NOTE (5) – Loans Receivable Held for Investment

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


	March 31, 2020		December 31, 2019
	(In thousands)
Real estate:
Single family	$	64,094	$	72,883
Multi-family		283,629		287,378
Commercial real estate		14,653		14,728
Church		19,907		21,301
Construction		717		3,128
Commercial – other		268		262
Consumer		24		21
Gross loans receivable before deferred loan costs and premiums		383,292		399,701
Unamortized net deferred loan costs and premiums		1,253		1,328
Gross loans receivable		384,545		401,029
Allowance for loan losses		(3,211)		(3,182)
Loans receivable, net	$	381,334	$	397,847

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


	Three Months Ended March 31, 2020
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182
Provision for (recapture of) loan losses		(4)		89		7		(39)		(24)		—		—		29
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	308	$	2,408	$	140	$	323	$	24	$	7	$	1	$	3,211


	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

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, 2020
	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	$	73	$	—	$	—	$	74	$	—	$	2	$	—	$	149
Collectively evaluated for impairment		235		2,408		140		249		24		5		1		3,062
Total ending allowance balance	$	308	$	2,408	$	140	$	323	$	24	$	7	$	1	$	3,211

Loans:
Loans individually evaluated for impairment	$	602	$	310	$	—	$	4,178	$	—	$	62	$	—	$	5,152
Loans collectively evaluated for impairment		63,684		284,929		14,742		15,091		717		206		24		379,393
Total ending loans balance	$	64,286	$	285,239	$	14,742	$	19,269	$	717	$	268	$	24	$	384,545


	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

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


	March 31, 2020						December 31, 2019
					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:
Single family	$	14	$	14	$	—	$	—	$	—	$	—
Multi-family		310		310		—		313		313		—
Church		2,913		2,283		—		3,491		2,446		—
With an allowance recorded:
Single family		588		588		73		593		593		60
Church		1,895		1,895		74		1,928		1,928		85
Commercial - other		62		62		2		63		63		2
Total	$	5,782	$	5,152	$	149	$	6,388	$	5,343	$	147

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, 2020				Three Months Ended March 31, 2019
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	608	$	7	$	608	$	8
Multi-family		311		5		322		6
Church		4,296		236		5,001		430
Commercial – other		62		1		64		1
Total	$	5,277	$	249	$	5,995	$	445

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 $23 thousand and $40 thousand for the three months ended March 31, 2020 and 2019, 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, 2020
					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	$	14	$	—	$	—	$	14	$	64,272	$	64,286
Multi-family		—		—		—		—		285,239		285,239
Commercial real estate		—		—		—		—		14,742		14,742
Church		—		—		—		—		19,269		19,269
Construction		—		—		—		—		717		717
Commercial - other		—		—		—		—		268		268
Consumer		—		—		—		—		24		24
Total	$	14	$	—	$	—	$	14	$	384,531	$	384,545


	December 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	$	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

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


	March 31, 2020		December 31, 2019
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	14	$	18
Church		266		406
Total non-accrual loans	$	280	$	424

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2020 or December 31, 2019.

Troubled Debt Restructurings

At March 31, 2020, loans classified as troubled debt restructurings (“TDRs”) totaled $4.5 million, of which $265 thousand were included in non-accrual loans and $4.3 million were on accrual status. At December 31, 2019, loans classified as TDRs totaled $4.7 million, of which $406 thousand were included in non-accrual loans and $4.3 million were on accrual status. The Company has allocated $149 thousand and $147 thousand of specific reserves for TDRs as of March 31, 2020 and December 31, 2019, 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, 2020 and December 31, 2019, 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, 2020 and 2019.

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.

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, 2020
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	64,272	$	—	$	—	$	14	$	—	$	—
Multi-family		284,456		406		—		377		—		—
Commercial real estate		14,742		—		—		—		—		—
Church		15,330		1,080		—		2,859		—		—
Construction		717		—		—		—		—		—
Commercial - other		206		—		—		62		—		—
Consumer		24		—		—		—		—		—
Total	$	379,747	$	1,486	$	—	$	3,312	$	—	$	—


	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	$	—	$	—