0001558370-21-011636.txt : 20210813 0001558370-21-011636.hdr.sgml : 20210813 20210813130511 ACCESSION NUMBER: 0001558370-21-011636 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Eureka Homestead Bancorp, Inc. CENTRAL INDEX KEY: 0001769725 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-56071 FILM NUMBER: 211171100 BUSINESS ADDRESS: STREET 1: 1922 VETERANS MEMORIAL BOULEVARD CITY: METAIRIE STATE: LA ZIP: 70005 BUSINESS PHONE: 504-834-0242 MAIL ADDRESS: STREET 1: 1922 VETERANS MEMORIAL BOULEVARD CITY: METAIRIE STATE: LA ZIP: 70005 10-Q 1 erkh-20210630x10q.htm 10-Q
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

          Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

OR

          Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File No. 000-56071

Eureka Homestead Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland

83-4051300

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

1922 Veterans Memorial Boulevard

Metairie, Louisiana

70005

(Address of Principal Executive Offices)

(Zip Code)

(504) 834-0242

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES      NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES      NO

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO 

As of August 13, 2021, 1,188,402 shares of the Company’s common stock, par value $0.01 per share, were issued and outstanding.

Eureka Homestead Bancorp, Inc.

Form 10-Q

Index

    

    

Page

Part I. Financial Information

Item 1.

Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020 (unaudited)

3

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

4

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

5

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

6

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited)

7

Notes to Consolidated Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

Part II. Other Information

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

35

Signature Page

36

Part I. – Financial Information

Item 1.

Consolidated Financial Statements

EUREKA HOMESTEAD BANCORP, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

JUNE 30, 2021 AND DECEMBER 31, 2020

(in thousands)

June 30, 

December 31, 

    

2021

    

2020

ASSETS

Cash and Cash Equivalents

$

12,042

$

3,952

Interest-Bearing Deposits in Banks

 

5,494

 

9,488

Investment Securities

 

5,587

 

6,050

Loans Receivable, Net

 

74,589

 

69,892

Loans Held-for-Sale

 

2,385

 

3,610

Accrued Interest Receivable

 

419

 

436

Federal Home Loan Bank Stock

 

1,444

 

1,440

Premises and Equipment, Net

 

644

 

661

Cash Surrender Value of Life Insurance

 

4,181

 

4,137

Prepaid Expenses and Other Assets

 

179

 

230

Total Assets

$

106,964

$

99,896

LIABILITIES AND STOCKHOLDERS' EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Deposits

$

63,430

$

56,428

Advances from Federal Home Loan Bank

 

19,456

 

19,443

Advance Payments by Borrowers for Taxes and Insurance

 

1,497

 

1,309

Deferred Tax Liability

20

12

Accrued Expenses and Other Liabilities

 

679

 

764

Total Liabilities

 

85,082

 

77,956

Commitments and Contingencies (Note 7)

 

  

 

  

Stockholders' Equity:

 

  

 

  

Preferred Stock, $0.01 Par Value, 1,000,000 Shares Authorized, No Shares Issued

Common Stock, $0.01 Par Value, 9,000,000 Shares Authorized, 1,188,402 and 1,210,902 Shares Issued and Outstanding on June 30, 2021 and December 31, 2020, Respectively

12

12

Additional Paid-in Capital

10,491

10,765

Unallocated Common Stock Held by:

Employee Stock Ownership Plan (ESOP)

(1,029)

(1,052)

Retained Earnings

 

12,334

 

12,171

Accumulated Other Comprehensive Income

 

74

 

44

Total Stockholders' Equity

 

21,882

 

21,940

Total Liabilities and Stockholders' Equity

$

106,964

$

99,896

The accompanying notes are an integral part of these financial statements.

3

EUREKA HOMESTEAD BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)

(in thousands except for Earnings Per Share )

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Interest Income:

 

  

 

  

  

 

  

Loans Receivable

$

680

$

725

$

1,385

$

1,526

Investment Securities

 

14

 

15

 

28

 

47

Interest-Bearing Deposits in Banks

 

3

 

17

 

9

 

63

Total Interest Income

 

697

 

757

 

1,422

 

1,636

Interest Expense:

 

  

 

  

 

  

 

  

Deposits

 

192

 

261

 

393

 

553

Advances from Federal Home Loan Bank

 

109

 

160

 

225

 

317

Total Interest Expense

 

301

 

421

 

618

 

870

Net Interest Income

 

396

 

336

 

804

 

766

(Credit) Provision for Loan Losses

 

(8)

 

 

 

Net Interest Income After (Credit) Provision for Loan Losses

 

404

 

336

 

804

 

766

Non-Interest Income:

 

  

 

  

 

  

 

  

Service Charges and Other Income

 

23

 

21

 

51

 

33

Fees on Loans Sold

 

297

 

153

 

519

 

338

Income from Life Insurance

 

22

 

23

 

44

 

47

Total Non-Interest Income

 

342

 

197

 

614

 

418

Non-Interest Expenses:

 

  

 

  

 

  

 

  

Salaries and Employee Benefits

 

454

 

378

 

848

 

803

Occupancy Expense

 

49

 

50

 

99

 

102

FDIC Deposit Insurance Premium and Examination Fees

 

16

 

17

 

33

 

32

Data Processing

 

20

 

29

 

39

 

56

Accounting and Consulting

 

30

 

59

 

68

 

109

Insurance

 

21

 

20

 

42

 

41

Legal fees

16

21

29

32

Other

 

57

 

56

 

97

 

114

Total Non-Interest Expenses

 

663

 

630

 

1,255

 

1,289

Income (Loss) Before Income Tax Expense

 

83

 

(97)

 

163

 

(105)

Income Tax Expense (Benefit)

 

 

(62)

 

 

(62)

Net Income (Loss)

$

83

$

(35)

$

163

$

(43)

Earnings (Loss) Per Share: Basic

$

0.08

$

(0.03)

$

0.15

$

(0.03)

The accompanying notes are an integral part of these financial statements.

4

EUREKA HOMESTEAD BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)

(in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Net Income (Loss)

$

83

$

(35)

$

163

$

(43)

Other Comprehensive (Loss) Income:

 

  

 

  

 

  

 

  

Unrealized Gains on Investment Securities

 

43

 

17

 

38

 

77

Other Comprehensive Income Before Income Taxes

43

17

38

77

Income Tax Effect

 

(9)

 

(4)

 

(8)

 

(16)

Other Comprehensive Income, Net of Income Taxes

 

34

 

13

 

30

 

61

Comprehensive Income (Loss)

$

117

$

(22)

$

193

$

18

The accompanying notes are an integral part of these financial statements.

5

EUREKA HOMESTEAD BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)

(in thousands)

Accumulated

Additional

Unallocated

Other

Common

Paid-in

ESOP

Retained

Comprehensive

    

Stock

    

Capital

    

Shares

    

Earnings

    

Income/(Loss)

    

Total

Balance, January 1, 2020

$

14

$

13,112

$

(1,098)

$

12,274

$

(18)

$

24,284

ESOP Shares Earned

(1)

23

22

Net Loss

 

 

 

 

(43)

 

 

(43)

Other Comprehensive Income

 

 

 

 

 

61

 

61

Balance, June 30, 2020

$

14

$

13,111

$

(1,075)

$

12,231

$

43

$

24,324

Balance, January 1, 2021

$

12

$

10,765

$

(1,052)

$

12,171

$

44

$

21,940

ESOP Shares Earned

6

23

29

Stock Shares Repurchased

(280)

(280)

Net Income

 

 

 

 

163

 

 

163

Other Comprehensive Income

 

 

 

 

 

30

 

30

Balance, June 30, 2021

$

12

$

10,491

$

(1,029)

$

12,334

$

74

$

21,882

The accompanying notes are an integral part of these financial statements.

6

EUREKA HOMESTEAD BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited)

(in thousands)

    

Six Months Ended June 30, 

    

2021

    

2020

Cash Flows from Operating Activities:

 

  

 

  

Net Income (Loss)

$

163

$

(43)

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:

 

  

 

  

Cash Provided by (Used in) Operating Activities:

Provision for Loan Losses

 

 

Depreciation Expense

 

20

 

28

Amortization of FHLB Advance Prepayment Penalty

 

13

 

33

Net Amortization of Premium/Discount on Mortgage-Backed Securities

 

9

 

1

Stock Dividend on Federal Home Loan Bank Stock

 

(4)

 

(16)

Non-cash Compensation for ESOP

29

22

Net Decrease in Loans Held-for-Sale

 

1,225

 

836

Changes in Assets and Liabilities:

 

  

 

  

Decrease (Increase) in Accrued Interest Receivable

 

17

 

(149)

(Increase) in CSV of Life Insurance

 

(44)

 

(47)

Decrease (Increase) in Prepaid Expenses and Other Assets

 

51

 

(116)

(Decrease) in Accrued Expenses and Other Liabilities

 

(85)

 

(8)

Net Cash Provided by Operating Activities

 

1,394

 

541

Cash Flows from Investing Activities:

 

  

 

  

Net (Increase) Decrease in Loans

 

(4,697)

 

7,917

Proceeds from Maturities of Interest-Bearing Deposits in Banks

7,990

3,735

Purchases of Interest-Bearing Deposits in Banks

 

(3,996)

 

(10,735)

Proceeds from Sales, Calls and Principal Repayments of Investment Securities

 

492

 

820

Purchases of Premises and Equipment

 

(3)

 

(7)

Net Cash (Used in) Provided by Investing Activities

 

(214)

 

1,730

Cash Flows from Financing Activities:

 

  

 

  

Net Increase (Decrease) in Deposits

 

7,002

 

(1,678)

Shares Repurchased

(280)

Advances from Federal Home Loan Bank

 

2,000

 

4,000

Payments on Advances from Federal Home Loan Bank

 

(2,000)

 

(3,000)

Net Increase (Decrease) in Advance Payments by Borrowers for Taxes and Insurance

 

188

 

(557)

Net Cash Provided by (Used in) Financing Activities

 

6,910

 

(1,235)

Net Increase in Cash and Cash Equivalents

 

8,090

 

1,036

Cash and Cash Equivalents at Beginning of Period

 

3,952

 

11,875

Cash and Cash Equivalents at End of Period

$

12,042

$

12,911

Supplemental Disclosures for Cash Flow Information:

 

  

 

  

Cash Paid (Received) for:

 

  

 

  

Interest

$

609

$

917

Income Taxes

$

(23)

Supplemental Schedule for Noncash Investing and Financing Activities:

 

  

 

  

Change in the Unrealized Gain/Loss on Investment Securities

$

38

$

77

The accompanying notes are an integral part of these financial statements.

7

Eureka Homestead Bancorp, Inc.

Form 10-Q

EUREKA HOMESTEAD BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 (Unaudited)

Note 1 – Basis of Presentation -

The accompanying unaudited consolidated financial statements of Eureka Homestead Bancorp, Inc. (the “Company”) were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results which may be expected for the entire year. These statements should be read in conjunction with the Financial Statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”). Reference is made to the accounting policies of the Company described in the Notes to the Financial Statements contained in the Annual Report.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Note 2 Recent Accounting Pronouncements -

Emerging Growth Company Status

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), Conforming Amendments Related to Leases. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the balance sheet and disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The adoption of this ASU is not expected to have a material effect on the Company’s Consolidated Financial Statements.

8

In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on current expected credit losses (“CECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held to maturity securities), including certain off-balance sheet financial instruments (e.g., commitments to extend credit and standby letters of credit that are not unconditionally cancellable). The CECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the CECL. The ASU also amends the current available-for-sale security impairment model for debt securities whereby credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. For an emerging growth company, the amendments in this update, as amended through more recent related ASUs, are effective for fiscal years beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2023. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently planning for the implementation of this accounting standard. It is too early to assess the impact this ASU will have on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adopting permitted. The Company is currently assessing the impact of the adoption of this standard on the Company’s consolidated financial position.

In March 2020the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial reporting. Specifically, the amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These relate only to those contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU became effective March 12, 2020 and can be adopted anytime during the period of January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of this guidance. There are only two relationship that have LIBOR pricing with a maturity date beyond December 31, 2022The loan documentation for the relationships contain language for an alternative pricing index when LIBOR is no longer available.

Note 3 – Earnings (Loss) Per Share -

Basic earnings per share (“EPS”) represents income available or loss attributable to common stockholders divided by the weighted average number of common shares outstanding; no dilution for any potentially convertible shares is included in the calculation. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential common shares that may be issued by the Company relate to outstanding stock options.

9

Earnings (loss) per common share were computed based on the following:

Three Months Ended June 30, 

Six Months Ended June 30, 

(in thousands, except per share data)

2021

    

2020

2021

2020

Numerator:

Net income (loss) available to common stockholders

$

83

$

(35)

$

163

$

(43)

Denominator:

 

 

 

 

Weighted average common shares outstanding

 

1,188

 

1,430

 

1,192

 

1,430

Less: Average unallocated ESOP shares

104

108

103

108

Weighted average shares

1,084

1,322

1,089

1,322

Basic earnings (loss) per common share

$

0.08

$

(0.03)

$

0.15

$

(0.03)

Note 4 – Investment Securities -

The amortized cost and fair values of investment securities available-for-sale were as follows:

Gross

Gross

June 30, 2021:

Amortized

Unrealized

Unrealized

Fair

(in thousands)

    

Cost

    

Gains

    

(Losses)

    

Value

Mortgage-Backed Securities:

 

  

 

  

 

  

 

  

FHLMC

$

2,500

$

51

$

$

2,551

SBA 7a Pools

 

2,993

 

43

 

 

3,036

Total Investment Securities Available-for-Sale

$

5,493

$

94

$

$

5,587

Gross

Gross

December 31, 2020:

Amortized

Unrealized

Unrealized

Fair

(in thousands)

    

Cost

    

Gains

    

(Losses)

    

Value

Mortgage-Backed Securities:

 

  

 

  

 

  

 

  

FHLMC

$

2,811

$

63

$

$

2,874

SBA 7a Pools

 

3,183

 

 

(7)

 

3,176

Total Investment Securities Available-for-Sale

$

5,994

$

63

$

(7)

$

6,050

All investment securities held on June 30, 2021 and December 31, 2020, were government-sponsored mortgage-backed or SBA pool securities.

The amortized cost and fair values of the investment securities available-for-sale at June 30, 2021, by contractual maturity, are shown below. For mortgage-backed securities and SBA 7a pools, expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale

June 30, 2021

Amortized

Fair

(in thousands)

    

Cost

    

Value

Amounts Maturing:

 

  

 

  

After One Year through Five Years

$

$

After Five Years through Ten Years

 

3,054

 

3,077

After Ten Years

 

2,439

 

2,510

$

5,493

$

5,587

No investment securities were pledged to secure advances from the FHLB at June 30, 2021 and December 31, 2020.

10

There were no sales or calls of available-for-sale investment securities for the three and six months ended June 30, 2021 and the year ended December 31, 2020.

Gross unrealized losses in investment securities at June 30, 2021 and December 31, 2020, existing for continuous periods of less than 12 months and for continuous periods of 12 months or more, are as follows:

June 30, 2021

(in thousands)

Less Than 12 Months

12 Months or More

Totals

Security

Unrealized

Unrealized

Unrealized

Description

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

Mortgage-Backed

 

  

 

  

 

  

 

  

 

  

 

  

FHLMC

$

$

$

$

$

$

SBA 7a Pools

 

 

 

 

 

 

$

$

$

$

$

$

December 31, 2020

(in thousands)

Less Than 12 Months

12 Months or More

Totals

Security

Unrealized

Unrealized

Unrealized

Description

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

    

Fair Value

    

(Losses)

Mortgage-Backed

 

  

 

  

 

  

 

  

 

  

 

  

FHLMC

$

$

$

$

$

$

SBA 7a Pools

 

873

 

(8)

 

1,349

 

(1)

 

2,222

 

(9)

$

873

$

(8)

$

1,349

$

(1)

$

2,222

$

(9)

Management evaluates securities for other-than temporary impairment on a periodic and regular basis, as well as when economic or market concerns warrant such evaluation. No declines at June 30, 2021 and December 31, 2020, were deemed to be other-than-temporary.

In analyzing an issuer’s financial condition, management considers whether the federal government or its agencies issued the securities, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial statements.

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

Loans receivable at June 30, 2021 and December 31, 2020 are summarized as follows:

June 30, 

December 31, 

(in thousands)

    

2021

    

2020

Mortgage Loans

 

  

 

  

1-4 Family

$

65,575

$

64,792

Multifamily

 

2,829

 

2,877

Construction and Land

 

3,201

 

1,356

Commercial Real Estate

2,330

 

364

Consumer Loans

 

197

 

214

 

74,132

 

69,603

Plus (Less):

 

  

 

  

Unamortized Loan Fees/Costs

 

1,315

 

1,139

Allowance for Loan Losses

 

(858)

 

(850)

Net Loans Receivable

$

74,589

$

69,892

The performing mortgage loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at June 30, 2021 and December 31, 2020.

11

Management evaluates the allowance for loan losses to assess the risk of loss in the loan portfolio and to determine the adequacy of the allowance for loan losses. For purposes of this evaluation, loans are aggregated into pools based on various characteristics. Some of those characteristics include payment status, concentrations, and loan to collateral value and the financial status of borrowers. The allowance allocated to each of these pools is based on historical charge-off rates, adjusted for changes in the credit risk characteristics within these pools, as determined from current information and analyses. In determining the appropriate level of the allowance, management also ensures that the overall allowance appropriately reflects current macroeconomic conditions, industry exposure and a margin for the imprecision inherent in most estimates of expected credit losses. In addition to these factors, management also considers the following for each segment of the loan portfolio when determining the allowance:

Residential mortgages - This category consists of loans secured by first and junior liens on residential real estate. The performance of these loans may be adversely affected by unemployment rates, local residential real estate market conditions and the interest rate environment.

Commercial real estate - This category consists of loans primarily secured by office buildings, and retail shopping facilities. The performance of commercial real estate loans may be adversely affected by conditions specific to the relevant industry, the real estate market for the property type and geographic region where the property or borrower is located.

Construction and land - This category consists of loans to finance the ground-up construction and/or improvement of construction of residential and commercial properties and loans secured by land. The performance of construction and land loans is generally dependent upon the successful completion of improvements and/or land development for the end user, the sale of the property to a third party, or a secondary source of cash flow from the owners. The successful completion of planned improvements and development maybe adversely affected by changes in the estimated property value upon completion of construction, projected costs and other conditions leading to project delays.

Multi-family residential - This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. The performance of multi-family loans is generally dependent on the receipt of rental income from the tenants who occupy the subject property. The occupancy rate of the subject property and the ability of the tenants to pay rent may be adversely affected by the location of the subject property and local economic conditions.

Consumer - This category consists of loans to individuals for household, family and other personal use. The performance of these loans may be adversely affected by national and local economic conditions, unemployment rates and other factors affecting the borrower's income available to service the debt. All of our consumer loans are secured by our customers’ savings accounts and/or certificates of deposit.

As a result of the uncertainties inherent in the estimation process, management’s estimate of loan losses and the related allowance could change in the near term.

Based on management’s periodic evaluation of the allowance for loan losses, a provision for loan losses is charged to operations if additions to the allowance are required. Actual loan charge-offs are deducted from the allowance and subsequent recoveries of previously charged-off loans are added to the allowance.

The following tables set forth, as of June 30, 2021 and December 31, 2020, 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.

12

Allowance for Loan Losses and Recorded Investment in Loans Receivable
June 30, 2021 (in thousands)

Mortgage-

Mortgage-

Mortgage-

Mortgage-

Construction

Commercial

    

1-4 Family

    

Multifamily

    

and Land

    

Real Estate

    

Consumer

    

Total

Allowance for Loan Losses:

 

 

  

 

  

 

  

 

  

 

  

Beginning Balance

$

818

$

22

$

6

$

4

$

$

850

Charge-Offs

 

 

 

 

 

 

Recoveries

 

8

 

 

 

 

 

8

Provision (Credit)

 

(55)

 

(1)

 

29

 

27

 

 

Ending Balance

$

771

$

21

$

35

$

31

$

$

858

Ending Balance:

 

  

 

  

 

  

 

  

 

  

 

  

Individually Evaluated for Impairment

$

$

$

$

$

$

Collectively Evaluated for Impairment

$

771

$

21

$

35

$

31

$

$

858

Loans Receivable:

 

  

 

  

 

  

 

  

 

  

Ending Balance

$

65,575

$

2,829

$

3,201

$

2,330

$

197

$

74,132

Ending Balance:

 

  

 

  

 

  

 

  

 

  

 

  

Individually Evaluated for Impairment

$

$

$

$

$

$

Collectively Evaluated for Impairment

$

65,575

$

2,829

$

3,201

$

2,330

$