Quarterly report [Sections 13 or 15(d)]

Note 3 - Loans and Allowance for Credit Losses

v3.25.2
Note 3 - Loans and Allowance for Credit Losses
6 Months Ended
Jun. 30, 2025
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 June 30, 2025 and December 31, 2024 is as follows:

 

   

June 30, 2025

   

December 31, 2024

 
   

(Dollars in thousands)

 

First mortgage loans

               

1-4 family residential

  $ 121,837     $ 119,409  

Multi-family

    3,304       3,368  

Commercial

    4,271       4,197  

Construction

    3,901       3,651  

Total first mortgage loans

    133,313       130,625  

Consumer loans

    314       282  

Total loans

    133,627       130,907  

Net deferred loan costs

    408       650  

Allowance for credit losses on loans

    (1,200 )     (1,201 )

Total loans, net

  $ 132,835     $ 130,356  

 

First mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balance of these loans totaled $21.7 million and $13.9 million at June 30, 2025 and December 31, 2024, respectively. Custodial escrow balances maintained in connection with the loans serviced were $342,000 and $236,000 at June 30, 2025 and December 31, 2024, respectively. 

 

The accrued interest receivable for loans, net, was $563,000 and $560,000 for June 30, 2025 and December 31, 2024, 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  June 30, 2025 and December 31, 2024, such borrowers were indebted to the Bank in the aggregate amount of $575,000 and $587,000, respectively.

 

The following tables present the activity in the allowance for credit losses ("ACL") for the three and six months ended June 30, 2025 and 2024:

 

   

June 30, 2025

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Three months ended

                                               

Beginning balance

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

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

Provision for credit losses

    22             6       16            

44

 

Ending balance

  $ 1,056     $ 37     $ 44     $ 61     $ 2     $ 1,200  

 

   

June 30, 2025

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Six months ended

                                               

Beginning balance

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

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

Provision for (release of) credit losses

                3       (4 )           (1 )

Ending balance

  $ 1,056     $ 37     $ 44     $ 61     $ 2     $ 1,200  

 

   

June 30, 2024

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Three months ended

                                               

Beginning balance

  $ 1,091     $ 36     $ 37     $ 11     $ 2     $ 1,177  

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

Provision for (release of) credit losses

    74             4       13       (1 )   $ 90  

Ending balance

  $ 1,165     $ 36     $ 41     $ 24     $ 1     $ 1,267  

 

   

June 30, 2024

 
   

1-4 family

                                         
   

residential

   

Multi-family

   

Commercial

   

Construction

   

Consumer

   

Total

 
   

(Dollars in thousands)

 

Six months ended

                                               

Beginning balance

  $ 1,094     $ 40     $ 37     $ 4     $ 1     $ 1,176  

Charge-offs

                                   

Recoveries

                                   

Net recoveries (charge-offs)

                                   

Provision for (release of) credit losses

    71       (4 )     4       20             91  

Ending balance

  $ 1,165     $ 36     $ 41     $ 24     $ 1     $ 1,267  

 

The ACL on loans excludes $80,000 and $45,000 of allowance for off-balance sheet exposures as of June 30, 2025 and 2024, respectively, recorded within Other Liabilities on the Consolidated Balance Sheets. The net provision for credit losses for the three and six months ended June 30, 2025 in the table above excludes a provision for credit losses of $13,000 and $21,000, respectively, related to off balance sheet exposures. The net provision for credit losses for the three and six months ended June 30, 2024 in the table above excludes a provision for credit losses of $33,000 and $31,000, respectively, related to off balance sheet exposures.

 

As of June 30, 2025, there were two collateral dependent loan totaling $287,000 in the one to four-family residential loan segment. These loans are collateralized by residential real estate and have no ACL as of June 30, 2025. There were no other collateral dependent loans as of June 30, 2025. There were no collateral dependent loans as of December 31, 2024. 

 

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 June 30, 2025 and  December 31, 2024.

 

   

As of June 30, 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

  $ 12,235     $ 15,068     $ 19,831     $ 12,265     $ 16,825     $ 40,210     $ 5,116     $     $ 121,550  

Special Mention

                                                     

Substandard

          263                         24                   287  

Total 1-4 family residential

    12,235       15,331       19,831       12,265       16,825       40,234       5,116             121,837  

Current year-to-date gross write-offs

                                                     

Multi-family

                                                                       

Pass

          511                   226       2,567                 $ 3,304  

Special Mention

                                                     

Substandard

                                                     

Total multi-family

          511                   226       2,567                   3,304  

Current year-to-date gross write-offs

                                                     

Commercial

                                                                       

Pass

                171             94       2,960       1,046           $ 4,271  

Special Mention

                                                     

Substandard

                                                     

Total commercial

                171             94       2,960       1,046             4,271  

Current year-to-date gross write-offs

                                                     

Construction

                                                                       

Pass

    507       3,299       95                                   $ 3,901  

Special Mention

                                                     

Substandard

                                                     

Total construction

    507       3,299       95                                     3,901  

Current year-to-date gross write-offs

                                                     

Consumer

                                                                       

Pass

    120       75       62       49       6       2                 $ 314  

Special Mention

                                                     

Substandard

                                                     

Total consumer

    120       75       62       49       6       2                   314  

Current year-to-date gross write-offs

                                                     

Total

                                                                       

Pass

    12,862       18,953       20,159       12,314       17,151       45,739       6,162             133,340  

Special Mention

                                                     

Substandard

          263                         24                   287  

Total

    12,862       19,216       20,159       12,314       17,151       45,763       6,162             133,627  

Current year-to-date gross write-offs

                                                     
                                                                         

    

   

As of December 31, 2024

 
   

Term loans amortized cost basis by origination year

                         
   

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

  $ 20,577     $ 20,986     $ 12,421     $ 18,074     $ 43,245     $ 4,106     $     $ 119,409  

Special Mention

                                               

Substandard

                                               

Total 1-4 family residential

    20,577       20,986       12,421       18,074       43,245       4,106             119,409  

Current year-to-date gross write-offs

                                               

Multi-family

                                                               

Pass

    515                   230       2,623                   3,368  

Special Mention

                                               

Substandard

                                               

Total multi-family

    515                   230       2,623                   3,368  

Current year-to-date gross write-offs

                                               

Commercial

                                                               

Pass

    148       301             96       3,158       494             4,197  

Special Mention

                                               

Substandard

                                               

Total commercial

    148       301             96       3,158       494             4,197  

Current year-to-date gross write-offs

                                               

Construction

                                                               

Pass

    3,134       517                                     3,651  

Special Mention

                                               

Substandard

                                               

Total construction

    3,134       517                                     3,651  

Current year-to-date gross write-offs

                                               

Consumer

                                                               

Pass

    127       77       58       18       2                   282  

Special Mention

                                               

Substandard

                                               

Total consumer

    127       77       58       18       2                   282  

Current year-to-date gross write-offs

                                               

Total

                                                               

Pass

    24,501       21,881       12,479       18,418       49,028       4,600             130,907  

Special Mention

                                               

Substandard

                                               

Total

    24,501       21,881       12,479       18,418       49,028       4,600             130,907  

Current year-to-date gross write-offs

                                               

     

The aging of the Bank’s loan portfolio as of June 30, 2025 and December 31, 2024, 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)

 

June 30, 2025

                                               

1-4 family residential

  $ 455     $     $ 287     $ 742     $ 121,095     $ 121,837  

Multi-family

                            3,304       3,304  

Commercial

                            4,271       4,271  

Construction

                            3,901       3,901  

Consumer

                            314       314  

Total

  $ 455     $     $ 287     $ 742     $ 132,885     $ 133,627  
                                                 

December 31, 2024

                                               

1-4 family residential

  $ 371     $     $     $ 371     $ 119,038     $ 119,409  

Multi-family

                            3,368       3,368  

Commercial

                            4,197       4,197  

Construction

                            3,651       3,651  

Consumer

                            282       282  

Total

  $ 371     $     $     $ 371     $ 130,536     $ 130,907  

 

The following table presents the amortized cost basis of loans on nonaccrual status recorded at June 30, 2025 December 31, 2024 and January 1, 2024. There was no interest recognized on non-accrual loans for the six months ended June 30, 2025 and 2024.

 

   

June 30, 2025

   

December 31, 2024

   

January 1, 2024

 
   

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

  $ 287     $ 287     $     $     $ 200     $ 200  

Multi-family

                                   

Commercial

                                   

Construction

                                   

Consumer loans

                                   

Total loans

  $ 287     $ 287     $     $     $ 200     $ 200  

 

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 six months ended June 30, 2025 and 2024.