Attached files
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended
December 31, 2009
|
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period from
___________________ to ______________________
Commission
File Number: 000-50377
Flatbush
Federal Bancorp, Inc.
(Exact
Name of Registrant as Specified in its Charter)
Federal
|
11-3700733
|
|||
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|||
2146 Nostrand Avenue, Brooklyn, New
York
|
11210
|
|||
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(718)
859-6800
(Registrant’s
Telephone Number Including Area Code)
Securities
Registered Pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par
value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
o
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 (229.405) of this
chapter during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405) is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K of any
amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell
company. Yes ¨ No
x
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, computed by reference to the price at which
the common equity was last sold on the OTC Bulletin Board as of the last
business day of the registrant’s most recently completed second fiscal quarter
was $4,325,955.
The
number of shares outstanding of the registrant’s common stock was 2,736,907 as
of March 29, 2010.
DOCUMENTS
INCORPORATED BY REFERENCE
1.
|
Annual
Report to Shareholders for the fiscal year ended December 31, 2009 (Part
II).
|
2.
|
Proxy
Statement for the 2010 Annual Meeting of Stockholders (Part
III)
|
FLATBUSH FEDERAL
BANCORP, INC.
2009
FORM 10-K
TABLE
OF CONTENTS
PART I
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Page No.
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|
Item
1.
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1
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Item
1A.
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30
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Item
1B.
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30
|
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Item
2.
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30
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Item
3.
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31
|
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Item
4.
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(Removed
and Reserved)
|
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PART II
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||
Item
5.
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32-33
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Item
6.
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33
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Item
7.
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33
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Item
7A.
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33
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Item
8.
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33
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Item
9.
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34
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Item
9A(T).
|
34-35
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Item
9B.
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35
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PART III
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Item
10.
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36
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Item
11.
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36
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Item
12.
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36
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Item
13.
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36
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Item
14.
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36
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PART IV
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Item
15.
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37-38
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39
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ITEM
1.
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BUSINESS
|
Forward
Looking Statements
This Annual Report contains certain
“forward-looking statements” which may be identified by the use of words such as
“believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and
“potential.” Examples of forward-looking statements include, but are
not limited to, estimates with respect to the Company’s financial condition,
results of operations and business that are subject to various factors which
could cause actual results to differ materially from these estimates and most
other statements that are not historical in nature. These factors
include, but are not limited to, general and local economic conditions, changes
in interest rates, deposit flows, demand for mortgage, commercial and other
loans, real estate values, competition, changes in accounting principles,
policies, or guidelines, changes in legislation or regulation, and other
economic, competitive, governmental, regulatory, and technological factors
affecting operations, pricing products and services.
Flatbush
Federal Bancorp, Inc.
Flatbush Federal Bancorp, Inc. (the
“Company”) is a Federal corporation which was organized in 2003 as part of the
mutual holding company reorganization of Flatbush Federal Savings & Loan
Association (the “Association”). The Company’s principal asset is its
investment in Flatbush Federal Savings & Loan Association. The
Company is a majority owned subsidiary of Flatbush Federal Bancorp, MHC
(“Flatbush MHC”), a Federally-chartered mutual holding
company. Flatbush MHC owned 1,484,208 shares of common stock, or
54.23% of the outstanding shares of the common stock at December 31, 2009. At
December 31, 2009, the Company had consolidated assets of $156.0 million,
deposits of $115.2 million and stockholders’ equity of
$15.2 million. The Company’s executive office is located at 2146
Nostrand Avenue, Brooklyn, New York 11210 and its telephone number is (718)
859-6800.
Flatbush
Federal Savings & Loan Association
General. The Association’s
principal business consists of attracting retail deposits from the general
public in the areas surrounding its three locations in Brooklyn, New York and
investing those deposits, together with funds generated from operations,
primarily in one-to-four family residential mortgage loans, commercial real
estate loans, construction loans, investment securities, and mortgage-backed
securities. The Association’s revenues are derived principally from
the interest on loans and securities, loan origination and servicing fees, bank
owned life insurance (“BOLI”) income, and service charges and fees collected on
deposit accounts. The Association’s primary sources of funds are
deposits, principal and interest payments on loans and securities, and
borrowings.
Competition. The Association faces
intense competition within its market area both in making loans and attracting
deposits. The New York City area has a high concentration of
financial institutions including large money center and regional banks,
community banks and credit unions. Some of the Association’s
competitors offer products and services that it currently does not offer, such
as trust services and private banking. As of December 31, 2009, the
Association’s market share of deposits represented less than one half of one
percent of deposits in Kings County.
The
Association’s competition for loans and deposits comes principally from
commercial banks, savings institutions, mortgage banking firms and credit
unions. The Association faces additional competition for deposits
from short-term money market funds, brokerage firms, mutual funds and insurance
companies. The primary focus is to build and develop profitable
customer relationships across all lines of business while maintaining a role as
a community bank.
Market
Area. The
Association operates in an urban market area that has a stable population and
household base. The Association’s primary lending area is
concentrated in Brooklyn, as well as the other four boroughs of New York City,
and Long Island, New York. One-to-four family residential real estate
in the market area is characterized by a large number of attached and
semi-detached houses, including a number of two-and three-family homes and
condominium apartments. Most of the deposit customers are residents
of the greater New York metropolitan area. The economy of the market
area is characterized by a large number of small retail
establishments. The Association’s customer base is comprised of
middle-income households, and to a lesser extent, low-to-moderate-income
households.
Lending
Activities. Historically,
the Association’s principal lending activity has been the origination of first
mortgage loans for the purchase or refinancing of one-to-four family residential
real property. Historically, the Association retained all loans that
it originated. However, beginning in 2002 the Association sold a
limited number of its one- to-four family loans, on a servicing retained basis,
to the Federal Home Loan Bank of New York. No loans were sold during
the year ended December 31, 2009. One-to-four family
residential real estate mortgage loans represented $79.3 million, or 68.90%, of
our loan portfolio at December 31, 2009. The Association also offers
commercial real estate loans, multifamily loans, condominium loans and
construction loans secured by real estate. Construction loans totaled $10.0
million, or 8.65% of the total loan portfolio at December 31, 2009. Commercial
real estate loans totaled $20.8 million, or 18.05% of the total loan portfolio
at December 31, 2009. Multi-family real estate loans totaled $4.4
million, or 3.84% of the total loan portfolio at December 31,
2009. On a limited basis, non real estate secured loans are
originated and consist of, passbook loans and credit card loans.
Loan Portfolio
Composition. The following
table sets forth the composition of the Association’s loan portfolio by type of
loan as of the dates indicated, including a reconciliation of gross loans
receivable after consideration of loans in process, the allowance for loan
losses and net deferred fees.
At
December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Real Estate Loans:
|
||||||||||||||||
One-
to four-family
|
$ | 79,344 | 68.90 | % | $ | 77,579 | 73.43 | % | ||||||||
Multi-family
|
4,425 | 3.84 | 1,994 | 1.89 | ||||||||||||
Commercial
|
20,784 | 18.05 | 10,747 | 10.17 | ||||||||||||
Construction
|
9,965 | 8.65 | 15,102 | 14.29 | ||||||||||||
Land
|
399 | 0.35 | - | - | ||||||||||||
Total
real estate loans
|
114,917 | 99.79 | 105,422 | 99.78 | ||||||||||||
Other Loans:
|
||||||||||||||||
Unsecured
Business
|
20 | 0.02 | - | - | ||||||||||||
Passbook
or certificate
|
38 | 0.03 | 61 | 0.06 | ||||||||||||
Home
equity
|
139 | 0.12 | 117 | 0.11 | ||||||||||||
Credit
cards
|
43 | 0.04 | 51 | 0.05 | ||||||||||||
Total
other loans
|
240 | 0.21 | 229 | 0.22 | ||||||||||||
Total
loans
|
115,157 | 100 | % | 105,651 | 100 | % | ||||||||||
Less:
|
||||||||||||||||
Loans
in process
|
3,231 | 7,084 | ||||||||||||||
Allowance
for loan losses
|
828 | 191 | ||||||||||||||
Deferred
loan fees
|
110 | 135 | ||||||||||||||
4,169 | 7,410 | |||||||||||||||
Total
loans receivable, net
|
$ | 110,988 | $ | 98,241 |
Maturity of Loan
Portfolio. The following table shows the remaining contractual
maturity of loans at December 31, 2009. The table does not include
the effect of possible prepayments or due on sale clause payments.
One-to-Four
Family
|
Multi-Family
|
Commercial
Real Estate
|
Construction
|
Land
|
Passbook
or Certificate
|
Home
Equity
|
Credit
Cards
|
Unsecured
Business
|
Total
|
|||||||||||||||||||||||||||||||
One
year or less
|
$ | 18 | $ | 112 | $ | 1,166 | $ | 9,965 | $ | - | $ | 38 | $ | - | $ | 43 | $ | - | $ | 11,342 | ||||||||||||||||||||
After
one year:
|
||||||||||||||||||||||||||||||||||||||||
1
to 3 years
|
1,180 | - | 2,012 | - | - | - | 26 | - | 20 | 3,238 | ||||||||||||||||||||||||||||||
3
to 5 years
|
1,066 | - | 4,322 | - | 399 | - | 17 | - | - | 5,804 | ||||||||||||||||||||||||||||||
5
to 10 years
|
16,610 | 2,377 | 8,418 | - | - | - | 96 | - | - | 27,501 | ||||||||||||||||||||||||||||||
10
to 20 years
|
11,132 | 1,491 | 4,866 | - | - | - | - | - | - | 17,489 | ||||||||||||||||||||||||||||||
More
than 20 years
|
49,338 | 445 | - | - | - | - | - | - | - | 49,783 | ||||||||||||||||||||||||||||||
Total
due after one year
|
79,326 | 4,313 | 19,618 | - | 399 | - | 139 | - | 20 | 103,815 | ||||||||||||||||||||||||||||||
Total
loans
|
79,344 | 4,425 | 20,784 | 9,965 | 399 | 38 | 139 | 43 | 20 | 115,157 | ||||||||||||||||||||||||||||||
Less:
|
||||||||||||||||||||||||||||||||||||||||
Loans
in process
|
- | - | - | 3,231 | - | - | - | - | - | 3,231 | ||||||||||||||||||||||||||||||
Allowance
for loan losses
|
85 | 13 | 173 | 551 | 4 | - | - | 2 | - | 828 | ||||||||||||||||||||||||||||||
Deferred
loan fees
|
78 | 8 | 24 | 5 | - | - | (5 | ) | - | - | 110 | |||||||||||||||||||||||||||||
Total
loans receivable, net
|
$ | 79,181 | $ | 4,404 | $ | 20,587 | $ | 6,178 | $ | 395 | $ | 38 | $ | 144 | $ | 41 | $ | 20 | $ | 110,988 |
The total amount of loans due after
December 31, 2010 that have fixed interest rates is $84.5 million, and the total
amount of loans due after such date which have floating or adjustable interest
rates is $19.3 million. Of the $19.6 million of commercial real estate
loans due after December 31, 2010, 15.8% have fixed interest rates and 84.2%
have adjustable interest rates. At December 31, 2009, there were no
construction loans due after December 31, 2010.
One-to-Four
Family Residential Loans. The Association’s
primary lending activity consists of the origination of one-to-four family
residential mortgage loans that are primarily secured by properties located in
Brooklyn, as well as the other four boroughs of New York City, and Long Island,
New York. At December 31, 2009, approximately $79.3 million, or
68.90% of our loan portfolio, consisted of one- to-four family residential
loans. Generally, one-to-four family residential mortgage loans are
originated in amounts up to 80% of the lesser of the appraised value or purchase
price of the property. Private mortgage insurance is required on loans with a
loan-to-value ratio in excess of 80%. The Association will not make
loans with a loan-to-value ratio in excess of 95% for loans secured by single
family homes and 90% for loans secured by two-to-four family
properties. Fixed-rate loans are originated for terms of 15 and 30
years. At December 31, 2009, the Association’s largest loan secured
by one-to-four family real estate had a principal balance of $975,000 and was
secured by a one-family residence. This loan was performing in
accordance with its terms.
The
Association also offers adjustable-rate mortgage loans with one, two, three and
five year adjustment periods based on changes in a designated United States
Treasury index. During the year ended December 31, 2009, the
Association originated one adjustable rate mortgage for $293,000. In general,
the adjustable rate mortgage loans provide for maximum rate adjustments of 200
basis points per adjustment, with a lifetime maximum adjustment of 600 basis
points. Adjustable rate mortgage loans amortize over terms of up to 30
years.
Adjustable
rate mortgage loans decrease the risk associated with changes in market interest
rates by periodically repricing, but involve other risks because, as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same
time, the marketability of the underlying collateral may be adversely affected
by higher interest rates. Upward adjustment of the contractual
interest rate is also limited by the maximum periodic and lifetime interest rate
adjustments permitted by the loan documents, and therefore, is potentially
limited in effectiveness during periods of rapidly rising interest
rates. At December 31, 2009, $3.8 million, or 4.75% of the
Association’s one-to-four family residential loans had adjustable rates of
interest.
All
one-to-four family residential mortgage loans that the Association originates
include “due-on-sale” clauses, which give the Association the right to declare a
loan immediately due and payable in the event that, among other things, the
borrower sells or otherwise disposes of the real property subject to the
mortgage and the loan is not repaid.
Regulations
limit the amount that a savings association may lend relative to the appraised
value of the real estate securing the loan, as determined by an appraisal of the
property at the time the loan is originated. For all loans, the
Association utilizes outside independent appraisers approved by the board of
directors. All borrowers are required to obtain title
insurance. The Association also requires homeowner’s insurance and
fire and casualty insurance and, where circumstances warrant, flood insurance on
properties securing real estate loans.
Multi-Family Real
Estate Loans. Loans secured by
multi-family real estate totaled approximately $4.4 million, or 3.84% of the
total loan portfolio at December 31, 2009. Multi-family real estate
loans generally are secured by rental properties. Substantially all
multi-family real estate loans are secured by properties located within the
Association’s lending area. At December 31, 2009, the
Association
had twelve multi-family loans with an average principal balance of $369,000, and
the largest multi-family real estate loan had a principal balance of
$838,000. All of the loans secured by multi-family real estate
properties are performing in accordance with their terms. Multi-family real estate
loans generally are offered with adjustable interest rates that adjust after
five years. Multi-family loans are originated for terms of up to 15
years. Multi-family real estate loan adjustments are tied to the
prime rate as reported in The
Wall Street Journal, or the FHLB five year advance rate.
The
Association considers a number of factors in originating multi-family real
estate loans. Management evaluates the qualifications and financial
condition of the borrower (including credit history), profitability and
expertise, as well as the value and condition of the mortgaged property securing
the loan. When evaluating the qualifications of the borrower,
management considers the financial resources of the borrower, the borrower’s
experience in owning or managing similar property and the borrower’s payment
history with the Association and other financial institutions. In
evaluating the property securing the loan, the factors considered include the
net operating income of the mortgaged property before debt service and
depreciation, the debt service coverage ratio (the ratio of net operating income
to debt service) to ensure that it is at least 125% of the debt service, and the
ratio of the loan amount to the appraised value of the mortgaged
property. Multi-family real estate loans are originated in amounts up
to 75% of the appraised value of the mortgaged property securing the
loan. All multi-family loans are appraised by outside independent
appraisers approved by the board of directors. An environmental inspection,
performed by an independent environmental engineer approved by the board of
directors, may be required on certain loans. Personal guarantees may
be obtained from multi-family real estate borrowers.
Loans
secured by multi-family real estate generally involve a greater degree of credit
risk than one-to-four family residential mortgage loans and carry larger loan
balances. This increased credit risk is a result of several factors,
including the concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income producing
properties, and the increased difficulty of evaluating and monitoring these
types of loans. Furthermore, the repayment of loans secured by
multi-family real estate typically depends upon the successful operation of the
real estate property securing the loan. If the cash flow from the
project is reduced, the borrower’s ability to repay the loan may be
impaired.
Commercial Real
Estate Loans. At December 31, 2009,
$20.8 million, or 18.05% of the total loan portfolio consisted of commercial
real estate loans. Commercial real estate loans are secured by office
buildings, mixed use properties and other commercial properties. The
Association generally originates adjustable rate commercial real estate loans,
as well as balloon maturity loans, with maximum terms of up to 15
years. The maximum loan-to-value ratio of commercial real estate
loans is 75%. At December 31, 2009, the Association had 41 commercial
real estate loans with an average outstanding balance of $507,000. At
December 31, 2009, the Association’s largest loan secured by commercial real
estate was a $2.0 million loan. At December 31, 2009, this loan was performing
in accordance with its terms. At December 31, 2009, one loan of
$766,000, secured by commercial real estate was not performing in accordance
with its terms.
The
Association considers a number of factors in originating commercial real estate
loans. Management evaluates the qualifications and financial
condition of the borrower (including credit history), profitability and
expertise, as well as the value and condition of the mortgaged property securing
the loan. When evaluating the qualifications of the borrower,
management considers the financial resources of the borrower, the borrower’s
experience in owning or managing similar property and the borrower’s payment
history with the Association and other financial institutions. In
evaluating the property securing the loan, the factors management considered
include the net operating income of the mortgaged property before debt service
and depreciation, the debt service coverage ratio (the ratio of net
operating
income to debt service) to ensure that it is at least 125% of the debt service,
and the ratio of the loan amount to the appraised value of the mortgaged
property. All commercial real estate loans are appraised by
outside independent appraisers approved by the board of directors. An
environmental inspection is performed by an independent environmental engineer
approved by the board of directors. Personal guarantees
may be obtained from commercial real estate borrowers.
Loans
secured by commercial real estate generally are larger than one-to-four family
residential loans and involve greater credit risk. Commercial real
estate loans often involve large loan balances to single borrowers or groups of
related borrowers. Repayment of these loans depends to a large degree
on the results of operations and management of the properties securing the loans
or the businesses conducted on such property, and may be affected to a greater
extent by adverse conditions in the real estate market or the economy in
general.
Construction
Loans. At December 31,
2009, $10.0 million, or 8.65% of the Association’s total loan portfolio
consisted of construction loans. Construction loans are originated by
the Association which currently offers adjustable-rate multi-family
construction loans. The Association also
participates in construction loans with adjustable rates for the construction of
multifamily and non-residential real estate. At December 31, 2009,
the largest construction loan was a $1.6 million participation of which $996,000
was advanced. The loan was performing in accordance with its
terms. These loans have interest rates that adjust
monthly. Construction loans require the payment of interest only
during the construction period. Construction loans will generally be
made in amounts of up to 75% of the lower of the appraisal value of the
property, or the actual cost of the improvements. Funds are disbursed
in accordance with a schedule reflecting the completion of portions of the
project. At December 31, 2009, the Association’s construction loans
are secured by properties located in Brooklyn, Queens, Long Island and
Manhattan.
Construction
loans generally involve a greater degree of credit risk than one-to-four family
residential mortgage loans. The risk of loss on a construction loan
depends upon the accuracy of the initial estimate of the value of the property
at completion of construction compared to the estimated cost of
construction. If the estimated cost of construction is inaccurate,
funds may have to be advanced beyond the original amount committed in order to
protect the value of the property. An environmental inspection is performed by
an independent environmental engineer.
In
addition, because construction loans primarily consist of participation loans,
the Company relies on other parties to document the loans. As a result, the
Company has less control over the underwriting and monitoring of these
loans.
Other
Loans. The Association
offers a variety of loans secured by real estate, or by property other than real
estate. These loans include loans secured by deposits, home equity
loans, and credit cards secured by deposit accounts, as well as unsecured credit
cards and business loans. At December 31, 2009, these other loans
totaled $240,000, or 0.21% of the total loan portfolio.
Origination and
Servicing of Loans. Historically, the Association has
originated mortgage loans pursuant to underwriting standards that generally
conform with the Fannie Mae and Freddie Mac guidelines. Loan
origination activities are primarily concentrated in Brooklyn, as well as the
other four boroughs of New York City, and Long Island, New York. Properties
securing real estate and construction loans are primarily located in Brooklyn,
Queens, Long Island and Manhattan. New loans are generated primarily
from walk-in customers, customer referrals, a network of mortgage brokers, and
other parties with whom the Association does business, and from the efforts of
employees and advertising. Loan applications are underwritten and
processed at the main office. The Association services all loans that
it originates.
The
following table shows the loan originations, purchases, sales and repayment
activities for the periods indicated.
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(In
Thousands)
|
||||||||
Beginning
of period
|
$ | 98,241 | $ | 101,483 | ||||
Originations by Type:
|
||||||||
Real
estate:
|
||||||||
One-to-four
family
|
8,928 | 4,521 | ||||||
Multi-family
|
2,090 | 1,050 | ||||||
Commercial
|
10,546 | 3,079 | ||||||
Construction
|
500 | - | ||||||
Other
loans:
|
||||||||
Unsecured
business
|
20 | - | ||||||
Passbook
or certificate
|
20 | 27 | ||||||
Home
equity
|
100 | - | ||||||
Credit
cards
|
118 | 134 | ||||||
Total
originations
|
22,322 | 8,811 | ||||||
Purchases:
|
||||||||
Real
estate:
|
||||||||
Construction
|
3,300 | 6,103 | ||||||
Total
purchases
|
3,300 | 6,103 | ||||||
Sales and Repayments:
|
||||||||
Real
estate:
|
||||||||
One-to-four
family
|
- | - | ||||||
Total
sales
|
- | |||||||
Principal
repayments
|
(12,263 | ) | (18,197 | ) | ||||
Total
reductions
|
(12,263 | ) | (18,197 | ) | ||||
Increase in
other items, net
|
(612 | ) | 41 | |||||
Net
increase (decrease)
|
12,747 | (3,242 | ) | |||||
Ending
of period
|
$ | 110,988 | $ | 98,241 |
Loan Approval
Procedures and Authority. The loan approval process is
intended to assess the borrower’s ability to repay the loan, the viability of
the loan, and the adequacy of the value of the property that will secure the
loan. To assess the borrower’s ability to repay, the Association
reviews the employment and credit history and information on the historical and
projected income and expenses of mortgagors or if applicable, the historical and
projected income and expenses of the property. All
loans are approved by the board of directors.
The
Association requires appraisals of all real property securing loans, and if
applicable, environmental inspections. Appraisals are performed by
independent licensed appraisers. All appraisers are approved by the
board of directors. The Association requires fire and extended coverage
insurance in amounts at least equal to the principal amount of the
loan.
Non-performing
and Problem Assets
After a
mortgage loan becomes 10 days past due, a computer generated late notice is
delivered to the borrower. A second late notice is sent once the loan
becomes 16 days past due. When a loan becomes 30 days delinquent, a
delinquency notice is sent to the borrower and an attempt is made to make
personal contact with the borrower by letter or telephone from the head of the
collection department to establish an acceptable repayment
schedule. When a mortgage loan is 90 days delinquent and no
acceptable resolution has been reached, the loan is placed in foreclosure and
the property collateral is appraised and
inspected. Management is authorized to begin foreclosure
proceedings on any loan after determining that it is prudent to do
so.
Mortgage
loans are reviewed on a regular basis and such loans, with the exception of
loans guaranteed by the Federal Housing Administration, may be placed on
non-accrual status when they become delinquent 90 days or more. When
loans are placed on a non-accrual status, unpaid accrued interest is fully
reserved, and further income is recognized only to the extent received. Loans
guaranteed by the Federal Housing Administration may be placed on non-accrual
status when they become delinquent 120 days or more.
Non-performing
Loans. At
December 31, 2009, $4.0 million, or 3.61%, of the Association’s total loans were
non-performing loans.
Non-performing
Assets. The table below sets forth the amounts and categories
of the non-performing assets at the dates indicated. Delinquent loans
that are 90 days or more past due are generally considered non-performing
assets. During the 2009 and 2008 periods presented, there was one
troubled debt restructuring of $400,000 and $0, respectively. There
were no restructured loans past due 90 days or more, or in a nonaccrual status
at December 31, 2009. For the year ended December 31, 2009,
non-accruing loans consisted of five one-to-four family residential loans of
$1.8 million, one commercial real estate loan participation of $766,000, one
construction loan participation of $1.5 million with a $460,00 specific
valuation allowance reserved and five credit card loans of $3,000.
At
December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
in Thousands)
|
||||||||
Non-accruing
loans:
|
||||||||
One-to-four
family
|
$ | 1,784 | $ | 823 | ||||
Commercial
|
766 | - | ||||||
Construction
|
1,456 | - | ||||||
Credit
cards
|
3 | 4 | ||||||
Total
|
4,009 | 827 | ||||||
Accruing
loans delinquent 90 days or more:
|
- | - | ||||||
Total
non-performing loans
|
$ | 4,009 | $ | 827 | ||||
Total
as a percentage of total assets
|
2.57 | % | 0.55 | % | ||||
Total
as a percent of total loans
|
3.61 | % | 0.84 | % |
For the years ended December 31, 2009
and 2008, gross interest income which would have been recorded had the
non-accruing loans been current in accordance with their original terms amounted
to $152,000 and $21,000, respectively. No interest income was
recognized on such loans subsequent to their non-accrual status for the years
ended December 31, 2009 or 2008.
Delinquent
Loans. The following table sets forth the loan delinquencies by type, by
amount and by percentage of type at the dates indicated.
At
December 31, 2009
|
At
December 31, 2008
|
|||||||||||||||||||||||||||||||
60-89
Days
|
90
Days or More
|
60-89
Days
|
90
Days or More
|
|||||||||||||||||||||||||||||
Number
of Loans
|
Principal
Balance of Loans
|
Number
of Loans
|
Principal
Balance of Loans
|
Number
of Loans
|
Principal
Balance of Loans
|
Number
of Loans
|
Principal
Balance of Loans
|
|||||||||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||||||||||
Real Estate loans:
|
||||||||||||||||||||||||||||||||
One-to-four
family
|
2 | $ | 739 | 5 | $ | 1,784 | - | $ | - | 4 | $ | 823 | ||||||||||||||||||||
Multi-family
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Commercial
real estate
|
- | - | 1 | 766 | - | - | - | - | ||||||||||||||||||||||||
Construction
|
- | - | 1 | 1,456 | - | - | - | - | ||||||||||||||||||||||||
Land
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
|
2 | 739 | 7 | 4,006 | - | - | 4 | 823 | ||||||||||||||||||||||||
Other loans:
|
||||||||||||||||||||||||||||||||
Unsecured
business
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Passbook
or certificate
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Home
equity
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Credit
cards
|
- | - | 5 | 3 | - | - | 6 | 4 | ||||||||||||||||||||||||
Total
other loans
|
- | - | 5 | 3 | - | - | 6 | 4 | ||||||||||||||||||||||||
Total
delinquent loans
|
2 | $ | 739 | 12 | $ | 4,009 | - | $ | - | 10 | $ | 827 | ||||||||||||||||||||
Delinquent
loans to total loans
|
0.67 | % | 3.61 | % | - | % | 0.84 | % |
Classified
Assets. Office of Thrift
Supervision regulations and the Association’s Asset Classification Policy
provide that loans and other assets considered to be of lesser quality be
classified as “substandard,” “doubtful” or “loss” assets. An asset is
considered “substandard” if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
“Substandard” assets include those characterized by the “distinct possibility”
that the institution will sustain “some loss” if the deficiencies are not
corrected. Assets classified as “doubtful” have all of the weaknesses
inherent in those classified “substandard,” with the added characteristic that
the weaknesses present make “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. Management
classifies an asset as “special mention” if the asset has a potential weakness
that warrants management’s close attention. While such assets are not
impaired, management has concluded that if the potential weakness in the asset
is not addressed, the value of the asset may deteriorate, adversely affecting
the repayment of the asset.
An insured institution is required to
establish general allowances for loan losses in an amount deemed prudent by
management for loans classified substandard or doubtful, as well as for other
problem loans. General allowances represent loss allowances which
have been established to recognize the inherent losses associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When an insured institution classifies
problem assets as “loss,” it is required either to establish a specific
allowance for losses equal to 100% of the amount of the asset so classified or
to charge off such amount. An institution’s determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the Office of Thrift Supervision which can order the
establishment of additional general or specific loss allowances.
On the basis of management’s review of
its assets, at December 31, 2009 the Association had classified $1.8 million in
one to four family residential loans, $766,000 in commercial real estate, $1.5
million in construction loan participation and $2,000 in Visa credit card loans
respectively, as substandard and $516,000 in one to four family residential
loans as special mention. The construction loan of $1.5 million has a specific
valuation allowance of $463,000.
The loan portfolio is reviewed on a
regular basis to determine whether any loans require classification in
accordance with applicable regulations. Not all classified assets
constitute non-performing assets.
Allowance
for Loan Losses
The Association’s allowance for loan
losses is maintained at a level necessary to absorb loan losses which are both
probable and reasonably estimable. Management, in determining the
allowance for loan losses, considers the losses inherent in its loan portfolio
and changes in the nature and volume of loan activities, along with the general
economic and real estate market conditions. Management utilizes a
two-tier approach: (1) identification of impaired loans and establishment of
specific loss allowances on such loans; and (2) establishment of general
valuation allowances on the remainder of the loan
portfolio. Management maintains a loan review system, which allows
for a periodic review of the loan portfolio and the early identification of
potential impaired loans. Such system takes into consideration, among
other things, delinquency status, size of loans, type and market value of
collateral and financial condition of the borrowers. Specific loan
loss allowances are established for identified losses based on a review of such
information. A loan evaluated for impairment is considered to be
impaired when, based on current information and events, it is probable that the
Association will be unable to collect all amounts due according to the
contractual terms of the loan agreement. All loans identified as
impaired are evaluated independently. Management does not aggregate
such loans for evaluation purposes. Loan impairment is 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 loan’s observable
market price or the fair value of the collateral if the loan is collateral
dependent. General loan loss allowances are based upon a combination
of factors including, but not limited to, actual loan loss experience,
composition of the loan portfolio, current economic conditions, management’s
judgment and losses which are probable and reasonably estimable. The
allowance is increased through provisions charged against current earnings and
recoveries of previously charged-off loans. Loans which are
determined to be uncollectible are charged against the
allowance. While management uses available information to recognize
probable and reasonably estimable loan losses, future loss provisions may be
necessary based on changing economic conditions. The allowance for
loan losses as of December 31, 2009 is maintained at a level that represents
management’s best estimate of losses inherent in the loan portfolio, and such
losses were both probable and reasonably estimable.
Payments
received on impaired loans are applied to principal. The Association had three
loans totaling $2.6 million deemed to be impaired at December 31, 2009 and had
no loans deemed to be impaired at December 31, 2008. Impaired loans consisted of
a construction loan participation of $1.5 million on which a $463,000 specific
valuation allowance was reserved, a commercial real estate loan participation of
$766,000 and a land loan participation of $399,000. The payment
status of the land loan is current but, due to debt restructuring during 2009,
is considered impaired.
In addition, the Office of Thrift
Supervision, as an integral part of its examination process, periodically
reviews the allowance for loan losses. The OTS may require that the
Association recognize additions to the allowance based on its evaluation of
information available to it at the time of the examination.
Allowance for
Loan Losses. The following
table analyzes changes in the allowance for the periods presented.
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
In Thousands)
|
||||||||
Balance
at beginning of period
|
$ | 191 | $ | 202 | ||||
Charge-offs:
|
||||||||
One-to-four
family
|
10 | - | ||||||
Small
Business Administration
|
- | 12 | ||||||
Credit
cards
|
3 | - | ||||||
Total
charge-offs
|
13 | 12 | ||||||
Recoveries
|
- | - | ||||||
Net
charge-offs
|
13 | 12 | ||||||
Additions
charged to operations
|
650 | 1 | ||||||
Ending
balance
|
$ | 828 | $ | 191 | ||||
Ratio
of non-performing assets to total assets at the end of
period
|
2.57 | % | 0.55 | % | ||||
Ratio
of net charge-offs during the period to loans outstanding during the
period
|
0.011 | % | 0.012 | % | ||||
Ratio
of allowance for loan losses to loans outstanding
|
0.75 | % | 0.19 | % |
Allocation of
Allowance for Loan Losses. The following table
presents an analysis of the allocation of the allowance for loan losses at the
dates indicated. The allocation of the allowance to each category is
not necessarily indicative of future loss in any particular category and does
not restrict the use of the allowance to absorb losses in other categories. The total amount of loan
loss allowance of $828,000 for the year ended December 31, 2009 includes a
specific valuation allowance of $463,000 reserved for one
construction loan participation of $1.5 million.
At
December 31,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Amount
of Loan Loss Allowance
|
Loan
Amounts by Category
|
Percent
of Loans in Each Category to Total Loans
|
Amount
of Loan Loss Allowance
|
Loan
Amounts by Category
|
Percent
of Loans in Each Category to Total Loans
|
|||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||
One-to-four
family
|
$ | 85 | $ | 79,344 | 68.90 | % | $ | 87 | $ | 77,579 | 73.43 | % | ||||||||||||
Multi-family
|
13 | 4,425 | 3.84 | 5 | 1,994 | 1.89 | ||||||||||||||||||
Commercial
|
173 | 20,784 | 18.05 | 27 | 10,747 | 10.17 | ||||||||||||||||||
Construction
|
551 | 9,965 | 8.65 | 53 | 15,102 | 14.29 | ||||||||||||||||||
Land
|
4 | 399 | 0.35 | - | - | - | ||||||||||||||||||
Passbook
or certificate
|
- | 38 | 0.03 | - | 61 | 0.06 | ||||||||||||||||||
Home
equity
|
- | 139 | 0.12 | - | 117 | 0.11 | ||||||||||||||||||
Credit
cards
|
2 | 43 | 0.04 | 6 | 51 | 0.05 | ||||||||||||||||||
Unsecured
business
|
- | 20 | 0.02 | - | - | - | ||||||||||||||||||
Unallocated
|
- | - | - | 13 | - | - | ||||||||||||||||||
Total
|
$ | 828 | $ | 115,157 | 100.00 | % | $ | 191 | $ | 105,651 | 100.00 | % |
Each
quarter, management evaluates the total balance of the allowance for loan losses
based on several factors that are not loan specific, but are reflective of the
inherent losses in the loan portfolio. This process includes, but is
not limited to, a periodic review of loan collectibility in light of historical
experience, the nature and volume of loan activity, conditions that may affect
the ability of the borrower to repay, underlying value of collateral, if
applicable, and economic conditions in the Association’s immediate market
area. First, loans are grouped by delinquency status. All
loans 90 days or more delinquent are evaluated individually, based primarily on
the value of the collateral securing the loan. Specific loss
allowances are established as required by this analysis. All loans
for which a specific loss allowance has not been assigned are segregated by type
and delinquency status and a loss allowance is established by using loss
experience data and management’s judgment concerning other matters it considers
significant. The allowance is allocated to each category of loan
based on the results of the above analysis. Small differences between
the allocated balances and recorded allowances are reflected as unallocated to
absorb losses resulting from the inherent imprecision involved in the loss
analysis process.
This
analysis process is inherently subjective, as it requires estimates that are
susceptible to revisions as more information becomes
available. Although management believes that it has established the
allowance at levels to absorb probable and estimable losses, future additions
may be necessary if economic or other conditions in the future differ from the
current environment.
Investments
Investments and
Mortgage-Backed Securities. The
Association’s investment portfolio at December 31, 2009 consisted of $1.3
million in Federal Home Loan Bank of New York stock and $3.6 million in
other interest earning assets, consisting of deposits at other financial
institutions and federal funds sold. The investment policy objectives
are to maintain liquidity within the guidelines established by the board of
directors. At December 31, 2009, the Association did not hold investments in any
single entity (other than United States Government or agency sponsored entities)
that had an aggregate book value in excess of 10% of its stockholder’s
equity.
The
following table sets forth the carrying value of the investment portfolio at the
dates indicated. The Federal Home Loan Bank stock has no stated
maturity, and the interest-bearing deposits with other institutions are payable
on demand.
At
December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Carrying
Value
|
%
of Total
|
Carrying
Value
|
%
of Total
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Investment
securities
|
||||||||||||||||
Federal
Home Loan Bank stock
|
$ | 1,275 | 26.09 | % | $ | 1,522 | 23.10 | % | ||||||||
Other
interest-earning assets:
|
||||||||||||||||
Interest-earning
deposits
|
1,861 | 38.09 | 2,967 | 45.03 | ||||||||||||
Federal
funds sold
|
1,750 | 35.82 | 2,100 | 31.87 | ||||||||||||
Total
interest-earning assets
|
3,611 | 73.91 | 5,067 | 76.90 | ||||||||||||
Total
|
$ | 4,886 | 100.00 | % | $ | 6,589 | 100.00 | % |
The Association also invests in
mortgage-backed securities, which are classified as held to
maturity. At December 31, 2009, the mortgage-backed securities
portfolio totaled $28.3 million, or 18.2% of total assets, and consisted of
$28.0 million in fixed-rate mortgage-backed securities guaranteed by Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), and $347,000 in
adjustable rate mortgage-backed securities guaranteed by GNMA, FNMA or
FHLMC.
The following table sets forth the
composition of the mortgage-backed securities at the dates
indicated.
At
December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Carrying
Value
|
%
of Total
|
Carrying
Value
|
%
of Total
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Mortgage-backed
securities held to maturity (1):
|
||||||||||||||||
GNMA
|
$ | 2,587 | 9.13 | % | $ | 3,202 | 9.72 | % | ||||||||
FNMA
|
20,126 | 71.02 | 23,380 | 71.01 | ||||||||||||
FHLMC
|
5,627 | 19.85 | 6,344 | 19.27 | ||||||||||||
Total
|
$ | 28,340 | 100.00 | % | $ | 32,926 | 100.00 | % |
________________________
(1) Mortgage-backed
securities classified as held to maturity are reported at amortized
cost.
The
composition and maturities of the mortgage-backed securities portfolio as of
December 31, 2009, are indicated in the following table.
Due
|
||||||||||||||||||||||||||||||||||||||||||||
Less
Than 1 Year
|
1
to 5 Years
|
5
to 10 Years
|
Over
10 Years
|
Total
Investment Securities
|
||||||||||||||||||||||||||||||||||||||||
Carrying
Value
|
Weighted
Average Yield
|
Carrying
Value
|
Weighted
Average Yield
|
Carrying
Value
|
Weighted
Average Yield
|
Carrying
Value
|
Weighted
Average Yield
|
Carrying
Value
|
Weighted
Average Yield
|
Market
Value
|
||||||||||||||||||||||||||||||||||
(Dollars
In Thousands)
|
||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed
securities
|
$ | 389 | 4.00 | % | $ | 144 | 4.00 | % | $ | 217 | 5.51 | % | $ | 27,590 | 5.32 | % | $ | 28,340 | 5.30 | % | $ | 29,567 |
The
following table shows mortgage-backed security purchase and repayment activities
of the Association for the periods indicated. The Association did not sell any
mortgage-backed and related securities during the periods
indicated.
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(In
Thousands)
|
||||||||
Purchases:
|
||||||||
Adjustable-rate
|
$ | - | $ | - | ||||
Fixed-rate
|
906 | 10,815 | ||||||
Total
purchases
|
906 | 10,815 | ||||||
Principal
repayments
|
(5,598 | ) | (3,148 | ) | ||||
Accretion
(amortization), net
|
106 | (92 | ) | |||||
Net (decrease)
increase
|
$ | (4,586 | ) | $ | 7,575 |
Sources
of Funds
General. Deposits
have traditionally been the primary source of funds for use in lending and
investment activities. In addition to deposits, funds are derived
from scheduled loan payments, investment maturities, loan prepayments and income
on earning assets. While scheduled loan payments and income on
earning assets are relatively stable sources of funds, deposit inflows and
outflows can vary widely and are influenced by prevailing interest rates, market
conditions and levels of competition. Borrowings from the Federal
Home Loan Bank of New York may be used in the short-term to compensate for
reductions in deposits and to fund loan growth.
Deposits. Deposits are not
actively solicited outside of the New York City metropolitan area, and
substantially all of the depositors are persons who work or reside in Brooklyn,
New York. The Association offers a selection of deposit instruments,
including demand deposits consisting of non-interest bearing and NOW accounts,
passbook savings and club accounts, and fixed-term certificates of
deposit. Deposit account terms vary, with the principal differences
being the minimum balance required, the amount of time the funds must remain on
deposit and the interest rate. The Association does not accept
brokered deposits.
Interest rates paid, maturity terms,
service fees and withdrawal penalties are established on a periodic
basis. Deposit rates and terms are based primarily on current
operating strategies and market rates, liquidity requirements, rates paid by
competitors and growth goals. Personalized customer service and
long-standing relationships with customers are relied upon to attract and retain
deposits.
The flow of deposits is influenced
significantly by general economic conditions, changes in money market and other
prevailing interest rates and competition. The variety of deposit
accounts offered allows the Association to be competitive in obtaining funds and
responding to changes in consumer demand. Based on experience,
management believes the deposits in the Association are relatively
stable. However, the ability to attract and maintain certificates of
deposit, and the rates paid on these deposits have been and will continue to be
significantly affected by market conditions. At December 31, 2009,
$74.8 million, or 64.9% of deposit accounts were certificates of deposit, of
which $60.7 million have maturities of one year or less.
Deposit
Accounts. The following table sets forth the dollar amount of
deposits in the various types of deposit programs offered as of the dates
indicated.
At
December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Weighted
Average Rate
|
Amount
|
Weighted
Average Rate
|
Amount
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Demand
deposits:
|
||||||||||||||||
Non-interest-bearing
|
- | % | $ | 5,863 | - | % | $ | 3,868 | ||||||||
NOW
|
0.30 | 415 | 0.30 | 504 | ||||||||||||
6,278 | 4,372 | |||||||||||||||
Passbook
and club accounts
|
0.34 | 34,118 | 0.34 | 33,588 | ||||||||||||
Certificates
of deposit
|
2.47 | 74,772 | 3.65 | 63,716 | ||||||||||||
Total
|
1.71 | % | $ | 115,168 | 2.40 | % | $ | 101,676 |
Deposit
Activity. The following
table sets forth the deposit activities for the periods indicated.
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
In Thousands)
|
||||||||
Beginning balance
|
$ | 101,676 | $ | 102,672 | ||||
Net
deposits (withdrawals)
|
11,133 | (3,482 | ) | |||||
Interest
credited on deposit accounts
|
2,359 | 2,486 | ||||||
Ending
balance
|
$ | 115,168 | $ | 101,676 | ||||
Net
increase (decrease)
|
$ | 13,492 | $ | (996 | ) | |||
Percent
increase (decrease)
|
13.27 | % | (0.97 | )% |
Certificates of
Deposits. The following
table indicates the amount of Certificates of Deposit as of December 31, 2009,
by time remaining until maturity.
Three months or
less
|
Over
three months to six months
|
Over
six months to twelve months
|
Over
twelve months
|
Total
|
||||||||||||||||
(In
Thousands)
|
||||||||||||||||||||
Certificates
of deposit:
|
||||||||||||||||||||
Less
than $100,000
|
$ | 12,779 | $ | 12,132 | $ | 12,034 | $ | 8,814 | $ | 45,759 | ||||||||||
$100,000
or more
|
9,307 | 6,046 | 8,369 | 5,291 | 29,013 | |||||||||||||||
Total
|
$ | 22,086 | $ | 18,178 | $ | 20,403 | $ | 14,105 | $ | 74,772 |
Time Deposit
Maturity Schedule. The following table presents, by rate
category, the remaining period to maturity of time deposit accounts outstanding
as of December 31, 2009 (Dollars in thousands).
Quarter
Ending
|
1.00%
to 2.00%
|
2.01%
to 3.00%
|
3.01
% to 4.00%
|
4.01%
to 5.00%
|
5.01%
to 6.00%
|
TOTAL
|
||||||||||||||||||
March
31, 2010
|
$ | 6,498 | $ | 6,597 | $ | 8,872 | $ | 119 | $ | - | $ | 22,086 | ||||||||||||
June
30, 2010
|
6,038 | 10,643 | 766 | 308 | 423 | 18,178 | ||||||||||||||||||
September
30, 2010
|
5,983 | 2,071 | 389 | 152 | 73 | 8,668 | ||||||||||||||||||
December
31, 2010
|
10,239 | 692 | 228 | 367 | 209 | 11,735 | ||||||||||||||||||
March
31, 2011
|
1,276 | 169 | 270 | 174 | 96 | 1,985 | ||||||||||||||||||
June
30, 2011
|
467 | 128 | 210 | 78 | - | 883 | ||||||||||||||||||
September
30, 2011
|
324 | 387 | 188 | 277 | - | 1,176 | ||||||||||||||||||
December
31, 2011
|
201 | 260 | 334 | 150 | - | 945 | ||||||||||||||||||
Thereafter
|
352 | 1,289 | 2,293 | 2,605 | 2,577 | 9,116 | ||||||||||||||||||
Total
|
$ | 31,378 | $ | 22,236 | $ | 13,550 | $ | 4,230 | $ | 3,378 | $ | 74,772 | ||||||||||||
Percentage
of total
|
41.96 | % | 29.74 | % | 18.12 | % | 5.66 | % | 4.52 | % |
Borrowings. The
Association may obtain advances from the Federal Home Loan Bank of New York upon
the security of the common stock owned in the Federal Home Loan Bank and its
qualifying residential mortgage loans and mortgage-backed securities, provided
certain standards related to creditworthiness are met. These advances
are made pursuant to several credit programs, each of which has its own interest
rate and range of maturities. All borrowings consisted solely of
fixed interest rate advances from Federal Home Loan Bank of New
York. As of December 31, 2009, the outstanding amount of these
advances totaled $22.9 million. See Note 8 to the Consolidated Financial
Statements included hereto in Exhibit 13.
Subsidiary
Activities
Office of Thrift Supervision
regulations permit federal savings associations to invest in the capital stock,
obligations or other specified types of securities of subsidiaries (referred to
as “service corporations”) and to make loans to such subsidiaries and joint
ventures in which such subsidiaries are participants in an aggregate amount not
exceeding 2% of the association’s assets, plus an additional 1% of assets if the
amount over 2% is used for specified community or inner-city development
purposes. In addition, federal regulations permit associations to
make specified types of loans to such subsidiaries (other than special purpose
finance subsidiaries) in which the association owns more than 10% of the stock,
in an aggregate amount not exceeding 50% of the association’s regulatory capital
if the association’s regulatory capital is in compliance with applicable
regulations.
Flatbush Federal has one active
subsidiary, Flatbush REIT, Inc. Flatbush REIT, Inc. was incorporated
in 2001 as a special purpose real estate investment trust under New York
law. Flatbush REIT, Inc. holds a portion of our mortgage
related assets. At December 31, 2009, Flatbush REIT, Inc. held $16.8
million in loans.
FEDERAL
AND STATE TAXATION
Federal
Taxation
General. Flatbush Federal
Bancorp, Inc. and Flatbush Federal are subject to federal income taxation in the
same general manner as other corporations, with some exceptions discussed
below. Flatbush Federal’s tax returns have not been audited during
the past five years. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive description of the tax rules applicable to Flatbush Federal
Bancorp, Inc. or Flatbush Federal.
Method of
Accounting. For Federal
income tax purposes, Flatbush Federal currently reports its income and expenses
on the accrual method of accounting and uses a tax year ending December 31 for
filing its federal income tax returns.
Bad Debt
Reserves. Prior to the
Small Business Protection Act of 1996 (the “1996 Act”), Flatbush Federal was
permitted to establish a reserve for bad debts and to make annual additions to
the reserve. These additions could, within specified formula limits,
be deducted in arriving at our taxable income. Flatbush Federal was
required to use the specific charge off method in computing its bad debt
deduction beginning with its 1996 federal tax return. Savings
institutions were required to recapture any excess reserves over those
established as of December 31, 1987 (base year reserve). Flatbush
Federal had approximately $3.4 million of pre-1988 bad debt reserves that are
subject to recapture.
As more
fully discussed below, Flatbush Federal files a New York State franchise tax
return. New York State and New York City enacted legislation in 1996,
which among other things, decoupled the Federal tax laws regarding thrift bad
debt deductions and permits the continued use of the bad debt provisions that
applied under federal law prior to the enactment of the 1996
Act. Provided Flatbush Federal continues to satisfy certain
definitional tests and other conditions, for New York State and New York City
income tax purposes it is permitted to continue to use a reserve method for bad
debt deductions. The deductible annual addition to such reserves may
be computed using a specific formula based on an institution’s loss history (the
“experience method”) or a statutory percentage equal to 32% of its New York
State and New York City taxable income (the “percentage method”) before bad debt
deduction.
Taxable
Distributions and Recapture. Prior to the
1996 Act, bad debt reserves created prior to January 1, 1988 were subject to
recapture into taxable income if Flatbush Federal failed to meet certain thrift
asset and definitional tests. Federal legislation has eliminated
these thrift related recapture rules.
At
December 31, 2009, our total federal pre-1988 base year reserve was
approximately $3.4 million. Under current law, pre-1988 base year
reserves remain subject to recapture if Flatbush Federal makes certain
non-dividend distributions, repurchases any of its stock, pays dividends in
excess of tax earnings and profits, or ceases to maintain a bank
charter. In addition, New York State and New York City reserves for
loan losses in the amount of $5,182,000 and $5,250,000, respectively, are also
subject to similar recapture.
Alternative
Minimum Tax. The Internal
Revenue Code of 1986, as amended (the “Code”), imposes an alternative minimum
tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain
tax preferences (“alternative minimum taxable income” or “AMTI”). The
AMT is payable to the extent such AMTI is in excess of an exemption amount and
the AMT exceeds the regular income tax. Net operating losses can
offset no more than 90% of AMTI. Certain payments of AMT may be used
as credits against regular tax liabilities in future years. Flatbush
Federal has not been subject to the AMT and has no AMT payments available as
credits for carryover.
Net Operating
Loss Carryovers. A financial
institution may carry back net operating losses to the preceding two taxable
years and forward to the succeeding 20 taxable years. At December 31,
2009, Flatbush Federal had no net operating loss carry forwards for federal
income tax purposes.
Corporate
Dividends-Received Deduction. Flatbush Federal
Bancorp, Inc. may exclude from its income 100% of dividends received from
Flatbush Federal as a member of the same affiliated group of
corporations. The corporate dividends-received deduction is 80% in
the case of dividends received from corporations with which a corporate
recipient does not file a consolidated return, and corporations which own less
than 20% of the stock of a corporation distributing a dividend may deduct only
70% of dividends received or accrued on their behalf.
State
Taxation
New York State
Taxation. Flatbush Federal
Bancorp, Inc. and Flatbush Federal will report income on a calendar year basis
to New York State. New York State franchise tax on corporations is
imposed in an amount equal to the greater of (a) 7.5% of “entire net income”
allocable to New York State, (b) 3% of “alternative entire net income” allocable
to New York State, (c) 0.01% of the average value of assets allocable to New
York State, or (d) nominal minimum tax. Entire net income is based on
Federal taxable income, subject to certain modifications. Alternative
entire net income is equal to entire net income without certain
modifications.
Personnel
As of
December 31, 2009, the Company had 34 full-time employees and 2 part-time
employees. The employees are not represented by any collective
bargaining group. Management believes that the Company has good
relations with its employees.
SUPERVISION
AND REGULATION
General
The
Association is examined and supervised by the Office of Thrift Supervision and
subject to the regulation of the Federal Deposit Insurance Corporation
(FDIC). This regulation and supervision establishes a comprehensive
framework of activities in which an institution may engage and is intended
primarily for the protection of the FDIC’s deposit insurance funds and
depositors. Under this system of federal regulation, financial
institutions are periodically examined to ensure that they satisfy applicable
standards with respect to their capital adequacy, assets, management, earnings,
liquidity and sensitivity to market interest rates. Following
completion of its examination, the federal agency critiques the institution’s
operations and assigns its rating (known as an institution’s CAMELS
rating). Under federal law, an institution may not disclose its
CAMELS rating to the public. The Association also is a member of and owns stock
in the Federal Home Loan Bank of New York, which is one of the twelve regional
banks in the Federal Home Loan Bank System. The Association also is
regulated to a lesser extent by the Board of Governors of the Federal Reserve
System, governing reserves to be maintained against deposits and other
matters. The Office of Thrift Supervision examines the Association
and prepares reports for the consideration of its board of directors on any
operating deficiencies. The Association’s relationship with its
depositors and borrowers also is regulated to a great extent by both federal and
state laws, especially in matters concerning the ownership of deposit accounts
and the form and content of the Association’s mortgage documents.
Certain regulatory requirements
applicable to Flatbush Federal Savings and Loan Association and Flatbush Federal
Bancorp, Inc. are referred to below or appear elsewhere in this Form 10-K. This
regulatory discussion, however, does not purport to be an exhaustive treatment
of applicable laws and regulations. Any change in these laws or regulations,
whether by the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision or Congress, could have a material adverse impact on Flatbush
Federal Bancorp, Inc. and Flatbush Federal Savings and Loan Association and
their operations.
Proposed
Federal Legislation
Legislation
has been introduced in the United States Senate and House of Representatives
that would implement sweeping changes to the current bank regulatory structure
described in this section. A bill passed by the House of
Representatives would eliminate the primary federal regulator for the
Association and the Company, the Office of Thrift Supervision, by merging the
Office of Thrift Supervision into the Comptroller of the Currency (the primary
federal regulator for national banks). If the House legislation is enacted, the
Association would become subject to supervision by the Division of Thrift
Supervision of the Comptroller of the Currency. The Company would
become a bank holding company subject to regulation and supervision by the Board
of Governors of the Federal Reserve System.
The Senate proposal would also merge
the Office of Thrift Supervision into the Office of the Comptroller of the
Currency. Supervision of savings and loan holding companies with a
federal savings bank subsidiary and less than $50 billion in assets, such as the
Company, would be transferred to the Office of the Comptroller of the
Currency. The Office of the Comptroller of the Currency would also
become the primary federal regulator of the Association.
Both the House bill and the Senate
proposal would establish new government bureaucracies empowered to write
consumer protection rules and, in certain cases, to conduct examinations and
implement enforcement actions with respect thereto. The creation of
such consumer protection bureaucracies could result in an increase in our
compliance costs.
Federal
Banking Regulation
Business
Activities. A federal savings association derives its lending
and investment powers from the Home Owners’ Loan Act, as amended, and the
regulations of the Office of Thrift Supervision. Under these laws and
regulations, the Association may invest in mortgage loans secured by residential
and commercial real estate, commercial business and consumer loans, certain
types of debt securities and certain other assets. Certain types of
lending, such as commercial and consumer loans, are subject to an aggregate
limit calculated as a specified percentage of the Association’s capital or
assets. The Association also may establish subsidiaries that may
engage in activities not otherwise permissible for the Association, including
real estate investment and securities and insurance brokerage.
Capital
Requirements. Office of Thrift Supervision regulations require
savings associations to meet three minimum capital standards: a 1.5%
tangible capital ratio, a 4% leverage ratio (3% for associations receiving the
highest rating on the CAMELS rating system) and an 8% risk-based capital
ratio. The prompt corrective action standards discussed below, in
effect, establish a minimum 2% tangible capital standard.
The
risk-based capital standard for savings associations requires the maintenance of
Tier 1 (core) and total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all
assets, including certain off-balance sheet assets, are multiplied by a
risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision
based on the risks believed inherent in the type of asset. Core
capital is
defined
as common stockholders’ equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus and minority
interests in equity accounts of consolidated subsidiaries, less intangibles
other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital currently
include cumulative preferred stock, long-term perpetual preferred stock,
mandatory convertible securities, subordinated debt and intermediate preferred
stock, the allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of net unrealized gains on available-for-sale
equity securities with readily determinable fair market
values. Overall, the amount of supplementary capital included as part
of total capital cannot exceed 100% of core capital.
At
December 31, 2009, the Association’s capital exceeded all applicable
requirements.
Loans-to-One
Borrower. A
federal savings association generally may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of unimpaired capital and
surplus. An additional amount may be loaned, equal to 10% of
unimpaired capital and surplus, if the loan is secured by readily marketable
collateral, which generally does not include real estate. As of
December 31, 2009, the Association was in compliance with the loans-to-one
borrower limitations.
Qualified Thrift
Lender Test. As a federal savings
association, the Association is subject to a qualified thrift lender, or “QTL,”
test. Under the QTL test, the Association must maintain at least 65%
of its “portfolio assets” in “qualified thrift investments” in at least nine of
the most recent 12 month period. “Portfolio assets” generally means
total assets of a savings institution, less the sum of specified liquid assets
up to 20% of total assets, goodwill and other intangible assets, and the value
of property used in the conduct of the savings association’s
business.
“Qualified
thrift investments” includes various types of loans made for residential and
housing purposes, investments related to such purposes, including certain
mortgage-backed and related securities, and loans for personal, family,
household and certain other purposes up to a limit of 20% of portfolio
assets. “Qualified thrift investments” also include 100% of an
institution’s credit card loans, education loans and small business
loans. The Association also may satisfy the QTL test by qualifying as
a “domestic building and loan association” as defined in the Internal Revenue
Code.
A savings
association that fails the QTL test must either convert to a bank charter or
operate under specified restrictions. At December 31, 2009, the
Association maintained approximately 81.13% of its portfolio assets in qualified
thrift investments.
Capital
Distributions. Office of Thrift
Supervision regulations govern capital distributions by a federal savings
association, which include cash dividends, stock repurchases and other
transactions charged to the capital account. A savings association
must file an application for approval of a capital distribution if:
|
·
|
the
total capital distributions for the applicable calendar year exceed the
sum of the association’s net income for that year to date plus the
association’s retained net income for the preceding two
years;
|
|
·
|
the
association would not be at least adequately capitalized following the
distribution;
|
|
·
|
the
distribution would violate any applicable statute, regulation, agreement
or Office of Thrift Supervision-imposed condition;
or
|
|
·
|
the
association is not eligible for expedited treatment of its
filings.
|
Even if
an application is not otherwise required, every savings association that is a
subsidiary of a holding company must still file a notice with the Office of
Thrift Supervision at least 30 days before the board of directors declares a
dividend or approves a capital distribution.
The
Office of Thrift Supervision may disapprove a notice or application
if:
|
·
|
the
association would be undercapitalized following the
distribution;
|
|
·
|
the
proposed capital distribution raises safety and soundness concerns;
or
|
|
·
|
the
capital distribution would violate a prohibition contained in any statute,
regulation or agreement.
|
In
addition, the Federal Deposit Insurance Act provides that an insured depository
institution shall not make any capital distribution, if after making such
distribution the institution would be undercapitalized.
Liquidity. A
federal savings association is required to maintain a sufficient amount of
liquid assets to ensure its safe and sound operation.
Community
Reinvestment Act and Fair Lending Laws. All savings
associations have a responsibility under the Community Reinvestment Act and
related regulations of the Office of Thrift Supervision to help meet the credit
needs of their communities, including low- and moderate-income
neighborhoods. In connection with its examination of a federal
savings association, the Office of Thrift Supervision is required to assess the
association’s record of compliance with the Community Reinvestment
Act. In addition, the Equal Credit Opportunity Act and the Fair
Housing Act prohibit lenders from discriminating in their lending practices on
the basis of characteristics specified in those statutes. An
association’s failure to comply with the provisions of the Community
Reinvestment Act could, at a minimum, result in denial of certain corporate
applications such as branches or mergers, or restrictions on its
activities. The failure to comply with the Equal Credit Opportunity
Act and the Fair Housing Act could result in enforcement actions by the Office
of Thrift Supervision, as well as other federal regulatory agencies and the
Department of Justice. The Association received a satisfactory
Community Reinvestment Act rating in its most recent federal
examination.
Transactions with
Related Parties. A federal savings association’s authority to
engage in transactions with its “affiliates” is limited by Office of Thrift
Supervision regulations and by Sections 23A and 23B of the Federal Reserve Act
(the “FRA”). The term “affiliates” for these purposes generally means
any company that controls, is controlled by, or is under common control with an
institution. Flatbush Federal Bancorp, Inc. is an affiliate of
Flatbush Federal Savings and Loan Association. In general, transactions with
affiliates must be on terms that are as favorable to the association as
comparable transactions with non-affiliates. In addition, certain
types of these transactions are restricted to an aggregate percentage of the
association’s capital. Collateral in specified amounts must usually
be provided by affiliates in order to receive loans from the
association. In addition, Office of Thrift Supervision regulations
prohibit a savings association from lending to any of its affiliates that are
engaged in activities that are not permissible for bank holding companies and
from purchasing the securities of any affiliate, other than a
subsidiary.
The
Association’s authority to extend credit to its directors, executive officers
and 10% shareholders, as well as to entities controlled by such persons, is
currently governed by the requirements of Sections 22(g) and 22(h) of the
FRA and Regulation O of the Federal Reserve Board. Among
other
things,
these provisions require that extensions of credit to insiders (i) be made on
terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features, and (ii) not
exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the Association’s capital. In addition, extensions of
credit in excess of certain limits must be approved by the Association’s board
of directors.
Enforcement. The
Office of Thrift Supervision has primary enforcement responsibility over federal
savings institutions and has the authority to bring enforcement action against
all “institution-affiliated parties,” including stockholders, and attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured
institution. Formal enforcement action may range from the issuance of
a capital directive or cease and desist order to removal of officers and/or
directors of the institution, receivership, conservatorship or the termination
of deposit insurance. Civil penalties cover a wide range of
violations and actions, and range up to $25,000 per day, unless a finding of
reckless disregard is made, in which case penalties may be as high as $1 million
per day. The FDIC also has the authority to recommend to the Director
of the Office of Thrift Supervision that enforcement action be taken with
respect to a particular savings institution. If action is not taken
by the Director, the FDIC has authority to take action under specified
circumstances.
Standards for
Safety and Soundness. Federal law requires each federal
banking agency to prescribe certain standards for all insured depository
institutions. These standards relate to, among other things, internal
controls, information systems and audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, compensation, and other
operational and managerial standards as the agency deems
appropriate. The federal banking agencies adopted Interagency
Guidelines Prescribing Standards for Safety and Soundness to implement the
safety and soundness standards required under federal law. The
guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. The guidelines address internal
controls and information systems, internal audit systems, credit underwriting,
loan documentation, interest rate risk exposure, asset growth, compensation,
fees and benefits. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard. If an
institution fails to meet these standards, the appropriate federal banking
agency may require the institution to submit a compliance plan.
Prompt Corrective
Action Regulations. Under the prompt
corrective action regulations, the Office of Thrift Supervision is required and
authorized to take supervisory actions against undercapitalized savings
associations. For this purpose, a savings association is placed in
one of the following five categories based on the association’s
capital:
|
·
|
well-capitalized
(at least 5% leverage capital, 6% Tier 1 risk-based capital and 10%
total risk-based capital);
|
|
·
|
adequately
capitalized (at least 4% leverage capital, 4% Tier 1 risk-based
capital and 8% total risk-based
capital);
|
|
·
|
undercapitalized
(less than 8% total risk-based capital, 4% Tier 1 risk-based capital
or 3% leverage capital);
|
|
·
|
significantly
undercapitalized (less than 6% total risk-based capital, 3% Tier 1
risk-based capital or 3% leverage capital);
and
|
|
·
|
critically
undercapitalized (less than 2% tangible
capital).
|
Generally,
the banking regulator is required to appoint a receiver or conservator for an
association that is “critically undercapitalized” within specific time
frames. The regulations also provide that a capital restoration plan
must be filed with the Office of Thrift Supervision within 45 days of the date
an association receives notice that it is “undercapitalized,” “significantly
undercapitalized” or “critically undercapitalized,” the performance of which
must be guaranteed by any company controlling the association up to specified
limits. In addition, numerous mandatory supervisory actions become
immediately applicable to the association, including, but not limited to,
restrictions on growth, investment activities, capital distributions and
affiliate transactions. The Office of Thrift Supervision may also
take any one of a number of discretionary supervisory actions against
undercapitalized associations, including the issuance of a capital directive and
the replacement of senior executive officers and directors.
At
December 31, 2009, the Association met the criteria for being considered
“well-capitalized.”
Insurance of
Deposit Accounts. Deposit accounts in the
Association are insured by the FDIC, generally up to a maximum of $100,000 per
separately insured depositor and up to a maximum of $250,000 for self-directed
retirement accounts. However, pursuant to its statutory authority,
the Board of Directors of the FDIC recently increased the deposit insurance
available on deposit accounts to $250,000 effective until December 31,
2013.
The FDIC imposes an assessment against
financial institutions for deposit insurance. This assessment is based on the
risk category of the institution. Federal law requires that the designated
reserve ratio for the deposit insurance fund be established by the FDIC at 1.15%
to 1.50% of estimated insured deposits. If this reserve ratio drops below 1.15%
or the FDIC expects that it will do so within six months, the FDIC must, within
90 days, establish and implement a plan to restore the designated reserve ratio
to 1.15% of estimated insured deposits within five years (absent extraordinary
circumstances).
Recent bank failures coupled with
deteriorating economic conditions have significantly reduced the deposit
insurance fund’s reserve ratio. As of June 30, 2008, the designated reserve
ratio was 1.01% of estimated insured deposits at March 31, 2008. As a
result of this reduced reserve ratio, on October 16, 2008, the FDIC
published a proposed rule that would restore the reserve ratio to its required
level of 1.15 percent within five years. On February 27, 2009, the FDIC
took action to extend the restoration plan horizon to seven years.
The amended restoration plan was
accompanied by a final rule that sets assessment rates and makes adjustments
that improve how the assessment system differentiates for risk. Under the final
rule, total base assessment rates range from 7 to 77.5 basis points of the
institution’s
deposits.
The FDIC also adopted a final rule
imposing an emergency special assessment of 5 basis points on the industry on
June 30, 2009. The assessment was collected on September 30, 2009. The
cost of this special assessment to the Association was $70,560.
On November 12, 2009, the FDIC adopted
a final rule that required insured depository institutions to prepay their
quarterly risk-based assessments for all of 2010, 2011, and 2012, on December
30, 2009, along with each institution’s risk-based deposit insurance assessment
for the third and fourth quarters of 2009. For purposes of calculating the
amount to prepay, the FDIC required that institutions use their total base
assessment rate in effect on September 30, 2009 and increase that assessment
base
quarterly
at a 5 percent annual growth rate through the end of 2012. On September 29,
2009, the FDIC also increased annual assessment rates uniformly by 3 basis
points beginning in 2011 such that an institution’s assessment for 2011 and 2012
would be increased by an annualized 3 basis points. The Company’s prepayment for
2010, 2011 and 2012 amounted to $599,901.
Insurance of deposits may be terminated
by the FDIC upon a finding that an institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC. We do not know of any practice, condition or violation that might lead to
termination of the Association’s deposit insurance.
In
addition to the Federal Deposit Insurance Corporation assessments, the Financing
Corporation (“FICO”) is authorized to impose and collect, with the approval of
the Federal Deposit Insurance Corporation, assessments for anticipated payments,
issuance costs and custodial fees on bonds issued by the FICO in the 1980s to
recapitalize the former Federal Savings and Loan Insurance
Corporation. The bonds issued by the FICO are due to mature in 2017
through 2019. For the quarter ended December 31, 2009, the annualized
FICO assessment was equal to 1.02 basis points for each $100 in domestic
deposits maintained at an institution.
In
October 2008, the FDIC announced the Transaction Account Guarantee Program as
part of the FDIC’s Temporary Liquidity Guarantee Program. Under the Transaction
Account Guarantee Program, any participating depository institution would be
able to provide full deposit insurance coverage for non-interest bearing
transaction accounts, regardless of the dollar amount. Under the
program, effective December 5, 2008, insured depository institutions that have
not opted out of the Temporary Liquidity Guarantee Program became subject to a
0.10% surcharge applied to non-interest bearing transaction deposit account
balances in excess of $250,000, which surcharge was added to the institution’s
existing risk-based deposit insurance assessments. The Association
has chosen to participate in the Transaction Account Guarantee Program until the
program, as extended, expires on June 30, 2010.
Prohibitions
Against Tying Arrangements. Federal savings
associations are prohibited, subject to some exceptions, from extending credit
to or offering any other service, or fixing or varying the consideration for
such extension of credit or service, on the condition that the customer obtain
some additional service from the institution or its affiliates or not obtain
services of a competitor of the institution.
Federal Home Loan
Bank System. The Association is a member of the Federal Home
Loan Bank System, which consists of 12 regional Federal Home Loan
Banks. The Federal Home Loan Bank System provides a central credit
facility primarily for member institutions. As a member, the
Association is required to acquire and hold shares of capital stock in the
Federal Home Loan Bank of New York in an amount at least equal to 1% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its borrowings from the
Federal Home Loan Bank, whichever is greater. As of December 31,
2009, Flatbush Federal was in compliance with this requirement.
The
dividend yield from Federal Home Loan Bank stock was 5.60% for the year ended
December 31, 2009. The Federal Home Loan Bank of New York paid
quarterly dividends in 2009 and 2008 totaling $68,000 and $94,000,
respectively. No assurance can be given that it will pay any
dividends in the future.
Federal
Reserve System
The
Federal Reserve Board regulations require savings associations to maintain
non-interest-earning reserves against their transaction accounts, such as
negotiable order of withdrawal and regular
checking
accounts. At December 31, 2009, Flatbush Federal was in compliance
with these reserve requirements.
The
USA PATRIOT Act
In
response to the events of September 11, 2001, Congress enacted in 2001 the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, or the “USA PATRIOT Act,” which
was signed into law on October 26, 2001. The USA PATRIOT Act gives
the federal government new powers to address terrorist threats through enhanced
domestic security measures, expanded surveillance powers, increased information
sharing and broadened anti-money laundering requirements.
Sarbanes-Oxley
Act of 2002
The
Sarbanes-Oxley Act of 2002 (the “Act”) contains a range of corporate accounting
and reporting reforms that are intended to address corporate and accounting
fraud. In addition to the establishment of a new accounting oversight
board that will enforce auditing, quality control and independence standards and
will be funded by fees from all publicly traded companies, the Act places
certain restrictions on the scope of services that may be provided by accounting
firms to their public company audit clients. Any non-audit services
being provided to a public company audit client will require preapproval by the
company’s audit committee. In addition, the Act makes certain changes
to the requirements for audit partner rotation after a period of
time. The Act requires chief executive officers and chief financial
officers, or their equivalent, to certify to the accuracy of periodic reports
filed with the Securities and Exchange Commission, subject to civil and criminal
penalties if they knowingly or willingly violate this certification
requirement. In addition, under the Act, counsel will be required to
report evidence of a material violation of the securities laws or a breach of
fiduciary duty by a company to its chief executive officer or its chief legal
officer, and, if such officer does not appropriately respond, to report such
evidence to the audit committee or other similar committee of the board of
directors or the board itself.
Under the
Act, longer prison terms will apply to corporate executives who violate federal
securities laws; the period during which certain types of suits can be brought
against a company or its officers is extended; and bonuses issued to top
executives prior to restatement of a company’s financial statements are now
subject to disgorgement if such restatement was due to corporate
misconduct. Executives are also prohibited from insider trading
during retirement plan “blackout” periods, and loans to company executives
(other than loans by financial institutions permitted by federal rules and
regulations) are restricted. In addition, a provision directs that
civil penalties levied by the Securities and Exchange Commission as a result of
any judicial or administrative action under the Act be deposited to a fund for
the benefit of harmed investors. The Federal Accounts for Investor
Restitution provision also requires the Securities and Exchange Commission to
develop methods of improving collection rates. The legislation
accelerates the time frame for disclosures by public companies, as they must
immediately disclose any material changes in their financial condition or
operations. Directors and executive officers must also provide
information for most changes in ownership in a company’s securities within two
business days of the change.
The Act
also increases the oversight of, and codifies certain requirements relating to
audit committees of public companies and how they interact with the company’s
“registered public accounting firm.” Audit Committee members must be
independent and are absolutely barred from accepting consulting, advisory or
other compensatory fees from the issuer. In addition, companies must
disclose whether at least one member of the committee is a “financial expert”
(as such term will be defined by the Securities and Exchange Commission) and if
not, why not. Under the Act, a company’s registered
public
accounting
firm will be prohibited from performing statutorily mandated audit services for
a company if such company’s chief executive officer, chief financial officer,
comptroller, chief accounting officer or any person serving in equivalent
positions had been employed by such firm and participated in the audit of such
company during the one-year period preceding the audit initiation
date. The Act also prohibits any officer or director of a company or
any other person acting under their direction from taking any action to
fraudulently influence, coerce, manipulate or mislead any independent accountant
engaged in the audit of the company’s financial statements for the purpose of
rendering the financial statements materially misleading. The Act
also requires the Securities and Exchange Commission to prescribe rules
requiring inclusion of any internal control report and assessment by management
in the annual report to shareholders. The Act requires the company’s
registered public accounting firm that issues the audit report to attest to and
report on the company’s internal controls.
Management
has incurred certain costs and continues to evaluate the estimated cost of
ongoing compliance with the Sarbanes-Oxley Act.
Holding
Company Regulation
General. Flatbush
Federal Bancorp, MHC and Flatbush Federal Bancorp, Inc. are nondiversified
savings and loan holding companies within the meaning of the Home Owners’ Loan
Act. As such, Flatbush Federal Bancorp, MHC and Flatbush Federal
Bancorp, Inc. are registered with the Office of Thrift Supervision and are
subject to Office of Thrift Supervision regulations, examinations, supervision
and reporting requirements. In addition, the Office of Thrift
Supervision has enforcement authority over Flatbush Federal Bancorp, Inc. and
Flatbush Bancorp MHC, and their subsidiaries. Among other things,
this authority permits the Office of Thrift Supervision to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
institution. As federal corporations, Flatbush Federal Bancorp, Inc.
and Flatbush Federal Bancorp, MHC are generally not subject to state business
organization laws.
Permitted
Activities. Pursuant to Section 10(o) of the Home Owners’ Loan
Act and Office of Thrift Supervision regulations and policy, a mutual holding
company and a federally chartered mid-tier holding company such as Flatbush
Federal Bancorp, Inc. may engage in the following activities: (i) investing in
the stock of a savings association; (ii) acquiring a mutual association through
the merger of such association into a savings association subsidiary of such
holding company or an interim savings association subsidiary of such holding
company; (iii) merging with or acquiring another holding company, one of whose
subsidiaries is a savings association; (iv) investing in a corporation, the
capital stock of which is available for purchase by a savings association under
federal law or under the law of any state where the subsidiary savings
association or associations share their home offices; (v) furnishing or
performing management services for a savings association subsidiary of such
company; (vi) holding, managing or liquidating assets owned or acquired from a
savings subsidiary of such company; (vii) holding or managing properties used or
occupied by a savings association subsidiary of such company; (viii) acting as
trustee under deeds of trust; (ix) any other activity (A) that the Federal
Reserve Board, by regulation, has determined to be permissible for bank holding
companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the
Director of the Office of Thrift Supervision, by regulation, prohibits or limits
any such activity for savings and loan holding companies; or (B) in which
multiple savings and loan holding companies were authorized (by regulation) to
directly engage on March 5, 1987; (x) any activity permissible for financial
holding companies under Section 4(k) of the Bank Holding Company Act, including
securities and insurance underwriting; and (xi) purchasing, holding, or
disposing of stock acquired in connection with a qualified stock issuance if the
purchase of such stock by such savings and loan holding company is approved by
the Director. If a mutual holding company acquires or merges with
another holding company, the holding company acquired or the holding company
resulting from such merger or acquisition may only invest in assets and engage
in activities listed in (i) through (xi)
above,
and has a period of two years to cease any nonconforming activities and divest
of any nonconforming investments.
The Home Owners’ Loan Act prohibits a
savings and loan holding company, including Flatbush Federal Bancorp, Inc. and
Flatbush Federal Bancorp, MHC, directly or indirectly, or through one or more
subsidiaries, from acquiring more than 5% of another savings institution or
holding company thereof, without prior written approval of the Office of Thrift
Supervision. It also prohibits the acquisition or retention of, with
certain exceptions, more than 5% of a nonsubsidiary company engaged in
activities other than those permitted by the Home Owners’ Loan Act; or acquiring
or retaining control of an institution that is not federally
insured. In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision must consider the
financial and managerial resources, future prospects of the company and
institution involved, the effect of the acquisition on the risk to the insurance
fund, the convenience and needs of the community and competitive
factors.
The Office of Thrift Supervision is
prohibited from approving any acquisition that would result in a multiple
savings and loan holding company controlling savings institutions in more than
one state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies, and (ii) the acquisition of
a savings institution in another state if the laws of the state of the target
savings institution specifically permit such acquisitions. The states
vary in the extent to which they permit interstate savings and loan holding
company acquisitions.
Waivers of
Dividends by Flatbush Federal Bancorp, MHC. Office of Thrift
Supervision regulations require Flatbush Federal Bancorp, MHC to notify the
Office of Thrift Supervision of any proposed waiver of its receipt of dividends
from Flatbush Federal Bancorp, Inc. The Office of Thrift Supervision
reviews dividend waiver notices on a case-by-case basis, and, in general, does
not object to any such waiver if: (i) the mutual holding company’s board of
directors determines that such waiver is consistent with such directors’
fiduciary duties to the mutual holding company’s members; (ii) for as long as
the savings association subsidiary is controlled by the mutual holding company,
the dollar amount of dividends waived by the mutual holding company is
considered as a restriction on the retained earnings of the savings association,
which restriction, if material, is disclosed in the public financial statements
of the savings association as a note to the financial statements; (iii) the
amount of any dividend waived by the mutual holding company is available for
declaration as a dividend solely to the mutual holding company, and where the
savings association determines that the payment of such dividend to the mutual
holding company is probable, an appropriate dollar amount is recorded as a
liability; and (iv) the amount of any waived dividend is considered as having
been paid by the savings association in evaluating any proposed dividend under
Office of Thrift Supervision capital distribution regulations. We
anticipate that Flatbush Federal Bancorp, MHC will waive dividends paid by
Flatbush Federal Bancorp, Inc. Under Office of Thrift Supervision regulations,
our public stockholders would not be diluted because of any dividends waived by
Flatbush Federal Bancorp, MHC (and waived dividends would not be considered in
determining an appropriate exchange ratio) in the event Flatbush Federal
Bancorp, MHC converts to stock form.
Conversion of
Flatbush Federal Bancorp, MHC to Stock Form. Office of Thrift
Supervision regulations permit Flatbush Federal Bancorp, MHC to convert from the
mutual form of organization to the capital stock form of organization (a
“Conversion Transaction”). There can be no assurance when, if ever, a
Conversion Transaction will occur, and the Board of Directors has no current
intention or plan to undertake a Conversion Transaction. In a
Conversion Transaction, a new holding company would be formed as the successor
to Flatbush Federal Bancorp, Inc. (the “New Holding Company”), Flatbush Federal
Bancorp,
MHC’s
corporate existence would end, and certain depositors of Flatbush Federal would
receive the right to subscribe for additional shares of the New Holding
Company. In a Conversion Transaction, each share of common stock held
by stockholders other than Flatbush Federal Bancorp, MHC (“Minority
Stockholders”) would be automatically converted into a number of shares of
common stock of the New Holding Company determined pursuant to an exchange ratio
that ensures that Minority Stockholders own the same percentage of common stock
in the New Holding Company as they owned in Flatbush Federal Bancorp, Inc.
immediately prior to the Conversion Transaction. Under Office of
Thrift Supervision regulations, Minority Stockholders would not be diluted
because of any dividends waived by Flatbush Federal Bancorp, MHC (and waived
dividends would not be considered in determining an appropriate exchange ratio),
in the event Flatbush Federal Bancorp, MHC converts to stock
form. The total number of shares held by Minority Stockholders after
a Conversion Transaction also would be increased by any purchases by Minority
Stockholders in the stock offering conducted as part of the Conversion
Transaction.
Emergency
Economic Stabilization Act of 2008
In response to recent unprecedented
market turmoil, the Emergency Economic Stabilization Act of Act (“EESA”) was
enacted on October 3, 2008. EESA authorizes the Secretary of the
Treasury to purchase up to $700 billion in troubled assets from financial
institutions under the Troubled Asset Relief Program (“TARP”). EESA
increases the maximum deposit insurance amount up to $250,000 until December 31,
2013 and removes the statutory limits on the Federal Deposit Insurance
Corporation’s (the “FDIC”) ability to borrow from the Treasury during this
period. The FDIC may not take the temporary increase in deposit
insurance coverage into account when setting assessments. EESA allows
financial institutions to treat any loss on the preferred stock of the Federal
National Mortgage Association or Federal Home Loan Mortgage Corporation as an
ordinary loss for tax purposes.
Pursuant
to his authority under EESA, the Secretary of the Treasury has created the TARP
Capital Purchase Program under which the Treasury Department will invest up to
$250 billion in senior preferred stock of U.S. banks and savings associations or
their holding companies. Qualifying financial institutions may issue
senior preferred stock with a value equal to not less than 1% of risk-weighted
assets and not more than the lesser of $25 billion or 3% of risk-weighted
assets. The Company did not participate in the Capital Purchase
Program.
Federal
Securities Laws
Flatbush
Federal Bancorp, Inc.’s common stock is registered with the Securities and
Exchange Commission under the Securities Exchange Act of
1934. Flatbush Federal Bancorp, Inc. is subject to the information,
proxy solicitation, insider trading restrictions and other requirements under
the Securities Exchange Act of 1934.
Flatbush
Federal Bancorp, Inc. common stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If the Company meets specified current public
information requirements, each affiliate of the Company is able to sell in the
public market, without registration, a limited number of shares in any
three-month period.
Executive
Officers of the Company
Listed below is information, as of
December 31, 2009, concerning the Company’s executive officers. There
are no arrangements or understandings between the Company and any of the persons
named below with respect to which he was or is to be selected as an
officer.
Name
|
Age
|
Position and Term
|
||
Jesus
R. Adia
|
56
|
President
and Chief Executive Officer
|
||
John
S. Lotardo
|
48
|
Chief
Financial Officer and Controller
|
Availability
of Annual Report on Form 10-K
The Company files annual, quarterly
and current reports, proxy statements and other information with the SEC. You
may read and copy any document we file at the SEC’s Public Reference room at
100 F Street, N.E., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on its public reference room. In
addition, our SEC filings are available to the public at the SEC’s web site at
http://www.sec.gov and on the website at http://www.flatbush.com. The
Company has included the SEC’s web address and our web address as inactive
textual references only.
ITEM
1A.
|
RISK FACTORS
|
A smaller reporting company is not
required to provide the information required of this item.
ITEM
1B.
|
UNRESOLVED STAFF
COMMENTS
|
A smaller reporting company is not
required to provide the information required of this item.
ITEM
2.
|
PROPERTIES
|
Properties
The following table provides certain
information with respect to our offices as of December 31, 2009:
Location
|
Leased
or Owned
|
Year
Acquired
or Leased
|
||
Main
Office
2146
Nostrand Avenue
Brooklyn,
NY 11210
|
Owned
|
1963
|
||
Branch
Office
6410
18th
Avenue
Brooklyn,
NY 11204
|
Owned
|
2005
|
||
Branch
Office
518
Brighton Beach Avenue
Brooklyn,
NY 11235
|
Leased
|
1976
|
The net book value of our premises,
land and equipment was approximately $2.4 million at December 31,
2009.
ITEM
3.
|
LEGAL
PROCEEDINGS
|
We are involved, from time to time, as
plaintiff or defendant in various legal actions arising in the normal course of
our business. At December 31, 2009, we were not involved in any legal
proceedings, the outcome of which would be material to our financial condition
or results of operations.
PART
II
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
SECURITIES
|
The
Company’s Common Stock is traded on the over-the-counter bulletin board under
the symbol “FLTB.”
As of December 31, 2009, there were
2,799,657 shares of Company common stock issued and 2,736,907 common shares
outstanding and approximately 510 stockholders of record. Of the
total outstanding shares, 1,484,208 were held by Flatbush Federal Bancorp, MHC
and 1,252,699 were held by other shareholders.
The following table sets forth the
range of the high and low bid prices of the Company’s Common Stock for the
periods presented, and is based upon information provided on the Yahoo Finance
website. The Company declared 10% stock dividends on February 23,
2006 and March 22, 2005. The Company has never issued a cash
dividend.
Prices
of Common Stock
|
||||||||
High
|
Low
|
|||||||
Calendar
Quarter Ended
|
||||||||
December
31, 2009
|
$ | 4.01 | $ | 3.63 | ||||
September
30, 2009
|
$ | 4.05 | $ | 3.56 | ||||
June
30, 2009
|
$ | 4.02 | $ | 3.16 | ||||
March
31, 2009
|
$ | 4.07 | $ | 2.80 | ||||
December
31, 2008
|
$ | 4.80 | $ | 2.50 | ||||
September
30, 2008
|
$ | 6.00 | $ | 4.00 | ||||
June
30, 2008
|
$ | 6.05 | $ | 4.50 | ||||
March
31, 2008
|
$ | 6.00 | $ | 5.20 |
Set forth
below is information, as of December 31, 2009 regarding equity compensation
plans categorized by those plans that have been approved by stockholders and
those plans that have not been approved by stockholders.
Plan
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options and
Rights
|
Weighted
Average Exercise Price (2)
|
Number
of Securities Remaining Available For Issuance Under
Plan
|
Equity
compensation plans approved by stockholders
|
82,378
(1)
|
$ 9.71
|
57,357
|
Equity
compensation plans not approved by stockholders
|
---
|
---
|
---
|
Total
|
82,378
|
$ 9.71
|
57,357
|
(1)
|
Consists
of options to purchase 82,378 shares of common stock under the
2004 Plan .In addition to these outstanding options, restricted stock
awards of 11,398 shares were non-vested under the 2004 Plan as of December
31, 2009 The shares reflect the 10% stock dividends paid to all
stockholders on April 25, 2005 and March 29,
2006.
|
(2)
|
The
weighted average exercise price, following the 10% stock dividends paid on
April 25, 2005 and March 29, 2006, reflects the exercise price of $9.71
per share for options granted under the 2004
Plan.
|
On
June 30, 2005, the Board of Directors approved a stock repurchase program
and authorized the repurchase of up to 50,000 shares of the Company's
outstanding shares of common stock. This repurchase program was completed
on December 7, 2007 with 50,000 shares having been repurchased. On August
30, 2007, the Company approved a second stock repurchase program and
authorized the repurchase of up to 50,000 shares of the
Company’s outstanding shares of common stock. Stock repurchases
will be made from time to time and may be effected through open market
purchases, block trades and in privately negotiated transactions.
Repurchased stock will be held as treasury stock and will be available for
general corporate purposes. As of December 31, 2009, 12,750 total shares
have been repurchased by the Company under the second repurchase program.
For the quarter ending December 31, 2009, no shares were repurchased.
These total repurchased shares do not include the stock dividend shares of
1,340 which, along with the repurchased shares, are held as treasury
stock.
|
Company
Purchases of Common Stock
|
||||||||||||||||
Period
|
Total
number of shares purchased
|
Average
price paid per share
|
Total
number of shares purchased as part of publicly announced plans or
programs
|
Maximum
number (or approximate dollar value) of shares that may yet be purchased
under the plans or programs
|
||||||||||||
October
1, 2009 through October 31, 2009
|
- | $ | - | 62,750 | 37,250 | |||||||||||
November
1, 2009 through November 30, 2009
|
- | - | 62,750 | 37,250 | ||||||||||||
December
1, 2009 through December 31, 2009
|
- | - | 62,750 | 37,250 |
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
A smaller reporting company is not
required to provide the information required of this item.
ITEM
7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
The information required by this item
is incorporated by reference to our Annual Report to Shareholders.
ITEM
7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
A smaller
reporting company is not required to provide the information required of this
item.
ITEM
8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
|
The information required by this item
is incorporated by reference to our Annual Report to Shareholders.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
ITEMS
9A(T). CONTROLS AND
PROCEDURES
|
(a)
|
Evaluation
of disclosure controls and
procedures.
|
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of
the design and operation of our 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
fiscal year (the “Evaluation Date”). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures were effective in timely
alerting them in a timely manner to material information relating to us (or our
consolidated subsidiary) required to be included in our periodic SEC
filings.
|
(b)
|
Management’s
Annual Report on Internal Control over Financial
Reporting.
|
Management
of the Company and subsidiary is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company’s
system of internal control is designed under the supervision of management,
including our Chief Executive Officer and Chief Financial Officer, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of the Company’s consolidated financial statements for external
reporting purposes in accordance with U.S. generally accepted accounting
principles (“GAAP”).
Our
internal control over financial reporting including policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect transactions and dispositions of assets; provide reasonable
assurances that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures
are made only in accordance with the authorization of management and the Board
of Directors; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on our consolidated financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections on any evaluation of
effectiveness to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions or that the degree of
compliance with policies and procedures may deteriorate.
As of
December 31, 2009, management assessed the effectiveness of the Company’s
internal control over financial reporting based upon the framework established
in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). Based upon its assessment,
management believes that the Company’s internal control over financial reporting
as of December 31, 2009 is effective using these criteria. This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting, pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s report in this
annual report.
|
(c)
|
Changes
in Internal Controls over Financial
Reporting.
|
There
were no significant changes made in our internal controls during the period
covered by this report or, to our knowledge, in other factors that has
materially affected or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
See the
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
ITEM
9B.
|
OTHER
INFORMATION
|
None.
PART
III
ITEM
10.
|
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
|
The Company has adopted a Code of
Ethics that applies to the Company’s principal executive officer, principal
financial officer, principal accounting officer or controller or persons
performing similar functions. The Code of Ethics may be accessed on
the Company’s website at www.flatbush.com.
Information
concerning Directors of the Company is incorporated herein by reference from our
definitive Proxy Statement (the “Proxy Statement”), specifically in the section
captioned “Proposal I—Election of Directors.” In addition, see
“Executive Officers of the Company” in Item 1 for information concerning our
executive officers. Information concerning compliance with Section
16(a) of the Exchange Act is incorporated herein by reference from our Proxy
Statement, specifically captioned as “Section 16(a) Beneficial Ownership
Reporting Compliance.” Information regarding the Company’s Audit
Committee is incorporated herein by reference from our Proxy Statement,
specifically captioned as “Audit Committee.”
ITEM
11. EXECUTIVE
COMPENSATION
Information concerning executive
compensation is incorporated herein by reference from our Proxy Statement,
specifically the section captioned “Executive Compensation.”
ITEM
12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
|
Information concerning security
ownership of certain owners and management is incorporated herein by reference
from our Proxy Statement, specifically the section captioned “Voting Securities
and Principal Holder Thereof.”
Information
regarding equity compensation plans categorized by those plans that have been
approved by stockholders and those plans that have not been approved by
stockholders is incorporated herein by reference from Item 5 of this Annual
Report on Form 10-K.
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Information concerning relationships
and transactions is incorporated herein by reference from our Proxy Statement,
specifically the section captioned “Transactions with Certain Related
Persons.”
ITEM
14.
|
PRINCIPAL ACCOUNTANT FEES AND
SERVICES
|
Information concerning principal
accountant fees and services is incorporated herein by reference from our Proxy
Statement, specifically the section captioned “Proposal II-Ratification of
Appointment of Auditors.”
PART
IV
ITEM
15.
|
EXHIBITS
|
The
exhibits and financial statement schedules filed as a part of this Form 10-K are
as follows:
|
(a)(1)
|
Financial
Statements
|
|
·
|
Report
of Independent Registered Public Accounting
Firm
|
|
·
|
Consolidated
Statements of Financial Condition at December 31, 2009 and
2008
|
|
·
|
Consolidated
Statements of Income for the Years Ended December 31, 2009 and
2008
|
|
·
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended December 31, 2009
and 2008
|
|
·
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2009 and
2008
|
|
·
|
Notes
to Consolidated Financial
Statements.
|
|
(a)(2)
|
Financial Statement
Schedules
|
No
financial statement schedules are filed because the required information is not
applicable or is included in the consolidated financial statements or related
notes.
|
(a)(3)
|
Exhibits
|
|
3.1
|
Federal
Stock Charter of Flatbush Federal Bancorp,
Inc.*
|
|
3.2
|
Bylaws
of Flatbush Federal Bancorp, Inc., as
amended.*
|
|
4
|
Form
of common stock certificate of Flatbush Federal Bancorp,
Inc.*
|
|
10.1
|
Deferred
Compensation Plan for Anthony J.
Monteverdi*
|
|
10.2
|
Flatbush
Federal Savings & Loan Association Amended and Restated Directors
Retirement Plan**
|
|
10.3
|
Employee
Stock Ownership Plan*
|
|
10.4
|
Amended
and Restated Employment Agreement for Jesus R.
Adia**
|
|
10.5
|
Amended
and Restated Employment Agreement for John S.
Lotardo**
|
|
10.6
|
Amended
and Restated Executive Supplemental Retirement Income Agreement for Jesus
R. Adia**
|
|
10.7
|
Amended
and Restated Executive Supplemental Retirement Income Agreement for John
S. Lotardo**
|
|
13
|
Annual
Report to Stockholders
|
|
21
|
Subsidiaries
of the Registrant
|
|
23
|
Consent
of ParenteBeard LLC
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
___________________________
*
|
Incorporated
by reference to the Registration Statement on Form SB-2 of Flatbush
Federal Bancorp, Inc. (file no. 333-106557), originally filed with the
Securities and Exchange Commission on June 27,
2003.
|
**
|
Incorporated
by reference to the Annual Report on Form 10-K for the year ended December
31, 2008, filed with the Securities and Exchange Commission on March 31,
2009.
|
|
(b)
|
Reports on Form
8-K
|
None.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Flatbush
Federal Bancorp, Inc.
|
|||
Date:
|
March
29, 2010
|
By:
|
/s/ Jesus R. Adia
|
Jesus
R. Adia
|
|||
President
and Chief Executive Officer
|
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
|
/s/ Jesus R. Adia
|
By:
|
/s/ John S. Lotardo
|
|
Jesus
R. Adia
|
John
S. Lotardo,
|
|||
Chairman
of the Board President and Chief Executive Officer (Principal Executive
Officer)
|
EVP
and Chief Financial Officer (Principal Financial and Accounting
Officer)
|
|||
Date:
|
March
29, 2010
|
Date:
|
March
29, 2010
|
|
By:
|
/s/ D. John Antoniello
|
By:
|
/s/ Michael J. Lincks
|
|
D.
John Antoniello
|
Michael
J. Lincks
|
|||
Director
|
Director
|
|||
Date:
|
March
29, 2010
|
Date:
|
March
29, 2010
|
|
By:
|
/s/ Patricial A. McKinley
|
By:
|
/s/ Alfred S. Pantaleone
|
|
Patricia
A. McKinley
|
Alfred
S. Pantaleone
|
|||
Director
|
Director
|
|||
Date:
|
March
29, 2010
|
Date:
|
March
29, 2010
|
|
By:
|
/s/ Charles J. Vorbach
|
|||
Charles
J. Vorbach
|
||||
Director
|
||||
Date:
|
March
29, 2010
|
EXHIBIT
INDEX
|
3.1
|
Federal
Stock Charter of Flatbush Federal Bancorp,
Inc.*
|
|
3.2
|
Bylaws
of Flatbush Federal Bancorp, Inc.*
|
|
4
|
Form
of common stock certificate of Flatbush Federal Bancorp,
Inc.*
|
|
10.1
|
Deferred
Compensation Plan for Anthony J.
Monteverdi*
|
|
10.2
|
Flatbush
Federal Savings & Loan Association Amended and Restated Directors
Retirement Plan**
|
|
10.3
|
Employee
Stock Ownership Plan*
|
10.4 Amended
and Restated Employment Agreement for Jesus R. Adia**
10.5 Amended
and Restated Employment Agreement for John S. Lotardo**
|
10.6
|
Amended
and Restated Executive Supplemental Retirement Income Agreement for Jesus
R. Adia**
|
|
10.7
|
Amended
and Restated Executive Supplemental Retirement Income Agreement for John
S. Lotardo**
|
|
Annual
Report to Stockholders
|
|
Subsidiaries
of the Registrant
|
|
Consent
of ParenteBeard LLC
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
______________________
*
|
Incorporated
by reference to the Registration Statement on Form SB-2 of Flatbush
Federal Bancorp, Inc. (file no. 333-106557), originally filed with the
Securities and Exchange Commission on June 27,
2003.
|
**
|
Incorporated
by reference to the Annual Report on Form 10-K for the year ended December
31, 2008, filed with the Securities and Exchange Commission on March 31,
2009.
|