NOTE (5) – Loans Receivable Held for Investment

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

	September 30, 2017		December 31, 2016
	(In thousands)
Real estate:
Single family	$	89,521	$	104,807
Multi-family	194,483		229,566
Commercial real estate	6,129		8,914
Church	31,188		37,826
Construction	1,394		837
Commercial – other	351		308
Consumer	7		6

Gross loans receivable before deferred loan costs and premiums	323,073		382,264
Unamortized net deferred loan costs and premiums	1,662		1,793

Gross loans receivable	324,735		384,057
Allowance for loan losses	(4,213)		(4,603)

Loans receivable, net	$	320,522	$	379,454

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

	Three Months Ended September 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	320	$	2,719	$	77		$	1,104	$	9	$	17	$	-		$	4,246
Provision for (recapture of) loan losses	219		(297)		(4)			(214)		5		(9)		-			(300)
Recoveries	-		-		-			267		-		-		-			267
Loans charged off	-		-		-			-		-		-		-			-

Ending balance	$	539	$	2,422	$	73		$	1,157	$	14	$	8	$	-		$	4,213


	Three Months Ended September 30, 2016

	Real Estate

	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total

	(In thousands)
Beginning balance	$	441	$	2,247	$	240		$	1,596	$	3	$	17	$		1	$	4,545
Provision for (recapture of) loan losses	(68)		200		2			(133)		-		(1)		-			-
Recoveries	47		-		-			4		-		1		-			52
Loans charged off	-		-		-			-		-		-		-			-

Ending balance	$	420	$	2,447	$		242	$	1,467	$	3	$	17	$		1	$		4,597

	Nine Months Ended September 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	367	$	2,659	$	215		$	1,337	$	8	$	17	$	-		$	4,603
Provision for (recapture of) loan losses	142		(237)		(142)			(710)		6		(9)		-			(950)
Recoveries	30		-		-			530		-		-		-			560
Loans charged off	-		-		-			-		-		-		-			-

Ending balance	$	539	$	2,422	$	73		$	1,157	$	14	$	8	$	-		$	4,213


	Nine Months Ended September 30, 2016

	Real Estate

	Single family		Multi- family		Commercial real estate			Church		Construction		Commercial - other		Consumer			Total

	(In thousands)
Beginning balance	$	597	$	1,658	$	469		$	2,083	$	3	$	18	$		-	$	4,828
Provision for (recapture of) loan losses	(224)		789		(475)			(632)		-		(9)		1			(550)
Recoveries	47		-		248			16		-		8		-			319
Loans charged off	-		-		-			-		-		-		-			-

Ending balance	$	420	$	2,447	$		242	$	1,467	$	3	$	17	$		1	$		4,597

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:

	September 30, 2017
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	102	$	1	$	-	$	521	$	-	$	5	$	-	$	629
Collectively evaluated for impairment	437		2,421		73		636		14		3		-		3,584

Total ending allowance balance	$	539	$	2,422	$	73	$	1,157	$	14	$	8	$	-	$	4,213

Loans:
Loans individually evaluated for impairment	$	631	$	630	$	-	$	8,435	$	-	$	65	$	-	$	9,761
Loans collectively evaluated for impairment	89,348		195,398		6,136		22,418		1,381		286		7		314,974

Total ending loans balance	$	89,979	$	196,028	$	6,136	$	30,853	$	1,381	$	351	$	7	$	324,735

	December 31, 2016
	Real Estate
	Single family		Multi- family		Commercial real estate		Church		Construction		Commercial - other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	125	$	-	$	-	$	516	$	-	$	15	$	-	$	656
Collectively evaluated for impairment	242		2,659		215		821		8		2		-		3,947

Total ending allowance balance	$	367	$	2,659	$	215	$	1,337	$	8	$	17	$	-	$	4,603

Loans:
Loans individually evaluated for impairment	$	644	$	642	$	-	$	10,545	$	-	$	66	$	-	$	11,897
Loans collectively evaluated for impairment	104,688		230,798		8,921		26,678		827		242		6		372,160

Total ending loans balance	$	105,332	$	231,440	$	8,921	$	37,223	$	827	$	308	$	6	$	384,057

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

	September 30, 2017						December 31, 2016
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Multi-family	$	295	$	295	$	-	$	642	$	642	$	-
Church	5,181		3,398		-		5,946		3,589		-
With an allowance recorded:
Single family	631		631		102		644		644		125
Multi-family	335		335		1		-		-		-
Church	5,077		5,037		521		7,330		6,956		516
Commercial - other	65		65		5		66		66		15

Total	$	11,584	$	9,761	$	629	$	14,628	$	11,897	$	656

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.


	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized
					(In thousands)
Single family		$	634		$	7		$	638		$	21
Multi-family		631			5			636			28
Commercial real estate		-			-			397			104
Church		9,038			256			9,674			592
Commercial – other		65			2			65			4

Total		$	10,368		$	270		$	11,410		$	749



	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016

	Average Recorded Investment			Cash Basis Interest Income Recognized			Average Recorded Investment			Cash Basis Interest Income Recognized

					(In thousands)
Single family		$	780		$	232		$	878		$	246
Multi-family		804			92			997			144
Commercial real estate		425			4			1,277			271
Church		10,766			122			10,966			369
Commercial –other		66			2			66			4

Total		$	12,841		$	452		$	14,184		$	1,034

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.

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

	September 30, 2017
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	54		$	-		$	54		$	89,925
Multi-family		-			295			-			295			195,733
Commercial real estate		-			-			-			-			6,136
Church		17			-			371			388			30,465
Construction		-			-			-			-			1,381
Commercial - other		-			-			-			-			351
Consumer		-			-			-			-			7

Total		$	17		$	349		$	371		$	737		$	323,998

	December 31, 2016
	30-59 Days Past Due			60-89 Days Past Due			Greater than 90 Days Past Due			Total Past Due			Current
	(In thousands)
Loans receivable held for investment:
Single family		$	-		$	64		$	-		$	64		$	105,268
Multi-family		-			-			-			-			231,440
Commercial real estate		1,324			-			-			1,324			7,597
Church		-			-			-			-			37,223
Construction		-			-			-			-			827
Commercial - other		-			-			-			-			308
Consumer		-			-			-			-			6

Total		$	1,324		$	64		$	-		$	1,388		$	382,669

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

	September 30, 2017			December 31, 2016
	(In thousands)
Loans receivable held for investment:
Multi-family		$	295		$	-
Church		1,865			2,944

Total non-accrual loans		$	2,160		$	2,944

There were no loans 90 days or more delinquent that were accruing interest as of September 30, 2017 or December 31, 2016.

Troubled Debt Restructurings

At September 30, 2017, loans classified as troubled debt restructurings (“TDRs”) totaled $9.4 million, of which $1.8 million were included in non-accrual loans and $7.6 million were on accrual status. At December 31, 2016, loans classified as TDRs totaled $11.5 million, of which $2.5 million were included in non-accrual loans and $9.0 million were on accrual status. The Company has allocated $629 thousand and $656 thousand of specific reserves for accruing TDRs as of September 30, 2017 and December 31, 2016, 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 of time 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 September 30, 2017 and December 31, 2016, 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 three or nine months ended September 30, 2017 and 2016.

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, on the basis of 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:

	September 30, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	89,967	$	-	$	-	$	12	$	-	$	-
Multi-family	194,754		-		-		1,274		-		-
Commercial real estate	6,013		123		-		-		-		-
Church	24,692		695		-		5,466		-		-
Construction	1,381		-		-		-		-		-
Commercial - other	286		-		-		65		-		-
Consumer	7		-		-		-		-		-

Total	$	317,100	$	818	$	-	$	6,817	$	-	$	-


	December 31, 2016

	Pass		Watch		Special Mention		Substandard		Doubtful		Loss

	(In thousands)
Single family	$	105,332	$	-	$	-	$	-	$	-	$	-
Multi-family	228,522		1,274		342		1,302		-		-
Commercial real estate	6,965		-		-		1,956		-		-
Church	27,560		1,143		823		7,697		-		-
Construction	827		-		-		-		-		-
Commercial - other	242		-		-		66		-		-
Consumer	6		-		-		-		-		-

Total	$	369,454	$	2,417	$	1,165	$	11,021	$	-	$	-