Note 4 - Allowance for Loan Losses

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Allowance for Credit Losses [Text Block]

Note 4: Allowance for Loan Losses

Changes in the allowance for loan losses and the related loan balance information by portfolio segment as of and for the years ended December 31, 2022 and 2021 were as follows:

	December 31, 2022
	1-4 family residential			Multi-family			Commercial			Consumer			Total
	(Dollars in thousands)
Year ended:
Beginning balance	$	675			69			25			10		$	779
Charge-offs		—			—			—			—			—
Recoveries		75			—			—			—			75
Net recoveries		75			—			—			—			75
Reversal of provision for loan losses		(169	)		(50	)		(6	)		(5	)		(230	)
Ending balance	$	581			19			19			5		$	624

	December 31, 2021
	1-4 family residential			Multi-family		Commercial			Consumer			Total
	(Dollars in thousands)
Year ended:
Beginning balance	$	798			29		38			5		$	870
Charge-offs		—			—		—			(99	)		(99	)
Recoveries		31			—		—			—			31
Net recoveries (charge-offs)		31			—		—			(99	)		(68	)
(Reversal of) Provision for loan losses		(154	)		40		(13	)		104			(23	)
Ending balance	$	675			69		25			10		$	779

The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2022 and 2021, were as follows:

	Collectively evaluated				Individually evaluated				Total
	Allowance for loan losses		Recorded investment in loans		Allowance for loan losses		Recorded investment in loans		Allowance for loan losses		Recorded investment in loans
		(Dollars in thousands)
December 31, 2022
1-4 family residential	$	512	$	94,711	$	69	$	873	$	581	$	95,584
Multi-family		19		3,237		—		—		19		3,237
Commercial		19		3,921		—		—		19		3,921
Consumer		5		249		—		—		5		249
Total	$	555	$	102,118	$	69	$	873	$	624	$	102,991
December 31, 2021
1-4 family residential	$	557	$	86,892	$	118	$	1,136	$	675	$	88,028
Multi-family		69		3,497		—		—		69		3,497
Commercial		25		4,604		—		—		25		4,604
Consumer		10		372		—		—		10		372
Total	$	661	$	95,365	$	118	$	1,136	$	779	$	96,501

The Bank evaluates collectability based on payment activity and other factors. The Bank uses a graded loan rating system as a means of identifying potential problem loans, as follows:

Pass

Loans in these categories are performing as expected with low to average risk.

Special Mention

Loans in this category are internally designated by management as “watch loans.” These loans are starting to show signs of potential weakness and are closely monitored by management.

Substandard

Loans in this category are internally designated by management as “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the paying capacity of the obligors or the current net worth of the collateral pledged. Substandard loans present a distinct possibility that the Bank will sustain losses if such weaknesses are not corrected.

Doubtful

Loans classified as doubtful have all the weaknesses inherent in those designated as “substandard” with the added characteristic that the weaknesses may make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

On an annual basis, or more often if needed, the Bank formally reviews the ratings on commercial loans. In addition, the Bank performs an independent review of a significant portion of the commercial loan portfolio. Management uses the results of the independent review as part of its annual review process.

The following table presents loan balances based on risk rating by class of loans as of December 31, 2022 and 2021:

			Special
	Pass		Mention		Substandard		Doubtful		Total loans
		(Dollars in thousands)
December 31, 2022
1-4 family residential	$	95,353	$	43	$	188	$	—	$	95,584
Multi-family		3,237		—		—		—		3,237
Commercial		3,921		—		—		—		3,921
Consumer		249		—		—		—		249
Total	$	102,760	$	43	$	188	$	—	$	102,991
December 31, 2021
1-4 family residential	$	87,881	$	45	$	102	$	—	$	88,028
Multi-family		3,497		—		—		—		3,497
Commercial		4,604		—		—		—		4,604
Consumer		372		—		—		—		372
Total	$	96,354	$	45	$	102	$	—	$	96,501

The aging of the Bank’s loan portfolio by class of loans as of December 31, 2022 and 2021, is as follows:

	31-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non-Accrual		Total Past Due and Non-Accrual		Current		Total Loan Balance
		(Dollars in thousands)
December 31, 2022
1-4 family residential	$	28	$	—	$	154	$	182	$	95,402	$	95,584
Multi-family		—		—		—		—		3,237		3,237
Commercial		—		—		—		—		3,921		3,921
Consumer		—		—		—		—		249		249
Total	$	28	$	—	$	154	$	182	$	102,809	$	102,991
December 31, 2021
1-4 family residential	$	—	$	41	$	102	$	143	$	87,885	$	88,028
Multi-family		—		—		—		—		3,497		3,497
Commercial		—		—		—		—		4,604		4,604
Consumer		—		—		—		—		372		372
Total	$	—	$	41	$	102	$	143	$	96,358	$	96,501

Loans individually evaluated for impairment by class of loans as of December 31, 2022 and 2021, were as follows:

	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
		(Dollars in thousands)
December 31, 2022
With no related allowance recorded
1-4 family residential	$	429	$	635	$	—	$	442	$	29
Multi-family		—		—		—		—		—
Commercial		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	429	$	635	$	—	$	442	$	29
With a related allowance recorded
1-4 family residential	$	444	$	444	$	69	$	452	$	21
Multi-family		—		—		—		—		—
Commercial		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	444	$	444	$	69	$	452	$	21
Total individually assessed as of December 31, 2022	$	873	$	1,079	$	69	$	894	$	50
December 31, 2021
With no related allowance recorded
1-4 family residential	$	355	$	595	$	—	$	348	$	26
Multi-family		—		—		—		—		—
Commercial		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	355	$	595	$	—	$	348	$	26
With a related allowance recorded
1-4 family residential	$	781	$	797	$	118	$	797	$	35
Multi-family		—		—		—		—		—
Commercial		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	781	$	797	$	118	$	797	$	35
Total individually assessed as of December 31, 2021	$	1,136	$	1,392	$	118	$	1,145	$	61

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs. 

Troubled debt restructurings provide for modifications to repayment terms; more specifically, modifications to loan interest rates. Management performs an impairment analysis at the time of restructuring and periodically thereafter. Any reserve required is recorded through a provision to the allowance for loan losses.

There were no new troubled debt restructurings during the years ended December 31, 2022 and 2021.