Loans

12 Months Ended

Dec. 31, 2014

Loans held-for-investment, net, consists of the following (in thousands):



	December 31,
	2014			2013
Real estate loans:
Multifamily	$	1,072,193		$	870,951
Commercial mortgage	390,288			340,174
One-to-four family residential mortgage	74,401			64,753
Home equity and lines of credit	54,533			46,231
Construction and land	21,412			14,152
Total real estate loans	1,612,827			1,336,261
Commercial and industrial loans	12,945			10,162
Other loans	2,157			2,310
Total commercial and industrial and other loans	15,102			12,472
Deferred loan cost, net	4,565			3,458
Originated loans held-for-investment, net	1,632,494			1,352,191
PCI Loans	44,816			59,468
Loans acquired:
One-to-four family residential mortgage	234,478			60,262
Multifamily	18,844			3,930
Commercial mortgage	11,999			13,254
Construction and land	364			371
Total loans acquired	265,685			77,817
Loans held for investment, net	1,942,995			1,489,476
Allowance for loan losses	(26,292		)	(26,037		)
Net loans held-for-investment	$	1,916,703		$	1,463,439

The Company had no loans held-for-sale at December 31, 2014, and $471,000 in loans held-for-sale at December 31, 2013. Loans held-for-sale included $471,000 of non-accrual loans at December 31, 2013.

PCI loans, primarily acquired as part of a Federal Deposit Insurance Corporation-assisted transaction, totaled $44.8 million at December 31, 2014, as compared to $59.5 million at December 31, 2013. The Company accounts for PCI loans utilizing generally accepting accounting principles applicable to loans acquired with deteriorated credit quality. At December 31, 2014, PCI loans consist of approximately 33% commercial real estate loans and 53% commercial and industrial loans, with the remaining balance in residential and home equity loans. At December 31, 2013, PCI loans consist of approximately 37% commercial real estate loans and 47% commercial and industrial loans, with the remaining balance in residential and home equity loans. The following details the accretable yield (in thousands):



	For The Year Ended December 31,
	2014			2013
Balance at the beginning of year	$	32,464		$	43,431
Accretable yield at purchase date	—			—
Accretion into interest income	(4,895		)	(5,701		)
Net reclassification from non-accretable difference⁽¹⁾	374			(5,266		)
Balance at end of year	$	27,943		$	32,464

(1) Due to re-casting of cash flows for loan pools acquired in the 2011 FDIC-assisted transaction.

At December 31, 2014 and 2013, PCI loans included $2.8 million and $3.6 million, respectively, of loans acquired as part of the acquisition of Flatbush Federal Bancorp, Inc. and its wholly-owned subsidiary, Flatbush Federal Savings and Loan Association.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios.

During 2012, we sold the servicing rights of loans sold to Freddie Mac to a third-party bank. These one-to-four family residential mortgage real estate loans were underwritten to Freddie Mac guidelines and to comply with applicable federal, state, and local laws. At the time of the closing of these loans the Company owned the loans and subsequently sold them to Freddie Mac providing normal and customary representations and warranties, including representations and warranties related to compliance with Freddie Mac underwriting standards. At the time of sale, the loans were free from encumbrances except for the mortgages filed by the Company which, with other underwriting documents, were subsequently assigned and delivered to Freddie Mac. At the time of sale to the third-party, substantially all of the loans serviced for Freddie Mac were performing in accordance with their contractual terms and management believes that it has no significant repurchase obligations associated with these loans.

We provide for loan losses based on the consistent application of our documented allowance for loan loss methodology. Loan losses are charged to the allowance for loans losses and recoveries are credited to it. Additions to the allowance for loan losses are provided by charges against income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. Loan losses are charged-off in the period the loans, or portion thereof, are deemed uncollectible. Generally, the Company will record a loan charge-off (including a partial charge-off) to reduce a loan to the estimated fair value of the underlying collateral, less cost to sell, for collateral dependent loans. We regularly review the loan portfolio in order to maintain the allowance for loan losses in accordance with U.S. GAAP. At December 31, 2014 and 2013, the allowance for loan losses related to loans held-for-investment (excluding PCI loans) consisted primarily of the following two components:

(1)

Specific allowances are established for impaired loans (generally defined by the Company as non-accrual loans with an outstanding balance of $500,000 or greater and all loans restructured in troubled debt restructurings). The amount of impairment, if any, provided for as a specific reserve determined by the deficiency, if any, between the present value of expected future cash flows discounted at the original loan’s effective interest rate or the underlying collateral value (less estimated costs to sell,) if the loan is collateral dependent, and the carrying value of the loan. Impaired loans that have no impairment losses are not considered for general allowances described below. Generally, the Company charges down a loan to the estimated fair value of the underlying collateral, less costs to sell for collateral dependent loans and, if necessary, maintains a specific reserve in the allowance for loan losses related to cash flow dependent impaired loans where the present value of the expected future cash flows, discounted at the loan’s original contractual interest rate, is less than the carrying value of the loan unless management determines that such shortfall should be charged off.

(2)

General allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired. The portfolio is grouped into similar risk characteristics, primarily loan type, loan-to-value, if collateral dependent, and internal credit risk ratings. We apply an estimated loss rate to each loan group. The loss rates applied are based on our loss experience (using appropriate look-back and loss emergence periods) as adjusted for our qualitative assessment of relevant changes related to: underwriting standards; delinquency trends; collection, charge-off and recovery practices; the nature or volume of the loan group; changes in lending staff; concentration of loan type; current economic conditions; and other relevant factors considered appropriate by management. The loss emergence period is the estimated time from the date of the loss event to the actual recognition of the loss (typically via the first charge-off), and is determined based upon a study of the Company's past loss experience by loan group This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions, and incorporates matters that are not fully captured in the loss experience. Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results. We also maintain an unallocated component related to the general loss allocation. The primary purpose of the unallocated component is to account for the inherent imprecision of the loss estimation process related primarily to periodic updating of appraisals on impaired loans and the internal and external credit risk rating process, including loans that are not subject to an independent third party review, such as loans that are less than $500,000.

Additionally, loans acquired with no evidence of credit deterioration are held-for-investment and initially valued at an estimated fair value on the date of acquisition, with no initial related allowance for loan losses. These loans are evaluated for impairment on quarterly basis as part of our analysis of the allowance for loan losses.

In underwriting a loan secured by real property, we require an appraisal (or an automated valuation model) of the property by an independent licensed appraiser approved by the Company’s board of directors. The appraisal is subject to review by an independent third-party hired by the Company. We review and inspect properties before disbursement of funds during the term of a construction loan. Generally, management obtains updated appraisals when a loan is deemed impaired, or sooner if management deems it appropriate. These appraisals may be more limited than those prepared for the underwriting of a new loan. In addition, when the Company acquires other real estate owned, it generally obtains a current appraisal to substantiate the net carrying value of the asset.

The adjustments to our loss experience are based on our evaluation of several environmental factors, including:


•	changes in lending policies and procedures


•	changes in local, regional, national, and international economic and business conditions and developments that affect the collectability of our portfolio, including the condition of various market segments;


•	changes in the nature and volume of our portfolio and in the terms of our loans;


•	changes in the experience, ability and depth of lending management and other relevant staff;


•	changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;


•	changes in the quality of our loan review system;


•	changes in the value of underlying collateral for collateral-dependent loans;


•	the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and


•	the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in our existing portfolio.

In evaluating the estimated loss factors to be utilized for each loan group, management also reviews actual net loss history over an extended period of time as reported by the FDIC for institutions both in our market area and nationally for periods that are believed to have experienced similar economic conditions.

We evaluate the allowance for loan losses based on the combined total of the impaired and general components for originated loans. Generally when the loan portfolio increases, absent other factors, our allowance for loan loss methodology results in a higher dollar amount of estimated probable losses. Conversely, when the loan portfolio decreases, absent other factors, our allowance for loan loss methodology results in a lower dollar amount of estimated probable losses.

Each quarter we evaluate the allowance for loan losses and adjust the allowance as appropriate through a provision for loan losses. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, the Office of the Comptroller of the Currency (“OCC”) will periodically review the allowance for loan losses. The OCC may require us to adjust the allowance based on their analysis of information available to them at the time of their examination. Our last examination date was as of June 30, 2014.

A summary of changes in the allowance for loan losses for the years ended December 31, 2014, 2013, and 2012 follows (in thousands):



	December 31,
	2014			2013			2012
Balance at beginning of year	$	26,037		$	26,424		$	26,836
Provision for loan losses	645			1,927			3,536
Recoveries	402			860			245
Charge-offs	(792		)	(3,174		)	(4,193		)
Balance at end of year	$	26,292		$	26,037		$	26,424

Loans

Loans held-for-investment, net, consists of the following (in thousands):



	December 31,
	2014			2013
Real estate loans:
Multifamily	$	1,072,193		$	870,951
Commercial mortgage	390,288			340,174
One-to-four family residential mortgage	74,401			64,753
Home equity and lines of credit	54,533			46,231
Construction and land	21,412			14,152
Total real estate loans	1,612,827			1,336,261
Commercial and industrial loans	12,945			10,162
Other loans	2,157			2,310
Total commercial and industrial and other loans	15,102			12,472
Deferred loan cost, net	4,565			3,458
Originated loans held-for-investment, net	1,632,494			1,352,191
PCI Loans	44,816			59,468
Loans acquired:
One-to-four family residential mortgage	234,478			60,262
Multifamily	18,844			3,930
Commercial mortgage	11,999			13,254
Construction and land	364			371
Total loans acquired	265,685			77,817
Loans held for investment, net	1,942,995			1,489,476
Allowance for loan losses	(26,292		)	(26,037		)
Net loans held-for-investment	$	1,916,703		$	1,463,439

The Company had no loans held-for-sale at December 31, 2014, and $471,000 in loans held-for-sale at December 31, 2013. Loans held-for-sale included $471,000 of non-accrual loans at December 31, 2013.



	For The Year Ended December 31,
	2014			2013
Balance at the beginning of year	$	32,464		$	43,431
Accretable yield at purchase date	—			—
Accretion into interest income	(4,895		)	(5,701		)
Net reclassification from non-accretable difference⁽¹⁾	374			(5,266		)
Balance at end of year	$	27,943		$	32,464

(1) Due to re-casting of cash flows for loan pools acquired in the 2011 FDIC-assisted transaction.

(1)

(2)

The adjustments to our loss experience are based on our evaluation of several environmental factors, including:


•	changes in lending policies and procedures


•	changes in local, regional, national, and international economic and business conditions and developments that affect the collectability of our portfolio, including the condition of various market segments;


•	changes in the nature and volume of our portfolio and in the terms of our loans;


•	changes in the experience, ability and depth of lending management and other relevant staff;


•	changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;


•	changes in the quality of our loan review system;


•	changes in the value of underlying collateral for collateral-dependent loans;


•	the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and


•	the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in our existing portfolio.

A summary of changes in the allowance for loan losses for the years ended December 31, 2014, 2013, and 2012 follows (in thousands):



	December 31,
	2014			2013			2012
Balance at beginning of year	$	26,037		$	26,424		$	26,836
Provision for loan losses	645			1,927			3,536
Recoveries	402			860			245
Charge-offs	(792		)	(3,174		)	(4,193		)
Balance at end of year	$	26,292		$	26,037		$	26,424

The following table sets forth activity in our allowance for loan losses, by loan type, for the years ended December 31, 2014 and 2013. The following table also details the amount of loans receivable held-for-investment, net of deferred loan fees and costs, that are evaluated individually, and collectively, for impairment, and the related portion of allowance for loan losses that is allocated to each loan portfolio segment (in thousands).



	December 31, 2014
	Real Estate
	Commercial			One-to-Four Family			Construction and Land			Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other		Unallocated		Originated Loans Total			PCI			Acquired Loans		Total
Allowance for loan losses:
Beginning Balance	$	12,619		$	875		$	205		$	9,374		$	860		$	425		$	67	$	1,024	$	25,449		$	588		$	—	$	26,037
Charge-offs	(103		)	(58		)	—			(7		)	(489		)	(135		)	—		—		(792		)	—			—		(792		)
Recoveries	72			—			246			35			—			8			41		—		402			—			—		402
Provisions (credit)	(3,279		)	134			(185		)	2,817			530			543			26		185		771			(188		)	62		645
Ending Balance	$	9,309		$	951		$	266		$	12,219		$	901		$	841		$	134	$	1,209	$	25,830		$	400		$	62	$	26,292
Ending balance: individually evaluated for impairment	$	2,361		$	57		$	—		$	215		$	13		$	109		$	—	$	—	$	2,755		$	—		$	—	$	2,755
Ending balance: collectively evaluated for impairment	$	6,948		$	894		$	266		$	12,004		$	888		$	732		$	134	$	1,209	$	23,075		$	400		$	62	$	23,537
Loans, net:
Ending Balance	$	390,885		$	74,990		$	21,445		$	1,074,539		$	55,486		$	12,992		$	2,157	$	—	$	1,632,494		$	44,816		$	265,685	$	1,942,995
Ending balance: individually evaluated for impairment	$	29,224		$	1,072		$	—		$	1,990		$	327		$	806		$	—	$	—	$	33,419		$	—		$	855	$	34,274
Ending balance: collectively evaluated for impairment	$	361,661		$	73,918		$	21,445		$	1,072,549		$	55,159		$	12,186		$	2,157	$	—	$	1,599,075		$	44,816		$	264,830	$	1,908,721



	December 31, 2013
	Real Estate
	Commercial			One-to-Four Family			Construction and Land			Multifamily			Home Equity and Lines of Credit			Commercial and Industrial			Other			Unallocated			Originated Loans Total			PCI		Acquired Loans		Total
Allowance for loan losses:
Beginning Balance	$	14,480		$	623		$	994		$	7,086		$	623		$	1,160		$	21		$	1,201		$	26,188		$	236	$	—	$	26,424
Charge-offs	(1,208		)	(414		)	—			(657		)	(491		)	(379		)	(25		)	—			(3,174		)	—		—		(3,174		)
Recoveries	1			18			567			—			—			201			73			—			860			—		—		860
Provisions (credit)	(654		)	648			(1,356		)	2,945			728			(557		)	(2		)	(177		)	1,575			352		—		1,927
Ending Balance	$	12,619		$	875		$	205		$	9,374		$	860		$	425		$	67		$	1,024		$	25,449		$	588	$	—	$	26,037
Ending balance: individually evaluated for impairment	$	2,385		$	19		$	—		$	117		$	7		$	104		$	—		$	—		$	2,632		$	—	$	—	$	2,632
Ending balance: collectively evaluated for impairment	$	10,234		$	856		$	205		$	9,257		$	853		$	321		$	67		$	1,024		$	22,817		$	588	$	—	$	23,405
Loans, net:
Ending Balance	$	340,534		$	65,289		$	14,161		$	872,901		$	46,825		$	10,202		$	2,279		$	—		$	1,352,191		$	59,468	$	77,817	$	1,489,476
Ending balance: individually evaluated for impairment	$	32,194		$	1,115		$	109		$	2,074		$	1,341		$	1,504		$	—		$	—		$	38,337		$	—	$	—	$	38,337
Ending balance: collectively evaluated for impairment	$	308,340		$	64,174		$	14,052		$	870,827		$	45,484		$	8,698		$	2,279		$	—		$	1,313,854		$	59,468	$	77,817	$	1,451,139

Included in loans receivable (including held-for-sale) are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded investment of these nonaccrual loans was $13.9 million and $17.8 million at December 31, 2014, and December 31, 2013, respectively. Generally, originated loans (both held-for-investment and held-for-sale) are placed on non-accruing status when they become 90 days or more delinquent, or sooner if considered appropriate by management, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status.

Non-accrual amounts include loans deemed to be impaired of $10.1 million and $13.5 million at December 31, 2014, and December 31, 2013, respectively. Loans on non-accrual status with principal balances less than $500,000, and therefore not meeting the Company’s definition of an impaired loan, amounted to $3.8 million at both December 31, 2014, and December 31, 2013. Non-accrual amounts included in loans held-for-sale were $0 and $471,000 at December 31, 2014, and December 31, 2013, respectively. Loans past due ninety days or more and still accruing interest were $708,000 and $32,000 at December 31, 2014, and December 31, 2013, respectively, and consisted of loans that are well secured and in the process of collection.

The following table sets forth the detail, and delinquency status, of non-performing loans (non-accrual loans and loans past due ninety days or more and still accruing), net of deferred fees and costs, at December 31, 2014 and 2013 (in thousands), excluding PCI loans which have been segregated into pools. For PCI loans, each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.



	At December 31, 2014
	Total Non-Performing Loans
	Non-Accruing Loans
	0-29 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total		90 Days or More Past Due and Accruing		Total Non-Performing Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Substandard	—		395		10,769		11,164		—		11,164
Total commercial	—		395		10,769		11,164		—		11,164
One-to-four family residential
LTV < 60%
Substandard	—		190		674		864		286		1,150
Total	—		190		674		864		286		1,150
LTV => 60%
Substandard	—		—		1,028		1,028		—		1,028
Total	—		—		1,028		1,028		—		1,028
Total one-to-four family residential	—		190		1,702		1,892		286		2,178
Home equity and lines of credit
Substandard	—		98		—		98		—		98
Total home equity and lines of credit	—		98		—		98		—		98
Commercial and industrial loans
Substandard	—		—		408		408		—		408
Total commercial and industrial loans	—		—		408		408		—		408
Total non-performing loans held-for-investment	—		683		12,879		13,562		286		13,848
Loans acquired:
One-to-four family residential
LTV < 60%
Pass	—		—		—		—		422		422
Substandard	—		—		313		313		—		313
Total one-to-four family residential	—		—		313		313		422		735
Total non-performing loans acquired	—		—		313		313		422		735
Total non-performing loans	$	—	$	683	$	13,192	$	13,875	$	708	$	14,583



	At December 31, 2013
	Total Non-Performing Loans
	Non-Accruing Loans
	0-29 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total		90 Days or More Past Due and Accruing		Total Non-Performing Loans
Loans held-for-investment:
Real estate loans:
Commercial
LTV => 35%
Special Mention	—		—		335		335		—		335
Substandard	3,606		421		7,836		11,863		—		11,863
Total commercial	3,606		421		8,171		12,198		—		12,198
One-to-four family residential
LTV < 60%
Special Mention	—		16		114		130		—		130
Substandard	—		418		186		604		—		604
Total	—		434		300		734		—		734
LTV => 60%
Substandard	—		189		993		1,182		—		1,182
Total	—		189		993		1,182		—		1,182
Total one-to-four family residential	—		623		1,293		1,916		—		1,916
Construction and land
Substandard	108		—		—		108		—		108
Total construction and land	108		—		—		108		—		108
Multifamily
LTV => 35%
Substandard	—		—		73		73		—		73
Total multifamily	—		—		73		73		—		73
Home equity and lines of credit
Substandard	—		—		1,239		1,239		—		1,239
Total home equity and lines of credit	—		—		1,239		1,239		—		1,239
Commercial and industrial loans
Substandard	—		—		441		441		—		441
Total commercial and industrial loans	—		—		441		441		—		441
Other loans
Pass	—		—		—		—		32		32
Total other loans	—		—		—		—		32		32
Total non-performing loans held-for-investment	$	3,714	$	1,044	$	11,217	$	15,975	$	32	$	16,007
Loans acquired:
One-to-four family residential
LTV => 60%
Substandard	607		—		466		1,073		—		1,073
Total one-to-four family residential	607		—		466		1,073		—		1,073
Commercial and industrial loans
LTV => 35%
Special Mention	—		—		252		252		—		252
Total commercial and industrial loans	—		—		252		252		—		252
Total non-performing loans acquired	607		—		718		1,325		—		1,325
Total non-performing loans	$	4,321	$	1,044	$	11,935	$	17,300	$	32	$	17,332

The following table sets forth the detail and delinquency status of originated loans receivable held-for-investment and acquired loans, net of deferred fees and costs, by performing and non-performing loans at December 31, 2014 and 2013 (in thousands).



	December 31, 2014
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass	$	47,534	$	—	$	47,534	$	—	$	47,534
Special Mention	2,436		—		2,436		—		2,436
Total	49,970		—		49,970		—		49,970
LTV => 35%
Pass	288,915		878		289,793		—		289,793
Special Mention	9,792		—		9,792		—		9,792
Substandard	25,073		5,093		30,166		11,164		41,330
Total	323,780		5,971		329,751		11,164		340,915
Total commercial	373,750		5,971		379,721		11,164		390,885
One-to-four family residential
LTV < 60%
Pass	29,288		341		29,629		—		29,629
Special Mention	1,143		—		1,143		—		1,143
Substandard	867		286		1,153		1,150		2,303
Total	31,298		627		31,925		1,150		33,075
LTV => 60%
Pass	38,062		2,465		40,527		—		40,527
Special Mention	—		—		—		—		—
Substandard	—		360		360		1,028		1,388
Total	38,062		2,825		40,887		1,028		41,915
Total one-to-four family residential	69,360		3,452		72,812		2,178		74,990
Construction and land
Pass	21,445		—		21,445		—		21,445
Total construction and land	21,445		—		21,445		—		21,445
Multifamily
LTV < 35%
Pass	64,692		—		64,692		—		64,692
Special Mention	283		—		283		—		283
Substandard	801		—		801		—		801
Total	65,776		—		65,776		—		65,776
LTV= > 35%
Pass	999,469		239		999,708		—		999,708
Special Mention	3,822		520		4,342		—		4,342
Substandard	4,382		331		4,713		—		4,713
Total	1,007,673		1,090		1,008,763		—		1,008,763
Total multifamily	1,073,449		1,090		1,074,539		—		1,074,539
Home equity and lines of credit
Pass	54,800		135		54,935		—		54,935
Special Mention	360		—		360		—		360
Substandard	93		—		93		98		191
Total home equity and lines of credit	55,253		135		55,388		98		55,486
Commercial and industrial loans
Pass	11,331		90		11,421		—		11,421
Special Mention	652		—		652		—		652
Substandard	479		32		511		408		919
Total commercial and industrial loans	12,462		122		12,584		408		12,992



	December 31, 2014
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Other loans
Pass	2,097		60		2,157		—		2,157
Total other loans	2,097		60		2,157		—		2,157
Total originated loans held-for-investment	1,607,816		10,830		1,618,646		13,848		1,632,494
Acquired loans:
One-to-four family residential
LTV < 60%
Pass	225,741		526		226,267		422		226,689
Special Mention	597		—		597		—		597
Substandard	424		—		424		313		737
Total	226,762		526		227,288		735		228,023
LTV => 60%
Pass	5,787		375		6,162		—		6,162
Substandard	294		—		294		—		294
Total	6,081		375		6,456		—		6,456
Total one-to-four family residential	232,843		901		233,744		735		234,479
Commercial
LTV < 35%
Pass	2,477		—		2,477		—		2,477
Special Mention	187		521		708		—		708
Total	2,664		521		3,185		—		3,185
LTV => 35%
Pass	5,817		—		5,817		—		5,817
Substandard	2,997		—		2,997		—		2,997
Total	8,814		—		8,814		—		8,814
Total commercial	11,478		521		11,999		—		11,999
Construction and land
Substandard	363		—		363		—		363
Total construction and land	363		—		363		—		363
Multifamily
LTV < 35%
Pass	4,857		—		4,857		—		4,857
Special Mention	164		—		164		—		164
Total	5,021		—		5,021		—		5,021
LTV => 35%
Pass	13,457		—		13,457		—		13,457
Special Mention	366		—		366		—		366
Total	13,823		—		13,823		—		13,823
Total multifamily	18,844		—		18,844		—		18,844
Total loans acquired	263,528		1,422		264,950		735		265,685
	$	1,871,344	$	12,252	$	1,883,596	$	14,583	$	1,898,179



	December 31, 2013
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Loans held-for-investment:
Real estate loans:
Commercial
LTV < 35%
Pass	$	42,995	$	—	$	42,995	$	—	$	42,995
Special Mention	1,304		—		1,304		—		1,304
Substandard	1,333		—		1,333		—		1,333
Total	45,632		—		45,632		—		45,632
LTV => 35%
Pass	239,544		928		240,472		—		240,472
Special Mention	10,927		1,676		12,603		335		12,938
Substandard	28,949		680		29,629		11,863		41,492
Total	279,420		3,284		282,704		12,198		294,902
Total commercial	325,052		3,284		328,336		12,198		340,534
One-to-four family residential
LTV < 60%
Pass	28,216		379		28,595		—		28,595
Special Mention	1,746		413		2,159		130		2,289
Substandard	269		515		784		604		1,388
Total	30,231		1,307		31,538		734		32,272
LTV => 60%
Pass	27,575		2,666		30,241		—		30,241
Special Mention	703		—		703		—		703
Substandard	522		369		891		1,182		2,073
Total	28,800		3,035		31,835		1,182		33,017
Total one-to-four family residential	59,031		4,342		63,373		1,916		65,289
Construction and land
Pass	13,458		—		13,458		—		13,458
Special Mention	595		—		595		—		595
Substandard	—		—		—		108		108
Total construction and land	14,053		—		14,053		108		14,161
Multifamily
LTV < 35%
Pass	40,638		328		40,966		—		40,966
Special Mention	94		215		309		—		309
Substandard	821		—		821		—		821
Total	41,553		543		42,096		—		42,096
LTV => 35%
Pass	817,923		—		817,923		—		817,923
Special Mention	6,751		1,115		7,866		—		7,866
Substandard	4,118		825		4,943		73		5,016
Total	828,792		1,940		830,732		73		830,805
Total multifamily	870,345		2,483		872,828		73		872,901
Home equity and lines of credit
Pass	45,116		1		45,117		—		45,117
Special Mention	376		93		469		—		469
Substandard	—		—		—		1,239		1,239
Total home equity and lines of credit	45,492		94		45,586		1,239		46,825
Commercial and industrial loans
Pass	7,415		73		7,488		—		7,488
Special Mention	962		—		962		—		962
Substandard	570		741		1,311		441		1,752
Total Commercial and industrial loans	8,947		814		9,761		441		10,202



	December 31, 2013
	Performing (Accruing) Loans
	0-29 Days Past Due		30-89 Days Past Due		Total		Non-Performing Loans		Total Loans Receivable, net
Other loans
Pass	2,226		21		2,247		32		2,279
Total other loans	2,226		21		2,247		32		2,279
Total originated loans held-for-investment	$	1,325,146	$	11,038	$	1,336,184	$	16,007	$	1,352,191
Loans acquired:
One-to-four family residential
LTV < 60%
Pass	43,112		1,195		44,307		—		44,307
Special Mention	306		104		410		—		410
Substandard	136		4		140		—		140
Total	43,554		1,303		44,857		—		44,857
LTV => 60%
Pass	13,838		—		13,838		—		13,838
Special Mention	232		—		232		—		232
Substandard	262		—		262		1,073		1,335
Total	14,332		—		14,332		1,073		15,405
Total one-to-four family residential	57,886		1,303		59,189		1,073		60,262
Commercial
LTV < 35%
Pass	$	2,143	$	—	2,143		$	—	2,143
Special Mention	189		—		189		—		189
Substandard	937		529		1,466		—		1,466
Total	3,269		529		3,798		—		3,798
LTV => 35%
Pass	8,742		461		9,203		—		9,203
Substandard	—		—		—		252		252
Total	8,742		461		9,203		252		9,455
Total commercial	12,011		990		13,001		252		13,253
Construction and land
Substandard	372		—		372		—		372
Total construction and land	372		—		372		—		372
Multifamily
LTV < 35%
Pass	588		$	—	588		$	—	588
Substandard	490		—		490		—		490
Total	1,078		—		1,078		—		1,078
LTV => 35%
Pass	2,262		—		2,262		—		2,262
Special Mention	590		—		590		—		590
Total	2,852		—		2,852		—		2,852
Total multifamily	3,930		—		3,930		—		3,930
Total loans acquired	74,199		2,293		76,492		1,325		77,817
	$	1,399,345	$	13,331	$	1,412,676	$	17,332	$	1,430,008

The following table summarizes impaired loans as of December 31, 2014 and 2013 (in thousands):



	At December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Pass	3,311		3,448		—
Substandard	12,880		14,339		—
One-to-four family residential
LTV < 60%
Special Mention	138		138
Substandard	262		262		—
Multifamily
LTV => 35%
Pass	86		557		—
Substandard	477		477		—
Home Equity
Special Mention	49		49
Commercial and industrial loans
Special Mention	267		268		—
Substandard	99		99		—
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Substandard	13,033		14,365		(2,361		)
One-to-four family residential
LTV => 60%
Special Mention	319		319		(4		)
Substandard	353		353		(53		)
Multifamily
LTV => 35%
Substandard	1,427		1,427		(215		)
Home equity and lines of credit
Special Mention	278		278		(13		)
Commercial and industrial loans
Special Mention	32		32		(1		)
Substandard	408		530		(108		)

Total:
Real estate loans
Commercial	29,224		32,152		(2,361		)
One-to-four family residential	1,072		1,072		(57		)
Multifamily	1,990		2,461		(215		)
Home equity and lines of credit	327		327		(13		)
Commercial and industrial loans	806		$	929	(109		)
	$	33,419	$	36,941	$	(2,755	)



	At December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Allowance Recorded:
Real estate loans:
Commercial
LTV < 35%
Pass	$	3,405	$	3,542	$	—
Substandard	—		707		—
LTV => 35%
Pass	19,689		21,382		—
Construction and land
Substandard	108		91		—
One-to-four family residential
LTV < 60%
Special Mention	507		507		—
Substandard	269		269		—
Multifamily
LTV < 35%
Substandard	593		1,064		—
Commercial and industrial loans
Special Mention	210		219		—
Substandard	853		1,008		—
With a Related Allowance Recorded:
Real estate loans:
Commercial
LTV => 35%
Special Mention	2,289		2,672		(52		)
Substandard	6,810		6,937		(2,333		)
One-to-four family residential
LTV => 60%
Substandard	340		340		(19		)
Multifamily
LTV => 35%
Substandard	1,481		1,481		(117		)
Home equity and lines of credit
Special Mention	342		342		(7		)
Substandard	1,000		1,395		—
Commercial and industrial loans
Substandard	441		485		(104		)
Total:
Real estate loans
Commercial	32,193		35,240		(2,385		)
One-to-four family residential	1,116		1,116		(19		)
Construction and land	108		91		—
Multifamily	2,074		2,545		(117		)
Home equity and lines of credit	1,342		1,737		(7		)
Commercial and industrial loans	1,504		1,712		(104		)
	$	38,337	$	42,441	$	(2,632	)

Included in the table above at December 31, 2014, are impaired loans with carrying balances of $13.1 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Included in the impaired loans at December 31, 2013, are loans with carrying balances of $21.8 million that were not written down by charge-offs or for which there are no specific reserves in our allowance for loan losses. Loans not written down by charge-offs or specific reserves at December 31, 2014 and 2013, have sufficient collateral values, less costs to sell (including any discounts to facilitate a sale), or sufficient future cash flows to support the carrying balances of the loans.

The average recorded balance of originated impaired loans (including held-for-investment and held-for-sale) for the years ended December 31, 2014, 2013, and 2012 was approximately $34.3 million, $43.9 million, and $54.3 million, respectively. The Company recorded $2.7 million, $2.0 million, and $2.8 million of interest income on impaired loans for the years ended December 31, 2014, 2013, and 2012, respectively.

The following tables summarize loans that were modified in a troubled debt restructuring during the years ended December 31, 2014 and 2013:



	Year Ended December 31, 2014
		Pre-Modification		Post-Modification
	Number of	Outstanding Recorded		Outstanding Recorded
	Relationships	Investment		Investment
	(in thousands)
One-to-four Family
Substandard	2	$	556	$	556
Total Troubled Debt Restructurings	2	$	556	$	556

Both of the relationships in the table above were restructured to receive reduced interest rates.



	Year Ended December 31, 2013
		Pre-Modification		Post-Modification
	Number of	Outstanding Recorded		Outstanding Recorded
	Relationships	Investment		Investment
	(in thousands)
One-to-four Family
Pass	1	$	70	$	70
Special Mention	1	331		331
Substandard	2	606		606
Total Troubled Debt Restructurings	4	$	1,007	$	1,007

All four of the relationships in the table above were restructured to receive reduced interest rates.

At December 31, 2014 and 2013, we had troubled debt restructurings of $33.8 million and $36.8 million, respectively.

Management classifies all troubled debt restructurings as impaired loans. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the estimated fair value of the collateral (less cost to sell), if the loan is collateral dependent, or the present value of the expected future cash flows, if the loan is not collateral dependent. Management performs a detailed evaluation of each impaired loan and generally obtains updated appraisals as part of the evaluation. In addition, management adjusts estimated fair values down to appropriately consider recent market conditions, our willingness to accept a lower sales price to effect a quick sale, and costs to dispose of any supporting collateral. Determining the estimated fair value of underlying collateral (and related costs to sell) can be difficult in illiquid real estate markets and is subject to significant assumptions and estimates. Management employs an independent third-party expert in appraisal preparation and review to ascertain the reasonableness of updated appraisals. Projecting the expected cash flows under troubled debt restructurings which are not collateral dependent is inherently subjective and requires, among other things, an evaluation of the borrower’s current and projected financial condition. Actual results may be significantly different than our projections and our established allowance for loan losses on these loans, which could have a material effect on our financial results.

There were no loans that were restructured during the twelve months ended December 31, 2014, that subsequently defaulted.

There were four loans to one borrower that were restructured during the twelve months ended December 31, 2013, that subsequently defaulted. The following table details these loans at December 31, 2013:



	Year Ended December 31, 2013
	Number of	30-89 Days		90 Days or More
	Relationships	Past Due		Past Due
	(in thousands)
Commercial & Industrial
Substandard - non-accrual	1	$	—	$	441
Total	1	—		441
CRE
Substandard - non-accrual	3	—		7,052
Total	3	—		7,052
Total	4	$	—	$	7,493

- 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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