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Loans Receivable and the Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2019
Loans Receivable and the Allowance for Loan Losses  
Loans Receivable and the Allowance for Loan Losses

Note 5 - Loans Receivable and the Allowance for Loan Losses -

Loans receivable at December 31, 2019 and December 31, 2018 are summarized as follows:

 

 

 

 

 

 

 

(in thousands)

    

2019

    

2018

Mortgage Loans

 

 

  

 

 

  

1-4 Family

 

$

73,591

 

$

75,185

Multifamily

 

 

3,567

 

 

4,117

Commercial real estate

 

 

1,117

 

 

1,175

Consumer Loans

 

 

209

 

 

211

 

 

 

78,484

 

 

80,688

Plus (Less):

 

 

  

 

 

  

Unamortized Loan Fees/Costs

 

 

1,151

 

 

1,234

Allowance for Loan Losses

 

 

(850)

 

 

(850)

Net Loans Receivable

 

$

78,785

 

$

81,072

 

The performing mortgage loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at December 31, 2019 and 2018.

Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses.  The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.  The following tables set forth, as of December 31, 2019 and 2018, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually.  The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.

Allowance for Loan Losses and Recorded Investment in Loans Receivable For the Year Ended December 31, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-

 

 

 

 

 

 

 

 

Mortgage-

 

Mortgage-

 

Commercial

 

 

 

 

 

 

 

    

1-4 Family

    

Multifamily

    

Real Estate

    

Consumer

    

Total

Allowance for Loan Losses:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Beginning Balance

 

$

807

 

$

31

 

$

12

 

$

 —

 

$

850

Charge-Offs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Recoveries

 

 

 9

 

 

 —

 

 

 —

 

 

 —

 

 

 9

Provision

 

 

(4)

 

 

(4)

 

 

(1)

 

 

 —

 

 

(9)

Ending Balance

 

$

812

 

$

27

 

$

11

 

$

 —

 

$

850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Individually Evaluated for Impairment

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively Evaluated for Impairment

 

$

812

 

$

27

 

$

11

 

$

 —

 

$

850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Ending Balance

 

$

73,591

 

$

3,567

 

$

1,117

 

$

209

 

$

78,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Individually Evaluated for Impairment

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively Evaluated for Impairment

 

$

73,591

 

$

3,567

 

$

1,117

 

$

209

 

$

78,484

 

The allowance for loan losses for Mortgage 1-4 Family Loans of $812,000 includes an unallocated portion of $437,000 as of December 31, 2019.

Allowance for Loan Losses and Recorded Investment in Loans Receivable For the Year Ended December 31, 2018 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

    

 

    

Mortgage-

    

    

 

    

    

 

 

 

Mortgage-

 

Mortgage-

 

Commercial

 

 

 

 

 

 

 

 

1-4 Family

 

Multifamily

 

Real Estate

 

Consumer

 

Total

Allowance for Loan Losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

813

 

$

20

 

$

17

 

$

 —

 

$

850

Charge-Offs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Recoveries

 

 

11

 

 

 —

 

 

 —

 

 

 —

 

 

11

Provision

 

 

(17)

 

 

11

 

 

(5)

 

 

 —

 

 

(11)

Ending Balance

 

$

807

 

$

31

 

$

12

 

$

 —

 

$

850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Individually Evaluated for Impairment

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively Evaluated for Impairment

 

$

807

 

$

31

 

$

12

 

$

 —

 

$

850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Receivable:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Ending Balance

 

$

75,185

 

$

4,117

 

$

1,175

 

$

211

 

$

80,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Individually Evaluated for Impairment

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively Evaluated for Impairment

 

$

75,185

 

$

4,117

 

$

1,175

 

$

211

 

$

80,688

 

The allowance for loan losses for Mortgage 1-4 Family Loans of $807,000 includes an unallocated portion of $433,000 as of December 31, 2018.

Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.

Loan Grades / Classification

The primary purpose of grading loans is to assess credit quality and assist in identifying potential problem loans.  Every loan in the portfolio is assigned a loan grade based on quality and level of risk.  Loan grades are updated as events occur that bear on the collectability of the loan, such as change in payment flow or status of the obligor or collateral.  Changes in loan grades are reported to the Board Loan Committee.

Each credit reviewed is assigned a loan grade based on the following system:

Loan Grade 1Pass – Good

Loans with no identified problems and do not require more than normal attention.  The repayment source is well defined and the borrower/guarantor exhibits no inability of repaying the loan as agreed. The financial information is acceptable and the loan meets credit and policy requirements and exhibits no unusual elements of risk.  The collateral is acceptable and adequate. 

Loan Grade 2Pass – Fair

These are performing owner-occupied loans that exhibit diminished borrower capacity, such as sufficiently-aged Troubled Debt Restructurings or loans that are frequently delinquent more than 30 days but less than 60 days.  Also included are performing investor loans with a good payment record but lack updated financial information but are judged from alternate sources to have satisfactory cash flows and a sufficiently strong guarantor.

Loan Grade 3Watch 

Owner-occupied loans that are well-secured but are occasionally delinquent more than 60 days but less than 90.  Also included are performing investor loans lacking required current financial information or that demonstrate diminished guarantor capacity and an estimated stressed debt service coverage ratio of less than 1.20.

Loan Grade 4Special  Mention (For investment loans only.)

Investment loans that have potential or identified weaknesses that deserve management’s close attention.  If left uncorrected, these may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. These loans are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification. Default is not imminent.

Adverse  Classifications

Loan Grade 5Substandard

A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledge, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. 

Loan Grade 6Doubtful    

A loan that has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.

Credit Quality Indicators - Credit Risk Profile Based on Loan Grades at December 31, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Special

    

 

 

    

 

    

 

 

 

 

Pass

 

Watch

 

Mention

 

Substandard

 

Doubtful

 

Total

Mortgage Loans:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

72,937

 

$

87

 

$

 —

 

$

567

 

$

 —

 

$

73,591

Multifamily

 

 

3,567

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,567

Commercial real estate

 

 

1,117

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,117

Non-Mortgage Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

Consumer

 

 

209

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

209

Total

 

$

77,830

 

$

87

 

$

 —

 

$

567

 

$

 —

 

$

78,484

 

Credit Quality Indicators - Credit Risk Profile Based on Loan Grades at December 31, 2018 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Special

    

 

 

    

 

    

 

 

 

 

Pass

 

Watch

 

Mention

 

Substandard

 

Doubtful

 

Total

Mortgage Loans:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

74,514

 

$

91

 

$

 —

 

$

580

 

$

 —

 

$

75,185

Multifamily

 

 

4,117

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,117

Commercial real estate

 

 

1,175

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,175

Non-Mortgage Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

Consumer

 

 

211

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

211

Total

 

$

80,017

 

$

91

 

$

 —

 

$

580

 

$

 —

 

$

80,688

 

At December 31, 2019 and 2018,  loan balances outstanding on non-accrual status amounted to $0 and $0, respectively.  The Company considers loans more than 90 days past due and on nonaccrual as nonperforming loans. 

At December 31, 2019 and 2018, the credit quality indicators (performing and nonperforming loans), disaggregated by class of loan, are as follows:

Credit Quality Indicators - Credit Risk Profile Based on Payment Activity at December 31, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Non-

    

 

 

 

 

Performing

 

Performing

 

Total

Mortgage Loans:

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

73,591

 

$

 —

 

$

73,591

Multifamily

 

 

3,567

 

 

 —

 

 

3,567

Commercial real estate

 

 

1,117

 

 

 —

 

 

1,117

Non-Mortgage Loans:

 

 

 

 

 

  

 

 

  

Consumer

 

 

209

 

 

 —

 

 

209

Total

 

$

78,484

 

$

 —

 

$

78,484

 

Credit Quality Indicators - Credit Risk Profile Based on Payment Activity at December 31, 2018 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Non-

    

 

 

 

 

Performing

 

Performing

 

Total

Mortgage Loans:

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

75,185

 

$

 —

 

$

75,185

Multifamily

 

 

4,117

 

 

 —

 

 

4,117

Commercial real estate

 

 

1,175

 

 

 —

 

 

1,175

Non-Mortgage Loans:

 

 

  

 

 

  

 

 

  

Consumer

 

 

211

 

 

 —

 

 

211

Total

 

$

80,688

 

$

 —

 

$

80,688

 

The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of December 31, 2019 and 2018. There were no loans over 90 days past due and still accruing as of December 31, 2019 and 2018.

Aged Analysis of Past Due Loans Receivable at December 31, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

30-59

    

60-89 

    

90 Days or

    

 

 

    

 

 

    

Total

 

 

Days

 

Days

 

Greater  

 

Total

 

 

 

 

Loans

 

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Receivable

Mortgage Loans:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

 —

 

$

89

 

$

 —

 

$

89

 

$

73,502

 

$

73,591

Multifamily

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,567

 

 

3,567

Commercial real estate

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,117

 

 

1,117

Non-Mortgage Loans:

 

 

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Consumer

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

209

 

 

209

Total

 

$

 —

 

$

89

 

$

 —

 

$

89

 

$

78,395

 

$

78,484

 

Aged Analysis of Past Due Loans Receivable at December 31, 2018 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

30-59

    

60-89 

    

90 Days or

    

 

 

    

 

 

    

Total

 

 

Days

 

Days

 

Greater  

 

Total

 

 

 

 

Loans

 

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Receivable

Mortgage Loans:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

1 to 4 Family

 

$

227

 

$

171

 

$

 —

 

$

398

 

$

74,787

 

$

75,185

Multifamily

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,117

 

 

4,117

Commercial real estate

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,175

 

 

1,175

Non-Mortgage Loans:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Consumer

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

211

 

 

211

Total

 

$

227

 

$

171

 

$

 —

 

$

398

 

$

80,290

 

$

80,688

 

Loans Receivable on Nonaccrual Status at December 31 (in thousands)

 

 

 

 

 

 

 

 

    

2019

    

2018

Mortgage Loans:

 

 

  

 

 

  

1 to 4 Family

 

$

 —

 

$

 —

 

The following is a summary of information pertaining to impaired loans as of December 31, 2019 and December 31, 2018.

Impaired Loans For the Year Ended December 31, 2019 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Unpaid

    

 

 

    

Average

    

Interest

 

 

Recorded

 

Principal

 

Related

 

Recorded

 

Income

 

 

Investment

 

Balance

 

Allowance

 

Investment

 

Recognized

Mortgage Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

Impaired Loans For the Year Ended December 31, 2018 (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Unpaid

    

 

 

    

Average

    

Interest

 

 

Recorded

 

Principal

 

Related

 

Recorded

 

Income

 

 

Investment

 

Balance

 

Allowance

 

Investment

 

Recognized

Mortgage Loans

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

1-4 Family

 

$

 —

 

$

 —

 

$

 —

 

$

197

 

$

98

 

The Company seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. For the years ended December 31, 2019 and 2018, the concessions granted to certain borrowers included extending the payment due dates. Once modified in a trouble debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evaluated for an asset-specific allowance for credit losses. The Company continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, the Company provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

The following tables summarize information relative to the loan modifications determined to be TDRs during the period: 

 

 

 

 

 

 

 

 

 

 

    

 

    

Pre-

    

Post-

 

 

 

 

Modification

 

Modification

 

 

 

 

Outstanding

 

Outstanding

 

 

Number of

 

Recorded

 

Recorded

 

 

Contracts

 

Investment

 

Investment

Modifications as of December 31, 2019

 

  

 

 

  

 

 

  

(in thousands)

 

  

 

 

  

 

 

  

Troubled Debt Restructurings:

 

  

 

 

  

 

 

  

Mortgage Loans

 

  

 

 

  

 

 

  

1-4 Family

 

 —

 

$

 —

 

$

 —

Total Loans

 

 —

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

Modifications as of December 31, 2018

 

  

 

 

  

 

 

  

(in thousands)

 

  

 

 

  

 

 

  

Troubled Debt Restructurings:

 

  

 

 

  

 

 

  

Mortgage Loans

 

  

 

 

  

 

 

  

1-4 Family

 

 —

 

$

 —

 

$

 —

Total Loans

 

 —

 

$

 —

 

$

 —

 

The Company had no troubled debt restructurings that defaulted subsequent to the restructuring through the date the financial statements were issued.