Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates shown:



	December 31, 2012		March 31, 2012
Residential Real Estate Loans	$	90,677,625	$	97,807,917
Consumer Loans	56,595,093		58,685,000
Commercial Business	8,063,901		9,552,575
Commercial Real Estate	250,924,094		276,317,897
Total Loans Held For Investment	406,260,713		442,363,389
Loans Held For Sale	4,770,760		2,671,771
Total Loans Receivable, Gross	411,031,473		445,035,160
Less:
Allowance For Loan Losses	11,318,371		14,615,198
Loans In Process	2,002,595		1,886,652
Deferred Loan Fees	4,687		22,704
	13,325,653		16,524,554
Total Loans Receivable, Net	$	397,705,820	$	428,510,606

Changes in the allowance for loan losses for the nine months ended December 31, 2012 and for the years ended March 31, 2012 and 2011 are summarized as follows:



	Nine Months Ended December 31,			Years Ended March 31,
	2012			2012			2011
Balance At Beginning Of Period	$	14,615,198		$	12,501,800		$	12,307,394
Provision For Loan Losses	1,975,000			8,650,000			7,800,000
Charge Offs	(7,422,393		)	(6,643,834		)	(8,116,667		)
Recoveries	2,150,566			107,232			511,073
Total Allowance For Loan Losses	$	11,318,371		$	14,615,198		$	12,501,800

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.

(4) Loans Receivable, Net, Continued

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.



	Credit Quality Measures
December 31, 2012	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	82,565,630	$	222,046	$	293,079	$	7,596,870	$	90,677,625
Consumer	54,899,665		152,368		184,731		1,358,329		56,595,093
Commercial Business	7,256,607		151,521		514,253		141,520		8,063,901
Commercial Real Estate	162,570,021		32,049,447		17,417,778		38,886,848		250,924,094
Total	$	307,291,923	$	32,575,382	$	18,409,841	$	47,983,567	$	406,260,713



	Credit Quality Measures
March 31, 2012	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

(4) Loans Receivable, Net, Continued

The following table presents an age analysis of past due balances by category at December 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	$	—	$	1,794,644	$	3,757,801	$	5,552,445	$	85,125,180	$	90,677,625
Consumer	1,862,611		211,756		646,136		2,720,503		53,874,590		56,595,093
Commercial Business	445,113		36,079		86,991		568,183		7,495,718		8,063,901
Commercial Real Estate	2,432,423		4,852,227		13,913,190		21,197,840		229,726,254		250,924,094
Total	$	4,740,147	$	6,894,706	$	18,404,118	$	30,038,971	$	376,221,742	$	406,260,713

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

At December 31, 2012 and March 31, 2012, 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 December 31, 2012 compared to March 31, 2012.



	At December 31, 2012				At March 31, 2012				$			%
	Amount		Percent ⁽¹⁾		Amount		Percent ⁽¹⁾		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,757,801	0.9	%	$	3,638,929	0.8	%	$	118,872		3.3	%
Commercial Business	86,991		—		20,808		—		66,183			318.1
Commercial Real Estate	13,913,190		3.4		18,378,165		4.2		(4,464,975		)	(24.3	)
Consumer	646,136		0.2		620,358		0.1		25,778			4.2
Total Non- accrual Loans	$	18,404,118	4.5	%	$	22,658,260	5.1	%	$	(4,254,142	)	(18.8	)%

^{(1) PERCENT OF GROSS LOANS RECEIVABLE, NET OF DEFERRED FEES AND LOANS IN PROCESS AND LOANS HELD FOR SALE.}

(4) Loans Receivable, Net, Continued

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



	For the Nine Months Ended December 31, 2012
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,928,625		$	1,498,111		$	644,855		$	10,543,607		$	14,615,198
Provision	183,236			(227,872		)	175,141			1,844,495			1,975,000
Charge-Offs	(647,161		)	(286,612		)	(209,898		)	(6,278,722		)	(7,422,393		)
Recoveries	56,859			17,644			8,821			2,067,242			2,150,566
Ending Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371



	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

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
December 31, 2012	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,521,559	$	1,521,559
Consumer	—		1,001,271		1,001,271
Commercial Business	—		618,919		618,919
Commercial Real Estate	440,000		7,736,622		8,176,622
Total	$	440,000	$	10,878,371	$	11,318,371



	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

(4) Loans Receivable, Net, Continued

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
December 31, 2012	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	4,500,902	$	86,176,723	$	90,677,625
Consumer	322,588		56,272,505		56,595,093
Commercial Business	7,853		8,056,048		8,063,901
Commercial Real Estate	35,115,195		215,808,899		250,924,094
Total	$	39,946,538	$	366,314,175	$	406,260,713



	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 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 $41.6 million for nine months ended December 31, 2012 compared to $34.3 million for the year ended March 31, 2012.

(4) Loans Receivable, Net, Continued

The following tables are a summary of information related to impaired loans as of December 31, 2012 and March 31, 2012.



	December 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	$	4,500,902	$	4,611,873	$	—	$	4,531,543	$	130,896
Consumer Loans	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	31,808,577		35,373,833		—		32,963,079		1,036,344
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer Loans	—		—		—		—		—
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,306,618		4,766,031		440,000		3,705,660		—
Total
Residential Real Estate	4,500,902		4,611,873		—		4,531,543		130,896
Consumer Loans	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	35,115,195		40,139,864		440,000		36,668,739		1,036,344
Total	$	39,946,538	$	45,146,178	$	440,000	$	41,555,434	$	1,195,659



	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

(4) Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (FASB ASC Topic 310-40). The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment. TDRs included in impaired loans at December 31, 2012 and March 31, 2012 amounted to $15.9 million and $18.0 million, respectively.

Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

The following table is a summary of loans restructured as TDRs during the periods indicated:



	For the Nine Months Ended December 31, 2012					For the Year Ended March 31, 2012
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	—	—		—		1	15,358		15,358
Commercial Business	—	—		—		—	—		—
Commercial Real Estate	1	257,452		257,452		14	11,988,576		11,988,576
Total	1	257,452		257,452		15	$	12,003,934	$	12,003,934

(4) Loans Receivable, Net, Continued

During the nine months ended December 31, 2012, the Bank modified one loan that was considered to be a TDR. The Bank lowered the interest rate on the loan and changed the payment to interest only for one year. 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. The following table is a summary of TDRs restructured in the last 12 months that subsequently defaulted during the period:



	For the Nine Months Ended December 31, 2012			For the Year Ended March 31, 2012
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	—	—		—	—
Commercial Real Estate	4	880,745		—	—
Total	4	$	880,745	—	$	—

At December 31, 2012, six loans that had been previously restructured were in default, four of which defaulted during the nine month period and had been restructured in the last 12 months. During the year ended March 31, 2012, six loans that had been previously restructured were in default. The Bank considers any loan 30 days or more past due to be in default.

Our policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance. That is, if a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is likely. If a borrower was materially delinquent on payments prior to the restructuring but shows capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward. Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status.

We will continue to closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms. If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms before that loan can be placed back on accrual status. Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status.