XNYS:PBNY Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________ 
FORM 10-Q
______________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
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: 001-35385
______________________________ 
PROVIDENT NEW YORK BANCORP
(Exact Name of Registrant as Specified in its Charter)
______________________________ 
Delaware
 
80-0091851
(State or Other Jurisdiction of
 
(IRS Employer ID No.)
Incorporation or Organization)
 
 
 
 
 
400 Rella Boulevard, Montebello, New York
 
10901
(Address of Principal Executive Office)
 
(Zip Code)
(845) 369-8040
(Registrant’s Telephone Number including area code)
______________________________
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 twelve 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  ¨
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
 
¨
  
Accelerated Filer
 
x
 
 
 
 
 
 
 
Non-Accelerated Filer
 
¨
  
Smaller Reporting Company
 
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Classes of Common Stock
  
Shares Outstanding as of August 7, 2012
$0.01 per share
  
44,154,787



PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
QUARTERLY PERIOD ENDED JUNE 30, 2012

 
PART I. FINANCIAL INFORMATION
 
Item 1. 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
PART II. OTHER INFORMATION
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 


PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
(In thousands, except share data)


 
 
 
June 30,
2012
 
September 30,
2011
ASSETS
 
 
 
Cash and due from banks
$
111,400

 
$
281,512

Securities (including $672,650 and $644,910 pledged as collateral for borrowings and deposits at June 30, 2012 and September 30, 2011 respectively)
 
 
 
Available for Sale
714,200

 
739,844

Held to maturity, at amortized cost (fair value of $174,402 and $111,272 at June 30, 2012 and September 30, 2011, respectively)
171,233

 
110,040

Total securities
885,433

 
849,884

Loans held for sale
5,369

 
4,176

Gross loans:
1,851,027

 
1,703,799

Allowance for loan losses
(27,587
)
 
(27,917
)
Total loans, net
1,823,440

 
1,675,882

Federal Home Loan Bank (“FHLB”) stock, at cost
18,207

 
17,584

Accrued interest receivable
9,059

 
9,904

Premises and equipment, net
38,877

 
40,886

Goodwill
160,861

 
160,861

Core deposit and other intangible assets
3,718

 
4,629

Bank owned life insurance (BOLI)
58,506

 
56,967

Foreclosed properties
7,292

 
5,391

Other assets
27,878

 
29,726

Total assets
$
3,150,040

 
$
3,137,402

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
LIABILITIES
 
 
 
Deposits
$
2,332,091

 
$
2,296,695

FHLB borrowings (including repurchase agreements of $207,268 and $211,694 at June 30, 2012 and September 30, 2011, respectively)
314,154

 
323,522

Borrowings senior unsecured note (FDIC insured)

 
51,499

Mortgage escrow funds
24,223

 
9,701

Other liabilities
34,902

 
24,851

Total liabilities
2,705,370

 
2,706,268

Commitment and contingent liabilities


 


STOCKHOLDERS’ EQUITY
 
 
 
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; none issued or outstanding)

 

Common stock (par value $0.01 per share; 75,000,000 shares authorized; 45,929,552 issued; 37,899,007 and 37,864,008 shares outstanding at June 30, 2012 and September 30, 2011, respectively)
459

 
459

Additional paid-in capital
357,620

 
357,063

Unallocated common stock held by employee stock ownership plan (“ESOP”)
(5,763
)
 
(6,138
)
Treasury stock, at cost (8,030,545 and 8,065,544 shares at June 30, 2012 and September 30, 2011, respectively)
(90,328
)
 
(90,585
)
Retained earnings
175,999

 
165,199

Accumulated other comprehensive income, net of taxes
6,683

 
5,136

Total stockholders’ equity
444,670

 
431,134

Total liabilities and stockholders’ equity
$
3,150,040

 
$
3,137,402


See accompanying notes to unaudited consolidated financial statements
3

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share data)


 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Interest and dividend income:
 
 
 
 
 
 
 
Loans
$
22,312

 
$
22,261

 
$
66,614

 
$
67,505

Taxable securities
4,224

 
3,607

 
12,629

 
10,668

Non-taxable securities
1,581

 
1,829

 
4,954

 
5,655

Other earning assets
228

 
237

 
727

 
968

Total interest and dividend income
28,345

 
27,934

 
84,924

 
84,796

Interest expense:
 
 
 
 
 
 
 
Deposits
1,262

 
1,493

 
3,792

 
4,720

Borrowings
3,001

 
3,637

 
9,907

 
11,578

Total interest expense
4,263

 
5,130

 
13,699

 
16,298

Net interest income
24,082

 
22,804

 
71,225

 
68,498

Provision for loan losses
2,312

 
3,600

 
7,112

 
7,800

Net interest income after provision for loan losses
21,770

 
19,204

 
64,113

 
60,698

Non-interest income:
 
 
 
 
 
 
 
Deposit fees and service charges
2,816

 
2,674

 
8,312

 
8,085

Net gain on sale of securities
2,412

 
542

 
7,300

 
5,492

Other than temporary impairment on securities
(6
)
 
(27
)
 
(44
)
 
(27
)
Title insurance fees
249

 
312

 
774

 
949

Bank owned life insurance
518

 
488

 
1,538

 
1,535

Gain on sale of loans
578

 
9

 
1,468

 
861

Investment management fees
802

 
815

 
2,367

 
2,347

Fair value loss on interest rate cap
(14
)
 
(259
)
 
(57
)
 
(27
)
Other
624

 
663

 
1,468

 
1,681

Total non-interest income
7,979

 
5,217

 
23,126

 
20,896

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
10,845

 
11,122

 
33,165

 
33,533

Retirement benefit settlement charge

 
1,494

 

 
1,772

Stock-based compensation plans
326

 
284

 
885

 
859

Merger related expense
451

 

 
997

 

Occupancy and office operations
3,388

 
3,423

 
10,498

 
10,815

Advertising and promotion
440

 
855

 
1,480

 
2,651

Professional fees
1,128

 
1,137

 
3,111

 
3,242

Data and check processing
705

 
712

 
2,087

 
2,045

Amortization of intangible assets
283

 
305

 
911

 
1,088

Foreclosed property expense
428

 
461

 
1,045

 
494

FDIC insurance and regulatory assessments
782

 
587

 
2,253

 
2,274

ATM/debit card expense
437

 
400

 
1,273

 
1,159

Other
1,949

 
1,889

 
5,468

 
5,797

Total non-interest expense
21,162

 
22,669

 
63,173

 
65,729

Income before income tax expense
8,587

 
1,752

 
24,066

 
15,865

Income tax expense
2,378

 
(187
)
 
6,439

 
3,633

Net Income
$
6,209

 
$
1,939

 
$
17,627

 
$
12,232


See accompanying notes to unaudited consolidated financial statements
4

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except share data)


 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Weighted average common shares:
 
 
 
 
 
 
 
Basic
37,302,693

 
37,368,391

 
37,278,507

 
37,472,548

Diluted
37,330,467

 
37,370,213

 
37,292,366

 
37,473,167

Per common share
 
 
 
 
 
 
 
Basic
$
0.17

 
$
0.05

 
$
0.47

 
$
0.33

Diluted
$
0.17

 
$
0.05

 
$
0.47

 
$
0.33


See accompanying notes to unaudited consolidated financial statements
5

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(In thousands, except share data)

 
For the Three Months Ended June 30,
 
For the Nine Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Net Income:
$
6,209

 
$
1,939

 
$
17,627

 
$
12,232

Other comprehensive income (loss) :
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on securities available for sale net of related tax expense (benefit) of $1,223, $6,305, $3,313, and ($2,467)
1,790

 
9,220

 
4,846

 
(3,608
)
Less:
 
 
 
 
 
 
 
Reclassification adjustment for net unrealized gains included in net income, net of related income tax expense of $980, $220, $2,965, and $2,230
1,432

 
322

 
4,335

 
3,262

Reclassification adjustment for other than temporary impaired losses included in net income, net of related income tax benefit of $3, $11, $18, and $11
(3
)
 
(16
)
 
(26
)
 
(16
)
 
361

 
8,914

 
537

 
(6,854
)
Change in funded status of defined benefit plans, net of related income tax expense of $230, $272, $690, and $652
337

 
400

 
1,010

 
956

Other comprehensive income (loss)
698

 
9,314

 
1,547

 
(5,898
)
Total comprehensive income
$
6,907

 
$
11,253

 
$
19,174

 
$
6,334


See accompanying notes to unaudited consolidated financial statements
6

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)

 
Number
of
Shares
 
Common
Stock
 
Additional
Paid-In
Capital
 
Unallocated
ESOP
Shares
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at October 1, 2011
37,864,008

 
$
459

 
$
357,063

 
$
(6,138
)
 
$
(90,585
)
 
$
165,199

 
$
5,136

 
$
431,134

Net income

 

 

 

 

 
17,627

 

 
17,627

Other comprehensive income

 

 

 

 

 

 
1,547

 
1,547

Total comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,174

Deferred compensation transactions

 

 
151

 

 

 

 

 
151

Stock option transactions, net

 

 
411

 

 

 

 

 
411

ESOP shares allocated or committed to be released for allocation (24,966 shares)

 

 
62

 
375

 

 

 

 
437

Recognition and Retention Plan "RRP" Awards
36,000

 

 
(276
)
 

 
267

 

 

 
(9
)
Vesting of RRP Awards

 

 
209

 

 

 

 

 
209

Other RRP Awards
(1,001)

 

 

 

 
(10
)
 

 

 
(10
)
Purchase of treasury shares

 

 

 

 

 

 

 

Cash dividends paid ($0.18 per common share)

 

 

 

 

 
(6,827
)
 

 
(6,827
)
Balance at June 30, 2012
37,899,007

 
$
459

 
$
357,620

 
$
(5,763
)
 
$
(90,328
)
 
$
175,999

 
$
6,683

 
$
444,670


See accompanying notes to unaudited consolidated financial statements
7

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands, except share data)

 
For the Nine Months Ended June 30,
 
2012
 
2011
Cash flows from operating activities:
 
 
 
Net income
$
17,627

 
$
12,232

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Provision for loan losses
7,112

 
7,800

Loss on real estate owned
427

 
429

Depreciation of premises and equipment
3,488

 
3,971

Amortization of intangibles
911

 
1,088

Net gains on loans held for sale
(1,468
)
 
(861
)
Other than temporary impairment loss (credit loss)
44

 
27

Net gains on sale of securities
(7,300
)
 
(5,492
)
Fair value loss on interest rate cap
57

 
27

Net gain on sale of premises and equipment
(5
)
 

Net accretion (amortization) of premium on securities
(128
)
 
2,318

Accretion of premiums on borrowings
1

 
686

Accretion (amortization) of prepaid penalties on borrowings
1,092

 
(31
)
ESOP and RRP expense
474

 
453

ESOP forfeitures
(1
)
 
(3
)
Stock option compensation expense
412

 
409

Originations of loans held for sale
(53,107
)
 
(37,819
)
Proceeds from sales of loans held for sale
53,382

 
44,570

Increase in cash surrender value of bank owned life insurance
(1,539
)
 
(1,535
)
Deferred income tax benefit
(5,628
)
 
(4,109
)
Net changes in accrued interest receivable and payable
581

 
747

Other adjustments (principally net changes in other assets and other liabilities)
18,787

 
(1,843
)
Net cash provided by operating activities
35,219

 
23,064

Cash flows from investing activities
 
 
 
Purchases of available for sale securities
(338,469
)
 
(505,846
)
Purchases of held to maturity securities
(83,574
)
 
(6,675
)
Proceeds from maturities, calls and other principal payments on securities:
 
 
 
Available for sale
137,306

 
185,343

Held to maturity
21,916

 
15,088

Proceeds from sales of securities available for sale
235,559

 
293,328

Loan originations
(551,305
)
 
(409,980
)
Loan principal payments
392,153

 
415,994

Proceeds from sales of other real estate owned
1,745

 

Purchase (sale) of FHLB stock, net
(623
)
 
765

Purchase of bank owned life insurance

 
(3,980
)
Purchases of premises and equipment
(1,474
)
 
(2,622
)
Net cash used in investing activities
(186,766
)
 
(18,585
)

See accompanying notes to unaudited consolidated financial statements
8

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands, except share data)

 
For the Nine Months Ended June 30,
 
2012
 
2011
Cash flows from financing activities
 
 
 
Net increase (decrease) in transaction, savings and money market deposits
84,016

 
(55,752
)
Net increase (decrease) in time deposits
(48,620
)
 
11,123

Net increase (decrease) in short-term borrowings
(10,000
)
 
27,100

Gross repayments of long-term borrowings
(5,183
)
 
(36,020
)
Restructured debt
5,000

 

Payment of penalties on restructured borrowings
(278
)
 
(5,151
)
Net decrease in borrowings senior note
(51,499
)
 

Net increase in mortgage escrow funds
14,522

 
18,112

Treasury shares purchased

 
(2,566
)
Stock option transactions
153

 
4

Other stock-based compensation transactions
151

 
19

Cash dividends paid
(6,827
)
 
(6,690
)
Net cash used in financing activities
(18,565
)
 
(49,821
)
Net decrease in cash and cash equivalents
(170,112
)
 
(45,342
)
Cash and cash equivalents at beginning of period
281,512

 
90,872

Cash and cash equivalents at end of period
$
111,400

 
$
45,530

Supplemental information:
 
 
 
Interest payments
$
13,963

 
$
16,408

Income tax payments
1,644

 
7,034

Net change in net unrealized gains recorded on securities available for sale
903

 
(11,540
)
Change in deferred taxes on net unrealized gains on securities available for sale
(366
)
 
4,686

Real estate acquired in settlement of loans
4,482

 
985

Trade day security accounting
9,314

 


See accompanying notes to unaudited consolidated financial statements
9

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


 
1. Basis of Presentation

The consolidated financial statements include the accounts of Provident New York Bancorp (“Provident Bancorp” or “the Company”), Hardenburgh Abstract Title Company, Inc., which provides title searches and insurance for residential and commercial real estate, Hudson Valley Investment Advisors, LLC (“HVIA”), a registered investment advisor, Provident Risk Management, (a captive insurance company), Provident Bank (“the Bank”), and the Bank’s wholly owned subsidiaries. These subsidiaries are (i) Provident Municipal Bank (“PMB”) which is a limited-purpose, New York State-chartered commercial bank formed to accept deposits from municipalities in the Company’s market area, (ii) Provident REIT, Inc. and WSB Funding, Inc. which are real estate investment trusts that hold a portion of the Company’s real estate loans, (iii) Provest Services Corp. I, which has invested in a low-income housing partnership, (iv) Provest Services Corp. II, which has engaged a third-party provider to sell mutual funds and annuities to the Bank’s customers, and (v) companies that hold foreclosed properties acquired by the Bank. Intercompany transactions and balances are eliminated in consolidation.

The Company’s off-balance sheet activities are limited to loan origination commitments, loan commitments pending sale, lines of credit extended to customers and letters of credit on behalf of customers, which all occur in the ordinary course of its lending activities. In addition, the Company purchased interest rate caps with a notional value of $50,000 during the first quarter of fiscal 2010. The Company does not engage in off-balance sheet financing transactions or other activities involving the use of special-purpose or variable interest entities.

The consolidated financial statements have been prepared by management without audit, but, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s financial position and results of operations as of the dates and for the periods presented. Although certain information and footnote disclosures have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the Company believes that the disclosures are adequate to make the information presented clear. The results of operations for the three months and nine months ended June 30, 2012 are not necessarily indicative of results to be expected for other interim periods or the entire fiscal year ending September 30, 2012. The unaudited consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2011.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense. Actual results could differ significantly from these estimates. A material estimate that is particularly susceptible to near-term change is the allowance for loan loss (see note 4), which reflects the application of a critical accounting policy.

Certain loan amounts from prior periods have been reclassified to conform to the current fiscal year presentation.

2. Stock-Based Compensation

The Company has two share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $228, and $171, for the three months ending June 30, 2012 and 2011. There was no income tax benefit for the three months ending June 30, 2012 and 2011. Total compensation cost that has been charged against income for those plans was $601, and $510, for the nine months ending June 30, 2012 and 2011. There was no income tax benefit for the nine months ending June 30, 2012 and 2011.

Stock Option Plan

The Company’s shareholders approved the 2012 Employee Share Option Plan (stock option plan) on February 16, 2012. The plan permits the grant of share options to employees for up to 2,864,000 shares of common stock as of June 30, 2012. The plan allows for the following type of stock based awards to be issued: options, stock appreciation rights, restricted stock awards, performance based restricted stock awards, restricted stock unit awards, deferred stock awards, performance unit awards or other stock based awards. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from 2 to 5 years and have 10 year contractual terms. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises.


10

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


The Company’s 2004 Employee Share Option Plan (stock option plan), which is shareholder-approved, permits the grant of share options to its employees for up to 58,857 shares of common stock as of June 30, 2012. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from 2 to 5 years and have 10 year contractual terms. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises.
 
The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of options granted was determined using the following weighted-average assumptions as the grant date:

 
Nine Months Ended June 30,
 
2012
 
2011
Risk-free interest rate (1)
1.5
%
 
%
Expected stock price volatility
39.8
%
 
%
Dividend yield (2)
3.1
%
 
%
Expected term in years
5.8

 

(1) represents the yield on a risk free rate of return (either the US Treasury curve or the SWAP curve, in periods with high volatility in US Treasury securities) with a remaining term equal to the expected option term 
(2) represents the approximate annualized cash dividend rate paid with respect to a share of common stock at or near the grant date 

The following table summarizes the Company’s stock option activity for the nine months ended June 30, 2012:

 
Number of
Shares
 
Weighted
Average
Exercise
Price
Outstanding at October 1, 2011
1,906,020
 
$
12.20

Granted
419,500
 
7.73

Exercised
0
 

Forfeited
(322,940)
 
12.22

Outstanding at June 30, 2012
2,002,580
 
$
11.26

Exercisable at June 30, 2012
1,350,254
 
$
12.65

Weighted average estimated fair value of options granted during the period
 
 
$
2.27


Information related to the stock option plan during each year follows:
 
 
2012
 
2011
 
2010
Intrinsic value of options exercised
$

 
$

 
$
1,615

Cash received from option exercises

 

 
984

Tax benefit realized from option exercises

 

 

Weighted average fair value of options granted
2.27

 
2.27

 
2.69


As of June 30, 2012, there was $1,058 of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.4 years.

There were no modifications for the nine months ending June 30, 2012 and 2011.
 

11

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


Share Award Plan

The Company’s 2004 Recognition and Retention Plan (“RRP”) provides for the issuance of shares to directors and officers. Compensation expense is recognized on a straight line basis over the vesting period of the awards based on the fair value of the stock at issue date. RRP shares vest annually on the anniversary of the grant date over the vesting period. Total shares remaining that are authorized and available for future grant under the RRP are 2,120 at June 30, 2012. Inducement shares of 41,370 were issued in July 2011.

A summary of restricted stock award activity for the nine months ended June 30, 2012, is presented below:
 
 
Number
of Shares
 
Weighted
Average
Grant-Date
Fair Value
Nonvested shares at September 30, 2011
57,520
 
$
8.77

Granted
36,000
 
7.40

Vested
0
 

Forfeited
(1,000)
 
9.85

Nonvested shares at June 30, 2012
92,520
 
$
8.23


As of June 30, 2012, there was $545 of total unrecognized compensation cost related to non-vested shares granted under the RRP. The cost is expected to be recognized over a weighted-average period of 2.69 years.

3. Recent Accounting Standards, Not Yet Adopted

Accounting standards update (ASU) 2011-11, Balance Sheet (Topic 210)—Disclosures about offsetting Assets and Liabilities has been issued to enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This standard is effective for the Company on January 1, 2013 and is not expected to have a material effect on the Company’s consolidated financial statements.

Adoption of New Accounting Standards

Accounting Standards Update (ASU) 2011-03, Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements has been issued, which is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This standard was effective for the Company on January 1, 2012 and did not have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820)-Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS has been issued, which will conform the meaning and disclosure requirements of fair value measurement between U.S. GAAP and IFRS. This standard was effective for the Company on January 1, 2012 and did not have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-05- Presentation of Comprehensive Income (Topic 220) has been issued. This standard was issued to conform U.S. GAAP and IFRS as well as to increase the prominence of items reported in other comprehensive income. The adoption of this amendment had no impact on the consolidated financial statements as the prior presentation of comprehensive income was in compliance with this amendment.








12

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


4. Loans

The components of the loan portfolio, excluding loans held for sale, were as follows:
 
 
June 30, 2012
 
September 30, 2011
One-to four-family residential mortgage loans
$
357,943

 
$
389,765

Commercial real estate loans
906,798

 
703,356

Commercial business loans
207,966

 
209,923

Acquisition, development & construction loans
165,125

 
175,931

Total commercial loans
1,279,889

 
1,089,210

Consumer loans:
 
 
 
Home equity lines of credit
167,296

 
174,521

Homeowner loans
37,173

 
40,969

Other consumer loans, including overdrafts
8,726

 
9,334

 
213,195

 
224,824

Total loans
1,851,027

 
1,703,799

Allowance for loan losses
(27,587
)
 
(27,917
)
Total loans, net
$
1,823,440

 
$
1,675,882


Total loans include net deferred loan origination fees of $(247) at June 30, 2012 and $308 net deferred loan origination costs at September 30, 2011.

Loans where management has the intent and ability to hold for the foreseeable future or until maturity or payoff (other than loans held for sale) are reported at amortized cost less the allowance for loan losses. Interest income on loans is accrued on the level yield method.

A loan is placed on non-accrual status when management has determined that the borrower may likely be unable to meet contractual principal or interest obligations, or when payments are 90 days or more past due, unless well secured and in the process of collection. Accrual of interest ceases and, in general, uncollected past due interest is reversed and charged against current interest income, while interest recorded in the prior year is charged to the allowance for loan losses. Interest payments received on non-accrual loans, including impaired loans, are not recognized as income unless warranted based on the borrower’s financial condition and payment record.

The Company defers nonrefundable loan origination and commitment fees, and certain direct loan origination costs, and amortizes the net amount as an adjustment of the yield over the estimated life of the loan. If a loan is prepaid or sold, the net deferred amount is recognized in the statement of income at that time. Interest and fees on loans include prepayment fees and late charges collected.

The allowance for loan losses (the “allowance”) is increased through provisions charged against current earnings and additionally by crediting amounts of recoveries received, if any, on previously charged-off loans. The allowance is reduced by charge-offs on loans, in accordance with established policies, when all efforts of collection have been exhausted. The allowance is maintained at a level estimated to absorb probable credit losses inherent in the loan portfolio as well as other credit risk related charge-offs. The allowance is based on ongoing evaluations of the probable estimated losses inherent in the performing loan portfolio, as well as reserves for impaired loans.

The Bank’s methodology for evaluating the appropriateness of the allowance includes grouping the performing loan portfolio into loan segments based on common risk characteristics, tracking the historical levels of classified loans and delinquencies, applying economic outlook factors, assigning specific incremental reserves where necessary, providing specific reserves on impaired loans, and assessing the nature and trend of loan charge-offs. Additionally, the volume of delinquencies and non-performing loans, loan trends, concentration risks by relationship, type, and , collateral adequacy, credit policies and procedures, staffing, underwriting consistency, loan review and economic conditions are taken into consideration.


13

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


The allowance for loan losses consists of the following elements: (i) specific reserves for individually impaired credits, (ii) reserves for other loans based on historical loss factors, (iii) reserves based on general economic conditions and other qualitative risk factors both internal and external to Provident Bank, including changes in loan portfolio volume and the composition and concentrations of credit.

The Credit and Risk Management Department individually evaluates non-accrual (non-homogeneous) loans and all troubled debt restructured loans to determine if an impairment reserve is needed. The Company considers a loan to be impaired when, based on current information and events, it is probable that the borrower will be unable to comply with contractual principal and interest payments due. Smaller-balance homogeneous loans are collectively evaluated for impairment, such as residential mortgage loans and consumer loans. The value of an impaired loan is measured based upon the underlying anticipated method of payment consisting of either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, if the loan is collateral dependent, and its payment is expected solely based on the underlying collateral. If the value of an impaired loan is less than its carrying amount, impairment is recognized through a provision to the allowance for loan losses. Loans in the commercial real estate segment are re-appraised using a summary report every six to nine months, and segments for residential mortgages, ELOCs, and Homeowner loans are also re-appraised every six to nine months primarily using drive-by appraisals because of the limitations on entering the premises for a full evaluation. All loans in real estate secured segments are evaluated for impairment on a quarterly basis based on information obtained by following ASU-2010-10-50, Receivables (Topic 310) guidelines. If the book value exceeds the fair market value of the collateral the difference is charged in that quarter to the allowance. This quarterly evaluation of value continues until the loan is transferred to Other Real Estate Owned (OREO) or is paid-off. If the loan is transferred to OREO, the Allowance for Loan and Lease Losses is charged for any subsequent negative adjustments that occur within a reporting period or 90 days, whichever is less. Subsequent negative adjustments are charged to the Bank’s income account - All other segments that are not secured by real estate are written off to the allowance between 90 or 120 days of deliquency or sooner if deemed uncollectible such as in the case of a bankruptcy. Once charged off all subsequent collection and legal expenses are expensed.

Collateral dependent impaired loan balances are written down to the current fair value. If repayment is based upon future expected cash flows, the present value of the expected future cash flows discounted at the loan’s original effective interest rate is compared to the carrying value of the loan, and any shortfall is recorded as a specific valuation allowance in the allowance for loan losses. Accrual of interest is discontinued on an impaired loan when management believes, after considering collection efforts and other factors, the borrower’s financial condition is such that collection of interest is doubtful. Cash collections on impaired loans are generally credited to the loan balance, and no interest income is recognized on these loans until the principal balance has been determined to be fully collectible.

A substantial portion of the Company’s loan portfolio is secured by residential and commercial real estate located primarily in Rockland and Orange Counties of New York and contiguous areas such as Ulster, Sullivan, Putnam and Westchester Counties of New York, Bergen County, New Jersey and New York City. The ability of the Company’s borrowers to make principal and interest payments is dependent upon, among other things, the level of overall economic activity and the real estate market conditions prevailing within the Company’s concentrated lending area. Commercial real estate and acquisition, development and construction loans are considered by management to be of somewhat greater credit risk than loans to fund the purchase of a primary residence due to the generally larger loan amounts and dependency on income production or sale of the real estate. Substantially all of these loans are collateralized by real estate located in the Company’s primary market area.

The allowances established for inherent losses on specific loans are based on a regular analysis and evaluation of the loans. Loans are evaluated based on an internal credit risk rating system for the commercial loan portfolio segments and non-performing loan status for the residential and consumer loan portfolio segments. Loans are risk-rated based on an internal credit risk grading process that evaluates, among other things: (i) the obligor’s ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship manager level for all loans, and reviewed by the Portfolio Risk Management Department. Loans with a grade that is below “Pass” grade are adversely classified. Any change in the credit risk grade of performing and/or non-performing loans affects the amount of the related allowance. Once a loan is adversely classified, the assigned relationship manager and/or a special assets officer in conjunction with the Credit and Portfolio Risk Management Department analyze the loan to determine whether the loan is impaired and, if impaired, the need to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. Loans identified as losses by management are charged-off. Loans are assessed for full or partial charge-off when they are between 90 and 120 days past due or sooner if deemed uncollectible. Furthermore, residential mortgage and consumer loan accounts are charged off

14

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


in accordance with regulatory requirements.

The allowance allocations for other loans (i.e.; risk rated loans that are not adversely classified and loans that are not risk rated) are calculated by applying historical loss factors for each loan portfolio segment to the applicable outstanding loan portfolio balances. Loss factors are calculated using a historical loss analysis supplemented by management judgment of general economic conditions and other qualitative risk factors both internal and external to Provident Bank. The management analysis includes an evaluation of loan portfolio volumes, the composition and concentrations of credit, credit quality and current delinquency trends.

The allowance also contains reserves to cover inherent losses within each of Provident’s loan portfolio segments, which have not been otherwise reviewed or measured on an individual basis. Such reserves include management’s evaluation of national and local economic and business conditions, loan portfolio volumes, the composition and concentrations of credit, credit quality and delinquency trends. These reserves reflect management’s attempt to ensure that the overall allowance reflects a margin for imprecision and the uncertainty that is inherent in estimates of probable credit losses.

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for June 30, 2012 are summarized below:
 
 
For the Three Months Ended June 30, 2012
 
Beginning
Allowance for
loan  losses
 
Charge-offs
 
Recoveries
 
Net
Charge-offs
 
Provision
for
losses
 
Ending
Allowance for
Loan  Losses
Loans by segment:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
4,187

 
$
(244
)
 
$
17

 
$
(227
)
 
$
454

 
$
4,414

Real estate—commercial mortgage
5,740

 
(174
)
 
1

 
(173
)
 
(30
)
 
5,537

Real estate—commercial mortgage (CBL)1
726

 
(481
)
 
3

 
(478
)
 
552

 
800

Commercial business loans
1,180

 
(20
)
 
86

 
66

 
173

 
1,419

Commercial business loans (CBL)1
3,551

 
(480
)
 
86

 
(394
)
 
(119
)
 
3,038

Acquisition Development & Construction
8,941

 
(1,263
)
 
263

 
(1,000
)
 
1,031

 
8,972

Consumer, including home equity
3,462

 
(335
)
 
29

 
(306
)
 
251

 
3,407

Total Loans
$
27,787

 
$
(2,997
)
 
$
485

 
$
(2,512
)
 
$
2,312

 
$
27,587

Annualized net charge-offs to average gross loans
 
 
 
 
 
 
 
 
 
0.55
%
1 

Community business loans



15

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


 
For the Nine Months Ended June 30, 2012
 
Beginning
Allowance for
loan losses
 
Charge-offs
 
Recoveries
 
Net
Charge-offs
 
Provision
for
losses
 
Ending
Allowance for
Loan Losses
Loans by segment:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
3,498

 
$
(1,710
)
 
$
137

 
$
(1,573
)
 
$
2,489

 
$
4,414

Real estate—commercial mortgage
4,533

 
(1,137
)
 
52

 
(1,085
)
 
2,089

 
5,537

Real estate—commercial mortgage (CBL)1
1,035

 
(1,179
)
 
353

 
(826
)
 
591

 
800

Commercial business loans
1,331

 
(50
)
 
155

 
105

 
(17
)
 
1,419

Commercial business loans (CBL)1
4,614

 
(1,151
)
 
646

 
(505
)
 
(1,071
)
 
3,038

Acquisition Development & Construction
9,895

 
(2,559
)
 
263

 
(2,296
)
 
1,373

 
8,972

Consumer, including home equity
3,011

 
(1,363
)
 
101

 
(1,262
)
 
1,658

 
3,407

Total Loans
$
27,917

 
$
(9,149
)
 
$
1,707

 
$
(7,442
)
 
$
7,112

 
$
27,587

Annualized net charge-offs to average gross loans
 
 
 
 
 
 
 
 
 
0.56
%
1

Community business loans

The following table sets forth the loans evaluated for impairment by segment at June 30, 2012:
 
 
 
 
Individually
evaluated for
impairment
 
Collectively
evaluated for
impairment
 
Total
ending loans
balance
Loans by segment:
 
 
 
 
 
Real estate—residential mortgage
$
12,772

 
$
345,171

 
$
357,943

Real estate—commercial mortgage
12,038

 
814,708

 
826,746

Real estate—commercial mortgage (CBL)1
2,680

 
77,372

 
80,052

Commercial business loans
449

 
143,133

 
143,582

Commercial business loans (CBL)1
71

 
64,313

 
64,384

Acquisition Development & Construction
27,985

 
137,140

 
165,125

Consumer, including home equity
3,195

 
210,000

 
213,195

Total Loans
$
59,190

 
$
1,791,837

 
$
1,851,027

1 

Community business loans
 

16

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)



The following table sets forth the allowance evaluated for impairment by segment at June 30, 2012:
 
 
 
Individually
evaluated for
impairment
 
Collectively
evaluated for
impairment
 
Total
allowance
balance
Ending allowance by segment:
 
 
 
 
 
Real estate—residential mortgage
$
1,155

 
$
3,259

 
$
4,414

Real estate—commercial mortgage
693

 
4,844

 
5,537

Real estate—commercial mortgage (CBL)
405

 
395

 
800

Commercial business loans
64

 
1,355

 
1,419

Commercial business loans (CBL)
35

 
3,003

 
3,038

Acquisition Development & Construction
867

 
8,105

 
8,972

Consumer, including home equity
271

 
3,136

 
3,407

Total allowance
$
3,490

 
$
24,097

 
$
27,587


Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for June 30, 2011 are summarized below:
 
 
For the Three Months Ended June 30, 2011
 
Beginning
Allowance for
loan losses
 
Charge-offs
 
Recoveries
 
Net
Charge-offs
 
Provision
for
losses
 
Ending
Allowance for
Loan Losses
Loans by segment:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
3,539

 
$
(438
)
 
$
13

 
$
(425
)
 
$
162

 
$
3,276

Real estate—commercial mortgage
5,213

 
(114
)
 
1

 
(113
)
 
439

 
5,539

Real estate—commercial mortgage (CBL)1
1,062

 
(279
)
 

 
(279
)
 
293

 
1,076

Commercial business loans
2,692

 
(185
)
 
2

 
(183
)
 
2

 
2,511

Commercial business loans (CBL)1
5,447

 
(599
)
 
103

 
(496
)
 
(200
)
 
4,751

Acquisition Development & Construction
8,728

 
(2,095
)
 
3

 
(2,092
)
 
2,316

 
8,952

Consumer, including home equity
3,449

 
(788
)
 
31

 
(757
)
 
588

 
3,280

Total Loans
$
30,130

 
$
(4,498
)
 
$
153

 
$
(4,345
)
 
$
3,600

 
$
29,385

Annualized net charge-offs to average gross loans outstanding
 
 
 
 
 
 
 
1.03
%


17

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)


 
For the Nine Months Ended June 30, 2011
 
Beginning
Allowance for
loan losses
 
Charge-offs
 
Recoveries
 
Net
Charge-offs
 
Provision
for
losses
 
Ending
Allowance for
Loan Losses
Loans by segment:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
2,587

 
$
(878
)
 
$
14

 
$
(864
)
 
$
1,553

 
$
3,276

Real estate—commercial mortgage
5,068

 
(547
)
 
1

 
(546
)
 
1,017

 
5,539

Real estate—commercial mortgage (CBL)1
845

 
(722
)
 

 
(722
)
 
953

 
1,076

Commercial business loans
3,172

 
(367
)
 
179

 
(188
)
 
(473
)
 
2,511

Commercial business loans (CBL)1
5,505

 
(3,697
)
 
315

 
(3,382
)
 
2,628

 
4,751

Acquisition Development & Construction
10,231

 
(2,220
)
 
10

 
(2,210
)
 
931

 
8,952

Consumer, including home equity
3,435

 
(1,453
)
 
107

 
(1,346
)
 
1,191

 
3,280

Total Loans
$
30,843

 
$
(9,884
)
 
$
626

 
$
(9,258
)
 
$
7,800

 
$
29,385

Annualized net charge-offs to average gross loans outstanding
 
 
 
 
 
 
 
0.73
%
1 

Community business loans

The following table sets forth the loans evaluated for impairment by segment at September 30, 2011:
 
 
 
 
Individually
evaluated for
impairment
 
Collectively
evaluated for
impairment
 
Total
ending  loans
balance
Loans by segment:
 
 
 
 
 
Real estate—residential mortgage
$
8,573

 
$
381,192

 
$
389,765

Real estate—commercial mortgage
10,653

 
599,726

 
610,379

Real estate—commercial mortgage (CBL)1
4,477

 
88,500

 
92,977

Commercial business loans
531

 
133,868

 
134,399

Commercial business loans (CBL)1

 
75,524

 
75,524

Acquisition Development & Construction
28,223

 
147,708

 
175,931

Consumer, including home equity
2,504

 
222,320

 
224,824

Total Loans
$
54,961

 
$
1,648,838

 
$
1,703,799


1 

Community business loans

18

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)



The following table sets forth the allowance evaluated for impairment by segment at September 30, 2011:
 
 
 
 
Individually
evaluated for
impairment
 
Collectively
evaluated for
impairment
 
Total
allowance
balance
Ending allowance by segment:
 
 
 
 
 
Real estate—residential mortgage
$
1,069

 
$
2,429

 
$
3,498

Real estate—commercial mortgage
474

 
4,059

 
4,533

Real estate—commercial mortgage (CBL)1
594

 
441

 
1,035

Commercial business loans

 
1,331

 
1,331

Commercial business loans (CBL)1

 
4,614

 
4,614

Acquisition Development & Construction
1,409

 
8,486

 
9,895

Consumer, including home equity
260

 
2,751

 
3,011

Total allowance
$
3,806

 
$
24,111

 
$
27,917

1 

Community business loans

A loan is impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans substantially consist of non-performing loans and accruing and performing troubled debt restructured loans. The recorded investment of an impaired loan includes the unpaid principal balance, negative escrow and any tax in arrears.
 

















19

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)



The following table presents loans individually evaluated for impairment by segment of loans as of June 30, 2012:
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
 
YTD
Average
Impaired
Loans
 
Interest
Income
Recognized
 
Cash-basis
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
5,232

 
$
5,232

 
$

 
$
5,228

 
$
197

 
$
109

Real estate—commercial mortgage
7,013

 
7,013

 

 
6,989

 
225

 
179

Real estate—commercial mortgage (CBL)
1,202

 
1,202

 

 
1,202

 
56

 
32

Commercial business loans
358

 
358

 

 
358

 
30

 
30

Commercial business loans (CBL)

 

 

 

 

 

Acquisition, development and construction
22,269

 
22,269

 

 
22,402

 
423

 
290

Consumer loans, including home equity
2,144

 
2,144

 

 
2,145

 
28

 
10

Subtotal
38,218

 
38,218

 

 
38,324

 
959

 
650

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
7,540

 
7,540

 
1,155

 
7,650

 
119

 
96

Real estate—commercial mortgage
5,025

 
5,025

 
693

 
5,250

 
103

 
74

Real estate—commercial mortgage (CBL)1
1,478

 
1,478

 
405

 
1,540

 
6

 
6

Commercial business loans
91

 
91

 
64

 
93

 

 

Commercial business loans (CBL)1
71

 
71

 
35

 
69

 

 

Acquisition, development and construction
5,716

 
5,716

 
867

 
6,644

 
100

 
100

Consumer loans, including home equity
1,051

 
1,051

 
271

 
1,044

 
1

 
1

Subtotal
20,972

 
20,972

 
3,490

 
22,290

 
329

 
277

Total
$
59,190

 
$
59,190

 
$
3,490

 
$
60,614

 
$
1,288

 
$
927

1 

Community business loans



















20

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share data)



The following table presents loans individually evaluated for impairment by segment of loans as of September 30, 2011:
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
 
YTD
Average
Impaired
Loans
 
Interest
Income
Recognized
 
Cash-basis
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
$
2,437

 
$
2,577

 
$

 
$
2,702

 
$
92

 
$
51

Real estate—commercial mortgage
6,753

 
6,823

 

 
6,769

 
332

 
146

Real estate—commercial mortgage (CBL)
2,012

 
2,050

 

 
2,148

 
165

 
102

Commercial business loans
531

 
531

 

 
862

 
42

 
42

Commercial business loans (CBL)

 

 

 

 

 

Acquisition, development and construction
20,914

 
21,316

 

 
26,111

 
1,892

 
1,454

Consumer loans, including home equity
1,879

 
1,885

 

 
1,860

 
61

 
13

Subtotal
34,526

 
35,182

 

 
40,452

 
2,584

 
1,808

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential mortgage
5,836

 
5,996

 
1,069

 
6,319

 
159

 
159

Real estate—commercial mortgage
3,741

 
3,830

 
474

 
3,843

 
108

 
108

Real estate—commercial mortgage (CBL)1
2,283

 
2,427

 
594

 
2,662

 
91

 
36

Commercial business loans

 

 

 

 

 

Commercial business loans (CBL)1

 

 

 

 

 

Acquisition, development and construction
6,900

 
6,907

 
1,409

 
6,963

 
114

 
96

Consumer loans, including home equity
619

 
619

 
260

 
642

 
33

 
22

Subtotal
19,379

 
19,779

 
3,806

 
20,429

 
505

 
421

Total
$
53,905

 
$
54,961

 
$
3,806

 
$
60,881

 
$
3,089

 
$
2,229

1 

Community business loans

Listed below is the interest income recognized during impairment and cash received for interest during impairment for the three months ended June 30, 2012 and June 30, 2011, respectively.
 
June 30,
2012
 
June 30,
2011
Interest income recognized during impairment
$
345

 
$
755

Cash-basis interest income recognized
264

 
527


Listed below is the interest income recognized during impairment and cash received for interest during impairment for the nine months ended June 30, 2012 and June 30, 2011, respectively.
 
 
June 30,
2012
 
June 30,
2011
Interest income recognized during impairment
$
1,288

 
$
1,385

Cash-basis interest income recognized
927