Loans Receivable | Loans Receivable Loans receivable are disclosed net of loans in process (“LIP”) and are summarized as follows at the dates indicated: March 31, 2022 December 31, 2021 (In thousands) One-to-four family residential: Permanent owner occupied $ 197,447 $ 185,320 Permanent non-owner occupied 214,784 199,796 412,231 385,116 Multifamily 152,855 130,146 Commercial real estate 416,988 419,417 Construction/land: One-to-four family residential 35,953 34,677 Multifamily 17,196 37,194 Commercial 6,189 6,189 Land 15,359 15,395 74,697 93,455 Business 30,546 46,590 Consumer 49,431 44,812 Total loans 1,136,748 1,119,536 Less: Deferred loan fees, net 207 418 ALLL 15,159 15,657 Loans receivable, net $ 1,121,382 $ 1,103,461 At March 31, 2022, loans totaling $518.9 million were pledged to secure borrowings from the FHLB compared to $561.4 million at December 31, 2021. In addition, loans totaling $120.8 million and $120.0 million were pledged to the Federal Reserve Bank of San Francisco to secure a line of credit at March 31, 2022 and December 31, 2021, respectively. Credit Quality Indicators . The Company assigns a risk rating to all credit exposures based on a risk rating system designed to define the basic characteristics and identified risk elements of each credit extension. The Company utilizes a nine point risk rating system. A description of the general characteristics of the risk grades is as follows: • Grades 1 through 5: These grades are considered to be “pass” credits. These include assets where there is virtually no credit risk, such as cash secured loans with funds on deposit with the Bank. Pass credits also include credits that are on the Company’s watch list (grade 5), where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower’s financial capacity and threaten their ability to fulfill debt obligations in the future. • Grade 6: These credits, classified as “special mention”, possess weaknesses that deserve management’s close attention. Special mention assets do not expose the Company to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. If left uncorrected, these potential weaknesses may result in deterioration in the Company’s credit position at a future date. • Grade 7: These credits, classified as “substandard”, present a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These credits have well defined weaknesses which jeopardize the orderly liquidation of the debt and are inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged. • Grade 8: These credits are classified as “doubtful” and possess well defined weaknesses which make the full collection or liquidation of the loan highly questionable and improbable. This classification is used where significant risk exposures are perceived but the exact amount of the loss cannot yet be determined due to pending events. • Grade 9: Assets classified as “loss” are considered uncollectible and cannot be justified as a viable asset for the Company. There is little or no prospect of near term recovery and no realistic strengthening action of significance is pending. The grades for watch and special mention loans are used by the Company to identify and track potential problem loans which do not rise to the levels described for substandard, doubtful, or loss. These are loans which have been criticized based upon known characteristics such as periodic payment delinquency, failure to comply with contractual terms of the loan or stale financial information from the borrower and/or guarantors. Loans identified as criticized (watch and special mention) or classified (substandard, doubtful or loss) are subject to problem loan reporting every three months. As of March 31, 2022, and December 31, 2021, the Company had no loans rated as doubtful or loss. The following tables represent a summary of loans at March 31, 2022, and December 31, 2021 by type and risk category: March 31, 2022 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) Risk Rating: Pass, grade 1-4 $ 409,798 $ 148,877 $ 349,724 $ 72,444 $ 30,546 $ 49,005 $ 1,060,394 Pass, grade 5 (watch) 1,696 2,318 16,094 2,253 — 31 22,392 Special mention 737 — 10,997 — — 216 11,950 Substandard — 1,660 40,173 — — 179 42,012 Total loans $ 412,231 $ 152,855 $ 416,988 $ 74,697 $ 30,546 $ 49,431 $ 1,136,748 December 31, 2021 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) Risk Rating: Pass, grade 1-4 $ 383,276 $ 126,149 $ 351,241 $ 91,202 $ 46,590 $ 44,379 $ 1,042,837 Pass, grade 5 (watch) 911 3,997 23,019 2,253 — 33 30,213 Special mention 929 — 11,127 — — 221 12,277 Substandard — — 34,030 — — 179 34,209 Total loans $ 385,116 $ 130,146 $ 419,417 $ 93,455 $ 46,590 $ 44,812 $ 1,119,536 ALLL . When the Company classifies problem assets as either substandard or doubtful, pursuant to Federal regulations, or identifies a loan where it is uncertain if the Bank will be able to collect all amounts due according to the contractual terms of the loan, it may establish a specific allowance in an amount deemed prudent to address the risk specifically. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been specifically allocated to the particular problem assets. When an insured institution classifies problem assets as a loss, pursuant to Federal regulations, it is required to charge-off such assets in the period in which they are deemed uncollectible. The determination as to the classification of the Company’s assets and the amount of valuation allowances is subject to review by bank regulators, who can require the establishment of additional allowances for loan losses. At March 31, 2022, total loans receivable included $5.2 million of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). Although these loans were included in the population of loans collectively evaluated for impairment, no general allowance was allocated to them as these loans are 100% guaranteed by the SBA. The following tables summarize changes in the ALLL and loan portfolio by loan type and impairment method at the dates and for the periods shown: At or For the Three Months Ended March 31, 2022 One-to-Four Multifamily Commercial Real Estate Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 3,214 $ 1,279 $ 6,615 $ 2,064 $ 1,112 $ 1,373 $ 15,657 Recoveries 2 — — — — — 2 Provision (recapture) 259 176 (300) (422) (331) 118 (500) Ending balance $ 3,475 $ 1,455 $ 6,315 $ 1,642 $ 781 $ 1,491 $ 15,159 ALLL by category: General allowance $ 3,457 $ 1,455 $ 6,315 $ 1,642 $ 781 $ 1,491 $ 15,141 Specific allowance 18 — — — — — 18 Loans: Total loans $ 412,231 $ 152,855 $ 416,988 $ 74,697 $ 30,546 $ 49,431 $ 1,136,748 Loans collectively evaluated for impairment 410,136 151,195 376,815 74,697 30,546 49,431 1,092,820 Loans individually evaluated for impairment 2,095 1,660 40,173 — — — 43,928 At or For the Three Months Ended March 31, 2021 One-to-Four Multifamily Commercial Real Estate Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 3,181 $ 1,366 $ 6,127 $ 2,189 $ 1,242 $ 1,069 $ 15,174 Recoveries 28 — — — — — 28 (Recapture) provision (158) (34) 765 4 (216) (61) 300 Ending balance $ 3,051 $ 1,332 $ 6,892 $ 2,193 $ 1,026 $ 1,008 $ 15,502 ALLL by category: General allowance $ 3,046 $ 1,332 $ 6,892 $ 2,193 $ 1,026 $ 1,008 $ 15,497 Specific allowance 5 — — — — — 5 Loans: Total loans $ 379,246 $ 140,068 $ 385,470 $ 94,545 $ 78,294 $ 38,768 $ 1,116,391 Loans collectively evaluated for impairment 376,722 138,032 368,911 94,545 78,294 38,768 1,095,272 Loans individually evaluated for impairment 2,524 2,036 16,559 — — — 21,119 Past Due Loans. Loans are considered past due if a scheduled principal or interest payment is due and unpaid for 30 days or more. At March 31, 2022, total past due loans were $208,000, representing 0.02% of total loans receivable, and at December 31, 2021, were $255,000, representing 0.02% of total loans receivable. The following tables represent a summary of the aging of loans by type at the dates indicated: Loans Past Due as of March 31, 2022 30-59 Days 60-89 Days 90 Days and Total Past Current Total (1) (In thousands) Real estate: One-to-four family residential: Owner occupied $ — $ — $ — $ — $ 197,447 $ 197,447 Non-owner occupied 29 — — 29 214,755 214,784 Multifamily — — — — 152,855 152,855 Commercial real estate — — — — 416,988 416,988 Construction/land — — — 74,697 74,697 Total real estate 29 — — 29 1,056,742 1,056,771 Business — — — — 30,546 30,546 Consumer — — 179 179 49,252 49,431 Total loans $ 29 $ — $ 179 $ 208 $ 1,136,540 $ 1,136,748 ________________ (1) There were no loans 90 days and greater past due and still accruing interest at March 31, 2022. Loans Past Due as of December 31, 2021 30-59 Days 60-89 Days 90 Days and Total Past Current Total (1) (In thousands) Real estate: One-to-four family residential: Owner occupied $ — $ — $ — $ — $ 185,320 $ 185,320 Non-owner occupied — — — — 199,796 199,796 Multifamily — — — — 130,146 130,146 Commercial real estate — — — — 419,417 419,417 Construction/land — — — — 93,455 93,455 Total real estate — — — — 1,028,134 1,028,134 Business 76 — — 76 46,514 46,590 Consumer 179 — — 179 44,633 44,812 Total loans $ 255 $ — $ — $ 255 $ 1,119,281 $ 1,119,536 _________________ (1) There were no loans 90 days and greater past due and still accruing interest at December 31, 2021. Nonperforming Loans. When a loan becomes 90 days past due, the Bank generally places the loan on nonaccrual status. Loans may be placed on nonaccrual status prior to being 90 days past due if there is an identified problem that indicates the borrower is unable to meet their scheduled payment obligations. The following table is a summary of nonaccrual loans by loan type at the dates indicated: March 31, 2022 December 31, 2021 (In thousands) Consumer 179 — Total nonaccrual loans $ 179 $ — Nonaccrual loans at March 31, 2022, consisted of one secured consumer loan. The Bank has initiated repossession of the collateralized vehicle and does not expect to incur a loss on the loan. The following tables summarize the loan portfolio by type and payment status at the dates indicated: March 31, 2022 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) Performing (1) $ 412,231 $ 152,855 $ 416,988 $ 74,697 $ 30,546 $ 49,252 $ 1,136,569 Nonperforming — — — — — 179 179 Total loans $ 412,231 $ 152,855 $ 416,988 $ 74,697 $ 30,546 $ 49,431 $ 1,136,748 _____________ (1) There were $197.4 million of owner-occupied one-to-four family residential loans and $214.8 million of non-owner occupied one-to-four family residential loans classified as performing. December 31, 2021 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) Performing (1) $ 385,116 $ 130,146 $ 419,417 $ 93,455 $ 46,590 $ 44,812 $ 1,119,536 Nonperforming — — — — — — — Total loans $ 385,116 $ 130,146 $ 419,417 $ 93,455 $ 46,590 $ 44,812 $ 1,119,536 _____________ (1) There were $185.3 million of owner-occupied one-to-four family residential loans and $199.8 million of non-owner occupied one-to-four family residential loans classified as performing. Impaired Loans. A loan is considered impaired when we have determined that we may be unable to collect payments of principal or interest when due under the terms of the original loan document or the borrower failing to comply with contractual terms of the loan. At March 31, 2022, and December 31, 2021, there were no commitments to advance funds related to impaired loans. The following tables present a summary of loans individually evaluated for impairment by loan type at the dates indicated: March 31, 2022 Recorded Investment (1) Unpaid Principal Balance (2) Related Allowance (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 177 $ 183 $ — Non-owner occupied 908 908 — Multifamily 1,660 1,660 — Commercial real estate 40,173 40,173 — Total 42,918 42,924 — Loans with an allowance: One-to-four family residential: Owner occupied 492 539 18 Non-owner occupied 518 518 — Total 1,010 1,057 18 Total impaired loans: One-to-four family residential: Owner occupied 669 722 18 Non-owner occupied 1,426 1,426 — Multifamily 1,660 1,660 — Commercial real estate 40,173 40,173 — Total $ 43,928 $ 43,981 $ 18 _________________ (1) Represents the loan balance less charge-offs. (2) Contractual loan principal balance. December 31, 2021 Recorded Investment (1) Unpaid Principal Balance (2) Related Allowance (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 178 $ 185 $ — Non-owner occupied 915 915 — Commercial real estate 34,030 34,030 — Total 35,123 35,130 — Loans with an allowance: One-to-four family residential: Owner occupied 494 541 19 Non-owner occupied 520 520 1 Total 1,014 1,061 20 Total impaired loans: One-to-four family residential: Owner occupied 672 726 19 Non-owner occupied 1,435 1,435 1 Commercial real estate 34,030 34,030 — Total $ 36,137 $ 36,191 $ 20 _________________ (1) Represents the loan balance less charge-offs. (2) Contractual loan principal balance. The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 178 $ 3 $ 273 $ 5 Non-owner occupied 912 15 984 16 Multifamily 830 17 2,070 46 Commercial real estate 37,102 410 16,614 161 Total 39,022 445 19,941 228 Loans with an allowance: One-to-four family residential: Owner occupied 493 7 501 8 Non-owner occupied 519 9 819 13 Total 1,012 16 1,320 21 Total impaired loans: One-to-four family residential: Owner occupied 671 10 774 13 Non-owner occupied 1,431 24 1,803 29 Multifamily 830 17 2,070 46 Commercial real estate 37,102 410 16,614 161 Total $ 40,034 $ 461 $ 21,261 $ 249 Troubled Debt Restructurings. Certain loan modifications are accounted for as TDR. At both March 31, 2022, and December 31, 2021, TDRs totaled $2.1 million. At March 31, 2022, the Company had no commitments to extend additional credit to borrowers whose loan terms have been modified as a TDR. All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment as part of the calculation of the ALLL. No loans accounted for as TDRs were charged-off to the ALLL for the three months ended March 31, 2022 and 2021. There were no TDR modifications during the three months ended March 31, 2022. The following table presents TDR modifications during the three months ended March 31, 2021, and the recorded investment prior to and after the modification. Three Months Ended March 31, 2021 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (Dollars in thousands) Commercial real estate: Advancement of maturity date 1 $ 1,241 $ 1,241 Total 1 $ 1,241 $ 1,241 |