LOANS RECEIVABLE AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The loans receivable portfolio is segmented into one-to-four family, multifamily mortgage, commercial real estate, construction, business (including Small Business Administration loans), and consumer loans.

The allowance for loan and lease loss ("ALLL") reflects management’s judgment in the evaluation of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to calculate the ALLL each quarter. To determine the total ALLL, management estimates the reserves needed for each segment of the loan portfolio, including loans analyzed individually and loans analyzed on a pooled basis.

From time to time, events or economic factors may affect the loan portfolio, causing management to provide additional amounts or release balances from the ALLL. The ALLL is sensitive to risk ratings assigned to individually evaluated loans and economic assumptions and delinquency trends. Individual loan risk ratings are evaluated based on the specific facts related to that loan. Additions to the ALLL are made by charges to the provision for loan losses. Credit exposures deemed to be uncollectible are charged against the ALLL, while recoveries of previously charged off amounts are credited to the ALLL.

The following is a summary of loans receivable, net of allowance for loan losses, and loans held-for-sale at December 31, 2014 and March 31, 2014:



	December 31, 2014					March 31, 2014
$ in thousands	Amount			Percent		Amount			Percent
Gross loans receivable:
One-to-four family	$	125,994		29	%	$	111,220		29	%
Multifamily	63,576			15	%	47,399			12	%
Commercial real estate	200,892			46	%	198,808			51	%
Construction	5,104			1	%	5,100			1	%
Business	38,371			9	%	27,149			7	%
Consumer ⁽¹⁾	333			—	%	138			—	%
Total loans receivable	$	434,270		100	%	$	389,814		100	%

Add:
Premium on loans	1,400					957
Less:
Deferred fees and loan discounts,net	(136		)			(815		)
Allowance for loan losses	(5,880		)			(7,233		)
Total loans receivable, net	$	429,654				$	382,723

⁽¹⁾ Includes personal loans

The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the three and nine month periods ended December 31, 2014 and 2013, and the fiscal year ended March 31, 2014.



Three months ended December 31, 2014
$ in thousands	One-to-four family		Multifamily			Commercial Real Estate			Construction			Business			Consumer			Total
Allowance for loan losses:
Beginning Balance	$	3,301	$	372		$	1,154		$	214		$	1,535		$	21		$	6,597
Charge-offs	112		—			—			—			—			—			112
Recoveries	—		—			2			—			540			4			546
Provision for (Recovery of) Loan Losses	225		(19		)	(291		)	(53		)	(1,004		)	(9		)	(1,151		)
Ending Balance	$	3,414	$	353		$	865		$	161		$	1,071		$	16		$	5,880



Nine months ended December 31, 2014
$ in thousands	One-to-four family			Multifamily			Commercial Real Estate			Construction		Business			Consumer		Total
Allowance for loan losses:
Beginning Balance	$	3,377		$	308		$	1,835		$	—	$	1,705		$	8	$	7,233
Charge-offs	195			—			—			—		—			—		195
Recoveries	379			82			256			—		763			7		1,487
Provision for (Recovery of) Loan Losses	(147		)	(37		)	(1,226		)	161		(1,397		)	1		(2,645		)
Ending Balance	$	3,414		$	353		$	865		$	161	$	1,071		$	16	$	5,880

Allowance for Loan Losses Ending Balance: collectively evaluated for impairment	2,515			172			832			161		828			15		4,523
Allowance for Loan Losses Ending Balance: individually evaluated for impairment	899			181			32			—		244			1		1,357

Loan Receivables Ending Balance	$	127,417		$	64,138		$	200,334		$	5,074	$	38,244		$	327	$	435,534
Ending Balance: collectively evaluated for impairment	120,367			62,648			196,229			5,074		33,638			320		418,276
Ending Balance: individually evaluated for impairment	7,050			1,490			4,105			—		4,606			7		17,258



Fiscal year ended March 31, 2014
$ in thousands	One-to-four family		Multifamily			Commercial Real Estate			Construction			Business			Consumer			Total
Allowance for loan losses:
Beginning Balance	$	3,496	$	408		$	3,298		$	—		$	3,759		$	28		$	10,989
Charge-offs	2,887		98			574			—			966			15			4,540
Recoveries	534		31			—			149			486			10			1,210
Provision for (Recovery of) Loan Losses	2,234		(33		)	(889		)	(149		)	(1,574		)	(15		)	(426		)
Ending Balance	$	3,377	$	308		$	1,835		$	—		$	1,705		$	8		$	7,233

Allowance for Loan Losses Ending Balance: collectively evaluated for impairment	2,857		216			1,580			—			941			8			5,602
Allowance for Loan Losses Ending Balance: individually evaluated for impairment	520		92			255			—			764			—			1,631

Loan Receivables Ending Balance:	$	112,191	$	47,525		$	198,101		$	5,070		$	26,931		$	138		389,956
Ending Balance: collectively evaluated for impairment	105,719		45,285			189,317			5,070			21,926			137			367,454
Ending Balance: individually evaluated for impairment	6,472		2,240			8,784			—			5,005			1			22,502



Three months ended December 31, 2013
$ in thousands	One-to-four family			Multifamily		Commercial Real Estate			Construction			Business		Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	4,223		$	394	$	2,888		$	210		$	1,602	$	29		$	53		$	9,399
Charge-offs	—			98		58			—			179		—			—			335
Recoveries	13			7		—			149			230		4			—			403
Provision for (Recovery of) Loan Losses	(169		)	78		(610		)	(359		)	112		(51		)	(53		)	(1,052		)
Ending Balance	$	4,067		$	381	$	2,220		$	—		$	1,765	$	(18	)	$	—		$	8,415



Nine months ended December 31, 2013
$ in thousands	One-to-four family		Multifamily		Commercial Real Estate			Construction			Business			Consumer			Total
Allowance for loan losses:
Beginning Balance	$	3,496	$	408	$	3,298		$	—		$	3,759		$	28		$	10,989
Charge-offs	1,619		98		570			—			572			15			2,874
Recoveries	515		23		—			149			326			13			1,026
Provision for (Recovery of) Loan Losses	1,675		48		(508		)	(149		)	(1,748		)	(44		)	(726		)
Ending Balance	$	4,067	$	381	$	2,220		$	—		$	1,765		$	(18	)	$	8,415

Allowance for Loan Losses Ending Balance: collectively evaluated for impairment	3,636		329		1,971			—			1,212			16			7,164
Allowance for Loan Losses Ending Balance: individually evaluated for impairment	431		52		249			—			519			—			1,251

Loan Receivables Ending Balance:	$	118,187	$	47,544	$	194,019		$	5,068		$	28,083		$	262		$	393,163
Ending Balance: collectively evaluated for impairment	110,268		46,181		181,435			5,068			23,022			261			366,235
Ending Balance: individually evaluated for impairment	7,919		1,363		12,584			—			5,061			1			26,928

The following is a summary of nonaccrual loans at December 31, 2014 and March 31, 2014.



$ in thousands	December 31, 2014		March 31, 2014
Gross loans receivable:
One-to-four family	$	3,089	$	2,301
Multifamily	1,053		2,240
Commercial real estate	2,850		7,024
Business	1,550		993
Consumer	7		1
Total nonaccrual loans	$	8,549	$	12,559

Nonaccrual loans decreased $4.0 million, or 31.9%, to $8.5 million at December 31, 2014 from $12.6 million at March 31, 2014.

Non-performing loans at December 31, 2014, were comprised of $4.8 million of loans 90 days or more past due and non-accruing, and included $3.7 million of loans classified as a troubled debt restructuring which had either not consistently performed in accordance with their modified terms or were not performing in accordance with their modified terms for at least six months.

Non-performing loans at March 31, 2014, were comprised of $9.0 million of loans 90 days or more past due and non-accruing, and included $3.0 million of loans classified as a troubled debt restructuring which had either not consistently performed in accordance with their modified terms or were not performing in accordance with their modified terms for at least six months.

At December 31, 2014, other non-performing assets totaled $6.5 million which consisted of other real estate owned and held-for-sale loans. At December 31, 2014, other real estate owned valued at $3.9 million comprised of nine foreclosed properties, compared to $1.4 million comprised of eight properties at March 31, 2014. At December 31, 2014, held-for-sale loans totaled $2.6 million, compared to $5.0 million at March 31, 2014.

The Bank utilizes an internal loan classification system as a means of reporting problem loans within its loan categories. Loans may be classified as "Pass," “Special Mention,” “Substandard,” “Doubtful,” and “Loss.” Loans rated Pass have demonstrated satisfactory asset quality, earning history, liquidity, and other adequate margins of creditor protection. They represent a moderate credit risk and some degree of financial stability. Loans are considered collectible in full, but perhaps require greater than average amount of loan officer attention. Borrowers are capable of absorbing normal setbacks without failure. Loans rated Special Mention have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date. Loans rated Substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans rated Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged off immediately to the allowance for loan losses.

One-to-four family residential loans and consumer and other loans are rated non-performing if they are delinquent in payments ninety or more days, a troubled debt restructuring with less than six months contractual performance or past maturity. All other one-to-four family residential loans and consumer and other loans are performing loans.

As of December 31, 2014, the risk category by class of loans is as follows:



$ in thousands	Multifamily		Commercial Real Estate		Construction		Business
Credit Risk Profile by Internally Assigned Grade:
Pass	$	62,648	$	193,905	$	5,074	$	31,908
Special Mention	—		2,519		—		889
Substandard	1,490		3,910		—		5,447
Doubtful	—		—		—		—
Loss	—		—		—		—
Total	$	64,138	$	200,334	$	5,074	$	38,244

					One-to-four family		Consumer
Credit Risk Profile Based on Payment Activity:
Performing					$	123,280	$	313
Non-Performing					4,137		14
Total					$	127,417	$	327

As of March 31, 2014, and based on the most recent analysis performed, the risk category by class of loans is as follows:



$ in thousands	Multifamily		Commercial Real Estate		Construction		Business
Credit Risk Profile by Internally Assigned Grade:
Pass	$	46,028	$	184,850	$	5,070	$	20,638
Special Mention	—		7,129		—		1,295
Substandard	1,497		6,122		—		4,998
Doubtful	—		—		—		—
Loss	—		—		—		—
Total	$	47,525	$	198,101	$	5,070	$	26,931

					One-to-four family		Consumer
Credit Risk Profile Based on Payment Activity:
Performing					$	109,890	$	137
Non-Performing					2,301		1
Total					$	112,191	$	138

The following table presents an aging analysis of the recorded investment of past due financing receivable as of December 31, 2014 and March 31, 2014.



December 31, 2014
$ in thousands	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Financing Receivables
One-to-four family	$	1,126	$	—	$	3,011	$	4,137	$	123,280	$	127,417
Multifamily	—		437		1,053		1,490		62,648		64,138
Commercial real estate	3,581		—		1,115		4,696		195,638		200,334
Construction	—		—		—		—		5,074		5,074
Business	—		—		741		741		37,503		38,244
Consumer	—		7		7		14		313		327
Total	$	4,707	$	444	$	5,927	$	11,078	$	424,456	$	435,534



March 31, 2014
$ in thousands	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables
One-to-four family	$	244	$	888	$	1,863	$	2,995	$	109,196	112,191
Multifamily	444		—		2,240		2,684		44,841		47,525
Commercial real estate	3,133		292		3,891		7,316		190,785		198,101
Construction	—		—		—		—		5,070		5,070
Business	—		131		993		1,124		25,807		26,931
Consumer	2		2		1		5		133		138
Total	$	3,823	$	1,313	$	8,988	$	14,124	$	375,832	$	389,956

The following table presents information on impaired loans with the associated allowance amount, if applicable, at December 31, 2014 and March 31, 2014.



	At December 31, 2014						At March 31, 2014
$ in thousands	Recorded Investment		Unpaid Principal Balance		Associated Allowance		Recorded Investment		Unpaid Principal Balance		Associated Allowance
With no specific allowance recorded:
One-to-four family	$	753	$	1,106	$	—	$	639	$	893	—
Multifamily	156		156		—		—		—		—
Commercial real estate	2,937		3,109		—		3,972		4,147		—
Business	952		952		—		341		402		—
Consumer	—		—		—		1		1		—
With an allowance recorded:
One-to-four family	6,297		6,425		899		5,833		5,958		520
Multifamily	1,334		1,432		181		2,240		2,240		92
Commercial real estate	1,168		1,168		32		4,812		5,023		255
Business	3,654		3,737		244		4,664		4,664		764
Consumer and other	7		7		1		—		—		—
Total	$	17,258	$	18,092	$	1,357	$	22,502	$	23,328	$	1,631

The following tables presents information on average balances on impaired loans and the interest income recognized on a cash basis for the three and nine month period ended December 31, 2014 and 2013. All impaired loans during the period were carried on cash-basis nonaccrual



	For the Three Months Ended December 31,									For the Nine Months Ended December 31,
	2014					2013				2014				2013
$ in thousands	Average Balance		Interest Income Recognized			Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
With no specific allowance recorded:
One-to-four family	$	736	$	2		$	1,793	$	4	$	731	$	11	$	1,889	$	5
Multifamily	157		—			1,206		5		137		—		519		6
Commercial real estate	2,945		22			9,086		65		2,660		136		9,104		127
Construction	—		—			38		—		—		—		615		—
Business	1,014		11			1,953		40		1,032		89		1,684		47
Consumer and other	—		—			1				—		—		1
With an allowance recorded:
One-to-four family	6,299		$	14		5,210		58		6,106		101		5,464		98
Multifamily	1,334		2			162		—		1,336		17		162		—
Commercial real estate	1,171		(15		)	3,041		32		684		24		5,138		37
Business	3,678		28			2,870		78		3,466		106		—		—
Consumer and other	7		—			—				7		—		3,728		114
Total	$	17,341	$	64		$	25,360	$	282	$	16,159	$	484	$	28,304	$	434

In certain circumstances, the Bank will modify a loan as part of a troubled debt restructure ("TDR") under ASC Subtopic 310-40 and the related allowance under ASC Subtopic 310-10-35. Situations around these modifications may include extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt or reduction of past accrued interest. Loans modified in TDRs are placed on nonaccrual status until the Company determines that future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate performance according to the restructured terms for a period of at least six months.

The following table presents an analysis of those loan modifications that were classified as TDRs during the three and nine month period ended December 31, 2014.



	Modifications to loans during the three month period ended December 31, 2014									Modifications to loans during the nine month period ended December 31, 2014

$ in thousands	Number of loans	Pre-modification outstanding recorded investment		Post- modification recorded investment		Pre-Modification rate		Post-Modification rate		Number of loans	Pre-modification outstanding recorded investment		Post- modification recorded investment		Pre-Modification rate		Post-Modification rate
One-to-four family	1	$	43	$	43	12.00	%	12.00	%	1	$	43	$	43	12.00	%	12.00	%
Commercial real estate	—	—		—		—	%	—	%	1	873		856		6.60	%	6.60	%
Business	1	50		50		10.50	%	10.50	%	1	50		50		10.50	%	10.50	%
Total	2	$	93	$	93					3	$	966	$	949

The following table presents an analysis of those loan modifications that were classified as TDRs during the three and nine month period ended December 31, 2013:



	Modifications to loans during the three month period ended December 31, 2013									Modifications to loans during the nine month period ended December 31, 2013

$ in thousands	Number of loans	Pre- modification outstanding recorded investment		Post modification recorded investment		Pre-Modification rate		Post-Modification rate		Number of loans	Pre-modification outstanding recorded investment		Post- modification recorded investment		Pre-Modification rate		Post-Modification rate
One-to-four family	1	$	429	$	428	6.50	%	4.50	%	2	$	913	$	975	7.03	%	5.06	%
Business	—	—		—		—	%	—	%	1	919		719		6.00	%	6.00	%
Total	1	$	429	$	428					3	$	1,832	$	1,694

In an effort to proactively resolve delinquent loans, Carver has selectively extended to certain borrowers concessions such as extensions, rate reductions or forbearance agreements. For the three month period ended December 31, 2014, one loan of $43 thousand was modified and one loan of $50 thousand was extended. The nine month period ended December 31, 2014 also included one loan of $856 thousand that was extended. For the three month period ended December 31, 2013, one loan of $428 thousand was modified with an interest rate concession of 2.00%. For the nine month period ended December 31, 2013, two loans totaling $975 thousand were modified with interest rate concessions of 2.00%, and one loan of $719 thousand was extended.

For the periods ended December 31, 2014 and 2013, there were no modified loans that subsequently defaulted within the last 12 months.

At December 31, 2014, there were 12 loans in the TDR portfolio totaling $4.7 million that were on accrual status as the Company has determined that future collection of the principal and interest is reasonably assured. These have generally performed according to restructured terms for a period of at least six months. At March 31, 2014, there were 14 loans in the performing TDR portfolio totaling $6.3 million.

At December 31, 2014 and 2013, there were no loans to officers or directors of the Company.