NOTE 3 — Loans

The composition of loans by class is summarized as follows at December 31:


	2019		2018
1 – 4 family residential	$	48,140	$	56,043
Commercial		257,957		191,828
Multifamily		152,633		136,537
Commercial real estate		52,477		33,145
Construction		6,450		5,921
Consumer		47,322		43,675
Total Loans		564,979		467,149

Deferred costs and unearned premiums, net		390		952
Allowance for loan losses		(6,989)		(5,629)
Loans, net	$	558,380	$	462,472

The following tables present the activity in the allowance for loan losses by class for the years ending December 31, 2019, 2018 and 2017:


	1-4 Family						Commercial
	Residential		Commercial		Multifamily		Real Estate		Construction		Consumer		Total
December 31, 2019
Allowance for loan losses:
Beginning balance	$	407	$	3,110	$	952	$	357	$	149	$	654	$	5,629
Provision (credit) for loan losses		(63)		957		159		203		12		582		1,850
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		(19)		(63)		—		—		(408)		(490)
Total ending allowance balance	$	344	$	4,048	$	1,048	$	560	$	161	$	828	$	6,989

December 31, 2018
Allowance for loan losses:
Beginning balance	$	382	$	2,272	$	713	$	266	$	127	$	504	$	4,264
Provision for loan losses		25		838		239		91		22		160		1,375
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(10)		(10)
Total ending allowance balance	$	407	$	3,110	$	952	$	357	$	149	$	654	$	5,629

December 31, 2017
Allowance for loan losses:
Beginning balance	$	360	$	1,934	$	621	$	238	$	141	$	119	$	3,413
Provision (credit) for loan losses		22		352		92		28		(14)		425		905
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		(14)		—		—		—		(40)		(54)
Total ending allowance balance	$	382	$	2,272	$	713	$	266	$	127	$	504	$	4,264

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by class and based on impairment method as of December 31, 2019 and 2018:


	1‑4 Family						Commercial
	Residential		Commercial		Multifamily		Real Estate		Construction		Consumer		Total
December 31, 2019
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		344		4,048		1,048		560		161		828		6,989

Total ending allowance balance	$	344	$	4,048	$	1,048	$	560	$	161	$	828	$	6,989

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	1,476	$	1,476
Loans collectively evaluated for impairment		48,140		257,957		152,633		52,477		6,450		45,846		563,503

Total ending loans balance	$	48,140	$	257,957	$	152,633	$	52,477	$	6,450	$	47,322	$	564,979

Recorded investment is not adjusted for accrued interest, unearned premiums or deferred costs.


	1 – 4 Family						Commercial
	Residential		Commercial		Multifamily		Real Estate		Construction		Consumer		Total
December 31, 2018
Allowance for loan losses:
Ending allowance Balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		407		3,110		952		357		149		654		5,629

Total ending allowance balance	$	407	$	3,110	$	952	$	357	$	149	$	654	$	5,629

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		56,043		191,828		136,537		33,145		5,921		43,675		467,149

Total ending loans balance	$	56,043	$	191,828	$	136,537	$	33,145	$	5,921	$	43,675	$	467,149

The following tables provide an analysis of the impaired loans by segment as of December 31, 2019. There were no impaired loans as of December 31, 2018:


	December 31,
	2019
			Unpaid
	Recorded		Principal
	Investment		Balance
1-4 family residential	$	—	$	—
Commercial		—		—
Multifamily		—		—
Commercial real estate		—		—
Construction		—		—
Consumer		1,476		1,476
Total	$	1,476	$	1,476


	For the year ended December 31,
	2019
	Average		Interest
	Recorded		Income
	Investment		Recognized
1-4 family residential	$	—	$	—
Commercial		—		—
Multifamily		—		—
Commercial real estate		—		—
Construction		—		—
Consumer		541		—
Total	$	541	$	—

There were no impaired loans during the years ended December 31, 2018 and 2017.

The following tables present the aging of the recorded investment in past due loans by class of loans as of December 31, 2019 and 2018:


									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total
December 31, 2019
1 – 4 family residential	$	—	$	—	$	—	$	—	$	—	$	48,140	$	48,140
Commercial		—		—		—		—		—		257,957		257,957
Multifamily		—		2,602		—		—		2,602		150,031		152,633
Commercial real estate		—		—		—		—		—		52,477		52,477
Construction		—		—		—		—		—		6,450		6,450
Consumer		—		6		—		1,476		1,482		45,840		47,322
Total	$	—	$	2,608	$	—	$	1,476	$	4,084	$	560,895	$	564,979

The $2,602 past due multifamily loan balance was paid off subsequent to December 31, 2019.


									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total
December 31, 2018
1 – 4 family residential	$	—	$	—	$	—	$	—	$	—	$	56,043	$	56,043
Commercial		—		—		—		—		—		191,828		191,828
Multifamily		—		—		—		—		—		136,537		136,537
Commercial real estate		—		—		—		—		—		33,145		33,145
Construction		—		—		—		—		—		5,921		5,921
Consumer		—		40		—		—		40		43,635		43,675
Total	$	—	$	40	$	—	$	—	$	40	$	467,109	$	467,149

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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed whenever a credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans.

The Company uses the following definitions for risk ratings:

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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:


	Pass		Special Mention		Substandard		Doubtful
December 31, 2019
1 – 4 family residential	$	48,140	$	—	$	—	$	—
Commercial		257,832		—		125		—
Multifamily		152,633		—		—		—
Commercial real estate		52,477		—		—		—
Construction		6,450		—		—		—
Consumer		42,431		3,415		1,476		—
Total	$	559,963	$	3,415	$	1,601	$	—


	Pass		Special Mention		Substandard		Doubtful
December 31, 2018
1 – 4 family residential	$	56,043	$	—	$	—	$	—
Commercial		182,482		9,166		180		—
Multifamily		136,537		—		—		—
Commercial real estate		33,145		—		—		—
Construction		5,921		—		—		—
Consumer		43,675		—		—		—
Total	$	457,803	$	9,166	$	180	$	—

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For 1 – 4 family residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

The Company has no loans identified as troubled debt restructurings at December 31, 2019 and 2018. Furthermore, there were no loan modifications during 2019, 2018 and 2017 that were troubled debt restructurings. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Related Party Loans

Loans to related parties include loans to directors, their related companies and executive officers of the Company.

Loans to principal officers, directors, and their affiliates during 2019 were as follows:


Beginning balance	$	8,464
New advances		2,567
Repayments		(2,814)
Ending balance	$	8,217