Note 4 - Loans Receivable

3 Months Ended

Mar. 31, 2013

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

4.         LOANS RECEIVABLE

Loans receivable consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013			December 31, 2012
Real estate:
One- to four-family residential	$	151,553		$	157,936
Multifamily residential		21,138			20,790
Nonfarm nonresidential		142,624			138,014
Construction and land development		13,158			14,551
Commercial and industrial		15,833			16,083
Consumer		5,214			5,818
Total loans receivable		349,520			353,192
Unearned discounts and net deferred loan costs		(177	)		(188	)
Allowance for loan and lease losses		(15,597	)		(15,676	)
Loans receivable—net	$	333,746		$	337,328

Mortgage loans serviced for others are not included in the accompanying consolidated statements of financial condition.  The unpaid principal balances of such loans at March 31, 2013 and December 31, 2012 were $4.2 million and $8.7 million, respectively.  Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing.   Servicing income for the three months ended March 31, 2013 and 2012 was $1,000 and $2,000, respectively.

As of March 31, 2013 and December 31, 2012, qualifying loans collateralized by first lien one- to four-family mortgages with balances totaling approximately $62.9 million and $67.3 million, respectively, were held in custody by the Federal Home Loan Bank of Dallas (“FHLB”) and were pledged for outstanding advances or available for future advances.

The FHLB has custody and endorsement of the loans that collateralize the Bank’s outstanding borrowings with the FHLB.  Qualifying loans (i) must not be 90 days or more past due; (ii) must not have been in default within the most recent twelve-month period, unless such default has been cured in a manner acceptable to the FHLB; (iii) must relate to real property that is covered by fire and hazard insurance in an amount at least sufficient to discharge the mortgage loan in case of loss and as to which all real estate taxes are current; (iv) must not have been classified as substandard, doubtful, or loss by the Bank or its regulatory authority; and (v) must not secure the indebtedness to any director, officer, employee, attorney, or agent of the Bank or of any FHLB.  The FHLB currently allows an aggregate lendable value on the qualifying loans of approximately 90% of the collateral value of loans pledged to the FHLB.

As of March 31, 2013 and December 31, 2012, qualifying loans collateralized by commercial real estate with balances of $8.9 million and $9.4 million, respectively, were pledged at the Federal Reserve Bank (“FRB”).  The Bank uses qualifying investment securities and qualifying commercial real estate loans as collateral for the discount window.

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

March 31, 2013	30-89 Days Past Due		90 Days or More Past Due		Current		Total (1)
One- to four-family residential	$	5,293	$	4,123	$	142,137	$	151,553
Multifamily residential		--		--		21,138		21,138
Nonfarm nonresidential		18		3,666		138,940		142,624
Construction and land development		375		3,212		9,571		13,158
Commercial		--		402		15,431		15,833
Consumer		9		25		5,180		5,214
Total (1)	$	5,695	$	11,428	$	332,397	$	349,520

December 31, 2012	30-89 Days Past Due		90 Days or More Past Due		Current		Total (1)
One- to four-family residential	$	7,411	$	3,982	$	146,543	$	157,936
Multifamily residential		3,459		--		17,331		20,790
Nonfarm nonresidential		--		4,523		133,491		138,014
Construction and land development		241		3,145		11,165		14,551
Commercial		341		402		15,340		16,083
Consumer		15		25		5,778		5,818
Total	$	11,467	$	12,077	$	329,648	$	353,192

(1) Gross of unearned discounts and net deferred loan costs and the allowance for loan and lease losses.

There were no loans over 90 days past due and still accruing at March 31, 2013 or December 31, 2012.  Restructured loans totaled $7.4 million and $9.2 million as of March 31, 2013 and December 31, 2012, respectively, with $3.4 million of such restructured loans on nonaccrual status at both March 31, 2013 and December 31, 2012, respectively.

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

March 31, 2013	30-89 Days Past Due		90 Days or More Past Due		Current		Total
One- to four-family residential	$	1,036	$	4,123	$	2,063	$	7,222
Multifamily residential		--		--		--		--
Nonfarm nonresidential		--		3,666		2,863		6,529
Construction and land development		325		3,212		271		3,808
Commercial		--		402		--		402
Consumer		--		25		5		30
Total	$	1,361	$	11,428	$	5,202	$	17,991

December 31, 2012	30-89 Days Past Due		90 Days or  More Past Due		Current		Total
One- to four-family residential	$	1,070	$	3,982	$	1,975	$	7,027
Multifamily residential		--		--		--		--
Nonfarm nonresidential		--		4,523		2,713		7,236
Construction and land development		241		3,145		747		4,133
Commercial		--		402		--		402
Consumer		1		25		--		26
Total	$	1,312	$	12,077	$	5,435	$	18,824

The following tables summarize information pertaining to impaired loans as of March 31, 2013 and December 31, 2012 and for quarters ended March 31, 2013 and 2012 (in thousands):

	March 31, 2013						Three Months Ended March 31, 2013
	Unpaid Principal Balance		Recorded Investment		Valuation Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with a valuation allowance:
One- to four-family residential	$	2,992	$	2,479	$	513	$	1,814	$	6
Multifamily residential		3,428		2,958		470		1,479		40
Nonfarm nonresidential		3,312		2,114		1,198		2,466		--
Construction and land development		1,808		1,306		502		957		--
Commercial		381		--		381		--		--
Consumer		6		--		6		2		--
		11,927		8,857		3,070		6,718		46
Impaired loans without a valuation allowance:
One- to four-family residential		4,737		4,737		--		6,538		--
Multifamily residential		--		--		--		2,785		--
Nonfarm nonresidential		3,217		3,217		--		5,423		--
Construction and land development		2,001		2,001		--		2,918		--
Commercial		21		21		--		150		--
Consumer		25		25		--		26		--
		10,001		10,001		--		17,840		--
Total impaired loans	$	21,928	$	18,858	$	3,070	$	24,558	$	46
Interest based on original terms									$	344
Interest income recognized on a cash basis on impaired loans									$	--

	December 31, 2012						Three Months Ended March 31, 2012
	Unpaid Principal Balance		Recorded Investment		Valuation Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with a valuation allowance:
One- to four-family residential	$	1,424	$	1,149	$	275	$	3,437	$	9
Multifamily residential		--		--		--		1,128		--
Nonfarm nonresidential		3,596		2,817		778		2,287		4
Construction and land development		737		607		130		1,393		9
Commercial		380		--		380		--		--
Consumer		5		4		2		13		--
		6,142		4,577		1,565		8,258		22
Impaired loans without a valuation allowance:
One- to four-family residential		6,718		6,718		--		8,663		29
Multifamily residential		3,459		3,459		--		4,474		46
Nonfarm nonresidential		4,876		4,876		--		8,099		50
Construction and land development		3,396		3,396		--		2,240		5
Commercial		22		22		--		278		--
Consumer		27		27		--		52		1
		18,498		18,498		--		23,806		131
Total impaired loans	$	24,640	$	23,075	$	1,565	$	32,064	$	153
Interest based on original terms									$	477
Interest income recognized on a cash basis on impaired loans									$	69

Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the loan portfolio, the Bank assigns loans into risk categories based on the ability of borrowers to service their debt as determined by available and relevant information such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank assigns a credit risk rating to certain non-homogeneous loans over $250,000 on at least an annual basis.  Homogeneous loans and non-homogeneous loans under $250,000 are generally not risk rated.  The Bank 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 value, 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 all or a portion of the asset, even though partial recovery may be effected in the future.

Based on analyses performed at March 31, 2013 and December 31, 2012, the risk categories of loans are as follows:

	March 31, 2013
	Pass		Special Mention		Substandard		Not Rated		Total (1)
One- to four-family residential	$	31,888	$	3,121	$	12,898	$	103,646	$	151,553
Multifamily residential		17,349		--		3,775		14		21,138
Nonfarm nonresidential		123,545		7,104		11,090		885		142,624
Construction and land development		4,789		397		4,600		3,372		13,158
Commercial		14,933		--		747		153		15,833
Consumer		157		--		47		5,010		5,214
Total (1)	$	192,661	$	10,622	$	33,157	$	113,080	$	349,520

	December 31, 2012
	Pass		Special Mention		Substandard		Not Rated		Total (1)
One- to four-family residential	$	30,216	$	3,698	$	12,993	$	111,029	$	157,936
Multifamily residential		16,695		--		4,078		17		20,790
Nonfarm nonresidential		117,604		7,445		12,045		920		138,014
Construction and land development		5,298		867		4,934		3,452		14,551
Commercial		15,127		340		425		191		16,083
Consumer		159		--		45		5,614		5,818
Total (1)	$	185,099	$	12,350	$	34,520	$	121,223	$	353,192

(1) Gross unearned discounts and net deferred loan costs and the allowance for loan and lease losses.

As of March 31, 2013 and December 31, 2012, the Bank did not have any loans categorized as subprime or classified as doubtful or loss.

Troubled Debt Restructurings. Troubled debt restructurings (“TDRs”) are loans where the contractual terms 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 March 31, 2013 and December 31, 2012: (dollars in thousands)

March 31, 2013	Number of  Accruing TDR Loans		Balance		Number of Nonaccrual TDR Loans		Balance		Total Number of TDR Loans		Total Balance
One- to four-family residential		5	$	508		12	$	1,555		17	$	2,063
Multifamily residential		1		3,428		--		--		1		3,428
Nonfarm nonresidential		--		--		3		595		3		595
Construction and land development		--		--		6		1,283		6		1,283
Consumer		--		--		1		5		1		5
Total		6	$	3,936		22	$	3,438		28	$	7,374

December 31, 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		12	$	1,115		9	$	1,461		21	$	2,576
Multifamily residential		1		3,459		--		--		1		3,459
Nonfarm nonresidential		1		1,235		3		606		4		1,841
Construction and land development		--		--		6		1,315		6		1,315
Consumer		3		7		--		--		3		7
Total		17	$	5,816		18	$	3,382		35	$	9,198

The Bank restructured one loan as a TDR during the three months ended March 31, 2013 in the amount of $6,000. The Bank did not restructure any loans receivable that were TDRs during the three months ended March 31, 2012.

The Bank had no loans receivable for which a payment default occurred during the three months ended March 31, 2013 or 2012 and that had been modified as a TDR within 12 months or less of the payment default.