Loans Receivable, Net

3 Months Ended

Sep. 30, 2011

Loans Receivable, Net {1}

Loans Receivable, Net

10.    Loans Receivable, Net

Loans receivable, net, at September 30, 2011 and March 31, 2011 consisted of the following:

	September 30, 2011			March 31, 2011
Residential Real Estate	$	103,781,323		$	111,028,021
Consumer		62,729,028			64,862,668
Commercial Business		10,858,439			13,529,957
Commercial Real Estate		294,561,038			306,955,623
Total Loans Held For Investment		471,929,828			496,376,269
Loans Held For Sale		3,963,917			5,166,234
Total Loans Receivable, Gross		475,893,745			501,542,503
Less:
Allowance For Possible Loan Loss		13,779,432			12,501,800
Loans In Process		2,568,011			4,580,059
Deferred Loan Fees		(7,047	)		(9,972	)
		16,340,396			17,071,887
Total Loans Receivable, Net	$	459,553,349		$	484,470,616

The Company uses a risk based approach based on the following credit quality measures when analyzing the loan portfolio: pass, watch, special mention, and substandard. These indicators are used to rate the credit quality of loans for the purposes of determining the Company’s allowance for loan losses. Pass loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered the least risky in terms of determining the allowance for loan losses. Substandard loans are considered the most risky category. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 60 days or more past due are automatically classified in this category. The other two categories fall in between these two grades. The following tables list the loan grades used by the Company as credit quality indicators and the balance in each category, excluding loans held for sale for the periods indicated.

	Credit Quality Measures
September 30, 2011	Pass		Watch		Special Mention		Substandard		Total Loans
Residential Real Estate	$	94,103,289	$	-	$	1,581,343	$	8,096,691	$	103,781,323
Consumer		59,213,955		212,967		53,456		3,248,650		62,729,028
Commercial Business		9,701,749		374,892		13,743		768,055		10,858,439
Commercial Real Estate		211,390,251		16,234,580		25,661,938		41,274,269		294,561,038
Total	$	374,409,244	$	16,822,439	$	27,310,480	$	53,387,665	$	471,929,828

	Credit Quality Measures
March 31, 2011	Pass		Watch		Special Mention		Substandard		Total Loans
Residential Real Estate	$	104,826,411	$	433,710	$	379,036	$	5,388,864	$	111,028,021
Consumer		61,425,853		97,706		9,180		3,329,929		64,862,668
Commercial Business		12,059,761		6,285		-		1,463,911		13,529,957
Commercial Real Estate		230,031,130		10,786,846		30,462,062		35,675,585		306,955,623
Total	$	408,343,155	$	11,324,547	$	30,850,278	$	45,858,289	$	496,376,269

The following tables present an age analysis of past due balances by category at the periods indicated.

September 30, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Day or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	-	$	2,813,696	$	2,968,938	$	5,782,634	$	97,998,689	$	103,781,323
Consumer		1,145,961		1,498,762		1,302,772		3,947,495		58,781,533		62,729,028
Commercial    Business		135,298		121,771		6,911		263,980		10,594,459		10,858,439
Commercial    Real Estate		7,778,026		10,293,920		10,908,778		28,980,724		265,580,314		294,561,038
Total	$	9,059,285	$	14,728,149	$	15,187,399	$	38,974,333	$	432,954,995	$	471,929,828

March 31, 2011	30-59 Days Past Due		60-89 Days Past Due		90 Day or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	1,799,800	$	-	$	1,809,881	$	3,609,681	$	107,418,340	$	111,028,021
Consumer		2,673,973		196,958		1,194,171		4,065,102		60,797,566		64,862,668
Commercial    Business		93,579		133,399		171,901		398,879		13,131,078		13,529,957
Commercial    Real Estate		19,441,992		2,708,373		9,337,385		31,487,750		275,467,873		306,955,623
Total	$	24,009,344	$	3,038,730	$	12,513,338	$	39,561,412	$	456,814,857	$	496,376,269

At September 30, 2011, the Company did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them. The following table shows non-accrual loans by category at September 30, 2011 compared to March 31, 2011.

	At September 30, 2011					At March 31, 2011					$			%
	Amount		Percent (1)			Amount		Percent (1)			Increase (Decrease)			Increase (Decrease)
Non-accrual loans:
Residential real estate	$	2,968,938		0.6	%	$	1,809,881		0.4	%	$	1,159,057			64.0	%
Commercial business		6,911		-			171,901		-			(164,990	)		(96.0	)
Commercial real estate		10,908,778		2.3			9,337,385		1.9			1,571,393			16.8
Consumer		1,302,772		0.3			1,194,171		0.2			108,601			9.1
Total non-accural loans	$	15,187,399		3.2	%	$	12,513,338		2.5	%	$	2,674,061			21.4	%

(1) Percent of gross loans receivable, net of deferred fees and loans in process and loans held for sale

The following tables show the activity in the allowance for loan losses by category for the periods indicated.

	For the Three Months Ended September 30, 2011
Allowance For Loan Losses	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,763,457		$	1,102,767		$	651,426		$	9,984,923		$	13,502,573
Provision		(40,280	)		9,979			526,919			1,803,382			2,300,000
Charge-Offs		(16,381	)		(83,678	)		(335,327	)		(1,628,968	)		(2,064,354	)
Recoveries		-			4,771			1,744			34,699			41,214
Ending Balance	$	1,706,796		$	1,033,839		$	844,762		$	10,194,036		$	13,779,433

	For the Six Months Ended September 30, 2011
Allowance For Loan Losses	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,702,864		$	1,122,055		$	924,149		$	8,752,732		$	12,501,800
Provision		191,352			34,787			315,014			4,058,847			4,600,000
Charge-Offs		(187,420	)		(138,416	)		(408,138	)		(2,652,242	)		(3,386,216	)
Recoveries		-			15,413			13,737			34,699			63,849
Ending Balance	$	1,706,796		$	1,033,839		$	844,762		$	10,194,036		$	13,779,433

	For the Year Ended March 31, 2011
Allowance For Loan Losses	Residential Real Estate			Consumer			Commercial  Business			Commercial Real Estate			Total
Beginning Balance	$	1,944,257		$	988,634		$	678,728		$	8,695,775		$	12,307,394
Provision		644,032			649,542			539,264			5,967,162			7,800,000
Charge-Offs		(1,009,937	)		(584,600	)		(320,960	)		(6,201,170	)		(8,116,667	)
Recoveries		124,512			68,479			27,117			290,965			511,073
Ending Balance	$	1,702,864		$	1,122,055		$	924,149		$	8,752,732		$	12,501,800

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses for the periods indicated.

	Allowance For Loan Losses
September 30, 2011	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	67,500	$	1,639,296	$	1,706,796
Consumer		-		1,033,839		1,033,839
Commercial Business		148,610		696,152		844,762
Commercial Real Estate		1,022,894		9,171,142		10,194,036
Total	$	1,239,004	$	12,540,429	$	13,779,433

	Allowance For Loan Losses
March 31, 2011	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	-	$	1,702,864	$	1,702,864
Consumer		41,100		1,080,955		1,122,055
Commercial Business		240,648		683,501		924,149
Commercial Real Estate		490,728		8,262,004		8,752,732
Total	$	772,476	$	11,729,324	$	12,501,800

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable for the periods indicated.

	Loans Receivable
September 30, 2011	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,449,273	$	101,332,050	$	103,781,323
Consumer		3,338,815		59,390,213		62,729,028
Commercial Business		355,044		4,137,200		4,492,244
Commercial Real Estate		26,669,232		274,258,001		300,927,233
Total	$	32,812,364	$	439,117,464	$	471,929,828

	Loans Receivable
March 31, 2011	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,278,966	$	108,749,055	$	111,028,021
Consumer		1,436,829		63,425,839		64,862,668
Commercial Business		770,011		12,759,946		13,529,957
Commercial Real Estate		28,811,862		278,143,761		306,955,623
Total	$	33,297,668	$	463,078,601	$	496,376,269

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sale, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis.

The following table is a summary of information related to impaired loans as of September 30, 2011.

Impaired Loans		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance    recorded:
Residential Real Estate	$	2,122,103	$	2,684,103	$	-	$	2,154,605	$	24,640
Consumer Loans		3,338,815		3,564,915		-		2,349,851		89,883
Commercial Business		206,434		230,434		-		417,380		5,445
Commercial Real Estate		21,509,872		23,986,972		-		23,528,997		368,993
With an allowance recorded:
Residential Real Estate		327,170		327,170		67,500		109,057		-
Consumer Loans		-		-		-		40,445		-
Commercial Business		148,610		148,610		148,610		246,152		3,256
Commercial Real Estate		5,159,360		6,054,210		1,022,894		4,028,557		51,765
Total
Residential Real Estate		2,449,273		3,011,273		67,500		2,263,662		24,640
Consumer Loans		3,338,815		3,564,915		-		2,390,296		89,883
Commercial Business		355,044		379,044		148,610		663,532		8,701
Commercial Real Estate		26,669,232		30,041,182		1,022,894		27,557,554		420,758

The following table is a summary of information related to impaired loans as of March 31, 2011.

Impaired Loans		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance    recorded:
Residential Real Estate	$	2,278,966	$	2,683,966	$	-	$	1,458,882	$	51,267
Consumer Loans		1,376,161		1,583,160		-		729,889		56,764
Commercial Business		499,481		499,481		-		327,785		14,790
Commercial Real Estate		26,387,167		27,948,568		-		30,244,873		1,361,177
With an allowance recorded:
Residential Real Estate		-		-		-		41,879		-
Consumer Loans		60,668		60,668		41,100		124,089		-
Commercial Business		270,530		270,530		240,648		207,073		4,833
Commercial Real Estate		2,424,695		2,614,695		490,728		4,018,967		44,337
Total
Residential Real Estate		2,278,966		2,683,966		-		1,500,761		51,267
Consumer Loans		1,436,829		1,643,828		41,100		853,978		56,764
Commercial Business		770,011		770,011		240,648		534,858		19,623
Commercial Real Estate		28,811,862		30,563,263		490,728		34,263,840		1,405,514

TDRs included in impaired loans at September 30, 2011 and March 31, 2011 were $11.8 million and $12.2 million, respectively. Interest earned during the six months ended September 30, 2011 and fiscal 2011 on these loans amounted to $112,441 and $649,348, respectively. At September 30, 2011 and March 31, 2011, the Bank did not have any loans 90 days delinquent and still accruing interest.

As a result of adopting the amendments in ASU 2011-02, management reassessed all restructurings that occurred on or after the beginning of the fiscal year of adoption (April 1, 2011) to determine whether they are considered TDRs under the amended guidance.  Management identified as TDRs certain loans for which the allowance for loan losses had previously been measured under a general allowance methodology. Upon identifying those loans as TDRs, management identified them as impaired under the guidance in ASC 310-10-35. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance in ASC 310-10-35 for those loans newly identified as impaired. At the end of the first interim period of adoption (September 30, 2011), the recorded investment in loans for which the allowance was previously measured under a general allowance methodology and are now impaired under ASC 310-10-35 was $11.8 million, and the allowance for loan losses associated with those loans, on the basis of a current evaluation of loss was $661,000.

	For the Six Months Ended  September 30, 2011					For the Three Months Ended September 30, 2011
Troubled Debt    Restructurings	Number of Contracts		Pre- modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment	Number of Contracts		Pre-modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	-	$	-	$	-	-	$	-	$	-
Consumer Loans	-		-		-	-		-		-
Commercial Business	-		-		-	-		-		-
Commercial Real Estate	3		1,787,936		1,787,936	3		1,787,936		1,787,936
Total	3	$	1,787,936	$	1,787,936	3	$	1,787,936	$	1,787,936

During the six months ended September 30, 2011, we modified three loans that were considered to be TDRs.   The interest rate was lowered for all three of these loans.

	For the Six Months Ended September 30, 2011			For the Three Months Ended September 30, 2011
Troubled Debt Restructurings That Subsequently    Defaulted During the Period	Number of Contracts		Recorded Investment	Number of Contracts		Recorded Investment
Residential Real Estate	-	$	-	-	$	-
Consumer Loans	-		-	-		-
Commercial Business	1		48,785	-		-
Commercial Real Estate	8		4,627,880	2		2,612,713
Total	9	$	4,676,665	2	$	2,612,713

During the six months ended September 30, 2011, nine loans that had been previously restructured were in default, two of which went into default in the quarter ended September 30, 2011.