LOANS

9 Months Ended

Sep. 30, 2014

Loans and Leases Receivable Disclosure [Abstract]

LOANS

NOTE 3 - LOANS

The components of loans are as follows:

	At September 30,						At December 31,
	2014						2013
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family	$	118,018,468			29.6	%	$	118,884,453			31.4	%
Multi-family		37,203,901			9.4			40,262,269			10.7
Commercial		125,299,492			31.5			120,839,112			32.0
Construction and land		29,521,120			7.4			12,848,111			3.4
		310,042,981			77.9			292,833,945			77.5
Commercial business		73,887,739			18.6			71,940,431			19.0
Consumer:
Home equity		12,478,053			3.1			11,712,701			3.1
Automobile and other		1,399,498			0.4			1,525,594			0.4
		13,877,551			3.5			13,238,295			3.5
Total gross loans		397,808,271			100.0	%		378,012,671			100.0	%
Deferred loan origination costs, net		182,022						146,959
Allowance for loan losses		(5,790,519	)					(5,590,668	)
Loans, net	$	392,199,774					$	372,568,962

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and presents these policies to the board of directors at least annually. A reporting system supplements the review process by providing management with reports related to loan production, loan quality, loan delinquencies and non-performing and potential problem loans.

Additional information regarding our accounting policies for the individual loan categories is contained in our 2013 Annual Report to Stockholders that is filed as Exhibit 13 to the Company’s Annual Report on Form 10-K.

On occasion, the Company originates loans secured by single-family dwellings with loan to value ratios exceeding 90%. As of September 30, 2014 and December 31, 2013, these loans represented 2.32% and 1.07%, respectively, of our combined one-to-four family and home equity portfolios. The Company does not consider the level of such loans to be a significant concentration of credit as of September 30, 2014 or December 31, 2013.

The recorded investment in loans does not include accrued interest and loan origination fees due to immateriality. The allowance for loan losses does not include a component for undisbursed loan commitments; rather this amount is included in other liabilities.

The following tables present our past-due loans, segregated by class, as of September 30, 2014 and December 31, 2013:

September 30, 2014
	Loans 30-59 Days Past  Due		Loans 60-89 Days Past  Due		Loans 90 or More  Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	-	$	302,334	$	331,715	$	634,049	$	117,384,419	$	118,018,468	$	-
Multi-family		-		-		-		-		37,203,901		37,203,901		-
Commercial		819,357		-		34,805		854,162		124,445,330		125,299,492		-
Construction and land		-		-		-		-		29,521,120		29,521,120		-
		819,357		302,334		366,520		1,488,211		308,554,770		310,042,981		-
Commercial business		44,623		6,206		-		50,829		73,836,910		73,887,739		-
Consumer:
Home equity		-		346,382		38,924		385,306		12,092,747		12,478,053		-
Automobile and other		-		-		-		-		1,399,498		1,399,498		-
		-		346,382		38,924		385,306		13,492,245		13,877,551		-
Total	$	863,980	$	654,922	$	405,444	$	1,924,346	$	395,883,925	$	397,808,271	$	-
December 31, 2013
	Loans 30-59 Days Past  Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	631,656	$	116,090	$	673,677	$	1,421,423	$	117,463,030	$	118,884,453	$	-
Multi-family		-		-		-		-		40,262,269		40,262,269		-
Commercial		15,162		-		30,016		45,178		120,793,934		120,839,112		-
Construction and land		-		-		-		-		12,848,111		12,848,111		-
		646,818		116,090		703,693		1,466,601		291,367,344		292,833,945		-
Commercial business		4,719		-		-		4,719		71,935,712		71,940,431		-
Consumer:
Home equity		40,473		-		30,047		70,520		11,642,181		11,712,701		-
Automobile and other		-		-		-		-		1,525,594		1,525,594		-
		40,473		-		30,047		70,520		13,167,775		13,238,295		-
Total	$	692,010	$	116,090	$	733,740	$	1,541,840	$	376,470,831	$	378,012,671	$	-

All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed. Subsequent payments are applied to the outstanding principal balance.

Non-accrual loans, segregated by class, are as follows:

	September 30,		December 31,
	2014		2013
Real estate loans:
One-to-four family	$	626,082	$	1,671,324
Multi-family		1,371,080		2,100,064
Commercial		1,265,044		1,388,887
Construction and land		1,362,047		1,141,057
		4,624,253		6,301,332
Commercial business		675,454		-
Consumer:
Home equity		38,924		144,800
Total non-accrual loans	$	5,338,631	$	6,446,132

The following tables present the activity in the allowance for loan losses for the three and nine months ended September 30, 2014 and 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three months ended September 30, 2014
	Beginning Balance		Charge-offs			Recoveries			Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,225,852	$	-		$	465,270		$	(593,575	)	$	1,097,547
Multi-family		438,431		-			-			(31,035	)		407,396
Commercial		1,709,815		-			-			133,384			1,843,199
Construction and land		1,011,316		-			-			315,997			1,327,313
		4,385,414		-			465,270			(175,229	)		4,675,455
Commercial business		997,689		-			(600	)		(64,303	)		932,786
Consumer
Home equity		172,037		-			7,465			(5,168	)		174,334
Automobile and other		12,769		-			475			(5,300	)		7,944
		184,806		-			7,940			(10,468	)		182,278
Total	$	5,567,909	$	-		$	472,610		$	(250,000	)	$	5,790,519
Three months ended September 30, 2013
	Beginning Balance		Charge-offs			Recoveries			Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,011,386	$	(199,030	)	$	418		$	122,716		$	935,490
Multi-family		559,998		-			-			92,785			652,783
Commercial		1,073,664		(49,499	)		204,091			210,213			1,438,469
Construction and land		1,512,094		-			57,000			(259,470	)		1,309,624
		4,157,142		(248,529	)		261,509			166,244			4,336,366
Commercial business		1,195,622		(10,328	)		15,997			(116,554	)		1,084,737
Consumer
Home equity		120,776		-			233			(7,720	)		113,289
Automobile and other		5,158		-			6,023			(6,970	)		4,211
		125,934		-			6,256			(14,690	)		117,500
Total	$	5,478,698	$	(258,857	)	$	283,762		$	35,000		$	5,538,603

Nine months ended September 30, 2014
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,424,663	$	(219,163	)	$	466,287	$	(574,240	)	$	1,097,547
Multi-family		661,358		-			-		(253,962	)		407,396
Commercial		1,454,455		(1,876	)		-		390,620			1,843,199
Construction and land		668,085		-			230,000		429,228			1,327,313
		4,208,561		(221,039	)		696,287		(8,354	)		4,675,455
Commercial business		1,219,080		-			8,116		(294,410	)		932,786
Consumer:
Home equity		116,478		(43,519	)		9,381		91,994			174,334
Automobile and other		46,549		-			625		(39,230	)		7,944
		163,027		(43,519	)		10,006		52,764			182,278
Total	$	5,590,668	$	(264,558	)	$	714,409	$	(250,000	)	$	5,790,519
Nine months ended September 30, 2013
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	847,285	$	(502,265	)	$	17,036	$	573,434		$	935,490
Multi-family		958,303		(482,478	)		-		176,958			652,783
Commercial		1,268,081		(216,750	)		204,681		182,457			1,438,469
Construction and land		1,413,002		-			214,268		(317,646	)		1,309,624
		4,486,671		(1,201,493	)		435,985		615,203			4,336,366
Commercial business		1,296,114		(135,114	)		23,967		(100,230	)		1,084,737
Consumer:
Home equity		151,625		(13,009	)		233		(25,560	)		113,289
Automobile and other		10,175		(7,574	)		6,023		(4,413	)		4,211
		161,800		(20,583	)		6,256		(29,973	)		117,500
Total	$	5,944,585	$	(1,357,190	)	$	466,208	$	485,000		$	5,538,603

The following tables separate the allocation of the allowance for loan losses and the loan balances between loans evaluated both individually and collectively as of September 30, 2014 and December 31, 2013:

September 30, 2014
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	103,569	$	993,978	$	1,097,547	$	1,210,236	$	116,808,232	$	118,018,468
Multi-family		-		407,396		407,396		1,842,865		35,361,036		37,203,901
Commercial		149,971		1,693,228		1,843,199		2,304,185		122,995,307		125,299,492
Construction and land		107		1,327,206		1,327,313		1,574,294		27,946,826		29,521,120
		253,647		4,421,808		4,675,455		6,931,580		303,111,401		310,042,981
Commercial business		119,948		812,838		932,786		795,402		73,092,337		73,887,739
Consumer:
Home equity		-		174,334		174,334		56,386		12,421,667		12,478,053
Automobile and other		-		7,944		7,944		-		1,399,498		1,399,498
		-		182,278		182,278		56,386		13,821,165		13,877,551
Total	$	373,595	$	5,416,924	$	5,790,519	$	7,783,368	$	390,024,903	$	397,808,271
December 31, 2013
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	160,881	$	1,263,782	$	1,424,663	$	1,720,101	$	117,164,352	$	118,884,453
Multi-family		-		661,358		661,358		2,100,064		38,162,205		40,262,269
Commercial		195,103		1,259,352		1,454,455		1,978,525		118,860,587		120,839,112
Construction and land		10,315		657,770		668,085		1,141,057		11,707,054		12,848,111
		366,299		3,842,262		4,208,561		6,939,747		285,894,198		292,833,945
Commercial business		131,774		1,087,306		1,219,080		131,774		71,808,657		71,940,431
Consumer:
Home equity		8,602		107,876		116,478		162,449		11,550,252		11,712,701
Automobile and other		-		46,549		46,549		-		1,525,594		1,525,594
		8,602		154,425		163,027		162,449		13,075,846		13,238,295
Total	$	506,675	$	5,083,993	$	5,590,668	$	7,233,970	$	370,778,701	$	378,012,671

Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements. The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends. Generally, all sizeable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credit’s risk profile. Credits classified as watch generally receive a review more frequently than annually. The risk category of homogeneous loans, such as consumer loans and smaller balance loans, is evaluated when the loan becomes delinquent. For special mention, substandard, and doubtful credit classifications, the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates.

The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:

Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.

Special Mention - A special mention asset has potential weaknesses that deserve management’s close attention. The asset may also be subject to a weak or speculative market or to economic conditions, which may, in the future adversely affect the obligor. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard - A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the institution will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.

Doubtful - An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.

Loss - An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Company’s books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off. Therefore, there is no balance to report for credits categorized as loss.

The following tables present our credit quality indicators, segregated by class, as of September 30, 2014 and December 31, 2013:

September 30, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	116,575,339	$	280,990	$	998,297	$	163,842	$	118,018,468
Multi-family		33,110,684		2,722,138		1,371,079		-		37,203,901
Commercial		110,632,286		10,665,461		4,001,745		-		125,299,492
Construction and land		27,886,725		-		1,634,395		-		29,521,120
		288,205,034		13,668,589		8,005,516		163,842		310,042,981
Commercial business		72,168,789		923,548		795,402		-		73,887,739
Consumer:
Home equity		12,409,165		29,964		38,924		-		12,478,053
Automobile and other		1,399,498		-		-		-		1,399,498
		13,808,663		29,964		38,924		-		13,877,551
Total	$	374,182,486	$	14,622,101	$	8,839,842	$	163,842	$	397,808,271
December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	115,491,532	$	1,672,820	$	1,367,925	$	352,176	$	118,884,453
Multi-family		35,412,469		2,749,736		2,100,064		-		40,262,269
Commercial		110,571,786		5,902,447		4,334,863		30,016		120,839,112
Construction and land		11,583,780		-		1,264,331		-		12,848,111
		273,059,567		10,325,003		9,067,183		382,192		292,833,945
Commercial business		71,074,289		534,368		331,774		-		71,940,431
Consumer:
Home equity		11,518,523		31,730		132,401		30,047		11,712,701
Automobile and other		1,525,594		-		-		-		1,525,594
		13,044,117		31,730		132,401		30,047		13,238,295
Total	$	357,177,973	$	10,891,101	$	9,531,358	$	412,239	$	378,012,671

The following tables provide details of impaired loans, segregated by class, as of and for the periods indicated. The unpaid contractual balance represents the recorded balance prior to any partial charge-offs. The recorded investment represents customer balances net of any partial charge-offs recognized on the loans.

	As of September 30, 2014						As of December 31, 2013
	Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Real estate loans:
One-to-four family	$	597,011	$	500,252	$	-	$	1,082,196	$	899,959	$	-
Multi-family		2,477,263		1,842,865		-		2,734,462		2,100,064		-
Commercial		779,422		779,422		-		808,008		808,008		-
Construction and land		3,135,281		1,362,047		-		1,986,485		213,251		-
		6,988,977		4,484,586		-		6,611,151		4,021,282		-
Commercial business		675,454		675,454		-		-		-		-
Consumer:
Home equity		56,386		56,386		-		132,402		132,402		-
Subtotal	$	7,720,817	$	5,216,426	$	-	$	6,743,553	$	4,153,684	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	763,492	$	709,984	$	103,569	$	864,017	$	820,142	$	160,881
Multi-family		-		-		-		-		-		-
Commercial		1,716,998		1,524,763		149,971		1,360,876		1,170,517		195,103
Construction and land		212,247		212,247		107		927,806		927,806		10,315
		2,692,737		2,446,994		253,647		3,152,699		2,918,465		366,299
Commercial business		119,948		119,948		119,948		131,774		131,774		131,774
Consumer:
Home equity		-		-		-		30,047		30,047		8,602
Subtotal		2,812,685		2,566,942		373,595		3,314,520		3,080,286		506,675
Total	$	10,533,502	$	7,783,368	$	373,595	$	10,058,073	$	7,233,970	$	506,675

	For the three months ended September 30, 2014						For the three months ended September 30, 2013
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	508,560	$	763	$	-	$	1,146,644	$	517	$	-
Multi-family		1,842,099		30		-		1,322,609		-		-
Commercial		909,202		-		-		1,730,282		10,134		-
Construction and land		1,001,091		-		-		1,450,938		-		-
		4,260,952		793		-		5,650,473		10,651		-
Commercial business		677,727		-		-		28,911		-		-
Consumer:
Home equity		114,922		264		-		126,655		315		-
Automobile and other		-		-		-		-		-		-
		114,922		264		-		126,655		315		-
Subtotal	$	5,053,601	$	1,057	$	-	$	5,806,039	$	10,966	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	677,011	$	5,945	$	-	$	1,197,003	$	-	$	-
Multi-family		-		-		-		1,106,998		-		-
Commercial		1,318,324		4,481		-		552,825		-		-
Construction and land		106,123		2,430		-		-		-		-
		2,101,458		12,856		-		2,856,826		-		-
Commercial business		121,912		2,465		-		342,867		2,318		-
Consumer:
Home equity		-		-		-		37,060		-		-
Automobile and other		-		-		-		-		-		-
		-		-		-		37,060		-		-
Subtotal		2,223,370		15,321		-		3,236,753		2,318		-
Total	$	7,276,971	$	16,378	$	-	$	9,042,792	$	13,284	$	-

	For the nine months ended September 30, 2014						For the nine months ended September 30, 2013
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	742,155	$	1,726	$	-	$	1,040,242	$	517	$	-
Multi-family		1,499,240		30		-		773,675		-		-
Commercial		863,767		7,709		-		2,329,088		10,134		-
Construction and land		826,652		-		-		1,768,331		-		-
		3,931,814		9,465		-		5,911,336		10,651		-
Commercial business		338,864		-		-		15,096		-		-
Consumer:
Home equity		125,947		838		-		140,974		315		-
Automobile and other		-		-		-		1,137		-		-
		125,947		838		-		142,111		315		-
Subtotal	$	4,396,625	$	10,303	$	-	$	6,068,543	$	10,966	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	673,152	$	5,945	$	-	$	1,104,666	$	-	$	-
Multi-family		414,444		-		-		1,930,451		-		-
Commercial		1,285,412		7,667		-		569,846		-		-
Construction and land		285,013		2,430		-		-		-		-
		2,658,021		16,042		-		3,604,963		-		-
Commercial business		125,867		7,190		-		311,683		2,548		-
Consumer:
Home equity		7,512		-		-		32,347		-		-
Automobile and other		-		-		-		3,380		-		-
		7,512		-		-		35,727		-		-
Subtotal		2,791,400		23,232		-	$	3,952,373	$	2,548	$	-
Total	$	7,188,025	$	33,535	$	-	$	10,020,916	$	13,514	$	-

Troubled Debt Restructurings:

The Company had allocated $354,958 of specific reserves on $6,152,048 of loans to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2014. The Company had $354,822 of allocations of specific reserves on $6,215,918 of loans to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2013. The Company has committed to lend an immaterial amount as of September 30, 2014 to customers with outstanding loans that are classified as troubled debt restructurings. The Company had no commitments to lend additional amounts as of December 31, 2013 to customers with outstanding loans that are classified as troubled debt restructurings.

During the three and nine months ended September 30, 2014, three loans totaling $1,410,854 were modified as troubled debt restructurings. The modifications included payment and maturity changes not available in the market.

During the three months ended September 30, 2013, six loans totaling $1,019,972 were modified as troubled debt restructurings. During the nine months ended September 30, 2013, 11 loans totaling $1,243,886 were modified as troubled debt restructurings. The modifications included one or a combination of the following: payment and maturity changes not available in the market; and a reduction of the stated interest rate of the loan.

The following tables present loans, by class, modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2014 and 2013:

Three and nine months ended September 30, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		2	$	517,725	$	512,242
Construction and land		1		893,129		893,129
Total		3	$	1,410,854	$	1,405,371

The troubled debt restructurings described above resulted in a net increase in the allowance for loan losses of $43,720 and $76,797 during the three and nine months ended September 30, 2014, respectively. There were no charge offs during the three and nine months ended September 30, 2014.

Three months ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		1	$	49,678	$	49,000
Commercial		3		809,404		809,404
		4		859,082		858,404
Commercial business		1		142,112		142,112
Consumer:
Home equity		1		18,778		17,722
Total		6	$	1,019,972	$	1,018,238

Nine months ended September 30, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		5	$	135,590	$	134,277
Commercial		3		809,404		809,404
		8		944,994		943,681
Commercial business		2		280,114		276,041
Consumer:
Home equity		1		18,778		17,722
Total		11	$	1,243,886	$	1,237,444

The following tables present the troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2014 and 2013.

	Three and nine months ended September 30, 2014
	Number of Contracts		Recorded Investment (as of period end)
Real estate loans:
One-to-four family		4	$	95,804
Total		4	$	95,804

	Three and nine months ended September 30, 2013
	Number of Contracts		Recorded Investment (as of period end)
Real estate loans:
One-to-four family		1	$	53,152
Total		1	$	53,152

The troubled debt restructurings that subsequently defaulted, described above, resulted in a net decrease in the allowance for loan losses of $2,340 and resulted in charge-offs of $5,327 during the nine months ended September 30, 2014.

A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.