LOANS

12 Months Ended

Dec. 31, 2017

Loans and Leases Receivable Disclosure [Abstract]

NOTE 3 — LOANS

Net loans consist of the following as of December 31, 2017 and 2016 (dollars in thousands):

	At December 31,
	2017			2016
Real estate
Commercial		$	783,745		$	547,711
Construction			36,960			29,447
Multifamily			190,097			117,373
One-to-four family			25,568			26,480
Total Real Estate			1,036,370			721,011
Commercial and industrial			340,001			315,870
Consumer			44,595			18,825
Total loans			1,420,966			1,055,706
Deferred fees			(1,070)			(1,160)
Allowance for loan losses			(14,887)			(11,815)
Net loans at the end of the year		$	1,405,009		$	1,042,731

The following tables represent the changes in the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015, by portfolio segment (dollars in thousands). The portfolio segments represent the categories that the Bank uses to determine its allowance for loan losses:

December 31, 2017	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance		$	5,206		$	5,364		$	409		$	620		$	109		$	107		$	11,815
Provision for loan losses			1,930			4,093			110			536			29			361			7,059
Loans charged-off			—			(3,879)			—			—			—			(108)			(3,987)
Recoveries			—			—			—			—			—			—			—
Total ending allowance balance		$	7,136		$	5,578		$	519		$	1,156		$	138		$	360		$	14,887

December 31, 2016	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance		$	3,650		$	4,254		$	589		$	986		$	444		$	19		$	9,942
Provision (credit) for loan losses			1,556			6,640			(180)			(366)			322			88			8,060
Loans charged-off			—			(5,530)			—			—			(659)			—			(6,189)
Recoveries			—			—			—			—			2			—			2
Total ending allowance balance		$	5,206		$	5,364		$	409		$	620		$	109		$	107		$	11,815

December 31, 2015	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance		$	3,283		$	3,106		$	269		$	778		$	480		$	—		$	7,916
Provision (credit) for loan losses			367			1,148			320			208			(47)			19			2,015
Loans charged-off			—			—			—			—			—			—			—
Recoveries			—			—			—			—			11			—			11
Total ending allowance balance		$	3,650		$	4,254		$	589		$	986		$	444		$	19		$	9,942

Total charge offs were $4.0 million, $6.2 and $0 million during the years ended December 31, 2017, 2016 and 2015 respectively. Included in the charge offs for the years ended December 31, 2017 and December 31, 2016 were write downs associated with taxi medallion loans of $3.7 million and $5.1 million, respectively.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of December 31, 2017 and 2016 (dollars in thousands):

At December 31, 2017	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Individually evaluated for impairment		$	—		$	—		$	—		$	—		$	9		$	77		$	86
Collectively evaluated for impairment			7,136			5,578			519			1,156			129			283		$	14,801
Total ending allowance balance		$	7,136		$	5,578		$	519		$	1,156		$	138		$	360		$	14,887
Loans:
Individually evaluated for impairment		$	2,368		$	—		$	—		$	—		$	3,566		$	155		$	6,089
Collectively evaluated for impairment			781,377			340,001			36,960			190,097			22,002			44,440			1,414,877
Total ending loan balance		$	783,745		$	340,001		$	36,960		$	190,097		$	25,568		$	44,595		$	1,420,966

At December 31, 2016	Commercial Real Estate			Commercial & Industrial			Construction			Multi Family			One-to-four Family			Consumer			Total
Allowance for loan losses:
Individually evaluated for impairment		$	—		$	366		$	—		$	—		$	10		$	—		$	376
Collectively evaluated for impairment			5,206			4,998			409			620			99			107		$	11,439
Total ending allowance balance		$	5,206		$	5,364		$	409		$	620		$	109		$	107		$	11,815
Loans:
Individually evaluated for impairment		$	5,504		$	4,915		$	—		$	—		$	1,130		$	—		$	11,549
Collectively evaluated for impairment			542,207			310,955			29,447			117,373			25,350			18,825			1,044,157
Total ending loan balance		$	547,711		$	315,870		$	29,447		$	117,373		$	26,480		$	18,825		$	1,055,706

The following tables present information related to loans determined to be impaired by class of loans as of and for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):

At December 31, 2017	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	—		$	—		$	—		$	2,928		$	—
One-to-four family			686			556			9			563			21
Consumer			155			155			77			75			8
Total		$	841		$	711		$	86		$	3,566		$	29
Without an allowance recorded:
Commercial & industrial		$	—		$	—		$	—		$	5,367		$	229
Commercial real estate			2,890			2,368			0			938			43
One-to-four family			3,157			3,010			0			1,547			87
Total		$	6,047		$	5,378		$	—		$	7,852		$	359

At December 31, 2016	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	8,783		$	3,660		$	366		$	6,330		$	207
One-to-four family			694			565			10			565			21
Total		$	9,477		$	4,225		$	376		$	6,895		$	228
Without an allowance recorded:
Commercial real estate		$	5,974		$	5,504		$	—		$	5,814		$	267
Commercial & industrial			1,255			1,255			—			1,340			54
One-to-four family			713			565			—			565			23
Total		$	7,942		$	7,324		$	—		$	7,719		$	344

At December 31, 2015	Unpaid Principal Balance			Recorded Investment			Allowance for Loan Losses Allocated			Average Recorded Investment			Interest Income Recognized
With an allowance recorded:
Commercial & industrial		$	1,933		$	1,933		$	134		$	1,983		$	136
One-to-four family			1,694			1,223			293			1,223			21
Total		$	3,627		$	3,156		$	427		$	3,206		$	157
Without an allowance recorded:
Commercial real estate		$	2,155		$	1,806		$	—		$	1,833		$	93
Commercial & industrial			1,425			1,425			—			1,510			61
Multi-family			5,971			5,971			—			6,010			235
One-to-four family			713			565			—			565			21
Total		$	10,264		$	9,767		$	—		$	9,918		$	410

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. Cash basis interest income equals interest income recognized.

Interest on non-accrual loans not recognized was $88,000 and $57,000 for the years ended December 31, 2017 and 2016, respectively. Non-accrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

For a loan to be considered impaired, management determines after review whether it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management applies its normal loan review procedures in making these judgments. Impaired loans include individually classified nonaccrual loans and TDRs. Impairment is determined based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based on recent appraised values. The fair value of the collateral or present value of expected cash flows is compared to the carrying value to determine if any write-down or specific loan loss allowance allocation is required.

The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2017 and 2016 (dollars in thousands):

At December 31, 2017	Nonaccrual			Loans Past Due Over 90 Days Still Accruing
Commercial real estate		$	787		$	—
Commercial & industrial			—			—
One-to-four family			2,447			—
Consumer			155			—
Total		$	3,389		$	—

At December 31, 2016	Nonaccrual			Loans Past Due Over 90 Days Still Accruing
Commercial & industrial		$	3,660		$	—

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2017 and 2016 (dollars in thousands):

At December 31, 2017	30 – 59 Days			60 – 89 Days			Greater than 90 days			Total Past Due			Loans not Past Due			Total
Commercial real estate		$	836		$	—		$	787		$	1,623		$	782,122		$	783,745
Commercial & industrial			85			142			—			227			339,774			340,001
Construction			—			—			—			—			36,960			36,960
Multifamily			—			—			—			—			190,097			190,097
One-to-four family			—			—			—			—			25,568			25,568
Consumer			149			21			155			325			44,270			44,595
Total		$	1,070		$	163		$	942		$	2,175		$	1,418,791		$	1,420,966

At December 31, 2016	30 – 59 Days			60 – 89 Days			Greater than 90 days			Total Past Due			Loans not Past Due			Total
Commercial real estate		$	—		$	958		$	—		$	958		$	546,753		$	547,711
Commercial & industrial			14			3,922			—			3,936			311,934			315,870
Construction			—			—			—			—			29,447			29,447
Multifamily			—			—			—			—			117,373			117,373
One-to-four family			—			—			—			—			26,480			26,480
Consumer			—			34			—			34			18,791			18,825
Total		$	14		$	4,914		$	—		$	4,928		$	1,050,778		$	1,055,706

Troubled Debt Restructurings:

Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. Included in impaired loans at December 31, 2017 and 2016 were recorded investment of $2.7 million and $7.9 million of loans modified in troubled debt restructurings. The Company has allocated $9,000 and $10,000 of specific reserves to customers whose loan terms have been modified as TDRs as of December 31, 2017 and 2016, respectively. The Company has not committed to lend additional amounts as of December 31, 2017 and 2016, to customers with outstanding loans that are classified as TDRs.

There were no loans modified as TDRs during the year ended December 31, 2017. During the years ended December 31, 2016 and 2015 the terms of certain loans were modified as TDRs. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. Modifications involving a reduction of the stated interest rate and/or an extension of the maturity date were for a period of three to five years.

The following table presents loans by class modified as troubled debt restructurings that occurred during the years ended 2016 and 2015 (dollars in thousands):

At December 31, 2016	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial Real Estate		1		$	3,875		$	3,875
Total		1		$	3,875		$	3,875

At December 31, 2015	Number of Loans		Pre-Modification Outstanding Recorded Investment			Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial & Industrial		1		$	1,933		$	1,933
Total		1		$	1,933		$	1,933

Since there were no modified troubled debt restructurings in 2017, there is no impact on the allowance for loan losses and charge-offs during the year ending December 31, 2017. The Bank has allocated $10,000 and $153,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and 2015, respectively.

In 2017, 2016 and 2015, there were no new loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy.

Credit Quality Indicators:

The Bank 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. The Bank analyzes all loans individually by classifying the loans as to credit risk at least annually. An analysis is performed on a quarterly basis for loans classified as special mention, substandard, or doubtful. The Bank uses the following definitions for risk ratings:

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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (dollars in thousands):

At December 31, 2017	Pass			Special Mention			Substandard			Doubtful			Total
Commercial real estate		$	777,410		$	4,369		$	1,966		$	—		$	783,745
Commercial & industrial			331,775			8,226			—			—			340,001
Construction			36,960			—			—			—			36,960
Multifamily			190,097			—			—			—			190,097
Total		$	1,336,242		$	12,595		$	1,966		$	—		$	1,350,803

At December 31, 2016	Pass			Special Mention			Substandard			Doubtful			Total
Commercial real estate		$	542,206		$	4,293		$	1,212		$	—		$	547,711
Commercial & industrial			309,295			2,915			3,660			—			315,870
Construction			29,447			—			—			—			29,447
Multifamily			117,373			—			—			—			117,373
Total		$	998,321		$	7,208		$	4,872		$	—		$	1,010,401

For one-to-four family loans and consumer loans, the Bank evaluates credit quality based on the aging status of the loan, which was previously presented, and by performance status. Non-performing loans are loans past due over 90 days or more still accruing interest and loans on non-accrual status. The following table presents the recorded investment in one-to-four family and consumer loans based on performance status as of December 31, 2017 and 2016 (dollars in thousands):

At December 31, 2017	Performing			Non-Performing			Total
One-to-four family		$	23,121		$	2,447		$	25,568
Consumer			44,440			155			44,595
Total		$	67,561		$	2,602		$	70,163

At December 31, 2016	Performing			Non-Performing			Total
One-to-four family		$	26,480		$	—		$	26,480
Consumer			18,825			—			18,825
Total		$	45,305		$	—		$	45,305

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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