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Loans Receivable Held for Investment
 3 Months Ended
Mar. 31, 2022
Loans Receivable Held for Investment [Abstract]  
Loans Receivable Held for Investment
NOTE (5) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the dates indicated:
   
March 31, 2022
    
December 31, 2021
  
   
(In thousands)
  
Real estate:
            
Single family
  
$
40,145
    
$
45,372
  
Multi-family
    
401,252
      
393,704
  
Commercial real estate
    
90,402
      
93,193
  
Church
    
21,365
      
22,503
  
Construction
    
33,938
      
32,072
  
Commercial – other
    
53,880
      
46,539
  
SBA loans
     15,488       18,837  
Consumer
    
146
      
-
  
Gross loans receivable before deferred loan costs and premiums
    
656,616
      
652,220
  
Unamortized net deferred loan costs and premiums
    
1,674
      
1,526
  
Gross loans receivable
    
658,290
      
653,746
  
Credit and interest marks on purchased loans, net
     (1,376 )     (1,842 )
Allowance for loan losses
    
(3,539
)
    
(3,391
)
Loans receivable, net
  
$
653,375
    
$
648,513
  


As of March 31, 2022 and December 31, 2021, the commercial loan category above included $14.7 million and $18.0 million, respectively, of loans issued under the SBA’s Paycheck Protection Program (PPP). PPP loans have terms of two to five years and earn interest at 1%. PPP loans are fully guaranteed by the SBA and have virtually no risk of loss. The Bank expects the vast majority of the PPP loans to be fully forgiven by the SBA.


As part of the CFBanc Merger, the Company acquired loans for which there was, at acquisition, evidence of credit deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. Prior to the CFBanc Merger, there were no such acquired loans. The carrying amount of those loans as of March 31, 2022, and December 31, 2021, was as follows:

 
  
March 31, 2022
    
December 31, 2021
  
 
  
(In thousands)
  
Real estate:
            
Single family
  
$
56
    
$
558
  
Commercial real estate
    
-
      
221
  
Commercial – other
    
109
      
104
  
   
$
165
    
$
883
  


On the acquisition date, the amount by which the undiscounted expected cash flows of the PCI loans exceeded the estimated fair value of the loan is the accretable yield. The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted cash flows and the current carrying value of the PCI loan. At March 31, 2022, and December 31, 2021, none of the Company’s PCI loans were classified as nonaccrual.


The following table summarizes the accretable yield on the PCI loans for the three months ended March 31, 2022:

 
  
March 31, 2022
  
   
(In thousands)
  
       
Balance at the beginning of the period
  
$
883
  
Deduction due to Payoffs
    
(707
)
Accretion
    
11
  
Balance at the end of the period
  
$
165
  


The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:
   
For the three months ended March 31, 2022
  
   
Real Estate
                    
   
Single
family
    
Multi-
family
    
Commercial
real estate
    
Church
    
Construction
    
Commercial - other
    
Consumer
    
Total
  
Beginning balance
  
$
145
    
$
2,657
    
$
236
    
$
103
    
$
212
    
$
23
    
$
15
    
$
3,391
  
Provision for (recapture of) loan losses
    
12
   
114
      
(20
)
    
(40
)
    
25
      
57
      
-
   
148
  
Recoveries
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Loans charged off
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Ending balance
  
$
157
    
$
2,771
    
$
217
    
$
63
    
$
236
    
$
95
    
$
-
    
$
3,539
  

   
For the three months ended March 31, 2021
  
   
Real Estate
                    
   
Single
family
    
Multi-
family
    
Commercial real estate
    
Church
    
Construction
    
Commercial - other
    
Consumer
    
Total
  
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
    
$
-
    
$
5
    
$
-
    
$
3,215
  


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 the dates indicated:
   
March 31, 2022
  
   
Real Estate
                    
   
Single
family
    
Multi-
family
    
Commercial
real estate
    
Church
    
Construction
    
Commercial - other
    
SBA
    
Total
  
   
(In thousands)
  
Allowance for loan losses:
                                                
Ending allowance balance attributable to loans:
                                      
Individually evaluated for impairment
  
$
3
    
$
-
    
$
-
    
$
4
    
$
-
    
$
-
    
$
-
    
$
7
  
Collectively evaluated for impairment
    
154
      
2,771
      
217
      
59
      
236
      
95
      
-
      
3,532
  
Total ending allowance balance
  
$
157
    
$
2,771
    
$
217
    
$
63
    
$
236
    
$
95
    
$
-
    
$
3,539
  
Loans:
                                                                
Loans individually evaluated for impairment
  
$
64
    
$
277
    
$
-
    
$
1,907
    
$
-
    
$
-
    
$
-
    
$
2,248
  
Loans collectively evaluated for impairment
    
31,151
      
368,647
      
24,594
      
8,062
      
26,606
      
17,281
      
-
      
476,341
  
Subtotal
     31,215       368,924       24,594       9,969       26,606       17,281       -       478,589  
Loans acquired in the Merger
     8,930       34,002       65,808       11,396       7,332       36,599       15,488       179,701  
Total ending loans balance
  
$
40,145
    
$
402,926
    
$
90,402
    
$
21,365
    
$
33,938
    
$
53,880
    
$
15,488
    
$
658,290
  

   
December 31, 2021
  
   
Real Estate
                    
   
Single
family
    
Multi-
family
    
Commercial
real estate
    
Church
    
Construction
    
Commercial - other
    
SBA
    
Total
  
   
(In thousands)
  
Allowance for loan losses:
                                                
Ending allowance balance attributable to loans:
                                      
Individually evaluated for impairment
  
$
3
    
$
-
    
$
-
    
$
4
    
$
-
    
$
 -    
$
-
    
$
7
  
Collectively evaluated for impairment
    
142
      
2,657
      
236
      
99
      
212
      
23
      
15
      
3,384
  
Total ending allowance balance
  
$
145
    
$
2,657
    
$
236
    
$
103
    
$
212
    
$
23
    
$
15
    
$
3,391
  
Loans:
                                                                
Loans individually evaluated for impairment
  
$
65
    
$
282
    
$
-
    
$
1,954
    
$
-
    
$
-
    
$
-
    
$
2,301
  
Loans collectively evaluated for impairment
    
32,599
      
353,179
      
25,507
      
9,058
      
24,225
      
3,124
      
-
      
447,692
  
Subtotal     32,664       353,461       25,507       11,012       24,225       3,124       -       449,993  
Loans acquired in the Merger     12,708       41,769       67,686       11,491       7,847       43,415       18,837       203,753  
Total ending loans balance
  
$
45,372
    
$
395,230
    
$
93,193
    
$
22,503
    
$
32,072
    
$
46,539
    
$
18,837
    
$
653,746
  



The following table presents information related to loans individually evaluated for impairment by loan type as of the dates indicated:
   
March 31, 2022
    
December 31, 2021
  
   
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
   $
277
     $
277
     $
-
     $
282
     $
282
     $
-
  
Church
    
1,811
      
1,810
      
-
      
1,854
      
1,854
      
-
  
With an allowance recorded:
                                                
Single family
    
64
      
64
      
3
      
65
      
65
      
3
  
Church
    
96
      
96
      
4
      
100
      
100
      
4
  
Total
  
$
2,248
    
$
2,248
    
$
7
    
$
2,301
    
$
2,301
    
$
7
  


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 table presents 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, 2022
    
Three Months Ended March 31, 2021
  
   
Average
Recorded
Investment
    
Cash Basis
Interest
Income
Recognized
    
Average
Recorded
Investment
    
Cash Basis
Interest
Income
Recognized
  
   
(In thousands)
  
Single family
  
$
64
    
$
1
    
$
571
    
$
7
  
Multi-family
    
279
      
5
      
296
      
5
  
Church
    
2,535
      
25
      
3,789
      
63
  
Commercial – other
    
-
      
-
      
46
      
1
  
Total
  
$
2,878
    
$
31
    
$
4,702
    
$
76
  


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 $17 thousand and $19 thousand for the three months ended March 31, 2022 and 2021, 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 dates indicated:
   
March 31, 2022
  
   
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
  
$
-
    
$
-
    
$
-
    
$
-
    
$
40,145
    
$
40,145
  
Multi-family
    
-
      
-
      
-
      
-
      
402,926
      
402,926
  
Commercial real estate
    
2,944
      
-
      
-
      
2,944
      
87,458
      
90,402
  
Church
    
-
      
-
      
-
      
-
      
21,365
      
21,365
  
Construction
    
-
      
-
      
-
      
-
      
33,938
      
33,938
  
Commercial - other
    
-
      
-
      
-
      
-
      
53,880
      
53,880
  
SBA loans
     -       -       -       -       15,488       15,488  
Consumer
    
-
      
-
      
-
      
-
      
146
      
146
  
Total
  
$
2,944
    
$
-
    
$
-
    
$
2,944
    
$
655,346
    
$
658,290
  

   
December 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
  
$
-
    
$
-
    
$
-
    
$
-
    
$
45,372
    
$
45,372
  
Multi-family
    
-
      
-
      
-
      
-
      
395,230
      
395,230
  
Commercial real estate
    
-
      
2,423
      
-
      
2,423
      
90,770
      
93,193
  
Church
    
-
      
-
      
-
      
-
      
22,503
      
22,503
  
Construction
    
-
      
-
      
-
      
-
      
32,072
      
32,072
  
Commercial - other
    
-
      
-
      
-
      
-
      
46,539
      
46,539
  
SBA
    
-
      
-
      
-
      
-
      
18,837
      
18,837
  
Total
  
$
-
    
$
2,423
    
$
-
    
$
2,423
    
$
651,323
    
$
653,746
  


The following table presents the recorded investment in non-accrual loans by loan type as of the dates indicated:
   
March 31, 2022
    
December 31, 2021
  
   
(In thousands)
  
Loans receivable held for investment:
            
Church
    
653
      
684
  
Total non-accrual loans
  
$
653
    
$
684
  


There were no loans 90 days or more delinquent that were accruing interest as of March 31, 2022 or December 31, 2021. None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.
Troubled Debt Restructurings

At March 31, 2022, loans classified as TDRs totaled $1.8 million, of which $177 thousand were included in non-accrual loans and $1.6 million were on accrual status.  At December 31, 2021, loans classified as TDRs totaled $1.8 million, of which $188 thousand were included in non-accrual loans and $1.6 million were on accrual status.  The Company has allocated $7 thousand of specific reserves for accruing TDRs as of March 31, 2022 and December 31, 2021.  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, 2022 and December 31, 2021, 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 month periods ended March 31, 2022 and 2021.
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 within this footnote.  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, 2022
  
   
Pass
    
Watch
    
Special Mention
    
Substandard
    
Doubtful
    
Loss
       Total  
   
(In thousands)
  
Single family
  
$
38,135
    
$
1,328
    
$
268
    
$
414
    
$
-
    
$
-
     $
40,145  
Multi-family
    
385,748
      
6,428
      
2,540
      
8,210
      
-
      
-
       402,926  
Commercial real estate
    
70,078
      
9,589
      
5,970
      
4,765
      
-
      
-
       90,402  
Church
    
16,795
      
931
      
-
      
3,639
      
-
      
-
       21,365  
Construction
    
9,158
      
24,780
      
-
      
-
      
-
      
-
       33,938  
Commercial - other
    
41,397
      
12,167
      
-
      
307
      
9
      
-
       53,880  
SBA
     14,668       657       163       -       -       -       15,488  
Consumer
    
146
      
-
      
-
      
-
      
-
      
-
       146  
Total
  
$
576,125
    
$
55,880
    
$
8,941
    
$
17,335
    
$
9
    
$
-
     $
658,290  

 
  
December 31, 2021
  
 
  
Pass
    
Watch
    
Special Mention
    
Substandard
    
Doubtful
    
Loss
       Total  
 
  
(In thousands)
  
Single family
  
$
42,454
    
$
1,343
    
$
271
    
$
1,304
    
$
-
    
$
-
     $
45,372  
Multi-family
    
378,141
      
7,987
      
575
      
8,527
      
-
      
-
       395,230  
Commercial real estate
    
69,257
      
7,034
      
9,847
      
7,055
      
-
      
-
       93,193  
Church
    
20,021
      
-
      
-
      
2,482
      
-
      
-
       22,503  
Construction
    
10,522
      
21,550
      
-
      
-
      
-
      
-
       32,072  
Commercial - other
    
33,988
      
12,551
      
-
      
-
      
-
      
-
       46,539  
SBA
    
18,665
      
-
      
172
      
-
      
-
      
-
       18,837  
Total
  
$
573,048
    
$
50,465
    
$
10,865
    
$
19,368
    
$
-
    
$
-
     $
653,746