Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable [Abstract]

Loans Receivable

NOTE (6) – Loans Receivable

Loans at September 30, 2012 and December 31, 2011 were as follows:

	September 30, 2012			December 31, 2011
	(In thousands)
Real estate:
One to four units	$	72,213		$	76,682
Five or more units		92,711			108,161
Commercial real estate		44,588			54,259
Church		82,778			89,099
Construction		1,019			3,790
Commercial:
Sports		1,721			1,996
Other		3,631			4,900
Consumer:
Loan on savings		0			821
Other		131			108
Total gross loans receivable		298,792			339,816
Less:
Loans in process		96			202
Net deferred loan costs		(597	)		(473	)
Unamortized discounts		17			18
Allowance for loan losses		16,984			17,299
Loans receivable, net	$	282,292		$	322,270

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2012 and 2011:

	Three Months Ended September 30, 2012
	One to four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,701		$	2,897		$	2,640		$	7,223		$	106		$	201		$	88		$	17,856
Provision for loan losses		453			(326	)		135			3			(1	)		(126	)		(9	)		129
Recoveries		0			1			15			3			0			97			3			119
Loans charged off		(539	)		(14	)		(346	)		(221	)		0			0			0			(1,120	)
Ending balance	$	4,615		$	2,558		$	2,444		$	7,008		$	105		$	172		$	82		$	16,984

	Nine Months Ended September 30, 2012
	One to four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,855		$	2,972		$	3,108		$	5,742		$	249		$	247		$	126		$	17,299
Provision for loan losses		654			(401	)		(305	)		1,864			(144	)		(427	)		(51	)		1,190
Recoveries		0			1			45			10			0			352			7			415
Loans charged off		(894	)		(14	)		(404	)		(608	)		0			0			0			(1,920	)
Ending balance	$	4,615		$	2,558		$	2,444		$	7,008		$	105		$	172		$	82		$	16,984

	Three Months Ended September 30, 2011
	One to four units			Five or more units			Commercial real estate			Church			Construction			Commercial			Consumer			Total
	(In thousands)
Beginning balance	$	4,229		$	2,892		$	6,253		$	7,197		$	68		$	1,538		$	68		$	22,245
Provision for loan losses		181			249			204			564			(1	)		2,627			(10	)		3,814
Recoveries		0			0			0			0			0			0			15			15
Loans charged off		(519	)		(289	)		(207	)		(1,623	)		0			(3,631	)		0			(6,269	)
Ending balance	$	3,891		$	2,852		$	6,250		$	6,138		$	67		$	534		$	73		$	19,805

	Nine Months Ended September 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		(64	)		821			3,573			1,041			(7	)		2,865			259			8,488
Recoveries		0			0			0			0			0			0			23			23
Loans charged off		(624	)		(438	)		(816	)		(1,812	)		0			(3,631	)		(1,843	)		(9,164	)
Ending balance	$	3,891		$	2,852		$	6,250		$	6,138		$	67		$	534		$	73		$	19,805

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2012 and December 31, 2011:

	September 30, 2012
	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	$	1,335	$	34	$	237	$	1,618	$	87	$	0	$	69	$	3,380
Collectively evaluated for impairment		3,280		2,524		2,207		5,390		18		172		13		13,604
Total ending allowance balance	$	4,615	$	2,558	$	2,444	$	7,008	$	105	$	172	$	82	$	16,984
Loans:
Loans individually evaluated for impairment	$	13,867	$	2,236	$	8,333	$	30,431	$	284	$	0	$	69	$	55,220
Loans collectively evaluated for impairment		58,346		90,475		36,255		52,347		735		5,352		62		243,572
Total ending loans balance	$	72,213	$	92,711	$	44,588	$	82,778	$	1,019	$	5,352	$	131	$	298,792

	December 31, 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	$	1,678	$	161	$	255	$	1,683	$	97	$	0	$	70	$	3,944
Collectively evaluated for impairment		3,177		2,811		2,853		4,059		152		247		56		13,355
Total ending allowance balance	$	4,855	$	2,972	$	3,108	$	5,742	$	249	$	247	$	126	$	17,299
Loans:
Loans individually evaluated for impairment	$	13,246	$	3,837	$	7,396	$	31,494	$	302	$	0	$	70	$	56,345
Loans collectively evaluated for impairment		63,436		104,324		46,863		57,605		3,488		6,896		859		283,471
Total ending loans balance	$	76,682	$	108,161	$	54,259	$	89,099	$	3,790	$	6,896	$	929	$	339,816

A loan is impaired when it is probable, based on current information and events, the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. When it is determined that a loss is probable, a valuation allowance is established and included in the allowance for loan losses. The amount of impairment is determined by the difference between the recorded investment in the loan and the present value of expected cash flows, or estimated net realizable value of the underlying collateral on collateral dependent loans.

The following table presents information related to loans individually evaluated for impairment by class of loans as of September 30, 2012 and December 31, 2011:

	September 30, 2012						December 31, 2011
	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	$	11,138	$	8,383	$	0	$	6,904	$	4,636	$	0
Five or more units		1,616		1,470		0		2,946		2,871		0
Commercial real estate		10,582		6,419		0		9,105		5,449		0
Church		23,264		19,487		0		24,680		20,560		0
Commercial:
Sports		3,887		0		0		4,000		0		0
Other		285		0		0		285		0		0
With an allowance recorded:
One to four units		5,484		5,484		1,335		8,610		8,610		1,678
Five or more units		768		766		34		966		966		161
Commercial real estate		1,914		1,914		237		1,947		1,947		255
Church		11,033		10,944		1,618		10,934		10,934		1,683
Construction		286		284		87		302		302		97
Commercial:
Other		69		69		69		70		70		70
Total	$	70,326	$	55,220	$	3,380	$	70,749	$	56,345	$	3,944

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

The following tables present monthly average of individually impaired loans by class of loans and the related interest income for three and nine months ended September 30, 2012 and 2011.

	Three Months Ended September 30, 2012				Nine Months Ended September 30, 2012
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One to four units	$	14,143	$	120	$	13,844	$	354
Five or more units		2,266		10		3,047		50
Commercial real estate		8,251		115		7,847		260
Church		31,094		237		31,709		834
Construction		288		3		294		12
Commercial:
Sports		0		0		0		0
Other		70		2		70		4
Total	$	56,112	$	487	$	56,811	$	1,514

	Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011
	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
	(In thousands)
One to four units	$	11,171	$	86	$	10,158	$	227
Five or more units		3,663		5		2,981		18
Commercial real estate		12,410		39		12,617		132
Church		31,099		144		29,790		556
Construction		315		0		317		0
Commercial:
Sports		2,740		0		3,336		0
Other		285		0		259		0
Consumer:
Loan on savings		0		0		1,035		0
Total	$	61,683	$	274	$	60,493	$	933

Cash-basis interest income recognized represents cash received for interest payments on accruing impaired loans. Interest income that would have been recognized for the nine months ended September 30, 2012 had loans performed in accordance with their original terms was $3.4 million.

The following table presents the recorded investment in non-accrual loans by class of loans as of September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
	(In thousands)
Loans receivable, held for sale:
Five or more units	$	2,001	$	2,496
Commercial real estate		0		338
Church		1,567		2,778
Loans receivable, net:
One to four units		8,597		7,974
Five or more units		1,856		3,450
Commercial real estate		6,676		5,449
Church		20,306		21,891
Construction		284		302
Consumer:
Other		69		70
Total non-accrual loans	$	41,356	$	44,748

As of September 30, 2012, five loans to a single borrower totaling $1.5 million were 90 days past due and were accruing interest. There were no loans 90 days or more delinquent that were accruing interest as of December 31, 2011.

The following tables present the aging of the recorded investment in past due loans, including loans held for sale, as of September 30, 2012 and December 31, 2011 by class of loans:

	September 30, 2012
	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)
Loans receivable, held for sale:
Five or more units	$	0	$	0	$	2,001	$	2,001	$	3,855
Commercial real estate		0		0		0		0		1,362
Church		0		0		1,567		1,567		2,751
Loans receivable, net:
One to four units		4,906		47		10,115		15,068		57,145
Five or more units		169		470		1,856		2,495		90,216
Commercial real estate		241		1,266		6,676		8,183		36,405
Church		1,169		556		20,306		22,288		60,747
Construction		0		0		284		284		735
Commercial:
Sports		0		0		0		0		1,721
Other		183		98		0		281		3,350
Consumer:
Loan on savings		0		0		0		0		0
Other		0		0		69		69		62
Total	$	6,668	$	2,437	$	42,874	$	51,979	$	258,349

	December 31, 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)
Loans receivable, held for sale:
Five or more units	$	0	$	0	$	2,496	$	2,496	$	3,899
Commercial real estate		0		0		338		338		1,374
Church		0		0		2,778		2,778		2,772
Loans receivable, net:
One to four units		921		2,464		7,974		11,359		65,323
Five or more units		1,324		63		3,450		4,837		103,324
Commercial real estate		2,247		525		5,449		8,221		46,038
Church		2,647		1,440		21,891		25,978		63,121
Construction		0		264		302		566		3,224
Commercial:
Sports		0		0		0		0		1,996
Other		125		0		0		125		4,775
Consumer:
Loan on savings		0		0		0		0		821
Other		0		0		70		70		38
Total	$	7,264	$	4,756	$	44,748	$	56,768	$	296,705

Troubled Debt Restructurings

The Company has allocated $2.9 million and $2.6 million of specific reserves for loans the terms of which have been modified in troubled debt restructurings and were performing as of September 30, 2012 and December 31, 2011. At September 30, 2012, loans classified as a troubled debt restructuring totaled $37.8 million, of which $19.8 million were included in non-accrual loans and $18.0 million were on accrual status. At December 31, 2011, loans classified as a TDR totaled $37.1 million, of which $19.4 million were included in non-accrual loans and $17.7 million were on accrual status. TDRs on accrual status are comprised of loans that were accruing at the time of restructuring or loans that have complied with the terms of their restructured agreements for a satisfactory period of time, and for which the Bank anticipates full repayment of both principal and interest. TDRs that are on non-accrual can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified. As of September 30, 2012 and December 31, 2011, the Company has no commitment to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the nine months ended September 30, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one of the following: a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 1 year to 7 years. Modifications involving an extension of the maturity date were for 2 year and 7 year periods.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2012:

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
One to four units		0	$	0	$	0		1	$	36	$	36
Commercial real estate		0		0		0		2		734		740
Church		1		503		503		9		3,902		3,907
Total		1	$	503	$	503		12	$	4,672	$	4,683

The troubled debt restructurings described above increased the allowance for loan losses by $0 thousand and $228 thousand for the three and nine months ended September 30, 2012 and resulted in charge offs of $100 thousand during the three and nine months ended September 30, 2012.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The following table presents loans by class modified as 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, 2012:

	Three Months Ended September 30, 2012				Nine Months Ended September 30, 2012
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Church		0	$	0		5	$	3,791
Total		0	$	0		5	$	3,791

The terms of certain other loans were modified during the nine months ended September 30, 2012 that did not meet the definition of a troubled debt restructuring. These loans have a total recorded investment as of September 30, 2012 of $2.2 million. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators

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. For one-to-four family residential, consumer and other smaller balance homogenous loans, a credit grade is established at inception, and generally only adjusted based on performance. Information about payment status is disclosed elsewhere. The Company analyzes all other 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 September 30, 2012 and December 31, 2011 is as follows:

	September 30, 2012
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One to four units	$	57,791	$	2,130	$	12,263	$	29	$	0
Five or more units		83,669		3,233		5,809		0		0
Commercial real estate		31,087		1,170		12,268		63		0
Church		35,859		15,491		31,203		225		0
Construction		471		264		284		0		0
Commercial:
Sports		0		1,721		0		0		0
Other		2,227		1,306		98		0		0
Consumer:
Other		62		0		69		0		0
Total	$	211,166	$	25,315	$	61,994	$	317	$	0

	December 31, 2011
	Pass		Special Mention		Substandard		Doubtful		Loss
	(In thousands)
One to four units	$	63,483	$	3,044	$	9,846	$	309	$	0
Five or more units		95,621		7,450		4,939		151		0
Commercial real estate		36,098		6,721		11,364		76		0
Church		37,532		13,100		37,873		594		0
Construction		500		2,988		302		0		0
Commercial:
Sports		0		1,996		0		0		0
Other		2,363		2,369		168		0		0
Consumer:
Loan on savings		821		0		0		0		0
Other		108		0		0		0		0
Total	$	236,526	$	37,668	$	64,492	$	1,130	$	0