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EX-31.2 - EX-31.2 - FLATBUSH FEDERAL BANCORP INCex-31_2.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

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

 

For the quarterly period ended March 31, 2012

 

 

 

£ 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 S No £

 

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 S No £

 

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

 

Large Accelerated filer  £     Accelerated filer £
Non-accelerated filer (Do not check if a smaller reporting company) o   Smaller reporting company x

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of May14 , 2011 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    
       
  Consolidated Statements of Financial Condition at March 31, 2012 and December 31, 2011 (Unaudited)   1
       
  Consolidated Statements of Income for the Three months ended March 31, 2012 and 2011 (Unaudited)   2
       
  Consolidated Statements of Comprehensive Income for the Three months ended March 31, 2012 and 2011 (Unaudited)   3
       
  Consolidated Statements of Cash Flows for the Three months ended March 31, 2012 and 2011 (Unaudited)   4
       
  Notes to Consolidated Financial Statements (Unaudited)   5 – 28
       
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operation   29-34
       
Item 3: Quantitative and Qualitative Disclosure About Market Risk   34
       
Item 4: Controls and Procedures   34-35
       
PART II – OTHER INFORMATION    
       
Item 1: Legal Proceedings   36
       
Item 1A: Risk Factors   36
       
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds   36
       
Item 3: Defaults upon Senior Securities   36
       
Item 4: Mine Safety Disclosures   36
       
Item 5: Other Information   37
       
Item 6: Exhibits   37
       
SIGNATURES 38

 

 

 

PART I – FINANCIAL INFORMATION 

ITEM 1 – FINANCIAL STATEMENTS 

FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 

(Unaudited)

 

   March 31,   December 31, 
ASSETS  2012   2011 
         
Cash and amounts due from depository institutions  $1,884,813   $1,871,605 
Interest earning deposits in other banks   5,878,201    1,179,582 
Federal funds sold   6,500,000    5,750,000 
Cash and cash equivalents   14,263,014    8,801,187 
           
Securities held to maturity; fair value of $26,662,594 (2012) and $27,402,087 (2011)   24,941,701    25,748,582 
Loans receivable, net of allowance for loan losses of $1,074,396 (2012) and $2,247,171 (2011)   90,540,279    95,161,715 
Real estate owned   1,195,030    743,830 
Premises and equipment   5,211,979    2,377,057 
Federal Home Loan Bank of New York stock   501,500    698,200 
Accrued interest receivable   503,143    554,307 
Bank owned life insurance   4,561,444    4,523,252 
Other assets   4,151,048    4,106,279 
Total assets  $145,869,138   $142,714,409 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Liabilities:          
Deposits:          
Non-interest bearing  $5,297,349   $5,197,945 
Interest bearing   113,378,774    109,724,623 
Total deposits   118,676,123    114,922,568 
Federal Home Loan Bank of New York advances   5,709,107    10,081,574 
Advance payments by borrowers for taxes and insurance   512,873    190,155 
Other liabilities   1,730,071    2,960,087 
Total liabilities   126,628,174    128,154,384 
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   12,742,273    12,725,312 
Retained earnings   9,746,876    5,152,987 
Unearned employees’ stock ownership plan (ESOP) shares   (400,390)   (409,108)
Treasury stock, 62,750 shares   (446,534)   (446,534)
Accumulated other comprehensive loss   (2,429,259)   (2,490,630)
Total stockholders’ equity   19,240,964    14,560,025 
           
Total liabilities and stockholders’ equity  $145,869,138   $142,714,409 

 

See notes to consolidated financial statements.

 

1

 

FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

 

   Three months ended 
   March 31, 
   2012   2011 
Interest Income          
Loans, including fees  $1,260,334   $1,475,152 
Mortgage-backed securities   256,976    273,666 
Investment securities   36,793    12,093 
Other interest earning assets   485    1,891 
Total interest income   1,554,588    1,762,802 
           
Interest Expense          
Deposits   349,804    372,208 
Borrowings   15,150    38,208 
Total interest expense   364,954    410,416 
           
Net Interest Income   1,189,634    1,352,386 
Provision for loan losses   198,426    139,793 
Net interest income after provision for loan losses   991,208    1,212,593 
           
Non-interest income          
Fees and service charges   15,435    24,924 
Gain on sale of property   9,072,771     
BOLI income   38,192    37,127 
Other   4,364    752 
Total non-interest income   9,130,762    62,803 
           
Non-interest expenses          
Salaries and employee benefits   632,335    605,023 
Net occupancy expense of premises   183,407    133,029 
Equipment   124,060    178,029 
Directors’ compensation   61,529    45,391 
Professional fees   363,100    89,850 
Other insurance premiums   56,730    36,361 
Federal deposit insurance premiums   22,000    48,333 
Other   287,433    115,332 
Total non-interest expenses   1,730,594    1,251,348 
           
Income before income tax expense (benefit)   8,391,376    24,048 
Income tax expense (benefit)   3,797,488    (11,966)
           
Net income  $4,593,888   $36,014 
           
Net income per common share – Basic and diluted  $1.72   $0.01 
Weighted average number of shares outstanding – Basic and diluted   2,675,410    2,670,143 

 

See notes to consolidated financial statements.

 

2

 

FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(Unaudited) 

 

   Three months ended
March 31,
 
   2012   2011 
         
Net income  $4,593,888   $36,014 
           
Other comprehensive income, net of income taxes:          
Benefit plans   105,538    66,661 
Deferred income taxes   (44,167)   (27,897)
    61,371    38,764 
Comprehensive income  $4,655,259   $74,778 

 

See notes to consolidated financial statements.

 

3

 

FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited)

 

   Three months ended March 31, 
   2012   2011 
Cash flow from operating activities:          
Net income  $4,593,888   $36,014 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization of premises and equipment   29,725    41,064 
Net accretion and amortization of discounts, premiums and    deferred loan fees and costs   (5,041)   24,792 
Deferred income tax   738,062     
Provision for loan losses   198,426    139,793 
Gain on Sale of premises and equipment   (9,072,771)    
ESOP shares committed to be released   5,180    7,683 
MRP expense   10,146    10,145 
Stock option expense   10,353    10,353 
Decrease in accrued interest receivable   51,164    85,779 
Increase in cash surrender value of BOLI   (38,192)   (37,127)
Increase in other assets   (826,997)   (423,399)
(Decrease) increase in other liabilities   (1,124,478)   123,417 
Net cash (used) provided by operating activities   (5,430,535)   18,514 
           
Cash flow from investing activities:          
Principal repayments on securities held to maturity   805,791    1,625,415 
Purchases of securities held to maturity       (1,119,746)
Purchases of loan participation interests       (104,808)
Net change in loans receivable   3,977,941    2,139,843 
Proceeds from sale of premises and equipment   6,215,924     — 
Additions to premises and equipment   (7,800)   (28,323)
Redemption of Federal Home Loan Bank of New York stock, net   196,700    86,200 
Net cash provided by investing activities   11,188,556    2,598,581 
           
Cash flow from financing activities:          
Net increase (decrease) in deposits   3,753,555    (712,570)
Repayment of advances from Federal Home Loan Bank of New York   (372,467)   (2,414,055)
Net change in short-term borrowings from Federal Home Loan Bank of New York   (4,000,000)   500,000 
Increase in advance payments by borrowers for taxes and insurance   322,718    214,842 
Net cash used by financing activities   (296,194)   (2,411,783)
Net increase in cash and cash equivalents   5,461,827    205,312 
Cash and cash equivalents – beginning   8,801,187    8,184,340 
           
Cash and cash equivalents – ending  $14,263,014   $8,389,652 
Supplemental disclosure of cash flow information:          
Cash paid during the year for:          
Interest  $367,109   $428,591 
Income taxes  $4,000,585   $346,960 
Acquisition of real estate owned in settlement of loans receivable  $451,200     

 

See notes to consolidated financial statements.

4

 

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 ended March 31, 2012, 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, 2011, 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 March 31, 2012 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 ended March 31, 2012 and 2011 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 ended March 31, 2012 and 2011, there was no dilutive effect for the 82,378 and 82,378, respectively, of stock options outstanding. At and for the three months ended March 31, 2012 and 2011, there was no dilutive effect for the 7,598 and 11,398, 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

5

 

NOTE 4. CRITICAL ACCOUNTING POLICIES (CONTINUED)

 

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 collectability of the loan portfolio. Management has 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. SECURITIES HELD TO MATURITY

 

   March 31, 2012 
       Gross   Gross   Estimated 
   Amortized   Unrealized   Unrealized   Fair 
   Cost   Gains   Losses   Value 
                 
Government National Mortgage Association  $5,166,420   $316,120   $   $5,482,540 
Federal National Mortgage Association   12,300,813    1,100,887        13,401,700 
Federal Home Loan Mortgage Corporation   3,131,125    175,867    19,300    3,287,692 
                     
Total Mortgage-Backed Securities   20,598,358    1,592,874    19,300    22,171,932 
Corporate Debt   4,343,343    152,355    5,036    4,490,662 
   $24,941,701   $1,745,229   $24,336   $26,662,594 

 

   December 31, 2011 
       Gross   Gross   Estimated 
   Amortized   Unrealized   Unrealized   Fair 
   Cost   Gains   Losses   Value 
                 
Government National Mortgage Association  $5,342,679   $322,917   $   $5,665,596 
Federal National Mortgage Association   12,778,385    1,068,213        13,846,598 
Federal Home Loan Mortgage Corporation   3,280,117    175,596    19,303    3,436,410 
                     
Total Mortgage-Backed Securities   21,401,181    1,566,727    19,303    22,948,604 
Corporate Debt   4,347,401    135,320    29,238    4,453,483 
   $25,748,582   $1,702,046   $48,561   $27,402,087 

 

6

 

NOTE 5. SECURITIES HELD TO MATURITY (CONTINUED)

 

All mortgage-backed securities held at March 31, 2012, and December 31, 2011, were secured by residential real estate.

 

The age of unrealized losses and fair value of related securities held to maturity are as follows:

 

   Less than 12 Months   12 Months or More   Total 
   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
   Value   Losses   Value   Losses   Value   Losses 
                         
March 31, 2012:                        
Federal Home Loan Mortgage Corporation  $46,588   $140   $648,520   $19,160   $695,108   $19,300 
Corporate debt   450,673    5,036            450,673    5,036 
                               
Total  $497,261   $5,176   $648,520   $19,160   $1,145,780   $24,336 

 

 

   Less than 12 Months   12 Months or More   Total 
   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses 
                         
December 31, 2011:                        
Federal Home Loan Mortgage Corporation  $581,132   $17,427   $119,298   $1,876   $700,430   $19,303 
Coporate debt   888,807    29,238            888,807    29,238 
                               
Total  $1,469,939   $46,665   $119,298   $1,876   $1,589,237   $48,541 

 

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.

 

7

 

NOTE 5. SECURITIES HELD TO MATURITY (CONTINUED)

 

At March 31, 2012, and December 31, 2011, management concluded that the unrealized losses above (which, at March 31, 2012, related to two corporate debt securities and four Federal Home Loan Mortgage Corporation mortgage-backed 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.

 

The amortized cost and estimated fair value of mortgage-backed securities at March 31, 2012 by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers generally have the right to prepay obligations.

 

   March 31, 2012 
   Amortized Cost   Estimated Fair Value 
Due within one year  $   $ 
Due after one year through five years   2,636,582    2,683,032 
Due after five years through ten years   1,889,087    1,994,814 
Due after ten years   20,416,032    21,984,748 
Total  $24,941,701   $26,662,594 

 

NOTE 6. LOANS RECEIVABLE

 

Loans receivable, net, consists of the following:

 

   March 31, 2012   December 31, 2011 
   (in thousands) 
         
Gross loans  $91,722   $97,610 
Loans in process       (105)
Deferred loan fees, net   (108)   (97)
Allowance for loan loss   (1,074)   (2,247)
   $90,540   $95,162 

 

8

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

The following table summarizes the primary segments of the allowance for loan losses (“ALLL”) and activity therein, segregated into the amounts required for loans individually evaluated for impairment and the amounts required for loans collectively evaluated for impairment as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and March 31, 2011.

 

   Construction,
Land and
Unsecured
Business
Loan
   Commercial Real Estate   Residential
Multifamily
Real Estate
   Residential One-to four- Family Real Estate   Credit Card   Home Equity   Passbook Loans   Total 
   (in thousands) 
Allowance
for loan
losses:
                                
Three months ended March 31, 2012:                                
Beginning Balance  $495   $1,280   $35   $436   $2   $   $   $2,247 
Charge-offs   (408)   (756)       (203)   (4)           (1,371)
Provision   (40)   142    1    92    4            198 
                                         
Ending Balance  $46   $666   $36   $324   $2   $   $   $1,074 

 

   Construction, Land and
Unsecured Business Loan
   Commercial Real Estate   Residential Multifamily Real Estate   Residential One-to four-Family Real Estate   Credit Card   Home Equity   Passbook Loans   Total 
   (in thousands) 
Allowance for loan losses:                                
Three months ended March 31, 2011:                                        
                                         
Beginning Balance  $810   $583   $36   $214   $6   $   $   $1,649 
Charge-offs               (5)               (5)
Provision   106    23        6    5            140 
                                         
Ending Balance  $916   $606   $36   $215   $11   $   $   $1,784 

 

9

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

   Construction, Land and Unsecured Business Loan   Commercial Real Estate   Residential Multifamily Real Estate   Residential One-to four-family Real Estate   Credit Card   Home Equity   Passbook Loan   Total 
   (in thousands) 
At March 31, 2012:Allowance for loan loss:                                
                                 
Ending balance: individually evaluated for impairment  $   $   $104   $   $   $   $   $104 
Ending balance: collectively evaluated for impairment  $46   $666   $36   $220   $2   $   $   $970 
                                         
Loan receivable:                                        
Ending balance  $748   $19,479   $5,892   $65,453   $32   $81   $37   $91,722 
Ending balance: individually evaluated for impairment  $708   $1,280   $   $5,923   $   $   $   $7,911 
Ending balance: collectively evaluated for impairment  $40   $18,200   $5,892   $59,530   $32   $81   $37   $83,811 

10
 

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

   Construction, Land and Unsecured Business Loan   Commercial Real Estate   Residential Multifamily Real Estate   Residential One-to four-family Real Estate   Credit Card   Home Equity   Passbook Loan   Total 
   (in thousands)         
December 31, 2011:                                
Allowance for loan losses:                                        
Ending Balance:  $495   $1,279   $35   $436   $2   $   $   $2,247 
Ending balance: individually evaluated for impairment  $407   $623   $   $260   $   $   $   $1,290 
Ending balance: collectively evaluated for impairment  $88   $656   $35   $176   $2   $   $   $957 
                                         
Loan receivable:                                        
Ending balance  $3,118   $21,901   $5,749   $66,681   $37   $87   $37   $97,610 
Ending balance: individually evaluated for impairment  $2,176   $2,325   $   $5,143   $   $   $   $9,644 
Ending balance: collectively evaluated for impairment  $942   $19,575   $5,749   $61,538   $37   $87   $37   $87,965 

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal

11

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial real estate loans and commercial construction loans by 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.

 

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.

 

For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

 

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual smaller balance residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

 

Loans whose terms are modified are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings also are designated as impaired.

 

The Company adopted Accounting Standards Update (“ASU”) No. 2011-02 on July 1, 2011. ASU No. 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring. In evaluating whether a restructuring constitutes a troubled debt restructuring, ASU No. 2011-02 requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. As a result of our adoption of ASU No. 2011-02, we reassessed the terms and conditions to customers on all modifications granted from January 1, 2012 through March 31, 2012, and determined that no such loans were troubled debt restructurings.

12

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of March 31, 2012.

 

   Impaired Loans With Specific Allowances   Impaired Loans With No Specific Allowances   Total Impaired Loans 
   Recorded Investment   Related Allowance   Recorded Investment   Recorded Investment   Unpaid Principal Balance 
   (in thousands) 
March 31, 2012:                    
Construction and land  $   $   $708   $708   $796 
Commercial Real                         
Estate           1,280    1,280    1,559 
Residential one-to four-family                         
Real Estate   913    104    5,010    5,923    6,126 
                          
Total impaired loans  $913   $104   $6,998   $7,911   $8,481 

 

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, 2011.

 

   Impaired Loans With
Specific Allowances
   Impaired Loans With No Specific Allowances   Total Impaired Loans 
   Recorded Investment   Related Allowance   Recorded Investment   Recorded Investment   Unpaid Principal Balance 
   (in thousands) 
December 31, 2011:                    
Construction and land  $2,176   $407   $    $  2, 176   $2,176 
Commercial Real Estate   2,297    623    29    2,325    2,325 
Residential one-to four-family real estate   2,239    260    2,904    5,143    5,143 
Total impaired loans  $6,712   $1,290   $2,933   $9,644   $9,644 

 

13

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

The following table presents the average recorded investment and interest income recognized on impaired loans during the three months ended March 31, 2012.

 

   Three months ended 
   March 31, 2012 
   Average   Interest 
   Recorded   Income 
   Investment   Recorded 
   (in thousands) 
         
Construction and land  $908   $ 
           
Commercial Real Estate   2,046    9 
           
Residential one-to four-family Real Estate   5,216    11 
           
Total  $8,170   $20 

 

The following table presents the average recorded investment and interest income recognized on impaired loans during the three months ended March 31, 2011.

 

   Three months ended March 31, 2011 
   Average Recorded Investment   Interest Income Recorded 
   (in thousands) 
         
Construction and land  $1,937   $ 
           
Commercial Real Estate   3,153    9 
           
Residential one-to four-family Real Estate   3,961    8 
           
Credit Card   7     
           
Total  $9,057   $17 

 

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of substandard, doubtful, loss and special mention. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets

14

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated special mention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans which are not classified as noted above are rated “pass”.

 

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

 

The following table presents the classes of the loan portfolio summarized by the pass category and the criticized categories of special mention, substandard and doubtful within the internal risk rating system as of March 31, 2012 and December 31, 2011.

 

   Pass   Special Mention   Substandard   Doubtful   Total 
   (in thousands) 
March 31, 2012:                    
Construction and land  $   $   $708   $   $708 
Commercial real estate   18,199        1,280        19,479 
Residential mortgage multifamily real estate   5,892                5,892 
Residential mortgage one-to four-family real estate   58,669    1,774    5,010        65,453 
Unsecured business loan   40                40 
Credit card   32                32 
Home equity   81                81 
Passbook loan   37                37 
Total  $82,950   $1,774   $6,998   $   $91,722 

 

15

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

 

   Pass   Special Mention   Substandard   Doubtful   Total 
   (in thousands) 
December 31, 2011:                    
Construction and land  $   $515   $2,563   $   $3,078 
Commercial real estate   19,575        2,325        21,901 
Residential mortgage multifamily real estate   5,749                5,749 
Residential mortgage one-to four-family real estate   60,732    1,720    4,230        66,681 
Unsecured business loan   40                40 
Credit card   37                37 
Home equity   87                87 
Passbook loan   37                37 
Total  $86,257   $2,235   $9,118   $   $97,610 

 

16

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2012 and December 31, 2011:

 

   Current   30-59 Days Past Due   60-89 Days Past Due   90 Days or More Past Due   Total Past Due   Total Loans Receivable   Non-
Accrual
 
   (in thousands) 
                             
March 31, 2012:Construction and land  $385   $   $   $323   $323   $708   $323 
Commercial real estate   18,735            744    744    19,479    744 
Unsecured Business Loan   40                    40     
Residential Multi family Real Estate   5,892                    5,892     
Residential One-to four-family Real Estate   57,846    1,216    1,382    5,009    7,607    65,453    5,009 
Credit Card   30    2            2    32     
Home Equity   81                    81     
Passbook Loan   37                    37     
Total  $83,046   $1,218   $1,382   $6,076   $8,676   $91,722   $6,076 

 

17

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

   Current   30-59 Days Past Due   60-89 Days Past Due   90 Days or More Past Due   Total Past Due   Total Loans Receivable   Non-
Accrual
 
   (in thousands) 
December 31, 2011:                            
Construction and land  $387   $515   $   $2,176   $2,691   $3,079   $2,176 
Commercial real estate   20,122            1,779    1,779    21,901    1,779 
Unsecured Business Loan   40                    40     
Residential Multi family Real Estate   5,749                    5,749     
Residential One-to four-family Real Estate   60,438    2,014         4,230    6,244    66,681    4,230 
Credit Card   33        3        3    37     
Home Equity   87                    87     
Passbook Loan   37                    37     
Total  $86,893   $2,529   $3   $8,185   $10,717   $97,610   $8,185 

 

The Association may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Association may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculation the Company’s allowance for loan losses.

 

The Association identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

 

18

 

NOTE 6. LOANS RECEIVABLE (CONTINUED)

 

The following table reflects information regarding troubled debt restructurings for the three months ended March 31, 2012 and year ended December 31, 2011:

 

         Pre-    Post 
         Modification    Modification 
         Outstanding    Outstanding 
    Number of    Recorded    Recorded 
    Contracts    Investments    Investments 
March 31, 2012:               
                
Troubled debt restructurings      $   $ 

 

       Pre-   Post 
       Modification   Modification 
       Outstanding   Outstanding 
   Number of   Recorded   Recorded 
   Contracts   Investments   Investments 
December 31, 2011:            
             
Troubled debt restructurings:               
Residential mortgage   3   $819,085   $777,229 

 

There were no troubled debt restructuring which subsequently defaulted during the three months ended March 31, 2012.

 

Loans whose terms are modified are classified as troubled debt restructurings if the Association grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired.

19

 

NOTE 7. RETIREMENT PLANS – COMPONENTS OF NET PERIODIC PENSION COST

 

Periodic pension expense for the funded employee pension plan was as follows:

 

   Three months Ended 
   March 31, 
   2012   2011 
         
Service cost  $   $ 
Interest cost   67,901    76,216 
Expected return on assets   (111,754)   (123,220)
Amortization of unrecognized net loss   95,554    60,678 
Net periodic benefit cost  $51,701   $13,674 

 

Periodic pension expense for other unfunded plans was as follows:

 

   Three months ended 
   March 31, 
   2012   2011 
         
Service cost  $7,492   $5,499 
Interest cost   13,876    15,525 
Amortization of past service cost   4,706    5,278 
Amortization of unrecognized net loss   5,278    705 
Net periodic benefit cost  $31,352   $27,007 

 

NOTE 8. 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).

 

20

 

NOTE 8. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT’D)

 

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 at fair value on a recurring basis at March 31, 2012 and December 31, 2011.

 

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:

 

Description  Total   (Level 1) Quoted Prices in Active Markets for Identical Assets   (Level 2) Significant Other Observable   (Level 3) Significant Unobservable Inputs 
       (In Thousands)   Inputs     
Impaired Loans:                    
                     
March 31, 2012  $2,144   $   $   $2,144 
                     
December 31, 2011  $5,422   $   $   $5,422 

 

Impaired loans at March 31, 2012, consisted of six loans valued based on appraisals adjusted by level 3 measurements to discount appraisals based on age and to estimate selling costs. The aggregate level 3 measurements reduced the appraised values by 15% to 25% (weighted average 20%).

 

The Company had no liabilities which are required to be measured at fair value on a recurring or non-recurring basis at March 31, 2012 and December 31, 2011.

 

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 March 31, 2012 and December 31, 2011:

 

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 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.

 

21

 

NOTE 8. 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.

 

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.

22

 

NOTE 8. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT’D)

 

As of March 31, 2012 and December 31, 2011, the fair value of commitments to extend credit were not considered to be material.

 

   March 31, 2012 
   Carrying
Amount
   Estimated Fair
Value
   (Level 1) Quoted Prices in Active Markets for Identical Assets   (Level 2) Significant Other Observable Inputs   (Level 3) Significant Unobservable Inputs 
   (In Thousands) 
                     
Financial assets:                    
Cash and cash equivalents  $14,263   $14,263   $14,263   $   $ 
Securities held to maturity   24,942    26,663        26,663     
FHLB stock   502    502        502      
Loans receivable   90,540    94,419            94,419 
Accrued interest receivable   503    503    503         
                          
Financial liabilities:                         
Deposits   118,676    119,318    39,540    79,778     
Advances from FHLB   5,709    5,718        5,718     
Accrued interest payable   3    3    3         

23

 

NOTE 8. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS (CONT’D)

 

The estimated fair values of financial instruments were as follows at December 31, 2011.

 

   December 31, 2011 
   Carrying
Amount
   Estimated Fair
Value
 
   (In Thousands) 
           
Financial assets:          
Cash and cash equivalents  $8,801   $8,801 
Securities held to maturity   25,749    27,402 
FHLB stock   698    698 
Loans receivable   95,162    101,557 
Accrued interest receivable   554    554 
           
Financial liabilities:          
Deposits   114,923    116,442 
Advances from FHLB   10,082    10,113 
Accrued interest payable   5    5 

 

NOTE 9. 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.

 

 

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Comprehensive Income - Presentation of Comprehensive Income”. The provisions of this ASU amend FASB Accounting Standards Codification (“ASC”) Topic 220, “Comprehensive Income,” to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements.

 

The FASB subsequently issued ASU 2011-12, which defers the presentation of all reclassification adjustments while the FASB considers the operational concerns raised with regard to this presentation, as

24

 

NOTE 9. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

 

well as whether or not this presentation meets the needs of financial statement users. Until the FASB has reached a decision, reporting entities should continue to present reclassifications out of accumulated other comprehensive income consistent with pre-existing requirements.

 

The provision to prepare either a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income remains in effect for fiscal years and interim periods beginning after December 15, 2011 for public companies, and for fiscal years ending after December 15, 2012 for nonpublic companies. The adoption of this pronouncement did not have a material impact on consolidated operations or financial position.

 

The FASB issued ASU 2011-04 to amend FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The ASU clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The ASU also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The ASU also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this pronouncement did not have a material impact on consolidated operations or financial position.

  

NOTE 10. 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 March 31, 2012 and December 31, 2011, 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 March 31, 2012.

 

25

 

NOTE 11. PROPERTY SALE

 

During 2010, the Company entered into an agreement (the “Agreement”) to sell its current main branch building and a portion of Flatbush Federal’s adjoining real estate to a third party (the “Purchaser”) (the “Transfer”). Under the Agreement, Purchaser would acquire Flatbush Federal’s current main branch building located at 2146 Nostrand Avenue, Brooklyn, New York (“Property A”). In addition thereto, the Purchaser would 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”).

 

On March 24, 2011, the Company and the Purchaser entered into an amendment to the Agreement. The significant terms of the Agreement, as amended, are as follows:

 

  1. The Purchaser was required to subdivide Lot 124 (of which Property C forms a part of) into two separate tax lots or parcels (the “Subdivision”). 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”).
     
  2. The Transfer must close (the “Closing”) five (5) days after the date the Subdivision has been approved and new tax lot numbers are assigned to Property C and the Retained Property.
     
  3. The Purchaser is obligated to complete construction of and deliver to the Company a building containing a 3,000 square foot ground floor bank branch, a cellar, and three (3) additional floors of office space. In consideration of constructing the three (3) additional floors of office space, the Purchaser shall receive a credit at the Closing.
     
  4. One of the principals of the Purchaser will personally guarantee the Purchaser’s obligation to deliver the bank branch and office building to Flatbush Federal.

 

The Company plans to use the additional three (3) floors of office space (consisting of approximately 7,125 of additional square feet) for its executive and administrative offices.

 

The transfer closed on January 13, 2012; at that date the Company received $6,340,000 in cash and a building valued at $3,176,000 and recorded a pre-tax gain of $9,073,000.

 

Upon the closing, Flatbush Federal began leasing back Property A on an interim basis for its continued use as a temporary bank branch (the “Branch Lease”) for one ($1.00) dollar per year. Flatbush Federal must relocate to the new Branch Building no later than 45 days after the Purchaser completes the construction of the Branch Building and if applicable, the Purchaser’s contractor has completed construction of the interior build-out and delivers to Flatbush Federal a temporary certificate of occupancy for the Branch Building, Bank branch expansion and interior build-out. At that time, the Branch Lease will terminate, and Flatbush Federal will open the Branch Building for business as its new bank branch. Estimated construction completion is first quarter of 2013.

  

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NOTE 12. MERGER AGREEMENT

  

On March 13, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between (i) Northfield Bank, Northfield Bancorp, Inc. (“Northfield Bancorp”), and Northfield Bancorp, MHC, and (ii) the Company, the Association and Flatbush Federal Bancorp, MHC. The Merger Agreement provides, among other things, that as a result of the merger of the Company into Northfield Bancorp (the “Mid-Tier Merger”), each outstanding share of the Company’s common stock will be converted into the right to receive 0.4748 shares of Northfield Bancorp common stock. The Merger Agreement contains a number of customary representations and warranties by the parties regarding certain aspects of their respective businesses, financial condition, structure and other facts pertinent to the Merger that are customary for a transaction of this kind. The obligation of the parties to complete the Merger is subject to various customary conditions. If the Merger is terminated under specified situations in the Merger Agreement (because the Company accepts a proposal to be acquired that is superior to the one contained in the Merger Agreement, enters into an agreement related to such a proposal and terminates the Merger Agreement, or fails to make, withdraws, modifies or qualifies its recommendation regarding the Merger Agreement), the Company may be required to pay a termination fee to Northfield Bancorp of approximately $700,000. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which was included in a Form 8-K filed with the Securities and Exchange Commission on March 15, 2012.

  

NOTE 13. REGULATORY CONSENT ORDER

  

Effective April 12, 2012, the Association entered into an agreement with the Comptroller of the Currency (the “OCC”). The Agreement provides, among other things, that within specified time frames:

 

  the Association must conduct a review and assess the qualifications of its senior executive officers and board members, and shall give notice to the OCC prior to appointing any new senior executive officer or director;
  the Association must submit for review and non-objection by the OCC a three-year written capital plan;
  the Association must submit for review and non-objection by the OCC a three-year business plan, including a projection of major balance sheet and income statement items;
  the Association must establish credit risk management practices that ensure effective credit administration, portfolio management and monitoring, and risk mitigation;
  the Association must review the adequacy of its allowance for loan and lease losses and establish a program for the maintenance of an adequate allowance;
  the Association may not invest in corporate securities without first developing an implementing OCC-approved policies and procedures to monitor and control such activity;
  the Association must adopt, implement and comply with a written consumer compliance program; and
  the Association will not be permitted to enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any senior executive officers or directors, unless it provides prior written notice of the proposed transaction to the OCC.

 

The foregoing description of the Agreement is qualified in its entirety by reference to the Agreement between the Association and the OCC, which is included in a Form 8-k filed with the Securities and Exchange Commission on April 12, 2012.

 

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NOTE 13. REGULATORY CONSENT ORDER (CONTINUED)

  

The existence and terms of the Order has and will influence the Association’s ongoing operations. Management is unable to determine the effects, if any, that the Association would experience if it is unable to comply with the Order.

 

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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 March 31, 2012 and December 31, 2011

 

The Company’s total assets as March, 31, 2012 were $145.9 million compared to $142.7 million at December 31, 2011, an increase of $3.2 million or 2.2%. Loans receivable decreased $4.6 million, or 4.8%, to $90.5 million at March 31, 2012 from $95.2 million at December 31, 2011. Mortgage-backed securities decreased $803,000, or 3.8%, to $20.6 million at March 31, 2012 from $21.4 million as of December 31, 2011. Investment securities totaled $4.3 million at March 31, 2012 and December 31, 2011. Cash and cash equivalents increased $5.5 million, primarily due to proceeds of the building sale and loan payoffs, or 62.5%, to $14.3 million at March 31, 2012 from $8.8 million at December 31, 2011.

  

Total deposits increased $3.8 million, or 3.3%, to $118.7 million at March 31, 2012 from $114.9 million at December 31, 2011. As of March 31, 2012, advances from the Federal Home Loan Bank of New York (“FHLB”) were $5.7 million compared to $10.1 million as of December 31, 2011, a decrease of $4.4 million, or 43.6%.

 

Total stockholders’ equity increased $4.7 million, or 32.2%, to $19.2 million at March 31, 2012 from $14.6 million at December 31, 2011. The increase to stockholders’ equity reflects net income of $4.6 million, amortization of $5,000 of unearned ESOP shares, amortization of $10,000 of restricted stock awards for the Company’s Stock-Based Incentive Program, amortization of $10,000 of stock option awards and a decrease of $61,000 of accumulated other comprehensive loss during the quarter ended March 31, 2012.

  

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 three months ended March 31, 2012, the Company did not repurchase any shares. As of March 31, 2012, 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 March 31, 2012 and March 31, 2011

 

General. Net income increased by $4.6 million, to net income of $4.6 million for the quarter ended March 31, 2012 from net income of $36,000 for the same quarter in 2011. The increase for the current quarter was primarily due to a one-time pre-tax gain on sale of property of $9.07 million and decreases of $22,000 in interest expense on deposits and $23,000 in interest expense on borrowings from FHLB, partially offset by decreases of $208,000 in interest income and $5,000 in other non-interest income, and increases of $479,000 in non-interest expense, $58,000 in the provision for loan loss and $3.8 million in income tax expense.

  

Interest Income. Total interest income decreased $208,000, or 11.8%, to $1.6 million for the quarter ended March 31, 2012 from $1.8 million for the quarter ended March 31, 2011. The decrease in interest income can be primarily attributed to lower average balances and yields for these assets. For the three months ended March 31, 2012, the average balance of $131.2 million in interest-earning assets earned an average yield of 4.74% compared to an average yield of 5.25% on an average balance of $134.2 million for the three months ended March 31, 2011. The decline in the average balance was primarily due to loan payoffs and slowing loan demand.

 

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Interest income on loans decreased $215,000, or 14.6%, to $1.26 million for the quarter ended March 31, 2012, from $1.48 million for the same quarter in 2010. The average balance of loans decreased $12.1 million to $92.9 million for the quarter ended March 31, 2012 from $105.0 million for the quarter ended March 31, 2011. The average yield on loans decreased by 19 basis points to 5.43% for the quarter ended March 31, 2012 from 5.62% for the quarter ended March 31, 2011.

 

Interest income on mortgage-backed securities decreased $17,000, or 6.2%, to $257,000 for the quarter ended March 31, 2012 from $274,000 for the quarter ended March 31, 2011. The average balance of mortgage-backed securities decreased $731,000, or 3.4%, to $20.9 million for the quarter ended March 31, 2012 from $21.7 million for the quarter ended March 31, 2011. The average yield decreased by 14 basis points to 4.91% for the quarter ended March 31, 2012 from 5.05% for the same period in 2011.

 

Interest income on investment securities increased $25,000, or 208.3%, to $37,000 for the quarter ended March 31, 2012 from $12,000 for the quarter ended March 31, 2011. The average balance of investment securities increased $4.1 million to $4.7 million for the quarter ended March 31, 2012 from $750,000 for the quarter ended March 31, 2011.The average yield on investment securities decreased 343 basis points to 3.02%, for the quarter ended March 31, 2012 from an average yield of 6.45% for the quarter ended March 31, 2011 primarily due to lower average yields on $4.3 million in corporate debt and lower dividend received on FHLB of NY stock.

 

Interest Expense. Total interest expense, comprised of interest expense on deposits and FHLB borrowings, decreased $45,000, or 11.0%, to $367,000 for the quarter ended March 31, 2012 from $410,000 for the quarter ended March 31, 2011. The average cost of interest-bearing liabilities decreased by 12 basis points to 1.23% for the quarter ended March 31, 2012 from 1.35% for the quarter ended March 31, 2011. The average balance of interest-bearing liabilities decreased $3.7 million, or 3.0% to $118.2 million for the quarter ended March 31, 2012 from $121.9 million for the quarter ended March 31, 2011.

 

Interest expense on deposits decreased $22,000, or 5.9%, to $350,000 for the quarter ended March 31, 2012, from $372,000 for the quarter ended March 31, 2011. The average cost of interest-bearing deposits decreased by 9 basis points to 1.25% for the quarter ended March 31, 2012 from 1.34% for the quarter ended March 31, 2011, reflecting the trend of declining interest rates on deposits. The average balance of interest-bearing deposits increased $907,000, or 0.8%, to $112.0 million for the quarter ended March 31, 2012 from $111.1 million for the quarter ended March 31, 2011.

 

Interest expense on FHLB borrowings decreased $23,000, or 60.5%, to $15,000 for the quarter ended March 31, 2012, from $38,000 for the quarter ended March 31, 2011. The average balance of FHLB borrowings decreased $4.6 million or 42.6%, to $6.2 million for the quarter ended March 31, 2012, from $10.8 million for the quarter ended March 31, 2011. The average cost of FHLB borrowings decreased by 44 basis points to 0.98% for the quarter ended March 31, 2012, from 1.42% for the quarter ended March 31, 2011.

 

Net Interest Income. Net interest income decreased $162,000, or 12.0%, to $1.19 million for the quarter ended March 31, 2012 from $1.35 million for the same quarter in 2011. The interest rate spread was 3.51% for the quarter ended March 31, 2012 compared to 3.91% for the quarter ended March 31, 2011, a decrease of 40 basis points. Interest margin for the quarter ended March 31, 2012 was 3.63% compared to 4.03% for the quarter ended March 31, 2011, a decrease of 40 basis points. The decrease in interest rate spread and interest margin can be attributed primarily to the decrease in the yield of interest-earning assets.

 

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

 

30

 

evaluation of these factors, a provision of $198,000 was recorded for the three months ended March 31, 2012. A provision of $140,000 was recorded for the three months ended March 31, 2011. The level of the allowance at March 31, 2012 is based on estimates, and the ultimate losses may vary from the estimates. Non-performing loans decreased to $6.1 million, or 4.2% of total assets as of March 31, 2012 from $8.2 million or 5.7% of total assets as of December 31, 2011 and $8.6 million or 6.0% of total assets as of March 31, 2011. As of March 31, 2012 the non-performing loans included fourteen 1-4 family residential mortgage loans totaling $5.0 million, two non-residential mortgage loans of $744,000 and one construction loans of $323,000. The allowance for loan losses totaled $1.1 million at March 31, 2012, and was comprised of $104,000 of specific allowance and $970,000 of general allowance. The allowance for loan losses totaled $2.2 million at December 31, 2011, and was comprised of $1.3 million of specific allowance and $957,000 of general allowance. A significant amount of the existing specific allowance of $1.3 million as of December 31, 2011 was charged-off during the quarter ended March 31, 2012.

 

Non-Interest Income. Non-interest income increased $9.07 million to $9.13 million for the quarter ended March 31, 2012 from $63,000 for the quarter ended March 31, 2011 primarily due to the $9.07 million pre-tax gain on sale of property previously discussed in Note 11 regarding property sale.

 

Non-Interest Expenses. Non-interest expenses increased $479,000, or 38.3%, to $1.73 million for the quarter ended March 31, 2012 from $1.25 million for the quarter ended March 31, 2011. The net increase of $479,000 in non-interest expenses is primarily attributable to increases to salaries and employee benefits, net occupancy expense of premises, director’s compensation, professional fees, other insurance premiums and miscellaneous expense, partially offset by decreases to equipment expense and Federal deposit insurance premium. Net occupancy expense of premises increased $50,000 to $183,000 for the quarter ended March 31, 2012, from $133,000 for the quarter ended March 31, 2011 primarily due to the loss of rental income from an expired property lease that was not renewed due to the sale of the property, along with new leasing terms for an existing branch location. Professional fees increased $273,000 to $363,000 for the quarter ended March 31, 2012 from $90,000 for the quarter ended March 31, 2011, primarily due to increased legal expenses related to the pending agreement of merger and acquisition. Miscellaneous expense increased $172,000 to $287,000 for the quarter ended March 31, 2012 from $115,000 for the quarter ended March 31, 2011 primarily due to expenses related to investment banking services for the pending agreement of merger and acquisition as well as additional consulting fees.

 

Income Tax Expense. The provision for income taxes increased $3.8 million, to an expense of $3.8 million for the quarter ended March 31, 2012 compared to a benefit of $12,000 for the same quarter in 2011. The increase was attributable to increased pre-tax income primarily due to the property sale gain.

 

Liquidity and Capital Resources

 

The Association is required to maintain levels of liquid assets under the Federal banking 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 12.94% during the month of March 2012. 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 securities. Net loans totaled $90.5 million and $104.3 million at March 31, 2012 and March 31, 2011, respectively. Securities held to maturity totaled $24.9 million and $21.3 million at March 31, 2011 and March 31, 2011, respectively. In addition to funding new loans and securities purchases through operating and financing activities, such activities were funded by principal repayments on existing loans and securities.

 

31

 

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 March 31, 2012, the Company had a borrowing limit of $48.6 million from the FHLB, of which $5.7 million was advanced. At December 31, 2011 advances from the FHLB totaled $10.1 million.

 

The Association anticipates that it will have sufficient funds available to meet its current loan commitments and obligations. At March 31, 2012, the Association had outstanding commitments to originate or purchase loans of $565,000. Certificates of deposit scheduled to mature in one year or less at March 31, 2012, totaled $61.5 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 Federal banking 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 March 31, 2012 and December 31, 2011, as compared to the minimum regulatory capital requirements:

 

   Actual   Minimal Capital Requirements   Under Prompt Corrective Actions Provisions 
   Amount   Ratio   Amount   Ratio   Amount   Ratio 
March 31, 2012:      (Dollars in Thousands)         
Total Capital  $22,108    25.60%  >$6,909    >8.00%  >$8,636    >10.00%
(to risk-weighted assets)                              
                               
Tier 1 Capital   21,117    24.45%  >    >—    >5,182    >6.00%
(to risk-weighted assets)                              
                               
Core (Tier 1) Capital   21,117    14.69%  5,750    >4.00%   >7,187    >5.00%
(to adjusted total assets)                              
                               
Tangible Capital   21,117    14.69%  2,156    >1.50%   >    >— 
(to adjusted total assets)                              

 

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   Actual   Minimal Capital Requirements   Under Prompt Corrective Actions Provisions 
   Amount   Ratio   Amount   Ratio   Amount   Ratio 
December 31, 2011:      (Dollars in Thousands)         
Total Capital  $17,137    19.88%  >$6,895    >8.00%  >$8,619    >10.00%
(to risk-weighted assets)                              
                               
Tier 1 Capital   16,179    18.77%  >    >—   5,171    >6.00%
(to risk-weighted assets)                              
                               
Core (Tier 1) Capital   16,263    11.52%  5,645    >4.00%  7,056    >5.00%
(to adjusted total assets)                              
                               
Tangible Capital   16,263    11.52%  2,117    >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.

 

33

 

Economic Value of Equity

 

The Association’s interest rate sensitivity is monitored by management through the use of an independent third party Asset/Liability vendor which estimates the change in the Association’s economic value of equity (“EVE”) over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The EVE ratio, under any interest rate scenario, is defined as the EVE in that scenario divided by the market value of assets in the same scenario. The Asset/Liability model produces its analysis based upon data submitted by the Association’s quarter-end financial data. The following table sets forth the Association’s EVE as of March 31, 2012, the most recent date the Association’s EVE was calculated.

  

   Economic Value of Equity  Economic Value of Equity as a Percentage of Present Value of Assets
Change in Interest Rates (basis points)   Estimated EVE   Amount of Change   Percent of Change   EVE Ratio   Change in Basis Points 
   (Dollars in Thousands)            
+300  $13,534   $(10,122)   (42.79%)   9.96%   (570)
+200   17,652    (6,004)   (25.38%)   12.46%   (320)
+100   21,419    (2,237)   (9.46%)   14.57%   (109)
0   23,656            15.66%    
-100   24,816    1,160    4.90%   16.17%   51 

  

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in economic value of equity 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 economic value of equity 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 economic value of equity 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 September 30, 2011 (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.

 

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(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.

  

35

 

PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings

  

As of March 31, 2012, 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, except as described below:.

  

On March 26, 2012, Robert H. Elburn, individually and on behalf of all others similarly situated (“Plaintiff'), filed a lawsuit against D. John Antoniello, Patricia A. McKinley Scanlan, Alfred S. Pantaleone, Charles J. Vorbach, Michael J. Lincks and Jesus R. Adia (the “Individual Defendants”), as well as Flatbush Federal Bancorp, Inc., Flatbush Federal Bancorp, MHC (collectively “Flatbush Federal”), Northfield Bancorp, Inc. and Northfield Bancorp, MHC (collectively “Northfield”) in the Supreme Court of the State of New York (the “Complaint”). Plaintiff purports to bring this action on his own behalf, as well as on behalf of all owners of Flatbush Federal common stock, except the Individual Defendants (the “Class”).

 

The allegations in the Complaint focus on the contemplated transaction in which Northfield will acquire all of the outstanding shares of Flatbush Federal (the “Transaction”). The Complaint alleges that the Individual Defendants breached their fiduciary duties to Flatbush Federal's shareholders by failing to take steps to maximize the value of Flatbush Federal by avoiding competitive bidding, failing to appropriately value Flatbush Federal and by ignoring numerous alleged conflicts of interest of Flatbush Federal's Board of Directors. The Complaint alleges that Flatbush Federal and Northfield aided and abetted the alleged breaches of fiduciary duty by the Individual Defendants.

 

As of May 15, 2012, none of the Defendants have been served by the Plaintiffs.  Upon service and after consultation with counsel, the Company and the other Defendants will review and respond to the Complaint.  Based on information about the Complaint, which is currently available to the Company, it is the Company’s opinion that the Complaint is without merit. 

 

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 March 31, 2012, 12,750 total shares have been repurchased by the Company under this repurchase program. During the quarter ended March 31, 2012, 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 
January 1, 2012 through January 31, 2012      $        37,250 
February 1, 2012 through February 29, 2012               37,250 
March 1, 2012 through March 31, 2012               37,250 

  

ITEM 3. Defaults Upon Senior Securities

  

Not applicable.

 

ITEM 4. Mine Safety Disclosures

  

Not applicable.

  

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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.*
  11.0 Computation of earnings per share. 
  31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith).
  32.1 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).

 

The following Exhibits are being furnished ** as part of this report:

 

  101. INS XBRL Instance Document. **
  101.SCH XBRL Taxonomy Extension Schema Document.**
  101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.**
  101.LAB XBRL Taxonomy Extension Label Linkbase Document.**
  101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.**
  101.DEF XBRL Taxonomy Extension Definitions Linkbase Document.**

 

*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.

 

**These interactive data files are being furnished as part of this Quarterly Report, and, in accordance with Rule 402 of Regulation S-T, shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

 

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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.

 

      FLATBUSH FEDERAL BANCORP, INC.
         
Date: May 15, 2012   By: /s/ Jesus R. Adia
        Jesus R. Adia
        President and
        Chief Executive Officer
         
Date: May 15, 2012   By: /s/ John S. Lotardo
        John S. Lotardo
        Executive Vice President and Chief
        Financial Officer

 

 

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