Note 4. Loans Receivable

6 Months Ended

Jun. 30, 2012

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4.         LOANS RECEIVABLE

The following tables present age analyses of loans, including both accruing and nonaccrual loans, as of the dates indicated (in thousands):

June 30, 2012	30-89 Days Past Due		90 Days or More Past Due		Current		Total (1)
One- to four-family residential	$	1,121	$	4,866	$	155,094	$	161,081
Home equity and second mortgage		88		323		9,511		9,922
Multifamily residential		--		--		13,254		13,254
Commercial real estate		1,390		2,118		113,198		116,706
One- to four-family construction		--		--		2,631		2,631
Other construction and land		421		3,910		17,922		22,253
Commercial		3		380		17,148		17,531
Consumer		15		81		6,542		6,638
Total (1)	$	3,038	$	11,678	$	335,300	$	350,016

December 31, 2011	30-89 Days Past Due		90 Days or More Past Due		Current		Total (1)
One- to four-family residential	$	8,319	$	5,604	$	169,235	$	183,158
Home equity and second mortgage		126		437		11,939		12,502
Multifamily residential		31		--		20,445		20,476
Commercial real estate		1,371		4,752		89,797		95,920
One- to four-family construction		--		--		2,391		2,391
Other construction and land		191		1,344		21,908		23,443
Commercial		--		388		7,215		7,603
Consumer		23		5		7,987		8,015
Total (1)	$	10,061	$	12,530	$	330,917	$	353,508

(1) Gross of undisbursed loan funds, unearned discounts and net loan fees and the allowance for loan and lease losses.

There was one loan over 90 days past due and still accruing at December 31, 2011 totaling $388,000 and no such loans at June 30, 2012.  Restructured loans totaled $11.0 million and $13.9 million as of June 30, 2012 and December 31, 2011, respectively, with $5.1 million and $8.7 million of such restructured loans on nonaccrual status at June 30, 2012 and December 31, 2011, respectively.

The following table presents age analyses of nonaccrual loans as of the dates indicated (in thousands):

June 30, 2012	30-89 Days Past Due		90 Days or More Past Due		Current		Total
One- to four-family residential	$	432	$	4,866	$	1,741	$	7,039
Home equity and second mortgage		41		323		224		588
Multifamily residential		--		--		279		279
Commercial real estate		1,389		2,118		4,920		8,427
Other construction and land		421		3,910		794		5,125
Commercial		3		380		19		402
Consumer		--		81		2		83
Total	$	2,286	$	11,678	$	7,979	$	21,943

December 31, 2011	30-89 Days Past Due		90 Days or More Past Due		Current		Total
One- to four-family residential	$	1,870	$	5,604	$	4,262	$	11,736
Home equity and second mortgage		57		437		270		764
Multifamily residential		--		--		4,645		4,645
Commercial real estate		203		4,752		8,283		13,238
Other construction and land		164		1,344		1,893		3,401
Commercial		--		--		72		72
Consumer		--		5		93		98
Total	$	2,294	$	12,142	$	19,518	$	33,954

The following tables summarize information pertaining to impaired loans as of June 30, 2012 and December 31, 2011 and for three and six month periods ended June 30, 2012 and 2011 (in thousands):

	June 30, 2012						For the Three and Six Months Ended June 30, 2012
	Unpaid Principal Balance		Recorded Investment		Valuation Allowance		Average Recorded Investment		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized
							(Three Months)		(Six Months)		(Three Months)		(Six Months)
Impaired loans with a valuation allowance:
One- to four-family residential	$	1,686	$	1,482	$	204	$	2,797	$	2,769	$	6	$	--
Home equity and second mortgage		157		20		137		20		22		--		--
Multifamily residential		--		--		--		--		752		--		--
Commercial real estate		4,313		3,429		884		2,791		2,668		17		40
Other construction and land		2,097		1,774		323		1,958		1,520		--		9
Commercial		--		--		--		--		--		--		--
Consumer		--		--		--		--		8		--		--
		8,253		6,705		1,548		7,566		7,739		23		49
Impaired loans without a valuation allowance:
One- to four-family residential		6,467		6,467		--		6,248		7,520		24		52
Home equity and second mortgage		449		449		--		479		560		1		5
Multifamily residential		279		279		--		2,026		3,076		3		7
Commercial real estate		5,379		5,379		--		6,320		7,192		31		84
Other construction and land		6,520		6,520		--		4,121		3,667		22		89
Commercial		402		402		--		443		319		--		--
Consumer		91		91		--		73		65		--		1
		19,587		19,587		--		19,710		22,399		81		238
Total impaired loans	$	27,840	$	26,292	$	1,548	$	27,276	$	30,138	$	104	$	287
Interest based on original terms											$	430	$	856
Interest income recognized on a cash basis on impaired loans											$	107	$	203

	December 31, 2011						For the Three and Six Months Ended June 30, 2011
	Unpaid Principal Balance		Recorded Investment		Valuation Allowance		Average Recorded Investment		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized
							(Three Months)		(Six Months)		(Three Months)		(Six Months)
Impaired loans with a valuation allowance:
One- to four-family residential	$	3,019	$	2,714	$	305	$	4,478	$	4,013	$	5	$	20
Home equity and second mortgage		108		27		81		155		217		1		3
Multifamily residential		2,958		2,255		703		4,997		5,073		--		--
Commercial real estate		4,301		2,422		1,879		1,542		2,341		--		13
One- to four-family construction		--		--		--		--		3		--		--
Other construction and land		925		645		280		4,214		4,003		1		12
Commercial		--		--		--		107		180		--		--
Consumer		70		25		45		10		16		--		1
		11,381		8,088		3,293		15,503		15,846		7		49
Impaired loans without a valuation allowance:
One- to four-family residential		10,066		10,066		--		18,153		19,398		82		158
Home equity and second mortgage		723		723		--		932		903		19		36
Multifamily residential		5,175		5,175		--		4,130		3,967		45		85
Commercial real estate		8,937		8,937		--		12,735		10,757		62		137
One- to four-family construction		--		--		--		--		--		--		--
Other construction and land		2,758		2,758		--		2,740		3,300		13		30
Commercial		72		72		--		431		407		1		3
Consumer		49		49		--		91		93		1		3
	$	27,780	$	27,780	$	--		39,212		38,825		223		452
Total impaired loans	$	39,161	$	35,868	$	3,293	$	54,715	$	54,671	$	230	$	501
Interest based on original terms											$	864	$	1,675
Interest income recognized on a cash basis on impaired loans											$	143	$	269

Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Bank’s loan portfolio, the Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by assigning a credit risk rating to loans on at least an annual basis for non-homogeneous loans over $250,000. The Company uses the following definitions for risk ratings:

Pass (Grades 1 to 5). Loans rated as pass generally meet or exceed normal credit standards and are rated on a scale from 1 to 5, with 1 being the highest quality loan and 5 being a pass/watch loan.  Factors influencing the level of pass grade include repayment source and strength, collateral, borrower cash flows, existence of and strength of guarantors, industry/business sector, financial trends, performance history, etc.

Special Mention (Grade 6). Loans rated as special mention, while still adequately protected by the borrower’s repayment capability, exhibit distinct weakening trends. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management’s close attention so as to avoid becoming adversely classified credits.

Substandard (Grade 7). Loans rated as substandard are inadequately protected by the current sound net worth and paying capacity of the borrower or the collateral pledged, if any. These assets must have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (Grade 8). Loans rated as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss (Grade 9). Loans rated as a loss are considered uncollectible and of such little value that continuance as an asset is not warranted. A loss classification does not mean that an asset has no recovery or salvage value, but that it is not practical or desirable to defer writing off or reserving all or a portion of the asset, even though partial recovery may be effected in the future.

Based on analyses performed at June 30, 2012 and December 31, 2011, the risk categories of loans are as follows:

	June 30, 2012
	Pass		Special Mention		Substandard		Not Rated		Total (1)
One- to four-family residential	$	16,163	$	10,764	$	12,454	$	121,700	$	161,081
Home equity and second mortgage		406		182		1,043		8,291		9,922
Multifamily residential		7,203		4,495		1,460		96		13,254
Commercial real estate		92,695		10,134		11,969		1,908		116,706
One- to four-family construction		1,477		690		250		214		2,631
Other construction and land		6,853		1,078		10,241		4,081		22,253
Commercial		16,415		346		511		259		17,531
Consumer		63		--		114		6,461		6,638
Total (1)	$	141,275	$	27,689	$	38,042	$	143,010	$	350,016

	December 31, 2011
	Pass		Special Mention		Substandard		Not Rated		Total (1)
One- to four-family residential	$	24,300	$	13,888	$	27,877	$	117,093	$	183,158
Home equity and second mortgage		558		487		1,569		9,888		12,502
Multifamily residential		4,736		6,655		6,203		2,882		20,476
Commercial real estate		55,997		9,174		29,020		1,729		95,920
One- to four-family construction		--		--		1,463		928		2,391
Other construction and land		9,508		2,908		8,696		2,331		23,443
Commercial		5,579		1,105		521		398		7,603
Consumer		626		13		191		7,185		8,015
Total (1)	$	101,304	$	34,230	$	75,540	$	142,434	$	353,508

(1) Gross of undisbursed loan funds, unearned discounts and net loan fees and the allowance for loan and lease losses.

As of June 30, 2012, the Bank had one loan with $192,000 of the balance considered doubtful and no loans categorized as subprime. As of December 31, 2011, the Bank did not have any loans categorized as subprime or classified as doubtful.

Troubled Debt Restructurings. Troubled debt restructurings (“TDRs”) are loans where the contractual terms on the loan have been modified and both of the following conditions exist: (i) the borrower is experiencing financial difficulty and (ii) the restructuring constitutes a concession that the Bank would not otherwise make. The Bank assesses all loan modifications to determine if the modifications constitute a TDR.  Restructurings resulting in an insignificant delay in payment are not considered to be TDRs.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length and the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

All TDRs are considered impaired loans. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

The following table summarizes TDRs as of June 30, 2012 and December 31, 2011: (dollars in thousands)

June 30, 2012	Number of Accruing TDR Loans		Balance		Number of Nonaccrual TDR Loans		Balance		Total Number of TDR Loans		Total Balance
One- to four-family residential		11	$	1,114		7	$	661		18	$	1,775
Home equity and second mortgage		1		19		3		75		4		94
Commercial real estate		1		1,265		3		2,757		4		4,022
Other construction and land		1		3,491		6		1,628		7		5,119
Consumer		4		8		--		--		4		8
Total		18	$	5,897		19	$	5,121		37	$	11,018

December 31, 2011	Number of Accruing TDR Loans		Balance		Number of Nonaccrual TDR Loans		Balance		Total Number of TDR Loans		Total Balance
One- to four-family residential		15	$	1,349		11	$	1,134		26	$	2,483
Home equity and second mortgage		3		68		4		133		7		201
Multifamily residential		1		3,488		1		1,399		2		4,887
Commercial real estate		--		--		6		4,759		6		4,759
Other construction and land		5		282		4		1,242		9		1,524
Consumer		7		20		--		--		7		20
Total		31	$	5,207		26	$	8,667		57	$	13,874

During the three and six months ended June 30, 2012, the Bank did not restructure any loans receivable that were TDRs. The Bank had no loans receivable for which a payment default occurred during the three and six months ended June 30, 2012 and that had been modified as a TDR within 12 months or less of the payment default.  A payment default is defined as a payment received more than 90 days after its due date.