Allowance for Credit Losses [Text Block] |
Note 4: Allowance for Credit Losses
The following tables present the activity in the allowance for credit losses and allowance for loan losses for the years ended December 31, 2023 and 2022:
|
|
December 31, 2023 |
|
|
|
1-4 family residential |
|
|
Multi-family |
|
|
Commercial |
|
|
Construction |
|
|
Consumer |
|
|
Total |
|
|
|
(Dollars in thousands) |
|
Year ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
581 |
|
|
$ |
19 |
|
|
$ |
19 |
|
|
$ |
— |
|
|
$ |
5 |
|
|
$ |
624 |
|
Cumulative effect of change in accounting principle |
|
|
335 |
|
|
|
23 |
|
|
|
29 |
|
|
|
— |
|
|
|
(3 |
) |
|
|
384 |
|
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Recoveries |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net recoveries (charge-offs) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Provision for (release of) credit losses |
|
|
178 |
|
|
|
(2 |
) |
|
|
(11 |
) |
|
|
4 |
|
|
|
(1 |
) |
|
|
168 |
|
Ending balance |
|
$ |
1,094 |
|
|
$ |
40 |
|
|
$ |
37 |
|
|
$ |
4 |
|
|
$ |
1 |
|
|
$ |
1,176 |
|
|
|
December 31, 2022 |
|
|
|
1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
residential |
|
|
Multi-family |
|
|
Commercial |
|
|
Consumer |
|
|
Total |
|
|
|
(Dollars in thousands) |
|
Year ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
675 |
|
|
$ |
69 |
|
|
$ |
25 |
|
|
$ |
10 |
|
|
$ |
779 |
|
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Recoveries |
|
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75 |
|
Net recoveries |
|
|
75 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75 |
|
Release of loan losses |
|
|
(169 |
) |
|
|
(50 |
) |
|
|
(6 |
) |
|
|
(5 |
) |
|
|
(230 |
) |
Ending balance |
|
$ |
581 |
|
|
$ |
19 |
|
|
$ |
19 |
|
|
$ |
5 |
|
|
$ |
624 |
|
The ACL on loans excludes $14,000 of allowance for off-balance sheet exposures as of December 31, 2023 recorded within Other Liabilities on the Consolidated Balance Sheets.
The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2022 were as follows:
|
|
Collectively evaluated |
|
|
Individually evaluated |
|
|
Total |
|
|
|
Allowance for loan losses |
|
|
Recorded investment in loans |
|
|
Allowance for loan losses |
|
|
Recorded investment in loans |
|
|
Allowance for loan losses |
|
|
Recorded investment in loans |
|
|
|
(Dollars in thousands) |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
512 |
|
|
$ |
94,711 |
|
|
$ |
69 |
|
|
$ |
873 |
|
|
$ |
581 |
|
|
$ |
95,584 |
|
Multi-family |
|
|
19 |
|
|
|
3,237 |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
|
|
3,237 |
|
Commercial |
|
|
19 |
|
|
|
3,921 |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
|
|
3,921 |
|
Consumer |
|
|
5 |
|
|
|
249 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
249 |
|
Total |
|
$ |
555 |
|
|
$ |
102,118 |
|
|
$ |
69 |
|
|
$ |
873 |
|
|
$ |
624 |
|
|
$ |
102,991 |
|
As of December 31, 2023, collateral dependent loans totaled $200,000 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, 2023. There were no other collateral dependent loans as of December 31, 2023.
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 December 31, 2023 and the risk rating category and class of loan as of December 31, 2022.
|
|
As of December 31, 2023 |
|
|
|
Term loans amortized cost basis by origination year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
23,395 |
|
|
$ |
18,950 |
|
|
$ |
19,605 |
|
|
$ |
47,517 |
|
|
$ |
1,414 |
|
|
$ |
— |
|
|
$ |
110,881 |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
200 |
|
|
|
— |
|
|
|
— |
|
|
|
200 |
|
Total 1-4 family residential |
|
|
23,395 |
|
|
|
18,950 |
|
|
|
19,605 |
|
|
|
47,717 |
|
|
|
1,414 |
|
|
|
— |
|
|
|
111,081 |
|
Current year-to-date gross write-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
|
— |
|
|
|
— |
|
|
|
239 |
|
|
|
2,872 |
|
|
|
— |
|
|
|
— |
|
|
|
3,111 |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total multi-family |
|
|
— |
|
|
|
— |
|
|
|
239 |
|
|
|
2,872 |
|
|
|
— |
|
|
|
— |
|
|
|
3,111 |
|
Current year-to-date gross write-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
|
186 |
|
|
|
— |
|
|
|
100 |
|
|
|
3,399 |
|
|
|
150 |
|
|
|
— |
|
|
|
3,835 |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total commercial |
|
|
186 |
|
|
|
— |
|
|
|
100 |
|
|
|
3,399 |
|
|
|
150 |
|
|
|
— |
|
|
|
3,835 |
|
Current year-to-date gross write-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
|
2,508 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,508 |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total construction |
|
|
2,508 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,508 |
|
Current year-to-date gross write-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
|
|
122 |
|
|
|
95 |
|
|
|
28 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
248 |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total consumer |
|
|
122 |
|
|
|
95 |
|
|
|
28 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
248 |
|
Current year-to-date gross write-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
26,211 |
|
|
$ |
19,045 |
|
|
$ |
19,972 |
|
|
$ |
53,991 |
|
|
$ |
1,564 |
|
|
$ |
— |
|
|
$ |
120,783 |
|
|
|
Pass |
|
|
Special Mention |
|
|
Substandard |
|
|
Doubtful |
|
|
Total loans |
|
|
|
(Dollars in thousands) |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
95,353 |
|
|
$ |
43 |
|
|
$ |
188 |
|
|
$ |
— |
|
|
$ |
95,584 |
|
Multi-family |
|
|
3,237 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,237 |
|
Commercial |
|
|
3,921 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,921 |
|
Consumer |
|
|
249 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
249 |
|
Total |
|
$ |
102,760 |
|
|
$ |
43 |
|
|
$ |
188 |
|
|
$ |
— |
|
|
$ |
102,991 |
|
The aging of the Bank’s loan portfolio as of December 31, 2023 and 2022, 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) |
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
131 |
|
|
$ |
— |
|
|
$ |
200 |
|
|
$ |
331 |
|
|
$ |
110,750 |
|
|
$ |
111,081 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,111 |
|
|
|
3,111 |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,835 |
|
|
|
3,835 |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,508 |
|
|
|
2,508 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
248 |
|
|
|
248 |
|
Total |
|
$ |
131 |
|
|
$ |
— |
|
|
$ |
200 |
|
|
$ |
331 |
|
|
$ |
120,452 |
|
|
$ |
120,783 |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
28 |
|
|
$ |
— |
|
|
$ |
154 |
|
|
$ |
182 |
|
|
$ |
95,402 |
|
|
$ |
95,584 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,237 |
|
|
|
3,237 |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,921 |
|
|
|
3,921 |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
249 |
|
|
|
249 |
|
Total |
|
$ |
28 |
|
|
$ |
— |
|
|
$ |
154 |
|
|
$ |
182 |
|
|
$ |
102,809 |
|
|
$ |
102,991 |
|
The following table presents the amortized cost basis of loans on nonaccrual status recorded at December 31, 2023 and 2022.
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
|
|
Nonaccrual with no Allowance for Credit Losses |
|
|
Nonaccrual |
|
|
Nonaccrual |
|
|
|
(Dollars in thousands) |
|
First mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
200 |
|
|
$ |
200 |
|
|
$ |
154 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Construction |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total loans |
|
$ |
200 |
|
|
$ |
200 |
|
|
$ |
154 |
|
Loans individually evaluated for impairment by class of loans as of December 31, 2022 were are follows:
|
|
Recorded investment |
|
|
Unpaid principal balance |
|
|
Related allowance |
|
|
Average recorded investment |
|
|
Interest income recognized |
|
|
|
(Dollars in thousands) |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
429 |
|
|
$ |
635 |
|
|
$ |
— |
|
|
$ |
442 |
|
|
$ |
29 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
429 |
|
|
$ |
635 |
|
|
$ |
— |
|
|
$ |
442 |
|
|
$ |
29 |
|
With a related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
$ |
444 |
|
|
$ |
444 |
|
|
$ |
69 |
|
|
$ |
452 |
|
|
$ |
21 |
|
Multi-family |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
444 |
|
|
$ |
444 |
|
|
$ |
69 |
|
|
$ |
452 |
|
|
$ |
21 |
|
Total individually assessed as of December 31, 2022 |
|
$ |
873 |
|
|
$ |
1,079 |
|
|
$ |
69 |
|
|
$ |
894 |
|
|
$ |
50 |
|
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.
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.
As of January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures, see Note 1. There were no modifications on loans to borrowers experiencing financial difficulty during the year ended December 31, 2023. There were no new troubled debt restructurings during the year ended December 31, 2022.
|