NOTE (5) – Loans Receivable Held for Investment

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


	September 30, 2018		December 31, 2017
	(In thousands)
Real estate:
Single family	$	96,863	$	111,085
Multi-family		222,982		187,455
Commercial real estate		5,972		6,089
Church		29,138		30,848
Construction		2,050		1,678
Commercial – other		200		192
Consumer		9		7
Gross loans receivable before deferred loan costs and premiums		357,214		337,354
Unamortized net deferred loan costs and premiums		1,241		1,566
Gross loans receivable		358,455		338,920
Allowance for loan losses		(3,183)		(4,069)
Loans receivable, net	$	355,272	$	334,851

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


	Three Months Ended September 30, 2018
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	517	$	2,656	$	61	$	925	$	18	$	6	$	—	$	4,183
Provision for (recapture of) loan losses		(120)		(791)		(6)		(87)		3		(1)		2		(1,000)
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	397	$	1,865	$	55	$	838	$	21	$	5	$	2	$	3,183


	Three Months Ended September 30, 2017
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- 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


	Nine Months Ended September 30, 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
Provision for (recapture of) loan losses		(197)		(435)		(16)		(357)		4		(1)		2		(1,000)
Recoveries		—		—		—		114		—		—		—		114
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	397	$	1,865	$	55	$	838	$	21	$	5	$	2	$	3,183


	Nine Months Ended September 30, 2017
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- 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

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, 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	$	55	$	—	$	—	$	365	$	—	$	4	$	—	$	424
Collectively evaluated for impairment		342		1,865		55		473		21		1		2		2,759
Total ending allowance balance	$	397	$	1,865	$	55	$	838	$	21	$	5	$	2	$	3,183

Loans:
Loans individually evaluated for impairment	$	614	$	326	$	—	$	7,421	$	—	$	64	$	—	$	8,425
Loans collectively evaluated for impairment		96,621		224,078		5,972		21,166		2,048		136		9		350,030
Total ending loans balance	$	97,235	$	224,404	$	5,972	$	28,587	$	2,048	$	200	$	9	$	358,455


	December 31, 2017
	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	$	100	$	1	$	—	$	479	$	—	$	5	$	—	$	585
Collectively evaluated for impairment		494		2,299		71		602		17		1		—		3,484
Total ending allowance balance	$	594	$	2,300	$	71	$	1,081	$	17	$	6	$	—	$	4,069

Loans:
Loans individually evaluated for impairment	$	627	$	333	$	—	$	8,280	$	—	$	65	$	—	$	9,305
Loans collectively evaluated for impairment		110,897		188,585		6,096		22,232		1,671		127		7		329,615
Total ending loans balance	$	111,524	$	188,918	$	6,096	$	30,512	$	1,671	$	192	$	7	$	338,920

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


	September 30, 2018						December 31, 2017
					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	$	326	$	326	$	—	$	—	$	—	$	—
Church		4,697		2,872		—		5,140		3,291		—
With an allowance recorded:
Single family		614		614		55		627		627		100
Multi-family		—		—		—		333		333		1
Church		4,549		4,549		365		5,028		4,989		479
Commercial - other		64		64		4		65		65		5
Total	$	10,250	$	8,425	$	424	$	11,193	$	9,305	$	585

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, 2018				Three Months Ended September 30, 2017
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	616	$	8	$	634	$	7
Multi-family		327		5		631		5
Commercial real estate		—		—		—		—
Church		7,486		119		9,038		256
Commercial – other		64		1		65		2
Total	$	8,493	$	133	$	10,368	$	270


	Nine Months Ended September 30, 2018				Nine Months Ended September 30, 2017
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	620	$	23	$	638	$	21
Multi-family		330		17		636		28
Commercial real estate		—		—		397		104
Church		7,746		404		9,674		592
Commercial – other		64		3		65		4
Total	$	8,760	$	447	$	11,410	$	749

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, 2018
					Greater
	30-59		60-89		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	$	39	$	—	$	—	$	39	$	97,196	$	97,235
Multi-family		—		—		—		—		224,404		224,404
Commercial real estate		—		—		—		—		5,972		5,972
Church		—		—		—		—		28,587		28,587
Construction		—		—		—		—		2,048		2,048
Commercial - other		—		—		—		—		200		200
Consumer		—		—		—		—		9		9
Total	$	39	$	—	$	—	$	39	$	358,416	$	358,455


	December 31, 2017
					Greater
	30-59		60-89		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	$	—	$	50	$	—	$	50	$	111,474	$	111,524
Multi-family		—		—		—		—		188,918		188,918
Commercial real estate		—		—		—		—		6,096		6,096
Church		341		—		—		341		30,171		30,512
Construction		—		—		—		—		1,671		1,671
Commercial - other		—		—		—		—		192		192
Consumer		—		—		—		—		7		7
Total	$	341	$	50	$	—	$	391	$	338,529	$	338,920

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

The above non-accrual loans were not delinquent, but did not qualify for accrual status as of the periods indicated. There were no loans 90 days or more delinquent that were accruing interest as of September 30, 2018 or December 31, 2017.

Troubled Debt Restructurings

At September 30, 2018, loans classified as troubled debt restructurings (“TDRs”) totaled $8.1 million, of which $856 thousand were included in non-accrual loans and $7.2 million were on accrual status. At December 31, 2017, loans classified as TDRs totaled $8.9 million, of which $1.4 million were included in non-accrual loans and $7.5 million were on accrual status. The Company has allocated $420 thousand and $585 thousand of specific reserves for accruing TDRs as of September 30, 2018 and December 31, 2017, 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, 2018 and December 31, 2017, 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, 2018 and 2017.

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, 2018
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	97,186	$	—	$	39	$	10	$	—	$	—
Multi-family		223,455		—		—		949		—		—
Commercial real estate		5,972		—		—		—		—		—
Church		22,397		1,300		—		4,890		—		—
Construction		2,048		—		—		—		—		—
Commercial - other		136		—		—		64		—		—
Consumer		9		—		—		—		—		—
Total	$	351,203	$	1,300	$	39	$	5,913	$	—	$	—


	December 31, 2017
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	111,513	$	—	$	—	$	11	$	—	$	—
Multi-family		187,946		—		—		972		—		—
Commercial real estate		5,974		122		—		—		—		—
Church		24,474		691		—		5,347		—		—
Construction		1,671		—		—		—		—		—
Commercial - other		127		—		—		65		—		—
Consumer		7		—		—		—		—		—
Total	$	331,712	$	813	$	—	$	6,395	$	—	$	—

September 30, 2018

December 31, 2017

(In thousands)

Loans receivable held for investment:

Total non-accrual loans