Loans

6 Months Ended

Jun. 30, 2011

Loans [Abstract]

LOANS

6. LOANS

Portfolio loans consist of the following:

	June 30,			December 31,
	2011			2010
	(Dollars in thousands)
Real Estate:
One-to four-family residential	$	693,435		$	757,426
Multi-family residential		129,767			135,771
Nonresidential		307,702			331,390
Land		25,515			25,138
Construction:
One-to four-family residential and land development		87,827			108,583
Multi-family and nonresidential		5,524			15,077
Total real estate		1,249,770			1,373,385
Consumer
Home equity		212,578			220,582
Auto		10,952			11,525
Marine		6,069			7,285
Recreational vehicles		32,584			35,671
Other		3,892			4,390
Total consumer		266,075			279,453
Commercial
Secured		28,404			28,876
Unsecured		9,950			17,428
Total commercial		38,354			46,304
Total loans		1,554,199			1,699,142
Less:
Allowance for loan losses		46,223			50,883
Deferred loan costs, net		(1,423	)		(1,227	)
Total		44,800			49,656
Loans, net	$	1,509,399		$	1,649,486

Changes in the allowance for loan losses are as follows:

	Three Months			Three Months
	ended			ended
	June 30, 2011			June 30, 2010
	(Dollars in thousands)
Balance, beginning of year	$	46,415		$	47,768
Provision for loan losses		8,244			10,310
Amounts charged off		(9,030	)		(17,558	)
Recoveries		594			208
Balance, end of year	$	46,223		$	40,728

	Six Months			Six Months
	ended			ended
	June 30, 2011			June 30, 2010
	(Dollars in thousands)
Balance, beginning of year	$	50,883		$	42,287
Provision for loan losses		10,436			22,760
Amounts charged off		(16,256	)		(24,678	)
Recoveries		1,160			379
Balance, end of year	$	46,223		$	40,748

The following tables present activity and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the three and six months ended June 30, 2011 and the year ended December 31, 2010.

Allowance For Loan Losses
(Dollars in thousands)
	Permanent
For the three months ended	Real Estate			Construction			Consumer			Commercial
June 30, 2011	Loans			Loans			Loans			Loans			Unallocated		Total
Beginning balance (3/31/11)	$	26,991		$	5,774		$	4,996		$	8,654		$	—	$	46,415
Provision		8,438			2,015			190			(2,399	)		—		8,244
Chargeoffs		(4,295	)		(1,405	)		(767	)		(2,563	)		—		(9,030	)
Recoveries		237			145			125			87			—		594
Net chargeoffs		(4,058	)		(1,260	)		(642	)		(2,476	)		—		(8,436	)
Ending balance (6/30/11)	$	31,371		$	6,529		$	4,544		$	3,779		$	—	$	46,223

Allowance For Loan Losses
(Dollars in thousands)
	Permanent
For the six months ended	Real Estate			Construction			Consumer			Commercial
June 30, 2011	Loans			Loans			Loans			Loans			Unallocated		Total
Beginning balance (12/31/10)	$	28,066		$	8,533		$	5,260		$	9,024		$	—	$	50,883
Provision		9,992			1,551			782			(1,889	)		—		10,436
Chargeoffs		(7,173	)		(3,757	)		(1,797	)		(3,529	)		—		(16,256	)
Recoveries		486			202			299			173			—		1,160
Net chargeoffs		(6,687	)		(3,555	)		(1,498	)		(3,356	)		—		(15,096	)
Ending balance (6/30/11)	$	31,371		$	6,529		$	4,544		$	3,779		$	—	$	46,223

	Permanent
	Real Estate		Construction		Consumer		Commercial
	Loans		Loans		Loans		Loans		Unallocated		Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$	6,914	$	3,727	$	—	$	1,011	$	—	$	11,652
Loans collectively evaluated for impairment		24,457		2,802		4,544		2,768		—		34,571
Ending balance (6/30/11)	$	31,371	$	6,529	$	4,544	$	3,779	$	—	$	46,223
Period-end balances:
Loans individually evaluated for impairment	$	105,604	$	45,345	$	1,169	$	10,428	$	—	$	162,546
Loans collectively evaluated for impairment		1,050,815		48,006		264,906		27,926		—		1,391,653
Ending balance (6/30/11)	$	1,156,419	$	93,351	$	266,075	$	38,354	$	—	$	1,554,199

The unpaid principal balance is the total amount of the loan that is due to Home Savings. The recorded investment includes the unpaid principal balance less any charge-offs or partial charge-offs applied to specific loans. The unpaid principal balance and the recorded investment exclude accrued interest receivable and deferred loan costs, both of which are immaterial.

Allowance For Loan Losses
(Dollars in thousands)
	Permanent
For the twelve months ended	Real Estate			Construction			Consumer			Commercial
December 31, 2010	Loans			Loans			Loans			Loans			Unallocated		Total
Beginning balance (12/31/09)	$	15,288		$	19,020		$	4,959		$	3,020		$	—	$	42,287
Provision		40,595			10,028			4,079			7,725			—		62,427
Chargeoffs		(28,153	)		(20,648	)		(4,316	)		(1,962	)		—		(55,079	)
Recoveries		336			133			538			241			—		1,248
Net chargeoffs		(27,817	)		(20,515	)		(3,778	)		(1,721	)		—		(53,831	)
Ending balance (12/31/10)	$	28,066		$	8,533		$	5,260		$	9,024		$	—	$	50,883
Period-end amount allocated to:
Loans individually evaluated for impairment	$	7,509		$	3,360		$	—		$	2,575		$	—	$	13,444
Loans collectively evaluated for impairment		20,557			5,173			5,260			6,449			—		37,439
Ending balance (12/31/10)	$	28,066		$	8,533		$	5,260		$	9,024		$	—	$	50,883
Period-end balances:
Loans individually evaluated for impairment**	$	101,410		$	47,054		$	1,547		$	6,444		$	—	$	156,455
Loans collectively evaluated for impairment		1,148,315			76,606			277,906			39,860			—		1,542,687
Ending balance (12/31/10)	$	1,249,725		$	123,660		$	279,453		$	46,304		$	—	$	1,699,142

** Revised to include impaired loans without specific allocations.

Impaired loans are defined as loans which, based on current information and events, it is probable that Home Savings will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement and the loan is non-homogeneous in nature. Impaired loans can be divided into two categories: those with a specific valuation and those without a specific valuation. In general, impaired loans without a specific valuation either has sufficient collateral to support the loan balance, or any collateral shortfall that did exist has been charged off such that the remaining loan balance is dully supported by collateral value (less costs to sell).

Impaired loans consisted of the following:

	As of or for		As of or for the		As of or for
	the six months		twelve months		the six months
	ended		ended		ended
	June 30,		December 31,		June 30,
	2011		2010		2010
	(Dollars in thousands)
Impaired loans on which no specific valuation allowance was provided	$	82,499	$	71,853	$	82,736
Impaired loans on which specific valuation allowance was provided		80,047		84,602		76,041
Total impaired loans at end of period	$	162,546	$	156,455	$	158,777
Specific valuation allowances on impaired loans at period-end		11,652		13,444		10,029
Average impaired loans during period		162,868		144,977		138,791
Interest income recognized on impaired loans during the period **		1,184		1,778		816
Interest income received on impaired loans during the period **		2,412		4,570		816

** Interest income recognized may be less than interest income received on an impaired loan if, for example, payments received on nonaccrual impaired loans are applied to principal.

The following table presents loans individually evaluated for impairment by class of loans as of and for the six months ended June 30, 2011:

Impaired Loans
(Dollars in thousands)
					Allowance
	Unpaid				for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Income
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	27,740	$	23,725	$	—	$	25,043	$	212	$	327
Multifamily residential		5,165		4,166		—		3,144		—		107
Nonresidential		26,358		24,760		—		21,536		225		459
Land		9,229		7,469		—		6,363		34		80
Total		68,492		60,120		—		56,086		471		973
Construction loans
One-to four-family residential		32,932		19,487		—		20,430		103		180
Multifamily and nonresidential		—		—		—		255		—		—
Total		32,932		19,487		—		20,685		103		180
Consumer loans
Home Equity		2,529		1,040		—		1,243		3		15
Auto		98		75		—		66		—		3
Marine		—		—		—		—		—		—
Recreational vehicle		113		47		—		47		—		1
Other		7		7		—		7		—		—
Total		2,747		1,169		—		1,363		3		19
Commercial loans
Secured		3,451		1,340		—		1,502		13		14
Unsecured		16,069		383		—		385		5		27
Total		19,520		1,723		—		1,887		18		41
Total	$	123,691	$	82,499	$	—	$	80,021	$	595	$	1,213

Impaired Loans
(Dollars in thousands)
					Allowance
	Unpaid				for Loan		Average		Interest		Cash Basis
	Principal		Recorded		Losses		Recorded		Income		Income
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	5,107	$	4,702	$	786	$	2,253	$	39	$	58
Multifamily residential		4,894		2,858		224		5,951		—		27
Nonresidential		39,329		36,920		5,659		39,438		469		657
Land		1,557		1,004		245		618		12		19
Total		50,887		45,484		6,914		48,260		520		761
Construction loans
One-to four-family residential		35,937		25,858		3,727		26,011		60		251
Multifamily and nonresidential		—		—		—		—		—		—
Total		35,937		25,858		3,727		26,011		60		251
Consumer loans
Home Equity		—		—		—		—		—		—
Auto		—		—		—		—		—		—
Marine		—		—		—		—		—		—
Recreational vehicle		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total		—		—		—		—		—		—
Commercial loans
Secured		7,405		7,369		63		5,824		9		163
Unsecured		2,090		1,336		948		2,752		—		24
Total		9,495		8,705		1,011		8,576		9		187
Total		96,319		80,047		11,652		82,847		589		1,199
Total	$	220,010	$	162,546	$	11,652	$	162,868	$	1,184	$	2,412

The difference between the unpaid principal balance of $220,010 and the recorded investment of $162,546 (i.e. $57,464) represents amounts previously charged off by Home Savings. This amount, plus any existing reserves of $11,652, totals $69,611, or 31.4% of the unpaid principal balance of these loans.

The following table presents the average recorded investment and interest income associated with impaired loans for the three months ended June 30, 2011:

Impaired Loans
(Dollars in thousands)
	Average				Cash Basis
	Recorded		Interest Income		Income
	Investment		Recognized		Recognized
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	25,373	$	91	$	152
Multifamily residential		2,889		—		64
Nonresidential		20,730		132		215
Land		6,087		23		58
Total		55,079		246		489
Construction loans
One-to four-family residential		20,666		76		93
Multifamily and nonresidential		319		—		—
Total		20,986		76		93
Consumer loans
Home Equity		1,294		1		6
Auto		64		—		1
Marine		—		—		—
Recreational vehicle		47		—		—
Other		7		—		—
Total		1,412		1		7
Commercial loans
Secured		1,543		6		6
Unsecured		386		5		17
Total		1,929		11		23
Total	$	79,406	$	334	$	612

Impaired Loans
(Dollars in thousands)
	Average					Cash Basis
	Recorded		Interest Income			Income
	Investment		Recognized			Recognized
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	1,641	$	39		$	49
Multifamily residential		6,725		—			17
Nonresidential		40,067		205			290
Land		522		12			15
Total		48,955		256			371
Construction loans
One-to four-family residential		26,050		1			157
Multifamily and nonresidential		—		—			—
Total		26,050		1			157
Consumer loans
Home Equity		—		—			—
Auto		—		—			—
Marine		—		—			—
Recreational vehicle		—		—			—
Other		—		—			—
Total		—		—			—
Commercial loans
Secured		5,438		(109	)		45
Unsecured		3,106		—			12
Total		8,544		(109	)		57
Total	$	83,549	$	148		$	585
Total	$	162,955	$	482		$	1,197

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

Impaired Loans
(Dollars in thousands)
					Allowance
	Unpaid				for Loan
	Principal		Recorded		Losses
	Balance		Investment		Allocated
With no specific allowance recorded
Permanent real estate	$	60,516	$	44,666	$	—
Construction loans		31,715		23,465		—
Consumer loans		3,407		1,547		—
Commercial loans		16,148		2,175		—
Total		111,786		71,853		—
With a specific allowance recorded
Permanent real estate		65,869		56,744		7,509
Construction loans		35,777		23,589		3,360
Consumer loans		—		—		—
Commercial loans		5,419		4,269		2,575
Total		107,065		84,602		13,444
Total	$	218,851	$	156,455	$	13,444

The following tables present the recorded investment in nonaccrual loans and loans past due over 90 days and still on accrual by class of loans as of June 30, 2011:

Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing
(Dollars in thousands)
			Loans past due
			over 90 days
			and still
	Nonaccrual		accruing
Real Estate Loans
Permanent
One-to four-family residential	$	28,776	$	—
Multifamily residential		6,414		—
Nonresidential		36,382		—
Land		8,316		—
Total		79,888		—
Construction Loans
One-to four-family residential		42,268		1,121
Multifamily and nonresidential		382		—
Total		42,650		1,121
Consumer Loans
Home Equity		3,737		—
Auto		138		—
Marine		—		—
Recreational vehicle		1,861		—
Other		45		—
Total		5,781		—
Commercial Loans
Secured		8,073		—
Unsecured		1,577		—
Total		9,650		—
Total	$	137,969	$	1,121

Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing
As of December 31, 2010
(Dollars in thousands)
			Loans past due
			over 90 days
			and still
	Nonaccrual		accruing
Real Estate Loans
Permanent
One-to four-family residential	$	27,417	$	—
Multifamily residential		10,983		—
Nonresidential		39,838		—
Land		5,188		—
Total		83,426		—
Construction Loans
One-to four-family residential		40,077		3,944
Multifamily and nonresidential		382		2,032
Total		40,459		5,976
Consumer Loans
Home Equity		3,179		210
Auto		89		—
Marine		—		—
Recreational vehicle		93		144
Other		10		—
Total		3,371		354
Commercial Loans
Secured		1,822		—
Unsecured		4,123		—
Total		5,945		—
Total	$	133,201	$	6,330

The following tables present an age analysis of past-due loans, segregated by class of loans as of June 30, 2011:

Past Due Loans
(Dollars in thousands)
					Greater
	30-59		60-89		than 90
	Days		Days Past		Days Past		Total Past		Current		Total
	Past Due		Due		Due		Due		Loans		Loans
Real Estate Loans
Permanent
One-to four-family residential	$	3,123	$	1,881	$	23,937	$	28,941	$	664,494	$	693,435
Multifamily residential		256		249		5,094		5,599		124,168		129,767
Nonresidential		1,697		1,564		34,604		37,865		269,837		307,702
Land		415		—		6,483		6,898		18,617		25,515
Total		5,491		3,694		70,118		79,303		1,077,116		1,156,419
Construction Loans
One-to four-family residential		254		3,150		40,454		43,858		43,969		87,827
Multifamily and nonresidential		—		—		382		382		5,142		5,524
Total		254		3,150		40,836		44,240		49,111		93,351
Consumer Loans
Home Equity		1,701		768		2,744		5,213		207,365		212,578
Auto		81		18		77		176		10,776		10,952
Marine		224		—		—		224		5,845		6,069
Recreational vehicle		1,452		638		1,075		3,165		29,419		32,584
Other		10		6		45		61		3,831		3,892
Total		3,468		1,430		3,941		8,839		257,236		266,075
Commercial Loans
Secured		178		—		8,041		8,219		20,185		28,404
Unsecured		42		74		1,041		1,157		8,793		9,950
Total		220		74		9,082		9,376		28,978		38,354
Total	$	9,433	$	8,348	$	123,977	$	141,758	$	1,412,441	$	1,554,199

The following table presents an age analysis of past-due loans, segregated by class of loans as of December 31, 2010:

Past Due Loans
(Dollars in thousands)
					Greater
	30-59		60-89		than 90
	Days Past		Days Past		Days Past		Total Past		Current		Total
	Due		Due		Due		Due		Loans		Loans
Real Estate Loans
Permanent
One-to four-family residential	$	6,620	$	2,351	$	24,914	$	33,885	$	723,541	$	757,426
Multifamily residential		326		—		9,898		10,224		125,547		135,771
Nonresidential		1,888		13,146		30,382		45,416		285,974		331,390
Land		12		426		5,188		5,626		19,512		25,138
Total		8,846		15,923		70,382		95,151		1,154,574		1,249,725
Construction Loans
One-to four-family residential		3,688		7,579		42,855		54,122		54,461		108,583
Multifamily and nonresidential		—		—		2,414		2,414		12,663		15,077
Total		3,688		7,579		45,269		56,536		67,124		123,660
Consumer Loans
Home Equity		2,003		880		2,519		5,402		215,180		220,582
Auto		194		56		87		337		11,188		11,525
Marine		61		—		—		61		7,224		7,285
Recreational vehicle		1,693		618		188		2,499		33,172		35,671
Other		25		10		9		44		4,346		4,390
Total		3,976		1,564		2,803		8,343		271,110		279,453
Commercial Loans
Secured		163		—		1,822		1,985		26,891		28,876
Unsecured		43		—		3,554		3,597		13,831		17,428
Total		206		—		5,376		5,582		40,722		46,304
Total	$	16,716	$	25,066	$	123,830	$	165,612	$	1,533,530	$	1,699,142

Restructured loans were $58.6 million and $44.6 million at June 30, 2011 and December 31, 2010, respectively. The Company has allocated $332,000 of specific reserves to customers whose loan terms were modified in troubled debt restructurings as of June 30, 2011. The Company had allocated $1.2 million of specific reserves to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2010. Troubled debt restructurings are considered impaired and are included in the table above.

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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes homogenous loans past due 90 cumulative days, and all non-homogenous loans including commercial loans and commercial real estate loans.

Asset quality ratings are divided into two groups: Pass (unclassified) and Classified. Within the Pass group, loans that display potential weakness are risk rated as special mention. In addition, there are three Classified risk ratings: substandard, doubtful and loss. These specific credit risk categories are defined as follows:

Special Mention. Loans classified as special mention have potential weaknesses that deserve 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. Loans may be housed in this category for no longer than 12 months during which time information is obtained to determine if the credit should be downgraded to the substandard category.

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 continuance as assets is not warranted. Although there may be a chance of recovery on these assets, it is not practical or desirable to defer writing off the asset.

The Company monitors loans on a monthly basis to determine if they should be included in one of the categories listed above. All impaired non-homogeneous credits classified as Substandard, Doubtful or Loss are analyzed on an individual basis for a specific reserve requirement. This analysis is performed on each individual credit at least annually or more frequently if warranted. Loans that are not individually impaired and housed in the Pass risk category have a loss factor percentage applied to the balance of the outstanding loan.

As of June 30, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loans
June 30, 2011
(Dollars in thousands)

	Unclassified				Classified
			Special								Total
	Unclassified		Mention		Substandard		Doubtful		Loss		Classified		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	657,587	$	1,763	$	34,085	$	—	$	—	$	34,085	$	693,435
Multifamily residential		104,488		7,300		17,979		—		—		17,979		129,767
Nonresidential		184,198		17,012		106,492		—		—		106,492		307,702
Land		9,303		1,123		15,089		—		—		15,089		25,515
Total		955,576		27,198		173,645		—		—		173,645		1,156,419
Construction Loans
One-to four-family residential		36,366		3,615		40,617		7,229		—		47,846		87,827
Multifamily and nonresidential		5,142		—		382		—		—		382		5,524
Total		41,508		3,615		40,999		7,229		—		48,228		93,351
Consumer Loans
Home Equity		208,616		—		3,962		—		—		3,962		212,578
Auto		10,470		336		146		—		—		146		10,952
Marine		6,055		14		—		—		—		—		6,069
Recreational vehicle		30,689		—		1,895		—		—		1,895		32,584
Other		3,839		—		53		—		—		53		3,892
Total		259,669		350		6,056		—		—		6,056		266,075
Commercial Loans
Secured		17,619		280		10,505		—		—		10,505		28,404
Unsecured		6,361		176		2,502		—		911		3,413		9,950
Total		23,980		456		13,007		—		911		13,918		38,354
Total	$	1,280,733	$	31,619	$	233,707	$	7,229	$	911	$	241,847	$	1,554,199

Loans
December 31, 2010
(Dollars in thousands)

	Unclassified				Classified
			Special								Total
	Unclassified		Mention		Substandard		Doubtful		Loss		Classified		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	723,814	$	2,404	$	31,208	$	—	$	—	$	31,208	$	757,426
Multifamily residential		106,839		6,900		22,032		—		—		22,032		135,771
Nonresidential		200,816		55,197		75,377		—		—		75,377		331,390
Land		9,677		1,100		14,361		—		—		14,361		25,138
Total		1,041,146		65,601		142,978		—		—		142,978		1,249,725
Construction Loans
One-to four-family residential		47,308		6,122		55,021		132		—		55,153		108,583
Multifamily and nonresidential		1,091		13,604		382		—		—		382		15,077
Total		48,399		19,726		55,403		132		—		55,535		123,660
Consumer Loans
Home Equity		216,994		—		3,588		—		—		3,588		220,582
Auto		11,420		—		105		—		—		105		11,525
Marine		7,285		—		0		—		—		—		7,285
Recreational vehicle		35,430		—		241		—		—		241		35,671
Other		4,375		—		15		—		—		15		4,390
Total		275,504		—		3,949		—		—		3,949		279,453
Commercial Loans
Secured		14,608		1,327		12,134		807		—		12,941		28,876
Unsecured		9,327		2,132		4,304		1,665		—		5,969		17,428
Total		23,935		3,459		16,438		2,472		—		18,910		46,304
Total	$	1,388,984	$	88,786	$	218,768	$	2,604	$	—	$	221,372	$	1,699,142