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Note 4 - Loans Receivable

9 Months Ended

Sep. 30, 2020

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

NOTE 4 - LOANS RECEIVABLE

Loans receivable are as follows:

	*September 30, 2020*			*December 31, 2019*
One-to-four family residential real estate	$	44,812		$	55,750
Multi-family mortgage		522,825			563,750
Nonresidential real estate		124,477			134,674
Commercial loans and leases		379,638			418,343
Consumer		1,784			2,211
		1,073,536			1,174,728
Net deferred loan origination costs		367			912
Allowance for loan losses		(8,011	)		(7,632	)
Loans, net	$	1,065,892		$	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*
September 30, 2020
One-to-four family residential real estate	$	—	$	623	$	623	$	1,746	$	43,066	$	44,812
Multi-family mortgage		—		4,143		4,143		596		522,229		522,825
Nonresidential real estate		20		1,697		1,717		1,870		122,607		124,477
Commercial loans and leases		—		1,480		1,480		155		379,483		379,638
Consumer		—		48		48		—		1,784		1,784
	$	20	$	7,991	$	8,011	$	4,367	$	1,069,169		1,073,536
Net deferred loan origination costs												367
Allowance for loan losses												(8,011	)
Loans, net											$	1,065,892

	*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 and leases		—		2,065		2,065		—		418,343		418,343
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:

	*Beginning balance*		*Provision for (recovery of) loan losses*			*Loans charged off*			*Recoveries*		*Ending balance*
For the three months ended

September 30, 2020
One-to-four family residential real estate	$	665	$	(42	)	$	(2	)	$	2	$	623
Multi-family mortgage		4,185		(98	)		—			56		4,143
Nonresidential real estate		1,602		115			—			—		1,717
Commercial loans and leases		1,658		(178	)		—			—		1,480
Consumer		46		16			(14	)		—		48
	$	8,156	$	(187	)	$	(16	)	$	58	$	8,011

September 30, 2019
One-to-four family residential real estate	$	563	$	56		$	(44	)	$	5	$	580
Multi-family mortgage		3,988		(268	)		—			8		3,728
Nonresidential real estate		1,195		77			(55	)		—		1,217
Construction and land		3		(1	)		—			—		2
Commercial loans and leases		2,044		(8	)		—			4		2,040
Consumer		31		10			(5	)		—		36
	$	7,824	$	(134	)	$	(104	)	$	17	$	7,603

For the nine months ended

September 30, 2020
One-to-four family residential real estate	$	675	$	(63	)	$	(7	)	$	18	$	623
Multi-family mortgage		3,676		384			—			83		4,143
Nonresidential real estate		1,176		541			—			—		1,717
Commercial loans and leases		2,065		(588	)		—			3		1,480
Consumer		40		52			(44	)		—		48
	$	7,632	$	326		$	(51	)	$	104	$	8,011

September 30, 2019
One-to-four family residential real estate	$	699	$	(30	)	$	(117	)	$	28	$	580
Multi-family mortgage		3,991		(287	)		—			24		3,728
Nonresidential real estate		1,476		(176	)		(83	)		—		1,217
Construction and land		4		(2	)		—			—		2
Commercial loans and leases		2,272		4,203			(4,443	)		8		2,040
Consumer		28		28			(20	)		—		36
	$	8,470	$	3,736		$	(4,663	)	$	60	$	7,603

Impaired loans

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

									*Three Months Ended*				*Nine Months Ended*
									*September 30, 2020*				*September 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*
September 30, 2020
With no related allowance recorded:
One-to-four family residential real estate	$	2,092	$	1,746	$	358	$	—	$	1,760	$	10	$	1,798	$	34
Multi-family mortgage - Illinois		596		596		—		—		600		8		608		26
Nonresidential real estate		1,582		1,582		—		—		791		—		316		32
Commercial leases - other		155		155		—		—		478		27		259		27
		4,425		4,079		358		—		3,629		45		2,981		119

With a related allowance recorded - nonresidential		280		288		—		20		288		—		288		—
	$	4,705	$	4,367	$	358	$	20	$	3,917	$	45	$	3,269	$	119

									*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*
September 30, 2020
One-to-four family residential real estate	$	485	$	465	$	—
Nonresidential real estate		1,863		1,870		—
	$	2,348	$	2,335	$	—
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 $135,000 and $81,000 at September 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*
September 30, 2020
One-to-four family residential real estate loans:
Owner occupied	$	48	$	-	$	462	$	510	$	35,604	$	36,114
Non-owner occupied		3		95		—	$	98		8,600		8,698
Multi-family mortgage:
Illinois		—		—		—		—		224,919		224,919
Other		—		—		—		—		297,906		297,906
Nonresidential real estate		—		—		1,870		1,870		122,607		124,477
Commercial loans and leases:
Commercial		—		—		—		—		90,767		90,767
Asset-based		—		—		—		—		1,471		1,471
Equipment finance:
Government		—		—		—		—		71,504		71,504
Investment-rated		439		124		—		563		81,449		82,012
Other		633		—		—		633		133,251		133,884
Consumer		6		4		—		10		1,774		1,784
	$	1,129	$	223	$	2,332	$	3,684	$	1,069,852	$	1,073,536

	*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 and leases:
Commercial		—		—		—		—		133,976		133,976
Asset-based		—		—		—		—		11,738		11,738
Equipment finance:
Government		—		—		—		—		33,555		33,555
Investment-rated		826		—		47		873		101,015		101,888
Other		543		136		—		679		136,507		137,186
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. For the nine months ended September 30, 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 Nine Months Ended September 30, 2020
Paycheck protection program loan originations		315	$	11,160

September 30, 2020
Paycheck protection program loans		310			$	11,042

COVID-19 Loan Forbearance Programs

Section 4013 of the 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 remaining loan forbearance modifications at September 30, 2020:

	*Number of loans*		*Principal Balance*		*Remaining Amounts Deferred*

Small Investment Property COVID-19 Qualified Limited Forbearance Agreement
Multi-family mortgage		15	$	4,511	$	46
Nonresidential real estate		15		5,871		93
Apartment and Commercial Real Estate COVID-19 Qualified Limited Forbearance Agreement
Multi-family mortgage		53		42,663		185
Nonresidential real estate		28		31,861		273
Commercial leases ⁽¹⁾		25		9,211		—
One-to-four family residential real estate		10		1,422		11

		146	$	95,539	$	608

(1) Commercial lease deferrals have been reamortized to maturity.

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 September 30, 2020 and December 31, 2019. During the nine months ended September 30, 2020 and 2019, there were no loans modified and classified as TDRs. During the three and nine months ended September 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*
September 30, 2020
One-to-four family residential real estate loans:
Owner occupied	$	35,165	$	-	$	484	$	465	$	36,114
Non-owner occupied		8,637		28		33		—		8,698
Multi-family mortgage:
Illinois		224,919		—		—		—		224,919
Other		297,906		—		—		—		297,906
Nonresidential real estate		119,260		2,151		1,196		1,870		124,477
Commercial loans and leases:
Commercial		90,767		—		—		—		90,767
Asset-based		1,471		—		—		—		1,471
Equipment finance:
Government		71,504		—		—		—		71,504
Investment-rated		82,012		—		—		—		82,012
Other		132,588		—		1,296		—		133,884
Consumer		1,774		5		5		—		1,784
	$	1,066,003	$	2,184	$	3,014	$	2,335	$	1,073,536

	*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 and leases:
Commercial		125,630		8,346		—		—		133,976
Asset-based		11,738		—		—		—		11,738
Equipment finance:
Government		33,555		—		—		—		33,555
Investment-rated		101,381		507		—		—		101,888
Other		136,289		761		136		—		137,186
Consumer		2,153		5		53		—		2,211
	$	1,163,028	$	9,847	$	1,053	$	800	$	1,174,728