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Loans and Leases Receivable, Net

12 Months Ended

Mar. 31, 2012

(4)

Loans Receivable, Net

Loans receivable, net, at March 31 consisted of the following:

		2012		2011

Residential Real Estate Loans	$	97,807,917	$	111,028,021
Consumer Loans		58,685,000		64,862,668
Commercial Business		9,552,575		13,529,957
Commercial Real Estate		276,317,897		306,955,623
Total Loans Held For Investment		442,363,389		496,376,269

Loans Held For Sale		2,671,771		5,166,234
Total Loans Receivable, Gross		445,035,160		501,542,503
Less:
Allowance For Loan Losses		14,615,198		12,501,800
Loans In Process		1,886,652		4,580,059
Deferred Loan Fees		22,704		(9,972)
		16,524,554		17,071,887
Total Loans Receivable, Net	$	428,510,606	$	484,470,616

Changes in the allowance for loan losses for the years ended March 31 are summarized as follows:

		2012		2011		2010

Balance At Beginning Of Year	$	12,501,800	$	12,307,394	$	10,181,599
Provision For Loan Losses		8,650,000		7,800,000		8,155,000
Charge Offs		(6,643,834)		(8,116,667)		(6,067,509)
Recoveries		107,232		511,073		38,304
Total Allowance For Loan Losses	$	14,615,198	$	12,501,800	$	12,307,394

The Company uses a risk based approach based on the following credit quality measures when analyzing the loan portfolio: pass, caution, 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 at the dates presented, excluding loans held for sale.

		March 31, 2012
		Credit Quality Measures
		Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	88,536,685	$	-	$	573,887	$	8,697,345	$	97,807,917
Consumer		57,113,676		159,805		27,604		1,383,915		58,685,000
Commercial Business		8,608,378		446,815		-		497,382		9,552,575
Commercial Real Estate		190,230,745		21,874,264		19,783,230		44,429,658		276,317,897
Total	$	344,489,484	$	22,480,884	$	20,384,721	$	55,008,300	$	442,363,389

		March 31, 2011
		Credit Quality Measures
		Pass		Caution		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 table presents an age analysis of past due balances by category at March 31, 2012.

		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	2,778,235	$	742,345	$	3,638,929	$	7,159,509	$	90,648,408	$	97,807,917
Consumer		659,028		352,421		620,358		1,631,807		57,053,193		58,685,000
Commercial Business		174,420		209,418		20,808		404,646		9,147,929		9,552,575
Commercial Real Estate		18,332,136		4,682,891		18,378,165		41,393,192		234,924,705		276,317,897
Total	$	21,943,819	$	5,987,075	$	22,658,260	$	50,589,154	$	391,774,235	$	442,363,389

The following table presents an age analysis of past due balances by category at March 31, 2011.

		30-59 Days Past Due		60-89 Days Past Due		90 Days 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 March 31, 2012 and 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 March 31, 2012 compared to March 31, 2011.

	At March 31, 2012		At March 31, 2011		$	%
	Amount	Percent (1)	Amount	Percent (1)	Increase (Decrease)	Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$ 3,638,929	0.8%	$ 1,809,881	0.4%	$ 1,829,048	101.1%
Commercial Business	20,808	-	171,901	-	(151,093)	(87.9)
Commercial Real Estate	18,378,165	4.2	9,337,385	1.9	9,040,780	96.8
Consumer	620,358	0.1	1,194,171	0.2	(573,813)	(48.1)
Total Non-accural Loans	$ 22,658,260	5.1%	12,513,338	2.5%	$ 10,144,922	81.1%

(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 Year Ended March 31, 2012
		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		789,365		1,570,350		114,169		6,176,116		8,650,000
Charge-Offs		(563,604)		(1,250,573)		(408,138)		(4,421,519)		(6,643,834)
Recoveries		-		56,279		14,675		36,278		107,232
Ending Balance	$	1,928,625	$	1,498,111	$	644,855	$	10,543,607	$	14,615,198

		For the Year Ended March 31, 2011
		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.

		Allowance For Loan Losses
March 31, 2012		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	155,000	$	1,773,625	$	1,928,625
Consumer		19,568		1,478,543		1,498,111
Commercial Business		148,610		496,245		644,855
Commercial Real Estate		1,313,670		9,229,937		10,543,607
Total	$	1,636,848	$	12,978,350	$	14,615,198

		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
March 31, 2012		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	3,544,061	$	94,263,856	$	97,807,917
Consumer		1,849,046		56,835,954		58,685,000
Commercial Business		172,362		9,380,213		9,552,575
Commercial Real Estate		35,231,717		241,086,180		276,317,897
Total	$	40,797,186	$	401,566,203	$	442,363,389

		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 average balance of impaired loans was $34.3 million for year ended March 31, 2012 compared to $37.2 million in the prior year. The following tables are a summary of information related to impaired loans as of March 31, 2012 and 2011.

		March 31, 2012
Impaired Loans		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

With No Related Allowance Recorded:
Residential Real Estate	$	2,201,560	$	2,456,960	$	-	$	2,066,066	$	65,818
Consumer Loans		1,829,478		1,879,478		-		2,398,298		86,180
Commercial Business		23,752		47,752		-		294,894		1,677
Commercial Real Estate		27,425,873		29,175,328		-		24,020,047		1,186,679

With An Allowance Recorded:
Residential Real Estate		1,342,501		1,954,501		155,000		586,109		6,137
Consumer Loans		19,568		60,668		19,568		28,181		-
Commercial Business		148,610		148,610		148,610		207,135		5,608
Commercial Real Estate		7,805,844		9,945,912		1,313,670		4,687,210		228,483

Total
Residential Real Estate		3,544,061		4,411,461		155,000		2,652,175		71,955
Consumer Loans		1,849,046		1,940,146		19,568		2,426,479		86,180
Commercial Business		172,362		196,362		148,610		502,029		7,285
Commercial Real Estate		35,231,717		39,121,240		1,313,670		28,707,257		1,415,162
Total	$	40,797,186	$	45,669,209	$	1,636,848	$	34,287,940	$	1,580,582

		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
Total	$	33,297,668	$	35,661,068	$	772,476	$	37,153,437	$	1,533,168

A TDR is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to a borrower that it would not otherwise consider. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment. TDRs included in impaired loans at March 31, 2012 and 2011 amounted to $18.0 million and $12.2 milion, respectively.

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 $215,000.

	For the Year Ended March 31, 2012
Troubled Debt Restructurings	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	-	$	-	$	-
Consumer Loans	1		15,358		15,358
Commercial Business	-		-		-
Commercial Real Estate	14		11,988,576		11,988,576
Total	15	$	12,003,934	$	12,003,934

During the year ended March 31, 2012, the Bank modified 15 loans that were considered to be TDRs. The modification for these loans consisted of lowering the interest rate.

During the year ended March 31, 2012, six loans that had been previously restructured were in default. However, there were no loans restructured during the previous twelve months that subsequently defaulted during the year ended March 31, 2012. The Bank considers any loan 30 days or more past due to be in default.

- Definition

Describes the major category and subcategories of loans held, any unusual risk concentration relating thereto, and the related loans receivable carrying amounts as of the balance sheet date. Such descriptions may include information pertaining to: (i) type of borrower, (ii) purpose of the loan, (iii) loan maturity, (iv) credit and other risk associated with the loan, and (v) other terms of importance (secured or unsecured, variable or fixed interest).

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