NOTE 5 - Loans

Major classifications of loans are as follows:


	December 31,		December 31,
	2019		2018
Commercial
Development	$	18,222	$	7,801
Real estate		68,621		69,425
Commercial and industrial		13,681		13,142
Residential real estate and consumer
One-to-four family owner-occupied		29,380		41,018
One-to-four family investor-owned		28,077		32,312
Multifamily		29,531		34,467
Consumer		4,230		2,733
Subtotal	$	191,742	$	200,898
Deferred loan fees		(187)		(86)
Allowance for loan losses		(2,264)		(2,118)
Net loans	$	189,291	$	198,694

Deposit accounts in an overdraft position and reclassified as loans approximated $6 and $7 at December 31, 2019 and 2018, respectively.

A summary of the activity in the allowance for loan losses by portfolio segment is as follows:


			Residential real
			estate
Year Ended	Commercial		and consumer		Total
December 31, 2019
Beginning balance	$	940	$	1,178	$	2,118
Provision for loan losses		311		(110)		201
Loans charged off		—		(58)		(58)
Recoveries of loans previously charged off		—		3		3
Total ending allowance balance	$	1,251	$	1,013	$	2,264

December 31, 2018
Beginning balance	$	660	$	1,140	$	1,800
Provision for loan losses		304		209		513
Loans charged off		(24)		(172)		(196)
Recoveries of loans previously charged off		—		1		1
Total ending allowance balance	$	940	$	1,178	$	2,118

Information about how loans were evaluated for impairment and the related allowance for loan losses follows:


			Residential real
			estate and
December 31, 2019	Commercial		consumer		Total
Loans:
Individually evaluated for impairment	$	798	$	1,457	$	2,255
Collectively evaluated for impairment		99,726		89,761		189,487
Total loans	$	100,524	$	91,218	$	191,742

Allowance for loan losses:
Individually evaluated for impairment	$	158	$	77	$	235
Collectively evaluated for impairment		1,093		936		2,029
Total allowance for loan losses	$	1,251	$	1,013	$	2,264


			Residential real
			estate and
December 31, 2018	Commercial		consumer		Total
Loans:
Individually evaluated for impairment	$	87	$	1,469	$	1,556
Collectively evaluated for impairment		90,281		109,061		199,342
Total loans	$	90,368	$	110,530	$	200,898

Allowance for loan losses:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment		940		1,178		2,118
Total allowance for loan losses	$	940	$	1,178	$	2,118

Information regarding impaired loans follows:


	Principal		Recorded		Related		Average		Interest
As of December 31, 2019	Balance		Investment		Allowance		Investment		Recognized
Loans with related allowance for loan losses:
Commercial
Commercial and industrial	$	729	$	729	$	158	$	740	$	19
Residential real estate and consumer
One-to-four family investor-owned		415		403		77		412		—
Total loans with related allowance for loan losses		1,144		1,132		235		1,152		19
Loans with no related allowance for loan losses:
Commercial
Commercial and industrial		73		69		—		77		5
Residential real estate and consumer
One-to-four family owner-occupied		795		744		—		754		5
One-to-four family investor-owned		243		221		—		231		—
Consumer		114		89		—		98		—
Total loans with no related allowance for loan losses		1,225		1,123		—		1,160		10

Total impaired loans	$	2,369	$	2,255	$	235	$	2,312	$	29


	Principal		Recorded		Related		Average		Interest
As of December 31, 2018	Balance		Investment		Allowance		Investment		Recognized

Loans with no related allowance for loan losses:
Commercial
Commercial and industrial	$	89	$	87	$	—	$	93	$	5
Residential real estate and consumer
One-to-four family owner-occupied		1,142		1,120		—		1,137		26
One-to-four family investor-owned		248		241		—		246		—
Consumer		114		108		—		114		—

Total impaired loans	$	1,593	$	1,556	$	—	$	1,590	$	31

There were no additional funds committed to impaired loans as of December 31, 2019 and 2018.

The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan.

Commercial loans and one-to-four family investor-owned and multifamily loans are generally evaluated using the following internally prepared ratings:

“Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.

“Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.

“Substandard” ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.

“Doubtful” ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectability of the contractual loan payments is unlikely.

Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:


			Special
	Pass		Mention		Substandard		Doubtful		Totals
December 31, 2019
Development	$	18,222	$	—	$	—	$	—	$	18,222
Real estate		68,036		585		—		—		68,621
Commercial and industrial		10,888		2,779		14		—		13,681
One-to-four family investor-owned		27,453		—		624		—		28,077
Multifamily		29,531		—		—		—		29,531
Totals	$	154,130	$	3,364	$	638	$	—	$	158,132
December 31, 2018
Development	$	7,801	$	—	$	—	$	—	$	7,801
Real estate		69,425		—		—		—		69,425
Commercial and industrial		13,122		—		20		—		13,142
One-to-four family investor-owned		30,558		1,353		401		—		32,312
Multifamily		34,467		—		—		—		34,467
Totals	$	155,373	$	1,353	$	421	$	—	$	157,147

Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.

Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows:


	Performing		Non-performing		Totals
December 31, 2019
One-to-four family owner-occupied	$	28,636	$	744	$	29,380
Consumer		4,141		89		4,230
	$	32,777	$	833	$	33,610
December 31, 2018
One-to-four family owner-occupied	$	39,919	$	1,099	$	41,018
Consumer		2,625		108		2,733
	$	42,544	$	1,207	$	43,751

Loan aging information follows:


			Loans Past Due		Loans Past Due				Nonaccrual
	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
December 31, 2019
Commercial
Development	$	18,222	$	—	$	—	$	18,222	$	—
Real estate		68,621		—		—		68,621		—
Commercial and industrial		13,681		—		—		13,681		14
Residential real estate and consumer
One-to-four family owner-occupied		29,034		—		346		29,380		346
One-to-four family investor-owned		28,077		—		—		28,077		624
Multifamily		29,531		—		—		29,531		—
Consumer		4,230		—		—		4,230		86
Total	$	191,396	$	—	$	346	$	191,742	$	1,070


			Loans Past Due		Loans Past Due				Nonaccrual
	Current Loans		30-89 Days		90+ Days		Total Loans		Loans
December 31, 2018
Commercial
Development	$	7,801	$	—	$	—	$	7,801	$	—
Real estate		69,425		—		—		69,425		—
Commercial and industrial		13,076		66		—		13,142		20
Residential real estate and consumer
One-to-four family owner-occupied		41,013		5		—		41,018		365
One-to-four family investor-owned		32,069		243		—		32,312		241
Multifamily		34,467		—		—		34,467		—
Consumer		2,733		—		—		2,733		94
Total	$	200,584	$	314	$	—	$	200,898	$	720

There are no loans 90 or more days past due and accruing interest as of December 31, 2019 or 2018.

Management regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses may be necessary.

Nonaccrual loans are as follows:


As of December 31	2019		2018
Nonaccrual loans, other than troubled debt restructurings	$	416	$	20
Nonaccrual loans, troubled debt restructurings		654		700
Total nonaccrual loans		1,070		720
Restructured loans, accruing	$	1,185	$	501

When, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that the Company would not otherwise consider, the modified loan is classified as a troubled debt-restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a reduction of the interest rate, allowing interest-only payments for a period of time, and/or extending amortization terms.

The following presents information regarding new modifications of loans classified as troubled debt restructurings during the years ended December 31, 2019 and 2018. All troubled debt restructurings are classified as impaired loans. The recorded investment presented in the following tables does not include specific reserves for loan losses recognized for these loans, which totaled $158 at December 31, 2019 and December 31, 2018.


				Post-
	Number of	Pre-Modification		Modification
	Modifications	Investment		Investment
December 31, 2019
Commercial
Commercial and industrial	2	$	729	$	729
Residential real estate and consumer:
One-to-four family owner-occupied	3		285		285
Total loan modifications	5	$	1,014	$	1,014
December 31, 2018
Residential real estate and consumer:
One-to-four family owner-occupied	2	$	302	$	302
One-to-four family investor-owned	1		250		250
Consumer	1		20		20
Total loan modifications	4	$	572	$	572

No troubled debt restructurings defaulted within 12 months of their modification date during the year ended December 31, 2019 and 2018. The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days.

The Company continues to evaluate purchased loans for impairment. The purchased loans were considered impaired at the acquisition date if there was evidence of deterioration since origination and if it was probable that not all contractually required principal and interest payments would be collected under the loans. The following table reflects the carrying value of all purchased loans:


	Contractually Required
	Payments Receivable				Carrying Value
			Non-Credit		of
As of December 31, 2019	Credit Impaired		Impaired		Purchased Loans
Commercial
Real estate	$	—	$	—	$	—
Residential real estate and consumer
One-to-four family owner-occupied		—		4,580		4,548
One-to-four family investor-owned		—		6,580		6,535
Multifamily		—		—		—
Consumer		—		—		—
Totals	$	—	$	11,160	$	11,083


	Contractually Required
	Payments Receivable				Carrying Value
			Non-Credit		of
As of December 31, 2018	Credit Impaired		Impaired		Purchased Loans
Commercial
Real estate	$	—	$	7,687	$	7,673
Residential real estate and consumer
One-to-four family owner-occupied		—		5,075		5,014
One-to-four family investor-owned		—		9,269		9,164
Multifamily		—		3,953		3,943
Consumer		—		—		—
Totals	$	—	$	25,984	$	25,794

As of December 31, 2019, the estimated contractually-required payments receivable on purchased credit impaired and purchased non-credit impaired loans was $0 and $11,160, respectively. The cash flows expected to be collected related to principal as of December 31, 2019 on all purchased loans is $11,083. As a result, there was approximately $77 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2019. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.

As of December 31, 2018, the estimated contractually-required payments receivable on purchased credit impaired and purchased non-credit impaired loans was $0 and $25,984, respectively. The cash flows expected to be collected related to principal as of December 31, 2018 on all purchased loans is $25,794. As a result, there was approximately $190 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2018. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off.

The change in carrying amount of accretable yield for purchased loans was as follows:


	For years ended December 31,
	2019		2018

Beginning Balance	$	190	$	334
Additions		—		—
Accretion		(113)		(144)
Ending Balance	$	77	$	190