LOANS AND ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2018

Loans and Leases Receivable Disclosure [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

NOTE 5 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans, net of deferred costs and fees, consist of the following as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018			At December 31, 2017
Real estate
Commercial	$	857,071		$	783,745
Construction		45,974			36,960
Multifamily		233,474			190,097
One-to-four family		23,929			25,568
Total real estate loans		1,160,448			1,036,370
Commercial and industrial		354,932			340,001
Consumer		86,277			44,595
Total loans		1,601,657			1,420,966
Deferred fees		(2,010	)		(1,070	)
Loans, net of deferred fees and unamortized costs		1,599,647			1,419,896
Allowance for loan losses		(17,463	)		(14,887	)
Balance at the end of the period	$	1,582,184		$	1,405,009

Non-performing loans include non-accrual loans and loans past due over 90 days and still accruing. Non-performing loans exclude troubled debt restructurings (“TDRs”) that are accruing and have been performing in accordance with the terms of their restructure agreement for at least six months.

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.

There were no loans past due over 90 days and still accruing or non-accruing TDRs at June 30, 2018 and December 31, 2017. The following tables present the recorded investment in non-accrual loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	At June 30, 2018		At December 31, 2017
Commercial real estate	$	-	$	787
Commercial & industrial		-		-
One-to-four family		-		2,447
Consumer		192		155
Total	$	192	$	3,389

Interest on non-accrual loans not recognized was $1,000 and $37,000 for the three months ended June 30, 2018 and June 30, 2017, respectively. Interest on non-accrual loans not recognized was $2,500 and $77,000 for the six months ended June 30, 2018 and June 30, 2017, respectively.

The following tables present the aging of the recorded investment in past due loans by class of loans as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	30-59 Days		60-89 Days		Greater than 90 days		Total Past Due		Loans not Past Due		Total
Commercial real estate	$	96	$	-	$	-	$	96	$	856,975	$	857,071
Commercial & industrial		114		73		-		187		354,745		354,932
Construction		-		-		-		-		45,974		45,974
Multifamily		-		-		-		-		233,474		233,474
One-to-four family		-		-		-		-		23,929		23,929
Consumer		39		-		142		181		86,096		86,277
Total	$	249	$	73	$	142	$	464	$	1,601,193	$	1,601,657

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

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 TDRs and classified as impaired. Included in impaired loans at June 30, 2018 and December 31, 2017 were $2.6 million and $2.7 million of loans modified in TDRs, respectively. The Bank has not allocated specific reserves to those customers with loans modified in TDRs as of June 30, 2018, compared to $9,000 allocated at December 31, 2017. The Bank had not committed to lend additional amounts as of June 30, 2018 and December 31, 2017 to customers with outstanding loans that are classified as TDRs. During the three months and six months ended June 30, 2018 and 2017, there were no significant loans modified as TDRs. During the three and six months ended June 30, 2018 and June 30, 2017 there were no payment defaults on any loans previously identified as TDRs. 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 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 June 30, 2018	Pass		Special Mention		Substandard		Doubtful		Total
Commercial real estate	$	855,536	$	392	$	1,143	$	-	$	857,071
Commercial & industrial		347,278		7,654		-		-		354,932
Construction		45,974		-		-		-		45,974
Multifamily		233,474		-		-		-		233,474
Total	$	1,482,262	$	8,046	$	1,143	$	-	$	1,491,451

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

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 June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Performing		Non-Performing		Total
One-to-four family	$	23,929	$	-	$	23,929
Consumer		86,085		192		86,277
Total	$	110,014	$	192	$	110,206

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

The following table presents the activity in the Allowance for Loan Losses (referred herein as “ALLL”) by segment for the three and six months ending June 30, 2018 and 2017 (dollars in thousands):

Three months ended June 30, 2018	Commercial Real Estate		Commercial & Industrial			Construction		Multi Family		One-to-four Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	7,800	$	5,784		$	503	$	1,210	$	383		$	580			16,260
Provision/(credit) for loan losses		339		269			163		347		(3	)		155			1,270
Loans charged-off		-		-			-		-		-			(67	)		(67	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	8,139	$	6,053		$	666	$	1,557	$	380		$	668		$	17,463
Three months ended  June 30, 2017	Commercial  Real Estate		Commercial  & Industrial			Construction		Multi  Family		One-to-four  Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	5,853	$	4,963		$	502	$	687	$	105		$	126			12,236
Provision for loan losses		605		713			55		255		(3	)		165			1,790
Loans charged-off		-		(88	)		-		-		-			(29	)		(117	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	6,458	$	5,588		$	557	$	942	$	102		$	262		$	13,909

Six months ended June  30, 2018	Commercial  Real Estate		Commercial  & Industrial			Construction		Multi Family		One-to-four  Family			Consumer			Total
Allowance for loan losses:
Beginning balance	$	7,136	$	5,578		$	519	$	1,156	$	138		$	360		$	14,887
Provision/(credit) for loan losses		950		546			147		401		242			461			2,747
Loans charged-off		-		(71	)		-		-		-			(153	)		(224	)
Recoveries		53		-			-		-		-			-			53
Total ending allowance balance	$	8,139	$	6,053		$	666	$	1,557	$	380		$	668		$	17,463
Six months ended June  30, 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/(credit) for loan losses		1,252		444			148		322		(7	)		201			2,360
Loans charged-off		-		(220	)		-		-		-			(46	)		(266	)
Recoveries		-		-			-		-		-			-			-
Total ending allowance balance	$	6,458	$	5,588		$	557	$	942	$	102		$	262		$	13,909

The following tables present the balance in the ALLL and the recorded investment in loans by portfolio segment based on impairment method as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Commercial Real Estate		Commercial  & Industrial		Construction		Multi Family		One-to-four Family		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	96	$	96
Collectively evaluated for impairment		8,139		6,053		666		1,557		380		572		17,367
Total ending allowance balance	$	8,139	$	6,053	$	666	$	1,557	$	380	$	668	$	17,463
Loans:
Individually evaluated for impairment	$	1,535	$	-	$	-	$	-	$	1,099	$	192	$	2,826
Collectively evaluated for impairment		855,536		354,932		45,974		233,474		22,830		86,085		1,598,831
Total ending loan balance	$	857,071	$	354,932	$	45,974	$	233,474	$	23,929	$	86,277	$	1,601,657
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

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when 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.

The following table presents loans individually evaluated for impairment recognized as of June 30, 2018 and December 31, 2017 (dollars in thousands):

At June 30, 2018	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
One-to-four family	$	-	$	-	$	-
Consumer		210		192		96
Total	$	210	$	192	$	96
Without an allowance recorded:
Commercial real estate	$	2,004	$	1,535	$	-
One-to-four family		1,376		1,099		-
Total	$	3,380	$	2,634	$	-

At December 31, 2017	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
One-to-four family	$	686	$	556	$	9
Consumer		155		155		77
Total	$	841	$	711	$	86
Without an allowance recorded:
Commercial real estate	$	2,890	$	2,368	$	-
One-to-four family		3,157		3,010		-
Total	$	6,047	$	5,378	$	-

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for the three month periods ended June 30, 2018 and 2017 (in thousands):

Three months ended June 30, 2018	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	-	$	-
Consumer		138		-
Total	$	138	$	-
Without an allowance recorded:
Commercial real estate	$	1,540	$	16
One-to-four family		1,104	$	14
Total	$	2,644	$	30

Three months ended June 30, 2017	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	847	$	9
Commercial and industrial		3,660		-
Consumer		48		-
Total	$	4,555	$	9
Without an allowance recorded:
Commercial real estate	$	6,331	$	68
Commercial and industrial		1,160		12
One-to-four family		283		26
Total	$	7,774	$	106

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of and for the six month periods ended June 30, 2018 and 2017 (in thousands):

Six months ended June 30, 2018	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	185	$	-
Consumer		144		2
Total	$	329	$	2
Without an allowance recorded:
Commercial real estate	$	1,816	$	62
One-to-four family		1,373		28
Total	$	3,189	$	90

Six months ended June 30, 2017	Average Recorded Investment		Interest Income Recognized
With an allowance recorded:
One-to-four family	$	753	$	18
Commercial and industrial		3,660		-
Consumer		32		1
Total	$	4,445	$	19
Without an allowance recorded:
Commercial real estate	$	6,056	$	112
Commercial and industrial		1,192		26
One-to-four family		377		-
Total	$	7,625	$	138