Loans Receivable And Allowance For Loan Losses

6 Months Ended

Jun. 30, 2011

Loans Receivable And Allowance For Loan Losses

Loans Receivable And Allowance For Loan Losses

NOTE (6) – Loans Receivable and Allowance for Loan Losses

Loans at June 30, 2011 and December 31, 2010 were as follows:

	June 30, 2011			December 31, 2010
	(In thousands)
Loans receivable, net:
One to four units	$	81,022		$	82,764
Five or more units		122,074			128,534
Commercial real estate		66,155			72,770
Church		95,050			97,634
Construction		4,271			5,421
Commercial:
Sports		5,698			5,768
Other		6,370			6,410
Consumer:
Loan on savings		1,006			3,259
Other		13			29
Total gross loans receivable		381,659			402,589
Less:
Loans in process		119			371
Net deferred loan fees (costs)		(881	)		(889	)
Unamortized discounts		32			33
Allowance for loan losses		22,245			20,458
Loans receivable, net	$	360,144		$	382,616

The activity in the allowance for loan losses by segment of loans for the three and six months ended June 30, 2011 was as follows:

	For the three months ended June 30, 2011
	One to four units			Five or more  units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	3,977		$	2,622		$	3,530		$	7,387		$	54		$	1,598		$	1,823		$	20,991
Provision for loan losses		319			419			2,723			(46	)		14			(60	)		65			3,434
Recoveries		—			—			—			—			—			—			6			6
Loans charged off		(67	)		(149	)		—			(144	)		—			—			(1,826	)		(2,186	)
Ending balance	$	4,229		$	2,892		$	6,253		$	7,197		$	68		$	1,538		$	68		$	22,245
	For the six months ended June 30, 2011
	One to four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,579		$	2,469		$	3,493		$	6,909		$	74		$	1,300		$	1,634		$	20,458
Provision for loan losses		(245	)		572			3,369			477			(6	)		238			269			4,674
Recoveries		—			—			—			—			—			—			8			8
Loans charged off		(105	)		(149	)		(609	)		(189	)		—			—			(1,843	)		(2,895	)
Ending balance	$	4,229		$	2,892		$	6,253		$	7,197		$	68		$	1,538		$	68		$	22,245

The activity in the allowance for loan losses for the three and six months ended June 30, 2010 was as follows:

	For the three months ended June 30, 2010			For the six months ended June 30, 2010
	(In thousands)
Beginning balance	$	20,110		$	20,460
Provision for loan losses		309			883
Recoveries		—			—
Loans charged off		(1,957	)		(2,881	)
Ending balance	$	18,462		$	18,462

The allowance for loan losses is comprised of specific loss allowances for impaired loans and general loan loss allowances based on quantitative and qualitative analyses.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by segment of loans and based on impairment method as of June 30, 2011 and December 31, 2010:

	June 30, 2011
	One to four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	871	$	183	$	3,400	$	3,127	$	—	$	1,210	$	—	$	8,791
Collectively evaluated for impairment		3,358		2,709		2,853		4,070		68		328		68		13,454
Total ending allowance balance	$	4,229	$	2,892	$	6,253	$	7,197	$	68	$	1,538	$	68	$	22,245
Loans:
Loans individually evaluated for impairment	$	10,492	$	3,067	$	11,925	$	30,850	$	317	$	3,983	$	—	$	60,634
Loans collectively evaluated for impairment		70,530		119,007		54,230		64,200		3,954		8,085		1,019		321,025
Total ending loans balance	$	81,022	$	122,074	$	66,155	$	95,050	$	4,271	$	12,068	$	1,019	$	381,659
	December 31, 2010
	One to four units		Five or more units		Commercial real estate		Church		Construction		Commercial		Consumer		Total
	(In thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	423	$	69	$	935	$	2,118	$	—	$	942	$	1,541	$	6,028
Collectively evaluated for impairment		4,156		2,400		2,558		4,791		74		358		93		14,430
Total ending allowance balance	$	4,579	$	2,469	$	3,493	$	6,909	$	74	$	1,300	$	1,634	$	20,458
Loans:
Loans individually evaluated for impairment	$	9,962	$	2,260	$	13,206	$	26,251	$	320	$	3,768	$	2,265	$	58,032
Loans collectively evaluated for impairment		72,802		126,274		59,564		71,383		5,101		8,410		1,023		344,557
Total ending loans balance	$	82,764	$	128,534	$	72,770	$	97,634	$	5,421	$	12,178	$	3,288	$	402,589

Impaired loans were as follows:

	June 30, 2011		December 31, 2010
	(In thousands)
Impaired loans with no allocated allowance:
Without charge-off	$	20,873	$	20,767
With charge-off		7,087		5,424
Impaired loans with allocated allowance:
Without charge-off		32,095		29,532
With charge-off		579		2,309
Total	$	60,634	$	58,032
Amount of the allowance for loan losses allocated	$	8,791	$	6,028

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2011 and December 31, 2010:

	June 30, 2011						December 31, 2010
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
One to four units	$	6,664	$	5,330	$	—	$	7,953	$	5,991	$	—
Five or more units		2,142		1,974		—		600		586		—
Commercial real estate		5,795		5,156		—		8,409		8,133		—
Church		15,652		15,183		—		11,782		11,161		—
Construction		317		317		—		320		320		—
With an allowance recorded:
One to four units		5,338		5,162		871		4,129		3,971		423
Five or more units		1,088		1,093		183		1,674		1,674		69
Commercial real estate		6,769		6,769		3,400		5,072		5,073		935
Church		15,766		15,667		3,127		15,183		15,090		2,118
Commercial:
Sports		4,000		3,698		925		4,000		3,768		942
Other		285		285		285		—		—		—
Consumer:
Loan on savings		—		—		—		2,249		2,249		1,525
Other		—		—		—		16		16		16
Total	$	63,816	$	60,634	$	8,791	$	61,387	$	58,032	$	6,028

The following table presents the average recorded investment, interest income recognized and cash basis interest income related to our impaired loans by segment and class for the six months ended June 30, 2011.

	For the six months ended June 30, 2011
	Average Recorded Investment		Interest Income Recognized		Cash  Basis Interest Income
	(In thousands)
With no related allowance recorded:
One to four units	$	5,767	$	25	$	25
Five or more units		1,739		13		13
Commercial real estate		8,369		37		36
Church		14,481		98		92
Construction		319		—		—
With an allowance recorded:
One to four units		3,860		113		116
Five or more units		808		—		—
Commercial real estate		4,268		57		57
Church		14,712		312		320
Commercial:
Sports		3,728		—		—
Other		247		—		—
Consumer:
Loan on savings		1,479		—		—
Total	$	59,777	$	655	$	659

	For the six months  ended June 30, 2010
	(In thousands)
Average recorded investment in impaired loans	$	48,678
Interest income recognized		740
Cash basis interest income		555

Interest income recognized during impairment represents interest income earned on accruing impaired loans. Cash-basis interest income recognized represents cash received for interest payments on performing TDRs.

The following table presents the recorded investment in nonaccrual loans by class of loans:

	June 30, 2011		December 31, 2010
	(In thousands)
Loans receivable, held for sale:
Five or more units	$	1,574	$	385
Church		5,190		5,533
Loans receivable, net:
One to four-units		5,824		6,227
Five or more units		2,675		1,865
Commercial real estate		9,061		10,321
Church		20,132		12,748
Construction		317		320
Commercial:
Sports		3,698		3,768
Other		285		—
Consumer:
Loan on Savings		—		2,249
Other		—		16
Total nonaccrual loans	$	48,756	$	43,432

As of June 30, 2011, a commercial loan for $569 thousand was more than 90 days past due and was accruing interest. The loan has matured and is currently being modified but since the loan has always been current with monthly payments, the loan remained on accruing status. There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2010.

The following table presents the aging of the recorded investment in past due loans, including loans held for sale, as of June 30, 2011 and December 31, 2010 by class of loans:

	June 30, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Loans Not Past Due
	(In thousands)
One to four units	$	5,795	$	—	$	5,824	$	11,619	$	69,403
Five or more units		251		769		4,249		5,269		123,293
Commercial real estate		733		1,424		9,061		11,218		57,005
Church		4,895		1,851		25,322		32,068		71,738
Construction		—		120		317		437		3,834
Commercial:
Sports		—		—		3,698		3,698		2,000
Other		99		—		854		953		5,417
Consumer:
Loan on savings		—		—		—		—		1,006
Other		—		—		—		—		13
Total	$	11,773	$	4,164	$	49,325	$	65,262	$	333,709
	December 31,2010
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Loans Not Past Due
	(In thousands)
One to four units	$	2,716	$	71	$	6,227	$	9,014	$	73,750
Five or more units		2,014		1,068		2,250		5,332		139,419
Commercial real estate		769		1,287		10,321		12,377		65,460
Church		12,914		5,230		18,281		36,425		70,617
Construction		898		—		320		1,218		4,203
Commercial:
Sports		—		—		3,768		3,768		2,000
Other		325		—		—		325		6,085
Consumer:
Loan on savings		—		—		2,249		2,249		1,010
Other		—		—		16		16		13
Total	$	19,636	$	7,656	$	43,432	$	70,724	$	362,557

At June 30, 2011, loans classified as a troubled debt restructurings ("TDR") totaled $36.5 million, of which $15.9 million were included in nonaccrual loans and $20.6 million were on accrual status as the loans have complied with the terms of their restructured agreements for a satisfactory period of time. At December 31, 2010, loans classified as a TDR totaled $37.1 million, of which $14.6 million were included in nonaccrual loans and $22.5 million were on accrual status as the loans have complied with the terms of their restructured agreements for a satisfactory period of time. The Company has specific allowances of $1.7 million and $1.6 million allocated to performing TDRs as of June 30, 2011 and December 31, 2010. As of June 30, 2011 and December 31, 2010, we did not have any outstanding commitments to extend additional funds to these borrowers.

The Company 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 classifying the loans as to credit risk. This analysis is performed at least on a quarterly basis. The Company uses the following definitions for risk ratings:

• Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

• Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

• Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

• Loss. Loans classified as loss are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed, the risk category of loans by class of loans as of June 30, 2011 and December 31, 2010 is as follows:

	As of June 30, 2011
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One to four units	$	69,883	$	3,220	$	7,919	$	—	$	—
Five or more units		114,116		3,541		4,368		—		49
Commercial real estate		43,321		4,923		17,826		85		—
Church		39,488		12,457		42,136		370		599
Construction		1,046		2,908		317		—		—
Commercial:
Sports		—		2,000		3,698		—		—
Other		856		5,049		465		—		—
Consumer:
Loan on savings		1,006		—		—		—		—
Other		13		—		—		—		—
Total	$	269,729	$	34,098	$	76,729	$	455	$	648

	As of December 31, 2010
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One to four units	$	71,846	$	2,440	$	8,478	$	—	$	—
Five or more units		118,490		6,412		3,632		—		—
Commercial real estate		46,692		5,281		20,797		—		—
Church		42,931		14,229		40,204		270		—
Construction		4,203		320		898		—		—
Commercial:
Sports		—		2,000		3,768		—		—
Other		925		4,870		615		—		—
Consumer:
Loan on savings		1,010		—		2,249		—		—
Other		13		—		—		—		16
Total	$	286,110	$	35,552	$	80,641	$	270	$	16