Note 4: Loans and Allowance for Loan Losses

Categories of loans at March 31, 2012 and December 31, 2011 include:

	March 31,			December 31,
	2012			2011
Real estate - residential mortgage:
One to four family units	$	97,644,102		$	98,030,718
Multi-family		42,961,186			43,165,695
Real estate - construction		47,432,973			44,912,049
Real estate - commercial		176,074,688			194,856,374
Commercial loans		86,004,719			88,088,580
Consumer and other loans		21,643,394			20,758,027
Total loans		471,761,062			489,811,443
Less:
Allowance for loan losses		(10,973,592	)		(10,613,145	)
Deferred loan fees/costs, net		(228,307	)		(237,562	)
Net loans	$	460,559,163		$	478,960,736

Classes of loans by aging at March 31, 2012 and December 31, 2011 were as follows:

As of March 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	569	$	-	$	33	$	602	$	97,042	$	97,644	$	-
Multi-family		-		-		-		-		42,961		42,961		-
Real estate - construction		720		-		157		877		46,556		47,433		-
Real estate - commercial		373		-		-		373		175,702		176,075		-
Commercial loans		499		527		1,128		2,154		83,851		86,005		-
Consumer and other loans		40		-		-		40		21,603		21,643		-
Total	$	2,201	$	527	$	1,318	$	4,046	$	467,715	$	471,761	$	-

As of December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	5	$	206	$	33	$	244	$	97,787	$	98,031	$	-
Multi-family		-		-		-		-		43,166		43,166		-
Real estate - construction		728		-		157		885		44,027		44,912		-
Real estate - commercial		167		-		1,193		1,360		193,496		194,856		-
Commercial loans		32		-		548		580		87,508		88,088		-
Consumer and other loans		14		18		20		52		20,706		20,758		-
Total	$	946	$	224	$	1,951	$	3,121	$	486,690	$	489,811	$	-

Nonaccruing loans are summarized as follows:

	March 31,		December 31,
	2012		2011
Real estate - residential mortgage:
One to four family units	$	1,784,696	$	1,671,245
Multi-family		-		-
Real estate - construction		7,854,111		8,514,187
Real estate - commercial		7,534,336		4,082,416
Commercial loans		4,011,343		2,377,081
Consumer and other loans		347,592		357,060
Total	$	21,532,078	$	17,001,989

The following tables present the activity in the allowance for loan losses based on portfolio segment for the three months ended March 31, 2012 and 2011:

March 31, 2012	Construction		Commercial Real Estate			One to four family			Multi-family			Commercial			Consumer and Other			Unallocated			Total
Allowance for loan losses:	(In Thousands)
Balance, beginning of period	$	2,508	$	2,725		$	1,735		$	390		$	1,948		$	372		$	935		$	10,613
Provision charged to expense		721		359			(24	)		(1	)		(163	)		26			(18	)	$	900
Losses charged off		-		(478	)		(108	)		-			-			(19	)		-		$	(605	)
Recoveries		10		14			3			-			31			8			-		$	66
Balance, end of period	$	3,239	$	2,620		$	1,606		$	389		$	1,816		$	387		$	917		$	10,974

March 31, 2011	Construction			Commercial Real Estate			One to four family			Multi-family			Commercial			Consumer and Other			Unallocated		Total
Allowance for loan losses:	(In Thousands)
Balance, beginning of period	$	4,547		$	3,125		$	1,713		$	528		$	2,483		$	687		$	-	$	13,083
Provision charged to expense		803			274			518			(7	)		12			(1,485	)		785	$	900
Losses charged off		(69	)		(1,475	)		(265	)		-			(518	)		(40	)		-	$	(2,367	)
Recoveries		10			2			-			-			34			1,247			-	$	1,293
Balance, end of period	$	5,291		$	1,926		$	1,966		$	521		$	2,011		$	409		$	785	$	12,909

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2012 and December 31, 2011:

March 31, 2012	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
Allowance for loan losses:	(In Thousands)
Ending balance: individually evaluated for impairment	$	1,356	$	324	$	124	$	-	$	444	$	61	$	-	$	2,309
Ending balance: collectively evaluated for impairment	$	1,883	$	2,297	$	1,482	$	389	$	1,372	$	325	$	917	$	8,665

Loans:
Ending balance: individually evaluated for impairment	$	7,854	$	9,136	$	1,792	$	-	$	4,011	$	621	$	-	$	23,414
Ending balance: collectively evaluated for impairment	$	39,579	$	166,939	$	95,852	$	42,961	$	81,994	$	21,022	$	-	$	448,347

December 31, 2011	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
Allowance for loan losses:	(In Thousands)
Ending balance: individually evaluated for impairment	$	1,355	$	659	$	127	$	-	$	399	$	72	$	-	$	2,612
Ending balance: collectively evaluated for impairment	$	1,153	$	2,066	$	1,608	$	390	$	1,549	$	300	$	935	$	8,001

Loans:
Ending balance: individually evaluated for impairment	$	8,515	$	5,019	$	1,819	$	-	$	3,048	$	653	$	-	$	19,054
Ending balance: collectively evaluated for impairment	$	36,397	$	189,837	$	96,212	$	43,166	$	85,040	$	20,105	$	-	$	470,757

The following table summarizes the recorded investment in impaired loans at March 31, 2012 and December 31, 2011:

	March 31, 2012						December 31, 2011
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,399	$	1,399	$	-	$	1,424	$	1,424	$	-
Multi-family		-		-		-		-		-		-
Real estate - construction		1,225		1,225		-		1,181		1,181		-
Real estate - commercial		5,635		5,960		-		4,646		5,985		-
Commercial loans		1,560		1,871		-		1,148		1,459		-
Consumer and other loans		361		361		-		376		376		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	393	$	419	$	124	$	395	$	421	$	127
Multi-family		-		-		-		-		-		-
Real estate - construction		6,629		7,149		1,356		7,334		7,854		1,355
Real estate - commercial		3,501		3,501		324		373		373		659
Commercial loans		2,451		2,451		444		1,900		1,900		399
Consumer and other loans		260		260		61		277		277		72
Total
Real estate - residential mortgage:
One to four family units	$	1,792	$	1,818	$	124	$	1,819	$	1,845	$	127
Multi-family		-		-		-		-		-		-
Real estate - construction		7,854		8,374		1,356		8,515		9,035		1,355
Real estate - commercial		9,136		9,461		324		5,019		6,358		659
Commercial loans		4,011		4,322		444		3,048		3,359		399
Consumer and other loans		621		621		61		653		653		72
Total	$	23,414	$	24,596	$	2,309	$	19,054	$	21,250	$	2,612

The following table summarizes average impaired loans and related interest recognized on impaired loans for the three months ended March 31, 2012 and 2011:

	For the Three Months Ended				For the Three Months Ended
	March 31, 2012				March 31, 2011
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,409	$	5	$	2,583	$	35
Multi-family		-		-		-		-
Real estate - construction		985		-		3,646		2
Real estate - commercial		5,650		13		2,644		11
Commercial loans		1,903		6		4,513		35
Consumer and other loans		383		8		458		18
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	604	$	-	$	1,214	$	-
Multi-family		-		-		-		-
Real estate - construction		7,021		-		7,556		-
Real estate - commercial		3,513		-		2,262		-
Commercial loans		2,270		-		2,894		-
Consumer and other loans		266		-		633		-
Total
Real estate - residential mortgage:
One to four family units	$	2,013	$	5	$	3,797	$	35
Multi-family		-		-		-		-
Real estate - construction		8,006		-		11,202		2
Real estate - commercial		9,163		13		4,906		11
Commercial loans		4,173		6		7,407		35
Consumer and other loans		649		8		1,091		18
Total	$	24,004	$	32	$	28,403	$	101

At March 31, 2012, the Bank's impaired loans shown in the table above included loans that were classified as troubled debt restructurings (TDR). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

In assessing whether or not a borrower is experiencing financial difficulties, the Bank considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy and (iv) the debtor's projected cash flow is sufficient to satisfy the contractual payments due under the original terms of the loan without a modification.

The Bank considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Bank include the debtor's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by the Bank generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (iii) a reduction on the face amount or maturity amount of the debt as stated in the original loan, (iv) a temporary period of interest-only payments, (v) a reduction in accrued interest, and (vi) an extension of amortization.

During the three months ended March 31, 2012, there were no loans modified that met the definition of a troubled debt restructuring.

The Company has allocated $1.3 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2012 and December 31, 2011.

There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ending March 31, 2012. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

As part of the on-going monitoring of the credit quality of the Bank's loan portfolio, management tracks loans by an internal rating system. All loans are assigned an internal credit quality rating based on an analysis of the borrower's financial condition. The criteria used to assign quality ratings to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Bank's safety and soundness. The following are the internally assigned ratings:

Pass-This rating represents loans that have strong asset quality and liquidity along with a multi-year track record of profitability.

Special mention-This rating represents loans that are currently protected but are potentially weak. The credit risk may be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.

Substandard-This rating represents loans that show signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

The following tables provide information about the credit quality of the loan portfolio using the Bank's internal rating system as of March 31, 2012 and December 31, 2011:

March 31, 2012	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	28,030	$	150,206	$	91,639	$	42,147	$	79,392	$	20,297	$	411,711
Special Mention		9,171		9,193		2,871		814		1,131		310		23,490
Substandard		10,232		16,676		3,134		-		5,482		1,036		36,560
Total	$	47,433	$	176,075	$	97,644	$	42,961	$	86,005	$	21,643	$	471,761

December 31, 2011	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	27,646	$	162,019	$	91,503	$	42,668	$	80,529	$	19,522	$	423,887
Special Mention		6,372		20,406		3,214		498		2,183		309		32,982
Substandard		10,894		12,431		3,314		-		5,376		927		32,942
Total	$	44,912	$	194,856	$	98,031	$	43,166	$	88,088	$	20,758	$	489,811