	$	—

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

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, 2013. (In Thousands):

													Loans Receivable
	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
	(In Thousands)
Originated loans:
Residential one-to-four family	$	1,221	$	1,446	$	—	$	2,667	$	94,914	$	97,581	$	—
Commercial and multi-family		7,170		—		873		8,043		541,875		549,918		—
Construction		1,174		—		—		1,174		36,133		37,307		—
Commercial business⁽¹⁾		627		—		290		917		51,742		52,659		—
Home equity⁽²⁾		126		—		49		175		28,485		28,660		—
Consumer		8		—		—		8		525		533		—

Sub-total:	$	10,326	$	1,446	$	1,212	$	12,984	$	753,674	$	766,658	$	—

Acquired loans recorded at fair value:
Residential one-to-four family	$	2,223	$	1,341	$	2,148	$	5,712	$	94,900		100,612	$	—
Commercial and multi-family		5,638		2,882		3,479		11,999		114,124		126,123		—
Construction		—		—		—		—		200		200		—
Commercial business⁽¹⁾		175		—		—		175		10,303		10,478		—
Home equity⁽²⁾		1,220		153		149		1,522		25,791		27,313		—
Consumer		28		2		—		30		889		919		—

Sub-total:	$	9,284	$	4,378	$	5,776	$	19,438	$	246,207	$	265,645	$	—

Acquired loans with deteriorated credit:
Residential one-to-four family	$	—	$	—	$	—	$	—	$	2,141	$	2,141	$	—
Commercial and multi-family		—		—		—		—		2,081		2,081		—
Construction		—		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		—		—		371		371		—
Home equity⁽²⁾		—		—		—		—		90		90		—
Consumer		—		—		—		—		—		—		—

Sub-total:	$	—	$	—	$	—	$	—	$	4,683	$	4,683	$	—

Total	$	19,610	$	5,824	$	6,988	$	32,422	$	1,004,564	$	1,036,986	$	—

__________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

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 loss within the Company’s internal risk rating system as of March 31, 2014. (In Thousands):

	Pass		Special Mention		Substandard		Doubtful		Loss		Total

Originated loans:
Residential one-to-four family	$	96,834	$	643	$	1,847	$	—	$	—	$	99,324
Commercial and multi-family		591,376		1,700		6,366		1,662		—		601,104
Construction		35,186		—		—		—		—		35,186
Commercial business⁽¹⁾		49,661		2,391		3,319		470		—		55,841
Home equity⁽²⁾		27,160		591		413		—		—		28,164
Consumer		669		36		—		—		—		705

Sub-total:	$	800,886	$	5,361	$	11,945	$	2,132	$	—	$	820,324

Acquired loans recorded at fair value:
Residential one-to-four family	$	88,951	$	3,023	$	4,972	$	—	$			96,946
Commercial and multi-family		107,468		3,028		9,176		394		—		120,066
Construction		2		—		—		—		—		2
Commercial business⁽¹⁾		8,889		—		—		—		—		8,889
Home equity⁽²⁾		25,615		91		1,330		—		—		27,036
Consumer		828		—		2		—		—		830

Sub-total:	$	231,753	$	6,142	$	15,480	$	394	$	—	$	253,769

Acquired loans with deteriorated credit:
Residential one-to-four family	$	281	$	644	$	694	$	—	$	—		1,619
Commercial and multi-family		1,715		39		120		—		—		1,874
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		371		—		—		371
Home equity⁽²⁾		—		—		89		—		—		89
Consumer		—		—		—		—		—		—

Sub-total:	$	1,996	$	683	$	1,274	$	—	$	—	$	3,953

Total Gross Loans	$	1,034,635	$	12,186	$	28,699	$	2,526	$	—	$	1,078,046

_________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

	Pass		Special Mention		Substandard		Doubtful		Loss		Total

Originated loans:
Residential one-to-four family	$	95,585	$	553	$	1,245	$	198	$	—	$	97,581
Commercial and multi-family		539,796		5,022		2,899		2,201		—		549,918
Construction		37,307		—		—		—		—		37,307
Commercial business⁽¹⁾		45,010		6,581		524		544		—		52,659
Home equity⁽²⁾		27,643		642		375		—		—		28,660
Consumer		495		38		—		—		—		533

Sub-total:	$	745,836	$	12,836	$	5,043	$	2,943	$	—	$	766,658

Acquired loans recorded at fair value:
Residential one-to-four family	$	92,351	$	3,049	$	5,212	$	—	$	—		100,612
Commercial and multi-family		114,034		4,594		5,214		2,281		—		126,123
Construction		200		—		—		—		—		200
Commercial business⁽¹⁾		10,478		—		—		—		—		10,478
Home equity⁽²⁾		26,254		264		795		—		—		27,313
Consumer		914		—		5		—		—		919

Sub-total:	$	244,231	$	7,907	$	11,226	$	2,281	$	—	$	265,645

Acquired loans with deteriorated credit:
Residential one-to-four family	$	278	$	1,040	$	823	$	—	$	—		2,141
Commercial and multi-family		1,332		749		—		—		—		2,081
Construction		—		—		—		—		—		—
Commercial business⁽¹⁾		—		—		371		—		—		371
Home equity⁽²⁾		—		—		90		—		—		90
Consumer		—		—		—		—		—		—

Sub-total:	$	1,610	$	1,789	$	1,284	$	—	$	—	$	4,683

Total Gross Loans	$	991,677	$	22,532	$	17,553	$	5,224	$	—	$	1,036,986

________

(1) Includes business lines of credit.

(2) Includes home equity lines of credit.

Index

Note 7 - Loans Receivable and Allowance for Loan Losses (Continued)

The following table presents the unpaid principal balance and the related recorded investment of acquired loans included in our Consolidated Statements of Financial Condition. (In Thousands):

	March 31,		December 31,
	2014		2013

Unpaid principal balance	$	261,531	$	274,205
Recorded investment		257,722		270,328

The following table presents changes in the accretable discount on loans acquired for the three months ended March 31, 2014 and 2013. (In Thousands):

	Three Months Ended March 31,
	2014			2013

Balance, Beginning of Period	$	102,454		$	136,209
Acquisitions		—			—
Accretion		(14,362	)		(11,531	)
Net Reclassification from Non-Accretable Difference		—			—
Balance, End of Period	$	88,092		$	124,678

The following table presents changes in the non-accretable yield on loans acquired for the three months ended March 31, 2014 and 2013. (In Thousands):

	Three Months Ended March 31,
	2014			2013

Balance, Beginning of Period	$	4,413		$	4,835
Loans Sold		—			—
Amounts not recognized due to chargeoffs on
transfers to other real estate		(91	)		—
Net Reclassification to Accretable Difference		(93	)		(88	)
Balance, End of Period	$	4,229		$	4,747

Index

Note 8 – 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 March 31, 2014:
Securities available for sale — Equity Securities	$	1,316	$	1,316	$	—	$	—

As of December 31, 2013:
Securities available for sale — Equity Securities	$	1,104	$	1,104	$	—	$	—

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 no transfers of assets or liabilities into or out of Level 1, Level 2, or Level 3 of the fair value hierarchy during the three months ended March 31, 2014.

The only assets or liabilities that the Company measured at fair value on a nonrecurring 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 March 31, 2014:
Impaired Loans	$	17,273	$	—	$	—	$	17,273

As of December 31, 2013:
Impaired Loans	$	22,174	$	—	$	—	$	22,174

Index

Note 8 – Fair Values of Financial Instruments (Continued)

The following tables present additional quantitative information as of March 31, 2014 and December 31, 2013 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	Range
		Estimate	Techniques	Input
March 31, 2014:
Impaired Loans	$	17,273	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	0%-10%


		Fair Value	Valuation	Unobservable	Range
		Estimate	Techniques	Input
December 31, 2013:
Impaired Loans	$	22,174	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-10%
				Liquidation expenses (3)	0%-10%

(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

(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.

(3)

Includes qualitative adjustments by management and estimated liquidation expenses.

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 March 31, 2014 and December 31, 2013.

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 those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or 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.

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 their cost as of March 31, 2014 and December 31, 2013.

Loans Receivable (Carried at Cost)

The fair value of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date 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.

Index

Note 8 – 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 contractual terms of the loan agreement. Impaired loans are measured 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 collateral if the loan is collateral dependent. 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 March 31, 2014 and December 31, 2013 consists of the loan balances of $19.2 million and $24.8 million, net of a valuation allowance of $1.9 million and $2.6 million, respectively.

Real Estate Owned (Generally Carried at Fair Value)

Real Estate Owned is generally carried at fair value, when the carrying value is written down to fair value, 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.

Long-Term Debt (Carried at Cost)

Fair values of long-term debt 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. These 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

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.

Index

Note 8 – Fair Values of Financial Instruments (Continued)

The carrying values and estimated fair values of financial instruments were as follows as of March 31, 2014 and December 31, 2013:

	As of March 31, 2014

					Quoted Prices in Active		Significant		Significant
	Carrying				Markets for Identical Assets		Other Observable Inputs		Unobservable Inputs
	Value		Fair Value		(Level 1)		(Level 2)		(Level 3)

	(In Thousands)
Financial assets:
Cash and cash equivalents	$	27,229	$	27,229	$	27,229	$	—	$	—
Interest-earning time deposits		990		990		990		—		—
Securities available for sale		1,316		1,316		1,316		—		—
Securities held to maturity		110,732		112,457		—		112,457		—
Loans held for sale		2,289		2,332		—		2,332		—
Loans receivable, net		1,060,855		1,080,436		—		—		1,080,436
FHLB of New York stock, at cost		8,380		8,380		—		8,380		—
Accrued interest receivable		4,102		4,102		—		4,102		—

Financial liabilities:
Deposits		992,005		995,768		609,475		386,293		—
Borrowings		140,000		147,046		—		147,046		—
Subordinated debentures		4,124		4,331		—		4,331		—
Acrrued interest payable		741		741		—		741		—

	As of December 31, 2013

					Quoted Prices in Active		Significant		Significant
	Carrying				Markets for Identical Assets		Other Observable Inputs		Unobservable Inputs
	Value		Fair Value		(Level 1)		(Level 2)		(Level 3)

	(In Thousands)
Financial assets:
Cash and cash equivalents	$	29,844	$	29,844	$	29,844	$	—	$	—
Interest-earning time deposits		990		990		990		—		—
Securities available for sale		1,104		1,104		1,104		—		—
Securities held to maturity		114,216		115,158		—		115,158		—
Loans held for sale		1,663		1,685		—		1,685		—
Loans receivable, net		1,020,344		1,042,552		—		—		1,042,552
FHLB of New York stock, at cost		7,840		7,840		—		7,840		—
Accrued interest receivable		4,157		4,157		—		4,157		—

Financial liabilities:
Deposits		968,670		972,911		587,889		385,022		—
Borrowings		128,000		135,574		—		135,574		—
Subordinated debentures		4,124		4,368		—		4,368		—
Accrued interest payable		771		771		—		771		—

Index

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition

Total assets increased by $36.5 million or 3.0% to $1.244 billion at March 31, 2014 from $1.208 billion at December 31, 2013. The increase in total assets occurred primarily as a result of an increase in loans receivable, net of $40.5 million, partially offset by a decrease in securities held to maturity of $3.5 million and a decrease in total cash and cash equivalents of $2.6 million. Management is concentrating on maintaining adequate liquidity in anticipation of funding loans in the loan pipeline as well as seeking opportunities to purchase in the secondary market that provide competitive returns in a risk-mitigated environment. It is our intention to grow our assets at a measured pace consistent with our capital levels and as business opportunities permit. Organic growth should occur consistent with our strategic plan under which we anticipate opening additional branch offices beginning in the second half of 2014.

Total cash and cash equivalents decreased by $2.6 million or 8.8% to $27.2 million at March 31, 2014 from $29.8 million at December 31, 2013. Investment securities classified as held-to-maturity decreased by $3.5 million or 3.1% to $110.7 million at March 31, 2014 from $114.2 million at December 31, 2013. This decrease in investment securities held-to-maturity resulted primarily from $4.4 million of repayments and prepayments in the mortgage-backed securities portfolio, partially offset by a purchase of $1.1 million of investment securities.

Loans receivable, net increased by $40.5 million or 4.0% to $1.06 billion at March 31, 2014 from $1.02 billion at December 31, 2013. The increase resulted primarily from a $43.6 million increase in real estate mortgages comprising commercial and multi-family, construction and participation loans with other financial institutions along with a $1.6 million increase in business loans and commercial lines of credit, partially offset by a decrease of $3.4 million in residential real estate loans, a $700,000 decrease in home equity loans and home equity lines of credit and a $300,000 increase in the allowance for loan losses. As of March 31, 2014, the allowance for loan losses was $14.6 million or 55.7% of non-performing loans and 1.36% of gross loans. As a result of the loans acquired in the business combination transactions being recorded at their fair value, the balances in the allowance for loan losses that were on the balance sheets of the former Pamrapo Bancorp, Inc., and Allegiance Community Bank are precluded from being reported in the allowance balance previously discussed, consistent with generally accepted accounting principles.

Deposit liabilities increased by $23.3 million or 2.4% to $992.0 million at March 31, 2014 from $968.7 million at December 31, 2013. The increase resulted primarily from a $10.7 million increase in non-interest bearing deposits, an increase of $2.5 million in savings and club deposits, an increase of $6.4 million in money market interest bearing deposits and a $7.2 million increase in certificate of deposits, partly offset by a decrease of $3.5 million in NOW deposits. Our retail deposit customers continue to express a preference to shift deposits from higher cost time deposit accounts to more liquid and lower cost core deposit accounts. Recognizing this shift of sentiment, the attraction and retention of non-interest bearing commercial deposits, and longer dated maturity deposits remains a focus of our retail deposit gathering philosophy. During the quarter ended March 31, 2014, the Federal Open Market Committee (FOMC) has continued its accommodative monetary policy. This extended environment of historically low short term market rates has resulted in continuing parallel low retail deposit account yields, directly decreasing interest expense.

Short-term borrowings increased by $12.0 million, or 66.7%, to $30.0 million at March 31, 2014 from $18.0 million at December 31, 2013. These additional borrowings were utilized in the funding of loan products. Long-term borrowed money remained constant at $110.0 million at March 31, 2014 and December 31, 2013. The purpose of these borrowings reflects the use of long and short term Federal Home Loan Bank advances to augment deposits as the Company’s funding source for originating loans and investing in GSE investment securities.

Stockholders’ equity increased by $2.1 million or 2.1% to $102.1 million at March 31, 2014 from $100.0 million at December 31, 2013. The increase in stockholders’ equity was primarily attributable to net income of $2.2 million, and an increase of $770,000 in preferred stock outstanding as a result of our on-going capital raising efforts, partly offset by cash dividends paid during the period totaling $1.0 million on outstanding common shares of stock and $170,000 on outstanding preferred stock. The Company accrued a dividend payable for the first quarter on the preferred shares for $193,000 which will be paid in the second quarter. As of March 31, 2014, the Bank’s Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were 8.57%, 11.86% and 13.12% respectively.

Three Months of Operation

Net income was $2.2 million for the three months ended March 31, 2014 compared with $2.4 million for three months ended March 31, 2013. The decrease in net income is primarily reflective of an increase in non-interest expense, partly offset by increases in net interest income and non-interest income and decreases in the provision for loan losses and income tax provision.

Net interest income increased by $647,000 or 5.7% to $12.1 million for the three months ended March 31, 2014 from $11.4 million for the three months ended March 31, 2013. The increase in net interest income resulted primarily from an increase in the average balance of interest earning assets of $65.5 million or 5.8% to $1.198 billion for the three months ended March 31, 2014 from $1.132 billion for the three months ended March 31, 2013, partly offset by a decrease in the average yield on interest earning assets of nine basis points to 4.88% for the three months ended March 31, 2014 from 4.97% for the three months ended March 31, 2013. The average balance of interest bearing liabilities increased by $26.3 million or 2.7% to $994.0 million for the three months ended March 31, 2014 from $967.7 million for the three months ended March 31, 2013, while the average cost of interest bearing liabilities decreased by seven basis points to 1.03% for the three months ended March 31, 2014 from 1.10% for the three months ended March 31, 2013. Net interest margin was 4.03% for each of the three-month periods ended March 31, 2014 and March 31, 2013.

Interest income on loans receivable increased by $689,000 or 5.3% to $13.68 million for the three months ended March 31, 2014 from $12.99 million for the three months ended March 31, 2013. The increase was primarily attributable to an increase in the average balance of loans receivable of $105.9 million or 11.2% to $1.052 billion for the three months ended March 31, 2014 from $945.7 million for the three months ended March 31, 2013, partially offset by a decrease in the average yield on loans receivable to 5.20% for the three months ended March 31, 2014 from 5.50% for the three months ended March 31, 2013. The decrease in average yield reflects the competitive price environment prevalent in the Company’s primary market area on loan facilities as well as the repricing downward of certain variable rate loans.

Interest income on securities decreased by $147,000 or 13.7% to $927,000 for the three months ended March 31, 2014 from $1.07 million for the three months ended March 31, 2013. This decrease was primarily due to a decrease in the average balance of securities of $42.6 million or 26.1% to $120.8 million for the three months ended March 31, 2014 from $163.4 million for the three months ended March 31, 2013, partly offset by an increase in the average yield of securities to 3.07% for the three months ended March 31, 2014 from 2.63% for the three months ended March 31, 2013.

Interest income on other interest-earning assets increased by $2,000 or 18.2% to $13,000 for the three months ended March 31, 2014 from $11,000 for the three months ended March 31, 2013. This increase was primarily due to a increase of $2.3 million or 9.8% in the average balance of other interest-earning assets to $25.6 million for the three months ended March 31, 2014 from $23.3 million for the three months ended March 31, 2013. The average yield on other interest-earning assets increased marginally to 0.20% for the three months ended March 31, 2014 from 0.19% for the three months ended March 31, 2013. The static nature of the average yield on other interest-earning assets reflects the current philosophy of the FOMC of keeping short term interest rates at historically low levels for the last several years.

Index

Total interest expense decreased by $103,000 or 3.9% to $2.56 million for the three months ended March 31, 2014 from $2.66 million for the three months ended March 31, 2013. The decrease resulted primarily from a decrease in the average cost of interest-bearing liabilities of seven basis points to 1.03% for the three months ended March 31, 2014 from 1.10% for the three months ended March 31, 2013, and a decrease in the average balance of certificate of deposits of $32.1 million or 7.9% to $375.6 million for the three months ended March 31, 2014 from $407.7 million for the three months ended March 31, 2013, partly offset by an increase the average balance of borrowings of $14.9 million or 12.8% to $131.5 million for the three months ended March 31, 2014 from $116.6 million for the three months ended March 31, 2013 . The decrease in the average cost reflects the lower short term interest rate environment and our ability to reduce our pricing on a select number of retail deposit products.

The provision for loan losses totaled $1.0 million and $1.2 million for the three months ended March 31, 2014 and 2013, respectively. 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 three months ended March 31, 2014, the Company experienced $696,000 in charge-offs. During the year ended December 31, 2013, the Company experienced $771,000 in net charge-offs (consisting of $971,000 in charge-offs and $200,000 in recoveries). The Bank had non-performing loans totaling $26.3 million or 2.44% of gross loans at March 31, 2014 and $20.6 million or 1.98% of gross loans at December 31, 2013. The allowance for loan losses was $14.6 million or 1.36% of gross loans at March 31, 2014, $14.3 million or 1.38% of gross loans at December 31, 2013 and $13.3 million or 1.41% of gross loans at March 31, 2013. 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 March 31, 2014, December 31, 2013 and March 31, 2013.

Total non-interest income increased by $516,000, or 65.8% to $1.3 million for the three months ended March 31, 2014 from $784,000 for the three months ended March 31, 2013. Non-interest income reflected an increase of $658,000 or 552.9% in gain on sale of loans originated for sale to $777,000 for the three months ended March 31, 2014 from $119,000 for the three months ended March 31, 2013, and an increase in fees and service charges to $504,000 for the three months ended March 31, 2014 from $424,000 for the three months ended March 31, 2013, partly offset by a decrease of $224,000 in gain on sale of securities held to maturity as there were no sales in the current period and a gain of that amount for the three months ended March 31, 2013. The securities sold consisted of mortgage-backed securities that had already returned at least 85% of the original principal purchased.

Total non-interest expense increased by $1.66 million or 23.9% to $8.56 million for the three months ended March 31, 2014 from $6.90 million for the three months ended March 31, 2013. Salaries and employee benefits expense increased by $1.0 million or 28.7% to $4.46 million for the three months ended March 31, 2014 from $3.47 million for the three months ended March 31, 2013. This increase in both salaries and employee benefits was mainly attributable to an increase of 51 full-time equivalent employees, or 23.2%, to 271 at March 31, 2014 from 220 at March 31, 2013, which relates to the addition of business development and loan administration employees, and the anticipated opening of new branch offices beginning in the second half of 2014, as well as providing health benefits to a greater number of existing employees. Occupancy expense increased by $168,000 or 20.7% to $980,000 for the three months ended March 31, 2014 from $812,000 for the three months ended March 31, 2013. Equipment expense increased by $191,000 or 16.4% to $1.36 million for the three months ended March 31, 2014 from $1.17 million for the three months ended March 31, 2013. The increases in occupancy and equipment expenses related primarily to the anticipated opening of new branch offices beginning in the second half of 2014. Professional fees increased by $31,000 or 6.8% to $490,000 for the three months ended March 31, 2014 from $459,000 for the three months ended March 31, 2013. Director fees were $168,000 for each of the three-month periods ending March 31, 2014 and March 31, 2013. Regulatory assessments decreased by $13,000 or 4.9% to $252,000 for the three months ended March 31, 2014 from $265,000 for the three months ended March 31, 2013. Advertising expense increased by $72,000 or 70.6% to $174,000 for the three months ended March 31, 2014 from $102,000 for the three months ended March 31, 2013. The increase was primarily due to our marketing efforts related to the previously mentioned expansion of our geographic footprint. Other real estate owned (OREO) (income)/expenses increased by $92,000 to expenses of $8,000 for the three months ended March 31, 2014 from income of $84,000 for the three months ended March 31, 2013. The increase in expenses was primarily due to an upward valuation adjustment of OREO property of $110,000 for the three months ended March 31, 2013 compared to no corresponding adjustment for the three months ended March 31, 2014. Other non-interest expense increased by $116,000 or 21.1% to $666,000 for the three months ended March 31, 2014 from $550,000 for the three months ended March 31, 2013, which included $50,000 of broker fees related to the sale of SBA loans for the current three-month period. Other non-interest expense is comprised of loan expense, stationary, forms and printing, check printing, correspondent bank fees, telephone and communication, and other fees and expenses.

Income tax provision decreased by $114,000 or 6.8% to $1.57 million for the three months ended March 31, 2014 from $1.69 million for the three months ended March 31, 2013. The decrease in income tax provision was a result of lower taxable income during the three-month period ended March 31, 2014 as compared to the three months ended March 31, 2013. The consolidated effective tax rate for the three months ended March 31, 2014 was 41.3% compared to 41.2% for the three months ended March 31, 2013.

Index

Item 3. Quantitative and Qualitative Disclosures About 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 as needed 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 March 31, 2014. 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 March 31, 2014. The following sets forth the Company’s NPV as of that date.

									NPV as a % of Assets
Change in Calculation	Net Portfolio Value		$ Change from PAR			% Change from PAR			NPV Ratio			Change

+300bp	$	100,019	$	(61,849	)		(42.01	)%		7.46	%	(416)	bps
+200bp		128,228		(33,639	)		(22.85	)		9.56		(206)	bps
+100bp		150,073		(11,795	)		(8.01	)		11.02		(60)	bps
PAR		161,868		—			—			11.62		-	bps
-100bp		187,206		25,339			17.21			13.21		159	bps

bp – basis points

The table above indicates that as of March 31, 2014, in the event of a 100 basis point increase in interest rates, we would experience a 8.01% decrease 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.

Index

ITEM 4.

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.

Index

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of business. Other than as set forth below, as of March 31, 2014, 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 affect on our financial condition or results of operations.

The Company, as the successor to Allegiance Community Bank, is a named defendant in the lawsuit Kontos v. Robbins, et al., filed in the Superior Court of New Jersey on May 15, 2012. The lawsuit alleges that Spencer Robbins, the former Chairman of the Board of Allegiance Community Bank and currently a director of the Company, and others misled Mr. Kontos with respect to his investment in a real estate project and they induced him to borrow money from Allegiance Community Bank, also a named defendant. The lawsuit seeks an unspecified dollar amount of damages. Insurance coverage is currently in effect. The Company has filed its Answer to the lawsuit. The Company is vigorously defending its interests in this litigation.

The Company, as the successor to Pamrapo Bancorp, Inc., and in its own corporate capacity, is a named defendant in a shareholder class action lawsuit, Kube v. Pamrapo Bancorp, Inc., et al., filed in the Superior Court of New Jersey, Hudson County, Chancery Division, General Equity. On May 9, 2012, the Company obtained partial summary judgment, dismissing three of the five Counts of the Complaint. On May 9, 2012, plaintiff’s counsel was awarded interim legal fees of approximately $350,000. The Company’s obligation to pay that amount has been stayed. By Order, dated December 10, 2013, the court denied the plaintiff's initial motion for class certification. The plaintiff thereafter filed a motion seeking certification for a substantially reduced class. That motion was granted on February 6, 2014. The Company filed a motion for summary judgment, seeking the dismissal of the remaining two Counts of the Complaint. That motion was denied on February 19, 2014. The parties have conferenced in an effort to resolve this case. A final resolution is being pursued. The Company is vigorously defending its interests in this litigation.

The Company has made claims with both of the Directors' and Officers' Liability insurance carriers for Pamrapo Bancorp, Inc., and the Company, seeking indemnification and reimbursement of the attorney's fees and defense costs incurred by the Company in defending the Kube v. Pamrapo Bancorp, Inc., et al., litigation These claims are pending.

The Company, as the successor to Pamrapo Bancorp, Inc., is a named defendant in a lawsuit, Armstrong v. BCB Bancorp, Inc., and Brian M. Campbell, which was filed in the Superior Court of New Jersey, Atlantic County, Law Division, on September 27, 2011. The lawsuit accuses Brian Campbell, the former Managing Director of Pamrapo Services Corporation, a wholly-owned subsidiary of Pamrapo Bancorp, Inc., of various violations of federal and state securities laws, fraud, breach of fiduciary duty and negligence. Prime Capital, Inc., has been named as a potentially-responsible party by the Company and/or the plaintiff. The case has been transferred to FINRA arbitration. The arbitration is in its discovery stage. The plaintiff is seeking unspecified damages. The arbitration hearing is scheduled to begin on June 23, 2014. Insurance coverage is currently in effect for the Company. The Company is vigorously defending its interests in this litigation. The parties have conferenced in an effort to resolve this case. It is anticipated that a final resolution among the parties will be reached prior to the commencement of the FINRA hearing.

ITEM 1.A. RISK FACTORS

Other than as set forth below, there have been no changes to the risk factors set forth under Item 1.A Risk Factors as set fourth in the Company’s Form 10-K for the year ended December 31, 2013.

The asset quality of our loan portfolio may deteriorate if the economy falters, resulting in a portion of our loans failing to perform in accordance with their terms. Under such circumstances our profitability will be adversely affected.

At March 31, 2014, the Company had $43.4 million in classified loans of which $2.5 million were classified as doubtful, $28.7 million were classified as substandard and $12.2 million were classified as special mention. In addition, at that date we had $21.0 million in non-accruing loans. While we have adhered to stringent underwriting standards in the origination of loans, a large percentage of our loan portfolio was obtained in connection with our acquisition of Pamrapo Bancorp, Inc. and Allegiance Community Bank. In addition, there can be no assurance that loans that we originated will not experience asset quality deterioration as a result of a downturn in the local economy. Should our local economy weaken, our asset quality may deteriorate resulting in losses to the Company.

Index

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Securities sold within the past three years without registering the securities under the Securities Act of 1933

On June 28, 2012, the Company announced a seventh stock repurchase plan to repurchase 5% or 440,000 shares of the Company’s common stock. On July 17, 2013, the Company announced an eighth stock repurchase plan to repurchase 5% or 400,000 shares of the Company’s common stock. The Company’s stock purchases for the three months ended March 31, 2014 are as follows:

Period	Shares Purchased		Average Price		Total Number of Shares Purchased		Maximum Number of Shares That May Yet be Purchased

January 1- January 31, 2014		410	$	13.15		410		415,379
February 1- February 28, 2014		0	$	0.00		0		415,379
March 1- March 31, 2014		0	$	0.00		0		415,379

Total		410	$	13.15		410		415,379

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFTEY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit 11.0	Computation of Earnings per Share.
Exhibit 31.1 and 31.2	Officers’ Certification filed pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
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

Index

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: May 7, 2014	By:	/s/ Donald Mindiak
		Donald Mindiak
		Chief Executive Officer

Date: May 7, 2014	By:	/s/ Thomas P. Keating
		Thomas P. Keating Senior Vice President and Chief Financial Officer
		(Principal Accounting and Financial Officer)