LOANS HELD FOR INVESTMENT, NET

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

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

NOTE 4 – LOANS HELD FOR INVESTMENT, NET

The components of loans held for investment, net in the consolidated balance sheets were as follows:

	December 31, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
Loans held for investment, net:
Commercial real estate	$	195,814,205		80.0	%	$	146,643,998		75.3	%
One- to four-family residential real estate		29,976,625		12.2	%		31,412,437		16.1	%
Commercial and industrial		9,876,020		4.0	%		10,235,492		5.3	%
Consumer and other		9,191,249		3.8	%		6,428,765		3.3	%
Total gross loans		244,858,099		100.0	%		194,720,692		100.0	%
Unamortized loan fees		(952,717)					(689,102)
Loans held for investment		243,905,382					194,031,590
Allowance for loan losses		(2,506,033)					(1,894,196)
Loans held for investment, net	$	241,399,349				$	192,137,394

At December 31, 2016 and 2015 commercial real estate loans include construction loans of $7.9 million and $7.8 million, respectively.

Allowance for Loan Losses and Recorded Investment in Loans – The following is a summary of the allowance for loan losses and recorded investment in loans as of December 31, 2016 and 2015:

	As of December 31, 2016
			One- to Four-
			Family
	Commercial		Residential Real		Commercial and		Commercial and
	Real Estate		Estate		Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		1,688,448		617,912		147,371		52,302		2,506,033
Total	$	1,688,448	$	617,912	$	147,371	$	52,302	$	2,506,033
Gross loans
Ending balance: individually evaluated for impairment	$	3,441,874	$	1,744,062	$	801,078	$	194,068	$	6,181,082
Ending balance: collectively evaluated for impairment		192,372,331		28,232,563		9,074,942		8,997,181		238,677,017
Ending balance: loans acquired with deteriorated credit quality		-		-		-		-		-
Total	$	195,814,205	$	29,976,625	$	9,876,020	$	9,191,249	$	244,858,099

	As of December 31, 2015
			One- to Four-
			Family
	Commercial		Residential Real		Commercial and		Commercial and
	Real Estate		Estate		Industrial		Other		Total
Allowance for loan losses
Ending balance: individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Ending balance: collectively evaluated for impairment		1,136,458		656,089		63,527		38,122		1,894,196
Total	$	1,136,458	$	656,089	$	63,527	$	38,122	$	1,894,196
Gross loans
Ending balance: individually evaluated for impairment	$	2,221,619	$	1,830,826	$	354,208	$	-	$	4,406,653
Ending balance: collectively evaluated for impairment		144,422,379		29,581,611		9,881,284		6,428,765		190,314,039
Ending balance: loans acquired with deteriorated credit quality		-		-		-		-		-
Total	$	146,643,998	$	31,412,437	$	10,235,492	$	6,428,765	$	194,720,692

The following is a summary of activities for the allowance for loan losses for the years ended December 31, 2016 and 2015:

	Year ended		Year ended
	December 31,		December 31,
	2016		2015
Beginning balance	$	1,894,196	$	1,707,282
Provision for (credit to) loan losses		1,019,000		694,000
Charge-offs:
Commercial real estate		-		-
One- to four-family residential real estate		(140,725)		(339,352)
Commercial and industrial		(384,563)		(354,000)
Consumer and other		-		(160)
Total charge-offs		(525,288)		(693,512)
Recoveries:
Commercial real estate		116,125		183,546
One- to four-family residential real estate		2,000		2,800
Commercial and industrial		-		-
Consumer and other		-		80
Total recoveries		118,125		186,426
Net (charge-offs) recoveries		(407,163)		(507,086)
Ending balance	$	2,506,033	$	1,894,196

Nonperforming Assets – The following tables present an aging analysis of the recorded investment of past due loans as of December 31, 2016 and 2015. Payment activity is reviewed by management on a monthly basis to determine the performance of each loan. Per Company policy, loans past due 90 days or more no longer accrue interest.

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
December 31, 2016
Commercial real estate	$	550,000	$	-	$	-	$	550,000	$	195,264,205	$	195,814,205
One- to four-family residential real estate		108,080		501,316		68,906		678,302		29,298,323		29,976,625
Commercial and industrial		1,139,634		-		461,021		1,600,655		8,275,365		9,876,020
Consumer and other		-		-		-		-		9,191,249		9,191,249
Totals	$	1,797,714	$	501,316	$	529,927	$	2,828,957	$	242,029,142	$	244,858,099

	Past Due										Total
					90 Days						Financing
	30 - 59 Days		60 - 89 Days		or More		Total		Current		Receivables
December 31, 2015
Commercial real estate	$	-	$	-	$	-	$	-	$	146,643,998	$	146,643,998
One- to four-family residential real estate		314,541		173,467		788,159		1,276,167		30,136,270		31,412,437
Commercial and industrial		-		-		-		-		10,235,492		10,235,492
Consumer and other		-		-		-		-		6,428,765		6,428,765
Totals	$	314,541	$	173,467	$	788,159	$	1,276,167	$	193,444,525	$	194,720,692

The following table sets forth nonaccrual loans and other real estate at December 31, 2016 and 2015:

	December 31,			December 31,
	2016			2015
Nonaccrual loans
Commercial real estate	$	3,718,686		$	-
One- to four-family residential real estate		648,880			1,489,851
Commercial and industrial		1,600,655			354,208
Consumer and other		-			-
Total nonaccrual loans		5,968,221			1,844,059
Other real estate (ORE)		-			306,000
Total nonperforming assets	$	5,968,221		$	2,150,059
Nonperforming assets to gross loans held for investment and ORE		2.44	%		1.10	%
Nonperforming assets to total assets		1.81	%		0.79	%

Two large loan relationships mostly secured by real estate make up $4.9 million or 81% of the $6.0 million in nonaccrual loans at December 31, 2016 and $3.7 million or 62% of the total December 31, 2016 nonaccrual loan balance is guaranteed by the SBA.

Credit Quality Indicators – The following table represents the credit exposure by internally assigned grades at December 31, 2016 and 2015. This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms. The Bank’s internal credit risk grading system is based on management’s experiences with similarly graded loans. Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics of the respective loan. 

	As of December 31, 2016
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	187,069,284	$	28,232,563	$	7,697,960	$	8,997,181	$	231,996,988
Special mention		523,207		65,457		267,327		-		855,991
Substandard		8,221,714		1,678,605		1,614,733		194,068		11,709,120
Doubtful		-		-		296,000		-		296,000
Loss		-		-		-		-		-
Totals	$	195,814,205	$	29,976,625	$	9,876,020	$	9,191,249	$	244,858,099

	As of December 31, 2015
	Commercial Real Estate		One- to Four- Family Residential Real Estate		Commercial and Industrial		Consumer and Other		Total
Grade
Pass	$	142,560,320	$	29,434,236	$	9,785,619	$	6,428,765	$	188,208,940
Special mention		1,862,059		147,375		95,665		-		2,105,099
Substandard		2,221,619		1,830,826		-		-		4,052,445
Doubtful		-		-		354,208		-		354,208
Loss		-		-		-		-		-
Totals	$	146,643,998	$	31,412,437	$	10,235,492	$	6,428,765	$	194,720,692

The Bank’s internally assigned grades are as follows:

Pass – Strong credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention – Potential weaknesses that deserve management’s close attention. Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard – Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful – All the weakness inherent in one classified as substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Loss – Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has absolutely no recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery may be collected in the future.

Impaired Loans – The following tables include the recorded investment and unpaid principal balances, net of charge-offs for impaired loans with the associated allowance amount, if applicable. Management determined the allocated allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less selling costs was used to determine the allocated allowance recorded.

	As of December 31, 2016
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	3,718,686	$	3,718,686	$	-	$	1,385,277
One- to four-family residential real estate		648,880		648,880		-		656,495
Commercial and industrial		1,600,655		1,600,655		-		1,075,536
Consumer and other		-		-		-		-
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	3,718,686	$	3,718,686	$	-	$	1,385,277
One- to four-family residential real estate		648,880		648,880		-		656,495
Commercial and industrial		1,600,655		1,600,655		-		1,075,536
Consumer and other		-		-		-		-

	As of December 31, 2015
			Principal				Average
	Recorded		Net of		Related		Recorded
	Investment		Charge-offs		Allowance		Investment
With no related allowance recorded:
Commercial real estate	$	-	$	-	$	-	$	-
One- to four-family residential real estate		1,489,851		1,489,851		-		1,949,279
Commercial and industrial		354,208		354,208		-		733,940
Consumer and other		-		-		-		-
With an allowance recorded:	$	-	$	-	$	-	$	-
Total:
Commercial real estate	$	-	$	-	$	-	$	-
One- to four-family residential real estate		1,489,851		1,489,851		-		1,949,279
Commercial and industrial		354,208		354,208		-		733,940
Consumer and other		-		-		-		-

During the years ended December 31, 2016 and 2015, no interest income was recognized on these loans as interest collected was credited to loan principal.

Certain loans within the Company’s loan and ORE portfolios are guaranteed by the Veterans Administration (VA). In the event of default by the borrower, the VA can elect to pay the guaranteed amount or take possession of the property. If the VA takes possession of the property, the Company is entitled to be reimbursed for the outstanding principal balance, accrued interest and certain other expenses. There were no commitments from the VA to take title to foreclosed VA properties at December 31, 2016 and 2015.

Troubled Debt Restructurings – Restructured loans are considered “troubled debt restructurings” if due to the borrower’s financial difficulties, the Bank has granted a concession that they would not otherwise consider. This may include a transfer of real estate or other assets from the borrower, a modification of loan terms, rates, or a combination of the two. All troubled debt restructurings placed on nonaccrual status must show no less than six months of repayment performance by the borrower in accordance with contractual terms to return to accrual status. Once a loan has been identified as a troubled debt restructuring, it will continue to be reported as such until the loan is paid in full.

In the normal course of business, the Company may modify a loan for a credit worthy borrower where the modified loan is not considered a troubled debt restructuring. In these cases, the modified terms are consistent with loan terms available to credit worthy borrowers and within normal loan pricing. The modifications to such loans are done according to existing underwriting standards which include review of historical financial statements, including current interim information if available, an analysis of the causes of the borrower’s decline in performance, and projections intended to assess repayment ability going forward.

There were no troubled debt restructurings as of December 31, 2016 and 2015.