Note 4—Loans Receivable Held for Investment

Loans at year-end were as follows:

	December 31, 2015			December 31, 2014
	(In thousands)
Real estate:
Single family (1)	$	130,891		$	39,792
Multi-family		118,616			171,792
Commercial real estate		11,442			16,722
Church		46,390			54,599
Construction		343			387
Commercial—other		270			262
Consumer		4			9

Gross loans receivable before deferred loan costs and premiums		307,956			283,563
Unamortized net deferred loan costs and premiums		1,043			1,545

Gross loans receivable		308,999			285,108
Allowance for loan losses		(4,828	)		(8,465	)

Loans receivable, net	$	304,171		$	276,643


(1)	Includes $99.5 million of non-impaired purchased loans which are accounted for under ASC 310-20.

The following tables present the activity in the allowance for loan losses by loan type for the years ended December 31, 2015 and 2014:

	For the year ended December 31, 2015
	Real Estate
	Single family			Multi- family			Commercial real estate			Church			Construction			Commercial —other		Consumer			Total
	(In thousands)
Beginning balance	$	1,174		$	2,726		$	496		$	4,047		$	7		$	12	$	3		$	8,465
Provision for (recapture of) loan losses		(702	)		(1,068	)		(27	)		(1,902	)		(4	)		6		(3	)		(3,700	)
Recoveries		129			—			—			23			—			—		—			152
Loans charged off		(4	)		—			—			(85	)		—			—		—			(89	)

Ending balance	$	597		$	1,658		$	469		$	2,083		$	3		$	18	$	—		$	4,828

	For the year ended December 31, 2014
	Real Estate
	Single family			Multi- family		Commercial real estate			Church			Construction		Commercial —other			Consumer			Total
	(In thousands)
Beginning balance	$	1,930		$	1,726	$	1,473		$	4,949		$	7	$	55		$	6		$	10,146
Provision for (recapture of) loan losses		(625	)		1,000		(969	)		(1,228	)		—		(1,107	)		(3	)		(2,932	)
Recoveries		2			—		—			859			—		1,083			—			1,944
Loans charged off		(133	)		—		(8	)		(533	)		—		(19	)		—			(693	)

Ending balance	$	1,174		$	2,726	$	496		$	4,047		$	7	$	12		$	3		$	8,465

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of December 31, 2015 and December 31, 2014:

	December 31, 2015
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial —other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	134	$	1	$	88	$	756	$	—	$	16	$	—	$	995
Collectively evaluated for impairment		463		1,657		381		1,327		3		2		—		3,833

Total ending allowance balance	$	597	$	1,658	$	469	$	2,083	$	3	$	18	$	—	$	4,828


Loans:
Loans individually evaluated for impairment	$	963	$	1,440	$	1,924	$	11,390	$	—	$	67	$	—	$	15,784
Loans collectively evaluated for impairment		30,660		118,186		9,488		34,359		343		203		4		193,243
Non-impaired purchased loans		99,972		—		—		—		—		—		—		99,972

Total ending loans balance	$	131,595	$	119,626	$	11,412	$	45,749	$	343	$	270	$	4	$	308,999

	December 31, 2014
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial —other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	132	$	115	$	161	$	1,088	$	—	$	10	$	—	$	1,506
Collectively evaluated for impairment		1,042		2,611		335		2,959		7		2		3		6,959

Total ending allowance balance	$	1,174	$	2,726	$	496	$	4,047	$	7	$	12	$	3	$	8,465


Loans:
Loans individually evaluated for impairment	$	1,414	$	2,765	$	4,636	$	14,602	$	—	$	102	$	—	$	23,519
Loans collectively evaluated for impairment		38,641		170,785		12,083		39,525		387		159		9		261,589

Total ending loans balance	$	40,055	$	173,550	$	16,719	$	54,127	$	387	$	261	$	9	$	285,108

The following table presents information related to loans individually evaluated for impairment by loan type as of December 31, 2015 and December 31, 2014:

	December 31, 2015						December 31, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	877	$	302	$	—	$	1,448	$	736	$	—
Multi-family		912		779		—		1,384		1,263		—
Commercial real estate		636		259		—		4,836		1,174		—
Church		5,615		3,542		—		6,234		4,350		—
Commercial—other		—		—		—		34		34		—
With an allowance recorded:
Single family		662		661		134		678		678		132
Multi-family		661		661		1		1,541		1,502		115
Commercial real estate		1,702		1,665		88		3,473		3,462		161
Church		8,245		7,848		756		10,751		10,252		1,088
Commercial—other		67		67		16		68		68		10

Total	$	19,377	$	15,784	$	995	$	30,447	$	23,519	$	1,506

The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following table presents the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the years ended December 31, 2015 and 2014.

	For the year ended December 31, 2015				For the year ended December 31, 2014
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	1,260	$	140	$	2,327	$	67
Multi-family		1,912		136		3,425		79
Commercial real estate		3,162		275		4,762		373
Church		13,630		614		17,212		787
Commercial—other		79		6		124		9

Total	$	20,043	$	1,171	$	27,850	$	1,315

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans. Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $708 thousand and $1.3 million for the years ended December 31, 2015 and 2014, respectively, and were not included in the consolidated results of operations.

The following tables present the aging of the recorded investment in past due loans as of December 31, 2015 and December 31, 2014 by loan type:

	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current
	(In thousands)
Loans receivable held for investment:
Single family	$	103	$	—	$	—	$	103	$	131,492
Multi-family		291		—		—		291		119,335
Commercial real estate		—		—		—		—		11,412
Church		595		—		456		1,051		44,698
Construction		—		—		—		—		343
Commercial—other		—		—		—		—		270
Consumer		—		—		—		—		4

Total	$	989	$	—	$	456	$	1,445	$	307,554

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current
	(In thousands)
Loans receivable held for investment:
Single family	$	—	$	—	$	—	$	—	$	40,055
Multi-family		455		—		—		455		173,095
Commercial real estate		856		—		—		856		15,863
Church		—		180		987		1,167		52,960
Construction		—		—		—		—		387
Commercial—other		34		—		—		34		227
Consumer		—		—		—		—		9

Total	$	1,345	$	180	$	987	$	2,512	$	282,596

The following table presents the recorded investment in non-accrual loans by loan type as of December 31, 2015 and December 31, 2014:

	December 31, 2015		December 31, 2014
	(In thousands)
Loans receivable held for investment:
Single family	$	302	$	736
Multi-family		779		1,618
Commercial real estate		259		1,174
Church		2,887		5,232
Commercial—other		—		102

Total non-accrual loans	$	4,227	$	8,862

There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2015 or December 31, 2014.

Troubled Debt Restructurings

At December 31, 2015, loans classified as troubled debt restructurings ("TDRs") totaled $15.3 million, of which $3.8 million were included in non-accrual loans and $11.5 million were on accrual status. At December 31, 2014, loans classified as TDRs totaled $20.2 million, of which $5.5 million were included in non-accrual loans and $14.7 million were on accrual status. The Company has allocated $995 thousand and $1.3 million of specific reserves for accruing TDRs as of December 31, 2015 and December 31, 2014, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time, and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified. A well-documented credit analysis that supports a return to accrual status based on the borrower's financial condition and prospects for repayment under the revised terms is also required. As of December 31, 2015 and December 31, 2014, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. No loans were modified during the years ended December 31, 2015 and 2014.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings:


	•	Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists but correction is anticipated within an acceptable time frame.
	•	Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.
	•	Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
	•	Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
	•	Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms.

The following tables present the recorded investment of loans by risk category and by loan type as of December 31, 2015 and December 31, 2014:

	December 31, 2015
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	128,736	$	—	$	2,557	$	302	$	—	$	—
Multi-family		117,602		—		352		1,672		—		—
Commercial real estate		7,509		—		—		3,903		—		—
Church		35,013		776		1,431		8,529		—		—
Construction		343		—		—		—		—		—
Commercial—other		203		—		—		67		—		—
Consumer		4		—		—		—		—		—

Total	$	289,410	$	776	$	4,340	$	14,473	$	—	$	—

	December 31, 2014
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	35,850	$	—	$	3,465	$	740	$	—	$	—
Multi-family		170,700		—		613		2,237		—		—
Commercial real estate		13,218		—		284		3,217		—		—
Church		41,716		—		2,202		10,209		—		—
Construction		387		—		—		—		—		—
Commercial—other		159		—		—		102		—		—
Consumer		9		—		—		—		—		—

Total	$	262,039	$	—	$	6,564	$	16,505	$	—	$	—