Attached files

file filename
EX-31.2 - EXHIBIT 31.2 - PROVIDENT FINANCIAL HOLDINGS INCprov-2015930x10qxex312.htm
EX-32.1 - EXHIBIT 32.1 - PROVIDENT FINANCIAL HOLDINGS INCprov-2015930x10qxex321.htm
EX-32.2 - EXHIBIT 32.2 - PROVIDENT FINANCIAL HOLDINGS INCprov-2015930x10qxex322.htm
EX-31.1 - EXHIBIT 31.1 - PROVIDENT FINANCIAL HOLDINGS INCprov-2015930x10qxex311.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
[  ü ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
September 30, 2015
[     ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to _________________
 
Commission File Number 000-28304

PROVIDENT FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware  
 
33-0704889
(State or other jurisdiction of 
 
(I.R.S.  Employer 
incorporation or organization) 
 
Identification No.) 
 
3756 Central Avenue, Riverside, California 92506
(Address of principal executive offices and zip code)

(951) 686-6060
(Registrant’s telephone number, including area code)

_________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ü     No      .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ü     No      .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer [   ] 
Accelerated filer [ ü ]
 
Non-accelerated filer [   ] 
Smaller reporting company [   ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Yes            No  ü  .
APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of class:
 
As of November 2, 2015
Common stock, $ 0.01 par value, per share
 
8,432,678 shares



PROVIDENT FINANCIAL HOLDINGS, INC.

Table of Contents
PART 1  -
FINANCIAL INFORMATION
 
 
 
 
 
ITEM 1  -
Financial Statements.  The Unaudited Interim Condensed Consolidated Financial Statements of Provident Financial Holdings, Inc. filed as a part of the report are as follows:
 
 
 
 
Page
 
Condensed Consolidated Statements of Financial Condition
 
 
 
as of September 30, 2015 and June 30, 2015
 
Condensed Consolidated Statements of Operations
 
 
 
for the Quarters Ended September 30, 2015 and 2014
 
Condensed Consolidated Statements of Comprehensive Income
 
 
 
for the Quarters Ended September 30, 2015 and 2014
 
Condensed Consolidated Statements of Stockholders’ Equity
 
 
 
for the Quarters Ended September 30, 2015 and 2014
 
Condensed Consolidated Statements of Cash Flows
 
 
 
for the Three Months Ended September 30, 2015 and 2014
 
Notes to Unaudited Interim Condensed Consolidated Financial Statements
 
 
 
 
ITEM 2  -
Management’s Discussion and Analysis of Financial Condition and Results of Operations:
 
 
 
 
 
 
General
 
Safe-Harbor Statement
 
Critical Accounting Policies
 
Executive Summary and Operating Strategy
 
Off-Balance Sheet Financing Arrangements and Contractual Obligations
 
Comparison of Financial Condition at September 30, 2015 and June 30, 2015
 
Comparison of Operating Results
 
 
 
for the Quarters Ended September 30, 2015 and 2014
 
Asset Quality
 
Loan Volume Activities
 
Liquidity and Capital Resources
 
Supplemental Information
 
 
 
 
ITEM 3  -
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
 
ITEM 4  -
Controls and Procedures
 
 
 
 
PART II  -
OTHER INFORMATION
 
 
 
 
 
ITEM 1  -
Legal Proceedings
ITEM 1A -
Risk Factors
ITEM 2  -
Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 3  -
Defaults Upon Senior Securities
ITEM 4  -
Mine Safety Disclosures
ITEM 5  -
Other Information
ITEM 6  -
Exhibits
 
 
 
 
SIGNATURES






PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Financial Condition
In Thousands, Except Share Information
 
(Unaudited)
 
 
September 30,
2015
June 30,
2015
Assets
 
 
Cash and cash equivalents
$
156,146

$
81,403

Investment securities – held to maturity, at cost
800

800

Investment securities – available for sale, at fair value
13,461

14,161

Loans held for investment, net of allowance for loan losses of
$9,034 and $8,724, respectively; includes $4,036 and $4,518 at fair value, respectively
805,686

814,234

Loans held for sale, at fair value
163,644

224,715

Accrued interest receivable
2,640

2,839

Real estate owned, net
3,674

2,398

Federal Home Loan Bank (“FHLB”) – San Francisco stock
8,094

8,094

Premises and equipment, net
5,259

5,417

Prepaid expenses and other assets
17,833

20,494

 
 

 

Total assets
$
1,177,237

$
1,174,555

 
 

 

Liabilities and Stockholders’ Equity
 

 

 
 

 

Liabilities:
 

 

Non interest-bearing deposits
$
68,101

$
67,538

Interest-bearing deposits
856,765

856,548

Total deposits
924,866

924,086

 
 

 

Borrowings
91,351

91,367

Accounts payable, accrued interest and other liabilities
21,766

17,965

Total liabilities
1,037,983

1,033,418

 
 

 

Commitments and Contingencies




 
 

 

Stockholders’ equity:
 

 

Preferred stock, $.01 par value (2,000,000 shares authorized;
none issued and outstanding)


Common stock, $.01 par value (40,000,000 shares authorized;
17,779,865 and 17,766,865 shares issued; 8,429,678 and
8,634,607 shares outstanding, respectively)
178

177

Additional paid-in capital
89,278

88,893

Retained earnings
189,617

188,206

Treasury stock at cost (9,350,187 and 9,132,258 shares, respectively)
(140,119
)
(136,470
)
Accumulated other comprehensive income, net of tax
300

331

 
 

 

Total stockholders’ equity
139,254

141,137

 
 

 

Total liabilities and stockholders’ equity
$
1,177,237

$
1,174,555



The accompanying notes are an integral part of these condensed consolidated financial statements.

1



PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
In Thousands, Except Per Share Information
 
Quarter Ended  
 September 30,
 
2015
2014
Interest income:
 
 
Loans receivable, net
$
9,490

$
9,195

Investment securities
67

76

FHLB – San Francisco stock
200

144

Interest-earning deposits
100

94

Total interest income
9,857

9,509

 
 
 
Interest expense:
 
 
Checking and money market deposits
117

104

Savings deposits
168

157

Time deposits
858

976

Borrowings
648

335

Total interest expense
1,791

1,572

 
 
 
Net interest income
8,066

7,937

Recovery from the allowance for loan losses
(38
)
(818
)
Net interest income, after recovery from the allowance for loan losses
8,104

8,755

 
 
 
Non-interest income:
 
 
Loan servicing and other fees
111

268

Gain on sale of loans, net
8,924

7,652

Deposit account fees
610

626

Gain (loss) on sale and operations of real estate owned acquired in the settlement of loans, net
229

(19
)
Card and processing fees
362

356

Other
213

227

Total non-interest income
10,449

9,110

 
 
 
Non-interest expense:
 
 
Salaries and employee benefits
10,792

9,581

Premises and occupancy
1,108

1,348

Equipment
379

472

Professional expenses
500

464

Sales and marketing expenses
262

331

     Deposit insurance premiums and regulatory assessments
262

273

Other
1,057

1,270

Total non-interest expense
14,360

13,739

 
 
 
Income before income taxes
4,193

4,126

Provision for income taxes
1,750

1,736

Net income
$
2,443

$
2,390

 
 
 
Basic earnings per share
$
0.29

$
0.26

Diluted earnings per share
$
0.28

$
0.25

Cash dividends per share
$
0.12

$
0.11


The accompanying notes are an integral part of these condensed consolidated financial statements.

2



PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
In Thousands
 
For the Quarters Ended  
 September 30,
 
2015
2014
Net income
$
2,443

$
2,390

 
 
 
Change in unrealized holding loss on securities available for sale
(53
)
(16
)
Reclassification of (gains) losses to net income


Other comprehensive loss, before income taxes
(53
)
(16
)
 
 
 
Income tax benefit
(22
)
(7
)
Other comprehensive loss
(31
)
(9
)
 
 
 
Total comprehensive income
$
2,412

$
2,381



The accompanying notes are an integral part of these condensed consolidated financial statements.

3



PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
In Thousands, Except Share Information

For the Quarters Ended September 30, 2015 and 2014:
 
Common
Stock
Additional
Paid-In Capital
Retained Earnings
Treasury Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
 
 
Shares
Amount
Total
Balance at June 30, 2015
8,634,607

$
177

$
88,893

$
188,206

$
(136,470
)
$
331

$
141,137

 
 
 
 
 
 
 
 
Net income
 
 
 
2,443

 
 
2,443

Other comprehensive loss
 
 
 
 
 
(31
)
(31
)
Purchase of treasury stock(1)
(220,429
)
 
 
 
(3,649
)
 
(3,649
)
Exercise of stock options
13,000

1

95

 
 
 
96

Distribution of restricted stock
2,500

 
 
 
 
 

Amortization of restricted stock
 
 
161

 
 
 
161

Stock options expense
 
 
128

 
 
 
128

Tax effect from stock based compensation
 
 
1

 
 
 
1

Cash dividends(2)
 
 
 
(1,032
)
 
 
(1,032
)
 
 
 
 
 
 
 
 
Balance at September 30, 2015
8,429,678

$
178

$
89,278

$
189,617

$
(140,119
)
$
300

$
139,254


(1) Includes the repurchase of 4,500 shares from a cashless stock option exercise.
(2) Cash dividends of $0.12 per share were paid in the quarter ended September 30, 2015.
 
 
Common
Stock
Additional
Paid-In Capital
Retained Earnings
Treasury Stock
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
 
 
Shares
Amount
Total
Balance at June 30, 2014
9,312,269

$
177

$
88,259

$
182,458

$
(125,418
)
$
386

$
145,862

 
 
 
 
 
 
 
 
Net income
 
 
 
2,390

 
 
2,390

Other comprehensive loss
 
 
 
 
 
(9
)
(9
)
Purchase of treasury stock
(162,204
)
 
 
 
(2,398
)
 
(2,398
)
Exercise of stock options
2,000


14

 
 
 
14

Amortization of restricted stock
 
 
59

 
 
 
59

Awards of restricted stock
 
 
(1,641
)
 
1,641

 

Stock options expense
 
 
84

 
 
 
84

Tax effect from stock based compensation
 
 
(16
)
 
 
 
(16
)
Cash dividends(1)
 
 
 
(1,023
)
 
 
(1,023
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014
9,152,065

$
177

$
86,759

$
183,825

$
(126,175
)
$
377

$
144,963


(1) Cash dividends of $0.11 per share were paid in the quarter ended September 30, 2014.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4



PROVIDENT FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited - In Thousands)
 
Three Months Ended 
 September 30,
 
2015
2014
Cash flows from operating activities:
 
 
Net income
$
2,443

$
2,390

Adjustments to reconcile net income to net cash provided by (used for) operating activities:
 
 
Depreciation and amortization
307

611

Recovery from the allowance for loan losses
(38
)
(818
)
Unrealized gain on real estate owned
(161
)
(17
)
Gain on sale of loans, net
(8,924
)
(7,652
)
(Gain) loss on sale of real estate owned, net
(30
)
9

Stock-based compensation
289

143

(Benefit) provision for deferred income taxes
(632
)
176

Tax effect from stock based compensation
(1
)
16

Increase (decrease) in accounts payable and other liabilities
1,617

(366
)
Decrease in prepaid expenses and other assets
1,711

1,852

Loans originated for sale
(540,289
)
(513,770
)
Proceeds from sale of loans
613,940

498,413

Net cash provided by (used for) operating activities
70,232

(19,013
)
 
 
 
Cash flows from investing activities:
 
 
Decrease (increase) in loans held for investment, net
7,289

(16,774
)
Principal payments from investment securities available for sale
650

780

Purchase of investment securities available for sale

(250
)
Proceeds from sale of real estate owned
463

502

Purchase of premises and equipment
(71
)
(168
)
Net cash provided by (used for) investing activities
8,331

(15,910
)
 
 
 
Cash flows from financing activities:
 
 
Increase in deposits, net
780

4,562

Repayments of long-term borrowings
(16
)
(15
)
Exercise of stock options
96

14

Tax effect from stock based compensation
1

(16
)
Cash dividends
(1,032
)
(1,023
)
Treasury stock purchases
(3,649
)
(2,398
)
Net cash (used for) provided by financing activities
(3,820
)
1,124

 
 
 
Net increase (decrease) in cash and cash equivalents
74,743

(33,799
)
Cash and cash equivalents at beginning of period
81,403

118,937

Cash and cash equivalents at end of period
$
156,146

$
85,138

Supplemental information:
 
 
Cash paid for interest
$
1,788

$
1,562

Cash paid for income taxes
$

$

Transfer of loans held for sale to held for investment
$
1,552

$
678

Real estate acquired in the settlement of loans
$
1,006

$
927


The accompanying notes are an integral part of these condensed consolidated financial statements.

5



PROVIDENT FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

Note 1: Basis of Presentation

The unaudited interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations for the interim periods presented.  All such adjustments are of a normal, recurring nature.  The condensed consolidated statement of financial condition at June 30, 2015 is derived from the audited consolidated financial statements of Provident Financial Holdings, Inc. and its wholly-owned subsidiary, Provident Savings Bank, F.S.B. (the “Bank”) (collectively, the “Corporation”).  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) with respect to interim financial reporting.  It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended June 30, 2015.  The results of operations for the quarter ended September 30, 2015 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2016.


Note 2: Accounting Standard Updates (“ASU”)

ASU 2014-04:
In January 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-04, "Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure." The amendments in this ASU are intended to reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate property recognized. Holding foreclosed real estate property presents different operational and economic risk to creditors compared with holding an impaired loan. Therefore, consistency in the timing of loan derecognition and presentation of foreclosed real estate properties is of qualitative significance to users of the creditor’s financial statements. Additionally, the disclosure of the amount of foreclosed residential real estate properties and of the recorded investment in consumer mortgage loans secured by residential real estate properties that are in the process of foreclosure is expected to provide decision-useful information to many users of the creditor’s financial statements. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Corporation's adoption of this ASU did not have a material impact on its consolidated financial statements.
 
ASU 2014-14:
In August 2014, the FASB issued ASU 2014-14," Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure." Current GAAP provides classification and measurement guidance for situations in which a creditor obtains a debtor’s assets in satisfaction of a receivable, including receipt of assets through foreclosure, but does not provide specific guidance on how to classify and measure foreclosed loans that are government guaranteed. Current GAAP also does not provide guidance on how to determine the unit of account; that is, whether a single asset should be recognized or whether two separate assets should be recognized (real estate and a guarantee receivable). In practice, most creditors derecognize the loan and recognize a single asset. Some creditors recognize a nonfinancial asset (other real estate owned), while others recognize a financial asset (typically, a guarantee receivable). Regardless of the classification of the asset (or assets), measurement of the asset (or total measurement of the assets) in practice generally represents the amount recoverable under the guarantee. The amendments in this ASU should reduce variations in practice by providing guidance on how to classify and measure certain government-guaranteed mortgage loans upon foreclosure. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Corporation's adoption of this ASU did not have a material impact on its consolidated financial statements.

ASU 2015-05:
In April 2015, the FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40).” The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP

6



for a customer’s accounting for service contracts. In addition, the guidance in this ASU supersedes paragraph 350-40-25-16. Consequently, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. For public entities, the FASB decided that the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015 and early adoption is permitted. The Corporation's adoption of this ASU is not expected have a material impact on its consolidated financial statements.

ASU 2015-10:
In June 2015, the FASB issued ASU 2015-10, "Technical Corrections and Improvements." The amendments in this ASU cover a wide range of topics in the Codification. The reason for each amendment is provided before each amendment for clarity and ease of understanding. The amendments generally related to: (1) amendments related to differences between original guidance and the codification, (2) guidance clarification and reference corrections, (3) simplification and (4) minor improvements. These amendments improve the guidance and are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Transition guidance varies based on the amendments in this ASU. The amendments in this ASU that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. All other amendments will be effective upon the issuance of this ASU. The Corporation's adoption of this ASU is not expected have a material impact on its consolidated financial statements.

ASU 2015-12:
In July 2015, the FASB issued ASU 2015-12, "Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (consensuses of the FASB Emerging Issues Task Force)." The amendments of this ASU (i) require fully benefit-responsive investment contracts to be measured, presented and disclosed only at contract value, not fair value; (ii) simplify the investment disclosure requirements; and (iii) provide a measurement date practical expedient for employee benefit plans. This ASU is effective for fiscal years beginning after December 15, 2015, earlier adoption is permitted. The Corporation's adoption of this ASU is not expected have a material impact on its consolidated financial statements.
 

Note 3: Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of the entity.

As of September 30, 2015 and 2014, there were outstanding options to purchase 1.0 million shares and 1.1 million shares of the Corporation’s common stock, respectively, of which 236,500 shares and 271,500 shares, respectively, were excluded from the diluted EPS computation as their effect was anti-dilutive. As of September 30, 2015 and 2014, there were outstanding restricted stock awards of 197,500 shares and 266,500 shares, respectively, all of which have dilutive effects.


7



The following table provides the basic and diluted EPS computations for the quarters ended September 30, 2015 and 2014, respectively.
 
(In Thousands, Except Earnings Per Share)
For the Quarters Ended
September 30,
 
2015
2014
Numerator:
 
 
Net income – numerator for basic earnings per share and diluted earnings per share - available to common stockholders
$
2,443

$
2,390

 
 
 
Denominator:
 

 

Denominator for basic earnings per share:
 

 

 Weighted-average shares
8,566

9,253

 
 
 
   Effect of dilutive shares:
 
 
Stock options
111

173

Restricted stock
67

42

 
 
 
Denominator for diluted earnings per share:
 

 

Adjusted weighted-average shares and assumed conversions
8,744

9,468

 
 
 
Basic earnings per share
$
0.29

$
0.26

Diluted earnings per share
$
0.28

$
0.25




8



Note 4: Operating Segment Reports

The Corporation operates in two business segments: community banking through the Bank and mortgage banking through Provident Bank Mortgage (“PBM”), a division of the Bank.

The following tables set forth condensed consolidated statements of operations and total assets for the Corporation’s operating segments for the quarters ended September 30, 2015 and 2014, respectively.
 
For the Quarter Ended September 30, 2015
(In Thousands)
Provident
Bank
Provident
Bank
Mortgage
Consolidated
Totals
Net interest income
$
6,903

$
1,163

$
8,066

Provision (recovery) for loan losses
12

(50
)
(38
)
Net interest income, after provision (recovery) for loan losses
6,891

1,213

8,104

 
 
 
 
Non-interest income:
 
 
 
     Loan servicing and other fees (1)
144

(33
)
111

     Gain on sale of loans, net (2)
1

8,923

8,924

Deposit account fees
610


610

     Gain on sale and operations of real estate owned
        acquired in the settlement of loans, net
224

5

229

Card and processing fees
362


362

Other
213


213

Total non-interest income
1,554

8,895

10,449

 
 
 
 
Non-interest expense:
 
 
 
Salaries and employee benefits
4,553

6,239

10,792

Premises and occupancy
696

412

1,108

Operating and administrative expenses
989

1,471

2,460

Total non-interest expense
6,238

8,122

14,360

Income before income taxes
2,207

1,986

4,193

Provision for income taxes
915

835

1,750

Net income
$
1,292

$
1,151

$
2,443

Total assets, end of period
$
1,013,345

$
163,892

$
1,177,237


(1) 
Includes an inter-company charge of $65 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2) 
Includes an inter-company charge of $108 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.

9




 
For the Quarter Ended September 30, 2014
(In Thousands)
Provident
Bank
Provident
Bank
Mortgage
Consolidated
Totals
Net interest income
$
6,895

$
1,042

$
7,937

(Recovery) provision for loan losses
(890
)
72

(818
)
Net interest income after (recovery) provision for loan losses
7,785

970

8,755

 
 
 
 
Non-interest income:
 
 
 
     Loan servicing and other fees (1)
8

260

268

     Gain on sale of loans, net (2)
71

7,581

7,652

Deposit account fees
626


626

     Loss on sale and operations of real estate owned
        acquired in the settlement of loans, net
(19
)

(19
)
Card and processing fees
356


356

Other
227


227

Total non-interest income
1,269

7,841

9,110

 
 
 
 
Non-interest expense:
 
 
 
Salaries and employee benefits
4,267

5,314

9,581

Premises and occupancy
872

476

1,348

Operating and administrative expenses
1,156

1,654

2,810

Total non-interest expense
6,295

7,444

13,739

Income before income taxes
2,759

1,367

4,126

Provision for income taxes
1,167

569

1,736

Net income
$
1,592

$
798

$
2,390

Total assets, end of period
$
925,881

$
180,973

$
1,106,854


(1) 
Includes an inter-company charge of $158 credited to PBM by the Bank during the period to compensate PBM for originating loans held for investment.
(2) 
Includes an inter-company charge of $14 credited to PBM by the Bank during the period to compensate PBM for servicing fees on loans sold on a servicing retained basis.
 
 
 
 
 
 
 
 




10



Note 5: Investment Securities

The amortized cost and estimated fair value of investment securities as of September 30, 2015 and June 30, 2015 were as follows:
September 30, 2015
 
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair
Value
 
Carrying
Value
(In Thousands)
 
 
 
 
 
Held to maturity:
 
 
 
 
 
Certificates of deposit
$
800

$

$

$
800

$
800

Total investment securities - held to maturity
$
800

$

$

$
800

$
800

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
U.S. government agency MBS (1)
$
7,305

$
268

$

$
7,573

$
7,573

U.S. government sponsored enterprise MBS
4,765

281


5,046

5,046

Private issue CMO (2)
683

8


691

691

Common stock - community development financial institution
250


(99
)
151

151

Total investment securities - available for sale
$
13,003

$
557

$
(99
)
$
13,461

$
13,461

Total investment securities
$
13,803

$
557

$
(99
)
$
14,261

$
14,261


(1) 
Mortgage-Backed Securities (“MBS”).
(2) 
Collateralized Mortgage Obligations (“CMO”).

June 30, 2015
 
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair
Value
 
Carrying
Value
(In Thousands)
 
 
 
 
 
Held to maturity:
 
 
 
 
 
Certificates of deposit
$
800

$

$

$
800

$
800

Total investment securities - held to maturity
$
800

$

$

$
800

$
800

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
U.S. government agency MBS
$
7,613

$
293

$

$
7,906

$
7,906

U.S. government sponsored enterprise MBS
5,083

304


5,387

5,387

Private issue CMO
708

9


717

717

Common stock - community development financial institution
250


(99
)
151

151

Total investment securities - available for sale
$
13,654

$
606

$
(99
)
$
14,161

$
14,161

Total investment securities
$
14,454

$
606

$
(99
)
$
14,961

$
14,961


In the first quarters of fiscal 2016 and 2015, the Corporation received MBS principal payments of $650,000 and $780,000, respectively, and did not purchase or sell investment securities, except the purchase in the first quarter of fiscal 2015 of $250,000 in the common stock of a community development financial institution to help fulfill the Bank's Community Reinvestment Act obligation.
  

11



The Corporation held investments with unrealized loss position at September 30, 2015 and June 2015 of $99,000 at both dates.
As of September 30, 2015
Unrealized Holding Losses
 
Unrealized Holding Losses
 
Unrealized Holding Losses
(In Thousands)
Less Than 12 Months
 
12 Months or More
 
Total
 
Fair
Unrealized
 
Fair
Unrealized
 
Fair
Unrealized
Description of Securities
Value
Losses
 
Value
Losses
 
Value
Losses
 
 
 
 
 
 
 
 
 
Common stock(1)
$
151

$
99

 
$

$

 
$
151

$
99

Total
$
151

$
99

 
$

$


$
151

$
99


As of June 30, 2015
Unrealized Holding Losses
 
Unrealized Holding Losses
 
Unrealized Holding Losses
(In Thousands)
Less Than 12 Months
 
12 Months or More
 
Total
 
Fair
Unrealized
 
Fair
Unrealized
 
Fair
Unrealized
Description of Securities
Value
Losses
 
Value
Losses
 
Value
Losses
 
 
 
 
 
 
 
 
 
Common stock(1)
$
151

$
99

 
$

$

 
$
151

$
99

Total
$
151

$
99

 
$

$


$
151

$
99


(1) 
Common stock of a community development financial institution.

The Corporation evaluates individual investment securities quarterly for other-than-temporary declines in market value.  As of September 30, 2015, the unrealized holding loss was less than 12 months on the common stock, primarily the result of the dilutive nature of the institution's recent merger with another community development financial institution.  Based on the nature of the investment, management concluded that such unrealized loss was not other than temporary as of September 30, 2015.  The Corporation intends and has the ability to hold the common stock and will not likely be required to sell before realizing a full recovery. The Corporation does not believe that there are any other-than-temporary impairments at September 30, 2015 and 2014; therefore, no impairment losses have been recorded for the quarters ended September 30, 2015 and 2014.  

Contractual maturities of investment securities as of September 30, 2015 and June 30, 2015 were as follows:
 
September 30, 2015
 
June 30, 2015
(In Thousands)
Amortized
Cost
Estimated
Fair
Value
 
Amortized
Cost
Estimated
Fair
Value
 
 
 
 
 
 
Held to maturity:
 
 
 
 
 
Due in one year or less
$
800

$
800

 
$
800

$
800

Due after one through five years


 


Due after five through ten years


 


Due after ten years


 


Total investment securities - held to maturity
$
800

$
800

 
$
800

$
800

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
Due in one year or less
$

$

 
$

$

Due after one through five years


 


Due after five through ten years


 


Due after ten years
12,753

13,310

 
13,404

14,010

No stated maturity (common stock)
250

151

 
250

151

Total investment securities - available for sale
$
13,003

$
13,461

 
$
13,654

$
14,161

Total investment securities
$
13,803

$
14,261

 
$
14,454

$
14,961



12



Note 6: Loans Held for Investment
 
Loans held for investment consisted of the following:
(In Thousands)
September 30,
2015
June 30,
2015
Mortgage loans:
 
 
Single-family
$
356,963

$
365,961

Multi-family
355,442

347,020

Commercial real estate
94,580

100,897

Construction
6,185

8,191

Other
72


Commercial business loans
399

666

Consumer loans
243

244

Total loans held for investment, gross
813,884

822,979

 
 
 
Undisbursed loan funds
(2,691
)
(3,360
)
Advance payments of escrows
193

199

Deferred loan costs, net
3,334

3,140

Allowance for loan losses
(9,034
)
(8,724
)
Total loans held for investment, net
$
805,686

$
814,234


As of September 30, 2015, the Corporation had $13.6 million in mortgage loans that are subject to negative amortization, consisting of $10.2 million in multi-family loans, $3.2 million in single-family loans and $213,000 in commercial real estate loans.  This compares to $14.1 million of negative amortization mortgage loans at June 30, 2015, consisting of $10.7 million in multi-family loans, $3.2 million in single-family loans and $227,000 in commercial real estate loans.  During the first quarters of fiscal 2016 and 2015, no loan interest income was added to the negative amortization loan balance.  Negative amortization involves a greater risk to the Corporation because the loan principal balance may increase by a range of 110% to 115% of the original loan amount during the period of negative amortization and because the loan payment may increase beyond the means of the borrower when loan principal amortization is required.  Also, the Corporation has originated interest-only ARM loans, which typically have a fixed interest rate for the first two to five years coupled with an interest only payment, followed by a periodic adjustable rate and a fully amortizing loan payment.  As of September 30, 2015 and June 30, 2015, the interest-only ARM loans were $131.4 million and $152.6 million, or 16.1% and 18.6% of loans held for investment, respectively. As of September 30, 2015, the Corporation had $4.0 million of single-family loans, 12 loans, held for investment which were originated for sale but were subsequently transferred to held for investment and are carried at fair value. This compares to $4.5 million of single-family loans, 13 loans, held for investment at June 30, 2015 which were originated for sale but were subsequently transferred to held for investment and are carried at fair value.

The following table sets forth information at September 30, 2015 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans.  Fixed-rate loans comprised 3% of loans held for investment at September 30, 2015, as compared to 4% at June 30, 2015.  Adjustable rate loans having no stated repricing dates that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year.  The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.


13



 
Adjustable Rate
 
 
(In Thousands)
Within One Year
After
One Year
Through 3 Years
After
3 Years
Through 5 Years
After
5 Years
Through 10 Years
Fixed Rate
Total
Mortgage loans:
 
 
 
 
 
 
Single-family
$
287,251

$
5,167

$
48,876

$
1,984

$
13,685

$
356,963

Multi-family
66,947

98,626

178,461

8,332

3,076

355,442

Commercial real estate
13,634

29,099

46,411


5,436

94,580

Construction
720


375


5,090

6,185

Other




72

72

Commercial business loans
138




261

399

Consumer loans
236




7

243

Total loans held for investment, gross
$
368,926

$
132,892

$
274,123

$
10,316

$
27,627

$
813,884


The Corporation has developed an internal loan grading system to evaluate and quantify the Bank’s loans held for investment portfolio with respect to quality and risk. Management continually evaluates the credit quality of the Corporation’s loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss. The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances. Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among others. Qualitative loan loss factors are developed by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices. The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating.

The Corporation categorizes all of the loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:
 
Pass - These loans range from minimal credit risk to average however still acceptable credit risk. The likelihood of loss is considered remote.
Special mention - A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.
Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.
Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.


14



The following tables summarize gross loans held for investment by loan types and risk category at the dates indicated:
 
 
September 30, 2015
(In Thousands)
Single-family
Multi-family
Commercial Real Estate
Construction
Other Mortgage
Commercial Business
Consumer
Total
 
 
 
 
 
 
 
 
 
 
Pass
$
337,156

$
350,923

$
92,628

$
6,185

$
72

$
292

$
243

$
787,499

Special Mention
7,187

408






7,595

Substandard
12,620

4,111

1,952



107


18,790

 
Total loans held for
   investment, gross
$
356,963

$
355,442

$
94,580

$
6,185

$
72

$
399

$
243

$
813,884


 
 
June 30, 2015
(In Thousands)
Single-family
Multi-family
Commercial Real Estate
Construction
Commercial Business
Consumer
Total
 
 
 
 
 
 
 
 
 
Pass
$
347,301

$
339,093

$
98,254

$
8,191

$
557

$
244

$
793,640

Special Mention
7,766

413





8,179

Substandard
10,894

7,514

2,643


109


21,160

 
Total loans held for
   investment, gross
$
365,961

$
347,020

$
100,897

$
8,191

$
666

$
244

$
822,979


The allowance for loan losses is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loans held for investment and upon management’s continuing analysis of the factors underlying the quality of the loans held for investment.  These factors include changes in the size and composition of the loans held for investment, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectability may not be assured, and determination of the realizable value of the collateral securing the loans.  The provision (recovery) for (from) the allowance for loan losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels.  Although management believes it uses the best information available to make such determinations, there can be no assurance that regulators, in reviewing the Corporation’s loans held for investment, will not request a significant increase in its allowance for loan losses.  Future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control.

Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans.  For loans that were modified from their original terms, were re-underwritten and identified in the Corporation’s asset quality reports as troubled debt restructurings (“restructured loans”), the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent.  The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses.  The allowance for loan losses for non-performing loans is determined by applying Accounting Standards Codification (“ASC”) 310, “Receivables.”  For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method.  For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is calculated based on the loan's fair value or collateral's fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required.


15



The following table summarizes the Corporation’s allowance for loan losses at September 30, 2015 and June 30, 2015:
(In Thousands)
September 30,
2015
June 30,
2015
Collectively evaluated for impairment:
 
 
Mortgage loans:
 
 
Single-family
$
6,261

$
5,202

Multi-family
1,943

2,616

Commercial real estate
697

734

Construction
40

42

Other
2


Commercial business loans
13

23

Consumer loans
9

9

Total collectively evaluated allowance
8,965

8,626

 
 
 
Individually evaluated for impairment:
 
 
Mortgage loans:
 
 
Single-family
49

78

Commercial business loans
20

20

Total individually evaluated allowance
69

98

Total loan loss allowance
$
9,034

$
8,724



16



The following table is provided to disclose additional details on the Corporation’s allowance for loan losses:
 
For the Quarters Ended
September 30,
(Dollars in Thousands)
2015
2014
 
 
 
Allowance at beginning of period
$
8,724

$
9,744

 
 
 
Recovery from the allowance for loan losses
(38
)
(818
)
 
 
 
Recoveries:
 

 

Mortgage loans:
 

 

Single-family
69

109

Multi-family
56

71

Commercial real estate
216


Commercial business loans
85


Consumer loans

1

Total recoveries
426

181

 
 
 
Charge-offs:
 

 

Mortgage loans:
 

 

Single-family
(78
)
(219
)
Total charge-offs
(78
)
(219
)
 
 
 
Net recoveries (charge-offs)
348

(38
)
Balance at end of period
$
9,034

$
8,888

 
 

 

Allowance for loan losses as a percentage of gross loans held for investment
1.11
 %
1.11
%
Net (recoveries) charge-offs as a percentage of average loans receivable, net, during the period (annualized)
(0.14
)%
0.02
%
Allowance for loan losses as a percentage of gross non-performing loans at the end of the period
57.33
 %
66.62
%



17



The following tables denote the past due status of the Corporation's loans held for investment, gross, at the dates indicated.
 
 
September 30, 2015
(In Thousands)
Current
30-89 Days Past Due
Non-Accrual (1)
Total Loans Held for Investment, Gross
 
 
 
 
 
 
Mortgage loans:
 
 
 
 
 
Single-family
$
343,126

$
1,217

$
12,620

$
356,963

 
Multi-family
353,467


1,975

355,442

 
Commercial real estate
93,564


1,016

94,580

 
Construction
6,185



6,185

 
Other
72



72

Commercial business loans
292


107

399

Consumer loans
241

2


243

 
Total loans held for investment, gross
$
796,947

$
1,219

$
15,718

$
813,884


(1) All loans 90 days or greater past due are placed on non-accrual status.
 
 
June 30, 2015
(In Thousands)
Current
30-89 Days Past Due
Non-Accrual (1)
Total Loans Held for Investment, Gross
 
 
 
 
 
 
Mortgage loans:
 
 
 
 
 
Single-family
$
354,082

$
1,335

$
10,544

$
365,961

 
Multi-family
344,774


2,246

347,020

 
Commercial real estate
99,198


1,699

100,897

 
Construction
8,191



8,191

Commercial business loans
557


109

666

Consumer loans
244



244

 
Total loans held for investment, gross
$
807,046

$
1,335

$
14,598

$
822,979

 
(1) All loans 90 days or greater past due are placed on non-accrual status.



18



The following tables summarize the Corporation’s allowance for loan losses and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.
 
 
Quarter Ended September 30, 2015
(In Thousands)
Single-family
Multi-family
Commercial Real Estate
Construction
Other Mortgage
Commercial Business
Consumer
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
Allowance at beginning of
  period
$
5,280

$
2,616

$
734

$
42

$

$
43

$
9

$
8,724

Provision (recovery) for loan
  losses
1,039

(729
)
(253
)
(2
)
2

(95
)

(38
)
Recoveries
69

56

216



85


426

Charge-offs
(78
)






(78
)
 
Allowance for loan losses,
  end of period
$
6,310

$
1,943

$
697

$
40

$
2

$
33

$
9

$
9,034

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
Individually evaluated for
  impairment
$
49

$

$

$

$

$
20

$

$
69

Collectively evaluated for
  impairment
6,261

1,943

697

40

2

13

9

8,965

 
Allowance for loan losses,
  end of period
$
6,310

$
1,943

$
697

$
40

$
2

$
33

$
9

$
9,034

 
 
 
 
 
 
 
 
 
 
Loans held for investment:
 
 
 
 
 
 
 
 
Individually evaluated for
  impairment
$
8,204

$
1,975

$
1,016

$

$

$
107

$

$
11,302

Collectively evaluated for
  impairment
348,759

353,467

93,564

6,185

72

292

243

802,582

 
Total loans held for
  investment, gross
$
356,963

$
355,442

$
94,580

$
6,185

$
72

$
399

$
243

$
813,884

Allowance for loan losses as
  a percentage of gross loans
  held for investment
1.77
%
0.55
%
0.74
%
0.65
%
2.78
%
8.27
%
3.70
%
1.11
%


19



 
 
Quarter Ended September 30, 2014
(In Thousands)
Single-family
Multi-family
Commercial Real Estate
Construction
Commercial Business
Consumer
Total
Allowance for loan losses:
 
 
 
 
 
 
 
Allowance at beginning of period
$
5,476

$
3,142

$
989

$
35

$
92

$
10

$
9,744

(Recovery) provision for loan losses
(714
)
(91
)
25

(30
)
(7
)
(1
)
(818
)
Recoveries
109

71




1

181

Charge-offs
(219
)





(219
)
 
Allowance for loan losses, end of
  period
$
4,652

$
3,122

$
1,014

$
5

$
85

$
10

$
8,888

 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
Individually evaluated for impairment
$

$

$

$

$
41

$

$
41

Collectively evaluated for impairment
4,652

3,122

1,014

5

44

10

8,847

 
Allowance for loan losses, end of
  period
$
4,652

$
3,122

$
1,014

$
5

$
85

$
10

$
8,888

 
 
 
 
 
 
 
 
 
Loans held for investment:
 
 
 
 
 
 
 
Individually evaluated for impairment
$
6,515

$
2,194

$
2,317

$

$
118

$

$
11,144

Collectively evaluated for impairment
370,718

312,680

98,410

4,378

991

271

787,448

 
Total loans held for investment,
  gross
$
377,233

$
314,874

$
100,727

$
4,378

$
1,109

$
271

$
798,592

Allowance for loan losses as a
  percentage of gross loans held for
  investment
1.23
%
0.99
%
1.01
%
0.11
%
7.66
%
3.69
%
1.11
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the periods indicated. Generally, a loan is placed on non-accrual status when it becomes 90 days past due as to principal or interest or if the loan is deemed impaired, after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance reserve have been individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell to establish realizable value. This analysis may identify a specific impairment amount needed or may conclude that no reserve is needed. Loans without a related allowance reserve have not been individually evaluated for impairment, but have been included in pools of homogeneous loans for evaluation of related allowance reserves.

20



 
 
 
At September 30, 2015
 
 
 
Unpaid
 
 
 
Net
 
 
 
Principal
Related
Recorded
 
Recorded
(In Thousands)
Balance
Charge-offs
Investment
Allowance(1)
Investment
 
 
 
 
 
 
 
 
Mortgage loans:
 
 
 
 
 
 
Single-family:
 
 
 
 
 
 
 
With a related allowance
$
5,078

$

$
5,078

$
(973
)
$
4,105

 
 
Without a related allowance(2)
9,387

(1,806
)
7,581


7,581

 
Total single-family
14,465

(1,806
)
12,659

(973
)
11,686

 
 
 
 
 
 
 
 
 
Multi-family:
 
 
 
 
 
 
 
Without a related allowance(2)
3,179

(1,204
)
1,975


1,975

 
Total multi-family
3,179

(1,204
)
1,975


1,975

 
 
 
 
 
 
 
 
 
Commercial real estate:
 
 
 
 
 
 
 
Without a related allowance(2)
1,016


1,016


1,016

 
Total commercial real estate
1,016


1,016


1,016

 
 
 
 
 
 
 
 
Commercial business loans:
 
 
 
 
 
 
With a related allowance
107


107

(20
)
87

Total commercial business loans
107


107

(20
)
87

 
 
 
 
 
 
 
 
Total non-performing loans
$
18,767

$
(3,010
)
$
15,757

$
(993
)
$
14,764


(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value credit adjustments.
(2) There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.

21



<
 
 
 
At June 30, 2015
 
 
 
Unpaid