Note 14 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 14 - Commitments and Contingencies

First Fed is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments generally represent a commitment to extend credit in the form of loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

First Fed’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, is represented by the contractual notional amount of those instruments. First Fed uses the same credit policies in making commitments as it does for on-balance-sheet instruments. Management does not anticipate any material loss as a result of these transactions.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established by the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. First Fed evaluates each customer’s creditworthiness on a case-by-case basis. First Fed did not incur any significant losses on its commitments for the years ended December 31, 2023, and 2022.

The following financial instruments were outstanding whose contract amounts represent credit risk at:

	December 31, 2023		December 31, 2022
	(In thousands)
Commitments to grant loans	$	220	$	25
Standby letters of credit		200		758
Unfunded commitments under lines of credit or existing loans		147,981		225,836

Low-Income Housing Tax Credit Investments - The carrying value of the unconsolidated LIHTC investment was $4.7 million and $4.9 million at December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company recognized tax benefits of $194,000 and $77,000 and proportional amortization of $165,000 and $66,000, respectively.

Total unfunded contingent commitments related to the Company’s LIHTC investment totaled $4.4 million and $4.7 million, at December 31, 2023 and 2022, respectively. The Company expects to fund LIHTC commitments of $3.4 million during the year ending  December 31, 2024 and $748,000 during the year ending December 31, 2025, with the remaining commitments of $291,000 funded by December 31, 2037. There were no impairment losses on the Company’s LIHTC investment during the years ended  December 31, 2023 and 2022.

Legal contingencies - Various legal claims may arise from time to time in the normal course of business, which, in the opinion of management, have no current material effect on First Fed’s consolidated financial statements.

Significant group concentrations of credit risk - Concentration of credit risk is the risk associated with a lack of diversification, such as having substantial loan concentrations in a specific type of loan within First Fed’s loan portfolio, thereby exposing First Fed to greater risks resulting from adverse economic, political, regulatory, geographic, industrial, or credit developments. Loans to one borrower are subject to the state banking regulations general limitation of 20 percent of First Fed’s equity, excluding accumulated other comprehensive income. At December 31, 2023 and 2022, First Fed’s most significant concentration of credit risk was in loans secured by real estate. These loans totaled approximately $1.33 billion and $1.24 billion, or 80.0% and 79.8%, of First Fed’s total loan portfolio at December 31, 2023 and 2022, respectively. Real estate construction, including land acquisition and land development, commercial real estate, multi-family, home equity, and one-to-four family residential loans, are included in the total loans secured by real estate for purposes of this calculation.

At December 31, 2023 and 2022, First Fed’s most significant investment portfolio exposure was from municipal bonds totaling $87.8 million and $98.1 million, or 28.4% and 29.0%, of the total investment portfolio. At  December 31, 2023 and 2022, First Fed's second most significant investment concentration of credit risk was with the U.S. Government, its agencies, and Government-Sponsored Enterprises ("GSEs"). First Fed’s exposure, which results from positions in securities issued by the U.S. Government, its agencies, and securities guaranteed by GSEs, was $88.7 million and $87.3 million, or 28.7% and 25.8%, of First Fed’s total investment portfolio (including FHLB stock) at December 31, 2023 and 2022, respectively.