Note 4 – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the periods indicated:


	December 31, 2019		December 31, 2018
	(In thousands)
Real estate:
Single family	$	72,883	$	91,835
Multi-family		287,378		231,870
Commercial real estate		14,728		5,802
Church		21,301		25,934
Construction		3,128		1,876
Commercial – other		262		226
Consumer		21		5
Gross loans receivable before deferred loan costs and premiums		399,701		357,548
Unamortized net deferred loan costs and premiums		1,328		937
Gross loans receivable		401,029		358,485
Allowance for loan losses		(3,182)		(2,929)
Loans receivable, net	$	397,847	$	355,556

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:


	For the year ended December 31, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		– other		Consumer		Total
	(In thousands)
Beginning balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Provision for (recapture of) loan losses		(57)		439		81		(501)		29		1		1		(7)
Recoveries		—		—		—		260		—		—		—		260
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182


	For the year ended December 31, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		– other		Consumer		Total
	(In thousands)
Beginning balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	—	$	4,069
Recapture of loan losses		(225)		(420)		(19)		(592)		2		—		—		(1,254)
Recoveries		—		—		—		114		—		—		—		114
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of and for the periods indicated:


	December 31, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		– other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	60	$	—	$	—	$	85	$	—	$	2	$	—	$	147
Collectively evaluated for impairment		252		2,319		133		277		48		5		1		3,035
Total ending allowance balance	$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182
Loans:
Loans individually evaluated for impairment	$	611	$	313	$	—	$	4,356	$	—	$	63	$	—	$	5,343
Loans collectively evaluated for impairment		72,501		288,730		14,818		16,292		3,125		199		21		395,686
Total ending loans balance	$	73,112	$	289,043	$	14,818	$	20,648	$	3,125	$	262	$	21	$	401,029


	December 31, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		– other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	53	$	—	$	—	$	170	$	—	$	4	$	—	$	227
Collectively evaluated for impairment		316		1,880		52		433		19		2		—		2,702
Total ending allowance balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Loans:
Loans individually evaluated for impairment	$	610	$	323	$	—	$	5,383	$	—	$	64	$	—	$	6,380
Loans collectively evaluated for impairment		91,567		232,986		5,800		19,713		1,872		162		5		352,105
Total ending loans balance	$	92,177	$	233,309	$	5,800	$	25,096	$	1,872	$	226	$	5	$	358,485

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:


	December 31, 2019						December 31, 2018
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
	(In thousands)
With no related allowance recorded:
Multi-family	$	313	$	313	$	—	$	323	$	323	$	—
Church		3,491		2,446		—		4,666		2,803		—
With an allowance recorded:
Single family		593		593		60		610		610		53
Multi-family		—		—		—		—		—		—
Church		1,928		1,928		85		2,580		2,580		170
Commercial - other		63		63		2		64		64		4
Total	$	6,388	$	5,343	$	147	$	8,243	$	6,380	$	227

The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:


	For the year ended December 31, 2019				For the year ended December 31, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
		(In thousands)
Single family	$	626	$	29	$	618	$	30
Multi-family		318		22		329		23
Commercial real estate		—		—		—		—
Church		5,017		939		7,893		398
Commercial – other		63		5		64		4
Total	$	6,024	$	995	$	8,904	$	455

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off. Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off. When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $120 thousand and $280 thousand for the years ended December 31, 2019 and 2018, respectively, and were not included in the consolidated results of operations.

The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:


	December 31, 2019
	30-59		60-89		Greater than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	18	$	—	$	—	$	18	$	73,094	$	73,112
Multi-family		—		—		—		—		289,043		289,043
Commercial real estate		—		—		—		—		14,818		14,818
Church		—		—		—		—		20,648		20,648
Construction		—		—		—		—		3,125		3,125
Commercial – other		—		—		—		—		262		262
Consumer		—		—		—		—		21		21
Total	$	18	$	—	$	—	$	18	$	401,011	$	401,029


	December 31, 2018
	30-59		60-89		Greater than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	35	$	—	$	—	$	35	$	92,142	$	92,177
Multi-family		—		—		—		—		233,309		233,309
Commercial real estate		—		—		—		—		5,800		5,800
Church		—		—		—		—		25,096		25,096
Construction		—		—		—		—		1,872		1,872
Commercial – other		—		—		—		—		226		226
Consumer		—		—		—		—		5		5
Total	$	35	$	—	$	—	$	35	$	358,450	$	358,485

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:


	December 31, 2019		December 31, 2018
Loans receivable held for investment:	(In thousands)
Single family	$	18	$	—
Church		406		911
Total non-accrual loans	$	424	$	911

There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2019 or December 31, 2018.

Troubled Debt Restructurings

At December 31, 2019, loans classified as troubled debt restructurings (“TDRs”) totaled $4.7 million, of which $406 thousand were included in non-accrual loans and $4.3 million were on accrual status. At December 31, 2018, loans classified as TDRs totaled $6.4 million, of which $591 thousand were included in non-accrual loans and $5.8 million were on accrual status. The Company has allocated $147 thousand and $227 thousand of specific reserves for accruing TDRs as of December 31, 2019 and 2018, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required. As of December 31, 2019 and 2018, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. No loans were modified during the years ended December 31, 2019 and 2018.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings:

Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists, but correction is anticipated within an acceptable time frame.

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms. Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:


	December 31, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	73,094	$	—	$	—	$	18	$	—	$	—
Multi-family		288,251		411		—		381		—		—
Commercial real estate		14,818		—		—		—		—		—
Church		16,546		411		—		3,691		—		—
Construction		3,125		—		—		—		—		—
Commercial – other		199		—		—		63		—		—
Consumer		21		—		—		—		—		—
Total	$	396,054	$	822	$	—	$	4,153	$	—	$	—


	December 31, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	92,132	$	—	$	35	$	10	$	—	$	—
Multi-family		232,642		—		—		667		—		—
Commercial real estate		5,800		—		—		—		—		—
Church		19,678		672		—		4,746		—		—
Construction		1,872		—		—		—		—		—
Commercial – other		162		—		—		64		—		—
Consumer		5		—		—		—		—		—
Total	$	352,291	$	672	$	35	$	5,487	$	—	$	—