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Note 3 - Loans Receivable

9 Months Ended

Sep. 30, 2020

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 - Loans Receivable

Loans receivable consisted of the following at the dates indicated:

	September 30, 2020			December 31, 2019
	(In thousands)
Real Estate:
One-to-four family	$	317,755		$	306,014
Multi-family		127,569			96,098
Commercial real estate		283,390			255,722
Construction and land		75,204			37,187
Total real estate loans		803,918			695,021

Consumer:
Home equity		34,120			35,046
Auto and other consumer		111,782			112,119
Total consumer loans		145,902			147,165

Commercial business loans		123,036			41,571

Total loans		1,072,856			883,757

Less:
Net deferred loan fees		2,628			206
Premium on purchased loans, net		(4,196	)		(4,514	)
Allowance for loan losses		13,007			9,628

Total loans receivable, net	$	1,061,417		$	878,437

Allowance for Loan Losses. The Company maintains a general allowance for loan losses based on evaluating known and inherent risks in the loan portfolio, including management’s continuing analysis of the factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, actual loan loss experience, and current and anticipated economic conditions. The reserve is an estimate based upon factors and trends identified by management at the time the financial statements are prepared.

The following tables summarize changes in the ALLL and loan portfolio by segment and impairment method for the periods shown:

	At or For the Three Months Ended September 30, 2020
	One-to-				Commercial		Construction		Home			Auto and other			Commercial
	four family		Multi-family		real estate		and land		equity			consumer			business		Unallocated			Total
	(In thousands)
ALLL:
Beginning balance	$	3,780	$	1,128	$	3,021	$	738	$	429		$	2,252		$	463	$	298		$	12,109
Provision for (recapture of) loan losses		62		307		319		240		(4	)		427			—		(1	)		1,350
Charge-offs		—		—		—		—		—			(479	)		—		—			(479	)
Recoveries		2		—		—		1		—			24			—		—			27
Ending balance	$	3,844	$	1,435	$	3,340	$	979	$	425		$	2,224		$	463	$	297		$	13,007

	At or For the Nine Months Ended September 30, 2020
	One-to-				Commercial		Construction		Home			Auto and other			Commercial
	four family		Multi-family		real estate		and land		equity			consumer			business		Unallocated		Total
	(In thousands)
ALLL:
Beginning balance	$	3,024	$	888	$	2,243	$	399	$	454		$	2,261		$	208	$	151	$	9,628
Provision for (recapture of) loan losses		764		547		1,097		577		(30	)		760			255		146		4,116
Charge-offs		—		—		—		—		—			(853	)		—		—		(853	)
Recoveries		56		—		—		3		1			56			—		—		116
Ending balance	$	3,844	$	1,435	$	3,340	$	979	$	425		$	2,224		$	463	$	297	$	13,007

	At September 30, 2020
	One-to-				Commercial		Construction		Home		Auto and other		Commercial
	four family		Multi-family		real estate		and land		equity		consumer		business		Unallocated		Total
	(In thousands)
Total ALLL	$	3,844	$	1,435	$	3,340	$	979	$	425	$	2,224	$	463	$	297	$	13,007
General reserve		3,791		1,435		3,339		978		421		2,036		463		297		12,760
Specific reserve		53		—		1		1		4		188		—		—		247

Total loans	$	317,755	$	127,569	$	283,390	$	75,204	$	34,120	$	111,782	$	123,036	$	—	$	1,072,856
Loans collectively evaluated (1)		313,744		127,282		282,103		75,179		33,983		111,174		123,036		—		1,066,501
Loans individually evaluated (2)		4,011		287		1,287		25		137		608		—		—		6,355

⁽¹⁾ Loans collectively evaluated for general reserves.

⁽²⁾ Loans individually evaluated for specific reserves.

	At or For the Three Months Ended September 30, 2019
	One-to-						Commercial		Construction		Home			Auto and other			Commercial
	four family			Multi-family			real estate		and land		equity			consumer			business			Unallocated			Total
	(In thousands)
ALLL:
Beginning balance	$	3,417		$	651		$	2,357	$	711	$	465		$	1,790		$	171		$	169		$	9,731
(Recapture of) provision for loan losses		(307	)		(64	)		47		16		(30	)		192			(13	)		(11	)		(170	)
Charge-offs		—			—			—		—		—			(237	)		1			—			(236	)
Recoveries		1			—			—		1		23			93			—			—			118
Ending balance	$	3,111		$	587		$	2,404	$	728	$	458		$	1,838		$	159		$	158		$	9,443

	At or For the Nine Months Ended September 30, 2019
	One-to-						Commercial		Construction		Home			Auto and other			Commercial
	four family			Multi-family			real estate		and land		equity			consumer			business			Unallocated			Total
	(In thousands)
ALLL:
Beginning balance	$	3,297		$	762		$	2,289	$	585	$	480		$	1,611		$	334		$	175		$	9,533
(Recapture of) provision for loan losses		(190	)		(175	)		115		142		(66	)		785			(174	)		(17	)		420
Charge-offs		—			—			—		—		—			(785	)		(3	)		—			(788	)
Recoveries		4			—			—		1		44			227			2			—			278
Ending balance	$	3,111		$	587		$	2,404	$	728	$	458		$	1,838		$	159		$	158		$	9,443

	At December 31, 2019
	One-to-				Commercial		Construction		Home		Auto and other		Commercial
	four family		Multi-family		real estate		and land		equity		consumer		business		Unallocated		Total
	(In thousands)
Total ALLL	$	3,024	$	888	$	2,243	$	399	$	454	$	2,261	$	208	$	151	$	9,628
General reserve		2,993		887		2,235		399		439		2,119		203		151		9,426
Specific reserve		31		1		8		—		15		142		5		—		202

Total loans	$	306,014	$	96,098	$	255,722	$	37,187	$	35,046	$	112,119	$	41,571	$	—	$	883,757
Loans collectively evaluated (1)		303,026		95,991		253,839		37,158		34,775		111,271		41,308		—		877,368
Loans individually evaluated (2)		2,988		107		1,883		29		271		848		263		—		6,389

⁽¹⁾ Loans collectively evaluated for general reserves.

⁽²⁾ Loans individually evaluated for specific reserves.

Impaired loans. A loan is considered impaired when First Federal has determined that it may be unable to collect payments of principal or interest when due under the contractual terms of the loan. Impairment is measured on a loan-by-loan basis for all loans in the portfolio except smaller balance homogeneous loans and certain qualifying troubled debt restructuring ("TDR") loans.

The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated:

	September 30, 2020						December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no allowance recorded:
One-to-four family	$	202	$	229	$	—	$	297	$	332	$	—
Multi-family		287		287		—		—		—		—
Commercial real estate		1,221		1,310		—		1,240		1,320		—
Construction and land		—		—		—		—		33		—
Home equity		37		94		—		45		110		—
Auto and other consumer		—		299		—		251		548		—
Commercial business		—		—		—		—		—		—
Total		1,747		2,219		—		1,833		2,343		—

With an allowance recorded:
One-to-four family	$	3,809	$	4,017	$	53		2,691		2,911		31
Multi-family		—		—		—		107		107		1
Commercial real estate		66		66		1		643		643		8
Construction and land		25		57		1		29		29		—
Home equity		100		159		4		226		286		15
Auto and other consumer		608		780		188		597		690		142
Commercial business		—		—		—		263		263		5
Total		4,608		5,079		247		4,556		4,929		202

Total impaired loans:
One-to-four family		4,011		4,246		53		2,988		3,243		31
Multi-family		287		287		—		107		107		1
Commercial real estate		1,287		1,376		1		1,883		1,963		8
Construction and land		25		57		1		29		62		—
Home equity		137		253		4		271		396		15
Auto and other consumer		608		1,079		188		848		1,238		142
Commercial business		—		—		—		263		263		5
Total	$	6,355	$	7,298	$	247	$	6,389	$	7,272	$	202

The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated:

	Three Months Ended				Nine Months Ended
	September 30, 2020				September 30, 2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)				(In thousands)
With no allowance recorded:
One-to-four family	$	203	$	6	$	154	$	6
Multi-family		294		1		197		—
Commercial real estate		1,200		1		1,211		15
Construction and land		—		—		12		—
Home equity		38		1		43		1
Auto and other consumer		—		13		—		16
Commercial business		168		—		90		—
Total		1,903		22		1,707		38

With an allowance recorded:
One-to-four family	$	4,397	$	91	$	3,335	$	158
Multi-family		—		—		158		—
Commercial real estate		67		2		380		2
Construction and land		26		2		28		3
Home equity		140		3		212		7
Auto and other consumer		702		24		718		33
Commercial business		—		—		146		—
Total		5,332		122		4,977		203

Total impaired loans:
One-to-four family		4,600		97		3,489		164
Multi-family		294		1		355		—
Commercial real estate		1,267		3		1,591		17
Construction and land		26		2		40		3
Home equity		178		4		255		8
Auto and other consumer		702		37		718		49
Commercial business		168		—		236		—
Total	$	7,235	$	144	$	6,684	$	241

Interest income recognized on a cash basis on impaired loans for the three and nine months ended September 30, 2020, was $84,000 and $181,000, respectively.

The following table presents the average recorded investment in loans individually evaluated for impairment and the related interest income recognized for the periods shown:

	Three Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)				(In thousands)
With no allowance recorded:
One-to-four family	$	236	$	4	$	243	$	8
Commercial real estate		1,260		15		1,278		39
Home equity		52		14		144		30
Auto and other consumer		—		10		—		14
Commercial business		—		1		—		4
Total		1,548		44		1,665		95

With an allowance recorded:
One-to-four family		2,891		64		2,850		146
Multi-family		108		1		109		4
Commercial real estate		651		8		657		23
Construction and land		52		2		57		2
Home equity		289		6		297		14
Auto and other consumer		394		9		324		16
Commercial business		266		2		299		9
Total		4,651		92		4,593		214

Total impaired loans:
One-to-four family		3,127		68		3,093		154
Multi-family		108		1		109		4
Commercial real estate		1,911		23		1,935		62
Construction and land		52		2		57		2
Home equity		341		20		441		44
Auto and other consumer		394		19		324		30
Commercial business		266		3		299		13
Total	$	6,199	$	136	$	6,258	$	309

Interest income recognized on a cash basis on impaired loans for the three and nine months ended September 30, 2019, was $99,000 and $271,000, respectively.

The following table presents the recorded investment in nonaccrual loans by class of loan at the dates indicated:

	September 30, 2020		December 31, 2019
	(In thousands)
One-to-four family	$	1,939	$	698
Multi-family		287		—
Commercial real estate		166		109
Construction and land		25		29
Home equity		74		112
Auto and other consumer		607		848
Commercial business		—		—

Total nonaccrual loans	$	3,098	$	1,796

Past due loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. There were no loans past due 90 days or more and still accruing interest at September 30, 2020 and December 31, 2019.

The following table presents past due loans, net of partial loan charge-offs, by class, as of September 30, 2020:

	30-59 Days		60-89 Days		90 Days or More		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total Loans
	(In thousands)
Real Estate:
One-to-four family	$	—	$	685	$	500	$	1,185	$	316,570	$	317,755
Multi-family		—		—		—		—		127,569		127,569
Commercial real estate		—		—		—		—		283,390		283,390
Construction and land		—		—		25		25		75,179		75,204
Total real estate loans		—		685		525		1,210		802,708		803,918

Consumer:
Home equity		—		12		—		12		34,108		34,120
Auto and other consumer		724		416		180		1,320		110,462		111,782
Total consumer loans		724		428		180		1,332		144,570		145,902

Commercial business loans		—		—		—		—		123,036		123,036

Total loans	$	724	$	1,113	$	705	$	2,542	$	1,070,314	$	1,072,856

The following table presents past due loans, net of partial loan charge-offs, by class, as of December 31, 2019:

	30-59 Days		60-89 Days		90 Days or More		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total Loans
	(In thousands)
Real Estate:
One-to-four family	$	928	$	92	$	116	$	1,136	$	304,878	$	306,014
Multi-family		—		—		—		—		96,098		96,098
Commercial real estate		—		—		—		—		255,722		255,722
Construction and land		38		—		—		38		37,149		37,187
Total real estate loans		966		92		116		1,174		693,847		695,021

Consumer:
Home equity		299		24		—		323		34,723		35,046
Auto and other consumer		1,423		370		614		2,407		109,712		112,119
Total consumer loans		1,722		394		614		2,730		144,435		147,165

Commercial business loans		—		115		—		115		41,456		41,571

Total loans	$	2,688	$	601	$	730	$	4,019	$	879,738	$	883,757

Credit quality indicator. Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful, or loss; risk ratings 6, 7, and 8 in our 8-point risk rating system, respectively. An asset is considered substandard if it is inadequately protected by the current net worth and pay capacity of the borrower or of any collateral pledged. Substandard assets include those characterized by the distinct possibility that First Federal will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

When First Federal classifies problem assets as either substandard or doubtful, it may establish a specific allowance to address the risk specifically or allow the loss to be addressed in the general allowance. General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities but that, unlike specific allowances, have not been specifically allocated to certain problem assets. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible. Assets that do not currently expose First Federal to enough risk to warrant classification as substandard or doubtful but do possess identified weaknesses are designated as either watch or special mention assets; risk ratings 4 and 5 in our risk rating system, respectively. Loans not otherwise classified are considered pass graded loans and are rated 1-3 in our risk rating system.

Additionally, First Federal categorizes loans as performing or nonperforming based on payment activity. Loans that are more than 90 days past due and nonaccrual loans are considered nonperforming.

The following table represents the internally assigned grade as of September 30, 2020, by class of loans:

	Pass		Watch		Special Mention		Substandard		Total
	(In thousands)
Real Estate:
One-to-four family	$	310,998	$	2,624	$	2,602	$	1,531	$	317,755
Multi-family		127,282		—		—		287		127,569
Commercial real estate		270,792		9,233		2,133		1,232		283,390
Construction and land		61,296		13,796		77		35		75,204
Total real estate loans		770,368		25,653		4,812		3,085		803,918

Consumer:
Home equity		33,503		394		100		123		34,120
Auto and other consumer		107,407		2,233		1,553		589		111,782
Total consumer loans		140,910		2,627		1,653		712		145,902

Commercial business loans		122,804		—		—		232		123,036

Total loans	$	1,034,082	$	28,280	$	6,465	$	4,029	$	1,072,856

The following table represents the internally assigned grade as of December 31, 2019, by class of loans:

	Pass		Watch		Special Mention		Substandard		Total
	(In thousands)
Real Estate:
One-to-four family	$	301,312	$	2,685	$	1,148	$	869	$	306,014
Multi-family		95,694		—		107		297		96,098
Commercial real estate		251,531		97		2,800		1,294		255,722
Construction and land		35,897		1,184		77		29		37,187
Total real estate loans		684,434		3,966		4,132		2,489		695,021

Consumer:
Home equity		34,260		470		89		227		35,046
Auto and other consumer		107,327		3,243		594		955		112,119
Total consumer loans		141,587		3,713		683		1,182		147,165

Commercial business loans		39,653		376		263		1,279		41,571

Total loans	$	865,674	$	8,055	$	5,078	$	4,950	$	883,757

The following table represents the credit risk profile based on payment activity as of September 30, 2020, by class of loans:

	Nonperforming		Performing		Total
	(In thousands)
Real Estate:
One-to-four family	$	1,939	$	315,816	$	317,755
Multi-family		287		127,282		127,569
Commercial real estate		166		283,224		283,390
Construction and land		25		75,179		75,204

Consumer:
Home equity		74		34,046		34,120
Auto and other consumer		607		111,175		111,782

Commercial business		—		123,036		123,036

Total loans	$	3,098	$	1,069,758	$	1,072,856

The following table represents the credit risk profile based on payment activity as of December 31, 2019, by class of loans:

	Nonperforming		Performing		Total
	(In thousands)
Real Estate:
One-to-four family	$	698	$	305,316	$	306,014
Multi-family		—		96,098		96,098
Commercial real estate		109		255,613		255,722
Construction and land		29		37,158		37,187

Consumer:
Home equity		112		34,934		35,046
Auto and other consumer		848		111,271		112,119

Commercial business		—		41,571		41,571

Total loans	$	1,796	$	881,961	$	883,757

Troubled debt restructuring. A TDR is a loan to a borrower who is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that First Federal is granting the borrower a concession of some kind. First Federal has granted a variety of concessions to borrowers in the form of loan modifications. The modifications are generally related to the loan's interest rate, term and payment amount or a combination thereof.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 signed into law on March 27, 2020, ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (i.e., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and related regulatory guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. Through September 30, 2020, the Company had granted COVID-19 pandemic related temporary loan modifications on a total of 346 loans aggregating to $174.9 million, or 16.3% of total loans. Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

The following table is a summary of COVID-19 modified loans that remain on deferral as of September 30, 2020:

	Count		Balance		Percent
	(Dollars in Thousands)
Real Estate:
One-to-four family		16	$	5,097		3.4	%
Multi-family		10		29,587		19.8
Commercial real estate		44		98,895		66.1
Construction and land		6		5,987		4.0
Total real estate loans		76		139,566		93.3

Consumer:
Home equity		6		707		0.5
Auto and other consumer		88		4,741		3.2
Total consumer loans		94		5,448		3.7

Commercial business loans		13		4,528		3.0

Total loans		183	$	149,542		100.0	%

The following table is a summary of information pertaining to TDR loans included in impaired loans at the dates indicated:

	September 30, 2020		December 31, 2019
	(In thousands)
Total TDR loans	$	2,244	$	3,544
Allowance for loan losses related to TDR loans		28		41
Total nonaccrual TDR loans		108		81

There were no newly restructured and renewals or modifications of existing TDR loans that occurred during the three and nine months ended September 30, 2020 or September 30, 2019.

There were no TDR loans which incurred a payment default within 12 months of the restructure date during three and nine months ended September 30, 2020.

The following table presents newly restructured and renewals or modifications of existing TDR loans by class that occurred during the three and nine months ended September 30, 2019, by type of concession granted.

	Number		Rate		Term		Combination		Total
	of Contracts		Modification		Modification		Modification		Modifications
			(Dollars in thousands)
Pre-modification outstanding recorded investment
One- to four-family		1	$	—	$	50	$	—	$	50

Post-modification outstanding recorded investment
One- to four-family		1	$	—	$	51	$	—	$	51

The following is a summary of TDR loans which incurred a payment default within 12 months of the restructure date during the three and nine months ended September 30, 2019.

	Number		Rate		Term		Combination		Total
	of Contracts		Modification		Modification		Modification		Modifications
			(Dollars in thousands)
TDR loans that subsequently defaulted
One- to four-family		1	$	—	$	—	$	48	$	48

No additional funds were committed to be advanced in connection with impaired loans at September 30, 2020.

The following table presents TDR loans by class at the dates indicated by accrual and nonaccrual status.

	September 30, 2020						December 31, 2019
	Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total
	(In thousands)
One-to-four family	$	2,072	$	108	$	2,180	$	2,290	$	81	$	2,371
Multi-family		—		—		—		107		—		107
Commercial real estate		—		—		—		643		—		643
Home equity		64		—		64		160		—		160
Commercial business		—		—		—		263		—		263

Total TDR loans	$	2,136	$	108	$	2,244	$	3,463	$	81	$	3,544