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LOANS RECEIVABLE

9 Months Ended

Sep. 30, 2025

NOTE 4. LOANS RECEIVABLE

Loans receivable at September 30, 2025 and December 31, 2024 are summarized as follows:



	September 30,		December 31,
(Dollars in thousands)	2025		2024
Real estate loans
One- to four-family residential	$	78,373	$	81,097
Commercial real estate		33,679		22,108
Construction and land		18,850		32,941
Multi-family residential		5,367		2,570
Total real estate loans		136,269		138,716
Other loans
Commercial and industrial		25,665		26,439
Consumer		2,833		1,921
Total other loans		28,498		28,360
Total loans		164,767		167,076
Less: Allowance for credit losses		(2,397)		(2,522)
Net loans	$	162,370	$	164,554

At September 30, 2025 and December 31, 2024, real estate loans totaling $84.7 million and $80.6 million, respectively, were pledged as collateral to the Federal Home Loan Bank of Dallas for borrowings under a blanket lien agreement.

Accrued interest receivable on the Company’s loans totaled $687,000 and $704,000 at September 30, 2025 and December 31, 2024, respectively. Accrued interest receivable is excluded from the Company’s estimate of the allowance for credit losses.

The following describes the general risk characteristics of each segment of the loan portfolio disclosed in this note:

One- to four-family residential – This category primarily consists of loans secured by residential real estate located in our market. The performance of these loans may be adversely affected by, among other factors, unemployment rates, local residential real estate market conditions and the interest rate environment. Generally, these loans are for longer terms than commercial and construction loans.

Commercial real estate – This category generally consists of loans secured by retail and industrial use buildings, hotels, strip shopping centers and other properties used for commercial purposes. The performance of these loans may be adversely affected by, among other factors, conditions specific to the relevant industry, the real estate market for the property type and geographic region where the property or borrower is located.

Construction and land – This category consists of loans to finance the ground-up construction and/or improvement of residential and commercial properties and loans secured by land. The performance of these loans is generally dependent upon the successful completion of improvements and/or land development for the end user, the sale of the property to a third party, or a secondary source of cash flow from the owners. The successful completion of planned improvements and development may be adversely affected by changes in the estimated property value upon completion of construction, projected costs and other conditions leading to project delays.

Multi-family residential – This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. The performance of multi-family loans is generally dependent on the receipt of rental income from the tenants who occupy the subject property. The occupancy rate of the subject property and the ability of the tenants to pay rent may be adversely affected by the location of the subject property and local economic conditions.

Commercial and industrial – This category primarily consists of secured and unsecured loans to small and mid-sized businesses to fund operations or purchase non-real estate assets. Secured loans are primarily secured by accounts receivable, inventory, equipment and certain other business assets. The performance of these loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral and individual performance factors related to the borrower.

Consumer – This category consists of loans to individuals for household, family and other personal use. The performance of these loans may be adversely affected by national and local economic conditions, unemployment rates and other factors affecting the borrower’s income available to service the debt.

The following tables outline the changes in the allowance for credit losses for the nine months ended September 30, 2025 and 2024.


	For the Nine Months Ended September 30, 2025
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses
One- to four-family residential	$	1,164	$	81	$	(113)	$	34	$	1,166
Commercial real estate		192		110		-		-		302
Construction and land		528		(246)		-		-		282
Multi-family residential		35		37		-		-		72
Commercial and industrial		372		(57)		-		17		332
Consumer		26		33		(40)		19		38
Unallocated		205		-		-		-		205
Total for loans	$	2,522	$	(42)	$	(153)	$	70	$	2,397
Unfunded lending commitments⁽¹⁾		121		6		-		-		127
Total	$	2,643	$	(36)	$	(153)	$	70	$	2,524

(1)

The allowance for credit losses on unfunded lending commitments is recorded within “other liabilities” on the statement of financial condition. The related provision for credit losses for unfunded lending commitments is recorded with the provision for credit losses on loans and reported in aggregate as the provision for credit losses on the income statement.


	For the Nine Months Ended September 30, 2024
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses
One- to four-family residential	$	1,240	$	62	$	(160)	$	68	$	1,210
Commercial real estate		213		17		(28)		14		216
Construction and land		283		258		-		-		541
Multi-family residential		50		(13)		-		-		37
Commercial and industrial		302		206		(133)		4		379
Consumer		36		27		(43)		11		31
Total for loans	$	2,124	$	557	$	(364)	$	97	$	2,414
Unfunded lending commitments		257		(26)		-		-		231
Total	$	2,381	$	531	$	(364)	$	97	$	2,645

The allowance for credit losses is established through a provision for credit losses charged to earnings. Loans, or portions of loans, are charged off against the allowance in the period that such loans, or portions thereof, are deemed uncollectible. Subsequent recoveries, if any, are credited to the allowance. The Company groups loans and unfunded lending commitments with similar risk characteristics into pools or segments and collectively evaluates each pool to estimate the allowance for credit losses. For each loan pool, the Company uses the remaining life method to calculate its credit loss estimate. Loans are individually evaluated for credit losses when they do not share similar risk characteristics with our identified loan pools. The allowance for credit losses reflects the Company’s estimate of current expected credit losses (“CECL”) over the full life of the financial assets.

The following tables outline the allowance for credit losses and the balance of loans by method of loss evaluation at September 30, 2025 and December 31, 2024.


	September 30, 2025						December 31, 2024
(Dollars in thousands)	Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total
Allowance for credit losses
One- to four-family residential	$	54	$	1,112	$	1,166	$	104	$	1,060	$	1,164
Commercial real estate		-		302		302		-		192		192
Construction and land		-		282		282		35		493		528
Multi-family residential		-		72		72		-		35		35
Commercial and industrial		-		332		332		-		372		372
Consumer		-		38		38		-		26		26
Unallocated		-		205		205		-		205		205
Total	$	54	$	2,343	$	2,397	$	139	$	2,383	$	2,522
Loans
One- to four-family residential	$	508	$	77,865	$	78,373	$	589	$	80,508	$	81,097
Commercial real estate		-		33,679		33,679		-		22,108		22,108
Construction and land		-		18,850		18,850		120		32,821		32,941
Multi-family residential		-		5,367		5,367		-		2,570		2,570
Commercial and industrial		2,055		23,610		25,665		-		26,439		26,439
Consumer		-		2,833		2,833		-		1,921		1,921
Total	$	2,563	$	162,204	$	164,767	$	709	$	166,367	$	167,076

At September 30, 2025 and December 31, 2024, all loans individually evaluated for credit losses were considered collateral-dependent financial assets under ASC 326. Loans are considered collateral-dependent and individually evaluated when, based on management’s assessment as of the reporting date, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following describes the types of collateral that secure collateral dependent loans:

●

One- to four-family first mortgages are primarily secured by first liens on residential real estate.

●

Construction and land loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment, and by raw land.

●

Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory and equipment.

A summary of current, past due and non-accrual loans as of September 30, 2025 and December 31, 2024 follows:


	As of September 30, 2025
(Dollars in thousands)	Past Due 30-89 Days and Accruing		Past Due Over 90 Days and Accruing		Past Due Over 30 Days and Non-accruing		Total Past Due		Current and Accruing		Current and Non-accruing		Total Loans
One- to four-family residential	$	2,664	$	364	$	654	$	3,682	$	73,907	$	784	$	78,373
Commercial real estate		342		-		-		342		33,337		-		33,679
Construction and land		-		-		-		-		18,829		21		18,850
Multi-family residential		-		-		-		-		5,367		-		5,367
Commercial and industrial		68		-		-		68		25,597		-		25,665
Consumer		6		-		-		6		2,827		-		2,833
Total	$	3,080	$	364	$	654	$	4,098	$	159,864	$	805	$	164,767


	As of December 31, 2024
(Dollars in thousands)	Past Due 30-89 Days and Accruing		Past Due Over 90 Days and Accruing		Past Due Over 30 Days and Non-accruing		Total Past Due		Current and Accruing		Current and Non-accruing		Total Loans
One- to four-family residential	$	2,926	$	64	$	767	$	3,757	$	76,577	$	763	$	81,097
Commercial real estate		-		-		-		-		22,108		-		22,108
Construction and land		81		-		13		94		32,823		24		32,941
Multi-family residential		-		-		-		-		2,570		-		2,570
Commercial and industrial		1		-		-		1		26,438		-		26,439
Consumer		8		-		-		8		1,913		-		1,921
Total	$	3,016	$	64	$	780	$	3,860	$	162,429	$	787	$	167,076

A summary of total non-accrual loans as of September 30, 2025 and December 31, 2024 follows:



	September 30, 2025						December 31, 2024
(Dollars in thousands)	With Allowance for Credit Loss		Without Allowance for Credit Loss		Total		With Allowance for Credit Loss		Without Allowance for Credit Loss		Total
Non-accrual loans
One- to four-family residential	$	1,392	$	46	$	1,438	$	1,518	$	12	$	1,530
Commercial real estate		-		-		-		-		-		-
Construction and land		21		-		21		37		-		37
Multi-family residential		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	1,413	$	46	$	1,459	$	1,555	$	12	$	1,567

The Company was not committed to lend any additional funds on non-accrual loans at September 30, 2025 or December 31, 2024. The Company does not recognize interest income while loans are on non-accrual status. All payments received while on non-accrual status are applied against the principal balance of non-accrual loans.

At September 30, 2025, the Company had no outstanding loans for which formal foreclosure proceedings were in process. At December 31, 2024, loans secured by residential real estate for which formal foreclosure proceedings were in process totaled $37,000.

Occasionally loans are modified to assist borrowers experiencing financial difficulty. We consider modifications such as term extensions, principal forgiveness, payment delays or alternate payment schedules, and alternate interest rate terms. At September 30, 2025 and December 31, 2024, loans with modifications for borrowers experiencing financial difficulty totaled $658,000 and $583,000, respectively. At September 30, 2025 and December 31, 2024, all loans with modifications for borrowers experiencing financial difficulty were one- to four-family residential loans and totaled less than 1.0% of total one- to four-family residential loans at such dates.

During the nine months ended September 30, 2025, the Company granted one loan modification to borrowers experiencing financial difficulty that resulted in a more than minor change in the timing or amount of contractual cash flows. The Company consolidated the debt of two related borrowers into a new residential mortgage loan totaling $131,000 to extend the maturity date and lower the monthly payment. During the year ended December 31, 2024, the Company granted one loan modification to a borrower experiencing financial difficulty that resulted in a more than minor change in the timing or amount of contractual cash flows. The maturity date was extended by three years for a residential mortgage loan with a balance of $20,000. The loans modified in 2025 and 2024 for borrowers experiencing financial difficulty have performed in accordance with their terms after modification. The Company was not committed to lend any additional funds to borrowers with modified terms and experiencing financial difficulty at September 30, 2025 or December 31, 2024.

Loans are categorized by credit quality indicators 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. Credit quality classifications follow regulatory guidelines and can generally be described as follows:

Pass – Loans in this category have strong asset quality and liquidity along with a multi-year track record of profitability.

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 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 have been identified as uncollectible and are generally charged-off in the period identified.

The information for each of the credit quality indicators is updated at least quarterly in conjunction with the determination of the adequacy of the allowance for credit losses.

The following table presents the Company’s loan portfolio by credit quality classification and origination year as of September 30, 2025. The Company uses the latter of origination or renewal date to classify term loans into vintages.


															Line-of-credit
															Arrangements
	Term Loans by Origination Year												Line-of-credit		Converted to
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Arrangements		Term Loans		Total
One- to four-family residential
Pass	$	2,375	$	3,695	$	3,762	$	11,826	$	2,491	$	47,219	$	2,011	$	2,410	$	75,789
Special Mention		-		-		-		-		54		-		244		-		298
Substandard		-		21		10		-		-		2,255		-		-		2,286
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,375	$	3,716	$	3,772	$	11,826	$	2,545	$	49,474	$	2,255	$	2,410	$	78,373
Commercial real estate
Pass	$	1,749	$	4,187	$	4,922	$	1,439	$	810	$	8,041	$	82	$	11,783	$	33,013
Special Mention		-		-		-		98		312		-		-		-		410
Substandard		-		222		-		-		-		34		-		-		256
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,749	$	4,409	$	4,922	$	1,537	$	1,122	$	8,075	$	82	$	11,783	$	33,679
Construction and land
Pass	$	368	$	196	$	-	$	99	$	48	$	282	$	17,725	$	-	$	18,718
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		111		-		-		-		-		21		-		-		132
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	479	$	196	$	-	$	99	$	48	$	303	$	17,725	$	-	$	18,850
Multi-family residential
Pass	$	-	$	-	$	-	$	-	$	470	$	1,939	$	-	$	2,958	$	5,367
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	470	$	1,939	$	-	$	2,958	$	5,367
Commercial and industrial
Pass	$	1,877	$	10,259	$	2,093	$	179	$	168	$	442	$	8,573	$	-	$	23,591
Special Mention		19		-		-		-		-		-		-		-		19
Substandard		867		392		-		796		-		-		-		-		2,055
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,763	$	10,651	$	2,093	$	975	$	168	$	442	$	8,573	$	-	$	25,665
Consumer
Pass	$	1,780	$	282	$	281	$	165	$	130	$	195	$	-	$	-	$	2,833
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,780	$	282	$	281	$	165	$	130	$	195	$	-	$	-	$	2,833
Total
Pass	$	8,149	$	18,619	$	11,058	$	13,708	$	4,117	$	58,118	$	28,391	$	17,151	$	159,311
Special Mention		19		-		-		98		366		-		244		-		727
Substandard		978		635		10		796		-		2,310		-		-		4,729
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	9,146	$	19,254	$	11,068	$	14,602	$	4,483	$	60,428	$	28,635	$	17,151	$	164,767

The following table presents the Company’s loan portfolio by credit quality classification and origination year as of December 31, 2024. The Company uses the latter of origination or renewal date to classify term loans into vintages.


															Line-of-credit
															Arrangements
	Term Loans by Origination Year												Line-of-credit		Converted to
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Arrangements		Term Loans		Total
One- to four-family residential
Pass	$	2,255	$	2,702	$	12,205	$	3,054	$	2,731	$	50,193	$	2,488	$	2,996	$	78,624
Special Mention		-		-		-		56		-		-		-		-		56
Substandard		22		21		-		-		24		2,350		-		-		2,417
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,277	$	2,723	$	12,205	$	3,110	$	2,755	$	52,543	$	2,488	$	2,996	$	81,097
Commercial real estate
Pass	$	3,176	$	4,691	$	1,729	$	1,070	$	3,236	$	5,673	$	-	$	1,884	$	21,459
Special Mention		-		-		102		320		-		-		-		-		422
Substandard		227		-		-		-		-		-		-		-		227
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,403	$	4,691	$	1,831	$	1,390	$	3,236	$	5,673	$	-	$	1,884	$	22,108
Construction and land
Pass	$	1,731	$	48	$	102	$	51	$	53	$	347	$	30,451	$	-	$	32,783
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		121		13		24		-		-		158
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,731	$	48	$	102	$	172	$	66	$	371	$	30,451	$	-	$	32,941
Multi-family residential
Pass	$	-	$	-	$	-	$	470	$	-	$	2,100	$	-	$	-	$	2,570
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	470	$	-	$	2,100	$	-	$	-	$	2,570
Commercial and industrial
Pass	$	11,095	$	3,640	$	1,142	$	429	$	243	$	281	$	7,944	$	1,665	$	26,439
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	11,095	$	3,640	$	1,142	$	429	$	243	$	281	$	7,944	$	1,665	$	26,439
Consumer
Pass	$	519	$	551	$	239	$	304	$	74	$	234	$	-	$	-	$	1,921
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	519	$	551	$	239	$	304	$	74	$	234	$	-	$	-	$	1,921
Total
Pass	$	18,776	$	11,632	$	15,417	$	5,378	$	6,337	$	58,828	$	40,883	$	6,545	$	163,796
Special Mention		-		-		102		376		-		-		-		-		478
Substandard		249		21		-		121		37		2,374		-		-		2,802
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	19,025	$	11,653	$	15,519	$	5,875	$	6,374	$	61,202	$	40,883	$	6,545	$	167,076

The following table presents gross charge-offs for the nine months ended September 30, 2025 by origination year of the related loans. The Company uses the latter of origination or renewal date to classify loans into vintages.


	Loan Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Total
Charge-offs
One- to four-family residential	$	-	$	-	$	-	$	-	$	-	$	113	$	113
Consumer		19		21		-		-		-		-		40
Total	$	19	$	21	$	-	$	-	$	-	$	113	$	153

The following table presents gross charge-offs for the year ended December 31, 2024 by origination year of the related loans. The Company uses the latter of origination or renewal date to classify loans into vintages.


	Loan Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Total
Charge-offs
One- to four-family residential	$	-	$	-	$	-	$	-	$	-	$	182	$	182
Commercial real estate		-		-		-		-		-		28		28
Commercial and industrial		43		45		45		-		-		-		133
Consumer		43		2		1		1		-		2		49
Total	$	86	$	47	$	46	$	1	$	-	$	212	$	392