Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable [Abstract]

Loans Receivable

3. Loans Receivable

The Company’s loans receivable as of the respective dates are summarized as follows:

(In thousands)	September 30, 2012			December 31, 2011
Mortgage loans:
Residential real estate
Single family	$	327,805		$	312,723
Construction		46,109			45,363
Multi family		32,888			32,370
Total residential real estate		406,802			390,456
Commercial real estate
Commercial		78,974			83,447
Construction		18,410			17,307
Total commercial real estate		97,384			100,754
Subtotal mortgage loans		504,186			491,210
Other loans:
Consumer loans
Home equity loans		76,780			72,493
Dealer auto and RV loans		48,300			47,039
Other loans		8,045			9,255
Total consumer loans		133,125			128,787
Commercial business		54,358			50,337
Subtotal other loans		187,483			179,124
Total loans receivable		691,669			670,334
Less:
Allowance for loan losses		6,564			6,537
Deferred loan fees and net discounts		(1,951	)		(1,852	)
Loans in process		15,120			16,728
Subtotal		19,733			21,413
Net loans receivable	$	671,936		$	648,921

At September 30, 2012 and December 31, 2011, the Company conducted its business through 25 offices in Allegheny, Beaver, Butler and Lawrence counties in Pennsylvania which also serves as its primary lending area. Management does not believe it has significant concentrations of credit risk to any one group of borrowers given its underwriting and collateral requirements.

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools: commercial business loans, commercial real estate loans, residential real estate loans and consumer loans. The Company sub-segments residential real estate loans into the following three classes: single family, construction and multi-family. Commercial real estate is sub-segmented into commercial and construction classes. The Company also sub-segments the consumer loan portfolio into the following three classes: home equity, dealer automobile and recreational vehicle (RV) and other consumer loans. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. These historical loss percentages are calculated over a three year period for all portfolio segments. Certain qualitative factors are then added to the historical loss percentages to get the adjusted factor to be applied to non classified loans. The following qualitative factors are analyzed for each portfolio segment:

• Levels of and trends in delinquencies and nonaccruals

• Changes in lending policies and procedures

• Volatility of losses within each risk category

• Loans and Lending staff acquired through acquisition

• Economic trends

• Concentrations of credit

• Trends in volume and terms

• Experience depth and ability of management

These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the portfolio. During 2012, the qualitative factors for levels of and trends in delinquencies & nonaccruals were increased for residential mortgages, commercial loans and consumer loans. Trends in volume and terms were also increased for residential mortgages.

In terms of the Company’s loan portfolio, the consumer, commercial business and commercial real estate loans are deemed to have more risk than the residential real estate loans in the portfolio. The commercial loans not secured by real estate are highly dependent on the borrowers’ financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. Within the consumer loan portfolio, the dealer auto and RV loans have historically carried more risk than the other segments of the consumer portfolio.

Loans by Segment

The total allowance for loan losses reflects management’s estimate of loan losses inherent in the loan portfolio at the statement of financial condition date. The Company considers the allowance for loan losses of $6.6 million adequate to cover loan losses inherent in the loan portfolio, at September 30, 2012. The following tables present by portfolio segment, the changes in the allowance for loan losses for the three and nine month periods ended September 30, 2012 and 2011.

As of the three months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	434		$	2,299		$	1,004	$	2,519		$	485		$	6,741
Charge-offs		32			163			206		153			—			554
Recoveries		—			—			27		—			—			27
Provision		94			—			174		82			—			350
Reallocations		—			(62	)		—		97			(35	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the three months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	367		$	2,027		$	1,108	$	2,636		$	515		$	6,653
Charge-offs		—			—			124		650			—			774
Recoveries		1			—			21		48			—			70
Provision		—			100			50		150			—			300
Reallocations		(11	)		331			80		(61	)		(339	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249
As of the nine months ended September 30, 2012
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	384		$	2,442		$	1,045	$	2,115		$	551		$	6,537
Charge-offs		32			163			445		277			—			917
Recoveries		—			—			77		17			—			94
Provision		144			—			322		384			—			850
Reallocations		—			(205	)		—		306			(101	)		—
Ending Balance	$	496		$	2,074		$	999	$	2,545		$	450		$	6,564
As of the nine months ended September 30, 2011
(Dollar amounts in thousands)	Commercial			Commercial Real Estate			Consumer		Residential			Unallocated			Total
Allowance for loan losses:
Beginning balance	$	784		$	1,831		$	1,125	$	2,573		$	234		$	6,547
Charge-offs		178			—			391		708			—			1,277
Recoveries		25			—			105		49			—			179
Provision		—			125			275		325			75			800
Reallocations		(274	)		502			21		(116	)		(133	)		—
Ending Balance	$	357		$	2,458		$	1,135	$	2,123		$	176		$	6,249

The following tables present by portfolio segment, the recorded investment in loans at September 30, 2012 and December 31, 2011.

As of September 30, 2012
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	3	$	1,169	$	48	$	—	$	—	$	1,220
Ending balance: collectively evaluated for impairment	$	493	$	905	$	951	$	2,545	$	450	$	5,344
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	54,358	$	97,384	$	133,125	$	406,802	$	—	$	691,669
Ending balance: individually evaluated for impairment	$	38	$	13,513	$	291	$	2,305	$	—	$	16,147
Ending balance: collectively evaluated for impairment	$	54,320	$	83,871	$	132,834	$	404,497	$	—	$	675,522
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

As of December 31, 2011
(Dollar amounts in thousands)	Commercial		Commercial Real Estate		Consumer		Residential		Unallocated		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	10	$	1,489	$	50	$	—	$	—	$	1,549
Ending balance: collectively evaluated for impairment	$	374	$	953	$	995	$	2,115	$	551	$	4,988
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—
Loans Receivable:
Ending Balance	$	50,337	$	100,754	$	128,787	$	390,456	$	—	$	670,334
Ending balance: individually evaluated for impairment	$	63	$	14,023	$	153	$	1,364	$	—	$	15,603
Ending balance: collectively evaluated for impairment	$	50,274	$	86,731	$	128,634	$	389,092	$	—	$	654,731
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—	$	—	$	—	$	—

Credit Quality Information

The following tables represent credit exposures by internally assigned grades as of September 30, 2012 and December 31, 2011. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

Substandard – loans that 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 – loans classified 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 – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,888	$	39,802	$	63,417	$	18,410	$	53,783
Special Mention		—		5,363		1,475		—		539
Substandard		—		944		14,082		—		36
Doubtful		—		—		—		—		—
Loss		—		—		—		—		—
Ending Balance	$	32,888	$	46,109	$	78,974	$	18,410	$	54,358
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Multi - family		Residential Real Estate Construction		Commercial Real Estate Commercial		Commercial Real Estate Construction		Commercial
Pass	$	32,370	$	38,219	$	67,119	$	17,307	$	50,232
Special Mention		—		7,144		2,319		—		57
Substandard		—		—		14,009		—		39
Doubtful		—		—		—		—		—
Loss		—		—		—		—		9
Ending Balance	$	32,370	$	45,363	$	83,447	$	17,307	$	50,337

The following tables present performing and nonperforming single family residential and consumer loans based on payment activity as of September 30, 2012 and December 31, 2011. Payment activity is reviewed by management on a monthly basis to determine how loans are performing. Loans are considered to be nonperforming when they become 90 days delinquent.

As of September 30, 2012
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	324,227	$	76,282	$	48,192	$	7,949
Nonperforming		3,578		498		108		96
Total	$	327,805	$	76,780	$	48,300	$	8,045
As of December 31, 2011
(Dollar amounts in thousands)	Residential Real Estate Single Family		Consumer Home Equity		Dealer Auto and RV		Other Consumer
Performing	$	310,263	$	72,091	$	46,907	$	9,162
Nonperforming		2,460		402		132		93
Total	$	312,723	$	72,493	$	47,039	$	9,255

Nonperforming loans also include certain loans that have been modified and classified as troubled debt restructuring (TDR) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

Non-performing loans, which include non-accrual loans and TDRs, were $15.6 million and $13.4 million at September 30, 2012 and December 31, 2011. The TDRs amounted to $8.6 million and $7.8 million at September 30, 2012 and December 31, 2011, respectively. The Company is not committed to lend additional funds to debtors whose loans are on non-accrual status.

Age Analysis of Past Due Loans Receivable by Class

Following tables are an aging analysis of the investment of past due loans receivable as of September 30, 2012 and December 31, 2011.

(Dollar amounts in thousands)													Recorded
As of September 30, 2012	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	222	$	422	$	3,578	$	4,222	$	323,583	$	327,805	$	—
Construction		—		—		—		—		46,109		46,109		—
Multi-family		—		—		—		—		32,888		32,888		—
Commercial Real Estate
Commercial		188		796		3,076		4,060		74,914		78,974		—
Construction		—		—		—		—		18,410		18,410		—
Consumer
Consumer - home equity		43		—		207		250		76,530		76,780		—
Consumer - dealer auto and RV		601		126		108		835		47,465		48,300		—
Consumer - other		16		17		96		129		7,916		8,045		—
Commercial		504		—		38		542		53,816		54,358		—
Total	$	1,574	$	1,361	$	7,103	$	10,038	$	681,631	$	691,669	$	—
(Dollar amounts in thousands)													Recorded
As of December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans Receivable		Investment > 90 Days and Accruing
Residential real estate
Single family	$	464	$	2,933	$	2,460	$	5,857	$	306,866	$	312,723	$	—
Construction		—		—		—		—		45,363		45,363		—
Multi-family		—		—		—		—		32,370		32,370		—
Commercial Real Estate
Commercial		48		1,507		2,629		4,184		79,263		83,447		—
Construction		—		—		—		—		17,307		17,307		—
Consumer
Consumer - home equity		143		9		249		401		72,092		72,493		—
Consumer - dealer auto and RV		698		101		132		931		46,108		47,039		—
Consumer - other		98		23		93		214		9,041		9,255		—
Commercial		59		—		54		113		50,224		50,337		—
Total	$	1,510	$	4,573	$	5,617	$	11,700	$	658,634	$	670,334	$	—

Impaired Loans

Management considers commercial loans, commercial real estate loans and multi-family real estate loans which are 90 days or more past due to be impaired. Larger commercial loans, commercial real estate loans and multi-family real estate loans which are 60 days or more past due, including any troubled debt restructuring, are selected for impairment testing in accordance with GAAP. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the fair value of the impaired loan is less than the recorded investment in the loan, impairment is recognized through a provision for loan loss estimate or a charge-off to the allowance for loan losses. The Company collectively reviews all single family residential real estate and consumer loans for impairment.

The following tables summarize impaired loans:

Impaired Loans

As of September 30, 2012 and December 31, 2011

(Dollar amounts in thousands)	September 30, 2012						December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,413	$	5,520	$	—	$	5,568	$	5,675	$	—
Commercial business loans		—		—		—		39		39		—
Residential loans		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Consumer Loans:
Home Equity		139		139		—		—		—		—
With an allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	8,100	$	8,264	$	1,169	$	8,454	$	8,454	$	1,489
Consumer Loans:
Home Equity		152		152		48		153		153		50
Commercial business loans		38		38		3		25		25		10
Total:
Commercial Real Estate	$	13,513	$	13,784	$	1,169	$	14,023	$	14,129	$	1,489
Consumer		291		291		48		153		153		50
Residential		1,361		1,361		—		1,364		1,364		—
Residential construction loans		944		944		—		—		—		—
Commercial		38		38		3		63		63		10

(Dollar amounts in thousands)	Three months ended September 30, 2012				Three months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,451	$	58	$	1,056	$	18
Commercial business loans		—		—		163		10
Residential loans		1,361		2		—		—
Residential construction loans		102		10		—		—
Consumer Loans:
Home Equity		91		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	—	$	—
Commercial Real Estate:
Commercial Real Estate		8,248		105		5,678		408
Consumer Loans:
Home Equity		152		1		154		7
Commercial business loans		37		2		25		3
Total:
Commercial Real Estate	$	13,699	$	163	$	6,734	$	426
Consumer		243		11		154		7
Residential		1,361		2		—		—
Residential construction loans		102		10		—		—
Commercial		37		2		188		13

(Dollar amounts in thousands)	Nine months ended September 30, 2012				Nine months ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate:
Commercial Real Estate	$	5,488	$	170	$	1,138	$	18
Commercial business loans		—		—		77		10
Residential loans		1,362		7		—		—
Residential construction loans		421		32		—		—
Consumer Loans:
Home Equity		43		10		—		—
With an allowance recorded:
Residential Real Estate
Construction	$	—	$	—	$	1,432	$	—
Commercial Real Estate:
Commercial Real Estate		8,353		319		7,363		408
Consumer Loans:
Home Equity		153		6		155		7
Commercial business loans		41		2		151		3
Total:
Commercial Real Estate	$	13,841	$	489	$	8,501	$	426
Consumer		196		16		155		7
Residential		1,362		7		—		—
Residential construction loans		421		32		1,432		—
Commercial		41		2		228		13

Nonaccrual Loans

Loans are considered nonaccrual upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed in nonaccrual status, previously accrued but unpaid interest is deducted from interest income.

On the following table are the loans receivable on nonaccrual status as of September 30, 2012 and December 31, 2011. The balances are presented by class of loans:

(Dollar amounts in thousands)	September 30, 2012		December 31, 2011
Commercial	$	38	$	54
Commercial Real Estate		11,338		10,237
Consumer
Consumer - Home Equity		359		402
Consumer - Dealer auto and RV		108		132
Consumer - Other		96		93
Residential		3,578		2,460
Total	$	15,517	$	13,378

Modifications

The Company’s loan portfolio also includes TDR’s, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The following table includes the recorded investment and number of modifications for modified loans, for the three and nine months ended September 2012 and 2011. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured.

(Dollar amounts in thousands)	For the three months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		6	$	139	$	139	$	—	$	—	$	139
Total Troubled Debt Restructurings		6	$	139	$	139	$	—	$	—	$	139
(Dollar amounts in thousands)	For the three months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Consumer
Home Equity		—	$	—	$	—	$	—	$	—	$	—
Total Troubled Debt Restructurings		—	$	—	$	—	$	—	$	—	$	—

(Dollar amounts in thousands)	For the nine months ended September 30, 2012
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		3	$	947	$	947	$	—	$	—	$	947
Commercial Real Estate		1		100		—		—		100		100
Consumer
Home Equity		6		139		139		—		—		139
Total Troubled Debt Restructurings		10	$	1,186	$	1,086	$	—	$	100	$	1,186
(Dollar amounts in thousands)	For the nine months ended September 30, 2011
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
					Maturity Date Extension		Deferral of Principal Payments		Other		Total
Troubled Debt Restructurings
Residential construction loans		—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate		3		7,372		—		7,305		125		7,430
Consumer
Home Equity		—		—		—		—		—		—
Total Troubled Debt Restructurings		3	$	7,372	$	—	$	7,305	$	125	$	7,430

The Company did not have any TDR’s that defaulted subsequent to their modification during the periods reported.