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)

Allowance for Loan Losses and Credit Quality Information

The allowance for loan losses is summarized as follows:

(Dollars in thousands)	Single Family		Commercial Real Estate		Consumer			Commercial Business			Total
Balance, December 31, 2019	$	857		5,060		1,507			1,140			8,564
Provision for losses		80		479		87			(186	)		460
Charge-offs		0		0		(12	)		0			(12	)
Recoveries		0		0		1			23			24
Balance, March 31, 2020	$	937		5,539		1,583			977			9,036

Balance, December 31, 2018	$	833		4,869		1,622			1,362			8,686
Provision for losses		100		13		3			(89	)		27
Charge-offs		0		0		(39	)		(43	)		(82	)
Recoveries		0		10		2			30			42
Balance, March 31, 2019	$	933		4,892		1,588			1,260			8,673

Allocated to:
Specific reserves	$	62		451		119			93			725
General reserves		795		4,609		1,388			1,047			7,839
Balance, December 31, 2019	$	857		5,060		1,507			1,140			8,564

Allocated to:
Specific reserves	$	46		443		120			38			647
General reserves		891		5,096		1,463			939			8,389
Balance, March 31, 2020	$	937		5,539		1,583			977			9,036

Loans receivable at December 31, 2019:
Individually reviewed for impairment	$	974		1,166		976			735			3,851
Collectively reviewed for impairment		119,090		349,029		68,973			63,492			600,584
Ending balance	$	120,064		350,195		69,949			64,227			604,435

Loans receivable at March 31, 2020:
Individually reviewed for impairment	$	1,003		1,703		802			131			3,639
Collectively reviewed for impairment		124,138		361,856		67,278			69,354			622,626
Ending balance	$	125,141		363,559		68,080			69,485			626,265

The following table summarizes the amount of classified and unclassified loans at

March 31, 2020

and

December 31, 2019:

	March 31, 2020
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
Single family	$	1,371		1,728		34		0		3,133		122,008		125,141
Commercial real estate:
Real estate rental and leasing		5,197		9,034		0		0		14,231		187,616		201,847
Other		6,399		5,473		0		0		11,872		149,840		161,712
Consumer		0		667		74		61		802		67,278		68,080
Commercial business		6,553		1,758		0		0		8,311		61,174		69,485
	$	19,520		18,660		108		61		38,349		587,916		626,265

	December 31, 2019
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
Single family	$	1,118		1,765		35		0		2,918		117,146		120,064
Commercial real estate:
Real estate rental and leasing		3,489		9,114		0		0		12,603		179,899		192,502
Other		4,451		5,253		0		0		9,704		147,989		157,693
Consumer		0		842		69		65		976		68,973		69,949
Commercial business		5,710		2,516		0		0		8,226		56,001		64,227
	$	14,768		19,490		104		65		34,427		570,008		604,435

Classified loans represent special mention, substandard (performing and non-performing), and non-performing loans categorized as doubtful and loss. Loans classified as special mention are loans that have potential weaknesses that, if left uncorrected,

may

result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Loans classified as substandard are loans that are generally inadequately protected by the current net worth and paying capacity of the obligor, or by the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are

not

corrected. Loans classified as doubtful have the weaknesses of those classified as substandard, with additional characteristics that make collection in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. A loan classified as loss is essentially uncollateralized and/or considered uncollectible and of such little value that continuance as an asset on the balance sheet

may

not

be warranted. Loans classified as substandard or doubtful require the Bank to perform an analysis of the individual loan and charge off any loans, or portion thereof, that are deemed uncollectible.

The aging of past due loans at

March 31, 2020

and

December 31, 2019

are summarized as follows:

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
March 31, 2020
Single family	$	1,124		206		91		1,421		123,720		125,141		0
Commercial real estate:
Real estate rental and leasing		0		0		0		0		201,847		201,847		0
Other		0		96		265		361		161,351		161,712		0
Consumer		294		80		107		481		67,599		68,080		0
Commercial business		11		11		0		22		69,463		69,485		0
	$	1,429		393		463		2,285		623,980		626,265		0
December 31, 201 9
Single family	$	786		77		59		922		119,142		120,064		0
Commercial real estate:
Real estate rental and leasing		0		0		0		0		192,502		192,502		0
Other		0		0		0		0		157,693		157,693		0
Consumer		527		31		206		764		69,185		69,949		0
Commercial business		147		13		550		710		63,517		64,227		0
	$	1,460		121		815		2,396		602,039		604,435		0

Impaired loans include loans that are non-performing (non-accruing) and loans that have been modified in a troubled debt restructuring (TDR). The following table summarizes impaired loans and related allowances as of

March 31, 2020

and

December 31, 2019:

	March 31, 2020						December 31, 2019
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans with no related allowance recorded:
Single family	$	583		602		0		544		563		0
Commercial real estate:
Other		557		557		0		0		0		0
Consumer		606		606		0		781		781		0

Loans with an allowance recorded:
Single family		420		420		46		430		430		62
Commercial real estate:
Real estate rental and leasing		179		179		6		184		184		16
Other		967		967		437		982		982		435
Consumer		196		196		120		195		195		119
Commercial business		131		683		38		735		1,287		93

Total:
Single family		1,003		1,022		46		974		993		62
Commercial real estate:
Real estate rental and leasing		179		179		6		184		184		16
Other		1,524		1,524		437		982		982		435
Consumer		802		802		120		976		976		119
Commercial business		131		683		38		735		1,287		93
	$	3,639		4,210		647		3,851		4,422		725

The following table summarizes the average recorded investment and interest income recognized on impaired loans during the

three

months ended

March 31, 2020

and

2019:

	March 31, 2020				March 31, 2019
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded:
Single family	$	564		5		448		4
Commercial real estate:
Other		279		2		25		30
Consumer		694		5		449		2

Loans with an allowance recorded:
Single family		425		6		789		3
Commercial real estate:
Real estate rental and leasing		182		0		200		0
Other		975		20		1,069		0
Consumer		196		2		290		3
Commercial business		433		2		325		1

Total:
Single family		989		11		1,237		7
Commercial real estate:
Real estate rental and leasing		182		0		200		0
Other		1,254		22		1,094		30
Consumer		890		7		739		5
Commercial business		433		2		325		1
	$	3,748		42		3,595		43

March 31, 2020

and

December 31, 2019,

non-accruing loans totaled

$1.9

million and

$2.1

million, respectively, for which the related allowance for loan losses was

$0.1

million and

$0.2,

respectively. All of the interest income recognized for non-accruing loans was recognized using the cash basis method of income recognition. Non-accruing loans for which

specific allowance has been recorded, because management determined that the value of the collateral was sufficient to repay the loan, totaled

$1.2

million and

$0.8

million, at

March 31, 2020

and

December 31, 2019,

respectively. Non-accrual loans also include certain loans that have had terms modified in a TDR.

The non-accrual loans at

March 31, 2020

and

December 31, 2019

are summarized as follows:

(Dollars in thousands)	March 31, 2020		December 31, 2019

Single family	$	647	$	617
Commercial real estate:
Real estate rental and leasing		179		184
Other		557		0
Consumer		491		659
Commercial business		40		621
	$	1,914	$	2,081

March 31, 2020

and

December 31, 2019,

there were loans included in loans receivable, net, with terms that had been modified in a TDR totaling

$2.7

million and

$2.5

million, respectively. Of the loans that were restructured in the

first

quarter of

2020,

none

were classified but performing, and

$0.4

million were non-performing at

March 31, 2020.

Loans that were restructured in the

first

quarter of

2019

were

not

material.

The following table summarizes TDRs at

March 31, 2020

and

December 31, 2019:

	March 31, 2020						December, 31, 2019

(Dollars in thousands)	Accruing		Non-Accrual		Total		Accruing		Non-Accrual		Total
Single family	$	357		271		628		357		266		623
Commercial real estate		966		292		1,258		983		0		983
Consumer		311		420		731		316		429		745
Commercial business		91		0		91		114		0		114
	$	1,725		983		2,708		1,770		695		2,465

As of

March 31, 2020,

the Bank had commitments to lend an additional

$1.0

million to a borrower who has TDR and non-accrual loans. These additional funds are for the construction of single family homes with a maximum loan-to-value ratio of

75%.

These loans are secured by the homes under construction. At

December 31, 2019,

there were commitments to lend additional funds of

$0.8

million to this same borrower.

TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal and/or interest due, or acceptance of real estate or other assets in full or partial satisfaction of the debt. Loan modifications are

not

reported as TDRs after

twelve

months if the loan was modified at a market rate of interest for comparable risk loans, and the loan is performing in accordance with the terms of the restructured agreement for the entire

twelve

month period. All loans classified as TDRs are considered to be impaired.

When a loan is modified in a TDR, there

may

be a direct, material impact on the loans within the consolidated balance sheets, as principal balances

may

be partially forgiven. The financial effects of TDRs are presented in the following table and represent the difference between the outstanding recorded balance pre-modification and post-modification, for the

three

months ended

March 31, 2020

and

March 31, 2019.

	Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
(Dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Single family		1	$	94		101		1	$	21		24
Commercial real estate:
Other		2		293		293		0		0		0
Consumer		0		0		0		2		26		26
Total		3	$	387		394		3	$	47		50

There were

loans that were restructured within the

twelve

months preceding

March 31, 2020

and

March 31, 2019

that defaulted during the

three

months ended

March 31, 2020

and

March 31, 2019.

The Company considers a loan to have defaulted when it becomes

or more days past due under the modified terms, when it is placed in non-accrual status, when it becomes other real estate owned, or when it becomes non-compliant with some other material requirement of the modification agreement. Loans that were non-accrual prior to modification remain on non-accrual status for at least

six

months following modification. Non-accrual TDR loans that have performed according to the modified terms for

six

months

may

be returned to accrual status. Loans that were accruing prior to modification remain on accrual status after the modification as long as the loan continues to perform under the new terms.

TDRs are reviewed for impairment following the same methodology as other impaired loans. For loans that are collateral-dependent, the value of the collateral is reviewed and additional reserves

may

be added as needed. Loans that are

not

collateral-dependent

may

have additional reserves established if deemed necessary. The reserves for TDRs were

$0.6

million, or

6.8%,

of the total

$9.0

million in loan loss reserves at

March 31, 2020

and

$0.6

million, or

7.2%,

of the total

$8.6

million in loan loss reserves at

December 31, 2019.

In the

first

quarter of

2020

the Company deferred loan payments up to

six

months for some borrowers that were negatively impacted by COVID-

19.

In accordance with the regulatory guidance in the

Interagency Statement on Loan Modification and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus

that was issued on

April 7, 2020,

these deferred amounts were

not

included in the TDR information noted above. Furthermore, the risk ratings on these loans were

not

changed and the loans continue to accrue interest based on the applicable guidance. Management will continue to monitor the performance and condition of these loans and make any necessary changes to their classification that

may

be required based on future regulatory guidance. At

March 31, 2020,

the Bank had deferred loan payments to customers in the following industries and collateral types:

(Dollars in thousands)	Balance March 31, 2020
Commercial loans by industry:
Hotels	$	48,410
Theaters		9,619
Restaurant/Bar		3,974
Retail/Office		4,623
Other		9,138
Total commercial loans		75,764

Consumer loans by collateral type:
Single family		2,575
Other consumer		300
Total consumer loans		2,875
Total deferred loans	$	78,639