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, 2014					March 31, 2013
$ in thousands	Amount			%		Amount			%
Gross loans receivable:
One-to-four family	$	111,220		29	%	$	73,625		20	%
Multifamily	47,399			12	%	56,427			15	%
Commercial real estate	198,808			51	%	203,813			55	%
Construction	5,100			1	%	1,228			—	%
Business	27,149			7	%	35,795			10	%
Consumer ⁽¹⁾	138			—	%	247			—	%
Total loans receivable	389,814			100	%	371,135			100	%

Add:
Premium on loans	957					728
Less:
Deferred fees and loan discounts, net	(815		)			(1,741		)
Allowance for loan losses	(7,233		)			(10,989		)
Total loans receivable, net	$	382,723				$	359,133

Loans held-for-sale	$	5,011				$	13,107


⁽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 $33.6 million, $37.4 million and $44.4 million at March 31, 2014, 2013, and 2012, respectively.

At March 31, 2014 the Bank pledged $81.5 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, 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 based upon the method of evaluating loan impairment for the fiscal year ended March 31, 2013:



$ in thousands	One-to-four family		Multifamily			Commercial Real Estate			Construction			Business		Consumer			Total
Allowance for loan losses:
Beginning Balance	$	4,305	$	5,409		$	6,709		$	1,532		$	1,786	$	80		$	19,821
Charge-offs	2,103		226			1,148			151			2,274		1			5,903
Recoveries	15		91			—			22			265		5			398
Provision for (Recovery of) Loan Losses	1,279		(4,866		)	(2,263		)	(1,403		)	3,982		(56		)	(3,327		)
Ending Balance	$	3,496	$	408		$	3,298		$	—		$	3,759	$	28		$	10,989

Allowance for Loan Losses Ending Balance: collectively evaluated for impairment	3,179		409			3,103			—			1,959		28			8,678
Allowance for Loan Losses Ending Balance: individually evaluated for impairment	317		—			194			—			1,800		—			2,311

Loan Receivables Ending Balance	$	73,987	$	56,607		$	202,771		$	1,230		$	35,277	$	250		$	370,122
Ending Balance: collectively evaluated for impairment	67,619		55,991			186,336			—			28,904		250			339,100
Ending Balance: individually evaluated for impairment	6,368		616			16,435			1,230			6,373		—			31,022

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



$ in thousands	2014			2013			2012
Balance at beginning of the year	$	10,989		$	19,821		$	23,147
Charge-offs of loans	(4,540		)	(5,903		)	(21,935		)
Recoveries of amounts previously charged off	1,210			398			2,267
Provision for (recovery of) loan losses	(426		)	(3,327		)	16,342
Balance at end of the year	$	7,233		$	10,989		$	19,821

At March 31, 2014, 2013 and 2012, the recorded investment in impaired loans was $22.5 million, $31.0 million and $36.0 million, respectively. The related allowance for loan losses for these impaired loans was approximately $1.6 million, $2.3 million and $949 thousand at March 31, 2014, 2013 and 2012, respectively. Interest income of $713 thousand, $3.2 million and $8.4 million for fiscal year 2014, 2013 and 2012, respectively, would have been recorded on impaired loans had they performed in accordance with their original terms. At March 31, 2014, 2013 and 2012, 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, 2014 and 2013.



$ in thousands	March 31, 2014		March 31, 2013
Loans accounted for on a nonaccrual basis:
Gross loans receivable:
One-to-four family	$	2,301	$	7,642
Multifamily	2,240		423
Commercial real estate	7,024		14,788
Construction	—		1,230
Business	993		6,505
Consumer	1		38
Total nonaccrual loans	$	12,559	$	30,626

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 $18.0 million, or 59.0%, to $12.6 million at March 31, 2014 from $30.6 million at March 31, 2013. During the current fiscal year, 36 non-performing loans with a fair value of $12.6 million were transferred to held-for-sale. Sales of held-for-sale loans during the fiscal year ended March 31, 2014 totaled $20.6 million. 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, 2014 were $9.2 million, $3 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, other non-performing assets totaled $6.4 million which consists of other real estate owned ("OREO") properties and held-for-sale loans. At March 31, 2014, other real estate owned valued at $1.4 million comprised of eight foreclosed properties, compared to $2.4 million comprised of nine properties at March 31, 2013. At March 31, 2014, held-for-sale loans totaled $5.0 million, compared to $13.1 million at March 31, 2013.

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, 2014, 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	$	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

As of March 31, 2013, 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	$	53,419	$	165,965	$	—	$	23,651
Special Mention	—		3,400		—		2,922
Substandard	3,188		33,406		1,230		8,704
Doubtful	—		—		—		—
Loss	—		—		—		—
Total	$	56,607	$	202,771	$	1,230	$	35,277

	One-to-four family		Consumer
Credit Risk Profile Based on Payment Activity:
Performing	$	66,344	$	212
Non-Performing	7,643		38
Total	$	73,987	$	250

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 table presents an aging analysis of the recorded investment of past due financing receivable as of March 31, 2013.



$ 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	$	586	$	28	$	7,404	$	8,018	$	65,969	$	73,987
Multifamily	238		1,142		423		1,803		54,804		56,607
Commercial real estate	1,044		846		13,964		15,854		186,917		202,771
Construction	—		—		1,230		1,230		—		1,230
Business	261		1,682		4,971		6,914		28,363		35,277
Consumer	6		1		38		45		205		250
Total	$	2,135	$	3,699	$	28,030	$	33,864	$	336,258	$	370,122

The following tables present information on impaired loans with the associated allowance amount, if applicable, at March 31, 2014 and 2013. 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,
	2014						2013
$ 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	$	639	$	893	$	—	$	1,319	$	1,460	$	—
Multifamily	—		—		—		616		616		—
Commercial real estate	3,972		4,147		—		11,070		11,270		—
Construction	—		—		—		1,230		1,492		—
Business	341		402		—		1,080		2,002		—
Consumer	—		—		—		—		—		—

With an allowance recorded:
One-to-four family	5,833		5,958		520		5,049		5,244		317
Multifamily	2,240		2,240		92		—		—		—
Commercial real estate	4,812		5,023		255		5,365		5,913		194
Business	4,664		4,664		764		5,293		5,293		1,800
Total	$	22,501	$	23,327	$	1,631	$	31,022	$	33,290	$	2,311

The following table presents information on average balances on impaired loans and the interest income recognized for the years ended March 31, 2014, 2013 and 2012.




	For the years ended March 31,
	2014				2013				2012
$ 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	$	1,541	$	12	$	1,215	$	47	$	1,404	$	78
Multifamily	729		17		308		5		195		21
Commercial real estate	7,941		227		9,865		235		7,375		89
Construction	393		—		1,230		53		4,603		859
Business	1,508		14		1,136		41		5,242		203
Consumer	—		—		—		—		—		—

With an allowance recorded:
One-to-four family	5,290		142		5,363		57		4,343		103
Multifamily	513		—		—		—		1,391		70
Commercial real estate	3,991		43		6,302		133		15,453		340
Construction	—		—		—		—		896		—
Business	3,899		212		4,932		254		1,336		110
Total	$	25,805	$	667	$	30,351	$	825	$	42,238	$	1,873

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, 2014 and March 31, 2013:



	Modifications to loans during the years ended March 31,
	2014									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	2	$	747	$	867	5.51	%	4.69	%	2	$	1,414	$	535	7.66	%	4.00	%
Commercial real estate	—	—		—		—	%	—	%	3	1,890		1,418		6.54	%	6.38	%
Business	1	844		719		6.00	%	6.00	%	4	2,242		2,210		7.23	%	7.21	%
Total	3	$	1,591	$	1,586					9	$	5,546	$	4,163

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, 2014, two loans of $747 thousand were modified with interest rate concessions and one loan of $844 thousand was extended. For the fiscal year ended March 31, 2013, loans on which concessions were made with respect to rate reductions were $0.5 million and those loans which reached forbearance agreements totaled $1.9 million.

There were no loans at March 31, 2014 and March 31, 2013 that had been modified and subsequently defaulted.

For the fiscal year ended March 31, 2014, there were 14 loans in the TDR portfolio totaling $6.3 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, 2013, there were nine loans in the performing TDR portfolio totaling $5.0 million.

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