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Note 4 - Loans Receivable

6 Months Ended

Jun. 30, 2020

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 4 - LOANS RECEIVABLE

Loans receivable are as follows:

June 30, 2020

December 31, 2019

One-to-four family residential real estate
$ 48,928 $ 55,750

Multi-family mortgage
536,619 563,750

Nonresidential real estate
127,560 134,674

Commercial loans
126,609 145,714

Commercial leases
247,997 272,629

Consumer
1,783 2,211

1,089,496 1,174,728

Net deferred loan origination costs
458 912

Allowance for loan losses
(8,156 ) (7,632 )

Loans, net
$ 1,081,798 $ 1,168,008

The following tables present the balance in the allowance for loan losses and loans receivable by portfolio segment and based on impairment method:

Allowance for loan losses

Loan Balances

Individually evaluated for impairment

Collectively evaluated for impairment

Total

Individually evaluated for impairment

Collectively evaluated for impairment

Total

June 30, 2020

One-to-four family residential real estate
$ — $ 665 $ 665 $ 1,768 $ 47,160 $ 48,928

Multi-family mortgage
— 4,185 4,185 604 536,015 536,619

Nonresidential real estate
— 1,602 1,602 288 127,272 127,560

Commercial loans
— 856 856 — 126,609 126,609

Commercial leases
— 802 802 833 247,164 247,997

Consumer
— 46 46 — 1,783 1,783

$ — $ 8,156 $ 8,156 $ 3,493 $ 1,086,003 1,089,496

Net deferred loan origination costs
458

Allowance for loan losses
(8,156 )

Loans, net
$ 1,081,798

Allowance for loan losses

Loan Balances

Individually evaluated for impairment

Collectively evaluated for impairment

Total

Individually evaluated for impairment

Collectively evaluated for impairment

Total

December 31, 2019

One-to-four family residential real estate
$ — $ 675 $ 675 $ 1,835 $ 53,915 $ 55,750

Multi-family mortgage
— 3,676 3,676 620 563,130 563,750

Nonresidential real estate
— 1,176 1,176 288 134,386 134,674

Commercial loans
— 1,308 1,308 — 145,714 145,714

Commercial leases
— 757 757 — 272,629 272,629

Consumer
— 40 40 — 2,211 2,211

$ — $ 7,632 $ 7,632 $ 2,743 $ 1,171,985 1,174,728

Net deferred loan origination costs
912

Allowance for loan losses
(7,632 )

Loans, net
$ 1,168,008

The following table represents the activity in the allowance for loan losses by portfolio segment:

One-to-four family residential real estate

Multi-family mortgage

Non-residential real estate

Construction and land

Commercial loans

Commercial leases

Consumer

Total

For the three months ended

June 30, 2020

Allowance for loan losses:

Beginning balance
$ 682 $ 3,869 $ 1,460 $ — $ 1,275 $ 780 $ 46 $ 8,112

Provision for (recovery of) loan losses
(20 ) 301 142 — (420 ) 22 17 42

Loans charged off
— — — — — — (17 ) (17 )

Recoveries
3 15 — — 1 — — 19

Total ending allowance balance
$ 665 $ 4,185 $ 1,602 $ — $ 856 $ 802 $ 46 $ 8,156

June 30, 2019

Allowance for loan losses:

Beginning balance
$ 649 $ 4,079 $ 1,487 $ 3 $ 1,422 $ 690 $ 24 $ 8,354

Provision for (recovery of) loan losses
(42 ) (99 ) (292 ) — 4,313 60 17 3,957

Loans charged off
(50 ) — — — (4,443 ) — (10 ) (4,503 )

Recoveries
6 8 — — 2 — — 16

Total ending allowance balance
$ 563 $ 3,988 $ 1,195 $ 3 $ 1,294 $ 750 $ 31 $ 7,824

For the six months ended

June 30, 2020

Allowance for loan losses:

Beginning balance
$ 675 $ 3,676 $ 1,176 $ — $ 1,308 $ 757 $ 40 $ 7,632

Provision for (recovery of) loan losses
(21 ) 482 426 — (455 ) 45 36 513

Loans charged off
(5 ) — — — — — (30 ) (35 )

Recoveries
16 27 — — 3 — — 46

Total ending allowance balance
$ 665 $ 4,185 $ 1,602 $ — $ 856 $ 802 $ 46 $ 8,156

June 30, 2019

Allowance for loan losses:

Beginning balance
$ 699 $ 3,991 $ 1,476 $ 4 $ 1,517 $ 755 $ 28 $ 8,470

Provision for (recovery of) loan losses
(86 ) (19 ) (253 ) (1 ) 4,216 (5 ) 18 3,870

Loans charged off
(73 ) — (28 ) — (4,443 ) — (15 ) (4,559 )

Recoveries
23 16 — — 4 — — 43

Total ending allowance balance
$ 563 $ 3,988 $ 1,195 $ 3 $ 1,294 $ 750 $ 31 $ 7,824

Impaired loans

The following tables present loans individually evaluated for impairment by class of loans:

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2020

Loan Balance

Recorded Investment
Partial Charge off
Allowance for Loan Losses Allocated

Average Investment in Impaired Loans

Interest Income Recognized

Average Investment in Impaired Loans

Interest Income Recognized

June 30, 2020

With no related allowance recorded:

One-to-four family residential real estate
$ 2,113 $ 1,768 $ 353 $ — $ 1,789 $ 11 $ 1,816 $ 24

Multi-family mortgage - Illinois
604 604 — — 609 9 612 18

Nonresidential real estate
280 288 — — 288 — 288 —

Other commercial leases
843 833 — — 350 — 216 2

$ 3,840 $ 3,493 $ 353 $ — $ 3,036 $ 20 $ 2,932 $ 44

Year ended

December 31, 2019

Loan Balance

Recorded Investment

Partial Charge-off

Allowance for Loan Losses Allocated

Average Investment in Impaired Loans

Interest Income Recognized

December 31, 2019

With no related allowance recorded:

One-to-four family residential real estate
$ 2,168 $ 1,835 $ 339 $ — $ 2,208 $ 51

Multi-family mortgage - Illinois
620 620 — — 637 37

Nonresidential real estate
280 288 — — 589 2

$ 3,068 $ 2,743 $ 339 $ — $ 3,434 $ 90

Nonaccrual Loans

The following tables present the recorded investment in nonaccrual and loans 90 days or more past due still on accrual by class of loans:

Loan Balance

Recorded Investment

Loans Past Due Over 90 Days, Still Accruing

June 30, 2020

One-to-four family residential real estate
$ 686 $ 662 $ —

Nonresidential real estate
280 288 —

Other commercial leases
843 833 —

$ 1,809 $ 1,783 $ —

December 31, 2019

One-to-four family residential real estate
$ 598 $ 512 $ —

Nonresidential real estate
280 288 —

Investment-rated commercial leases
47 — 47

$ 925 $ 800 $ 47

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some loans may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The Company’s reserve for uncollected loan interest was $123,000 and $81,000 at June 30, 2020 and December 31, 2019, respectively. When a loan is on nonaccrual status and the ultimate collectability of the total principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. Alternatively, when a loan is on nonaccrual status but there is doubt concerning only the ultimate collectability of interest, contractual interest is credited to interest income only when received, under the cash basis method pursuant to the provisions of FASB ASC 310–10, as applicable. In all cases, the average balances are calculated based on the month–end balances of the financing receivables within the period reported pursuant to the provisions of FASB ASC 310–10, as applicable.

Past Due Loans

The following tables present the aging of the recorded investment of loans by class of loans:

30-59 Days Past Due

60-89 Days Past Due

90 Days or Greater Past Due

Total Past Due

Loans Not Past Due

Total

June 30, 2020

One-to-four family residential real estate loans:

Owner occupied
$ — $ 21 $ 658 $ 679 $ 38,931 $ 39,610

Non-owner occupied
3 187 — $ 190 9,128 9,318

Multi-family mortgage:

Illinois
— — — — 230,913 230,913

Other
— — — — 305,706 305,706

Nonresidential real estate
— — 288 288 127,272 127,560

Commercial loans:

Regional commercial banking
— — — — 32,388 32,388

Health care
— — — — 12,554 12,554

Direct commercial lessor
— — — — 81,667 81,667

Commercial leases:

Investment-rated commercial leases
— 509 — 509 114,123 114,632

Other commercial leases
1,936 136 833 2,905 130,460 133,365

Consumer
6 1 — 7 1,776 1,783

$ 1,945 $ 854 $ 1,779 $ 4,578 $ 1,084,918 $ 1,089,496

30-59 Days Past Due

60-89 Days Past Due

90 Days or Greater Past Due

Total Past Due

Loans Not Past Due

Total

December 31, 2019

One-to-four family residential real estate loans:

Owner occupied
$ 777 $ 340 $ 507 $ 1,624 $ 43,365 $ 44,989

Non-owner occupied
280 15 — 295 10,466 10,761

Multi-family mortgage:

Illinois
981 302 — 1,283 246,680 247,963

Other
— — — — 315,787 315,787

Nonresidential real estate
— — 288 288 134,386 134,674

Commercial loans:

Regional commercial banking
— — — — 24,853 24,853

Health care
— — — — 70,430 70,430

Direct commercial lessor
— — — — 50,431 50,431

Commercial leases:

Investment-rated commercial leases
826 — 47 873 132,966 133,839

Other commercial leases
543 136 — 679 138,111 138,790

Consumer
24 37 — 61 2,150 2,211

$ 3,431 $ 830 $ 842 $ 5,103 $ 1,169,625 $ 1,174,728

U.S. Small Business Administration Paycheck Protection Program ("PPP")

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was passed by Congress and signed into law on March 27, 2020. The CARES Act established the Paycheck Protection Program loan, designed to provide a direct incentive for small businesses to keep their workers on the payroll. Under the most recently published guidance, the U.S. Small Business Administration ("SBA") will forgive PPP loans if all employee retention criteria are met, and the funds are used for eligible expenses. In the first half of 2020, we allocated approximately $11 million to the PPP based on the expected 100% guaranty of the SBA.

The following table presents the PPP activity:

Number of loans

Originated

Balance

For the Six Months Ended June 30, 2020

Paycheck protection program loan originations 305 $ 11,024

June 30, 2020

Paycheck protection program loans
300 $ 10,907

COVID-19 Loan Forbearance Programs

Section 4013 of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring ("TDR") pursuant to US GAAP. In addition, the Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (“OCC Bulletin 2020-50”) provides more limited circumstances in which a loan modification is not subject to classification as a TDR and also defined the circumstances where the borrower’s loan is reported as current on loan payments. Pursuant to these new capabilities, we developed several loan forbearance programs to assist borrowers with managing cash flows disrupted due to COVID-19.

Our Apartment and Commercial Real Estate COVID-19 Qualified Limited Forbearance Agreement permitted borrowers who qualified under Section 4013 of the CARES Act to make an election to pay scheduled interest and escrow payments (if applicable) for a four-month period beginning in April 2020, and pay all deferred principal payments by December 2020.

Our Small Investment Property COVID-19 Qualified Limited Forbearance Agreement permitted borrowers with loan balances under $750,000 who qualified under Section 4013 of the CARES Act to make an election to pay scheduled interest and escrow payments (if applicable) for a four-month period beginning in April 2020, and pay all deferred principal payments by December 2020. In addition, the borrower could elect to defer the May 2020 loan payment entirely, with all deferred interest amounts due by December 2020 and all deferred principal amounts due by June 30, 2021.

CARES Act Section 4013 and OCC Bulletin 2020-35 forbearance agreements are available to qualified commercial loan and commercial finance borrowers, and to commercial equipment lessees.

For residential mortgage and consumer loans, relief under CARES Act Section 4013 or OCC Bulletin 2020-35 forbearance agreements are available to qualified borrowers with terms consistent with secondary residential mortgage market standards established by Fannie Mae.

The following table summarizes the loan forbearance modifications at June 30, 2020:

Number of loans

Principal Balance

Principal Amount Deferred

Small Investment Property COVID-19 Forbearance Agreement

Multi-family mortgage
23 $ 7,143 $ 45

Nonresidential real estate
18 7,183 89

Qualified Limited Forbearance Program

Multi-family mortgage
66 50,959 244

Nonresidential real estate
34 42,968 373

Commercial leases
18 5,853 579

One-to-four family residential real estate
10 1,312 8

169 $ 115,418 $ 1,338

Troubled Debt Restructurings

The Company evaluates loan extensions or modifications not qualified under Section 4013 of the CARES Act or under OCC Bulletin 2020-35 in accordance with FASB ASC 340-10 with respect to the classification of the loan as a TDR.

Under ASC 340-10, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above.

The Company had no TDRs at June 30, 2020 and December 31, 2019. During the six months ended June 30, 2020 and 2019, there were no loans modified and classified as TDRs. During the three and six months ended June 30, 2020 and 2019, there were no TDR loans that subsequently defaulted within twelve months of their modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

To determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans based on credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

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

Substandard. Loans categorized as Substandard continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. The loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time. The risk rating guidance published by the Office of the Comptroller of the Currency clarifies that a loan with a well-defined weakness does not have to present a probability of default for the loan to be rated Substandard, and that an individual loan’s loss potential does not have to be distinct for the loan to be rated Substandard.

Nonaccrual. An asset classified Nonaccrual has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered “Pass” rated loans.

Based on the most recent analysis performed, the risk categories of loans by class of loans are as follows:

Pass

Special Mention

Substandard

Nonaccrual

Total

June 30, 2020

One-to-four family residential real estate loans:

Owner occupied
$ 38,402 $ 79 $ 467 $ 662 $ 39,610

Non-owner occupied
9,255 29 34 — 9,318

Multi-family mortgage:

Illinois
230,913 — — — 230,913

Other
305,706 — — — 305,706

Nonresidential real estate
124,322 160 2,790 288 127,560

Commercial loans:

Regional commercial banking
32,388 — — — 32,388

Health care
12,117 437 — — 12,554

Direct commercial lessor
81,667 — — — 81,667

Commercial leases:

Investment-rated commercial leases
114,632 — — — 114,632

Other commercial leases
131,271 — 1,261 833 133,365

Consumer
1,770 2 11 — 1,783

$ 1,082,443 $ 707 $ 4,563 $ 1,783 $ 1,089,496

Pass

Special Mention

Substandard

Nonaccrual

Total

December 31, 2019

One-to-four family residential real estate loans:

Owner occupied
$ 43,908 $ 36 $ 533 $ 512 $ 44,989

Non-owner occupied
10,696 30 35 — 10,761

Multi-family mortgage:

Illinois
247,757 — 206 — 247,963

Other
315,787 — — — 315,787

Nonresidential real estate
134,134 162 90 288 134,674

Commercial loans:

Regional commercial banking
24,853 — — — 24,853

Health care
62,084 8,346 — — 70,430

Direct commercial lessor
50,431 — — — 50,431

Commercial leases:

Investment-rated commercial leases
133,332 507 — — 133,839

Other commercial leases
137,893 761 136 — 138,790

Consumer
2,153 5 53 — 2,211

$ 1,163,028 $ 9,847 $ 1,053 $ 800 $ 1,174,728