Loans Receivable Held for Investment

6 Months Ended

Jun. 30, 2015

Loans receivable held for investment

Loans Receivable Held for Investment

Loans Receivable Held for Investment

NOTE (5) – Loans Receivable Held for Investment

Loans at June 30, 2015 and December 31, 2014 were as follows:

	June 30, 2015		December 31, 2014
	(In thousands)
Real estate:
Single family	$	34,200	$	39,792
Multi-family	103,947		171,792
Commercial real estate	12,979		16,722
Church	49,729		54,599
Construction	366		387
Commercial – other	252		262
Consumer	4		9
Gross loans receivable before deferred loan costs and premiums	201,477		283,563
Unamortized net deferred loan costs and premiums	600		1,545
Gross loans receivable	202,077		285,108
Allowance for loan losses	(6,923)		(8,465)
Loans receivable, net	$	195,154	$	276,643

The following tables present the activity in the allowance for loan losses by loan type for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015
	Real Estate
	Single family			Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	1,164		$	2,741	$	436		$	3,314	$	4	$	11	$	1		$	7,671
Provision for (recapture of) loan losses	(11)			(896)		(32)			189		-		1		(1)			(750)
Recoveries	-			-		-			5		-		-		-			5
Loans charged off	(3)			-		-			-		-		-		-			(3)
Ending balance	$	1,150		$	1,845	$	404		$	3,508	$	4	$	12	$	-		$	6,923
	Six Months Ended June 30, 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	(21)			(881)		(92)			(500)		(3)		-		(3)			(1,500)
Recoveries	-			-		-			11		-		-		-			11
Loans charged off	(3)			-		-			(50)		-		-		-			(53)
Ending balance	$		1,150	$	1,845	$		404	$	3,508	$	4	$	12	$		-	$	6,923

	Three Months Ended June 30, 2014
	Real Estate
	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	1,874	$	2,107	$	1,212		$	4,867	$	7	$	20	$	4		$	10,091
Provision for (recapture of) loan losses	65		197		(131)			(629)		-		(2)		-			(500)
Recoveries	-		-		-			13		-		1		-			14
Loans charged off	(90)		-		-			(139)		-		-		-			(229)
Ending balance	$	1,849	$	2,304	$	1,081		$	4,112	$	7	$	19	$	4		$	9,376
	Six Months Ended June 30, 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	10		578		(383)			(684)		-		(1,101)		(2)			(1,582)
Recoveries	2		-		-			169		-		1,083		-			1,254
Loans charged off	(93)		-		(9)			(322)		-		(18)		-			(442)
Ending balance	$	1,849	$	2,304	$		1,081	$	4,112	$	7	$	19	$		4	$		9,376

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 June 30, 2015 and December 31, 2014:

	June 30, 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	$	138	$	4	$	95	$	1,153	$	-	$	10	$	-	$	1,400
Collectively evaluated for impairment	1,012		1,841		309		2,355		4		2		-		5,523
Total ending allowance balance	$	1,150	$	1,845	$	404	$	3,508	$	4	$	12	$	-	$	6,923
Loans:
Loans individually evaluated for impairment	$	1,337	$	1,469	$	2,788	$	13,385	$	-	$	80	$	-	$	19,059
Loans collectively evaluated for impairment	33,085		103,344		10,200		35,847		366		172		4		183,018
Total ending loans balance	$	34,422	$	104,813	$	12,988	$	49,232	$	366	$	252	$	4	$	202,077

	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 June 30, 2015 and December 31, 2014:

	June 30, 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	$	1,432	$	667	$	-	$	1,448	$	736	$	-
Multi-family	915		798		-		1,384		1,263		-
Commercial real estate	1,862		1,081		-		4,836		1,174		-
Church	5,929		3,984		-		6,234		4,350		-
Commercial - other	13		13		-		34		34		-
With an allowance recorded:
Single family	670		670		138		678		678		132
Multi-family	671		671		4		1,541		1,502		115
Commercial real estate	1,707		1,707		95		3,473		3,462		161
Church	9,790		9,401		1,153		10,751		10,252		1,088
Commercial -other	67		67		10		68		68		10
Total	$	23,056	$	19,059	$	1,400	$	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 tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the three and six months ended June 30, 2015 and 2014.

	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	1,346		$	8		$	1,364		$	15
Multi-family		1,974			99			2,305			115
Commercial real estate		2,897			55			3,639			161
Church		13,695			144			14,191			286
Commercial -other		82			1			89			3
Total		$	19,994		$	307		$	21,588		$	580

	Three Months Ended June 30, 2014						Six Months Ended June 30, 2014
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
	(In thousands)
Single family		$	2,930		$	18		$	2,977		$	35
Multi-family		3,543			23			3,722			46
Commercial real estate		4,783			96			4,828			189
Church		17,110			192			18,557			333
Commercial -other		130			2			137			5
Total		$	28,496		$	331		$	30,221		$	608

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 $166 thousand and $328 thousand for the three months ended June 30, 2015 and 2014, respectively, and $450 thousand and $821 thousand for the six months ended June 30, 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 June 30, 2015 and December 31, 2014 by loan type:

	June 30, 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		$	82		$	-		$	-		$	82		$	34,340
Multi-family		341			-			457			798			104,015
Commercial real estate		-			-			-			-			12,988
Church		395			204			258			857			48,375
Construction		-			-			-			-			366
Commercial - other		-			-			-			-			252
Consumer		-			-			-			-			4
Total		$	818		$	204		$	715		$	1,737		$	200,340

	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 June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
	(In thousands)
Loans receivable held for investment:
Single family		$	667		$	736
Multi-family		798			1,618
Commercial real estate		1,081			1,174
Church		4,109			5,232
Commercial - other		80			102
Total non-accrual loans		$	6,735		$	8,862

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2015 or December 31, 2014.

Troubled Debt Restructurings

At June 30, 2015, loans classified as troubled debt restructurings (“TDRs”) totaled $17.4 million, of which $5.1 million were included in non-accrual loans and $12.3 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 $1.4 million and $1.3 million of specific reserves for accruing TDRs as of June 30, 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 June 30, 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 three and six months ended June 30, 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.  Based on the most recent analysis performed, the risk category of loans by loan type as of June 30, 2015 and December 31, 2014 is as follows:

	June 30, 2015
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	30,320	$	-	$	3,431	$	671	$	-	$	-
Multi-family	102,440		-		964		1,409		-		-
Commercial real estate	10,200		-		-		2,788		-		-
Church	37,964		782		1,443		9,043		-		-
Construction	366		-		-		-		-		-
Commercial - other	172		-		-		67		13		-
Consumer	4		-		-		-		-		-
Total	$	181,466	$	782	$	5,838	$	13,978	$	13	$	-
	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	$	-	$	-