(

)

Allowance for Loan Losses and Credit Quality Information

The allowance for loan losses is summarized as follows:


(Dollars in thousands)	Single Family			Commercial Real Estate			Consumer			Commercial Business			Total
Balance, December 31, 2017	$	900			5,073			1,630			1,708			9,311
Provision for losses		(68	)		118			(145	)		(30	)		(125	)
Charge-offs		(23	)		0			(69	)		0			(92	)
Recoveries		0			7			7			21			35
Balance, March 31, 2018	$	809			5,198			1,423			1,699			9,129

Balance, December 31, 2016	$	1,186			4,953			1,613			2,151			9,903
Provision for losses		(76	)		(90	)		(108	)		4			(270	)
Charge-offs		0			0			(201	)		0			(201	)
Recoveries		0			95			28			35			158
Balance, March 31, 2017	$	1,110			4,958			1,332			2,190			9,590

Allocated to:
Specific reserves	$	192			441			263			177			1,073
General reserves		708			4,632			1,367			1,531			8,238
Balance, December 31, 2017	$	900			5,073			1,630			1,708			9,311

Allocated to:
Specific reserves	$	99			445			239			165			948
General reserves		710			4,753			1,184			1,534			8,181
Balance, March 31, 2018	$	809			5,198			1,423			1,699			9,129

Loans receivable at December 31, 2017:
Individually reviewed for impairment	$	1,523			1,364			880			507			4,274
Collectively reviewed for impairment		105,482			332,753			72,887			79,402			590,524
Ending balance	$	107,005			334,117			73,767			79,909			594,798

Loans receivable at March 31, 2018:
Individually reviewed for impairment	$	1,172			1,524			859			480			4,035
Collectively reviewed for impairment		105,883			342,307			71,911			76,402			596,503
Ending balance	$	107,055			343,831			72,770			76,882			600,538

The following table summarizes the amount of classified and unclassified loans at

March 31, 2018

and

December 31, 2017:

	March 31, 2018
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
Single family	$	108		1,775		44		0		1,927		105,128		107,055
Commercial real estate:
Real estate rental and leasing		7,272		3,385		0		0		10,657		177,793		188,450
Other		8,839		5,870		0		0		14,709		140,672		155,381
Consumer		0		652		52		155		859		71,911		72,770
Commercial business		7,615		4,198		0		0		11,813		65,069		76,882
	$	23,834		15,880		96		155		39,965		560,573		600,538

	December 31, 2017
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
Single family	$	77		2,154		44		0		2,275		104,730		107,005
Commercial real estate:
Real estate rental and leasing		5,022		3,813		0		0		8,835		166,342		175,177
Other		9,135		4,257		0		0		13,392		145,548		158,940
Consumer		0		631		119		130		880		72,887		73,767
Commercial business		5,781		5,506		0		0		11,287		68,622		79,909
	$	20,015		16,361		163		130		36,669		558,129		594,798

Classified loans represent special mention, substandard (performing and non-performing), and non-performing loans categorized as doubtful and loss. Loans classified as special mention are loans that have potential weaknesses that, if left uncorrected,

may

result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Loans classified as substandard are loans that are generally inadequately protected by the current net worth and paying capacity of the obligor, or by the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are

not

corrected. Loans classified as doubtful have the weaknesses of those classified as substandard, with additional characteristics that make collection in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. A loan classified as loss is essentially uncollateralized and/or considered uncollectible and of such little value that continuance as an asset on the balance sheet

may

not

be warranted. Loans classified as substandard or doubtful require the Bank to perform an analysis of the individual loan and charge off any loans, or portion thereof, that are deemed uncollectible.

The aging of past due loans at

March 31, 2018

and

December 31, 2017

are summarized as follows:

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
March 31, 201 8
Single family	$	685		0		524		1,209		105,846		107,055		0
Commercial real estate:
Real estate rental and leasing		0		0		0		0		188,450		188,450		0
Other		0		0		22		22		155,359		155,381		0
Consumer		359		88		349		796		71,974		72,770		0
Commercial business		242		0		115		357		76,525		76,882		0
	$	1,286		88		1,010		2,384		598,154		600,538		0

December 31, 201 7
Single family	$	727		294		669		1,690		105,315		107,005		0
Commercial real estate:
Real estate rental and leasing		0		0		0		0		175,177		175,177		0
Other		0		0		0		0		158,940		158,940		0
Consumer		734		117		235		1,086		72,681		73,767		0
Commercial business		34		0		180		214		79,695		79,909		0
	$	1,495		411		1,084		2,990		591,808		594,798		0

Impaired loans include loans that are non-performing (non-accruing) and loans that have been modified in a troubled debt restructuring (TDR). The following table summarizes impaired loans and related allowances as of

March 31, 2018

and

December 31, 2017:

	March 31, 2018						December 31, 2017
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans with no related allowance recorded:
Single family	$	433		433		0		415		415		0
Commercial real estate:
Real estate rental and leasing		35		46		0		35		51		0
Other		165		1,821		0		25		1,682		0
Consumer		404		404		0		414		414		0
Commercial business		0		0		0		0		0		0

Loans with an allowance recorded:
Single family		739		739		99		1,108		1,108		192
Commercial real estate:
Real estate rental and leasing		0		0		0		0		0		0
Other		1,324		1,324		445		1,304		1,304		441
Consumer		455		472		239		466		483		263
Commercial business		480		1,332		165		507		1,358		177

Total:
Single family		1,172		1,172		99		1,523		1,523		192
Commercial real estate:
Real estate rental and leasing		35		46		0		35		51		0
Other		1,489		3,145		445		1,329		2,986		441
Consumer		859		876		239		880		897		263
Commercial business		480		1,332		165		507		1,358		177
	$	4,035		6,571		948		4,274		6,815		1,073

The following table summarizes the average recorded investment and interest income recognized on impaired loans during the

three

months ended

March 31, 2018

and

2017:

	March 31, 2018				March 31, 2017
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded:
Single family	$	424		6		375		3
Commercial real estate:
Real estate rental and leasing		35		0		40		0
Other		95		24		26		24
Consumer		409		2		308		3
Commercial business		0		0		250		0

Loans with an allowance recorded:
Single family		924		0		877		3
Commercial real estate:
Real estate rental and leasing		0		0		130		0
Other		1,314		0		1,798		8
Consumer		461		3		536		1
Commercial business		494		2		360		3

Total:
Single family		1,348		6		1,252		6
Commercial real estate:
Real estate rental and leasing		35		0		170		0
Other		1,409		24		1,824		32
Consumer		870		5		844		4
Commercial business		494		2		610		3
	$	4,156		37		4,700		45

March 31, 2018

and

December 31, 2017,

non-accruing loans totaled

$3.3

million and

$3.1

million, respectively, for which the related allowance for loan losses was

$0.8

million and

$0.9

million, respectively. All of the interest income recognized for non-accruing loans was recognized using the cash basis method of income recognition. Non-accruing loans for which

specific allowance has been recorded, because management determined that the value of the collateral was sufficient to repay the loan, totaled

$0.7

million and

$0.4

million, at

March 31, 2018

and

December 31, 2017,

respectively. Non-accrual loans also include certain loans that have had terms modified in a TDR.

The non-accrual loans at

March 31, 2018

and

December 31, 2017

are summarized as follows:

(Dollars in thousands)	March 31, 2018		December 31, 2017

Single family	$	839	$	949
Commercial real estate:
Real estate rental and leasing		35		35
Other		1,489		1,329
Consumer		632		553
Commercial business		269		278
	$	3,264	$	3,144

March 31, 2018

and

December 31, 2017,

there were loans included in loans receivable, net, with terms that had been modified in a TDR totaling

$2.6

million and

$3.0

million, respectively. For the loans that were restructured in the

first

quarter of

2018,

$0.1

million were classified but performing and

$1.3

million were non-performing at

March 31, 2018.

Of the loans that were restructured in the

first

quarter of

2017,

$45,000

were classified but performing, and

$0.5

million were non-performing at

March 31, 2017.

The following table summarizes TDRs at

March 31, 2018

and

December 31, 2017:

	March 31, 2018						December, 31, 2017
(Dollars in thousands)	Accruing		Non-Accrual		Total		Accruing		Non-Accrual		Total
Single family	$	333		153		486		573		112		685
Commercial real estate		0		1,193		1,193		0		1,210		1,210
Consumer		227		304		531		327		431		758
Commercial business		211		154		365		229		162		391
	$	771		1,804		2,575		1,129		1,915		3,044

As of

March 31, 2018,

the Bank had commitments to lend an additional

$0.6

million to a borrower who has TDR and non-accrual loans. These additional funds are for the construction of single family homes with a maximum loan-to-value ratio of

75%.

These loans are secured by the home under construction. At

December 31, 2017,

there were commitments to lend additional funds of

$0.8

million to this same borrower.

TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal and/or interest due, or acceptance of real estate or other assets in full or partial satisfaction of the debt. Loan modifications are

not

reported as TDRs after

twelve

months if the loan was modified at a market rate of interest for comparable risk loans, and the loan is performing in accordance with the terms of the restructured agreement for the entire

twelve

month period. All loans classified as TDRs are considered to be impaired.

When a loan is modified in a TDR, there

may

be a direct, material impact on the loans within the consolidated balance sheets, as principal balances

may

be partially forgiven. The financial effects of TDRs are presented in the following table and represent the difference between the outstanding recorded balance pre-modification and post-modification, for the

three

months ended

March 31, 2018

and

March 31, 2017.

	Three Months Ended March 31, 2018						Three Months Ended March 31, 2017
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Single family		1	$	55		58		3	$	282		514
Commercial real estate:
Real estate rental and leasing		1		54		54		0		0		0
Other		1		1,274		1,274		0		0		0
Consumer		4		117		118		2		45		45
Commercial business		1		70		70		0		0		0
Total		8	$	1,570		1,574		5	$	327		559

There were

loans that were restructured within the

twelve

months preceding

March 31, 2018

and

March 31, 2017

that defaulted during the

three

months ended

March 31, 2018

and

March 31, 2017.

The Company considers a loan to have defaulted when it becomes

or more days past due under the modified terms, when it is placed in non-accrual status, when it becomes other real estate owned, or when it becomes non-compliant with some other material requirement of the modification agreement. Loans that were non-accrual prior to modification remain on non-accrual status for at least

six

months following modification. Non-accrual TDR loans that have performed according to the modified terms for

six

months

may

be returned to accrual status. Loans that were accruing prior to modification remain on accrual status after the modification as long as the loan continues to perform under the new terms.

TDRs are reviewed for impairment following the same methodology as other impaired loans. For loans that are collateral-dependent, the value of the collateral is reviewed and additional reserves

may

be added as needed. Loans that are

not

collateral-dependent

may

have additional reserves established if deemed necessary. The reserves for TDRs were

$0.8

million, or

8.7%,

of the total

$9.1

million in loan loss reserves at

March 31, 2018

and

$0.9

million, or

9.8%,

of the total

$9.3

million in loan loss reserves at

December 31, 2017.

The following is additional information with respect to loans acquired through acquisitions:

(Dollars in thousands)	Contractual Principal Receivable			Accretable Difference			Net Carrying Amount
Purchased performing loans:
Balance at December 31, 2017	$	10,128			(231	)		9,897
Change due to payments/refinances		(681	)		13			(668	)
Balance at March 31, 2018	$	9,447			(218	)		9,229

(Dollars in thousands)	Contractual Principal Receivable			Non-Accretable Difference			Net Carrying Amount
Purchased credit impaired loans:
Balance at December 31, 2017	$	402			(39	)		363
Change due to payments/refinances		(2	)		2			0
Balance at March 31, 2018	$	400			(37	)		363

The Company has loans for which there was at acquisition evidence of deterioration of credit quality since origination and for which it was probable at acquisition that all contractually required payments would

not

be collected. The carrying amount of those loans as of

March 31, 2018

was

$0.4

million.

provision for loan losses was recognized during the period ended

March 31, 2018

related to acquired loans as there was

significant change to the credit quality of those loans.