Quarterly report [Sections 13 or 15(d)]

Note 3 - Loans and Allowance for Credit Losses

v3.26.1
Note 3 - Loans and Allowance for Credit Losses
3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Allowance for Credit Losses [Text Block]

Note 3: Loans and allowance for credit losses

 

A summary of loans by major category as of March 31, 2026 and December 31, 2025 is as follows:

 

   

March 31, 2026

   

December 31, 2025

 
   

(Dollars in thousands)

 

First mortgage loans

               

1-4 family residential

  $ 116,914     $ 118,222  

Multi-family

    3,425       3,240  

Commercial

    3,797       3,813  

Construction

    4,027       3,921  

Total first mortgage loans

    128,163       129,196  

Consumer loans

    322       268  

Total loans

    128,485       129,464  

Net deferred loan costs

    257       299  

Allowance for credit losses on loans

    (1,095 )     (1,128 )

Total loans, net

  $ 127,647     $ 128,635  

 

First mortgage loans serviced and subserviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balance of these loans totaled $39.5 million and $41.0 million at March 31, 2026 and December 31, 2025, respectively. Custodial escrow balances maintained in connection with the loans serviced were $396,000 and $480,000 at March 31, 2026 and December 31, 2025, respectively. 

 

The accrued interest receivable for loans, net, was $586,000 and $577,000 for March 31, 2026 and December 31, 2025, respectively

 

In the normal course of business, loans are made by the Bank to directors and officers of the Company and the Bank (related parties). The terms of these loans, including interest rate and collateral, are similar to those prevailing for comparable transactions with other customers and do not involve more than a normal risk of collectability. At  March 31, 2026 and December 31, 2025, such borrowers were indebted to the Bank in the aggregate amount of $547,000 and $564,000, respectively.

 

The following tables present the activity in the allowance for credit losses ("ACL") for the three months ended March 31, 2026 and 2025:

 

   

March 31, 2026

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Three months ended

                                               

Beginning balance

  $ 989     $ 39     $ 37     $ 61     $ 2     $ 1,128  

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

(Release of) provision for credit losses

    (33 )           (3 )     2       1      

(33

)

Ending balance

  $ 956     $ 39     $ 34     $ 63     $ 3     $ 1,095  

 

   

March 31, 2025

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Three months ended

                                               

Beginning balance

  $ 1,056     $ 37     $ 41     $ 65     $ 2     $ 1,201  

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

(Release of) provision for credit losses

    (22 )           (3 )     (20 )           (45 )

Ending balance

  $ 1,034     $ 37     $ 38     $ 45     $ 2     $ 1,156  

 

The ACL on loans excludes $46,000 and $67,000 of allowance for off-balance sheet exposures as of March 31, 2026 and 2025, respectively, recorded within Other Liabilities on the Consolidated Balance Sheets. Off-balance sheet exposures consist of unused lines of credit, the unused portion of construction loans and commitments to originate loans. The net release of provision for credit losses for the three months ended March 31, 2026 in the table above excludes a provision for credit losses of $7,000 related to off balance sheet exposures. The net release of provision for credit losses for the three months ended March 31, 2025 in the table above excludes a provision for credit losses of $8,000 related to off balance sheet exposures.

 

As of March 31, 2026, there were three collateral dependent loans totaling $1.7 million in the one to four-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of March 31, 2026. As of December 31, 2025, there were two collateral dependent loans totaling $284,000 in the one to four-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of December 31, 2025. There were no other collateral dependent loans as of March 31, 2026 and December 31, 2025. 

 

The Bank evaluates collectability based on payment activity and other factors. The Bank uses a graded loan rating system as a means of identifying potential problem loans, as follows:

 

Pass

Loans in these categories are performing as expected with low to average risk.

 

Special Mention

Loans in this category are internally designated by management as “watch loans.” These loans are starting to show signs of potential weakness and are closely monitored by management.

 

Substandard

Loans in this category are internally designated by management as “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the paying capacity of the obligors or the current net worth of the collateral pledged. Substandard loans present a distinct possibility that the Bank will sustain losses if such weaknesses are not corrected.

 

Doubtful

Loans classified as doubtful have all the weaknesses inherent in those designated as “substandard” with the added characteristic that the weaknesses may make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

 

On an annual basis, or more often if needed, the Bank formally reviews the ratings on commercial loans. In addition, the Bank performs an independent review of a significant portion of the commercial loan portfolio. Management uses the results of the independent review as part of its annual review process.

 

The following tables present the credit risk profile of the Company's loan portfolio based on risk rating category and year of origination as of March 31, 2026 and  December 31, 2025.

 

   

As of March 31, 2026

         
   

Term loans amortized cost basis by origination year

                                 
   

2026

   

2025

   

2024

   

2023

   

2022

   

Prior

   

Revolving loans amortized cost basis

   

Revolving loans converted to term loans amortized cost basis

   

Total

 
   

(Dollars in thousands)

         

1-4 family residential

                                                                       

Pass

  $ 2,581     $ 14,994     $ 12,426     $ 14,540     $ 10,720     $ 52,947     $ 6,982     $     $ 115,190  

Special Mention

                      1,441                               1,441  

Substandard

                262                   21                   283  

Total 1-4 family residential

    2,581       14,994       12,688       15,981       10,720       52,968       6,982             116,914  

Current year-to-date gross write-offs

                                                     

Multi-family

                                                                       

Pass

    220             504                   2,701                 $ 3,425  

Special Mention

                                                     

Substandard

                                                     

Total multi-family

    220             504                   2,701                   3,425  

Current year-to-date gross write-offs

                                                     

Commercial

                                                                       

Pass

                      162             2,863       772           $ 3,797  

Special Mention

                                                     

Substandard

                                                     

Total commercial

                      162             2,863       772             3,797  

Current year-to-date gross write-offs

                                                     

Construction

                                                                       

Pass

    332       2,646       963       86                             $ 4,027  

Special Mention

                                                     

Substandard

                                                     

Total construction

    332       2,646       963       86                               4,027  

Current year-to-date gross write-offs

                                                     

Consumer

                                                                       

Pass

    83       122       38       40       35       4                 $ 322  

Special Mention

                                                     

Substandard

                                                     

Total consumer

    83       122       38       40       35       4                   322  

Current year-to-date gross write-offs

                                                     

Total

                                                                       

Pass

    3,216       17,762       13,931       14,828       10,755       58,515       7,754             126,761  

Special Mention

                      1,441                               1,441  

Substandard

                262                   21                   283  

Total

    3,216       17,762       14,193       16,269       10,755       58,536       7,754             128,485  

Current year-to-date gross write-offs

                                                     
                                                                         

    

     

   

As of December 31, 2025

 
   

Term loans amortized cost basis by origination year

                         
   

2025

   

2024

   

2023

   

2022

   

2021

   

Prior

   

Revolving loans amortized cost basis

   

Revolving loans converted to term loans amortized cost basis

   

Total

 
   

(Dollars in thousands)

         

1-4 family residential

                                                                       

Pass

  $ 16,653     $ 13,335     $ 16,423     $ 10,870     $ 16,434     $ 37,769     $ 6,454     $       117,938  

Special Mention

                                                     

Substandard

          262                         22                   284  

Total 1-4 family residential

    16,653       13,597       16,423       10,870       16,434       37,791       6,454             118,222  

Current year-to-date gross write-offs

                                                     

Multi-family

                                                                       

Pass

          507                   221       2,512                   3,240  

Special Mention

                                                     

Substandard

                                                     

Total multi-family

          507                   221       2,512                   3,240  

Current year-to-date gross write-offs

                                                     

Commercial

                                                                       

Pass

                165             92       2,834       722             3,813  

Special Mention

                                                     

Substandard

                                                     

Total commercial

                165             92       2,834       722             3,813  

Current year-to-date gross write-offs

                                                     

Construction

                                                                       

Pass

    2,156       1,676       89                                     3,921  

Special Mention

                                                     

Substandard

                                                     

Total construction

    2,156       1,676       89                                     3,921  

Current year-to-date gross write-offs

                                                     

Consumer

                                                                       

Pass

    130       46       47       40       3       2                   268  

Special Mention

                                                     

Substandard

                                                     

Total consumer

    130       46       47       40       3       2                   268  

Current year-to-date gross write-offs

                                                     

Total

                                                                       

Pass

    18,939       15,564       16,724       10,910       16,750       43,117       7,176             129,180  

Special Mention

                                                     

Substandard

          262                         22                   284  

Total

    18,939       15,826       16,724       10,910       16,750       43,139       7,176             129,464  

Current year-to-date gross write-offs

                                                     

 

The aging of the Bank’s loan portfolio as of March 31, 2026 and December 31, 2025, is as follows:

 

   

31-89 Days Past Due and Accruing

   

Greater than 90 Days Past Due and Accruing

   

Non-Accrual

   

Total Past Due and Non-Accrual

   

Current

   

Total Loan Balance

 
   

(Dollars in thousands)

 

March 31, 2026

                                               

1-4 family residential

  $ 1,530     $     $ 283     $ 1,813     $ 115,101     $ 116,914  

Multi-family

                            3,425       3,425  

Commercial

                            3,797       3,797  

Construction

                            4,027       4,027  

Consumer

                            322       322  

Total

  $ 1,530     $     $ 283     $ 1,813     $ 126,672     $ 128,485  
                                                 

December 31, 2025

                                               

1-4 family residential

  $ 641     $     $ 284     $ 925     $ 117,297     $ 118,222  

Multi-family

                            3,240       3,240  

Commercial

                            3,813       3,813  

Construction

                            3,921       3,921  

Consumer

                            268       268  

Total

  $ 641     $     $ 284     $ 925     $ 128,539     $ 129,464  

 

The following table presents the amortized cost basis of loans on nonaccrual status recorded at March 31, 2026 and  December 31, 2025. There was no interest recognized on non-accrual loans for the three months ended March 31, 2026 and 2025.

 

   

March 31, 2026

   

December 31, 2025

   

January 1, 2025

 
   

Nonaccrual with no Allowance for Credit Losses

   

Total Nonaccrual

   

Nonaccrual with no Allowance for Credit Losses

   

Total Nonaccrual

   

Nonaccrual with no Allowance for Credit Losses

   

Total Nonaccrual

 
   

(Dollars in thousands)

First mortgage loans

                                               

1-4 family residential

  $ 283     $ 283     $ 284     $ 284     $     $  

Multi-family

                                   

Commercial

                                   

Construction

                                   

Consumer loans

                                   

Total loans

  $ 283     $ 283     $ 284     $ 284     $     $  

 

The Bank may modify loans to borrowers experiencing financial difficulty by providing modifications to repayment terms; more specifically, modifications to loan interest rates. Management performs an analysis at the time of loan modification. Any reserve required is recorded through a provision to the allowance for credit losses on loans. There were no modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2026 and 2025.