NOTE (5) – Loans Receivable Held for Investment

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


	March 31, 2019		December 31, 2018
	(In thousands)
Real estate:
Single family	$	89,043	$	91,835
Multi-family		245,551		231,870
Commercial real estate		6,890		5,802
Church		23,376		25,934
Construction		1,749		1,876
Commercial – other		234		226
Consumer		15		5
Gross loans receivable before deferred loan costs and premiums		366,858		357,548
Unamortized net deferred loan costs and premiums		1,086		937
Gross loans receivable		367,944		358,485
Allowance for loan losses		(2,929)		(2,929)
Loans receivable, net	$	365,015	$	355,556

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


	Three Months Ended March 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		(22)		110		10		(286)		(1)		(1)		—		(190)
Recoveries		—		—		—		190		—		—		—		190
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	—	$	2,929


	Three Months Ended March 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
Provision for (recapture of) loan losses		(6)		208		(6)		(190)		(6)		—		—		—
Recoveries		—		—		—		114		—		—		—		114
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	588	$	2,508	$	65	$	1,005	$	11	$	6	$	—	$	4,183

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:


	March 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	$	38	$	—	$	—	$	145	$	—	$	3	$	—	$	186
Collectively evaluated for impairment		309		1,990		62		362		18		2		—		2,743
Total ending allowance balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	—	$	2,929

Loans:
Loans individually evaluated for impairment	$	606	$	321	$	—	$	4,181	$	—	$	63	$	—	$	5,171
Loans collectively evaluated for impairment		88,762		246,683		6,894		18,503		1,745		171		15		362,773
Total ending loans balance	$	89,368	$	247,004	$	6,894	$	22,684	$	1,745	$	234	$	15	$	367,944


	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:


	March 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	$	321	$	321	$	—	$	323	$	323	$	—
Church		3,492		2,165		—		4,666		2,803		—
With an allowance recorded:
Single family		605		606		38		610		610		53
Church		2,017		2,016		145		2,580		2,580		170
Commercial - other		63		63		3		64		64		4
Total	$	6,498	$	5,171	$	186	$	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:


	Three Months Ended March 31, 2019				Three Months Ended March 31, 2018
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	608	$	8	$	625	$	8
Multi-family		322		6		332		6
Church		5,001		430		7,981		174
Commercial – other		64		1		65		1
Total	$	5,995	$	445	$	9,003	$	189

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 $40 thousand and $86 thousand for the three months ended March 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:


	March 31, 2019
					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	$	—	$	—	$	34	$	34	$	89,334	$	89,368
Multi-family		—		—		—		—		247,004		247,004
Commercial real estate		—		—		—		—		6,894		6,894
Church		259		283		—		542		22,142		22,684
Construction		—		—		—		—		1,745		1,745
Commercial - other		—		—		—		—		234		234
Consumer		—		—		—		—		15		15
Total	$	259	$	283	$	34	$	576	$	367,368	$	367,944


	December 31, 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	$	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:


	March 31, 2019		December 31, 2018
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	34	$	—
Church		748		911
Total non-accrual loans	$	782	$	911

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

Troubled Debt Restructurings

At March 31, 2019, loans classified as troubled debt restructurings (“TDRs”) totaled $5.2 million, of which $748 thousand were included in non-accrual loans and $4.4 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 $186 thousand and $227 thousand of specific reserves for TDRs as of March 31, 2019 and December 31, 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 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 March 31, 2019 and December 31, 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 three months ended March 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, 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:


	March 31, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	89,324	$	—	$	—	$	44	$	—	$	—
Multi-family		245,808		—		536		660		—		—
Commercial real estate		6,894		—		—		—		—		—
Church		17,670		667		259		4,088		—		—
Construction		1,745		—		—		—		—		—
Commercial - other		171		—		—		63		—		—
Consumer		15		—		—		—		—		—
Total	$	361,627	$	667	$	795	$	4,855	$	—	$	—


	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	$	—	$	—