Attached files
file | filename |
---|---|
EX-31.2 - EXHIBIT 31.2 - FLATBUSH FEDERAL BANCORP INC | ex31_2.htm |
EX-31.1 - EXHIBIT 31.1 - FLATBUSH FEDERAL BANCORP INC | ex31_1.htm |
EX-11.0 - EXHIBIT 11.0 - FLATBUSH FEDERAL BANCORP INC | ex11_0.htm |
EX-32.1 - EXHIBIT 32.1 - FLATBUSH FEDERAL BANCORP INC | ex32_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
T QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended June 30,
2010
|
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For
the transition period from __________ to
___________
|
Commission
File Number: 0-503777
FLATBUSH
FEDERAL BANCORP, INC.
|
(Exact
name of registrant as specified in its
charter)
|
FEDERAL
|
11-3700733
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
2146 NOSTRAND AVENUE, BROOKLYN, NEW
YORK 11210
|
(Address
of principal executive offices)
|
(718) 859-6800
|
(Registrant’s
telephone number)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the 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
T No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes
o No
o
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 o
|
Accelerated
filer o
|
Non-accelerated
filer (Do not check if a smaller reporting company) o
|
Smaller
reporting company T
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No T
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of
August 13,
2010 the Registrant had outstanding 2,736,907 shares of common
stock.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
INDEX
Page
|
|||
Number
|
|||
PART
I – FINANCIAL INFORMATION
|
|||
Item
1:
|
Financial
Statements
|
||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
5 –
17
|
|||
Item
2:
|
|||
18
– 24
|
|||
Item
3:
|
25
|
||
Item
4:
|
25
|
||
PART
II – OTHER INFORMATION
|
|||
Item
1:
|
26
|
||
Item
1A:
|
26
|
||
Item
2:
|
26
|
||
Item
3:
|
26
|
||
Item
4:
|
(Removed
and Reserved)
|
26
|
|
Item
5:
|
26
|
||
Item
6:
|
27
|
||
28
|
PART
I – FINANCIAL INFORMATION
ITEM
1 – FINANCIAL STATEMENTS
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
June 30,
|
December 31,
|
|||||||
ASSETS
|
2010
|
2009
|
||||||
Cash
and amounts due from depository institutions
|
$ | 1,717,097 | $ | 1,846,911 | ||||
Interest
earning deposits in other banks
|
2,008,559 | 1,861,116 | ||||||
Federal
funds sold
|
4,600,000 | 1,750,000 | ||||||
Cash
and cash equivalents
|
8,325,656 | 5,458,027 | ||||||
Mortgage-backed
securities held to maturity; fair value of
|
||||||||
$25,571,295
(2010) and $29,566,571 (2009)
|
23,875,118 | 28,340,092 | ||||||
Loans
receivable, net of allowance for loan losses of $1,116,215
|
||||||||
(2010)
and $828,534 (2009)
|
110,844,672 | 110,987,520 | ||||||
Premises
and equipment
|
2,357,202 | 2,440,313 | ||||||
Federal
Home Loan Bank of New York stock
|
938,600 | 1,274,900 | ||||||
Accrued
interest receivable
|
597,916 | 657,552 | ||||||
Bank
owned life insurance
|
4,295,156 | 4,219,982 | ||||||
Other
assets
|
2,269,837 | 2,601,027 | ||||||
Total
assets
|
$ | 153,504,157 | $ | 155,979,413 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
Deposits:
|
||||||||
Non-interest
bearing
|
$ | 5,365,142 | $ | 5,862,496 | ||||
Interest
bearing
|
115,484,259 | 109,305,224 | ||||||
Total
deposits
|
120,849,401 | 115,167,720 | ||||||
Federal
Home Loan Bank of New York advances
|
14,948,682 | 22,851,481 | ||||||
Advance
payments by borrowers for taxes and insurance
|
428,903 | 292,581 | ||||||
Other
liabilities
|
1,632,779 | 2,434,678 | ||||||
Total
liabilities
|
137,859,765 | 140,746,460 | ||||||
Stockholders’
equity:
|
||||||||
Preferred
stock $0.01 par value; 1,000,000 shares authorized;
|
||||||||
none
issued and outstanding
|
--- | --- | ||||||
Common
stock $0.01 par value; authorized 9,000,000
shares;
|
||||||||
issued
2,799,657 shares; outstanding 2,736,907 shares
|
27,998 | 27,998 | ||||||
Paid-in
capital
|
12,616,243 | 12,581,519 | ||||||
Retained
earnings
|
5,635,819 | 5,349,941 | ||||||
Unearned
employees’ stock ownership plan (ESOP) shares
|
(461,420 | ) | (478,857 | ) | ||||
Treasury
stock, 62,750 shares
|
(446,534 | ) | (446,534 | ) | ||||
Accumulated
other comprehensive loss
|
(1,727,714 | ) | (1,801,114 | ) | ||||
Total
stockholders’ equity
|
15,644,392 | 15,232,953 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 153,504,157 | $ | 155,979,413 |
See notes
to consolidated financial statements.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
Three months ended
|
Six months ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Interest
Income
|
||||||||||||||||
Loans,
including fees
|
$ | 1,620,225 | $ | 1,576,591 | $ | 3,296,771 | $ | 3,122,789 | ||||||||
Mortgage-backed
securities
|
368,343 | 452,353 | 760,550 | 906,907 | ||||||||||||
Federal
Home Loan Bank of New York stock
|
14,100 | 20,067 | 31,382 | 31,218 | ||||||||||||
Other
interest earning assets
|
1,589 | 2,192 | 2,403 | 4,112 | ||||||||||||
Total
interest income
|
2,004,257 | 2,051,203 | 4,091,106 | 4,065,026 | ||||||||||||
Interest
Expense
|
||||||||||||||||
Deposits
|
443,531 | 607,410 | 903,434 | 1,206,661 | ||||||||||||
Borrowings
|
87,693 | 249,246 | 184,294 | 508,380 | ||||||||||||
Total
interest expense
|
531,224 | 856,656 | 1,087,728 | 1,715,041 | ||||||||||||
Net
Interest Income
|
1,473,033 | 1,194,547 | 3,003,378 | 2,349,985 | ||||||||||||
Provision
for loan losses
|
134,106 | 21,864 | 288,578 | 21,864 | ||||||||||||
Net
interest income after provision for loan losses
|
1,338,927 | 1,172,683 | 2,714,800 | 2,328,121 | ||||||||||||
Non-interest
income
|
||||||||||||||||
Fees
and service charges
|
26,904 | 27,576 | 52,292 | 52,584 | ||||||||||||
BOLI
income
|
37,869 | 39,766 | 75,174 | 79,320 | ||||||||||||
Other
|
613 | 555 | 1,258 | 1,294 | ||||||||||||
Total
non-interest income
|
65,386 | 67,897 | 128,724 | 133,198 | ||||||||||||
Non-interest
expenses
|
||||||||||||||||
Salaries
and employee benefits
|
599,543 | 607,731 | 1,203,522 | 738,225 | ||||||||||||
Net
occupancy expense of premises
|
124,743 | 112,006 | 236,735 | 227,564 | ||||||||||||
Equipment
|
121,295 | 123,151 | 245,859 | 250,928 | ||||||||||||
Directors’
compensation
|
51,991 | 47,154 | 97,982 | 90,608 | ||||||||||||
Professional
fees
|
87,650 | 102,204 | 194,150 | 192,404 | ||||||||||||
Other
insurance premiums
|
35,443 | 35,928 | 70,886 | 71,508 | ||||||||||||
Federal
Deposit Insurance premiums
|
57,497 | 117,814 | 115,489 | 143,377 | ||||||||||||
Other
|
116,013 | 122,251 | 241,166 | 235,601 | ||||||||||||
Total
non-interest expenses
|
1,194,175 | 1,268,239 | 2,405,789 | 1,950,215 | ||||||||||||
Income
(loss) before income tax (benefit)
|
210,138 | (27,659 | ) | 437,735 | 511,104 | |||||||||||
Income
tax expense (benefit)
|
64,350 | (34,363 | ) | 151,857 | 180,533 | |||||||||||
Net
income
|
$ | 145,788 | $ | 6,704 | $ | 285,878 | $ | 330,571 | ||||||||
Net
income per common share – Basic and diluted
|
$ | 0.05 | $ | 0.00 | $ | 0.11 | $ | 0.12 | ||||||||
Weighted
average number of shares outstanding – Basic and
|
||||||||||||||||
diluted
|
2,666,191 | 2,660,923 | 2,665,537 | 2,660,573 |
See notes
to consolidated financial statements.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
Income
|
$ | 145,788 | $ | 6,704 | $ | 285,878 | $ | 330,571 | ||||||||
Other
comprehensive income,
|
||||||||||||||||
net
of income taxes:
|
||||||||||||||||
Benefit
plans
|
63,112 | 68,584 | 126,224 | 137,754 | ||||||||||||
Deferred
income taxes
|
(26,412 | ) | (28,361 | ) | (52,824 | ) | (57,308 | ) | ||||||||
36,700 | 40,223 | 73,400 | 80,446 | |||||||||||||
Comprehensive
income
|
$ | 182,488 | $ | 46,927 | $ | 359,278 | $ | 411,017 |
See notes to consolidated financial
statements.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flow from operating activities:
|
||||||||
Net
income
|
$ | 285,878 | $ | 330,571 | ||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by (used in) operating activities:
|
||||||||
Depreciation
and amortization of premises and equipment
|
91,196 | 92,138 | ||||||
Net
accretion of discounts, premiums and
|
||||||||
deferred
loan fees and costs
|
(96,078 | ) | (18,799 | ) | ||||
Provision
for loan losses
|
288,578 | 21,864 | ||||||
ESOP
shares committed to be released
|
11,164 | 9,192 | ||||||
MRP
expense
|
20,292 | 20,292 | ||||||
Stock
option expense
|
20,706 | 20,832 | ||||||
Decrease
(increase) in accrued interest receivable
|
59,636 | (25,078 | ) | |||||
Increase
in cash surrender value of BOLI
|
(75,174 | ) | (79,320 | ) | ||||
(Increase)
decrease in other assets
|
278,366 | (153,912 | ) | |||||
Decrease
in other liabilities
|
(675,675 | ) | (1,342,672 | ) | ||||
Net
cash provided by (used in) operating activities
|
208,889 | (1,124,892 | ) | |||||
Cash
flow from investing activities:
|
||||||||
Principal
repayments on mortgage-backed securities held to maturity
|
4,537,506 | 1,913,150 | ||||||
Purchases
of mortgage-backed securities held to maturity
|
- | (905,604 | ) | |||||
Purchases
of loan participation interests
|
(972,466 | ) | (1,426,344 | ) | ||||
Net
change in loans receivable
|
850,281 | (2,235,704 | ) | |||||
Additions
to premises and equipment
|
(8,085 | ) | (6,256 | ) | ||||
Redemption
of Federal Home Loan Bank of New York stock
|
336,300 | 162,100 | ||||||
Net
cash provided by (used in) investing activities
|
4,743,536 | (2,498,658 | ) | |||||
Cash
flow from financing activities:
|
||||||||
Net
increase in deposits
|
5,681,681 | 12,954,964 | ||||||
Repayment
of advances from Federal Home Loan Bank of New York
|
(902,799 | ) | (1,860,175 | ) | ||||
Net
change to short-term borrowings
|
(7,000,000 | ) | (2,000,000 | ) | ||||
Increase
(decrease) in advance payments by borrowers
|
||||||||
for
taxes and insurance
|
136,322 | (396,842 | ) | |||||
Purchase
of treasury stock
|
- | (3,550 | ) | |||||
Net
cash provided by (used in) financing activities
|
(2,084,796 | ) | 8,694,397 | |||||
Net
increase in cash and cash equivalents
|
2,867,629 | 5,070,847 | ||||||
Cash
and cash equivalents – beginning
|
5,458,027 | 7,678,488 | ||||||
Cash
and cash equivalents – ending
|
$ | 8,325,656 | $ | 12,749,335 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ | 1,094,196 | $ | 1,717,427 | ||||
Income
taxes
|
$ | 61,000 | $ | 276,050 |
See notes
to consolidated financial statements.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1. PRINCIPLES OF CONSOLIDATION
The
consolidated financial statements include the accounts of Flatbush Federal
Bancorp, Inc. (the “Company”), Flatbush Federal Savings and Loan
Association (the “Association”) and the Association’s subsidiary Flatbush REIT,
Inc. The Company’s business is conducted principally through the
Association. All significant intercompany accounts and transactions
have been eliminated in consolidation.
NOTE 2. BASIS OF
PRESENTATION
The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and Regulation S-X and do not include
information or footnotes necessary for a complete presentation of financial
condition, results of operations and cash flows in accordance with U.S.
generally accepted accounting principles. However, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three months and six
months ended June 30, 2010, are not necessarily indicative of the results which
may be expected for the entire year.
The
unaudited consolidated financial statements should be read in conjunction with
the Company’s audited consolidated financial statements and related notes for
the year ended December 31, 2009, which are included in the Company’s Annual
Report on Form 10-K as filed with the Securities and Exchange
Commission.
In
accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 855, “Subsequent Events”, the Company has
evaluated events and transactions occurring subsequent to the Statement of
Financial Condition date of June 30, 2010 for items that should potentially be
recognized or disclosed in these consolidated financial
statements. The evaluation was conducted through the date these
consolidated financial statements were issued.
NOTE 3. NET
INCOME PER COMMON SHARE
Net
income per common share was computed by dividing net income for the three months
and six months ended June 30, 2010 and 2009 by the weighted average number of
shares of common stock outstanding adjusted for unearned shares of the
ESOP. Stock options and restricted stock awards granted are
considered common stock equivalents and therefore considered in diluted net
income per share calculations, if dilutive, using the treasury stock method. At
and for the three months and six months ended June 30, 2010 and 2009, there was
no dilutive effect for the 82,378 and 82,879, respectively, of stock options
outstanding. At and for the three months and six months ended June 30, 2010 and
2009, there was no dilutive effect for the 11,398 and 15,198, respectively, of
non-vested restricted stock awards.
NOTE 4. CRITICAL
ACCOUNTING POLICIES
The
Company considers accounting policies involving significant judgments and
assumptions by management that have, or could have, a material impact on the
carrying value of certain assets or on income to be critical accounting
policies. A material estimate that is particularly susceptible to significant
change relates to the determination of the allowance for loan
losses. Determining the amount of the allowance for loan losses
necessarily involves a high degree of judgment. Management reviews
the level of the allowance on a quarterly basis, at a minimum, and establishes
the provision for loan losses based on the composition of the loan portfolio,
delinquency levels, loss experience, economic conditions, and other factors
related to the collectibility of the loan portfolio. Management
has
NOTE 4. CRITICAL
ACCOUNTING POLICIES (CONTINUED)
allocated
the allowance among categories of loan types as well as classification status at
each period-end date. Assumptions and allocation percentages based on
loan types and classification status have been consistently
applied. Management regularly evaluates various risk factors related
to the loan portfolio, such as type of loan, underlying collateral and payment
status, and the corresponding allowance allocation percentages.
Although
management believes that it uses the best information available to establish the
allowance for loan losses, future additions to the allowance may be necessary
based on estimates that are susceptible to change as a result of changes in
economic conditions and other factors. In addition, the regulatory
authorities, as an integral part of their examination process, periodically
review the allowance for loan losses. Such agencies may require
management to recognize adjustments to the allowance based on their judgments
about information available to them at the time of their
examinations.
NOTE
5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
June 30, 2010
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||
Government
National Mortgage Association
|
$ | 2,387,313 | $ | 185,874 | $ | - | $ | 2,573,187 | ||||||||
Federal
National Mortgage Association
|
16,852,850 | 1,315,287 | - | 18,168,137 | ||||||||||||
Federal
Home Loan Mortgage Corporation
|
4,634,955 | 207,348 | 12,332 | 4,829,971 | ||||||||||||
Total
|
$ | 23,875,118 | $ | 1,708,509 | $ | 12,332 | $ | 25,571,295 |
December 31, 2009
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||
Government
National Mortgage Association
|
$ | 2,587,153 | $ | 101,800 | $ | 7,233 | $ | 2,681,720 | ||||||||
Federal
National Mortgage Association
|
20,126,402 | 997,964 | - | 21,124,366 | ||||||||||||
Federal
Home Loan Mortgage Corporation
|
5,626,537 | 151,058 | 17,110 | 5,760,485 | ||||||||||||
Total
|
$ | 28,340,092 | $ | 1,250,822 | $ | 24,343 | $ | 29,566,571 |
All
mortgage-backed securities held at June 30, 2010, and December 31, 2009, were
secured by residential real estate.
NOTE
5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
(CONTINUED)
The age
of unrealized losses and fair value of related mortgage-backed securities held
to maturity are as follows:
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
June
30, 2010:
|
||||||||||||||||||||||||
Federal
Home Loan
|
||||||||||||||||||||||||
Mortgage
|
||||||||||||||||||||||||
Corporation
|
$ | 56,976 | $ | 147 | $ | 726,439 | $ | 12,185 | $ | 783,415 | $ | 12,332 | ||||||||||||
Total
|
$ | 56,976 | $ | 147 | $ | 726,439 | $ | 12,185 | $ | 783,415 | $ | 12,332 |
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
December
31, 2009:
|
||||||||||||||||||||||||
Government
National
|
||||||||||||||||||||||||
Mortgage
Association
|
$ | 359,809 | $ | 7,233 | $ | - | $ | - | $ | 359,809 | $ | 7,233 | ||||||||||||
Federal
National
|
||||||||||||||||||||||||
Mortgage
|
||||||||||||||||||||||||
Association
|
1,041,073 | 14,952 | 319,344 | 2,158 | 1,360,417 | 17,110 | ||||||||||||||||||
Total
|
$ | 1,400,882 | $ | 22,185 | $ | 319,344 | $ | 2,158 | $ | 1,720,226 | $ | 24,343 |
When the
fair value of a security is below its amortized cost, and depending on the
length of time the condition exists and the extent the fair value is below
amortized cost, additional analysis is performed to determine whether an
other-than-temporary impairment condition exits. Securities are analyzed
quarterly for possible other-than-temporary impairment. The analysis considers
(i) whether the Association has the intent to sell its securities prior to
recovery and/or maturity and (ii) whether it is more likely than not that the
Association will have to sell its securities prior to recovery and/or
maturity. Often, the information available to conduct these
assessments is limited and rapidly changing, making estimates of fair value
subject to judgment. If actual information or conditions are
different than estimated, the extent of the impairment of the security may be
different than previously estimated, which could have a material effect on the
Association’s consolidated financial statements.
At June
30, 2010, and December 31, 2009, management concluded that the unrealized losses
above (which, at June 30, 2010, related to four Federal Home Loan Mortgage
Corporation securities) are temporary in nature since they are primarily related
to market interest rates and not related to the underlying credit quality of the
issuer of the securities.
NOTE
5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
(CONTINUED)
The
amortized cost and estimated fair value of mortgage-backed securities at June
30, 2010 by contractual maturity, are shown below. Actual maturities
will differ from contractual maturities because borrowers generally have the
right to prepay obligations.
June 30, 2010
|
||||||||
Amortized
Cost
|
Estimated
Fair Value
|
|||||||
Due
within one year
|
$ | 316,344 | $ | 321,015 | ||||
Due
after one year through five years
|
- | - | ||||||
Due
after five years through ten years
|
207,966 | 217,460 | ||||||
Due
after ten years
|
23,350,808 | 25,032,820 | ||||||
Total
|
$ | 23,875,118 | $ | 25,571,295 |
NOTE
6. RETIREMENT PLANS – COMPONENTS OF NET PERIODIC PENSION
COST
Periodic
pension expense was as follows:
Three months Ended
|
Six months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Service
cost
|
$ | - | $ | - | $ | - | $ | 18,391 | ||||||||
Interest
cost
|
76,343 | 78,218 | 152,686 | 155,771 | ||||||||||||
Expected
return on assets
|
(106,170 | ) | (86,463 | ) | (212,340 | ) | (154,589 | ) | ||||||||
Amortization
of past service cost (credit)
|
- | - | - | (15,799 | ) | |||||||||||
Amortization
of unrecognized net loss
|
57,401 | 62,634 | 114,802 | 141,653 | ||||||||||||
Curtailment
credit
|
- | - | - | (507,058 | ) | |||||||||||
Net
periodic benefit cost
|
$ | 27,574 | $ | 54,389 | $ | 55,148 | $ | 361,631 |
On
February 26, 2009, the Company froze its defined benefit pension plan effective
March 31, 2009. The freezing of the Plan is consistent with ongoing cost
reduction strategies and shifts focus on future savings of retirement benefit
expense. The changes included a discontinuation of accrual of future service
cost in the defined benefit pension plan and fully preserving retirement
benefits that employees will have earned as of March 31, 2009. As a result of
freezing the plan, the Company recorded a one-time pre-tax
curtailment credit of approximately $416,000, net of periodic pension expense,
in the first quarter of 2009.
NOTE
6. RETIREMENT PLANS – COMPONENTS OF NET PERIODIC PENSION COST
(CONTINUED)
Periodic
pension expense for other plans was as follows:
Three months ended
|
Six months ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Service
cost
|
$ | 4,674 | $ | 4,344 | $ | 9,348 | $ | 8,688 | ||||||||
Interest
cost
|
16,782 | 17,711 | 33,564 | 35,422 | ||||||||||||
Amortization
of past service cost
|
5,278 | 5,278 | 10,556 | 10,556 | ||||||||||||
Amortization
of unrecognized net loss
|
433 | 672 | 866 | 1,344 | ||||||||||||
Net
periodic benefit cost
|
$ | 27,167 | $ | 28,005 | $ | 54,334 | $ | 56,010 |
NOTE 7. FAIR VALUE
MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
In
September 2006, the FASB issued ASC Topic 820 “Fair Value Measurement and
Disclosure,” which defines fair value, establishes a framework for measuring
fair value under generally accepted accounting principles in the United States
of America (“GAAP”), and expands disclosures about fair value measurements. FASB
ASC 820 applies to other accounting pronouncements that require or permit fair
value measurements.
ASC Topic
820 establishes a fair value hierarchy that prioritizes the inputs to valuation
methods used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy under ASC Topic 820
are as follows:
Level
1: Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
Level
2: Quoted prices in markets that are not active, or inputs that are
observable either directly or indirectly, for substantially the full term of the
asset or liability.
Level
3: Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (i.e. supported with
little or no market activity).
An asset
or liability’s level within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The
Company had no financial assets which are required to be measured on a recurring
basis at June 30, 2010 and December 31, 2009.
NOTE 7. FAIR VALUE
MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
(CONT’D)
For
assets measured at fair value on a non-recurring basis, the fair value
measurements by level within the fair value hierarchy used are as
follows:
(Level
1)
|
||||||||||||||||
Quoted Prices
|
(Level
2)
|
|||||||||||||||
in
Active
|
Significant
|
(Level
3)
|
||||||||||||||
Markets
for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Description
|
Total
|
Assets
|
Inputs
|
Inputs
|
||||||||||||
(In
Thousands)
|
||||||||||||||||
Impaired
Loans:
|
||||||||||||||||
June
30, 2010
|
$ | 1,440 | $ | - | $ | - | $ | 1,440 | ||||||||
December
31, 2009
|
$ | 992 | $ | - | $ | - | $ | 992 |
The
Company had no liabilities which are required to be measured on a recurring or
non-recurring basis at June 30, 2010 and December 31, 2009.
The
following information should not be interpreted as an estimate of the fair value
of the entire Association since a fair value calculation is only provided for a
limited portion of the Association’s assets and liabilities. Due to a
wide range of valuation techniques and the degree of subjectivity used in making
the estimates, comparisons between the Association’s disclosures and those of
other companies may not be meaningful. The following methods and
assumptions were used to estimate the fair values of financial
instruments at June 30, 2010 and December 31, 2009:
Cash
and Cash Equivalents, Interest Receivable and Interest Payable
The
carrying amounts for cash and cash equivalents, interest receivable and interest
payable approximate fair value because they mature in three months or
less.
Securities
The fair
value of securities held to maturity (carried at amortized cost) are determined
by obtaining quoted market prices on nationally recognized securities exchanges
(Level 1), or matrix pricing (Level 2), which is a mathematical technique used
widely in the industry to value debt securities without relying exclusively on
quoted market prices for the specific securities but rather by relying on the
securities’ relationship to other benchmark quoted prices. For
certain securities which are not traded in active markets or are subject to
transfer restrictions, valuations are adjusted to reflect illiquidity and/or non
transferability, and such adjustments are generally based on available market
evidence (Level 3). In the absence of such evidence, management’s
best estimate is used. Management’s best estimate consists of both
internal and external support on certain Level 3
investments. Internal cash flow models using a present value formula
that includes assumptions market participants would use along with indicative
exit pricing obtained from broker/dealers (where available) were used to support
fair value of certain Level 3 investments if applicable.
NOTE 7. FAIR VALUE
MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
(CONT’D)
Loans
Receivable
The fair
value of loans are estimated using discounted cash flow analyses, using market
rates at the balance sheet date that reflect the credit and interest rate-risk
inherent in the loans. Projected future cash flows are calculated
based upon contractual maturity or call dates, projected repayments and
prepayments of principal. Generally, for variable rate loans that
reprice frequently and with no significant change in credit risk, fair values
are based on carrying values.
Impaired
Loans
Impaired
loans are those for which the Company has measured and recorded impairment
generally based on the fair value of the
loan’s collateral. Fair value is generally determined based upon
independent third-party appraisals of the properties, or discounted cash flows
based upon the expected proceeds. These assets are included as Level
3 fair values, based upon the lowest level of input that is significant to the
fair value measurements. The fair value at June 30, 2010 and December
31, 2009 consists of the loan balance of $1,906,000 and $1,455,000, net of a
valuation allowance $466,000 and $463,000, respectively.
Federal
Home Loan Bank of New York (FHLB) Stock
The
carrying amount of restricted investment in FHLB stock approximates fair value,
and considers the limited marketability of such securities.
Deposit
Liabilities
The fair
value disclosed for demand deposits (e.g., interest and noninterest checking,
passbook savings and money market accounts) are, by definition, equal to the
amount payable on demand at the reporting date (i.e., their carrying
amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered in the market on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Advances
from FHLB
Fair
values of FHLB advances are estimated using discounted cash flow analysis, based
on quoted prices for new FHLB advances with similar credit risk characteristics,
terms and remaining maturity.
Off-Balance
Sheet Financial Instruments
Fair
value for the Association’s off-balance sheet financial instruments (lending
commitments and letters of credit) are based on fees currently charged in the
market to enter into similar agreements, taking into account, the remaining
terms of the agreements and the counterparties’ credit standing.
As of
June 30, 2010 and December 31, 2009, the fair value of commitments to extend
credit were not considered to be material.
NOTE 7. FAIR VALUE
MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
(CONT’D)
The
estimated fair values of financial instruments were as follows at June 30, 2010
and December 31, 2009.
June 30,
|
December 31,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||||||||||
(In
Thousands)
|
||||||||||||||||
Financial
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 8,326 | $ | 8,326 | $ | 5,458 | $ | 5,458 | ||||||||
Mortgage-backed
securities held to
|
||||||||||||||||
maturity
|
23,875 | 25,571 | 28,340 | 29,567 | ||||||||||||
FHLB
stock
|
939 | 939 | 1,275 | 1,275 | ||||||||||||
Loans
receivable
|
110,845 | 118,635 | 110,988 | 115,692 | ||||||||||||
Accrued
interest receivable
|
598 | 598 | 658 | 658 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Deposits
|
120,849 | 122,713 | 115,168 | 116,709 | ||||||||||||
Advances
from FHLB
|
14,949 | 15,168 | 22,851 | 23,352 | ||||||||||||
Accrued
interest payable
|
35 | 35 | 49 | 49 |
NOTE 8. RECENT ACCOUNTING
PRONOUNCEMENTS
The
following is a summary of recently issued authoritative pronouncements that
could have an impact on the accounting, reporting, and/or disclosure of the
consolidated financial information of the Company.
In
January 2010, the FASB issued Accounting Standard Update (“ASU”) 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. This ASU requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. The FASB’s objective is to improve these
disclosures and, thus, increase the transparency in financial reporting.
Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require
that a reporting entity disclose separately the amounts of significant transfers
in and out of Level 1 and Level 2 fair value measurements and describe the
reasons for the transfers; and present separately information about purchases,
sales, issuances, and settlements in the reconciliation for fair value
measurements using significant unobservable inputs. In addition, ASU 2010-06
clarifies the requirements of the following existing disclosures:
a) For
purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the
appropriate classes of assets and liabilities; and
b) A
reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements.
NOTE 8. RECENT ACCOUNTING
PRONOUNCEMENTS (CONTINUED)
ASU
2010-06 is effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal
years. The adoption of this guidance did not have a material impact
on the consolidated financial statements.
The FASB
has issued ASU 2010-08, Technical Corrections to Various
Topics, thereby amending the Codification. This ASU resulted from a
review by the FASB of its standards to determine if any provisions are outdated,
contain inconsistencies, or need clarifications to reflect the FASB’s original
intent. The FASB believes the amendments do not fundamentally change U.S. GAAP.
However, certain clarifications on embedded derivatives and hedging reflected in
Topic 815, Derivatives and
Hedging, may cause a change in the application of the guidance in
Subtopic 815-15. Accordingly, the FASB provided special transition provisions
for those amendments.
The ASU
contains various effective dates. The clarifications of the guidance on embedded
derivatives and hedging (Subtopic 815-15) are effective for fiscal years
beginning after December 15, 2009. The amendments to the guidance on accounting
for income taxes in a reorganization (Subtopic 852-740) applies to
reorganizations for which the date of the reorganization is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. All other amendments are effective as of the first reporting period
(including interim periods) beginning after the date this ASU was issued
(February 2, 2010). The adoption of this guidance did not have a material impact
on the consolidated financial statements.
The FASB
issued ASU 2010-11, Derivatives and Hedging (Topic 815):
Scope Exception Related to Embedded Credit Derivatives. The FASB believes
this ASU clarifies the type of embedded credit derivative that is exempt from
embedded derivative bifurcation requirements. Specifically, only one form of
embedded credit derivative qualifies for the exemption - one that is related
only to the subordination of one financial instrument to another. As a result,
entities that have contracts containing an embedded credit derivative feature in
a form other than such subordination may need to separately account for the
embedded credit derivative feature.
The
amendments in the ASU are effective for each reporting entity at the beginning
of its first fiscal quarter beginning after June 15, 2010. The adoption of this
guidance is not expected to have a material impact on the consolidated financial
statements.
The FASB
issued ASU 2010-13, Compensation—Stock Compensation
(Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Trades. The ASU codifies the consensus reached in Emerging Issues Task
Force (EITF) Issue No. 09-J. The amendments to the Codification clarify that an
employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity’s equity
shares trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as
equity.
The
amendments in the ASU are effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010. The amendments are
to be applied by recording a cumulative-effect adjustment to beginning retained
earnings. The adoption of this guidance is not expected to have a material
impact on the consolidated financial statements.
NOTE 8. RECENT ACCOUNTING
PRONOUNCEMENTS (CONTINUED)
ASU
2010-18, Receivables (Topic
310): Effect of a Loan Modification When the Loan Is Part of a Pool That Is
Accounted for as a Single Asset, codifies the consensus reached in EITF
Issue No. 09-I, “Effect of a Loan Modification When the Loan Is Part of a Pool
That Is Accounted for as a Single Asset.” The amendments to the Codification
provide that modifications of loans that are accounted for within a pool under
Subtopic 310-30 do not result in the removal of those loans from the pool even
if the modification of those loans would otherwise be considered a troubled debt
restructuring. An entity will continue to be required to consider whether the
pool of assets in which the loan is included is impaired if expected cash flows
for the pool change. ASU 2010-18 does not affect the accounting for loans under
the scope of Subtopic 310-30 that are not accounted for within pools. Loans
accounted for individually under Subtopic 310-30 continue to be subject to the
troubled debt restructuring accounting provisions within Subtopic
310-40.
ASU
2010-18 is effective prospectively for modifications of loans accounted for
within pools under Subtopic 310-30 occurring in the first interim or annual
period ending on or after July 15, 2010. Early application is permitted. Upon
initial adoption of ASU 2010-18, an entity may make a one-time election to
terminate accounting for loans as a pool under Subtopic 310-30. This election
may be applied on a pool-by-pool basis and does not preclude an entity from
applying pool accounting to subsequent acquisitions of loans with credit
deterioration. The adoption of this guidance is not expected to have a material
impact on the consolidated financial statements.
ASU
2010-20, Receivables (Topic
310): Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses, will help investors assess the credit risk
of a company’s receivables portfolio and the adequacy of its allowance for
credit losses held against the portfolios by expanding credit risk
disclosures.
This ASU
requires more information about the credit quality of financing receivables in
the disclosures to financial statements, such as aging information and credit
quality indicators. Both new and existing disclosures must be
disaggregated by portfolio segment or class. The disaggregation of
information is based on how a company develops its allowance for credit losses
and how it manages its credit exposure.
The
amendments in this Update apply to all public and nonpublic entities with
financing receivables. Financing receivables include loans and trade
accounts receivable. However, short-term trade accounts receivable,
receivables measured at fair value or lower of cost or fair value, and debt
securities are exempt from these disclosure amendments.
The
effective date of ASU 2010-20 differs for public and nonpublic
companies. For public companies, the amendments that require
disclosures as of the end of a reporting period are effective for periods ending on or after December
15, 2010. The amendments that require disclosures about activity that
occurs during a reporting period are effective for periods beginning on or after
December 15, 2010. For nonpublic companies, the amendments are
effective for annual reporting periods ending on or after December 15, 2011. The
adoption of this guidance is not expected to have a material impact on the
consolidated financial statements.
NOTE 9. FEDERAL HOME LOAN
BANK OF NEW YORK STOCK
Federal
Home Loan Bank of New York (“FHLB”) stock, which represents required investment
in the common stock of a correspondent bank, is carried at cost and as of June
30, 2010 and December 31, 2009, consists of the common stock of
FHLB.
Management
evaluates the FHLB stock for impairment in accordance with FASB ASC Topic
942-325-35 (Prior authoritative literature: Statement of Position (SOP) 01-6,
Accounting by Certain Entities
(Including Entities With Trade Receivables) That Lend to or Finance the
Activities of Others). Management’s determination of whether
this investment is impaired is based on their assessment of the ultimate
recoverability of their cost rather than by recognizing temporary declines in
value. The determination of whether a decline affects the ultimate
recoverability of their cost is influenced by criteria such as (1) the
significance of the decline in net assets of the FHLB as compared to the capital
stock amount for the FHLB and the length of time this situation has persisted,
(2) commitments by the FHLB to make payments required by law or regulation and
the level of such payments in relation to the operating performance of the FHLB
and (3) the impact of legislative and regulatory changes on institutions and,
accordingly, on the customer base of the FHLB.
Management
believes no impairment charge is necessary related to the FHLB stock as of June
30, 2010.
NOTE 10. SUBSEQUENT
EVENTS
Financial
reform legislation recently enacted by Congress will, among other things,
eliminate the Office of Thrift Supervision, tighten capital standards, create a
new Consumer Financial Protection Bureau and result in new laws and regulations
that are expected to increase our costs of operations.
The
recently enacted Dodd-Frank Act will significantly change the current bank
regulatory structure and affect the lending, investment, trading and operating
activities of financial institutions and their holding companies. The
Dodd-Frank Act will eliminate our current primary federal regulator, the Office
of Thrift Supervision, and require Flatbush Federal Savings and Loan Association
to be regulated by the Office of the Comptroller of the Currency (the primary
federal regulator for national banks). The Dodd-Frank Act also authorizes the
Board of Governors of the Federal Reserve System to supervise and regulate all
savings and loan holding companies, including mutual holding companies, like
Flatbush Federal Bancorp, Inc. and Flatbush Federal Bancorp, MHC, in addition to
bank holding companies that it currently regulates. As a result, the
Federal Reserve Board’s current regulations applicable to bank holding
companies, including holding company capital requirements, will apply to savings
and loan holding companies like Flatbush Federal Bancorp, Inc. and Flatbush
Federal Bancorp, MHC. Moreover, Flatbush Federal Bancorp, MHC
will require the approval of the Federal Reserve Board before it may waive the
receipt of any dividends from Flatbush Federal Bancorp, Inc., and there is no
assurance that the Federal Reserve Board will approve future dividend waivers or
what conditions it may impose on such waivers. The Dodd-Frank Act also requires
the Federal Reserve Board to set minimum capital levels for bank holding
companies that are as stringent as those required for the insured depository
subsidiaries, and the components of Tier 1 capital would be restricted to
capital instruments that are currently considered to be Tier 1 capital for
insured depository institutions. Bank holding companies with assets
of less than $500 million are exempt from these capital
requirements. Under the Dodd-Frank Act, the proceeds of trust
preferred securities are excluded from Tier 1 capital unless such securities
were issued prior to May 19, 2010 by bank or savings and loan holding companies
with less than $15 billion of assets. The legislation also
establishes a floor for capital of insured depository institutions that cannot
be lower than the standards in effect today, and directs the federal banking
regulators to implement new leverage and capital requirements within 18 months
that take into account off-balance sheet activities and other risks, including
risks relating to securitized products and derivatives.
NOTE 10. SUBSEQUENT EVENTS
CONTINUED
The
Dodd-Frank Act also creates a new Consumer Financial Protection Bureau with
broad powers to supervise and enforce consumer protection laws. The
Consumer Financial Protection Bureau has broad rule-making authority for a wide
range of consumer protection laws that apply to all banks and savings
institutions such as Flatbush Federal Savings and Loan Association, including
the authority to prohibit “unfair, deceptive or abusive” acts and
practices. The Consumer Financial Protection Bureau has examination
and enforcement authority over all banks and savings institutions with more than
$10 billion in assets. Banks and savings institutions with $10
billion or less in assets will be examined by their applicable bank
regulators. The new legislation also weakens the federal preemption
available for national banks and federal savings associations, and gives state
attorneys general the ability to enforce applicable federal consumer protection
laws.
The
legislation also broadens the base for Federal Deposit Insurance Corporation
insurance assessments. Assessments will now be based on the average consolidated
total assets less tangible equity capital of a financial
institution. The Dodd-Frank Act also permanently increases the
maximum amount of deposit insurance for banks, savings institutions and credit
unions to $250,000 per depositor, retroactive to January 1, 2008, and
non-interest bearing transaction accounts have unlimited deposit insurance
through December 31, 2013. Lastly, the Dodd-Frank Act will increase
stockholder influence over boards of directors by requiring companies to give
stockholders a non-binding vote on executive compensation and so-called “golden
parachute” payments, and by authorizing the Securities and Exchange Commission
to promulgate rules that would allow stockholders to nominate their own
candidates using a company’s proxy materials. The legislation also
directs the Federal Reserve Board to promulgate rules prohibiting excessive
compensation paid to bank holding company executives, regardless of whether the
company is publicly traded or not.
It is
difficult to predict at this time what impact the new legislation and
implementing regulations will have on community banks, including the lending and
credit practices of such banks. Moreover, many of the provisions of
the Dodd-Frank Act will not take effect for at least a year, and the legislation
requires various federal agencies to promulgate numerous and extensive
implementing regulations over the next several years. Although the
substance and scope of these regulations cannot be determined at this time, it
is expected that the legislation and implementing regulations, particularly
those provisions relating to the new Consumer Financial Protection Bureau and
mutual holding company dividend waivers, will increase our operating and
compliance costs and restrict our ability to pay dividends.
Flatbush
Federal Savings and Loan Association to Sell Main Office Building and
Surrounding Real Estate; Establish New, Nearby Branch Office.
On August
10, 2010 the Company announced the expiration of the investigation period
relating to the sale of its main branch building, making the purchaser legally
obligated to purchase the Bank’s main branch building. Flatbush Federal will
sell its current main branch building and a portion of Flatbush Federal’s
adjoining real estate to Purchaser for $9,136,000 (the
“Transfer”). Under the Agreement, Purchaser will acquire Flatbush
Federal’s current main branch building located at 2146 Nostrand Avenue,
Brooklyn, New York (“Property A”). In addition thereto, the Purchaser
will take title to 2158 Nostrand Avenue, Brooklyn, New York (“Property B”), and
an approximately 12,305 square foot parcel (“Property C”) of a larger adjoining
parking lot (“Lot 124”) abutting parts of Nostrand Avenue and Hillel Place,
Brooklyn, New York (Property A, Property B, and Property C are collectively, the
“Properties”). Property B is currently leased by Flatbush Federal to
a White Castle franchise.
NOTE 10. SUBSEQUENT EVENTS
CONTINUED
The
Agreement provided for an investigation period, that expired by its terms on
August 10, 2010. The investigation period allowed the Purchaser to
conduct environmental site assessments, a structural engineering survey and
other tests and investigations. With the expiration of the
investigation period, the Purchaser is legally committed to complete the
Transfer pursuant to the terms of the Agreement.
The
Agreement further requires Purchaser to subdivide Lot 124 (of which Property C
forms a part of) into two separate tax lots or parcels (the “Subdivision”),
which is currently underway. Lot 124 consists of (i) Parcel C and
(ii) a 3,100 square foot parcel which abuts Hillel Place (the “Retained
Property”). Flatbush Federal will retain title to the Retained Parcel, which
will become the site of a new branch building (“Branch Building”).
The
Transfer is expected to close (the “Closing”) approximately seventy-five (75)
days after the Subdivision has been approved and new tax lot numbers are
assigned to Property C and the Retained Property. Flatbush Federal
anticipates that the Transfer will occur during the fourth quarter of 2010,
although there can be no assurance that the Transfer will not be delayed beyond
that date.
After the
Closing, Purchaser will construct and deliver the Branch Building to Flatbush
Federal for a final fit out by Flatbush Federal to utilize as a new bank
branch. The Purchaser’s delivery will consist of a fully enclosed
Branch Building with an approximately 3,000 square foot ground level or branch
floor, and a 300 square foot lobby and ATM area. In connection
therewith, Purchaser will install, but not distribute, heating, ventilation and
air-conditioning systems. Additionally, the Purchaser is required to
install utility and power lines, power receptacles, circuit breakers and water
lines, among other things.
At the
Closing, Flatbush Federal will lease back Property A on an interim basis for its
continued use as a temporary bank branch (the “Branch Lease”) for one ($1.00)
dollar. Flatbush Federal must relocate to the new Branch Building no
later than 150 days after the Purchaser completes the construction of the Branch
Building and delivers to Flatbush Federal a temporary certificate of occupancy
for the Branch Building. At that time, the Branch Lease will
terminate, and Flatbush Federal will open the Branch Building for business as
its new bank branch. Flatbush Federal anticipates that the Branch
Building will be opened during the third quarter of 2011, although there can be
no assurance that the opening will be timely.
ITEM 2
FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Forward-Looking
Statements
This Form
10-Q may include certain forward-looking statements based on current management
expectations. The Company’s actual results could differ materially
from those management expectations. Factors that could cause future
results to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, changes in tax policies,
rates and regulations of federal, state and local tax authorities, changes in
interest rates, deposit flows, the cost of funds, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of loan and investment portfolios of the Company, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting the Company’s operations,
markets, products, services and prices.
Comparison
of Financial Condition at June 30, 2010 and December 31, 2009
The
Company’s total assets as of June 30, 2010 were $153.5 million compared to
$156.0 million at December 31, 2009, a decrease of $2.5 million or 1.6%. Loans
receivable decreased $143,000, or 0.1%, to $110.8 million at June 30, 2010 from
$111.0 million at December 31, 2009. Mortgage-backed securities
decreased $4.4 million, or 15.5%, to $23.9 million at June 30, 2010 from $28.3
million as of December 31, 2009. Cash and cash equivalents increased $2.8
million or 50.9%, to $8.3 million at June 30, 2010 from $5.5 million at December
31, 2009.
Total
deposits increased $5.6 million, or 4.9%, to $120.8 million at June 30, 2010
from $115.2 million at December 31, 2009. As of June 30,
2010, advances from the Federal Home Loan Bank of New York (“FHLB”) were $14.9
million compared to $22.9 million as of December 31, 2009, a decrease of $8.0
million, or 34.9%.
Total
stockholders’ equity increased $411,000, or 2.7%, to $15.6 million at June 30,
2010 from $15.2 million at December 31, 2009. The increase to
stockholders’ equity reflects net income of $286,000, an amortization of $11,000
of unearned ESOP shares, amortization of $20,000 of restricted stock awards,
amortization of $21,000 of stock option awards and $73,000, net of tax, of other
comprehensive income.
On August
30, 2007, the Company approved a stock repurchase program and authorized the
repurchase of up to 50,000 shares of the Company’s outstanding shares of common
stock. Stock repurchases are 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. During the quarter
ended June 30, 2010, the Company did not repurchase any shares. As of June 30,
2010, under the current program, a total of 12,750 shares had been repurchased
at a weighted average price of $4.44 per share.
Comparison
of Operating Results for the Three Months Ended June 30, 2010 and June 30,
2009
General. Net
income increased by $139,000, to $146,000 for the quarter ended June 30, 2010
from $7,000 for the same quarter in 2009. The increase in net income
for the quarter was primarily due to decreases of $163,000 in interest expense
on deposits, $161,000 in interest expense on borrowings from the FHLB and
$74,000 in non-interest expense, partially offset by increases of $112,000 in
provision for loan loss, $98,000 in income tax expense and decreases of $47,000
in interest income and $3,000 in non-interest income.
Interest
Income. Total interest income decreased $47,000, or 2.3%, to
$2.0 million for the quarter ended June 30, 2010 from $2.1 million for the
quarter ended June 30, 2009. The decrease in interest income can be primarily
attributed to a lower average yield for these assets. For the three
months ended June 30, 2010, the average balance of $144.1 million in
interest-earning assets earned an average yield of 5.56% compared to an average
yield of 5.70% on an average balance of $144.0 million for the three months
ended June 30, 2009.
Interest
income on loans increased $44,000, or 2.7%, to $1.62 million for the quarter
ended June 30, 2010, from $1.58 million for the same quarter in
2009. The average balance of loans increased $10.7 million to $111.7
million for the quarter ended June 30, 2010 from $101.0 million for the quarter
ended June 30, 2009. The average yield on loans decreased by 44 basis
points to 5.80% for the quarter ended June 30, 2010 from 6.24% for the quarter
ended June 30, 2009.
Interest
income on mortgage-backed securities decreased $84,000, or 18.6%, to $368,000
for the quarter ended June 30, 2010 from $452,000 for the quarter ended June 30,
2009. The average balance of mortgage-backed securities decreased
$7.7 million, or 23.8%, to $24.6 million for the quarter ended June 30, 2010
from $32.3 million for the quarter ended June 30, 2009. The average
yield increased by 38 basis points to 5.98% for the quarter ended June 30, 2010
from 5.60% for the same period in 2009.
Interest
income on FHLB stock decreased $6,000, or 29.7%, to $14,000 for the quarter
ended June 30, 2010 from $20,000 for the quarter ended June 30,
2009. The average yield on FHLB stock decreased 43 basis points
to 5.45%, for the quarter ended June 30, 2010 from an average yield of 5.88% for
the quarter ended June 30, 2009.
Interest
Expense. Total interest expense, comprised of interest
expense on deposits and FHLB borrowings, decreased $326,000, or 38.0%, to
$531,000 for the quarter ended June 30, 2010 from $857,000 for the quarter ended
June 30, 2009. The average cost of interest-bearing liabilities decreased by 97
basis points to 1.62% for the quarter ended June 30, 2010 from 2.59% for the
quarter ended June 30, 2009. The average balance of interest-bearing
liabilities decreased $959,000, or 0.7% to $131.5 million for the quarter ended
June 30, 2010 from $132.4 million for the quarter ended June 30,
2009.
Interest
expense on deposits decreased $163,000, or 26.9%, to $444,000 for the quarter
ended June 30, 2010, from $607,000 for the quarter ended June 30,
2009. The average cost of interest-bearing deposits decreased by 71
basis points to 1.55% for the quarter ended June 30, 2010 from 2.26% for the
quarter ended June 30, 2009, reflecting the declining trend of interest rates on
deposits. As a partial offset, the average balance of
interest-bearing deposits increased $6.8 million, or 6.3%, to $114.4 million for
the quarter ended June 30, 2010 from $107.6 million for the quarter ended June
30, 2009.
Interest
expense on FHLB borrowings decreased $161,000, or 64.7%, to $88,000 for the
quarter ended June 30, 2010, from $249,000 for the quarter ended June 30,
2009. The average balance of FHLB borrowings decreased $7.8 million
or 31.3%, to $17.1 million for the quarter ended June 30, 2010, from $24.9
million for the quarter ended June 30, 2009. The average cost of FHLB borrowings
decreased by 196 basis points to 2.05% for the quarter ended June 30, 2010, from
4.01% for the quarter ended June 30, 2009.
Net Interest
Income. Net interest income increased $278,000, or 23.3%, to
$1.5 million for the quarter ended June 30, 2010 from $1.2 million for the same
quarter in 2009. The interest rate spread was 3.94% for the quarter
ended June 30, 2010 compared to 3.11% for the quarter ended June 30, 2009, an
increase of 83 basis points. Interest margin for the quarter ended
June 30, 2010 was 4.09% compared to 3.32% for the quarter ended June 30, 2009,
an increase of 77 basis points. The increase in interest rate spread
and interest margin can be attributed primarily to the decrease in the average
cost of interest-bearing deposits and FHLB borrowings, as well as the increase
in the average balance of loans receivable.
Provision for Loan
Losses. The Company establishes the provision for loan loss,
which is charged to operations, at a level deemed appropriate to absorb known
and inherent losses that are both probable and reasonably estimable at the date
of the financial statements. In evaluating the level of the allowance
for loan losses, management considers historical loss experience, the types of
loans and the amount of loans in the loan portfolio, adverse situations that may
affect the borrower’s ability to repay, the estimated value of any underlying
collateral, and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available or as future events
change. Based on the evaluation of these factors, a provision of
$134,000 was recorded for the three months ended June 30, 2010. A provision of
$22,000 was recorded for the three months ended June 30,
2009. The level of the allowance at June 30, 2010 is based on
estimates, and the ultimate losses may vary from the
estimates. Non-performing loans increased to $6.5 million, or 4.2% of
total assets as of June 30, 2010 from $720,000 or 0.46% of total assets as of
June 30, 2009. As of June 30, 2010, the non-performing loans included eight 1-4
family residential mortgage loans
totaling
$2.5 million, three non-residential mortgage loans of $2.6 million and a
construction loan of $1.4 million which, at quarter-end, maintained aggregate
specific allowances for loan loss of $466,000.
Non-Interest
Income. Non-interest income decreased $3,000, or 4.4%, to
$65,000 for the quarter ended June 30, 2010 from $68,000 for the quarter ended
June 30, 2009. This was primarily attributable to the decrease of
$2,000 in BOLI investment income to $38,000 for quarter ended June 30, 2010 from
$40,000 for the same period ended in 2009.
Non-Interest Expenses. Non-interest expenses
decreased $74,000, or 5.8%, to $1.2 million for the quarter ended June 30, 2010
from $1.3 million for the quarter ended June 31, 2009. The net
decrease of $74,000 in non-interest expenses is primarily attributable to
decreases to salaries and employee benefits, professional fees, Federal
insurance premiums, equipment and other non-interest expenses, partially offset
by increases to net occupancy expense of premises and directors compensation.
Federal Deposit Insurance Corporation Premiums decreased $61,000 to $57,000 for
the three months ended June 30, 2010 from $118,000 for the three months ended
June 30, 2009 due to a special assessment of $71,000 during the three months
ended June 30, 2009.
Income Tax
Expense. The provision for income taxes increased $98,000, to
$64,000 for the quarter ended June 30, 2010 compared
to a tax benefit of $34,000 for the same quarter in 2009 primarily due to an
increase in income before income taxes of $238,000.
Comparison
of Operating Results for the Six Months Ended June 30, 2010 and June 30,
2009
General. Net
income decreased by $45,000, or 13.6% to $286,000 for the six months ended June
30, 2010 from $331,000 for the same period in 2009. The decrease in
net income for this period was primarily due to increases of $267,000 in
provision for loan loss and $456,000 in non-interest expense and a decrease of
$4,000 in non-interest income, partially offset by decreases of $303,000 in
interest expense on deposits, $324,000 in interest expense on borrowings from
the FHLB and $29,000 in income tax expense and an increase of $26,000 in
interest income.
Interest
Income. Total interest income increased $26,000, or 0.6%, to
$4.09 million for the six months ended June 30, 2010 from $4.07 million for the
six months ended June 30, 2009. For the six months ended June 30,
2010, the average balance of $144.6 million in interest-earning assets earned an
average yield of 5.66% compared to an average yield of 5.71% on an average
balance of $142.3 million for the six months ended June 30, 2009.
Interest
income on loans increased $174,000 or 5.6%, to $3.3 million for the six months
ended June 30, 2010, from $3.1 million for the same six months in
2009. The average balance of loans increased $12.6 million to $112.3
million for the six months ended June 30, 2010 from $99.7 million for the six
months ended June 30, 2009. The average yield on loans decreased by
40 basis points to 5.87% for the six months ended June 30, 2010 from 6.27% for
the six months ended June 30, 2009.
Interest
income on mortgage-backed securities decreased $146,000, or 16.1%, to $761,000
for the six months ended June 30, 2010 from $907,000 for the six months ended
June 30, 2009. The average balance of mortgage-backed securities
decreased $6.9 million, or 21.0%, to $25.9 million for the six months ended June
30, 2010 from $32.8 million for the six months ended June 30,
2009. The average yield increased by 35 basis points to 5.88% for the
six months ended June 30, 2010 from 5.53% for the same period in
2009.
Interest
income on FHLB stock was little changed at $31,000 for both the six months ended
June 30, 2010 and 2009. The average yield on FHLB stock
increased 85 basis points to 5.38%, for the six months ended June 30, 2010 from
an average yield of 4.53% for the six months ended June 30, 2009. The increased
yield was offset by a decrease in the average balance.
Interest
Expense. Total interest expense, comprised of interest
expense on deposits and FHLB borrowings, decreased $627,000, or 36.6%, to $1.1
million, for the six months ended June 30, 2010 from $1.7 million for the six
months ended June 30, 2009. The average cost of interest-bearing liabilities
decreased by 98 basis points to 1.65% for the six months ended June 30, 2010
from 2.63% for the six months ended June 30,
2009. The
average
balance of interest-bearing liabilities increased $1.6 million, or 1.2% to
$132.2 million for the six months ended June 30, 2010 from $130.6
million for the six months ended June 30, 2009.
Interest
expense on deposits decreased $303,000, or 25.1%, to $903,000 for the six months
ended June 30, 2010, from $1.2 million for the six months ended June 30,
2009. The average cost of interest-bearing deposits decreased by 68
basis points to 1.61% for the six months ended June 30, 2010 from 2.29% for the
six months ended June 30, 2009, reflecting the declining trend of interest rates
on deposits. As a partial offset, the average balance of
interest-bearing deposits increased $6.6 million, or 6.3%, to $112.0 million for
the six months ended June 30, 2010 from $105.4 million for the six months ended
June 30, 2009.
Interest
expense on FHLB borrowings decreased $324,000, or 63.8%, to $184,000 for the six
months ended June 30, 2010, from $508,000 for the six months ended
June 30, 2009. The average balance of FHLB borrowings decreased $5.1
million or 20.2%, to $20.2 million for the six months ended June 30, 2010, from
$25.3 million for the six months ended June 30, 2009. The average cost of FHLB
borrowings decreased by 221 basis points to 1.82% for the six months ended June
30, 2010, from 4.03% for the six months ended June 30, 2009.
Net Interest
Income. Net interest income increased $653,000, or 27.8%, to
$3.0 million for the six months ended June 30, 2010 from $2.3 million
for the same six months in 2009. The interest rate spread was 4.01%
for the six months ended June 30, 2010 compared to 3.09% for the six months
ended June 30, 2009, an increase of 92 basis points. Interest margin
for the six months ended June 30, 2010 was 4.15% compared to 3.30% for the six
months ended June 30, 2009, an increase of 85 basis
points. The increase in interest rate spread and interest margin can
be attributed primarily to the decrease in the average cost of interest-bearing
deposits and FHLB borrowings, as well as the increase in the average balance of
loans receivable.
Provision for Loan
Losses. The Company establishes the provision for loan loss,
which is charged to operations, at a level deemed appropriate to absorb known
and inherent losses that are both probable and reasonably estimable at the date
of the financial statements. In evaluating the level of the allowance
for loan losses, management considers historical loss experience, the types of
loans and the amount of loans in the loan portfolio, adverse situations that may
affect the borrower’s ability to repay, the estimated value of any underlying
collateral, and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available or as future events
change. Based on the evaluation of these factors, a provision of
$289,000 was recorded for the six months ended June 30, 2010. A provision of
$22,000 was recorded for the six months ended June 30,
2009. The level of the allowance at June 30, 2010 is based on
estimates, and the ultimate losses may vary from the estimates.
Non-Interest
Income. Non-interest income decreased $4,000, or 3.0%, to
$129,000 for the six months ended June 30, 2010 from $133,000 for the
six months ended June 30, 2009. This was primarily attributable to
the decrease of $4,000 in BOLI investment income to $75,000 for six months ended
June 30, 2010 from $79,000 for the same period ended in 2009.
Non-Interest Expenses.
Non-interest expenses increased $456,000, or 23.4%, to $2.4
million for the six months ended June 30, 2010 from $2.0 million for the six
months ended June 31, 2009. The net increase of $456,000 in
non-interest expenses is primarily attributable to increases to salaries and
employee benefits, net occupancy expense of premises, director’s compensation,
professional fees, and other non-interest expenses, partially offset by
decreases to Federal insurance premiums and equipment. Salaries and employee
benefits increased $465,000 to $1.2 million for the six months ended June 30,
2010 from $738,000 for the six months ended June 30, 2009 primarily due to the
one-time pre-tax curtailment credit of $416,000, net of periodic pension
expense, resulting from the freezing of the defined benefit pension plan during
the six months ended June 30, 2009. Excluding the curtailment credit, salaries
and employee benefits increased $50,000, or 4.3% primarily due to defined
benefit pension expenses and employee compensation expenses. All other
categories of non-interest expenses, in the aggregate, decreased $10,000, or
0.8%, to $1.20 million for the six months ended June 30, 2010, from $1.21
million for the prior six month period.
Income Tax
Expense. The provision for income taxes decreased $29,000, to
$152,000 for the six
months ended June 30, 2010 compared
to a tax expense of $181,000 for the same six months in 2009 primarily due to a
decrease in income before income taxes of $73,000.
Liquidity
and Capital Resources
The
Association is required to maintain levels of liquid assets under the Office of
Thrift Supervision (the “OTS”) regulations sufficient to ensure the
Association’s safe and sound operation. The Association’s liquidity,
calculated by a ratio of short-term assets to short-term liabilities, averaged
8.49% during the month of June 2010. The Association adjusts its
liquidity levels in order to meet funding needs for deposit outflows, payment of
real estate taxes from escrow accounts on mortgage loans, repayment of
borrowings, when applicable, and loan funding commitments. The Association also
adjusts its liquidity level as appropriate to meet its asset/liability
objectives.
The
Association’s primary sources of funds are deposits, borrowings, amortization
and prepayments of loans and mortgage-backed securities, maturities of
investment securities and funds provided from operations. While
scheduled loan and mortgage-backed securities amortization and maturing
investment securities are a relatively predictable source of funds, deposit
flows and loan and mortgage-backed securities prepayments are greatly influenced
by market interest rates, economic conditions and competition.
The
Association’s liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities.
The
primary sources of investing activity are lending and the purchase of investment
securities and mortgage-backed securities. Net loans totaled $110.8
million and $111.0 million at June 30, 2010 and December 31, 2009,
respectively. Mortgage-backed securities held to maturity totaled
$23.9 million and $28.3 million at June 30, 2010 and December 31, 2009,
respectively. In addition to funding new loans and mortgage-backed
and investment securities purchases through operating and financing activities,
such activities were funded by principal repayments on existing loans,
mortgage-backed securities and maturities of investment securities.
Liquidity
management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term
investments, such as federal funds and interest-bearing deposits. If
the Association requires funds beyond its ability to generate them internally,
borrowing agreements exist with the FHLB which provides an additional source of
funds. At June 30, 2010, the Company had a borrowing limit of $68.2
million from the FHLB, of which $14.9 million was advanced. At December 31,
2009, advances from the FHLB totaled $22.9 million.
The
Association anticipates that it will have sufficient funds available to meet its
current loan commitments and obligations. At June 30, 2010, the
Association had outstanding commitments to originate or purchase loans of
$845,000 and outstanding loans in process of $2.1 million. Certificates of
deposit scheduled to mature in one year or less at June 30, 2010, totaled $62.2
million. Management believes that, based upon its experience and the
Association’s deposit flow history, a significant portion of such deposits will
remain with the Association.
Under OTS
regulations, three separate measurements of capital adequacy (the “Capital
Rule”) are required. The Capital Rule requires each savings
institution to maintain tangible capital equal to at least 1.5% and core capital
equal to 4.0% of its adjusted total assets. The Capital rule further
requires each savings institution to maintain total capital equal to at least
8.0% of its risk-weighted assets.
The
following tables set forth the Association’s capital position at June 30, 2010
and December 31, 2009, as compared to the minimum regulatory capital
requirements:
Actual
|
Minimal Capital
Requirements
|
Under Prompt
Corrective Actions
Provisions
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
June
30, 2010:
|
(Dollars
in Thousands)
|
|||||||||||||||||||||||
Total
Capital
|
$ | 17,053 | 19.36 | % | $ | >7,046 | >8.00 | % | $ | >8,808 | >10.00 | % | ||||||||||||
(to
risk-weighted assets)
|
||||||||||||||||||||||||
Tier
1 Capital
|
16,403 | 18.62 | % | >- | >- | >5,285 | >6.00 | % | ||||||||||||||||
(to
risk-weighted assets)
|
||||||||||||||||||||||||
Core
(Tier 1) Capital
|
16,487 | 10.82 | % | >6,095 | >4.00 | % | >7,619 | >5.00 | % | |||||||||||||||
(to
adjusted total assets)
|
||||||||||||||||||||||||
Tangible
Capital
|
16,487 | 10.82 | % | >2,286 | >1.50 | % | >- | >- | ||||||||||||||||
(to
adjusted total assets)
|
Actual
|
Minimal Capital
Requirements
|
Under Prompt
Corrective Actions
Provisions
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
December
31, 2009:
|
(Dollars
in Thousands)
|
|||||||||||||||||||||||
Total
Capital
|
$ | 16,408 | 18.66 | % | $ | >7,036 | >8.00 | % | $ | >8,795 | >10.00 | % | ||||||||||||
(to
risk-weighted assets)
|
||||||||||||||||||||||||
Tier
1 Capital
|
16,044 | 18.24 | % | >- | >- | >5,277 | >6.00 | % | ||||||||||||||||
(to
risk-weighted assets)
|
||||||||||||||||||||||||
Core
(Tier 1) Capital
|
16,128 | 10.42 | % | >6,192 | >4.00 | % | >7,739 | >5.00 | % | |||||||||||||||
(to
adjusted total assets)
|
||||||||||||||||||||||||
Tangible
Capital
|
16,128 | 10.42 | % | >2,322 | >1.50 | % | >- | >- | ||||||||||||||||
(to
adjusted total assets)
|
Management
of Interest Rate Risk
The
ability to maximize net interest income largely depends upon maintaining a
positive interest rate spread during periods of fluctuating market interest
rates. Interest rate sensitivity is a measure of the difference
between amounts of interest-earning assets and interest-bearing liabilities
which either reprice or mature within a given period of time. The
difference, or the interest rate repricing “gap,” provides an indication of the
extent to which an institution’s interest rate spread will be affected by
changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Generally, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income, and during a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would result
in a decrease in net interest income.
The
Association’s current investment strategy is to maintain an overall securities
portfolio that provides a source of liquidity and that contributes to the
Association’s overall profitability and asset mix within given quality and
maturity considerations.
Net
Portfolio Value
The
Association’s interest rate sensitivity is monitored by management through the
use of the OTS model which estimates the change in the Association’s net
portfolio value (“NPV”) over a range of interest rate scenarios. NPV
is the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts. The NPV ratio, under any interest rate
scenario, is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. The OTS produces its analysis based upon data
submitted on the Association’s quarterly Thrift Financial Reports. The following
table sets forth the Association’s NPV as of June 30, 2010, the most recent date
the Association’s NPV was calculated by the OTS.
Change in
Interest Rates
(basis points)
|
Net Portfolio Value
|
Net Portfolio Value as a
Percentage of Present Value of
Assets
|
|||||||||||||||||||
Estimated
NPV
|
Amount of
Change
|
Percent of
Change
|
NPV Ratio
|
Change in Basis
Points
|
|||||||||||||||||
(Dollars
in Thousands)
|
|||||||||||||||||||||
+300 | $ | 14,916 | $ | (8,480 | ) | (36 | %) | 9.72 | % | (450 | ) | ||||||||||
+200 | 18,560 | (4,837 | ) | (21 | %) | 11.76 | % | (247 | ) | ||||||||||||
+100 | 21,581 | (1,816 | ) | (8 | %) | 13.34 | % | (88 | ) | ||||||||||||
+ 50 | 22,658 | (738 | ) | ( 3 | %) | 13.88 | % | (35 | ) | ||||||||||||
0 | 23,397 | — | — | 14.23 | % | — | |||||||||||||||
- 50 | 23,834 | 438 | 2 | % | 14.42 | % | 19 | ||||||||||||||
-100 | 24,084 | 687 | 3 | % | 14.53 | % | 30 |
Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement. Modeling changes in net portfolio value require
making certain assumptions that may or may not reflect the manner in which
actual yields and costs respond to changes in market interest
rates. In this regard, the net portfolio value table presented
assumes that the composition of interest-sensitive assets and liabilities
existing at the beginning of a period remains constant over the period being
measured, and assumes that a particular change in interest rates is reflected
uniformly across the yield curve regardless of the duration or repricing of
specific assets and liabilities. Accordingly, although the net
portfolio value table provides an indication of the Association’s interest rate
risk exposure at a particular point in time, such measurements are not intended
to and do not provide a precise forecast of the effect of changes in market
interest rates on its net interest income and will differ from actual
results.
ITEM 3. Quantitative and Qualitative
Disclosure About Market Risk
As a
smaller reporting company, the Company is not required to provide the
information required of this item.
ITEM 4. FLATBUSH FEDERAL BANCORP,
INC. AND SUBSIDIARIES 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 June 30, 2010 (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)
|
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.
PART
II – OTHER INFORMATION
As of
June 30, 2010, the Company was not involved in any legal proceedings other than
routine legal proceedings occurring in the ordinary course of business, which,
in the aggregate, involve amounts that management believes are
immaterial to the Company’s consolidated financial condition, results of
operations and cash flows.
ITEM 1A.Risk
Factors
A smaller
reporting company is not required to provide the information required of this
item.
ITEM 2. Unregistered Sales of Equity
Securities and Use of Proceeds
On August
30, 2007, the Company approved a 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 June 30, 2010, 12,750 total
shares have been repurchased by the Company under this repurchase program.
During the quarter ended June 30, 2010, 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
|
||||||||||||
April 1, 2010 through April 30,
2010
|
- | $ | - | 12,750 | 37,250 | |||||||||||
May 1, 2010 through May 31,
2010
|
- | - | 12,750 | 37,250 | ||||||||||||
June 1, 2010 through June 30,
2010
|
- | - | 12,750 | 37,250 |
ITEM 3. Defaults Upon Senior
Securities
Not
applicable.
ITEM 5. Other
Information
None
ITEM 6. Exhibits
The
following Exhibits are filed as part of this report.
|
3.1
|
Federal
Stock Charter of Flatbush Federal Bancorp,
Inc.*
|
|
3.2
|
Bylaws
of Flatbush Federal Bancorp, Inc.*
|
|
4.0
|
Form
of common stock certificate of Flatbush Federal Bancorp, Inc.
*
|
|
Computation
of earnings per share.
|
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley
Act of 2002 (filed herewith).
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (filed herewith).
|
*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.
SIGNATURES
Pursuant
to the requirements 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:
August 16,
2010
|
By:
|
/s/
|
Jesus R. Adia
|
||
Jesus
R. Adia
|
|||||
President
and
|
|||||
Chief
Executive Officer
|
|||||
Date:
August 16,
2010
|
By:
|
/s/
|
John S. Lotardo
|
||
John
S. Lotardo
|
|||||
Executive
Vice President and Chief
|
|||||
Financial
Officer
|
28