NOTE (5) – Loans Receivable Held for Investment

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

	March 31, 2021			December 31, 2020
	(In thousands)
Real estate:
Single family	$	44,402		$	48,217
Multi-family		279,554			272,387
Commercial real estate		24,129			24,289
Church		15,799			16,658
Construction		469			429
Commercial – other		54			57
Consumer		7			7
Gross loans receivable before deferred loan costs and premiums		364,414			362,044
Unamortized net deferred loan costs and premiums		1,321			1,300
Gross loans receivable		365,735			363,344
Allowance for loan losses		(3,215	)		(3,215	)
Loans receivable, net	$	362,520		$	360,129

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

	Three Months Ended March 31, 2021
	Real Estate
	Single family			Multi- family		Commercial real estate			Church			Construction		Commercial - other		Consumer			Total
	(In thousands)
Beginning balance	$	296		$	2,433	$	222		$	237		$	22	$	4	$	1		$	3,215
Provision for (recapture of) loan losses		(21	)		40		(3	)		(16	)		-		1		(1	)		-
Recoveries		-			-		-			-			-		-		-			-
Loans charged off		-			-		-			-			-		-		-			-
Ending balance	$	275		$	2,473	$	219		$	221		$	22	$	5	$	-		$	3,215

	Three Months Ended March 31, 2020
	Real Estate
	Single family			Multi- family		Commercial real estate		Church			Construction			Commercial - 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

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, 2021
	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	$	87	$	-	$	-	$	48	$	-	$	1	$	-	$	136
Collectively evaluated for impairment		188		2,473		219		173		22		4		-		3,079
Total ending allowance balance	$	275	$	2,473	$	219	$	221	$	22	$	5	$	-	$	3,215
Loans:
Loans individually evaluated for impairment	$	568	$	293	$	-	$	3,765	$	-	$	45	$	-	$	4,671
Loans collectively evaluated for impairment		43,969		280,753		24,164		11,693		469		9		7		361,064
Total ending loans balance	$	44,537	$	281,046	$	24,164	$	15,458	$	469	$	54	$	7	$	365,735

	December 31, 2020
	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	$	89	$	-	$	-	$	52	$	-	$		$	-	$	141
Collectively evaluated for impairment		207		2,433		222		185		22		4		1		3,074
Total ending allowance balance	$	296	$	2,433	$	222	$	237	$	22	$	4	$	1	$	3,215
Loans:
Loans individually evaluated for impairment	$	573	$	298	$	-	$	3,813	$	-	$	47	$	-	$	4,731
Loans collectively evaluated for impairment		47,784		273,566		24,322		12,495		430		9		7		358,613
Total ending loans balance	$	48,357	$	273,864	$	24,322	$	16,308	$	430	$	56	$	7	$	363,344

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

	March 31, 2021						December 31, 2020
	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:
Single family	$	-	$	-	$	-	$	2	$	1	$	-
Multi-family		293		293		-		298		298		-
Church		2,507		1,942		-		2,527		1,970		-
With an allowance recorded:
Single family		568		568		87		573		573		88
Church		1,823		1,823		48		1,842		1,842		52
Commercial - other		45		45		1		47		47		1
Total	$	5,236	$	4,671	$	136	$	5,289	$	4,731	$	141

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, 2021				Three Months Ended March 31, 2020
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
Single family	$	571	$	7	$	608	$	7
Multi-family		296		5		311		5
Church		3,789		63		4,296		236
Commercial – other		46		1		62		1
Total	$	4,702	$	76	$	5,277	$	249

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 $19 thousand and $23 thousand for the three months ended March 31, 2021 and 2020, 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, 2021
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	-	$	-	$	-	$	-	$	44,537	$	44,537
Multi-family		-		-		-		-		281,046		281,046
Commercial real estate		-		-		-		-		24,164		24,164
Church		-		-		-		-		15,458		15,458
Construction		-		-		-		-		469		469
Commercial - other		-		-		-		-		54		54
Consumer		-		-		-		-		7		7
Total	$	-	$	-	$	-	$	-	$	365,735	$	365,735

	December 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	-	$	-	$	-	$	-	$	48,357	$	48,357
Multi-family		-		-		-		-		273,864		273,864
Commercial real estate		-		-		-		-		24,322		24,322
Church		-		-		-		-		16,308		16,308
Construction		-		-		-		-		430		430
Commercial - other		-		-		-		-		56		56
Consumer		-		-		-		-		7		7
Total	$	-	$	-	$	-	$	-	$	363,344	$	363,344

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

	March 31, 2021		December 31, 2020
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	-	$	1
Church		760		786
Total non-accrual loans	$	760	$	787

There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2021 or December 31, 2020.

Troubled Debt Restructurings

At March 31, 2021, loans classified as troubled debt restructurings (“TDRs”) totaled $4.1 million, of which $221 thousand were included in non-accrual loans and $3.9 million were on accrual status. At December 31, 2020, loans classified as TDRs totaled $4.2 million, of which $232 thousand were included in non-accrual loans and $4.0 million were on accrual status. The Company has allocated $136 thousand and $141 thousand of specific reserves for TDRs as of March 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, 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, 2021 and 2020.

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, 2021
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	44,536	$ ‑		$	-	$	-	$	-	$	-
Multi-family		280,689		-		-		358		-		-
Commercial real estate		22,684		1,480		-	‑			-		-
Church		12,093		652		-		2,713		-		-
Construction		469	‑			-	‑			-		-
Commercial - other		9	‑			-		45		-		-
Consumer		7	‑			-	‑			-		-
Total	$	360,487	$	2,132	$	-	$	3,116	$	-	$	-

	December 31, 2020
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	48,357	$ ‑		$	-	$	1	$	-	$	-
Multi-family		273,501		-		-		362		-		-
Commercial real estate		22,834		1,488		-	‑			-		-
Church		12,899		657		-		2,752		-		-
Construction		430	‑			-	‑			-		-
Commercial - other		9	‑			-		47		-		-
Consumer		7	‑			-	‑			-		-
Total	$	358,037	$	2,145	$	-	$	3,162	$	-	$	-