Note D - Loans Receivable --

Loans receivable at December 31 are summarized as follows:


(in thousands)	December 31, 2019		December 31, 2018

Real Estate:
Secured by one-to four family residential properties
Owner-occupied	$	53,158	$	52,956
Non-owner-occupied		15,257		13,485
Home Equity Lines of Credit		3,858		2,973
Commercial (Nonresidential) Properties		22,349		21,868
Land		2,200		2,211
Construction		4,259		2,947
Multi-family		2,086		1,524
Commercial		2,335		1,964
Consumer Loans		246		354
Total Loans		105,748		100,282

Less: Net Deferred Loan Fees		(349)		(380)
Loans in Process		(2,161)		(1,601)
Allowance for Loan Losses		(769)		(768)
Net Loans	$	102,469	$	97,533

Discounts on loans purchased amounted to $230,000 and $251,000 for the years ended December 31, 2019 and 2018, respectively.

At December 31, 2019, the Bank did have not any loans where formal foreclosure procedures had been initiated.

Under its current lending status with the FHLB (Note J), the Bank may be required to deliver qualifying loans and securities to the FHLB in order to collateralize any outstanding and future advances. The Bank did not deliver any specific available for sale securities or loans to the FHLB at December 31, 2019 and 2018. FHLB maintains a blanket lien on on $46.0 million of our loan portfolio.

Loans - Real Estate, Commercial and Consumer

Commercial real estate loans are secured by the subject property and are underwritten based upon standards set forth in policies approved by the Bank’s Board of Directors (Board). Such standards include, among other factors, loan to value limits, cash flow coverage, and general creditworthiness of the obligors.

Residential real estate loans are underwritten in accordance with policies approved by the Board, including repayment capacity and source, value of the underlying property, credit history and stability.

Construction loans to borrowers are to finance the construction of owner occupied and leased properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Construction loan funds are disbursed periodically based on the percentage of construction completed. Management carefully monitors these loans with on-site inspections.

The Bank also makes loans on occasion for the purchase of land for future development for either commercial or residential use by the borrower.

Consumer loans are extended for deposit account collateralized loans and small unsecured loans.

Commercial loans and lines of credit are offered, and the Bank also purchases commercial loans from a third party company that extends loans to healthcare providers and other professionals.

The tables below provide an allocation and rollforward of the allowance for loan losses by loan type as of and for the years ended December 31, 2019 and 2018. The allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories.

Allowance for Credit Losses and Recorded Investment in Loans Receivable

For the Year Ended December 31, 2019

(in thousands)


	Real Estate
					One-to-Four
	Commercial		Land		Family		Construction		Multi-Family		Consumer		Commercial		Total

Allowance for Credit Losses:
Beginning Balance	$	113	$	23	$	519	$	16	$	5	$	9	$	83	$	768
Charge-offs		—		—		—		—		—		(18)		—		(18)
Recoveries		5		—		—		—		—		1		—		6
Provision		(22)		(5)		(3)		4		1		34		4		13
Ending Balance	$	96	$	18	$	516	$	20	$	6	$	26	$	87	$	769

Ending Balance:
Individually Evaluated for Impairment	$	—	$	—	$	85	$	—	$	—	$	—	$	—	$	85

Ending Balance:
Collectively Evaluated for Impairment	$	96	$	18	$	431	$	20	$	6	$	26	$	87	$	684

Loans Receivable:
Ending Balance	$	22,349	$	2,200	$	72,273	$	4,259	$	2,086	$	246	$	2,335	$	105,748

Ending Balance:
Individually Evaluated for Impairment	$	—	$	—	$	828	$	—	$	—	$	—	$	—	$	828

Ending Balance:
Collectively Evaluated for Impairment	$	22,349	$	2,200	$	71,445	$	4,259	$	2,086	$	246	$	2,335	$	104,920

Allowance for Credit Losses and Recorded Investment in Loans Receivable

For the Year Ended December 31, 2018

(in thousands)


	Real Estate
					One-to-Four
	Commercial		Land		Family		Construction		Multi-Family		Consumer		Commercial		Total

Allowance for Credit Losses:
Beginning Balance	$	94	$	56	$	545	$	8	$	4	$	1	$	48	$	756
Charge-offs		(1)		—		—		—		—		(8)		—		(9)
Recoveries		3		—		13		—		—		—		—		16
Provision		17		(33)		(39)		8		1		16		35		5
Ending Balance	$	113	$	23	$	519	$	16	$	5	$	9	$	83	$	768

Ending Balance:
Individually Evaluated for Impairment	$	—	$	—	$	10	$	—	$	—	$	—	$	—	$	10

Ending Balance:
Collectively Evaluated for Impairment	$	113	$	23	$	509	$	16	$	5	$	9	$	83	$	758

Loans Receivable:
Ending Balance	$	21,868	$	2,211	$	69,414	$	2,947	$	1,524	$	354	$	1,964	$	100,282

Ending Balance:
Individually Evaluated for Impairment	$	—	$	—	$	100	$	—	$	—	$	—	$	—	$	100

Ending Balance:
Collectively Evaluated for Impairment	$	21,868	$	2,211	$	69,314	$	2,947	$	1,524	$	354	$	1,964	$	100,182

Credit quality indicators as of December 31, 2019 and 2018:

Pass - A pass asset is properly approved, documented, collateralized, and performing. It does not reflect an abnormal amount of risk.

Special mention - A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard - An asset classified as substandard has a well-defined weakness or weaknesses. A substandard asset is inadequately protected by the current net worth or paying capacity of the obligor or pledged collateral, if any. It is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful - Assets classified as doubtful have all the weaknesses inherent in those classified as substandard. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions, and values.

Loss - Assets classified as loss are considered uncollectible or of such little value that the continuance of the loan or other asset on the books of the Bank is not warranted. Some recovery of funds could be possible in the future, but the amount and probability of this recovery are not determinable thus providing little justification for the assets to remain on the books.

The following tables represent the Bank’s credit exposure by credit quality indicator as of December 31:

Credit Risk Profile by Internally Assigned Grade

(in thousands)


	December 31, 2019
	Real Estate
	Commercial				One-to-Four
	Real Estate		Land		Family		Construction		Multi-Family		Consumer		Commercial		Total
Pass	$	22,349	$	2,200	$	71,203	$	4,259	$	2,086	$	246	$	2,335	$	104,678
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		1,070		—		—		—		—		1,070
Doubtful		—		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—		—
	$	22,349	$	2,200	$	72,273	$	4,259	$	2,086	$	246	$	2,335	$	105,748


	December 31, 2018
	Real Estate
	Commercial				One-to-Four
	Real Estate		Land		Family		Construction		Multi-Family		Consumer		Commercial		Total
Pass	$	21,868	$	2,189	$	68,774	$	2,947	$	1,524	$	354	$	1,964	$	99,620
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		22		640		—		—		—		—		662
Doubtful		—		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—		—
	$	21,868	$	2,211	$	69,414	$	2,947	$	1,524	$	354	$	1,964	$	100,282

The following tables are an aging analysis of loans as of December 31, 2019 and 2018:

Aged Analysis of Past Due Loans Receivable

(in thousands)


	December 31, 2019
	Accruing
	30-89		90 Days								Total
	Days		and Over		Total				Nonaccrual		Loans
	Past Due		Past Due		Past Due		Current		Status		Receivable
Real Estate:
Residential	$	2,366	$	—	$	2,366	$	69,079	$	828	$	72,273
Commercial		—		—		—		22,349		—		22,349
Land		34		—		34		2,166		—		2,200
Construction		—		—		—		4,259		—		4,259
Multi-family		—		—		—		2,086		—		2,086
Consumer		—		—		—		246		—		246
Commercial		—		—		—		2,335		—		2,335
	$	2,400	$	—	$	2,400	$	102,520	$	828	$	105,748

Aged Analysis of Past Due Loans Receivable

(in thousands)


	December 31, 2018
	Accruing
	30-89		90 Days								Total
	Days		and Over		Total				Nonaccrual		Loans
	Past Due		Past Due		Past Due		Current		Status		Receivable
Real Estate:
Residential	$	2,116	$	—	$	2,116	$	67,198	$	100	$	69,414
Commercial		222		—		222		21,646		—		21,868
Land		15		—		15		2,196		—		2,211
Construction		—		—		—		2,947		—		2,947
Multi-family		—		—		—		1,524		—		1,524
Consumer		66		—		66		288		—		354
Commercial		—		—		—		1,964		—		1,964
	$	2,419	$	—	$	2,419	$	97,763	$	100	$	100,282

The following tables below present impaired loans disaggregated by class as of and for the years ended December 31:

Impaired Loans

(in thousands)


	As Of And For The Year Ended December 31, 2019
					Allowance
			Unpaid		for Loan		Average		Interest
	Recorded		Principal		Losses		Recorded		Income
	Investment		Balance		Allocated		Investment		Recognized
Loans with an allowance recorded:
Real estate
Commercial	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—
1-4 family residential		828		828		85		769		—
Multi-Family		—		—		—		—		—
Construction		—		—		—		—		—
Consumer and Commercial		—		—		—		—		—

Loans with no allowance recorded:
Real estate
Commercial		—		—		—		—		—
Land		—		—		—		—		—
1-4 family residential		—		—		—		—		—
Multi-Family		—		—		—		—		—
Construction		—		—		—		—		—
Consumer and Commercial		—		—		—		—		—

Totals	$	828	$	828	$	85	$	769	$	—

(CONTINUED)

Impaired Loans

(in thousands)


	As Of And For The Year Ended December 31, 2018
					Allowance
			Unpaid		for Loan		Average		Interest
	Recorded		Principal		Losses		Recorded		Income
	Investment		Balance		Allocated		Investment		Recognized
Loans with an allowance recorded:
Real estate
Commercial	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—
1-4 family residential		100		100		10		99		—
Multi-Family		—		—		—		—		—
Construction		—		—		—		—		—
Consumer and Commercial		—		—		—		—		—

Loans with no allowance recorded:
Real estate
Commercial		—		—		—		—		—
Land		—		—		—		—		—
1-4 family residential		—		—		—		—		—
Multi-Family		—		—		—		—		—
Construction		—		—		—		—		—
Consumer and Commercial		—		—		—		—		—

Totals	$	100	$	100	$	10	$	99	$	—

Troubled Debt Restructuring

The tables below present modifications disaggregated by class for the years ended December 31, 2019 and 2018.


			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Modifications as of December 31, 2019:

Residential - modified amortization		2	$	668	$	668

Modifications as of December 31, 2018:

Residential - modified amortization		—	$	—	$	—

The Bank’s troubled debt restructurings are generally due to a modification of terms allowing the customer to make interest-only payments for an amount of time, an extension of the loan term, and/or a reduction in interest rate to obtain a lower payment for the customer. The Bank is not committed to lend additional funds to debtors whose loans have been modified.