NOTE (5) – Loans Receivable Held for Investment

Loans receivable held for investment were as follows as of the dates indicated:


	June 30, 2020		December 31, 2019
	(In thousands)
Real estate:
Single family	$	58,826	$	72,883
Multi-family		277,758		287,378
Commercial real estate		18,672		14,728
Church		19,489		21,301
Construction		1,409		3,128
Commercial – other		277		262
Consumer		10		21
Gross loans receivable before deferred loan costs and premiums		376,441		399,701
Unamortized net deferred loan costs and premiums		1,191		1,328
Gross loans receivable		377,632		401,029
Allowance for loan losses		(3,215)		(3,182)
Loans receivable, net	$	374,417	$	397,847

The following tables present the activity in the allowance for loan losses by loan type for the periods indicated:


	Three Months Ended June 30, 2020
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	308	$	2,408	$	140	$	323	$	24	$	7	$	1	$	3,211
Provision for (recapture of) loan losses		—		16		29		(41)		(2)		(1)		(1)		—
Recoveries		4		—		—		—		—		—		—		4
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	312	$	2,424	$	169	$	282	$	22	$	6	$	—	$	3,215


	Three Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	347	$	1,990	$	62	$	507	$	18	$	5	$	—	$	2,929
Provision for (recapture of) loan losses		(19)		(58)		(4)		(106)		26		—		3		(158)
Recoveries		—		—		—		—		—		—		—		—
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771


	Six Months Ended June 30, 2020
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182
Provision for (recapture of) loan losses		(4)		105		36		(80)		(26)		(1)		(1)		29
Recoveries		4		—		—		—		—		—		—		4
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	312	$	2,424	$	169	$	282	$	22	$	6	$	—	$	3,215


	Six Months Ended June 30, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Beginning balance	$	369	$	1,880	$	52	$	603	$	19	$	6	$	—	$	2,929
Provision for (recapture of) loan losses		(41)		52		6		(392)		25		(1)		3		(348)
Recoveries		—		—		—		190		—		—		—		190
Loans charged off		—		—		—		—		—		—		—		—
Ending balance	$	328	$	1,932	$	58	$	401	$	44	$	5	$	3	$	2,771

The following tables present the balance in the allowance for loan losses and the recorded investment (unpaid contractual principal balance less charge-offs, less interest applied to principal, plus unamortized deferred costs and premiums) by loan type and based on impairment method as of the dates indicated:


	June 30, 2020
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	71	$	—	$	—	$	72	$	—	$	1	$	—	$	144
Collectively evaluated for impairment		241		2,424		169		210		22		5		—		3,071
Total ending allowance balance	$	312	$	2,424	$	169	$	282	$	22	$	6	$	—	$	3,215

Loans:
Loans individually evaluated for impairment	$	592	$	307	$	—	$	4,135	$	—	$	50	$	—	$	5,084
Loans collectively evaluated for impairment		58,409		279,017		18,742		14,733		1,409		228		10		372,548
Total ending loans balance	$	59,001	$	279,324	$	18,742	$	18,868	$	1,409	$	278	$	10	$	377,632


	December 31, 2019
	Real Estate
	Single		Multi-		Commercial						Commercial
	family		family		real estate		Church		Construction		- other		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	60	$	—	$	—	$	85	$	—	$	2	$	—	$	147
Collectively evaluated for impairment		252		2,319		133		277		48		5		1		3,035
Total ending allowance balance	$	312	$	2,319	$	133	$	362	$	48	$	7	$	1	$	3,182

Loans:
Loans individually evaluated for impairment	$	611	$	313	$	—	$	4,356	$	—	$	63	$	—	$	5,343
Loans collectively evaluated for impairment		72,501		288,730		14,818		16,292		3,125		199		21		395,686
Total ending loans balance	$	73,112	$	289,043	$	14,818	$	20,648	$	3,125	$	262	$	21	$	401,029

The following table presents information related to loans individually evaluated for impairment by loan type as of the periods indicated:


	June 30, 2020						December 31, 2019
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
	(In thousands)
With no related allowance recorded:
Single family	$	10	$	9	$	—	$	—	$	—	$	—
Multi-family	$	307	$	307	$	—		313		313		—
Church	$	3,048	$	2,259	$	—		3,491		2,446		—
With an allowance recorded:
Single family		583		583		71		593		593		60
Church		1,876		1,876		72		1,928		1,928		85
Commercial - other		50		50		1		63		63		2
Total	$	5,874	$	5,084	$	144	$	6,388	$	5,343	$	147

The recorded investment in loans excludes accrued interest receivable due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following tables present the monthly average of loans individually evaluated for impairment by loan type and the related interest income for the periods indicated:


	Three Months Ended June 30, 2020				Three Months Ended June 30, 2019
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	597	$	7	$	638	$	5
Multi-family		308		5		320		5
Church		4,160		74		4,741		402
Commercial – other		59		1		63		—
Total	$	5,124	$	87	$	5,762	$	412


	Six Months Ended June 30, 2020				Six Months Ended June 30, 2019
			Cash Basis				Cash Basis
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(In thousands)
Single family	$	599	$	14	$	640	$	15
Multi-family		309		11		321		11
Church		4,190		309		5,383		517
Commercial – other		60		2		64		2
Total	$	5,158	$	336	$	6,408	$	545

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans and interest recoveries on non-accrual loans that were paid off. Interest payments collected on non-accrual loans are characterized as payments of principal rather than payments of the outstanding accrued interest on the loans until the remaining principal on the non-accrual loans is considered to be fully collectible or paid off. When a loan is returned to accrual status, the interest payments that were previously applied to principal are deferred and amortized over the remaining life of the loan. Foregone interest income that would have been recognized had loans performed in accordance with their original terms amounted to $22 thousand and $40 thousand for the three months ended June 30, 2020 and 2019, respectively, and $45 thousand and $80 thousand for the six months ended June 30, 2020 and 2019, respectively, and were not included in the consolidated results of operations.

There were no loans delinquent as of June 30, 2020. The following tables present the aging of the recorded investment in past due loans by loan type as of the periods indicated:


	June 30, 2020
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	—	$	—	$	—	$	—	$	59,001	$	59,001
Multi-family		—		—		—		—		279,324		279,324
Commercial real estate		—		—		—		—		18,742		18,742
Church		—		—		—		—		18,868		18,868
Construction		—		—		—		—		1,409		1,409
Commercial - other		—		—		—		—		278		278
Consumer		—		—		—		—		10		10
Total	$	—	$	—	$	—	$	—	$	377,632	$	377,632


	December 31, 2019
					Greater
	30-59		60-89		than
	Days		Days		90 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Loans receivable held for investment:
Single family	$	18	$	—	$	—	$	18	$	73,094	$	73,112
Multi-family		—		—		—		—		289,043		289,043
Commercial real estate		—		—		—		—		14,818		14,818
Church		—		—		—		—		20,648		20,648
Construction		—		—		—		—		3,125		3,125
Commercial - other		—		—		—		—		262		262
Consumer		—		—		—		—		21		21
Total	$	18	$	—	$	—	$	18	$	401,011	$	401,029

The following table presents the recorded investment in non-accrual loans by loan type as of the periods indicated:


	June 30, 2020		December 31, 2019
	(In thousands)
Loans receivable held for investment:
Single-family residence	$	9	$	18
Church	$	837		406
Total non-accrual loans	$	846	$	424

There were no loans 90 days or more delinquent that were accruing interest as of June 30, 2020 or December 31, 2019. None of the church non-accrual loans were delinquent, but none qualified for accrual status as of the periods indicated.

Troubled Debt Restructurings

In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications, such as payment deferrals, fee waivers, extensions of repayment terms or other insignificant payment delays, are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months or less is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as non-accrual loans during the term of the modification.

The Bank has implemented a loan modification program for the effects of COVID-19 on its borrowers. At the date of this filing, two borrowers have requested loan modifications. Both borrowers were current at the time modification program was implemented. To date, no modifications have been granted.

At June 30, 2020, loans classified as troubled debt restructurings (“TDRs”) totaled $4.5 million, of which $254 thousand were included in non-accrual loans and $4.2 million were on accrual status. At December 31, 2019, loans classified as TDRs totaled $4.7 million, of which $406 thousand were included in non-accrual loans and $4.3 million were on accrual status. The Company has allocated $144 thousand and $147 thousand of specific reserves for accruing TDRs as of June 30, 2020 and December 31, 2019, respectively. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments, as modified. A well-documented credit analysis that supports a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms is also required. As of June 30, 2020 and December 31, 2019, the Company had no commitment to lend additional amounts to customers with outstanding loans that are classified as TDRs. No loans were modified during the three or six months ended June 30, 2020 and 2019.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For single family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere herein. The Company analyzes all other loans individually by classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings:

Watch. Loans classified as watch exhibit weaknesses that could threaten the current net worth and paying capacity of the obligors. Watch graded loans are generally performing and are not more than 59 days past due. A watch rating is used when a material deficiency exists but correction is anticipated within an acceptable time frame.

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as 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.

Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Pass rated loans are generally well protected by the current net worth and paying capacity of the obligor and/or by the value of the underlying collateral. Pass rated loans are not more than 59 days past due and are generally performing in accordance with the loan terms. Based on the most recent analysis performed, the risk categories of loans by loan type as of the periods indicated were as follows:


	June 30, 2020
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	58,992	$	—	$	—	$	9	$	—	$	—
Multi-family		278,551		401		—		372		—		—
Commercial real estate		17,242		1,500		—		—		—		—
Church		14,741		1,302		—		2,825		—		—
Construction		1,409		—		—		—		—		—
Commercial - other		228		—		—		50		—		—
Consumer		10		—		—		—		—		—
Total	$	371,173	$	3,203	$	—	$	3,256	$	—	$	—


	December 31, 2019
	Pass		Watch		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
Single family	$	73,094	$	—	$	—	$	18	$	—	$	—
Multi-family		288,251		411		—		381		—		—
Commercial real estate		14,818		—		—		—		—		—
Church		16,546		411		—		3,691		—		—
Construction		3,125		—		—		—		—		—
Commercial - other		199		—		—		63		—		—
Consumer		21		—		—		—		—		—
Total	$	396,054	$	822	$	—	$	4,153	$	—	$	—