LOANS RECEIVABLE, NET

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



	March 31, 2015					March 31, 2014
$ in thousands	Amount			%		Amount			%
Gross loans receivable:
One-to-four family	$	125,020		26	%	$	111,220		29	%
Multifamily	93,780			19	%	47,399			12	%
Commercial real estate	186,443			39	%	198,808			51	%
Construction	5,107			1	%	5,100			1	%
Business	70,679			15	%	27,149			7	%
Consumer ⁽¹⁾	434			—	%	138			—	%
Total loans receivable	481,463			100	%	389,814			100	%

Add:
Premium on loans	2,233					957
Less:
Deferred fees and loan discounts, net	(503		)			(815		)
Allowance for loan losses	(4,477		)			(7,233		)
Total loans receivable, net	$	478,716				$	382,723

Loans held-for-sale	$	2,576				$	5,011


⁽¹⁾	Includes personal loans

Substantially all of the Bank's real estate loans receivable are principally secured by properties located in New York City. Accordingly, as with most financial institutions in the market area, the ultimate collectability of a substantial portion of the Company's loan portfolio is susceptible to changes in market conditions in this area.

Mortgage loan portfolios serviced for Federal National Mortgage Association (“FNMA”) and other third parties are not included in the accompanying consolidated financial statements. The unpaid principal balances of these loans aggregated $30.6 million, $33.6 million and $37.4 million at March 31, 2015, 2014, and 2013, respectively.

At March 31, 2015 the Bank pledged $58.4 million in total mortgage loans as collateral for advances from the FHLB-NY.

The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the fiscal year ended March 31, 2015:



$ 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	687			—		—			—		320			279		1,286
Recoveries	380			83		256			—		816			5		1,540
Provision for (Recovery of) Loan Losses	(1,081		)	143		(1,062		)	99		(1,388		)	279		(3,010		)
Ending Balance	$	1,989		$	534	$	1,029		$	99	$	813		$	13	$	4,477

Allowance for Loan Losses Ending Balance: collectively evaluated for impairment	1,702			353		953			99		801			13		3,921
Allowance for Loan Losses Ending Balance: individually evaluated for impairment	287			181		76			—		12			—		556

Loan Receivables Ending Balance	$	126,527		$	94,706	$	185,851		$	5,076	$	70,599		$	434	$	483,193
Ending Balance: collectively evaluated for impairment	119,480			93,218		183,230			5,076		65,243			434		466,681
Ending Balance: individually evaluated for impairment	7,047			1,488		2,621			—		5,356			—		16,512

The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the 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

The following is an analysis of the allowance for loan losses for the years ended March 31:



$ in thousands	2015			2014			2013
Balance at beginning of the year	$	7,233		$	10,989		$	19,821
Charge-offs of loans	(1,286		)	(4,540		)	(5,903		)
Recoveries of amounts previously charged off	1,540			1,210			398
Recovery of loan losses	(3,010		)	(426		)	(3,327		)
Balance at end of the year	$	4,477		$	7,233		$	10,989

At March 31, 2015, 2014 and 2013, the recorded investment in impaired loans was $16.5 million, $22.5 million and $31.0 million, respectively. The related allowance for loan losses for these impaired loans was approximately $0.6 million, $1.6 million and $2.3 million at March 31, 2015, 2014 and 2013, respectively. Interest income of $585 thousand, $713 thousand and $3.2 million for fiscal year 2015, 2014 and 2013, respectively, would have been recorded on impaired loans had they performed in accordance with their original terms. At March 31, 2015, 2014 and 2013, there were no loans that were past due 90 days or more and still accruing.

The following is a summary of nonaccrual loans at March 31, 2015 and 2014.



$ in thousands	March 31, 2015		March 31, 2014
Loans accounted for on a nonaccrual basis:
Gross loans receivable:
One-to-four family	$	3,664	$	2,301
Multifamily	1,053		2,240
Commercial real estate	2,817		7,024
Business	861		993
Consumer	—		1
Total nonaccrual loans	$	8,395	$	12,559

Non-performing loans generally consist of loans for which the accrual of interest has been discontinued as a result of such loans becoming 90 days or more delinquent as to principal and/or interest payments. Interest income on non-performing loans is recorded when received based upon the collectability of the loan. Nonaccrual loans decreased $4.2 million, or 33.2%, to $8.4 million at March 31, 2015 from $12.6 million at March 31, 2014. TDR loans consist of loans where borrowers have been granted concessions in regards to the terms of their loans due to financial or other difficulties, which rendered them unable to repay their loans under the original contractual terms. Total TDR loans at March 31, 2015 were $8.2 million, $3.6 million of which were non-performing as they were either not consistently performing in accordance with their modified terms or not performing in accordance with their modified terms for at least six months. At March 31, 2014, total TDR loans were $9.2 million, of which $3.0 million were non-performing.

At March 31, 2015, other non-performing assets totaled $6.9 million which consists of other real estate owned ("OREO") properties and held-for-sale loans. At March 31, 2015, other real estate owned valued at $4.3 million comprised of ten foreclosed properties, compared to $1.4 million comprised of eight properties at March 31, 2014. At March 31, 2015, 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 March 31, 2015, and based on the most recent analysis performed in the current quarter, 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	$	93,218	$	181,340	$	5,076	$	62,419
Special Mention	—		1,890		—		1,065
Substandard	1,488		2,621		—		7,115
Doubtful	—		—		—		—
Loss	—		—		—		—
Total	$	94,706	$	185,851	$	5,076	$	70,599

	One-to-four family		Consumer
Credit Risk Profile Based on Payment Activity:
Performing	$	122,689	$	434
Non-Performing	3,838		—
Total	$	126,527	$	434

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 March 31, 2015.



$ 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	$	464	$	—	$	3,574	$	4,038	$	122,489	$	126,527
Multifamily	—		434		1,054		1,488		93,218		94,706
Commercial real estate	1,150		936		1,102		3,188		182,663		185,851
Construction	—		—		—		—		5,076		5,076
Business	—		—		123		123		70,476		70,599
Consumer	—		1		—		1		433		434
Total	$	1,614	$	1,371	$	5,853	$	8,838	$	474,355	$	483,193

The following table presents an aging analysis of the recorded investment of past due financing receivable as of March 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	$	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 tables present information on impaired loans with the associated allowance amount, if applicable, at March 31, 2015 and 2014. Management determined the specific allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less selling costs was used to determine the specific allowance recorded. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.



Impaired Loans by Class

	At March 31,
	2015						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	$	2,752	$	3,007	$	—	$	639	$	893	$	—
Multifamily	237		237		—		—		—		—
Commercial real estate	1,880		1,880		—		3,972		4,147		—
Business	4,568		4,652		—		341		402		—
Consumer	—		—		—		1		1		—

With an allowance recorded:
One-to-four family	4,295		4,541		286		5,833		5,958		520
Multifamily	1,251		1,349		181		2,240		2,240		92
Commercial real estate	741		741		76		4,812		5,023		255
Business	788		788		13		4,664		4,664		764
Total	$	16,512	$	17,195	$	556	$	22,502	$	23,328	$	1,631

The following table presents information on average balances on impaired loans and the interest income recognized for the years ended March 31, 2015, 2014 and 2013.



	For the years ended March 31,
	2015				2014				2013
$ in thousands	Average Balance		Interest Income recognized		Average Balance		Interest Income recognized		Average Balance		Interest Income recognized
With no specific allowance recorded:
One-to-four family	$	1,669	$	17	$	1,541	$	12	$	1,215	$	47
Multifamily	222		—		729		17		308		5
Commercial real estate	1,670		83		7,941		227		9,865		235
Construction	—		—		393		—		1,230		53
Business	3,903		215		1,508		14		1,136		41

With an allowance recorded:
One-to-four family	5,158		104		5,290		142		5,363		57
Multifamily	1,255		24		513		—		—		—
Commercial real estate	—		—		3,991		43		6,302		133
Business	855		18		3,899		212		4,932		254
Total	$	14,732	$	461	$	25,805	$	667	$	30,351	$	825

In certain circumstances, loan modifications involve a troubled borrower to whom the Bank may grant a modification. Situations around modifications involving troubled borrowers 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. In cases where the Bank grants any significant concessions to a troubled borrower, the Bank accounts for the modification as a TDR under ASC Subtopic 310-40 and the related allowance under ASC Section 310-10-35. 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 twelve month periods ended March 31, 2015 and March 31, 2014:



	Modifications to loans during the years ended March 31,
	2015									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	%	2	747		867		5.51	%	4.69	%
Commercial real estate	1	860		860		6.60	%	6.60	%	—	—		—
Business	2	788		788		8.25	%	8.25	%	1	844		719		6.00	%	6.00	%
Total	4	$	1,691	$	1,691					3	$	1,591	$	1,586

In an effort to proactively manage delinquent loans, Carver has selectively extended to certain borrowers concessions such as extensions, rate reductions or forbearance agreements. For the fiscal year ended March 31, 2015, two loans of $860 thousand and $788 thousand were extended and one loan of $43 thousand was modified with interest rate concessions. For the fiscal year ended March 31, 2014, two loans of $747 thousand were modified with interest rate concessions and one loan of $844 thousand was extended.

There were no loans at March 31, 2015 and March 31, 2014 that had been modified and subsequently defaulted.

For the fiscal year ended March 31, 2015, there were 12 loans in the TDR portfolio totaling $4.6 million that were on accrual status as the Company has determined that the future collection of the principal and interest is reasonably assured. This generally represents those borrowers who have performed according to the 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 March 31, 2015, the Bank had one Regulation O loan of $1.5 million to a director. There were no loans to officers or directors of the Company at March 31, 2014.