10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:     June 30, 2013

OR

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                    to

Commission file number: 0-25976

UNITED BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2802415
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

30 S. 15th Street
Philadelphia, PA	19102
(Address of principal	(Zip code)
executive offices)

Registrant's telephone number, including area code:  (215)351-4600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]  No [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):
Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [ X]
(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ]  No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of August 28, 2013, the aggregate number of the shares of the Registrant’s Common Stock issued was 1,068,588 (including 191,667 Class B non-voting).

The Series Preferred Stock consists of 500,000 authorized shares of stock of which 250,000 have been designated as Series A Preferred stock of which 136,842 shares are issued as of August 28, 2013.

EXPLANATORY NOTE

The sole purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, originally filed with the Securities and Exchange Commission on August 14, 2013, is to furnish Exhibit 101 to the Form 10-Q which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part 1, Item 1 of the Form 10-Q. As permitted by Rule 405(a)(2)(ii) of Regulation S-T, Exhibit 101 was required to be furnished by amendment within 30 days of the original filing date of the Form 10-Q.

No changes have been made to the Form 10-Q other than the furnishing of Exhibit 101 described above. This amendment does not reflect subsequent events occurring after the original filing date of the Form 10-Q or modify or update in any way disclosures made in the Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the Interactive Data File on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UNITED BANCSHARES, INC
	(Registrant)
August 28, 2013	/s/ Evelyn F. Smalls
Date	Evelyn F. Smalls
	President and Chief Executive Officer
August 28, 2013	/s/ Brenda Hudson-Nelson
Date	Executive Vice President,
	Chief Financial Officer

Exhibit No.	Description
3.1	Certificate of Incorporation (1)
3.2	Bylaws (1)
31.1	Rule 13a-14(a)/15d-14(a) Certifications (1)
31.2	Rule 13a-14(a)/15d-14(a) Certifications (1)
32.1	Section 1350 Certifications (1)
32.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE	Section 1350 Certifications (1) XBRL Instance Document (2) XBRL Taxonomy Extension Schema Document(2) XBRL Taxonomy Extension Calculation Linkbase Document(2) XBRL Taxonomy Extension Definition Linkbase Document(2) XBRL Taxonomy Extension Label Linkbase Document(2) XBRL Taxonomy Extension Presentation Linkbase Document(2)

(1)	Filed previously.
(2)	Furnished herewith.

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3. Changes in Accumulated Other Comprehensive Income (loss): Schedule of Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Accumulated Other Comprehensive Income (Loss)

(in 000’s)	Three Months ended June 30, 2013	Six Months Ended June 30, 2013
Beginning Balance	$28	$34
Other comprehensive loss before reclassifications-- Unrealized losses on available for sale securities	(244)	(256)
Amounts reclassified from accumulated other comprehensive income to net income—Gain on sale of investment securities	28	34
Net current period other comprehensive loss	$(188)	$(188)

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest income:
Interest and fees on loans	$ 630,275	$ 660,151	$ 1,258,451	$ 1,319,842
Interest on investment securities	66,721	115,283	153,339	252,472
Interest on federal funds sold	3,214	3,338	7,607	8,930
Interest on time deposits with other banks	173	174	404	348
Total interest income	700,383	778,946	1,419,801	1,581,592
Interest expense:
Interest on time deposits	12,326	19,899	27,534	48,131
Interest on demand deposits	6,145	12,074	14,889	25,127
Interest on savings deposits	1,678	1,755	3,412	3,558
Total interest expense	20,149	33,728	45,835	76,816
Net interest income	680,234	745,218	1,373,966	1,504,776
(Credit)provision for loan losses	(55,000)	30,000	15,137	60,000
Net interest income after (credit)provision for loan losses	735,234	715,218	1,358,829	1,444,776
Noninterest income:
Customer service fees	101,304	95,745	201,912	192,891
ATM fee income	80,508	80,992	160,157	160,771
Gain on sale of investment securities	378,248		378,248
Loan syndication fees	88,300	80,000	88,300	80,000
Loss on sale of other real estate owned	(13,484)		(13,880)
Other income	19,187	22,243	34,805	39,557
Total noninterest income	654,063	278,980	849,542	473,219
Noninterest expense:
Salaries, wages and employee benefits	371,532	392,971	748,996	806,508
Occupancy and equipment	264,145	265,820	508,044	540,597
Office operations and supplies	76,454	75,718	154,808	150,123
Marketing and public relations	18,722	18,840	34,702	23,489
Professional services	77,346	78,294	148,180	151,532
Data processing	103,714	111,196	224,579	238,002
Other real estate expense	124,039	66,948	167,544	57,534
Loan and collection costs	38,906	33,013	58,808	61,693
Deposit insurance assessments	37,654	26,209	74,652	27,424
Other operating	180,808	162,085	330,868	335,798
Total noninterest expense	1,293,320	1,231,094	2,451,181	2,392,700
Net income (loss) before income taxes	95,977	(236,896)	(242,810)	(474,705)
Provision for income taxes
Net income (loss)	95,977	(236,896)	(242,810)	(474,705)
Net income (loss) per common share-basic and diluted	$ 0.09	$ (0.22)	$ (0.23)	$ (0.45)
Weighted average number of common shares	1,065,588	1,065,588	1,065,588	1,065,588
Comprehensive loss:
Net income (loss)	95,977	(236,896)	(242,810)	(474,705)
Unrealized losses on available for sale securities	(216,085)	(723)	(222,226)	(364)
Total comprehensive loss	$ (120,108)	$ (237,619)	$ (465,036)	$ (475,069)

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5. Investment Securities

6 Months Ended

Jun. 30, 2013

Notes

5. Investment Securities

5.  Investment Securities

The following is a summary of the Company's investment portfolio as of June 30, 2013: 

(In 000’s)	June 30, 2013
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(180)	$3,917
Government Sponsored Enterprises  residential mortgage-backed securities	5,425	41	(142)	5,324
Investments in money market funds	129	-	-	129
	$9,651	$41	$(322)	$9,370

	December 31, 2012
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
Government Sponsored Enterprises         residential mortgage-backed securities	$847	$51	-	$898
Investments in money market funds	129	-	-	129
	$976	$51	-	$1,027

Held-to-maturity:
U.S. Government agency securities	$3,605	$159	$(4)	$3,760
Government Sponsored Enterprises residential mortgage-backed securities	8,290	437	(1)	8,726
	$11,895	$596	$(5)	$12,486

The amortized cost and fair value of debt securities classified as available-for-sale and held-to-maturity, by contractual maturity, as of June 30, 2013, are as follows:

(In 000’s)	Amortized Cost	Fair Value
Available-for-Sale
Due in one year	-	-
Due after one year through five years	-	-
Due after five years through ten years	4,097	3,917
Government Sponsored Enterprises residential mortgage-backed securities	5,425	5,324
Total debt securities	9,522	9,241
Investments in money market funds	129	129
	$9,651	9,370

Expected maturities will differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without any penalties.

In May 2013, the Bank transferred its entire held to maturity portfolio to available for sale. This transfer was made to improve capital ratios and liquidity by allowing for the disposition of securities, if necessary. In May and June 2013, the Bank sold securities with a book value totaling approximately $7.4 million and recognized a gain of approximately $378,000.  Proceeds from the sale were reinvested in replacement securities.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2013:

	Number	Less than 12 months		12 months or longer		Total
Description of	of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	securities	Value	Losses	value	losses	value	losses
U.S. Government
agency securities	15	$3,917	$(180)	-	-	$3,917	$(180)
Government Sponsored Enterprises
residential mortgage-backed securities	18	4,307	(142)	-	-	4,307	(142)
Total temporarily
Impaired investment
securities	33	$8,544	$(322)	-	-	$8,224	$( 322)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2012:

	Number	Less than 12 months		12 months or longer		Total
Description of	of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	securities	Value	Losses	value	losses	value	losses
U.S. Government
agency securities	3	$746	$(4)	-	-	$746	$(4)
Government Sponsored Enterprises
residential mortgage-backed securities	2	$253	$(1)	-	-	$253	$(1)
Total temporarily
Impaired investment
securities	5	$999	$(5)	-	-	$999	$(5)

Government Sponsored Enterprises residential mortgage-backed securities. Unrealized losses on the Company’s investment in Government Sponsored Enterprises residential mortgage-backed securities were caused by market interest rate increases. The Company purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments. Because the decline in fair value is attributable to changes in market interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

U.S. Government and Agency Securities. Unrealized losses on the Company's investments in direct obligations of U.S. government agencies were caused by market interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired.

The Company has a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary.  This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.  On a quarterly basis, the Company reviews all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. The Company considers relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, the intent to sell a security or whether it is more likely than not the Company will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, the Company’s ability and intent to hold the security for a period of time that allows for the recovery in value.

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6. Loans and Allowance For Loan Losses: Schedule of Bank's Loans by Class To Their Credit Quality Indictors (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Bank's Loans by Class To Their Credit Quality Indictors

The tables below detail the Bank’s loans by class according to their credit quality indictors discussed above.

(In 000's)	Commercial Loans June 30, 2013
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$9	$220	$8	$84	$393	$964
SBA loans	-	25	-	43	49	-	117
Asset-based	-	1,737	125	49	-	-	1,911
	250	1,771	345	100	133	393	2,992
Commercial real estate:
Commercial mortgages	-	14,976	1,372	158	618	89	17,213
SBA Loans	-	607	-	-	-	-	607
Construction	-	2,244	-	-	-	-	2,244
Religious organizations	-	9,201	2,328	-	1,283	-	12,812
	-	27,028	3,700	158	1,901	89	32,876
Total commercial loans	$250	$28,799	$4,045	$258	$2,034	$482	$35,868

	Residential Mortgage and Consumer Loans June 30, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,243	$123	$1,366
Home equity line of credit	25	-	25
1-4 family residential mortgages	2,728	242	2,970
	3,996	365	4,361
Consumer Other:
Consumer Installment	23	-	23
Student loans	1,456	-	1,456
Other	145	-	145
	1,624	-	1,624
Total  consumer loans	$5,620	$365	$5,985
Total loans				$      41,853

(In 000's)	Commercial Loans, December 31, 2012
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$104	$15	$220	$480	$393	$1,462
SBA loans	-	27	-	49	49	-	125
Asset-based	-	1,869	125	54	99	-	2,147
	250	2,000	140	323	628	393	3,734
Commercial real estate:
Commercial mortgages	-	12,678	1,322	-	403	317	14,721
SBA Loans	-	621	-	-	-	-	621
Construction	-	2,767	-	-	631	-	3,398
Religious organizations	-	8,183	3,623	162	674	-	12,642
	-	24,349	4,945	162	1,708	317	31,381
Total commercial loans	$250	$26,249	$5,085	$485	$2,336	$710	$33,115

	Residential Mortgage and Consumer Loans December 31, 2012
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,390	$63	$1,453
Home equity line of credit	26	-	26
1-4 family residential mortgages	2,914	226	3,140
	4,330	289	4,619
Consumer Other:
Consumer Installment	30	-	30
Student loans	1,588	-	1,588
Other	150	-	150
	1,768	-	1,768
Total  consumer loans	$6,098	$289	$6,387
Total loans				$ 41,502

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5. Investment Securities: Investment Portfolio (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Investment Portfolio

The following is a summary of the Company's investment portfolio as of June 30, 2013: 

(In 000’s)	June 30, 2013
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(180)	$3,917
Government Sponsored Enterprises  residential mortgage-backed securities	5,425	41	(142)	5,324
Investments in money market funds	129	-	-	129
	$9,651	$41	$(322)	$9,370

	December 31, 2012
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	Value
Available-for-sale:
Government Sponsored Enterprises         residential mortgage-backed securities	$847	$51	-	$898
Investments in money market funds	129	-	-	129
	$976	$51	-	$1,027

Held-to-maturity:
U.S. Government agency securities	$3,605	$159	$(4)	$3,760
Government Sponsored Enterprises residential mortgage-backed securities	8,290	437	(1)	8,726
	$11,895	$596	$(5)	$12,486

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7. Other Real Estate Owned: Schedule of Components of Net Expense of Other Real Estate (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Professional services	$ 77,346	$ 78,294	$ 148,180	$ 151,532
Other Real Estate, Valuation Adjustments	(126,000)	(11,000)	(156,000)	(26,000)
Other Real Estate, Disposals	(65,000)		(92,000)
Other Real Estate
Real Estate Insurance	4,000	10,000	10,000	17,000
Professional services				3,000
Real Estate Tax Expense	5,000	33,000	11,000	36,000
Utilities Costs		11,000	2,000	17,000
Other Expenses	2,000	2,000	2,000	2,000
Other Real Estate, Valuation Adjustments				(43,000)
Other Real Estate, Disposals	113,000	11,000	143,000	26,000
Other Real Estate Revenue	$ 124,000	$ 67,000	$ 168,000	$ 58,000

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5. Investment Securities: Schedule of Unrealized Loss on Investments (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	33	5
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 8,544	$ 999
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(322)	(5)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	8,224	999
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(322)	(5)
US Government Agencies Debt Securities
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	15	3
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	3,917	746
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(180)	(4)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,917	746
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(180)	(4)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	18	2
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	4,307	253
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(142)	(1)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	4,307	253
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	$ (142)	$ (1)

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7. Other Real Estate Owned: Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Other Real Estate Owned

(in 000's)	Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
	June 30, 2013	June 30, 2012	June 30, 2013	June 30, 2012
Beginning balance	$718	$1,344	$775	$1,284
Additions, transfers from loans	-	-	-	75
Proceeds from sales	(65)	-	(92)	-
	653	1,344	683	1,359
Less: write-downs and losses on sales	(126)	(11)	(156)	(26)
Ending Balance	$527	$1,333	$527	$1,333

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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables Additional Information (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Impaired Financing Receivables Additional Information

	Three Months Ended		Three Months Ended
(In 000's)	June 30, 2013		June 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$512	-	$482	-
SBA  loans	49	-	17	1
Asset-based	88	-	138	-
Total commercial and industrial	649	-	637	1
Commercial real estate:
Commercial mortgages	639	-	666	-
SBA loans	-	-	-	-
Religious organizations	657	-	399	-
Total commercial real estate	1,296	-	1,065	-
Total loans	$1,945	-	$1,702	1

	Six Months Ended		Six Months Ended
(In 000's)	June 30, 2013		June 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$626	-	$482	-
SBA  loans	49	-	8	1
Asset-based	99	-	119	-
Total commercial and industrial	774	-	609	1
Commercial real estate:
Commercial mortgages	640	-	670	-
Religious organizations	614	-	405	-
Total commercial real estate	1,254	-	1,075	-
Total loans	$2,028	-	$1,075	$1

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7. Other Real Estate Owned: Other Real Estate Owned (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Details
Other Real Estate, Beginning Balance	$ 718,000	$ 1,344,000	$ 775,407	$ 1,284,000
SEC Schedule III, Real Estate, Other Additions				75,000
Other Real Estate, Disposals	(65,000)		(92,000)
Other Real Estate, Period Increase (Decrease)	653,000	1,344,000	683,000	1,359,000
Other Real Estate, Valuation Adjustments	(126,000)	(11,000)	(156,000)	(26,000)
Other Real Estate, Ending Balance	$ 526,537	$ 1,333,000	$ 526,537	$ 1,333,000

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3. Changes in Accumulated Other Comprehensive Income (loss): Schedule of Accumulated Other Comprehensive Income (Loss) (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Details
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance	$ 28	$ 34
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax	(244)	(256)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	28	34
Other Comprehensive Income (Loss), Net of Tax	$ (188)	$ (188)

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6. Loans and Allowance For Loan Losses (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
(Credit)provision for loan losses	$ (55,000)	$ 30,000	$ 15,137	$ 60,000
Commercial And Industrial
(Credit)provision for loan losses			$ 340,000

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8. Fair Value: Schedule of Fair Value of Assets on a Recurring Basis (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Available-for-sale, at fair value	$ 9,370,323	$ 1,027,293
US Government Agencies Debt Securities
Available-for-sale, at fair value	3,917,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	5,324,000	898,000
Money Market Funds
Available-for-sale, at fair value	129,000	129,000
Fair Value, Inputs, Level 1
Available-for-sale, at fair value	129,000	129,000
Fair Value, Inputs, Level 1 | Money Market Funds
Available-for-sale, at fair value	129,000	129,000
Fair Value, Inputs, Level 2
Available-for-sale, at fair value	9,241,000	898,000
Fair Value, Inputs, Level 2 | US Government Agencies Debt Securities
Available-for-sale, at fair value	3,917,000
Fair Value, Inputs, Level 2 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	$ 5,324,000	$ 898,000

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8. Fair Value: Schedule of Fair Value of Assets on a Nonrecurring Basis (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Fair Value of Assets on a Nonrecurring Basis

Carrying Value at June 30, 2013:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value gain (loss) during 6 months ended June 30, 2013
Impaired loans	$1,468	-	-	$1,468	-
Other real estate owned (“OREO”)	527	-	-	527	(143)

Carrying Value at December 31, 2012:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs  (Level 3)	Total fair value gain (loss) during 12 months ended December 31, 2012
Impaired Loans	$1,501	-	-	$1,501	$(843)
Other real estate owned (“OREO”)	775	-	-	775	(233)

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6. Loans and Allowance For Loan Losses: Schedule of Bank's Loans by Class To Their Credit Quality Indictors (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Loans Receivable, Gross, Commercial, Real Estate	$ 32,876	$ 31,381
Loans and Leases Receivable, Gross, Consumer, Real Estate	4,361	4,619
Loans and Leases Receivable, Gross, Consumer	1,624	1,768
Loans Receivable, Net	41,853	41,502
Good Excellent
Loans and Leases Receivable, Gross, Commercial	250	250
Good Excellent | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	250	250
Good Excellent | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	250	250
Satisfactory
Loans and Leases Receivable, Gross, Commercial	28,799	26,249
Satisfactory | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	1,771	2,000
Satisfactory | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	9	104
Satisfactory | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	25	27
Satisfactory | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	1,737	1,869
Satisfactory | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	27,028	24,349
Satisfactory | Commercial Real Estate | SBA Loans
Loans Receivable, Gross, Commercial, Real Estate	607	621
Satisfactory | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	14,976	12,678
Satisfactory | Commercial Real Estate | Construction
Loans Receivable, Gross, Commercial, Real Estate	2,244	2,767
Satisfactory | Commercial Real Estate | Religious Organizations
Loans Receivable, Gross, Commercial, Real Estate	9,201	8,183
Pass
Loans and Leases Receivable, Gross, Commercial	4,045	5,085
Pass | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	345	140
Pass | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	220	15
Pass | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	125	125
Pass | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	3,700	4,945
Pass | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	1,372	1,322
Pass | Commercial Real Estate | Religious Organizations
Loans Receivable, Gross, Commercial, Real Estate	2,328	3,623
Special Mention
Loans and Leases Receivable, Gross, Commercial	258	485
Special Mention | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	100	323
Special Mention | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	8	220
Special Mention | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	43	49
Special Mention | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	49	54
Special Mention | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	158	162
Special Mention | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	158
Special Mention | Commercial Real Estate | Religious Organizations
Loans Receivable, Gross, Commercial, Real Estate		162
Substandard
Loans and Leases Receivable, Gross, Commercial	2,034	2,336
Substandard | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	133	628
Substandard | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	84	480
Substandard | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	49	49
Substandard | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial		99
Substandard | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	1,901	1,708
Substandard | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	618	403
Substandard | Commercial Real Estate | Construction
Loans Receivable, Gross, Commercial, Real Estate		631
Substandard | Commercial Real Estate | Religious Organizations
Loans Receivable, Gross, Commercial, Real Estate	1,283	674
Doubtful
Loans and Leases Receivable, Gross, Commercial	482	710
Doubtful | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	393	393
Doubtful | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	393	393
Doubtful | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	89	317
Doubtful | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	89	317
Total
Loans and Leases Receivable, Gross, Commercial	35,868	33,115
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,624	1,768
Loans and Leases Receivable, Gross, Consumer	5,985	6,387
Total | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	2,992	3,734
Total | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	964	1,462
Total | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	117	125
Total | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	1,911	2,147
Total | Commercial Real Estate
Loans Receivable, Gross, Commercial, Real Estate	32,876	31,381
Loans and Leases Receivable, Gross, Consumer, Real Estate	4,361	4,619
Total | Commercial Real Estate | SBA Loans
Loans Receivable, Gross, Commercial, Real Estate	607	621
Total | Commercial Real Estate | Commercial Mortgages
Loans Receivable, Gross, Commercial, Real Estate	17,213	14,721
Total | Commercial Real Estate | Construction
Loans Receivable, Gross, Commercial, Real Estate	2,244	3,398
Total | Commercial Real Estate | Religious Organizations
Loans Receivable, Gross, Commercial, Real Estate	12,812	12,642
Total | Home Equity | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,366	1,453
Total | Home Equity Line Of Credit | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	25	26
Total | 14 Family Residential Mortgages | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	2,970	3,140
Total | Consumer Installment | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	23	30
Total | Student Loans | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,456	1,588
Total | Other | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	145	150
Performing
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,624	1,768
Loans and Leases Receivable, Gross, Consumer	5,620	6,098
Performing | Commercial Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	3,996	4,330
Performing | Home Equity | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,243	1,390
Performing | Home Equity Line Of Credit | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	25	26
Performing | 14 Family Residential Mortgages | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	2,728	2,914
Performing | Consumer Installment | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	23	30
Performing | Student Loans | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	1,456	1,588
Performing | Other | Consumer Other
Loans and Leases Receivable, Gross, Consumer, Real Estate	145	150
Nonperforming
Loans and Leases Receivable, Gross, Consumer	365	289
Nonperforming | Commercial Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	365	289
Nonperforming | Home Equity | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	123	63
Nonperforming | 14 Family Residential Mortgages | Consumer Real Estate
Loans and Leases Receivable, Gross, Consumer, Real Estate	$ 242	$ 226

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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Impaired Financing Receivables

Impaired loans as of June 30, 2013 are set forth in the following table.

(In 000's)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total
	Principal	With No	With	Recorded	Related
	Balance	Allowance	Allowance	Investment	Allowance
Commercial and industrial:
Commercial	$477	$77	$400	$477	$300
SBA  loans	49	-	49	49	49
Total commercial and industrial	526	77	449	526	349
Commercial real estate:
Commercial mortgages	638	638	-	638	-
Religious organizations	653	653	-	653	-
Total commercial real estate	1,291	1,291	-	1,291	-
Total loans	$1,817	$1,368	$449	$1,817	$349

Impaired loans as of December 31, 2012 are set forth in the following table.

(In 000's)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total
	Principal	With No	With	Recorded	Related
	Balance	Allowance	Allowance	Investment	Allowance
Commercial and industrial:
Commercial	$873	$78	$795	$873	$695
SBA loans	49	-	49	49	49
Asset-based	99	-	99	99	99
Total commercial and industrial	1,021	78	943	1,021	843
Commercial real estate:
Commercial mortgages	649	649	-	649	-
Religious organizations	674	674	-	674	-
Total commercial real estate	1,323	1,323	-	1,323	-
Total loans	$2,344	$1,401	$943	$2,344	$843

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1. Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Notes

1. Significant Accounting Policies

1. Significant Accounting Policies

 United Bancshares, Inc. (the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956.  The Company's principal activity is the ownership and management of its wholly owned subsidiary, United Bank of Philadelphia (the "Bank").

During interim periods, the Company follows the accounting policies set forth in its Annual Report on Form 10-K filed with the Securities and Exchange Commission.  Readers are encouraged to refer to the Company's Form 10-K for the fiscal year ended December 31, 2012 when reviewing this Form 10-Q.  Quarterly results reported herein are not necessarily indicative of results to be expected for other quarters.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company's consolidated financial position as of June 30, 2013 and December 31, 2012 and the consolidated results of its operations and its cash flows for the three and six months ended June 30, 2013 and 2012.

Management’s Use of Estimates

The preparation of the financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities and consideration of impairment of intangible assets.

Commitments

In the general course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying financial statements. Management does not anticipate any material losses as a result of these commitments.

Contingencies

The Company is from time to time a party to routine litigation in the normal course of its business. Management does not believe that the resolution of any such litigation will have a material adverse effect on the financial condition or results of operations of the Company. However, the ultimate outcome of any such litigation, as with litigation generally, is inherently uncertain and it is possible that some litigation matters may be resolved adversely to the Company.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance.

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

·       During regularly scheduled meetings of the Asset Quality Committee

·       During regular reviews of the delinquency report

·       During the course of routine account servicing, annual review, or credit file update

·       Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable LTV ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Non-accrual and Past Due Loans.

Loans are considered past due if the required principal and interest payments have not been received 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Income Taxes

Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.   For financial reporting purposes, a valuation allowance of 100% of the net deferred tax asset has been recognized to offset the net deferred tax assets related to cumulative temporary differences and tax loss carryforwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, an income tax benefit may be required to increase the recorded value of the net deferred tax asset to the expected realizable amount.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits, if any, would be recognized in income tax expense in the consolidated statements of operations.

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3. Changes in Accumulated Other Comprehensive Income (loss)

6 Months Ended

Jun. 30, 2013

Notes

3. Changes in Accumulated Other Comprehensive Income (loss)

3. Changes in Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in other comprehensive income(loss):

(in 000’s)	Three Months ended June 30, 2013	Six Months Ended June 30, 2013
Beginning Balance	$28	$34
Other comprehensive loss before reclassifications-- Unrealized losses on available for sale securities	(244)	(256)
Amounts reclassified from accumulated other comprehensive income to net income—Gain on sale of investment securities	28	34
Net current period other comprehensive loss	$(188)	$(188)

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6. Loans and Allowance For Loan Losses

6 Months Ended

Jun. 30, 2013

Notes

6. Loans and Allowance For Loan Losses

6. Loans and Allowance for Loan Losses

The composition of the Bank’s loan portfolio is as follows:

(Dollars in thousands)	June 30, 2013	December 31, 2012
Commercial and industrial	$2,992	$3,734
Commercial real estate	32,876	31,381
Consumer real estate	4,361	4,619
Consumer loans other	1,624	1,768
Total loans	$41,853	$41,502

The determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance is the accumulation of three components that are calculated based on various independent methodologies that are based on management’s estimates.  The three components are as follows:

·       Specific Loan Evaluation Component – Includes the specific evaluation of impaired loans.  

·       Historical Charge-Off Component – Applies an eight-quarter rolling historical charge-off rate to all pools of non-classified loans.

·       Qualitative Factors Component – The loan portfolio is broken down into multiple homogenous sub classifications, upon which multiple factors (such as delinquency trends, economic conditions, concentrations, growth/volume trends, and management/staff ability) are evaluated, resulting in an allowance amount for each of the sub classifications. The sum of these amounts comprises the Qualitative Factors Component.

All of these factors may be susceptible to significant change.  There were no changes in qualitative factors during period.  In addition, the average historical loss factor for commercial and industrial loans increased as a result of a $340,000 charge-off during the quarter. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.

The following table presents an analysis of the allowance for loan losses.

(in 000's)	For the Three months ended June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$614	$275	$48	-	$937
Provision (credit) for loan losses	15	(65)	(6)	1	(55)
Charge-offs	(184)	-	-	(4)	(188)
Recoveries	1	78	2	3	84
Net charge-offs	(183)	78	2	(1)	(104)
Ending balance	$446	$288	$44	-	$778

(in 000's)	For the Three Months ended June 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$417	$412	$35	-	$864
Provision for loan losses	79	(47)	(2)	-	30
Charge-offs	-	-		-	-
Recoveries	-	2	10	-	12
Net charge-offs	-	2	10	-	12
Ending balance	$496	$367	$43	-	$906

(in 000’s)	For the Six months ended June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision for loan losses	77	(98)	35	1	15
Charge-offs	(524)	-	-	(4)	(528)
Recoveries	2	78	4	3	87
Net charge-offs	(522)	78	4	(1)	(441)
Ending balance	$446	$288	$44	-	$778

(in 000's)	For the Six months ended June 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$387	$412	$68	-	$867
Provision for loan losses	109	(50)	-	1	60
Charge-offs	-	-	(38)	(9)	(47)
Recoveries	-	5	13	8	26
Net charge-offs	-	5	(21)	(1)	(21)
Ending balance	$496	$367	$43	-	$906

(in 000's)	June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Period-end amount allocated to:
Loans indivdually evaluated for impairment	$349	-	-	-	349
Loans collectively  evaluated for impairment	97	288	44	-	429
	$446	$288	$44	-	$778
Loans, ending balance:
Loans individually evaluated for impairment	$526	$1,291	-	-	1,817
Loans collectively  evaluated for impairment	2,466	31,585	4,361	1,624	40,036
Total	$2,992	$32,876	$4,361	$1,624	$41,853

(in 000's)	December 31, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Period-end amount allocated to:
Loans indivdually evaluated for impairment	843	-	-	-	843
Loans collectively  evaluated for impairment	48	308	5	-	361
	$891	$308	$5	-	$1,204
Loans, ending balance:
Loans indivdually evaluated for impairment	$1,021	$1,323	-	-	$2,344
Loans collectively  evaluated for impairment	2,713	30,058	4,619	1,768	39,158
Total	$3,734	$31,381	$4,619	$1,768	$41,502

Nonperforming and Nonaccrual and Past Due Loans

An age analysis of past due loans, segregated by class of loans, as of June 30, 2013 is as follows:

		Accruing
	Loans	Loans 90 or
(In 000's)	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	-	-	$477	$477	$487	$964
SBA loans		-	-	-	117	117
Asset-based	125	-	-	125	1,786	1,911
Total Commercial and industrial	125	-	477	602	2,390	2,992
Commercial real estate:
Commercial mortgages	213	-	638	851	16,362	17,213
SBA loans	-	-	-	-	607	607
Construction	-	-	-	-	2,244	2,244
Religious organizations	-	-	653	653	12,159	12,812
Total Commercial real estate	213	-	1,291	1,504	31,372	32,876
Consumer real estate:
Home equity loans	358	-	123	481	885	1,366
Home equity lines of credit	-	-	-	-	25	25
1-4 family residential mortgages	54	-	242	296	2,674	2,970
Total consumer real estate	412	-	365	777	3,584	4,361
Total real estate	625	-	1,656	2,281	34,956	37,237
Consumer and other:
Consumer installment	-	-	-	-	23	23
Student loans	103	132	-	235	1,221	1,456
Other	2	-	-	2	143	145
Total consumer and other	105	132	-	237	1,387	1,624
Total loans	$855	$132	$2,133	$3,120	$38,733	$41,853

An age analysis of past due loans, segregated by class of loans, as of December 31, 2012 is as follows:

		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
(In 000's)	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$15	-	$873	888	$574	$1,462
SBA loans	-	-	-	-	125	125
Asset-based	83	-	99	182	1,965	2,147
Total Commercial and industrial	98	-	972	1,070	2,664	3,734
Commercial real estate:
Commercial mortgages	306	-	649	955	13,765	14,720
SBA loans	-	-	-	-	621	621
Construction	-	-	-	-	3,398	3,398
Religious organizations	-	-	674	674	11,968	12,642
Total Commercial real estate	306	-	1,323	1,629	29,752	31,381
Consumer real estate:
Home equity loans	274	44	63	381	1,072	1,453
Home equity lines of credit	-	26	-	26	-	26
1-4 family residential mortgages	69	-	226	295	2,845	3,140
Total consumer real estate	343	70	289	702	3,917	4,619
Total real estate	649	70	1,612	2,331	33,669	36,000
Consumer and other:
Consumer installment	-	-	-	-	30	30
Student loans	87	141	-	228	1,360	1,588
Other	5	-	-	5	145	150
Total consumer and other	92	141	-	233	1,535	1,768
Total loans	$839	$211	$2,584	$3,634	$37,867	$41,502

Loan Origination/Risk Management.  The Bank has lending policies and procedures in place to maximize loan income within an acceptable level of risk.  Management reviews and approves these policies and procedures on a regular basis.  A reporting system supplements the review process by providing management with periodic reports related to loan origination, asset quality, concentrations of credit, loan delinquencies and non-performing and emerging problem loans.  Diversification in the portfolio is a means of managing risk with fluctuations in economic conditions.

Credit Quality Indicators.  For commercial loans, management uses internally assigned risk ratings as the best indicator of credit quality.  Each loan’s internal risk weighting is assigned at origination and updated at least annually and more frequently if circumstances warrant a change in risk rating.  The Bank uses a 1 through 8 loan grading system that follows regulatory accepted definitions as follows:

·       Risk ratings of “1” through “3” are used for loans that are performing and meet and are expected to continue to meet all of the terms and conditions set forth in the original loan documentation and are generally current on principal and interest payments.  Loans with these risk ratings are reflected as “Good/Excellent” and “Satisfactory” in the following table.

·       Risk ratings of “4” are assigned to “Pass/Watch” loans which may require a higher degree of regular, careful attention.  Borrowers may be exhibiting weaker balance sheets and positive but inconsistent cash flow coverage. Borrowers in this classification generally exhibit a higher level of credit risk and are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Loans with this rating would not normally be acceptable as new credits unless they are adequately secured and/or carry substantial guarantors. Loans with this rating are reflected as “Pass” in the following table.

·       Risk ratings of “5” are assigned to “Special Mention” loans that do not presently expose the Bank to a significant degree of risks, but have potential weaknesses/deficiencies deserving Management’s closer attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. No loss of principal or interest is envisioned.  Borrower is experiencing adverse operating trends, which potentially could impair debt, services capacity and may necessitate restructuring of credit.  Secondary sources of repayment are accessible and considered adequate to cover the Bank's exposure. However, a restructuring of the debt should result in repayment.  The asset is currently protected, but is potentially weak.  This category may include credits with   inadequate loan agreements, control over the collateral or an unbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized but exceptions are considered material. These borrowers would have limited ability to obtain credit elsewhere.

·       Risk ratings of “6” are assigned to “Substandard” loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets must have a well-defined weakness. They are characterized by the distinct possibility that some loss is possible if the deficiencies are not corrected. The borrower’s recent performance indicated an inability to repay the debt, even if restructured. Primary source of repayment is gone or severely impaired and the Bank may have to rely upon the secondary source. Secondary sources of repayment (e.g., guarantors and collateral) should be adequate for a full recovery. Flaws in documentation may leave the bank in a subordinated or unsecured position when the collateral is needed for the repayment.

·       Risk ratings of “7” are assigned to “Doubtful” loans which have all the weaknesses inherent in those classified “Substandard” with the added characteristic that the weakness makes the collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.  The borrower's recent performance indicates an inability to repay the debt.  Recovery from secondary sources is uncertain.  The possibility of a loss is extremely high, but because of certain important and reasonably- specific pending factors, its classification as a loss is deferred.

·       Risk rating of “8” are assigned to “Loss” loans which are considered non-collectible and do not warrant classification as active assets.  They are recommended for charge-off if attempts to recover will be long term in nature.  This classification does not mean that an asset has no recovery or salvage value, but rather, that it is not practical or desirable to defer writing off the loss, although a future recovery may be possible.  Loss should always be taken in the period in which they surface and are identified as non-collectible as a result there is no tabular presentation.

For consumer and residential mortgage loans, management uses performing versus nonperforming as the best indicator of credit quality.  Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being in default for a period of 90 days or more or when the ability to collect principal and interest according to contractual terms is in doubt.  These credit quality indicators are updated on an ongoing basis.  A loan is placed on nonaccrual status as soon as management believes there is doubt as to the ultimate ability to collect interest on a loan, but no later than 90 days past due.

The tables below detail the Bank’s loans by class according to their credit quality indictors discussed above.

(In 000's)	Commercial Loans June 30, 2013
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$9	$220	$8	$84	$393	$964
SBA loans	-	25	-	43	49	-	117
Asset-based	-	1,737	125	49	-	-	1,911
	250	1,771	345	100	133	393	2,992
Commercial real estate:
Commercial mortgages	-	14,976	1,372	158	618	89	17,213
SBA Loans	-	607	-	-	-	-	607
Construction	-	2,244	-	-	-	-	2,244
Religious organizations	-	9,201	2,328	-	1,283	-	12,812
	-	27,028	3,700	158	1,901	89	32,876
Total commercial loans	$250	$28,799	$4,045	$258	$2,034	$482	$35,868

	Residential Mortgage and Consumer Loans June 30, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,243	$123	$1,366
Home equity line of credit	25	-	25
1-4 family residential mortgages	2,728	242	2,970
	3,996	365	4,361
Consumer Other:
Consumer Installment	23	-	23
Student loans	1,456	-	1,456
Other	145	-	145
	1,624	-	1,624
Total  consumer loans	$5,620	$365	$5,985
Total loans				$      41,853

(In 000's)	Commercial Loans, December 31, 2012
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$104	$15	$220	$480	$393	$1,462
SBA loans	-	27	-	49	49	-	125
Asset-based	-	1,869	125	54	99	-	2,147
	250	2,000	140	323	628	393	3,734
Commercial real estate:
Commercial mortgages	-	12,678	1,322	-	403	317	14,721
SBA Loans	-	621	-	-	-	-	621
Construction	-	2,767	-	-	631	-	3,398
Religious organizations	-	8,183	3,623	162	674	-	12,642
	-	24,349	4,945	162	1,708	317	31,381
Total commercial loans	$250	$26,249	$5,085	$485	$2,336	$710	$33,115

	Residential Mortgage and Consumer Loans December 31, 2012
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,390	$63	$1,453
Home equity line of credit	26	-	26
1-4 family residential mortgages	2,914	226	3,140
	4,330	289	4,619
Consumer Other:
Consumer Installment	30	-	30
Student loans	1,588	-	1,588
Other	150	-	150
	1,768	-	1,768
Total  consumer loans	$6,098	$289	$6,387
Total loans				$ 41,502

Impaired Loans. The Bank identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis.

In accordance with guidance provided by ASC 310-10, Accounting by Creditors for Impairment of a Loan, management employs one of three methods to determine and measure impairment: the Present Value of Future Cash Flow Method; the Fair Value of Collateral Method; or the Observable Market Price of a Loan Method.  To perform an impairment analysis, the Company reviews a loan’s internally assigned grade, its outstanding balance, guarantors, collateral, strategy, and a current report of the action being implemented. Based on the nature of the specific loans, one of the impairment methods is chosen for the respective loan and any impairment is determined, based on criteria established in ASC 310-10.

The Company makes partial charge-offs of impaired loans when the impairment is deemed permanent and is considered a loss.  To date, these charge-offs have only included the unguaranteed portion of Small Business Administration (“SBA”) loans.  Specific reserves are allocated to cover “other-than-permanent” impairment for which the underlying collateral value may fluctuate with market conditions. During the three and six months ended June 30, 2013 and 2012, there were no partial charge-offs of impaired loans.

Consumer real estate and other loans are not individually evaluated for impairment, but collectively evaluated, because they are pools of smaller balance homogeneous loans.

Impaired loans as of June 30, 2013 are set forth in the following table.

(In 000's)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total
	Principal	With No	With	Recorded	Related
	Balance	Allowance	Allowance	Investment	Allowance
Commercial and industrial:
Commercial	$477	$77	$400	$477	$300
SBA  loans	49	-	49	49	49
Total commercial and industrial	526	77	449	526	349
Commercial real estate:
Commercial mortgages	638	638	-	638	-
Religious organizations	653	653	-	653	-
Total commercial real estate	1,291	1,291	-	1,291	-
Total loans	$1,817	$1,368	$449	$1,817	$349

Impaired loans as of December 31, 2012 are set forth in the following table.

(In 000's)	Unpaid Contractual	Recorded Investment	Recorded Investment	Total
	Principal	With No	With	Recorded	Related
	Balance	Allowance	Allowance	Investment	Allowance
Commercial and industrial:
Commercial	$873	$78	$795	$873	$695
SBA loans	49	-	49	49	49
Asset-based	99	-	99	99	99
Total commercial and industrial	1,021	78	943	1,021	843
Commercial real estate:
Commercial mortgages	649	649	-	649	-
Religious organizations	674	674	-	674	-
Total commercial real estate	1,323	1,323	-	1,323	-
Total loans	$2,344	$1,401	$943	$2,344	$843

The Bank recognizes interest income on impaired loans under the cash basis when the collateral on the loan is sufficient to cover the outstanding obligation to the Bank.   If these factors do not exist, the Bank will record interest payments on the cost recovery basis. The following tables present additional information about impaired loans for the three and six months ended June 30, 2013 and 2012.

	Three Months Ended		Three Months Ended
(In 000's)	June 30, 2013		June 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$512	-	$482	-
SBA  loans	49	-	17	1
Asset-based	88	-	138	-
Total commercial and industrial	649	-	637	1
Commercial real estate:
Commercial mortgages	639	-	666	-
SBA loans	-	-	-	-
Religious organizations	657	-	399	-
Total commercial real estate	1,296	-	1,065	-
Total loans	$1,945	-	$1,702	1

	Six Months Ended		Six Months Ended
(In 000's)	June 30, 2013		June 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$626	-	$482	-
SBA  loans	49	-	8	1
Asset-based	99	-	119	-
Total commercial and industrial	774	-	609	1
Commercial real estate:
Commercial mortgages	640	-	670	-
Religious organizations	614	-	405	-
Total commercial real estate	1,254	-	1,075	-
Total loans	$2,028	-	$1,075	$1

Troubled debt restructurings (“TDRs”).  TDRs occur when a creditor, for economic or legal reasons related to a debtor’s financial condition, grants a concession to the debtor that it would not otherwise consider, such as a below market interest rate, extending the maturity of a loan, or a combination of both. The Company made modifications to certain loans in its commercial loan portfolio that included the term out of lines of credit to begin the amortization of principal.  The terms of these loans do not include any financial concessions and are consistent with the current market.  Management reviews all loan modifications to determine whether the modification qualifies as a troubled debt restructuring (i.e. whether the creditor has been granted a concession or is experiencing financial difficulties).  Based on this review and evaluation, none of the modified loans met the criteria of a troubled debt restructuring.  Therefore, the Company had no troubled debt restructurings at June 30, 2013 and December 31, 2012.

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4. New Authoritative Accounting Guidance

6 Months Ended

Jun. 30, 2013

Notes

4. New Authoritative Accounting Guidance

4. New Authoritative Accounting Guidance

In December 2011, the FASB issued Accounting Standards Update ASU 2011-11: Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this Update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This Update affects all entities that have financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The requirements amend the disclosure requirements on offsetting in Section 210-20-50. This information is intended to enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. The amendments are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company’s adoption of this guidance in 2013 did not have an impact on its financial statements.

In February 2013, the FASB issued an update (ASU 2013-02 – Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income) which requires entities to disclose, for items reclassified out of accumulated other comprehensive income (“AOCI”) and into net income in their entirety, the effect of the reclassification on each affected net income line item and, for AOCI reclassification items that are not reclassified in their entirety into net income, a cross reference to other required U.S. GAAP disclosures. The guidance is effective for annual and interim reporting periods beginning after December 15, 2012; early adoption is allowed. The disclosures required by the adoption of this guidance in 2013 are included in Note 3 of the financial statements.

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6. Loans and Allowance For Loan Losses: Allowance for Credit Losses on Financing Receivables (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Beginning balance	$ 937	$ 864	$ 1,204	$ 867
Provision for loan losses	(55)	30	15	60
Charge-offs	(188)		(528)	(47)
Recoveries	84	12	87	26
Net charge-offs	(104)	12	(441)	(21)
Ending balance	778	906	778	906
Period-end amount allocated to loans individually evaluated for impairment	349		349		843
Period-end amount allocated to loans collectively evaluated for impairment	429		429		361
Loans, ending balance: Loans individually evaluated for impairment	1,817		1,817		2,344
Loans, ending balance: Loans collectively evaluated for impairment	40,036		40,036		39,158
Total	41,853		41,853		41,502
Commercial And Industrial
Beginning balance	614	417	891	387
Provision for loan losses	15	79	77	109
Charge-offs	(184)		(524)
Recoveries	1		2
Net charge-offs	(183)		(522)
Ending balance	446	496	446	496
Period-end amount allocated to loans individually evaluated for impairment	349		349		843
Period-end amount allocated to loans collectively evaluated for impairment	97		97		48
Loans, ending balance: Loans individually evaluated for impairment	526		526		1,021
Loans, ending balance: Loans collectively evaluated for impairment	2,466		2,466		2,713
Total	2,992		2,992		3,734
Commercial Real Estate
Beginning balance	275	412	308	412
Provision for loan losses	(65)	(47)	(98)	(50)
Recoveries	78	2	78	5
Net charge-offs	78	2	78	5
Ending balance	288	367	288	367
Period-end amount allocated to loans collectively evaluated for impairment	288		288		308
Loans, ending balance: Loans individually evaluated for impairment	1,291		1,291		1,323
Loans, ending balance: Loans collectively evaluated for impairment	31,585		31,585		30,058
Total	32,876		32,876		31,381
Consumer Real Estate
Beginning balance	48	35	5	68
Provision for loan losses	(6)	(2)	35
Charge-offs				(38)
Recoveries	2	10	4	13
Net charge-offs	2	10	4	(21)
Ending balance	44	43	44	43
Period-end amount allocated to loans collectively evaluated for impairment	44		44		5
Loans, ending balance: Loans collectively evaluated for impairment	4,361		4,361		4,619
Total	4,361		4,361		4,619
Consumer And Other Loans
Provision for loan losses	1		1	1
Charge-offs	(4)		(4)	(9)
Recoveries	3		3	8
Net charge-offs	(1)		(1)	(1)
Loans, ending balance: Loans collectively evaluated for impairment	1,624		1,624		1,768
Total	$ 1,624		$ 1,624		$ 1,768

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7. Other Real Estate Owned: Schedule of Components of Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Components of Other Real Estate Owned

(in 000's)	June 30, 2013	December 31, 2012
Commercial real estate	$206	$206
Residential real estate	321	569
Total	$527	$775

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8. Fair Value: Schedule of Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Fair Value of Assets and Liabilities

The fair value of assets and liabilities are depicted below:

		June 30, 2013		December 31, 2012
(in 000’s)	Level in	Carrying	Fair	Carrying	Fair
	Value Hierarchy	Amount	Value	Amount	Value
(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$9,277	$9,277	$10,236	$10,236
Available for sale securities	(1)	9,370	9,370	1,027	1,027
Held to maturity securities	Level 2	-	-	11,895	12,486
Loans, net of allowance for loan losses	(2)	41,075	41,786	40,298	40,325
Accrued interest receivable	Level 2	277	277	310	310
Liabilities:
Demand deposits	Level 2	28,218	28,218	29,851	29,851
Savings deposits	Level 2	13,202	13,202	14,239	14,239
Time deposits	Level 2	16,147	16,155	16,886	16,902
Accrued interest payable	Level 2	16	16	31	31

(1) Level 1 for money market funds; Level 2 for all other securities.

(2) Level 2 for non-impaired loans; Level 3 for impaired loans.

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5. Investment Securities (Details) (USD $)	0 Months Ended
	May 01, 2013	Jun. 30, 2013	Dec. 31, 2012
Details
Book value of securities to be sold	$ 7,400,000	$ 0	$ 12,485,687
Available-for-sale Securities, Gross Unrealized Gain (Loss)	$ 378,000

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8. Fair Value (Details) (USD $)			6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Maximum
Fair Value Inputs, Discount Rate			10.00%
Impaired Financing Receivable, Related Allowance	$ 349,000	$ 843,000

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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables Additional Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Impaired Financing Receivable, Average Recorded Investment	$ 1,945	$ 1,702	$ 2,028	$ 1,075
Impaired Financing Receivable, Interest Income, Accrual Method		1		1
Commercial And Industrial
Impaired Financing Receivable, Average Recorded Investment	649	637	774	609
Impaired Financing Receivable, Interest Income, Accrual Method		1		1
Commercial And Industrial | Commercial
Impaired Financing Receivable, Average Recorded Investment	512	482	626	482
Commercial And Industrial | SBA Loans
Impaired Financing Receivable, Average Recorded Investment	49	17	49	8
Impaired Financing Receivable, Interest Income, Accrual Method		1		1
Commercial And Industrial | Asset Based Loans
Impaired Financing Receivable, Average Recorded Investment	88	138	99	119
Commercial Real Estate
Impaired Financing Receivable, Average Recorded Investment	1,296	1,065	1,254	1,075
Commercial Real Estate | Commercial Mortgages
Impaired Financing Receivable, Average Recorded Investment	639	666	640	670
Commercial Real Estate | Religious Organizations
Impaired Financing Receivable, Average Recorded Investment	$ 657	$ 399	$ 614	$ 405

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Held-to-maturity, fair value	$ 0	$ 12,485,687
Preferred stock, dividend rate	6.00%	6.00%
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	136,842	136,842
Preferred stock, shares outstanding	136,842	136,842
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	2,000,000	2,000,000
Common stock, shares issued	876,921	876,921
Common stock, shares outstanding	876,921	876,921
Class B Non-voting common stock
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	191,667	191,667
Common stock, shares outstanding	191,667	191,667

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9. Regulatory

6 Months Ended

Jun. 30, 2013

Notes

9. Regulatory

9. Regulatory

On January 31, 2012, the Bank entered into stipulations consenting to the issuance of Consent Orders with the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking (“Department”).  The material terms of the Consent Orders are identical.  The requirements and status of items included in the Consent Orders are as follows:

Requirement	Status
Increase participation of the Bank’s board of directors in the Bank’s affairs by having the board assume full responsibility for approving the Bank’s policies and objectives and for supervising the Bank’s management;	Board participation has been improved with attendance at board and committee meetings.
Have and retain qualified management, and notify the FDIC and the Department of any changes in the Bank’s board of directors or senior executive officers;	A management assessment was completed in June 2012 in conjunction with the required management review and written management plan with benchmarks for recommended enhancements.
Retain a bank consultant acceptable to the FDIC and the Department to develop a written analysis and assessment of the Bank’s management needs and thereafter formulate a written management plan;	An engagement letter from a qualified consultant was received and approved by the Bank’s regulators.  Upon acceptance, the review commenced in May 2012 and was completed in June 2012.
Formulate and implement written profit and budget plans for each year during which the orders are in effect;	Profit and budget plans have been prepared and submitted to regulators as required annually.

Requirement	Status
Develop and implement a strategic plan for each year during which the orders are in effect, to be revised annually;	An annual comprehensive strategic plan was prepared and submitted to regulators as required.
Develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, within a reasonable but unspecified time period;	A capital plan with quarterly benchmarks was prepared and submitted to regulators as required annually.
Formulate a written plan to reduce the Bank’s risk positions in each asset or loan in excess of $100,000 classified as “Doubtful” or “Substandard” at its regulatory examination;	A classified asset reduction plan with quarterly benchmarks measured against capital was prepared and submitted as required.
Eliminate all assets classified as “Loss” at its current regulatory examination;	All assets classified as “Loss” have been eliminated.
Revise the Bank’s loan policy to establish and monitor procedures for adherence to the loan policy and to eliminate credit administration and underwriting deficiencies identified at its current regulatory examination;	The Bank’s loan policy has been revised to include enhanced monitoring procedures and submitted to regulators for review in April 2012.
Develop a comprehensive policy and methodology for determining the allowance for loan and lease losses;	The ALLL policy and methodology for determining the allowance for loan losses were submitted to regulators for review in April 2012.
Develop an interest rate risk policy and procedures to identify, measure, monitor and control the nature and amount of interest rate risk the Bank takes;	The Bank’s interest rate risk policy and procedures were submitted to regulators for review in April 2012.
Revise its liquidity and funds management policy and update and review the policy annually;	The Bank’s liquidity policy and contingency plan were submitted to regulators for review in April 2012.
Refrain from accepting any brokered deposits;	The Bank did not accept brokered deposits.
Refrain from paying cash dividends without prior approval of the FDIC and the Department;	The Bank did not pay cash dividends.
Establish an oversight committee of the board of directors of the Bank with the responsibility to ensure the Bank’s compliance with the orders, and	An oversight committee consisting of three outside directors and one inside director was established and meets periodically to ensure compliance with the orders.
Prepare and submit quarterly reports to the FDIC and the Department detailing the actions taken to secure compliance with the orders.	Quarterly reports were prepared and submitted   as required.

The Orders will remain in effect until modified or terminated by the FDIC and the Department and do not restrict the Bank from transacting its normal banking business.  The Bank will continue to serve its customers in all areas including making loans, establishing lines of credit, accepting deposits and processing banking transactions.  Customer deposits remain fully insured to the highest limits set by the FDIC.  The FDIC and the Department did not impose or recommend any monetary penalties in connection with the Consent Orders.

As of June 30, 2013 and December 31, 2012, the Bank’s tier one leverage capital ratio was 6.27% and 6.00%, respectively, and its total risk based capital ratio was 10.60% and 11.16%, respectively.  Although the Bank experienced losses, tier one leverage capital increased as a result of the decline in average assets.  The total risk based capital ratio decreased because of an increase in loans that carry a higher risk weight than cash or investments.  Management has developed and submitted a Capital Plan that focuses on the following:

1.     Core Profitability from Bank operations—Core profitability is essential to stop the erosion of capital.

2.     Sale of investment securities for a gain—approximately $7.5 million of the Bank’s investment portfolio were sold to generate a gain of approximately $378,000 during the quarter ended June 30, 2013.

3.     External equity investments—An investment banker has been engaged to assist the Bank in developing a strategy and offering memorandum to generate external capital investment.

As a result of the above actions, management believes that the Bank has and will continue to attempt to comply with the terms and conditions of the Orders and will continue to operate as a going concern and an independent financial institution for the foreseeable future.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net loss	$ (242,810)	$ (474,705)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses	15,137	60,000
Loss on sale of other real estate	13,880
Amortization of premiums on investments	44,346	63,512
Amortization of core deposit intangible	89,039	89,039
Depreciation on fixed assets	73,650	114,259
Gain on sale of investment securities	(378,248)
Write-down of other real estate owned	142,506	26,248
Increase in accrued interest receivable and other assets	35,488	11,184
Decrease in accrued interest payable and other liabilities	(141,943)	(105,496)
Net cash used in operating activities	(348,955)	(215,959)
Cash flows from investing activities:
Purchase of held-to-maturity investment securities		(3,249,311)
Purchase of available-for-sale investment securities	(6,972,202)
Proceeds from sale of available-for-sale investment securities	7,731,841
Proceeds from maturity and principal reductions of available-for-sale investment securities	2,904,044	117,594
Proceeds from maturity and principal reductions of held-to-maturity investment securities		7,316,585
Proceeds from the sale of other real estate owned	92,484
Net increase in loans	(792,325)	(1,418,792)
Purchase of bank premises and equipment	(164,652)	(16,135)
Net cash provided by investing activities	2,799,190	2,749,941
Cash flows from financing activities:
Net decrease in deposits	(3,409,638)	(8,971,562)
Net cash used in financing activities	(3,409,638)	(8,971,562)
Net decrease in cash and cash equivalents	(959,403)	(6,437,580)
Cash and cash equivalents at beginning of period	10,236,199	14,497,329
Cash and cash equivalents at end of period	9,276,796	8,059,749
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	60,761	111,552
Noncash transfer of investment securities from held-to-maturity to available-for sale	11,895,037
Noncash transfer of loans to other real estate owned		$ 74,800

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Jun. 30, 2013		Dec. 31, 2012
Assets:
Cash and due from banks	$ 2,538,365		$ 2,363,166
Interest-bearing deposits with banks	306,431		306,033
Federal funds sold	6,432,000		7,567,000
Cash and cash equivalents	9,276,796		10,236,199
Investment securities:
Available-for-sale, at fair value	9,370,323		1,027,293
Held-to-maturity, at amortized cost (fair value of $12,485,687 at December 31, 2012)			11,895,037
Loans, net of unearned discounts and deferred fees	41,853,357		41,501,555
Less allowance for loan losses	(778,556)		(1,203,942)
Net loans	41,074,801		40,297,613
Bank premises and equipment, net	653,731		562,729
Accrued interest receivable	277,108		309,971
Other real estate owned	526,537		775,407
Intangible assets	46,694		135,733
Prepaid expenses and other assets	372,899		375,524
Total assets	61,598,889		65,615,506
Liabilities:
Demand deposits, noninterest-bearing	15,214,822		14,324,970
Demand deposits, interest-bearing	13,002,758		15,526,344
Savings deposits	13,202,666		14,239,216
Time deposits, under $100,000	6,962,001		7,243,593
Time deposits, $100,000 and over	9,184,858		9,642,620
Total deposits	57,567,105		60,976,743
Accrued interest payable	15,574		30,500
Accrued expenses and other liabilities	241,261		368,278
Total liabilities	57,823,940		61,375,521
Shareholders' equity:
Series A preferred stock, noncumulative, 6%, $0.01 par value, 500,000 shares authorized; 136,842 issued and outstanding	1,368		1,368
Common Stock	10,686		10,686
Accumulated other comprehensive (loss) income			34
Common Stock
Shareholders' equity:
Common Stock	8,769	[1]	8,769	[1]
Class B Non-voting common stock
Shareholders' equity:
Common Stock	1,917	[2]	1,917	[2]
Additional paid-in-capital	14,749,852		14,749,852
Accumulated deficit	(10,798,888)		(10,556,078)
Accumulated other comprehensive (loss) income	(188,069)		34,157
Total shareholders' equity	3,774,949		4,239,985
Total liabilities and shareholders' equity	$ 61,598,889		$ 65,615,506

[1] Common stock, $0.01 par value; 2,000,000 shares authorized; 876,921 issued and outstanding

[2] Class B Non-voting common stock; 250,000 shares authorized; $0.01 par value; 191,667 issued and outstanding

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8. Fair Value: Schedule of Fair Value of Assets and Liabilities (Details) (USD $)	Jun. 30, 2013		May 01, 2013	Dec. 31, 2012		Jun. 30, 2012	Dec. 31, 2011
Cash and cash equivalents at beginning of period	$ 9,276,796			$ 10,236,199		$ 8,059,749	$ 14,497,329
Available-for-sale, at fair value	9,370,323			1,027,293
Held-to-maturity, at amortized cost (fair value of $12,485,687 at December 31, 2012)				11,895,037
Book value of securities to be sold	0		7,400,000	12,485,687
Loans, net of unearned discounts and deferred fees	41,853,357			41,501,555
Accrued interest receivable	277,108			309,971
Savings deposits	13,202,666			14,239,216
Accrued interest payable	15,574			30,500
Carrying Amount
Cash and cash equivalents at beginning of period	9,277,000	[1]		10,236,000	[1]
Available-for-sale, at fair value	9,370,323	[2]		1,027,293,000	[2]
Held-to-maturity, at amortized cost (fair value of $12,485,687 at December 31, 2012)				11,895,000	[3]
Loans, net of unearned discounts and deferred fees	41,075,000	[4]		40,298,000	[4]
Accrued interest receivable	277,000	[3]		310,000	[3]
Demand Deposit Accounts	28,218,000	[3]		29,851,000	[3]
Savings deposits	13,202,000	[3]		14,239,000	[3]
Time Deposits	16,147,000	[3]		16,886,000	[3]
Accrued interest payable	16,000	[3]		31,000	[3]
Fair Value
Cash and Cash Equivalents, Fair Value Disclosure	9,277,000	[1]		10,236,000	[1]
Available-for-sale, at fair value	9,370,323	[2]		1,027,293,000	[2]
Book value of securities to be sold				12,485,687,000	[3]
Loans Receivable, Fair Value Disclosure	41,786,000	[4]		40,325,000	[4]
Accrued interest receivable	277,000	[3]		310,000	[3]
Demand Deposit Accounts	28,218,000	[3]		29,851,000	[3]
Savings deposits	13,202,000	[3]		14,239,000	[3]
Time Deposits	16,155,000	[3]		16,902,000	[3]
Accrued interest payable	$ 16,000	[3]		$ 31,000	[3]

[1] Level in Value Hierarchy - Level 1.

[2] Level 1 for money market funds; Level 2 for all other securities.

[3] Level in Value Hierarchy - Level 2.

[4] Level 2 for non-impaired loans; Level 3 for impaired loans.

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7. Other Real Estate Owned: Schedule of Components of Net Expense of Other Real Estate (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Components of Net Expense of Other Real Estate

	Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
(in 000's)	June 30, 2013	June 30, 2012	June 30, 2013	June 30, 2012
Insurance	$4	$10	$10	$17
Professional fees	-	-	-	3
Real estate taxes	5	33	11	36
Utilities	-	11	2	17
Other	2	2	2	2
Transfer-in write-up	-	-	-	(43)
Impairment charges (net)	113	11	143	26
Total	$124	$67	$168	$58

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6. Loans and Allowance For Loan Losses: Past Due Financing Receivables (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Past Due Financing Receivables

An age analysis of past due loans, segregated by class of loans, as of June 30, 2013 is as follows:

		Accruing
	Loans	Loans 90 or
(In 000's)	30-89 Days	More Days		Total Past	Current
	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	-	-	$477	$477	$487	$964
SBA loans		-	-	-	117	117
Asset-based	125	-	-	125	1,786	1,911
Total Commercial and industrial	125	-	477	602	2,390	2,992
Commercial real estate:
Commercial mortgages	213	-	638	851	16,362	17,213
SBA loans	-	-	-	-	607	607
Construction	-	-	-	-	2,244	2,244
Religious organizations	-	-	653	653	12,159	12,812
Total Commercial real estate	213	-	1,291	1,504	31,372	32,876
Consumer real estate:
Home equity loans	358	-	123	481	885	1,366
Home equity lines of credit	-	-	-	-	25	25
1-4 family residential mortgages	54	-	242	296	2,674	2,970
Total consumer real estate	412	-	365	777	3,584	4,361
Total real estate	625	-	1,656	2,281	34,956	37,237
Consumer and other:
Consumer installment	-	-	-	-	23	23
Student loans	103	132	-	235	1,221	1,456
Other	2	-	-	2	143	145
Total consumer and other	105	132	-	237	1,387	1,624
Total loans	$855	$132	$2,133	$3,120	$38,733	$41,853

An age analysis of past due loans, segregated by class of loans, as of December 31, 2012 is as follows:

		Accruing
	Loans	Loans 90 or
	30-89 Days	More Days		Total Past	Current
(In 000's)	Past Due	Past Due	Nonaccrual	Due Loans	Loans	Total Loans
Commercial and industrial:
Commercial	$15	-	$873	888	$574	$1,462
SBA loans	-	-	-	-	125	125
Asset-based	83	-	99	182	1,965	2,147
Total Commercial and industrial	98	-	972	1,070	2,664	3,734
Commercial real estate:
Commercial mortgages	306	-	649	955	13,765	14,720
SBA loans	-	-	-	-	621	621
Construction	-	-	-	-	3,398	3,398
Religious organizations	-	-	674	674	11,968	12,642
Total Commercial real estate	306	-	1,323	1,629	29,752	31,381
Consumer real estate:
Home equity loans	274	44	63	381	1,072	1,453
Home equity lines of credit	-	26	-	26	-	26
1-4 family residential mortgages	69	-	226	295	2,845	3,140
Total consumer real estate	343	70	289	702	3,917	4,619
Total real estate	649	70	1,612	2,331	33,669	36,000
Consumer and other:
Consumer installment	-	-	-	-	30	30
Student loans	87	141	-	228	1,360	1,588
Other	5	-	-	5	145	150
Total consumer and other	92	141	-	233	1,535	1,768
Total loans	$839	$211	$2,584	$3,634	$37,867	$41,502

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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Impaired Financing Receivable, Unpaid Principal Balance	$ 1,817,000	$ 2,344,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,368,000	1,401,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment	449,000	943,000
Impaired Financing Receivable, Recorded Investment	1,817,000	2,344,000
Impaired Financing Receivable, Related Allowance	349,000	843,000
Commercial And Industrial
Impaired Financing Receivable, Unpaid Principal Balance	526,000	1,021,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	77,000	78,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment	449,000	943,000
Impaired Financing Receivable, Recorded Investment	526,000	1,021,000
Impaired Financing Receivable, Related Allowance	349,000	843,000
Commercial And Industrial | Commercial
Impaired Financing Receivable, Unpaid Principal Balance	477,000	873,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	77,000	78,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment	400,000	795,000
Impaired Financing Receivable, Recorded Investment	477,000	873,000
Impaired Financing Receivable, Related Allowance	300,000	695,000
Commercial And Industrial | SBA Loans
Impaired Financing Receivable, Unpaid Principal Balance	49,000	49,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment	49,000	49,000
Impaired Financing Receivable, Recorded Investment	49,000	49,000
Impaired Financing Receivable, Related Allowance	49,000	49,000
Commercial And Industrial | Asset Based Loans
Impaired Financing Receivable, Unpaid Principal Balance		99,000
Impaired Financing Receivable, with Related Allowance, Recorded Investment		99,000
Impaired Financing Receivable, Recorded Investment		99,000
Impaired Financing Receivable, Related Allowance		99,000
Commercial Real Estate
Impaired Financing Receivable, Unpaid Principal Balance	1,291,000	1,323,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,291,000	1,323,000
Impaired Financing Receivable, Recorded Investment	1,291,000	1,323,000
Commercial Real Estate | Commercial Mortgages
Impaired Financing Receivable, Unpaid Principal Balance	638,000	649,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	638,000	649,000
Impaired Financing Receivable, Recorded Investment	638,000	649,000
Commercial Real Estate | Religious Organizations
Impaired Financing Receivable, Unpaid Principal Balance	653,000	674,000
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	653,000	674,000
Impaired Financing Receivable, Recorded Investment	$ 653,000	$ 674,000

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6. Loans and Allowance For Loan Losses: Schedule of Bank's Loan portfolio (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Details
Loans Receivable, Gross, Commercial and Industrial	$ 2,992	$ 3,734
Loans Receivable, Gross, Commercial, Real Estate	32,876	31,381
Loans and Leases Receivable, Gross, Consumer, Real Estate	4,361	4,619
Loans and Leases Receivable, Gross, Consumer	1,624	1,768
Loans Receivable, Net	$ 41,853	$ 41,502

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5. Investment Securities: Investment Portfolio (Details) (USD $)	0 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	May 01, 2013
Available-for-sale Securities, Amortized Cost Basis	$ 9,651,000	$ 976,000
Available-for-sale Securities, Gross Unrealized Gain	41,000	51,000
Available-for-sale Securities, Gross Unrealized Loss	(322,000)
Available-for-sale, at fair value	9,370,323	1,027,293
Held-to-maturity Securities, Amortized Cost before Other than Temporary Impairment		11,895,000
Held-to-maturity Securities, Unrecognized Holding Gain		596,000
Held-to-maturity Securities, Unrecognized Holding Loss		(5,000)
Book value of securities to be sold	0	12,485,687	7,400,000
US Government Agencies Debt Securities
Available-for-sale Securities, Amortized Cost Basis	4,097,000
Available-for-sale Securities, Gross Unrealized Loss	(180,000)
Available-for-sale, at fair value	3,917,000
Held-to-maturity Securities, Amortized Cost before Other than Temporary Impairment		3,605,000
Held-to-maturity Securities, Unrecognized Holding Gain		159,000
Held-to-maturity Securities, Unrecognized Holding Loss		(4,000)
Book value of securities to be sold		3,760,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	5,425,000	847,000
Available-for-sale Securities, Gross Unrealized Gain	41,000	51,000
Available-for-sale Securities, Gross Unrealized Loss	(142,000)
Available-for-sale, at fair value	5,324,000	898,000
Held-to-maturity Securities, Amortized Cost before Other than Temporary Impairment		8,290,000
Held-to-maturity Securities, Unrecognized Holding Gain		437,000
Held-to-maturity Securities, Unrecognized Holding Loss		(1,000)
Book value of securities to be sold		8,726,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	129,000	129,000
Available-for-sale, at fair value	$ 129,000	$ 129,000

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5. Investment Securities: Contractual Maturities of Investment Securities (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Available-for-sale Securities, Debt Maturities, Rolling Year Six Through Ten, Amortized Cost Basis	$ 4,097,000
Available-for-sale Securities, Debt Maturities, Rolling Year Six Through Ten, Fair Value	3,917,000
Available-for-sale Securities, Amortized Cost Basis	9,651,000	976,000
Available-for-sale, at fair value	9,370,323	1,027,293
Available-for-sale Debt Securities, Amortized Cost Basis	9,522,000
Available-for-sale Securities, Debt Securities	9,241,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	5,425,000	847,000
Available-for-sale, at fair value	5,324,000	898,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	129,000	129,000
Available-for-sale, at fair value	$ 129,000	$ 129,000

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8. Fair Value

6 Months Ended

Jun. 30, 2013

Notes

8. Fair Value

8.  Fair Value

Fair Value Measurement

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance in FASB ASC 820 provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

Level 1

· Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

· Quoted prices for similar assets or liabilities in active markets.

· Quoted prices for identical or similar assets or liabilities in markets that are not active.

· Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

Level 3

· Prices or valuation techniques that require inputs that are both unobservable (i.e., supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

· These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

 A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Fair Value on a Recurring Basis

Securities Available for Sale (“AFS”):  Where quoted prices are available in an active market, securities would be classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds and mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow models. Level 2 securities include U.S. agency securities and mortgage backed agency securities.  In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at June 30, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$3,917	-	$3,917	-
Government Sponsored Enterprises residential mortgage-backed securities	5,324	-	5,324	-
Money Market Funds	129	129	-	-
Total	$9,370	$129	$9,241	-

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at December 31, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
Government Sponsored Enterprises residential mortgage-backed securities	$898	-	$898	-
Money Market Funds	129	129	-	-
Total	$1,027	$129	898$	-

The fair value of the Bank’s AFS securities portfolio was approximately $9,370,000 and $1,027,000 at June 30, 2013, and December 31, 2012, respectively.  In May 2013, the Bank transferred its investment securities held-to-maturity to available-for-sale.  At June 30, 2013, approximately 57% of the portfolio consisted of residential mortgage-backed securities, which had a fair value of approximately $5,324,000.  All the residential mortgage-backed securities were issued or guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).  The underlying loans for these securities are residential mortgages that are geographically dispersed throughout the United States.  The majority of the AFS securities were classified as level 2 assets at June 30, 2013.  The valuation of AFS securities using Level 2 inputs was primarily determined using the market approach, which uses quoted prices for similar instruments and all relevant information.  There were no transfers between Level 1 and Level 2 assets during the period ended June 30, 2013 and year ended December 31, 2012.

Fair Value on a Nonrecurring Basis

Certain assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  The following table presents the assets carried on the consolidated balance sheet by level within the hierarchy as of June 30, 2013 and December 31, 2012, for which a nonrecurring change in fair value has been recorded during the six months ended June 30, 2013 and year ended December 31, 2012.

Carrying Value at June 30, 2013:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total fair value gain (loss) during 6 months ended June 30, 2013
Impaired loans	$1,468	-	-	$1,468	-
Other real estate owned (“OREO”)	527	-	-	527	(143)

Carrying Value at December 31, 2012:

(in 000’s)	Total	Quoted Prices in Active markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs  (Level 3)	Total fair value gain (loss) during 12 months ended December 31, 2012
Impaired Loans	$1,501	-	-	$1,501	$(843)
Other real estate owned (“OREO”)	775	-	-	775	(233)

The measured impairment for collateral dependent of impaired loans is determined by the fair value of the collateral less estimated liquidation costs.  Collateral values for loans and OREO are determined by annual or more frequent appraisals if warranted by volatile market conditions, which may be discounted up to 10% based upon management’s review and the estimated cost of liquidation. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.  Adjustments are routinely made on the appraisal process by the appraisers for differences between the comparable sales and income data available.  Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation allowance for impaired loans is adjusted as necessary based on changes in the value of collateral as well as the cost of liquidation.  It is included in the allowance for loan losses in the consolidated statements of condition. The valuation allowance for impaired loans at June 30, 2013 was approximately $ 349,000.  The valuation allowance for impaired loans at December 31, 2012 was approximately $843,000.

Fair Value of Financial Instruments

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

      Cash and cash equivalents: The carrying amounts reported in the statement of condition for cash and cash equivalents approximate those assets’ fair values.

      Investment securities: Fair values for investment securities available-for-sale are as described above.  Investment securities held-to-maturity are based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

      Loans: The fair value of loans was estimated using a discounted cash flow analysis, which considered estimated pre­payments, amortizations, and non performance risk.  Prepayments and discount rates were based on current marketplace estimates and pricing.  Residential mortgage loans were discounted at the current effective yield, including fees, of conventional loans, adjusted for their maturities with a spread to the Treasury yield curve.   The fair value for nonperforming/impaired loans is determined by using discounted cashflow analysis or underlying collateral values, where applicable.

       Accrued interest receivable:  The carrying amount of accrued interest receivable approximates fair value.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings, and certain types of money market accounts) are equal to the amounts payable on demand at the reporting date (e.g., their carrying amounts).  The carrying amounts for variable-rate, fixed-term money market accounts and certificates of deposit approximate the fair values at the reporting date.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation.  The Treasury yield curve was utilized for discounting cash flows as it approximates the average marketplace certificate of deposit rates across the relevant maturity spectrum.

Accrued interest payable:  The carrying amounts of accrued interest payable approximate fair value.

Commitments to extend credit: The carrying amounts for commitments to extend credit approximate fair value as such commitments are not substantially different from the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparts.  The carrying amount of accrued interest payable approximates fair market value.

The fair value of assets and liabilities are depicted below:

		June 30, 2013		December 31, 2012
(in 000’s)	Level in	Carrying	Fair	Carrying	Fair
	Value Hierarchy	Amount	Value	Amount	Value
(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$9,277	$9,277	$10,236	$10,236
Available for sale securities	(1)	9,370	9,370	1,027	1,027
Held to maturity securities	Level 2	-	-	11,895	12,486
Loans, net of allowance for loan losses	(2)	41,075	41,786	40,298	40,325
Accrued interest receivable	Level 2	277	277	310	310
Liabilities:
Demand deposits	Level 2	28,218	28,218	29,851	29,851
Savings deposits	Level 2	13,202	13,202	14,239	14,239
Time deposits	Level 2	16,147	16,155	16,886	16,902
Accrued interest payable	Level 2	16	16	31	31

(1) Level 1 for money market funds; Level 2 for all other securities.

(2) Level 2 for non-impaired loans; Level 3 for impaired loans.

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8. Fair Value: Schedule of Fair Value of Assets on a Recurring Basis (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Fair Value of Assets on a Recurring Basis

Assets on the consolidated balance sheets measured at fair value on a recurring basis are summarized below.

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets Measured at Fair Value at June 30, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
U.S. Government agency securities	$3,917	-	$3,917	-
Government Sponsored Enterprises residential mortgage-backed securities	5,324	-	5,324	-
Money Market Funds	129	129	-	-
Total	$9,370	$129	$9,241	-

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets/Liabilities Measured at Fair Value at December 31, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale:
Government Sponsored Enterprises residential mortgage-backed securities	$898	-	$898	-
Money Market Funds	129	129	-	-
Total	$1,027	$129	898$	-

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6. Loans and Allowance For Loan Losses: Past Due Financing Receivables (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, 30-89 Days Past Due	$ 855	$ 839
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	132	211
Financing Receivable, Recorded Investment, Nonaccrual Status	2,133	2,584
Financing Receivable, Recorded Investment, Past Due	3,120	3,634
Financing Receivable, Recorded Investment, Current	38,733	37,867
Total Loans	41,853	41,502
Commercial And Industrial
Financing Receivable, Recorded Investment, 30-89 Days Past Due	125	98
Financing Receivable, Recorded Investment, Nonaccrual Status	477	972
Financing Receivable, Recorded Investment, Past Due	602	1,070
Financing Receivable, Recorded Investment, Current	2,390	2,664
Total Loans	2,992	3,734
Commercial And Industrial | Commercial
Financing Receivable, Recorded Investment, 30-89 Days Past Due		15
Financing Receivable, Recorded Investment, Nonaccrual Status	477	873
Financing Receivable, Recorded Investment, Past Due	477	888
Financing Receivable, Recorded Investment, Current	487	574
Total Loans	964	1,462
Commercial And Industrial | SBA Loans
Financing Receivable, Recorded Investment, Current	117	125
Total Loans	117	125
Commercial And Industrial | Asset Based Loans
Financing Receivable, Recorded Investment, 30-89 Days Past Due	125	83
Financing Receivable, Recorded Investment, Nonaccrual Status		99
Financing Receivable, Recorded Investment, Past Due	125	182
Financing Receivable, Recorded Investment, Current	1,786	1,965
Total Loans	1,911	2,147
Commercial Real Estate Portfolio Segment
Financing Receivable, Recorded Investment, 30-89 Days Past Due	213	306
Financing Receivable, Recorded Investment, Nonaccrual Status	1,291	1,323
Financing Receivable, Recorded Investment, Past Due	1,504	1,629
Financing Receivable, Recorded Investment, Current	31,372	29,752
Total Loans	32,876	31,381
Commercial Real Estate Portfolio Segment | SBA Loans
Financing Receivable, Recorded Investment, Current	607	621
Total Loans	607	621
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Financing Receivable, Recorded Investment, 30-89 Days Past Due	213	306
Financing Receivable, Recorded Investment, Nonaccrual Status	638	649
Financing Receivable, Recorded Investment, Past Due	851	955
Financing Receivable, Recorded Investment, Current	16,362	13,765
Total Loans	17,213	14,720
Commercial Real Estate Portfolio Segment | Construction
Financing Receivable, Recorded Investment, Current	2,244	3,398
Total Loans	2,244	3,398
Commercial Real Estate Portfolio Segment | Religious Organizations
Financing Receivable, Recorded Investment, Nonaccrual Status	653	674
Financing Receivable, Recorded Investment, Past Due	653	674
Financing Receivable, Recorded Investment, Current	12,159	11,968
Total Loans	12,812	12,642
Consumer Real Estate
Financing Receivable, Recorded Investment, 30-89 Days Past Due	412	343
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due		70
Financing Receivable, Recorded Investment, Nonaccrual Status	365	289
Financing Receivable, Recorded Investment, Past Due	777	702
Financing Receivable, Recorded Investment, Current	3,584	3,917
Total Loans	4,361	4,619
Consumer Real Estate | Home Equity Line of Credit
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due		26
Financing Receivable, Recorded Investment, Past Due		26
Financing Receivable, Recorded Investment, Current	25
Total Loans	25	26
Consumer Real Estate | Home Equity Loans
Financing Receivable, Recorded Investment, 30-89 Days Past Due	358	274
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due		44
Financing Receivable, Recorded Investment, Nonaccrual Status	123	63
Financing Receivable, Recorded Investment, Past Due	481	381
Financing Receivable, Recorded Investment, Current	885	1,072
Total Loans	1,366	1,453
Consumer Real Estate | Family Residential Mortgage
Financing Receivable, Recorded Investment, 30-89 Days Past Due	54	69
Financing Receivable, Recorded Investment, Nonaccrual Status	242	226
Financing Receivable, Recorded Investment, Past Due	296	295
Financing Receivable, Recorded Investment, Current	2,674	2,845
Total Loans	2,970	3,140
Total Real Estate
Financing Receivable, Recorded Investment, 30-89 Days Past Due	625	649
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due		70
Financing Receivable, Recorded Investment, Nonaccrual Status	1,656	1,612
Financing Receivable, Recorded Investment, Past Due	2,281	2,331
Financing Receivable, Recorded Investment, Current	34,956	33,669
Total Loans	37,237	36,000
Consumer And Other Loans
Financing Receivable, Recorded Investment, 30-89 Days Past Due	105	92
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	132	141
Financing Receivable, Recorded Investment, Past Due	237	233
Financing Receivable, Recorded Investment, Current	1,387	1,535
Total Loans	1,624	1,768
Consumer And Other Loans | Consumer Installment
Financing Receivable, Recorded Investment, Current	23	30
Total Loans	23	30
Consumer And Other Loans | Student Loans
Financing Receivable, Recorded Investment, 30-89 Days Past Due	103	87
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	132	141
Financing Receivable, Recorded Investment, Past Due	235	228
Financing Receivable, Recorded Investment, Current	1,221	1,360
Total Loans	1,456	1,588
Consumer And Other Loans | Other
Financing Receivable, Recorded Investment, 30-89 Days Past Due	2	5
Financing Receivable, Recorded Investment, Past Due	2	5
Financing Receivable, Recorded Investment, Current	143	145
Total Loans	$ 145	$ 150

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2. Net Income (loss) Per Share: Schedule of Earnings Per Shares Basic And Diluted (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Earnings Per Shares Basic And Diluted

The calculation of net (loss) income per share follows:

	Three Months Ended  June 30, 2013	Three Months Ended June 30, 2012	Six Months Ended  June 30, 2013	Six Months Ended June 30, 2012
Basic:
Net income (loss) available to common shareholders	$95,977	$(236,896)	$(242,810)	$(474,705)
Average common shares outstanding-basic	1,068,588	1,068,588	1,068,588	1,068,588
Net income (loss) per share-basic	$0.09	$(0.22)	$(0.23)	$(0.45)
Diluted:
Average common shares-diluted	1,068,588	1,068,588	1,068,588	1,068,588
Net income (loss) per share-diluted	$0.09	$(0.22)	$(0.23)	$(0.44)

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7. Other Real Estate Owned

6 Months Ended

Jun. 30, 2013

Notes

7. Other Real Estate Owned

7. Other Real Estate Owned

Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense.

Activity in other real estate owned for the periods was as follows:

(in 000's)	Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
	June 30, 2013	June 30, 2012	June 30, 2013	June 30, 2012
Beginning balance	$718	$1,344	$775	$1,284
Additions, transfers from loans	-	-	-	75
Proceeds from sales	(65)	-	(92)	-
	653	1,344	683	1,359
Less: write-downs and losses on sales	(126)	(11)	(156)	(26)
Ending Balance	$527	$1,333	$527	$1,333

The following schedule reflects the components of other real estate owned:

(in 000's)	June 30, 2013	December 31, 2012
Commercial real estate	$206	$206
Residential real estate	321	569
Total	$527	$775

The following table details the components of net expense of other real estate owned:

	Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
(in 000's)	June 30, 2013	June 30, 2012	June 30, 2013	June 30, 2012
Insurance	$4	$10	$10	$17
Professional fees	-	-	-	3
Real estate taxes	5	33	11	36
Utilities	-	11	2	17
Other	2	2	2	2
Transfer-in write-up	-	-	-	(43)
Impairment charges (net)	113	11	143	26
Total	$124	$67	$168	$58

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2. Net Income (loss) Per Share

6 Months Ended

Jun. 30, 2013

Notes

2. Net Income (loss) Per Share

2. Net Income (Loss) Per Share

The calculation of net (loss) income per share follows:

	Three Months Ended  June 30, 2013	Three Months Ended June 30, 2012	Six Months Ended  June 30, 2013	Six Months Ended June 30, 2012
Basic:
Net income (loss) available to common shareholders	$95,977	$(236,896)	$(242,810)	$(474,705)
Average common shares outstanding-basic	1,068,588	1,068,588	1,068,588	1,068,588
Net income (loss) per share-basic	$0.09	$(0.22)	$(0.23)	$(0.45)
Diluted:
Average common shares-diluted	1,068,588	1,068,588	1,068,588	1,068,588
Net income (loss) per share-diluted	$0.09	$(0.22)	$(0.23)	$(0.44)

The preferred stock is non cumulative and the Company is restricted from paying dividends.  Therefore, no effect of the preferred stock is included in the income (loss) per share calculations.

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9. Regulatory (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Details
Description of Regulatory Requirements, Prompt Corrective Action	Management has developed and submitted a Capital Plan that focuses on the following: 1. Core Profitability from Bank operations—Core profitability is essential to stop the erosion of capital. 2. Sale of investment securities for a gain—approximately $7.5 million of the Bank’s investment portfolio were sold to generate a gain of approximately $378,000 during the quarter ended June 30, 2013. 3. External equity investments—An investment banker has been engaged to assist the Bank in developing a strategy and offering memorandum to generate external capital investment.	Develop a written capital plan detailing the manner in which the Bank will meet and maintain a ratio of Tier 1 capital to total assets (“leverage ratio”) of at least 8.5% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) of at least 12.5%, within a reasonable but unspecified time period;
Tier One Leverage Capital to Average Assets	6.27%	6.00%
Capital to Risk Weighted Assets	10.60%	11.16%

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7. Other Real Estate Owned: Schedule of Components of Other Real Estate Owned (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Commercial Real Estate
Other Real Estate, Foreclosed Assets, and Repossessed Assets	$ 206	$ 206
Residential Real Estate
Other Real Estate, Foreclosed Assets, and Repossessed Assets	321	569
Real Estate
Other Real Estate, Foreclosed Assets, and Repossessed Assets	$ 527	$ 775

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2. Net Income (loss) Per Share: Schedule of Earnings Per Shares Basic And Diluted (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Details
Net income (loss)	$ 95,977	$ (236,896)	$ (242,810)	$ (474,705)
Weighted Average Number of Shares Outstanding, Basic	1,068,588	1,068,588	1,068,588	1,068,588
Earnings Per Share, Basic	$ 0.09	$ (0.22)	$ (0.23)	$ (0.45)
Weighted Average Number of Shares Outstanding, Diluted	1,068,588	1,068,588	1,068,588	1,068,588
Earnings Per Share, Diluted	$ 0.09	$ (0.22)	$ (0.23)	$ (0.44)

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5. Investment Securities: Contractual Maturities of Investment Securities (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Contractual Maturities of Investment Securities

The amortized cost and fair value of debt securities classified as available-for-sale and held-to-maturity, by contractual maturity, as of June 30, 2013, are as follows:

(In 000’s)	Amortized Cost	Fair Value
Available-for-Sale
Due in one year	-	-
Due after one year through five years	-	-
Due after five years through ten years	4,097	3,917
Government Sponsored Enterprises residential mortgage-backed securities	5,425	5,324
Total debt securities	9,522	9,241
Investments in money market funds	129	129
	$9,651	9,370

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1. Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Policies

Management's Use of Estimates

Management’s Use of Estimates

The preparation of the financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  Material estimates which are particularly susceptible to significant change in the near term relate to the fair value of investment securities, the determination of the allowance for loan losses, valuation allowance for deferred tax assets, the carrying value of other real estate owned, the determination of other than temporary impairment for securities and consideration of impairment of intangible assets.

Commitments

Commitments

In the general course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying financial statements. Management does not anticipate any material losses as a result of these commitments.

Contingencies

The Company is from time to time a party to routine litigation in the normal course of its business. Management does not believe that the resolution of any such litigation will have a material adverse effect on the financial condition or results of operations of the Company. However, the ultimate outcome of any such litigation, as with litigation generally, is inherently uncertain and it is possible that some litigation matters may be resolved adversely to the Company.

Allowance For Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses.  Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance.  When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.  Such periodic assessments may, in management’s judgment, require the Bank to recognize additions or reductions to the allowance.

Various regulatory agencies periodically review the adequacy of the Bank’s allowance for loan losses as an integral part of their examination process.  Such agencies may require the Bank to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination.  It is reasonably possible that the above factors may change significantly and, therefore, affects management’s determination of the allowance for loan losses in the near term.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical charge-off experience, other qualitative factors, and adjustments made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.  The Bank does not allocate reserves for unfunded commitments to fund lines of credit.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Bank will identify and assess loans that may be impaired through any of the following processes:

·       During regularly scheduled meetings of the Asset Quality Committee

·       During regular reviews of the delinquency report

·       During the course of routine account servicing, annual review, or credit file update

·       Upon receipt of verifiable evidence of a material reduction in the value of collateral to a level that creates a less than desirable LTV ratio

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller, homogeneous loans, including consumer installment and home equity loans, 1-4 family residential mortgages, and student loans are evaluated collectively for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.

Non-accrual and Past Due Loans.

Non-accrual and Past Due Loans.

Loans are considered past due if the required principal and interest payments have not been received 30 days as of the date such payments were due.  The Bank generally places a loan on non-accrual status when interest or principal is past due 90 days or more.  If it otherwise appears doubtful that the loan will be repaid, management may place the loan on nonaccrual status before the lapse of 90 days. Interest on loans past due 90 days or more ceases to accrue except for loans that are well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, previously accrued and unpaid interest is reversed out of income.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Income Taxes

Income Taxes

Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.   For financial reporting purposes, a valuation allowance of 100% of the net deferred tax asset has been recognized to offset the net deferred tax assets related to cumulative temporary differences and tax loss carryforwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, an income tax benefit may be required to increase the recorded value of the net deferred tax asset to the expected realizable amount.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more-likely-than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits, if any, would be recognized in income tax expense in the consolidated statements of operations.

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6. Loans and Allowance For Loan Losses: Allowance for Credit Losses on Financing Receivables (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Allowance for Credit Losses on Financing Receivables

The following table presents an analysis of the allowance for loan losses.

(in 000's)	For the Three months ended June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$614	$275	$48	-	$937
Provision (credit) for loan losses	15	(65)	(6)	1	(55)
Charge-offs	(184)	-	-	(4)	(188)
Recoveries	1	78	2	3	84
Net charge-offs	(183)	78	2	(1)	(104)
Ending balance	$446	$288	$44	-	$778

(in 000's)	For the Three Months ended June 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$417	$412	$35	-	$864
Provision for loan losses	79	(47)	(2)	-	30
Charge-offs	-	-		-	-
Recoveries	-	2	10	-	12
Net charge-offs	-	2	10	-	12
Ending balance	$496	$367	$43	-	$906

(in 000’s)	For the Six months ended June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision for loan losses	77	(98)	35	1	15
Charge-offs	(524)	-	-	(4)	(528)
Recoveries	2	78	4	3	87
Net charge-offs	(522)	78	4	(1)	(441)
Ending balance	$446	$288	$44	-	$778

(in 000's)	For the Six months ended June 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$387	$412	$68	-	$867
Provision for loan losses	109	(50)	-	1	60
Charge-offs	-	-	(38)	(9)	(47)
Recoveries	-	5	13	8	26
Net charge-offs	-	5	(21)	(1)	(21)
Ending balance	$496	$367	$43	-	$906

(in 000's)	June 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Period-end amount allocated to:
Loans indivdually evaluated for impairment	$349	-	-	-	349
Loans collectively  evaluated for impairment	97	288	44	-	429
	$446	$288	$44	-	$778
Loans, ending balance:
Loans individually evaluated for impairment	$526	$1,291	-	-	1,817
Loans collectively  evaluated for impairment	2,466	31,585	4,361	1,624	40,036
Total	$2,992	$32,876	$4,361	$1,624	$41,853

(in 000's)	December 31, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Period-end amount allocated to:
Loans indivdually evaluated for impairment	843	-	-	-	843
Loans collectively  evaluated for impairment	48	308	5	-	361
	$891	$308	$5	-	$1,204
Loans, ending balance:
Loans indivdually evaluated for impairment	$1,021	$1,323	-	-	$2,344
Loans collectively  evaluated for impairment	2,713	30,058	4,619	1,768	39,158
Total	$3,734	$31,381	$4,619	$1,768	$41,502

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5. Investment Securities: Schedule of Unrealized Loss on Investments (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Unrealized Loss on Investments

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2013:

	Number	Less than 12 months		12 months or longer		Total
Description of	of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	securities	Value	Losses	value	losses	value	losses
U.S. Government
agency securities	15	$3,917	$(180)	-	-	$3,917	$(180)
Government Sponsored Enterprises
residential mortgage-backed securities	18	4,307	(142)	-	-	4,307	(142)
Total temporarily
Impaired investment
securities	33	$8,544	$(322)	-	-	$8,224	$( 322)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2012:

	Number	Less than 12 months		12 months or longer		Total
Description of	of	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
Securities	securities	Value	Losses	value	losses	value	losses
U.S. Government
agency securities	3	$746	$(4)	-	-	$746	$(4)
Government Sponsored Enterprises
residential mortgage-backed securities	2	$253	$(1)	-	-	$253	$(1)
Total temporarily
Impaired investment
securities	5	$999	$(5)	-	-	$999	$(5)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 01, 2013
Document and Entity Information:
Entity Registrant Name	UNITED BANCSHARES INC /PA
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Entity Central Index Key	0000944792
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		1,068,588
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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6. Loans and Allowance For Loan Losses: Schedule of Bank's Loan portfolio (Tables)

6 Months Ended

Jun. 30, 2013

Tables/Schedules

Schedule of Bank's Loan portfolio

The composition of the Bank’s loan portfolio is as follows:

(Dollars in thousands)	June 30, 2013	December 31, 2012
Commercial and industrial	$2,992	$3,734
Commercial real estate	32,876	31,381
Consumer real estate	4,361	4,619
Consumer loans other	1,624	1,768
Total loans	$41,853	$41,502