Loans

6 Months Ended

Jun. 30, 2012

Loans [Abstract]

LOANS

6. LOANS

Portfolio loans consist of the following:

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Real Estate:
One-to four-family residential	$	635,756		$	667,375
Multi-family residential		98,545			120,991
Nonresidential		229,303			276,198
Land		19,113			23,222
Construction:
One-to four-family residential and land development		42,077			59,339
Multi-family and nonresidential		4,528			4,528
Total real estate		1,029,322			1,151,653
Consumer
Home equity		183,936			191,827
Auto		7,908			8,933
Marine		5,486			5,900
Recreational vehicles		25,019			28,530
Other		2,718			3,207
Total consumer		225,067			238,397
Commercial
Secured		21,784			25,120
Unsecured		3,015			5,026
Total commercial		24,799			30,146
Total loans		1,279,188			1,420,196
Less:
Allowance for loan losses		30,933			42,271
Deferred loan costs, net		(1,340	)		(1,351	)
Total		29,593			40,920
Loans, net	$	1,249,595		$	1,379,276

Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments extend over various periods of time with the majority of such commitments disbursed within a sixty-day period. Commitments generally have fixed expiration dates or other termination clauses, may require payment of a fee and may expire unused. Commitments to extend credit at fixed rates expose Home Savings to some degree of interest rate risk. Home Savings evaluates each customer’s creditworthiness on a case-by-case basis. The type or amount of collateral obtained varies and is based on management’s credit evaluation of the potential borrower. Home Savings normally has a number of outstanding commitments to extend credit.

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 June 30, 2012 and December 31, 2011 and activity for the three and six months ended June 30, 2012 and 2011.

Allowance For Loan Losses
(Dollars in thousands)
	Permanent Real Estate Loans			Construction Loans			Consumer Loans			Commercial Loans			Unallocated		Total
For the three months ended June 30, 2012
Beginning balance (03/31/12)	$	24,601		$	2,918		$	4,962		$	2,042		$	—	$	34,523
Provision		6,171			92			3			(2	)		—		6,264
Chargeoffs		(8,705	)		(526	)		(499	)		(550	)		—		(10,280	)
Recoveries		54			6			339			27			—		426
Net chargeoffs		(8,651	)		(520	)		(160	)		(523	)		—		(9,854	)
Ending balance (06/30/12)	$	22,121		$	2,490		$	4,805		$	1,517		$	—	$	30,933
For the six months ended June 30, 2012
Beginning balance (12/31/11)	$	31,323		$	4,493		$	4,576		$	1,879		$	—	$	42,271
Provision		4,634			615			1,134			561			—		6,944
Chargeoffs		(14,061	)		(2,670	)		(1,359	)		(974	)		—		(19,064	)
Recoveries		225			52			454			51			—		782
Net chargeoffs		(13,836	)		(2,618	)		(905	)		(923	)		—		(18,282	)
Ending balance (06/30/12)	$	22,121		$	2,490		$	4,805		$	1,517		$	—	$	30,933
Period-end amount allocated to:
Loans individually evaluated for impairment	$	5,328		$	1,498		$	18		$	185		$	—	$	7,029
Loans collectively evaluated for impairment		16,793			992			4,787			1,332			—		23,904
Ending balance	$	22,121		$	2,490		$	4,805		$	1,517		$	—	$	30,933
Period-end balances:
Loans individually evaluated for impairment	$	100,193		$	20,158		$	6,067		$	2,289		$	—	$	128,707
Loans collectively evaluated for impairment		882,525			26,446			219,000			22,510			—		1,150,481
Ending balance	$	982,718		$	46,604		$	225,067		$	24,799		$	—	$	1,279,188
For the three months ended June 30, 2011
Beginning balance (03/31/11)	$	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 (06/30/11)	$	31,371		$	6,529		$	4,544		$	3,779		$	—	$	46,223
For the six months ended June 30, 2011
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 (06/30/11)	$	31,371		$	6,529		$	4,544		$	3,779		$	—	$	46,223
December 31, 2011
Period-end amount allocated to:
Loans individually evaluated for impairment	$	8,275		$	3,102		$	236		$	210		$	—	$	11,823
Loans collectively evaluated for impairment		23,048			1,391			4,340			1,669			—		30,448
Ending balance	$	31,323		$	4,493		$	4,576		$	1,879		$	—	$	42,271
Period-end balances:
Loans individually evaluated for impairment	$	115,290		$	30,587		$	3,734		$	3,956		$	—	$	153,567
Loans collectively evaluated for impairment		972,496			33,280			234,663			26,190			—		1,266,629
Ending balance	$	1,087,786		$	63,867		$	238,397		$	30,146		$	—	$	1,420,196

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 chargeoffs or partial chargeoffs applied to specific loans. The unpaid principal balance and the recorded investment both exclude accrued interest receivable and deferred loan costs, both of which are immaterial.

The following table presents loans individually evaluated for impairment by class of loans as of and for the six months ended June 30, 2012:

Impaired Loans
(Dollars in thousands)
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	33,074	$	29,040	$	—	$	27,751	$	311	$	426
Multifamily residential		7,190		4,861		—		4,317		19		97
Nonresidential		26,409		24,740		—		27,257		69		201
Land		7,091		5,796		—		6,308		16		52
Total		73,764		64,437		—		65,633		415		776
Construction loans
One-to four-family residential		14,116		7,760		—		10,267		53		137
Multifamily and nonresidential		707		—		—		—		—		—
Total		14,823		7,760		—		10,267		53		137
Consumer loans
Home Equity		6,122		4,953		—		3,388		90		109
Auto		78		58		—		60		1		3
Marine		368		354		—		178		—		9
Recreational vehicle		940		659		—		367		—		21
Other		7		7		—		7		—		—
Total		7,515		6,031		—		4,000		91		142
Commercial loans
Secured		2,317		1,497		—		1,747		12		69
Unsecured		16,704		207		—		452		1		13
Total		19,021		1,704		—		2,199		13		82
Total	$	115,123	$	79,932	$	—	$	82,099	$	572	$	1,137
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	3,969	$	3,604	$	648	$	2,608	$	49	$	61
Multifamily residential		5,572		5,193		731		3,201		41		76
Nonresidential		27,410		23,820		3,469		34,570		132		650
Land		5,332		3,139		480		4,129		—		—
Total		42,283		35,756		5,328		44,508		222		787
Construction loans
One-to four-family residential		29,580		12,398		1,498		17,140		10		29
Multifamily and nonresidential		—		—		—		—		—		—
Total		29,580		12,398		1,498		17,140		10		29
Consumer loans
Home Equity		—		—		—		—		—		—
Auto		—		—		—		—		—		—
Marine		—		—		—		121		—		—
Recreational vehicle		88		36		18		27		—		—
Other		—		—		—		—		—		—
Total		88		36		18		148		—		—
Commercial loans
Secured		943		585		185		2,161		—		3
Unsecured		—		—		—		119		—		—
Total		943		585		185		2,280		—		3
Total	$	72,894	$	48,775	$	7,029	$	64,076	$	232	$	819
Total	$	188,017	$	128,707	$	7,029	$	146,175	$	804	$	1,956

The following table presents loans individually evaluated for impairment by class of loans as of and for the quarter ended June 30, 2012:

Impaired Loans
(Dollars in thousands)
	Average Recorded Investment		Interest Income Recognized			Cash Basis Income Recognized
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	28,780	$	221		$	266
Multifamily residential		4,367		50			85
Nonresidential		26,959		(75	)		(45	)
Land		6,028		8			36
Total		66,134		204			342
Construction loans
One-to four-family residential		9,036		10			55
Multifamily and nonresidential		—		—			—
Total		9,036		10			55
Consumer loans
Home Equity		4,683		51			58
Auto		56		1			2
Marine		356		—			4
Recreational vehicle		704		—			11
Other		7		—			—
Total		5,806		52			75
Commercial loans
Secured		1,665		5			27
Unsecured		482		(5	)		—
Total		2,147		—			27
Total	$	83,123	$	266		$	499
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	2,117	$	—		$	5
Multifamily residential		3,784		—			2
Nonresidential		28,931		(22	)		319
Land		2,957		—			—
Total		37,789		(22	)		346
Construction loans
One-to four-family residential		13,325		5			12
Multifamily and nonresidential		—		—			—
Total		13,325		5			12
Consumer loans
Home Equity		—		—			—
Auto		—		—			—
Marine		—		—			—
Recreational vehicle		36		—			—
Other		—		—			—
Total		36		—			—
Commercial loans
Secured		551		(1	)		1
Unsecured		—		—			—
Total		551		(1	)		1
Total	$	51,701	$	(18	)	$	359
Total	$	134,824	$	248		$	858

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

Impaired Loans
(Dollars in thousands)
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	32,372	$	28,566	$	—
Multifamily residential		5,112		4,205		—
Nonresidential		29,120		28,327		—
Land		9,213		7,290		—
Total		75,817		68,388		—
Construction loans
One-to four-family residential		19,081		12,532		—
Multifamily and nonresidential		707		—		—
Total		19,788		12,532		—
Consumer loans
Home Equity		4,908		3,139		—
Auto		80		59		—
Marine		—		—		—
Recreational vehicle		26		11		—
Other		7		7		—
Total		5,021		3,216		—
Commercial loans
Secured		3,875		3,084		—
Unsecured		22,716		371		—
Total		26,591		3,455		—
Total	$	127,217	$	87,591	$	—
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	2,487	$	1,721	$	152
Multifamily residential		4,077		2,387		187
Nonresidential		42,201		38,176		6,127
Land		5,074		4,618		1,809
Total		53,839		46,902		8,275
Construction loans
One-to four-family residential		35,759		18,055		3,102
Multifamily and nonresidential		—		—		—
Total		35,759		18,055		3,102
Consumer loans
Home Equity		—		—		—
Auto		—		—		—
Marine		482		482		218
Recreational vehicle		88		36		18
Other		—		—		—
Total		570		518		236
Commercial loans
Secured		776		427		136
Unsecured		105		74		74
Total		881		501		210
Total		91,049		65,976		11,823
Total	$	218,266	$	153,567	$	11,823

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 Recorded Investment		Interest Income Recognized		Cash Basis Income 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

(Continued)

Impaired Loans

(Dollars in thousands)

	Average Recorded Investment		Interest Income Recognized			Cash Basis Income 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 the average recorded investment and interest income associated with impaired loans for the six months ended June 30, 2011:

Impaired Loans
(Dollars in thousands)
	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
With no specific allowance recorded
Permanent real estate
One-to four-family residential	$	25,043	$	212	$	327
Multifamily residential		3,144		—		107
Nonresidential		21,536		225		459
Land		6,363		34		80
Total		56,086		471		973
Construction loans
One-to four-family residential		20,430		103		180
Multifamily and nonresidential		255		—		—
Total		20,685		103		180
Consumer loans
Home Equity		1,243		3		15
Auto		66		—		3
Marine		—		—		—
Recreational vehicle		47		—		1
Other		7		—		—
Total		1,363		3		19
Commercial loans
Secured		1.502		13		14
Unsecured		385		5		27
Total		1,887		18		41
Total	$	80,021	$	595	$	1,213

(Continued)

Impaired Loans

(Dollars in thousands)

	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
With a specific allowance recorded
Permanent real estate
One-to four-family residential	$	2,253	$	39	$	58
Multifamily residential		5,951		—		27
Nonresidential		39,438		469		657
Land		618		12		19
Total		48,260		520		761
Construction loans
One-to four-family residential		26,011		60		251
Multifamily and nonresidential		—		—		—
Total		26,011		60		251
Consumer loans
Home Equity		—		—		—
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		—		—		—
Other		—		—		—
Total		—		—		—
Commercial loans
Secured		5,824		9		163
Unsecured		2,752		—		24
Total		8,576		9		187
Total	$	82,847	$	589	$	1,199
Total	$	162,868	$	1,184	$	2,412

The following tables present the recorded investment in nonaccrual and loans past due over 90 days and still on accrual by class of loans as of June 30, 2012:

Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing
As of June 30, 2012
(Dollars in thousands)
	Nonaccrual		Loans past due over 90 days and still accruing
Real Estate Loans
Permanent
One-to four-family residential	$	26,705	$	—
Multifamily residential		9,582		—
Nonresidential		43,103		—
Land		8,316		—
Total		87,706		—
Construction Loans
One-to four-family residential		18,335		—
Multifamily and nonresidential		—		—
Total		18,335		—
Consumer Loans
Home Equity		4,897		47
Auto		101		—
Marine		342		—
Recreational vehicle		1,293		—
Other		22		—
Total		6,655		47
Commercial Loans
Secured		1,350		—
Unsecured		436		—
Total		1,786		—
Total	$	114,482	$	47

Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing
As of December 31, 2011
(Dollars in thousands)
	Nonaccrual		Loans past due over 90 days and still accruing
Real Estate Loans
Permanent
One-to four-family residential	$	26,637	$	—
Multifamily residential		5,860		—
Nonresidential		42,902		—
Land		11,142		—
Total		86,541		—
Construction Loans
One-to four-family residential		27,104		—
Multifamily and nonresidential		—		—
Total		27,104		—
Consumer Loans
Home Equity		4,198		39
Auto		170		—
Marine		479		—
Recreational vehicle		1,725		—
Other		9		—
Total		6,581		39
Commercial Loans
Secured		2,483		—
Unsecured		347		—
Total		2,830		—
Total	$	123,056	$	39

The following tables present an age analysis of past-due loans, segregated by class of loans as of June 30, 2012:

Past Due Loans
(Dollars in thousands)
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	2,187	$	947	$	21,131	$	24,265	$	611,491	$	635,756
Multifamily residential		228		95		9,018		9,341		89,204		98,545
Nonresidential		417		4,685		36,155		41,257		188,046		229,303
Land		63		11		8,316		8,390		10,723		19,113
Total		2,895		5,738		74,620		83,253		899,464		982,717
Construction Loans
One-to four-family residential		—		76		17,609		17,685		24,392		42,077
Multifamily and nonresidential		—		—		—		—		4,528		4,528
Total		—		76		17,609		17,685		28,920		46,605
Consumer Loans
Home Equity		1,048		453		4,006		5,507		178,429		183,936
Auto		37		16		54		107		7,801		7,908
Marine		—		173		169		342		5,144		5,486
Recreational vehicle		978		700		582		2,260		22,759		25,019
Other		155		1		20		176		2,542		2,718
Total		2,218		1,343		4,831		8,392		216,675		225,067
Commercial Loans
Secured		111		—		208		319		21,465		21,784
Unsecured		—		—		136		136		2,879		3,015
Total		111		—		344		455		24,344		24,799
Total	$	5,224	$	7,157	$	97,404	$	109,785	$	1,169,403	$	1,279,188

During the second quarter of 2012, one loan relationship consisting of seven loans totaling $8.4 million became past due as the borrower went into bankruptcy proceedings.

The following table presents an age analysis of past-due loans, segregated by class of loans as of December 31, 2011:

Past Due Loans
(Dollars in thousands)
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current Loans		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	2,878	$	1,928	$	20,124	$	24,930	$	642,445	$	667,375
Multifamily residential		1,405		—		4,564		5,969		115,022		120,991
Nonresidential		6,820		971		41,151		48,942		227,256		276,198
Land		167		530		9,705		10,402		12,820		23,222
Total		11,270		3,429		75,544		90,243		997,543		1,087,786
Construction Loans
One-to four-family residential		979		1,718		24,608		27,305		32,034		59,339
Multifamily and nonresidential		—		—		—		—		4,528		4,528
Total		979		1,718		24,608		27,305		36,562		63,867
Consumer Loans
Home Equity		1,485		601		2,749		4,835		186,992		191,827
Auto		73		13		87		173		8,760		8,933
Marine		184		—		479		663		5,237		5,900
Recreational vehicle		867		754		1,044		2,665		25,865		28,530
Other		57		1		7		65		3,142		3,207
Total		2,666		1,369		4,366		8,401		229,996		238,397
Commercial Loans
Secured		554		—		96		650		24,470		25,120
Unsecured		69		—		237		306		4,720		5,026
Total		623		—		333		956		29,190		30,146
Total	$	15,538	$	6,516	$	104,851	$	126,905	$	1,293,291	$	1,420,196

During the period ended June 30, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of a loan were for periods ranging from six months to 28 years. Modifications involving an extension of the maturity date were for periods ranging from six months to three years.

Restructured loans were $32.8 million and $50.9 million at June 30, 2012 and December 31, 2011, respectively. The Company has allocated $1.0 million of specific reserves to customers whose loan terms were modified in troubled debt restructurings as of June 30, 2012. The Company had allocated $2.0 million of specific reserves to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2011. Troubled debt restructurings are considered impaired and are included in the table above.

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

	Number of loans		Pre-Modification Outstanding Recorded Investment		Post- Modification Recorded Investment
Real Estate Loans
Permanent
One-to four-family		7	$	350	$	345
Multifamily residential		—		—		—
Nonresidential		—		—		—
Land		—		—		—
Total		7		350		345
Construction Loans
One-to four-family residential		—		—		—
Multifamily and nonresidential		—		—		—
Total		—		—		—
Consumer Loans
Home Equity		20		950		918
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		—		—		—
Other		—		—		—
Total		20		950		918
Commercial Loans
Secured		—		—		—
Unsecured		—		—		—
Total		—		—		—
Total Restructured Loans		27	$	1,300	$	1,263

The troubled debt restructurings described above had no effect on the allowance for loan losses and resulted in no chargeoffs during the three months ending June 30, 2012.

The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2012:

	Number of loans		Pre-Modification Outstanding Recorded Investment		Post- Modification Recorded Investment
Real Estate Loans
Permanent
One-to four-family		21	$	2,306	$	2,264
Multifamily residential		6		1,439		1,438
Nonresidential		1		424		424
Land		—		—		—
Total		28		4,169		4,126
Construction Loans
One-to four-family residential		3		853		830
Multifamily and nonresidential		—		—		—
Total		3		853		830
Consumer Loans
Home Equity		42		1,783		1,752
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		—		—		—
Other		—		—		—
Total		42		1,783		1,752
Commercial Loans
Secured		—		—		—
Unsecured		1		446		446
Total		1		446		446
Total Restructured Loans		74	$	7,251	$	7,154

The troubled debt restructurings described above increased the allowance for loan losses by $78,000 and resulted in no chargeoffs during the six months ending June 30, 2012.

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 period ended June 30, 2012:

	Number of loans		Recorded Investment
Real Estate Loans
Permanent
One-to four-family		14	$	1,570
Multifamily residential		—		—
Nonresidential		3		1,219
Land		2		1,495
Total		19		4,284
Construction Loans
One-to four-family residential		4		371
Multifamily and nonresidential		—		—
Total		4		371
Consumer Loans
Home Equity		5		197
Auto		—		—
Marine		—		—
Recreational vehicle		—		—
Other		—		—
Total		5		197
Commercial Loans
Secured		—		—
Unsecured		—		—
Total		—		—
Total Restructured Loans		28	$	4,852

A troubled debt restructuring is considered to be in payment default once it is 30 days contractually past due under the modified terms.

The troubled debt restructurings that subsequently defaulted described above resulted in chargeoffs of $29,000 and $505,000 during the three and six months ended June 30, 2012, respectively, but had no effect on the provision for loan losses.

The terms of certain other loans were modified during the period ended June 30, 2012 but the modifications did not meet the definition of a troubled debt restructuring. These loans have a total recorded investment as of June 30, 2012 of $7.9 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 significant.

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 in accordance with 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. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes homogeneous loans past due 90 cumulative days, and all non-homogeneous loans including commercial loans and commercial real estate loans. Smaller balance homogeneous loans are primarily monitored by payment status.

Asset quality ratings are divided into two groups: Pass (unclassified) and Classified. Within the unclassified 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 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. 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.

As of June 30, 2012 and December 31, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loans

June 30, 2012

(Dollars in thousands)

	Unclassified				Classified
	Unclassified		Special Mention		Substandard		Doubtful		Loss		Total Classified		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	598,449	$	1,865	$	35,442	$	—	$	—	$	35,442	$	635,756
Multifamily Residential		71,022		10,367		17,156		—		—		17,156		98,545
Nonresidential		126,419		21,797		81,087		—		—		81,087		229,303
Land		9,792		882		8,439		—		—		8,439		19,113
Total		805,682		34,911		142,124		—		—		142,124		982,717
Construction Loans
One-to four-family Residential		21,891		1,654		18,507		25		—		18,532		42,077
Multifamily and nonresidential		4,528		—		—		—		—		—		4,528
Total		26,419		1,654		18,507		25		—		18,532		46,605
Consumer Loans
Home Equity		178,667		—		5,269		—		—		5,269		183,936
Auto		7,563		228		117		—		—		117		7,908
Marine		5,122		10		354		—		—		354		5,486
Recreational vehicle		23,604		—		1,415		—		—		1,415		25,019
Other		2,688		—		30		—		—		30		2,718
Total		217,644		238		7,185		—		—		7,185		225,067
Commercial Loans
Secured		18,283		413		3,088		—		—		3,088		21,784
Unsecured		1,855		250		910		—		—		910		3,015
Total		20,138		663		3,998		—		—		3,998		24,799
Total	$	1,069,883	$	37,466	$	171,814	$	25	$	—	$	171,839	$	1,279,188

Loans

December 31, 2011

(Dollars in thousands)

	Unclassified				Classified
	Unclassified		Special Mention		Substandard		Doubtful		Loss		Total Classified		Total Loans
Real Estate Loans
Permanent
One-to four-family residential	$	626,072	$	4,094	$	37,209	$	—	$	—	$	37,209	$	667,375
Multifamily residential		90,820		8,392		21,779		—		—		21,779		120,991
Nonresidential		149,314		18,388		108,496		—		—		108,496		276,198
Land		10,475		1,200		11,547		—		—		11,547		23,222
Total		876,681		32,074		179,031		—		—		179,031		1,087,786
Construction Loans
One-to four-family residential		28,396		2,394		28,520		29		—		28,549		59,339
Multifamily and nonresidential		4,528		—		—		—		—		—		4,528
Total		32,924		2,394		28,520		29		—		28,549		63,867
Consumer Loans
Home Equity		187,153		269		4,405		—		—		4,405		191,827
Auto		8,738		12		183		—		—		183		8,933
Marine		5,418		—		482		—		—		482		5,900
Recreational vehicle		26,728		—		1,802		—		—		1,802		28,530
Other		3,192		—		15		—		—		15		3,207
Total		231,229		281		6,887		—		—		6,887		238,397
Commercial Loans
Secured		20,895		263		3,962		—		—		3,962		25,120
Unsecured		2,861		166		1,999		—		—		1,999		5,026
Total		23,756		429		5,961		—		—		5,961		30,146
Total	$	1,164,590	$	35,178	$	220,399	$	29	$	—	$	220,428	$	1,420,196