UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

(Exact name of registrant as specified in its charter)

(Address of principal executive offices and zip code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          [X] Yes  [   ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).            [X] Yes  [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [   ]		Accelerated filer [X]
	Non-accelerated filer [   ]		Smaller reporting company [X]
			Emerging growth company [   ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [   ] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 30, 2020 there were 7,436,315 shares of the registrant's common stock, $0.01 par value per share, outstanding.

PROVIDENT FINANCIAL HOLDINGS, INC.

Table of Contents

.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Financial Condition

(Unaudited)

In Thousands, Except Share Information

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

In Thousands, Except Per Share Information

		Quarter Ended March 31,								Nine Months Ended March 31,
		2020				2019				2020				2019
Interest income:
Loans receivable, net		$	9,622			$	10,011			$	30,017			$	30,516
Investment securities			478				592				1,659				1,381
FHLB – San Francisco stock			144				144				432				565
Interest-earning deposits			186				386				621				1,111
Total interest income			10,430				11,133				32,729				33,573
Interest expense:
Checking and money market deposits			106				102				333				327
Savings deposits			131				139				396				437
Time deposits			509				600				1,571				1,851
Borrowings			794				680				2,318				2,158
Total interest expense			1,540				1,521				4,618				4,773
Net interest income			8,890				9,612				28,111				28,800
Provision (recovery) for loan losses			874				4				671				(450	)
Net interest income, after  provision (recovery) for loan losses			8,016				9,608				27,440				29,250
Non-interest income:
Loan servicing and other fees			131				262				631				863
Gain (loss) on sale of loans, net			14				1,719				(115	)			7,114
Deposit account fees			423				471				1,321				1,485
Gain (loss) on sale and operations of real estate owned acquired in        the settlement of loans, net			—				2				—				(4	)
Card and processing fees			360				373				1,121				1,163
Other			173				225				557				575
Total non-interest income			1,101				3,052				3,515				11,196
Non-interest expense:
Salaries and employee benefits			4,966				9,292				14,950				24,753
Premises and occupancy			845				1,286				2,603				3,905
Equipment			314				417				855				1,333
Professional expenses			351				513				1,090				1,371
Sales and marketing expenses			177				246				506				668
Deposit insurance premiums and regulatory assessments			54				124				97				461
Other			798				1,122				2,196				3,088
Total non-interest expense			7,505				13,000				22,297				35,579
Income (loss) before income taxes			1,612				(340	)			8,658				4,867
Provision (benefit) for income taxes			467				(189	)			2,553				1,237
Net income (loss)		$	1,145			$	(151	)		$	6,105			$	3,630
Basic earnings (loss) per share		$	0.15			$	(0.02	)		$	0.82			$	0.49
Diluted earnings (loss) per share		$	0.15			$	(0.02	)		$	0.80			$	0.48
Cash dividends per share		$	0.14			$	0.14			$	0.42			$	0.42

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

In Thousands

		For the Quarter Ended March 31,								For the Nine Months Ended March 31,
		2020				2019				2020				2019
Net income (loss)		$	1,145			$	(151	)		$	6,105			$	3,630
Change in unrealized holding loss on securities available for sale			(94	)			(9	)			(133	)			(67	)
Reclassification adjustment for net loss on securities available   for sale included in net loss			—				—				—				—
Other comprehensive loss, before income tax benefit			(94	)			(9	)			(133	)			(67	)
Income tax benefit			(28	)			(3	)			(39	)			(20	)
Other comprehensive loss			(66	)			(6	)			(94	)			(47	)
Total comprehensive income (loss)		$	1,079			$	(157	)		$	6,011			$	3,583

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

In Thousands, Except Share Information

For the Quarter Ended March 31, 2020 and 2019:

		Common Stock								Additional Paid-In				Retained				Treasury				Accumulated Other Comprehensive Income (Loss),
		Shares				Amount				Capital				Earnings				Stock				Net of Tax				Total
Balance at December 31, 2019			7,483,071			$	181			$	95,118			$	193,704			$	(165,360	)		$	133			$	123,776
Net income															1,145												1,145
Other comprehensive loss																							(66	)			(66	)
Purchase of treasury stock			(46,756	)															(887	)							(887	)
Amortization of restricted stock											217																217
Stock options expense											20																20
Cash dividends (1)															(1,047	)											(1,047	)
Balance at March 31, 2020			7,436,315			$	181			$	95,355			$	193,802			$	(166,247	)		$	67			$	123,158

(1)	Cash dividends of $0.14 per share were paid in the quarter ended March 31, 2020.

		Common Stock								Additional Paid-In				Retained				Treasury				Accumulated Other Comprehensive Income (Loss),
		Shares				Amount				Capital				Earnings				Stock				Net of Tax				Total
Balance at December 31, 2018			7,506,855			$	181			$	95,913			$	192,306			$	(165,892	)		$	169			$	122,677
Net loss															(151	)											(151	)
Other comprehensive loss																							(6	)			(6	)
Purchase of treasury stock			(23,748	)															(460	)							(460	)
Exercise of stock options			11,250								164																164
Distribution of restricted    stock			3,000																								—
Amortization of restricted    stock											29																29
Stock options expense											8																8
Cash dividends (1)															(1,052	)											(1,052	)
Balance at March 31, 2019			7,497,357			$	181			$	96,114			$	191,103			$	(166,352	)		$	163			$	121,209

(1)	Cash dividends of $0.14 per share were paid in the quarter ended March 31, 2019.

The accompanying notes are an integral part of these condensed consolidated financial statements.

For the Nine Months Ended March 31, 2020 and 2019:

		Common Stock								Additional Paid-In				Retained				Treasury				Accumulated Other Comprehensive Income (Loss),
		Shares				Amount				Capital				Earnings				Stock				Net of Tax				Total
Balance at June 30, 2019			7,486,106			$	181			$	94,351			$	190,839			$	(164,891	)		$	161			$	120,641
Net income															6,105												6,105
Other comprehensive loss																							(94	)			(94	)
Purchase of treasury stock			(66,041	)															(1,284	)							(1,284	)
Exercise of stock options			16,250								215																215
Forfeiture of restricted stock											72								72								—
Amortization of restricted    stock											656																656
Stock options expense											61																61
Cash dividends (1)															(3,142	)											(3,142	)
Balance at March 31, 2020			7,436,315			$	181			$	95,355			$	193,802			$	(166,247	)		$	67			$	123,158

 ⁽¹⁾   Cash dividends of $0.42 per share were paid in the nine months ended March 31, 2020.

		Common Stock								Additional Paid-In				Retained				Treasury				Accumulated Other Comprehensive Income (Loss),
		Shares				Amount				Capital				Earnings				Stock				Net of Tax				Total
Balance at June 30, 2018			7,421,426			$	181			$	94,957			$	190,616			$	(165,507	)		$	210			$	120,457
Net income															3,630												3,630
Other comprehensive loss																							(47	)			(47	)
Purchase of treasury stock (1)			(44,819	)															(845	)							(845	)
Exercise of stock options			31,250								390																390
Distribution of restricted    stock			89,500																								—
Amortization of restricted    stock											426																426
Stock options expense											341																341
Cash dividends (2)															(3,143	)											(3,143	)
Balance at March 31, 2019			7,497,357			$	181			$	96,114			$	191,103			$	(166,352	)		$	163			$	121,209

PROVIDENT FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited - In Thousands)

6

PROVIDENT FINANCIAL HOLDINGS, INC.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

March 31, 2020

Note 1: Basis of Presentation

The unaudited interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations for the interim periods presented.  All such adjustments are of a normal, recurring nature.  The condensed consolidated statement of financial condition at June 30, 2019 is derived from the audited consolidated financial statements of Provident Financial Holdings, Inc. and its wholly-owned subsidiary, Provident Savings Bank, F.S.B. (the “Bank”) (collectively, the “Corporation”).  Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) with respect to interim financial reporting.  It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended June 30, 2019.  The results of operations for the quarter ended March 31, 2020 are not necessarily indicative of results that may be expected for the entire fiscal year ending June 30, 2020.

Note 2: Accounting Standard Updates (“ASU”)

There have been no accounting standard updates or changes in the status of their adoption that are significant to the Corporation as previously disclosed in Note 1 of the Corporation's Annual Report on Form 10-K for the year ended June 30, 2019, other than:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and subsequent amendments to the initial guidance in November 2018, ASU No. 2018-19, April 2019, ASU 2019-04, May 2019, ASU 2019-05, November 2019, ASU 2019-11, February 2020, ASU 2020-02 and March 2020, ASU 2020-03, all of which clarifies codification and corrects unintended application of the guidance. In November 2019, the FASB also issued ASU 2019-10, “Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates” extending the adoption date for certain registrants, including the Corporation. These ASUs will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Corporation is evaluating its current expected loss methodology of its loan and investment portfolios to identify the necessary modifications in accordance with these standards and expects a change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. A valuation adjustment to its allowance for loan losses or investment portfolio that is identified in this process will be reflected as a one-time adjustment in equity rather than earnings upon adoption. The Corporation is in the process of compiling historical data that will be used to calculate expected credit losses on its loan portfolio to ensure the Corporation is fully compliant with these ASUs at the adoption date and is evaluating the potential impact adoption that these ASUs will have on the Corporation’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," and a subsequent amendment to the initial guidance in February 2020, ASU 2020-02. This ASU introduces a lessee model that brings most leases onto the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, Accounting Standards Codification (“ASC”) 606, Revenue From Contracts With Customers. The new leases standard represents a

7

wholesale change to lease accounting and did not result in significant implementation challenges during the transition period. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The effective date of this ASU for annual periods is beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019) and interim periods therein. In July 2018, the FASB issued ASU 2018-11, Leases, Targeted Improvements, which allows entities the option of initially applying the new leases standard at the adoption date (such as January 1, 2019, for calendar year- end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Corporation adopted the provisions of ASC 842 effective July 1, 2019 utilizing the transition method allowed under ASU 2018-11 and will not restate comparative periods as well as electing to not separate non-lease components from lease components. The Corporation elected the package of practical expedients permitted under ASC 842's transition guidance, which allows the Corporation to carryforward its historical lease classifications and its assessment as to whether a contract is or contains a lease. The Corporation also elected to not recognize lease assets and lease liabilities for leases with an initial term of 12 months or less. The adoption of ASC 842 did not have a material impact on its consolidated financial statements. See Note 10 for additional discussion.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements on fair value measurements to improve their effectiveness.” The guidance permits entities to consider materiality when evaluating fair value measurement disclosures and, among other modifications, requires certain new disclosures related to Level 3 fair value measurements. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The guidance only affects disclosures in the notes to the consolidated financial statements and will not otherwise affect the Corporation’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of reference Rate Reform on Financial Reporting. This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform. The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Corporation is in the process of compiling data on the impact of reference rate reform and has not determined the impact of the adoption of this ASU on its consolidated financial statements.

8

Note 3: Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings of the Corporation.

As of March 31, 2020 and 2019, there were outstanding options to purchase 554,500 shares and 497,750 shares of the Corporation’s common stock, respectively. Of those shares, as of March 31, 2020 and 2019, there were 135,000 shares and 497,750 shares, respectively, which were excluded from the diluted EPS computation as their effect was anti-dilutive. As of March 31, 2020 and 2019, there were outstanding restricted stock awards of 225,500 shares and 9,000 shares, respectively. The outstanding restricted stock had a dilutive effect for the quarter and nine months ended March 31, 2020. There was no dilutive effect for the comparable quarter last year; however, there was a dilutive effect in the first nine month of fiscal 2019.

The following table provides the basic and diluted EPS computations for the quarter and nine months ended March 31, 2020 and 2019, respectively.

9

Note 4: Investment Securities

The amortized cost and estimated fair value of investment securities as of March 31, 2020 and June 30, 2019 were as follows:

March 31, 2020		Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Estimated Fair Value				Carrying Value
(In Thousands)
Held to maturity:
U.S. government sponsored enterprise MBS (1)		$	66,599			$	2,016			$	(88	)		$	68,527			$	66,599
U.S. SBA securities (2)			2,083				—				(11	)			2,072				2,083
Certificate of deposits			800				—				—				800				800
Total investment securities - held to maturity		$	69,482			$	2,016			$	(99	)		$	71,399			$	69,482
Available for sale:
U.S. government agency MBS		$	2,913			$	88			$	—			$	3,001			$	3,001
U.S. government sponsored enterprise MBS			1,614				16				—				1,630				1,630
Private issue CMO (3)			219				—				(22	)			197				197
Total investment securities - available for sale		$	4,746			$	104			$	(22	)		$	4,828			$	4,828
Total investment securities		$	74,228			$	2,120			$	(121	)		$	76,227			$	74,310

(1)	Mortgage-Backed Securities (“MBS”).

(2)	Small Business Administration (“SBA”).

(3)	Collateralized Mortgage Obligations (“CMO”).

June 30, 2019		Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Estimated Fair Value				Carrying Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS		$	90,394			$	1,289			$	(14	)		$	91,669			$	90,394
U.S. SBA securities			2,896				—				(6	)			2,890				2,896
Certificate of deposits			800				—				—				800				800
Total investment securities - held to maturity		$	94,090			$	1,289			$	(20	)		$	95,359			$	94,090
Available for sale
U.S. government agency MBS		$	3,498			$	116			$	(1	)		$	3,613			$	3,613
U.S. government sponsored enterprise MBS			1,998				89				—				2,087				2,087
Private issue CMO			261				8				—				269				269
Total investment securities - available for sale		$	5,757			$	213			$	(1	)		$	5,969			$	5,969
Total investment securities		$	99,847			$	1,502			$	(21	)		$	101,328			$	100,059

In the third quarter of fiscal 2020 and 2019, the Corporation received MBS principal payments of $7.9 million and $8.6 million, respectively, and there were no sales of investment securities during these periods. The Corporation did not purchase any investment securities in the third quarter of fiscal 2020, as compared to the purchase of $26.2 million of U.S. government sponsored enterprise MBS to be held to maturity in the same period of fiscal 2019.

For the first nine months of fiscal 2020 and 2019, the Corporation received MBS principal payments of $25.3 million and $25.2 million, respectively, and there were no sales of investment securities during these periods. The Corporation did not purchase

10

any investment securities in the first nine months of fiscal 2020, as compared to the purchase of $39.7 million of U.S. government sponsored enterprise MBS to be held to maturity in the same period of fiscal 2019.

The Corporation held investments with an unrealized loss position of $121,000 at March 31, 2020 and $21,000 at June 30, 2019.

As of March 31, 2020		Unrealized Holding Losses								Unrealized Holding Losses								Unrealized Holding Losses
(In Thousands)		Less Than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Description  of Securities		Value				Losses				Value				Losses				Value				Losses
Held to maturity:
U.S. government sponsored enterprise MBS		$	12,057			$	88			$	—			$	—			$	12,057			$	88
U.S. SBA securities			—				—				2,072				11				2,072				11
Total investment securities – held to maturity		$	12,057			$	88			$	2,072			$	11			$	14,129			$	99
Available for sale
Private issue CMO		$	197			$	22			$	—			$	—			$	197			$	22
Total investment securities – available for sale		$	197			$	22			$	—			$	—			$	197			$	22
Total investment securities		$	12,254			$	110			$	2,072			$	11			$	14,326			$	121

The Corporation evaluates individual investment securities quarterly for other-than-temporary declines in market value. At March 31, 2020, $11,000 of the $121,000 unrealized holding losses were 12 months or more; while at June 30, 2019, $12,000 of the $21,000 unrealized holding losses were 12 months or more. The Corporation does not believe that there were any other-than-temporary impairments on the investment securities at March 31, 2020 and 2019; therefore, no impairment losses were recorded for the quarter ended March 31, 2020 and 2019.

11

Contractual maturities of investment securities as of March 31, 2020 and June 30, 2019 were as follows:

		March 31, 2020								June 30, 2019
(In Thousands)		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Held to maturity:
Due in one year or less		$	800			$	800			$	400			$	400
Due after one through five years			22,193				22,942				32,584				32,728
Due after five through ten years			28,121				29,378				35,306				36,090
Due after ten years			18,368				18,279				25,800				26,141
Total investment securities - held to maturity		$	69,482			$	71,399			$	94,090			$	95,359
Available for sale:
Due in one year or less		$	—			$	—			$	—			$	—
Due after one through five years			—				—				—				—
Due after five through ten years			—				—				—				—
Due after ten years			4,746				4,828				5,757				5,969
Total investment securities - available for sale		$	4,746			$	4,828			$	5,757			$	5,969
Total investment securities		$	74,228			$	76,227			$	99,847			$	101,328

Note 5: Loans Held for Investment

Loans held for investment, net of fair value adjustments, consisted of the following:

(1)	Net of $5.5 million and $6.6 million of undisbursed loan funds as of March 31, 2020 and June 30, 2019, respectively

(2)	Net of $0.9 million and $1.0 million of undisbursed lines of credit as of March 31, 2020 and June 30, 2019, respectively.

(3)	Net of $0.5 million and $0.5 million of undisbursed lines of credit as of March 31, 2020 and June 30, 2019, respectively.

12

The following table sets forth information at March 31, 2020 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans.  Fixed-rate loans comprised one percent and two percent of loans held for investment at March 31, 2020 and June 30, 2019, respectively.  Adjustable rate loans having no stated repricing dates that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year.  The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.

The Corporation has developed an internal loan grading system to evaluate and quantify the Bank’s loans held for investment portfolio with respect to quality and risk.  Management continually evaluates the credit quality of the Corporation’s loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss.  The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances.  Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among others.  Qualitative loan loss factors are developed by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices.  The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating.

The Corporation categorizes all of the loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  A description of the general characteristics of the risk grades is as follows:

▪	Pass - These loans range from minimal credit risk to average, but still acceptable, credit risk.  The likelihood of loss is considered remote.

▪	Special Mention - A special mention loan has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss.  While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.

▪

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt.  A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

▪	Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

▪	Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.

The following tables summarize gross loans held for investment, net of fair value adjustments, by loan types and risk category at the dates indicated: