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:     September 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 April 11, 2014 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 April 11, 2014.

EXPLANATORY NOTE

The sole purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, originally filed with the Securities and Exchange Commission on November 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.

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)
April 11, 2014	/s/ Evelyn F. Smalls
Date	Evelyn F. Smalls
	President and Chief Executive Officer
April 11, 2014	/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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6. Loans and Allowance For Loan Losses: Schedule of Bank's Loan Portfolio (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Details
Commercial and industrial	$ 3,077	$ 3,734
Commercial real estate	33,672	31,381
Consumer real estate	3,978	4,619
Consumer loans other	1,591	1,768
Total loans	$ 42,318	$ 41,502

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7. Other Real Estate Owned: Schedule of Components Of Net Expense Of Other Real Estate (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Professional fees	$ 115,528	$ 104,666	$ 263,708	$ 256,198
Transfer-in write-up	3,000	(128,000)	(153,000)	(159,000)
Impairment charges (net)			142,506	153,298
Total	17,210	147,051	184,754	204,585
Other Real Estate
Insurance	3,000	5,000	13,000	22,000
Professional fees				3,000
Real estate taxes	6,000	11,000	17,000	47,000
Utilities	1,000	3,000	3,000	20,000
Other	7,000			3,000
Transfer-in write-up		1,000	8,000	(43,000)
Impairment charges (net)		127,000	144,000	153,000
Total	$ 17,210	$ 147,051	$ 184,754	$ 204,585

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7. Other Real Estate Owned: Other Real Estate, Roll Forward (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Details
Other Real Estate, Beginning Balance	$ 527,000	$ 1,333,000	$ 775,407	$ 1,284,000
Additions, transfers from loans				75,000
Proceeds from sales	(48,000)	(28,000)	(140,000)	(23,000)
Other Real Estate, Period Increase (Decrease)	479,000	1,305,000	635,000	1,336,000
Write-downs and net gains (losses) on sales	3,000	(128,000)	(153,000)	(159,000)
Other Real Estate, Ending Balance	$ 481,737	$ 1,177,000	$ 481,737	$ 1,177,000

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2. Net Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Details
Net loss available to common shareholders	$ (333,359)	$ (407,236)	$ (576,205)	$ (881,941)
Average common shares outstanding-basic	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-basic	$ (0.31)	$ (0.38)	$ (0.54)	$ (0.83)
Average common shares-diluted	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-diluted	$ (0.31)	$ (0.38)	$ (0.54)	$ (0.83)

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Impaired Financing Receivables

Impaired loans as of September 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	$451	$52	$399	$451	$298
SBA  loans	49	-	49	49	49
Total commercial and industrial	500	52	448	500	347
Commercial real estate:	632	632	-	632	-
Commercial mortgages	161	161	-	161	-
Religious organizations	642	642	-	642	-
Total commercial real estate	1,435	1,435	-	1,435	-
Total loans	$1,935	$1,487	$448	$1,935	$347

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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8. Fair Value: Schedule of Fair Value of Assets Measured on a Nonrecurring Basis (Details) (USD $)	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Impaired loans	$ 41,506,251		$ 40,297,613
Other real estate owned	481,737	527,000	775,407	1,177,000	1,333,000	1,284,000
Impaired Loans, Carrying Value
Impaired loans	1,588,000		1,501,000
Fair Value, Inputs, Level 1
Other real estate owned	0		0
Fair Value, Inputs, Level 1 | Impaired Loans, Carrying Value
Impaired loans	0		0
Fair Value, Inputs, Level 2
Other real estate owned	0		0
Fair Value, Inputs, Level 2 | Impaired Loans, Carrying Value
Impaired loans	0		0
Fair Value, Inputs, Level 3
Other real estate owned	481,737		775,407
Fair Value, Inputs, Level 3 | Impaired Loans, Carrying Value
Impaired loans	1,588,000		1,501,000
Total fair value gain (loss)
Other real estate owned	0		(233,000)
Total fair value gain (loss) | Impaired Loans, Carrying Value
Impaired loans	$ 0		$ (843,000)

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6. Loans and Allowance For Loan Losses: Past Due Financing Receivables (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Loans 30-89 Days Past Due	$ 1,352	$ 839
Accruing Loans 90 or More Days Past Due	118	211
Loans, Nonaccrual	2,249	2,584
Total Past Due Loans	3,719	3,634
Current Loans	38,599	37,867
Total Loans	42,318	41,502
Commercial And Industrial
Loans 30-89 Days Past Due	3	98
Loans, Nonaccrual	451	972
Total Past Due Loans	454	1,070
Current Loans	2,623	2,664
Total Loans	3,077	3,734
Commercial And Industrial | Commercial
Loans 30-89 Days Past Due	3	15
Loans, Nonaccrual	451	873
Total Past Due Loans	454	888
Current Loans	602	574
Total Loans	1,056	1,462
Commercial And Industrial | SBA Loans
Current Loans	115	125
Total Loans	115	125
Commercial And Industrial | Asset Based Loans
Loans 30-89 Days Past Due		83
Loans, Nonaccrual		99
Total Past Due Loans		182
Current Loans	1,906	1,965
Total Loans	1,906	2,147
Commercial Real Estate Portfolio Segment
Loans 30-89 Days Past Due	876	306
Loans, Nonaccrual	1,434	1,323
Total Past Due Loans	2,310	1,629
Current Loans	31,362	29,752
Total Loans	33,672	31,381
Commercial Real Estate Portfolio Segment | SBA Loans
Loans 30-89 Days Past Due	171
Loans, Nonaccrual	160
Total Past Due Loans	331
Current Loans	270	621
Total Loans	601	621
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Loans 30-89 Days Past Due	705	306
Loans, Nonaccrual	632	649
Total Past Due Loans	1,337	955
Current Loans	16,315	13,765
Total Loans	17,652	14,720
Commercial Real Estate Portfolio Segment | Construction
Current Loans	2,550	3,398
Total Loans	2,550	3,398
Commercial Real Estate Portfolio Segment | Religious Organizations
Loans, Nonaccrual	642	674
Total Past Due Loans	642	674
Current Loans	12,227	11,968
Total Loans	12,869	12,642
Consumer Real Estate
Loans 30-89 Days Past Due	385	343
Accruing Loans 90 or More Days Past Due		70
Loans, Nonaccrual	364	289
Total Past Due Loans	749	702
Current Loans	3,229	3,917
Total Loans	3,978	4,619
Consumer Real Estate | Home Equity Line of Credit
Accruing Loans 90 or More Days Past Due		26
Total Past Due Loans		26
Current Loans	25
Total Loans	25	26
Consumer Real Estate | Home Equity Loans
Loans 30-89 Days Past Due	331	274
Accruing Loans 90 or More Days Past Due		44
Loans, Nonaccrual	122	63
Total Past Due Loans	453	381
Current Loans	892	1,072
Total Loans	1,345	1,453
Consumer Real Estate | Family Residential Mortgage
Loans 30-89 Days Past Due	54	69
Loans, Nonaccrual	242	226
Total Past Due Loans	296	295
Current Loans	2,312	2,845
Total Loans	2,608	3,140
Total Real Estate
Loans 30-89 Days Past Due	1,261	649
Accruing Loans 90 or More Days Past Due		70
Loans, Nonaccrual	1,798	1,612
Total Past Due Loans	3,059	2,331
Current Loans	34,591	33,669
Total Loans	37,650	36,000
Consumer And Other Loans
Loans 30-89 Days Past Due	88	92
Accruing Loans 90 or More Days Past Due	118	141
Total Past Due Loans	206	233
Current Loans	1,385	1,535
Total Loans	1,591	1,768
Consumer And Other Loans | Consumer Installment
Current Loans	19	30
Total Loans	19	30
Consumer And Other Loans | Student Loans
Loans 30-89 Days Past Due	83	87
Accruing Loans 90 or More Days Past Due	118	141
Total Past Due Loans	201	228
Current Loans	1,215	1,360
Total Loans	1,416	1,588
Consumer And Other Loans | Other
Loans 30-89 Days Past Due	5	5
Total Past Due Loans	5	5
Current Loans	151	145
Total Loans	$ 156	$ 150

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5. Investment Securities (Details) (USD $)	2 Months Ended
	Jun. 30, 2013
Details
Held-to-maturity Securities, Sold Security, at Carrying Value	$ 7,400,000
Held-to-maturity Securities, Sold Security, Realized Gain (Loss)	$ 378,000

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8. Fair Value: Schedule of Fair Value of Assets and Liabilities (Details) (USD $)	Sep. 30, 2013		Dec. 31, 2012		Sep. 30, 2012	Dec. 31, 2011
Cash and cash equivalents	$ 9,177,594		$ 10,236,199		$ 11,703,161	$ 14,497,329
Available for sale securities	9,878,535		1,027,293
Held to maturity securities			11,895,037
Held to maturity securities, Fair Value	0		12,485,687
Loans, net of allowance for loan losses	42,317,856		41,501,555
Accrued interest receivable	285,877		309,971
Savings deposits	13,121,855		14,239,216
Accrued interest payable	14,892		30,500
Carrying Amount
Cash and cash equivalents	9,178,000	[1]	10,236,000	[1]
Available for sale securities	9,878,535	[2]	1,027,293	[2]
Held to maturity securities	0	[3]	11,895,037	[3]
Loans, net of allowance for loan losses	41,506,000	[4]	40,298,000	[4]
Accrued interest receivable	286,000	[3]	310,000	[3]
Demand deposits	30,063,000	[3]	29,851,000	[3]
Savings deposits	13,122,000	[3]	14,239,000	[3]
Time deposits	15,520,000	[3]	16,886,000	[3]
Accrued interest payable	15,000	[3]	31,000	[3]
Fair Value
Cash and cash equivalents	9,178,000	[1]	10,236,000	[1]
Available for sale securities	9,878,535	[2]	1,027,293	[2]
Held to maturity securities, Fair Value	0	[3]	12,485,687	[3]
Loans, net of allowance for loan losses	41,459,000	[4]	40,325,000	[4]
Accrued interest receivable	286,000	[3]	310,000	[3]
Demand deposits	30,063,000	[3]	29,851,000	[3]
Savings deposits	13,122,000	[3]	14,239,000	[3]
Time deposits	15,523,000	[3]	16,902,000	[3]
Accrued interest payable	$ 15,000	[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 Other Real Estate Owned (Details) (USD $)	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Other real estate owned	$ 481,737	$ 527,000	$ 775,407	$ 1,177,000	$ 1,333,000	$ 1,284,000
Commercial Real Estate
Other real estate owned	206,000		206,000
Residential Real Estate
Other real estate owned	$ 276,000		$ 569,000

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4. New Authoritative Accounting Guidance

9 Months Ended

Sep. 30, 2013

Notes

4. New Authoritative Accounting Guidance

4. New Authoritative Accounting Guidance

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.

ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in ASU 2013-11 include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  The amendments in this Update are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist.  The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  The Company is currently evaluating the impact of these amendments.

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6. Loans and Allowance For Loan Losses: Financing Receivable Credit Quality Indicators (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Commercial real estate	$ 33,672	$ 31,381
Consumer real estate	3,978	4,619
Total consumer loans	1,591	1,768
Total loans	42,318	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	29,582	26,249
Satisfactory | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	1,888	2,000
Satisfactory | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	132	104
Satisfactory | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	23	27
Satisfactory | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	1,733	1,869
Satisfactory | Commercial Real Estate
Commercial real estate		24,349
Satisfactory | Commercial Real Estate | SBA Loans
Commercial real estate	440	621
Satisfactory | Commercial Real Estate | Commercial Mortgages
Commercial real estate	15,552	12,678
Satisfactory | Commercial Real Estate | Construction
Commercial real estate	2,550	2,767
Satisfactory | Commercial Real Estate | Religious Organizations
Commercial real estate	9,152	8,183
Pass
Loans and Leases Receivable, Gross, Commercial	4,002	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
Commercial real estate		4,945
Pass | Commercial Real Estate | Commercial Mortgages
Commercial real estate	1,359	1,322
Pass | Commercial Real Estate | Religious Organizations
Commercial real estate	2,298	3,623
Special Mention
Loans and Leases Receivable, Gross, Commercial	873	485
Special Mention | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	95	323
Special Mention | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	4	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	48	54
Special Mention | Commercial Real Estate
Commercial real estate		162
Special Mention | Commercial Real Estate | Religious Organizations
Commercial real estate	777	162
Substandard
Loans and Leases Receivable, Gross, Commercial	1,417	2,336
Substandard | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	106	628
Substandard | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	57	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
Commercial real estate		1,708
Substandard | Commercial Real Estate | SBA Loans
Commercial real estate	161
Substandard | Commercial Real Estate | Commercial Mortgages
Commercial real estate	652	403
Substandard | Commercial Real Estate | Construction
Commercial real estate		631
Substandard | Commercial Real Estate | Religious Organizations
Commercial real estate	642	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
Commercial real estate		317
Doubtful | Commercial Real Estate | Commercial Mortgages
Commercial real estate	89	317
Total
Loans and Leases Receivable, Gross, Commercial	36,749	33,115
Consumer real estate	1,591	1,768
Total consumer loans	5,569	6,387
Total | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	3,077	3,734
Total | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	1,056	1,462
Total | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	115	125
Total | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	1,906	2,147
Total | Commercial Real Estate
Commercial real estate		31,381
Consumer real estate	3,978	3,140
Total | Commercial Real Estate | SBA Loans
Commercial real estate	601	621
Total | Commercial Real Estate | Commercial Mortgages
Commercial real estate	17,652	14,721
Total | Commercial Real Estate | Construction
Commercial real estate	2,550	3,398
Total | Commercial Real Estate | Religious Organizations
Commercial real estate	12,869	12,642
Total | Home Equity | Consumer Real Estate
Consumer real estate	1,345	4,619
Total | Home Equity Line Of Credit | Consumer Real Estate
Consumer real estate	25	1,453
Total | 1-4 Family Residential Mortgages | Consumer Real Estate
Consumer real estate	2,608	26
Total | Consumer Installment | Consumer Other
Consumer real estate	19	30
Total | Student Loans | Consumer Other
Consumer real estate	1,416	1,588
Total | Other | Consumer Other
Consumer real estate	156	150
Performing
Consumer real estate	1,591	1,768
Total consumer loans	5,205	6,098
Performing | Commercial Real Estate
Consumer real estate	3,614	2,914
Performing | Home Equity | Consumer Real Estate
Consumer real estate	1,223	4,330
Performing | Home Equity Line Of Credit | Consumer Real Estate
Consumer real estate	25	1,390
Performing | 1-4 Family Residential Mortgages | Consumer Real Estate
Consumer real estate	2,366	26
Performing | Consumer Installment | Consumer Other
Consumer real estate	19	30
Performing | Student Loans | Consumer Other
Consumer real estate	1,416	1,588
Performing | Other | Consumer Other
Consumer real estate	156	150
Nonperforming
Total consumer loans	364	289
Nonperforming | Commercial Real Estate
Consumer real estate	364	226
Nonperforming | Home Equity | Consumer Real Estate
Consumer real estate	122	289
Nonperforming | Home Equity Line Of Credit | Consumer Real Estate
Consumer real estate		63
Nonperforming | 1-4 Family Residential Mortgages | Consumer Real Estate
Consumer real estate	$ 242

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Components Of Net Expense Of Other Real Estate

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

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
(in 000's)	September 30, 2013	September 30, 2012	September 30, 2013	September 30, 2012
Insurance	$3	$5	$13	$22
Professional fees	-	-	-	3
Real estate taxes	6	11	17	47
Utilities	1	3	3	20
Other	7	-	-	3
Transfer-in write-up	-	1	8	(43)
Impairment charges (net)	-	127	144	153
Total	$17	$147	$185	$205

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Components Of Other Real Estate Owned

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

(in 000's)	September 30, 2013	December 31, 2012
Commercial real estate	$206	$206
Residential real estate	276	569
Total	$482	$775

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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Impaired Loans, Unpaid Contractual Principal Balance	$ 1,935,000	$ 2,344,000
Impaired Loans, Recorded Investment With No Allowance	1,487,000	1,401,000
Impaired Loans, Recorded Investment With Allowance	448,000	943,000
Impaired Loans, Total Recorded Investment	1,935,000	2,344,000
Impaired Loans, Related Allowance	347,000	843,000
Commercial And Industrial
Impaired Loans, Unpaid Contractual Principal Balance	500,000	1,021,000
Impaired Loans, Recorded Investment With No Allowance	52,000	78,000
Impaired Loans, Recorded Investment With Allowance	448,000	943,000
Impaired Loans, Total Recorded Investment	500,000	1,021,000
Impaired Loans, Related Allowance	347,000	843,000
Commercial And Industrial | Commercial
Impaired Loans, Unpaid Contractual Principal Balance	451,000	873,000
Impaired Loans, Recorded Investment With No Allowance	52,000	78,000
Impaired Loans, Recorded Investment With Allowance	399,000	795,000
Impaired Loans, Total Recorded Investment	451,000	873,000
Impaired Loans, Related Allowance	298,000	695,000
Commercial And Industrial | SBA Loans
Impaired Loans, Unpaid Contractual Principal Balance	49,000	49,000
Impaired Loans, Recorded Investment With Allowance	49,000	49,000
Impaired Loans, Total Recorded Investment	49,000	49,000
Impaired Loans, Related Allowance	49,000	49,000
Commercial And Industrial | Asset Based Loans
Impaired Loans, Unpaid Contractual Principal Balance		99,000
Impaired Loans, Recorded Investment With Allowance		99,000
Impaired Loans, Total Recorded Investment		99,000
Impaired Loans, Related Allowance		99,000
Commercial Real Estate
Impaired Loans, Unpaid Contractual Principal Balance	632,000
Impaired Loans, Recorded Investment With No Allowance	632,000
Impaired Loans, Total Recorded Investment	632,000
Commercial Real Estate | Commercial Mortgages
Impaired Loans, Unpaid Contractual Principal Balance	161,000	649,000
Impaired Loans, Recorded Investment With No Allowance	161,000	649,000
Impaired Loans, Total Recorded Investment	161,000	649,000
Commercial Real Estate | Religious Organizations
Impaired Loans, Unpaid Contractual Principal Balance	642,000	674,000
Impaired Loans, Recorded Investment With No Allowance	642,000	674,000
Impaired Loans, Total Recorded Investment	642,000	674,000
Total Commercial Real Estate
Impaired Loans, Unpaid Contractual Principal Balance	1,435,000	1,323,000
Impaired Loans, Recorded Investment With No Allowance	1,435,000	1,323,000
Impaired Loans, Total Recorded Investment	$ 1,435,000	$ 1,323,000

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Fair Value Assets Measured on 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 September 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	$3,881	-	$3,881	-
Government Sponsored Enterprises residential mortgage-backed securities	5,869	-	5,869	-
Money Market Funds	129	129	-	-
Total	$9,879	$129	$9,750	-

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Fair Value of Assets Measured on a Nonrecurring Basis

Carrying Value at September 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 9 months ended
Impaired loans	$1,588	-	-	$1,588	-
Other real estate owned (“OREO”)	482	-	-	482	-

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
Impaired Loans	$1,501	-	-	$1,501	$(843)
Other real estate owned (“OREO”)	775	-	-	775	(233)

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3. Changes in Accumulated Other Comprehensive Income (loss)

9 Months Ended

Sep. 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 September 30, 2013	Three Months ended September 30, 2012	Nine Months Ended September 30, 2013	Nine Months Ended September 30, 2012
Beginning Balance	$(188)	$39	$34	$39
Other comprehensive loss before reclassifications-- Unrealized losses on available for sale securities	(31)	(1)	(287)	(1)
Amounts reclassified from accumulated other comprehensive income to net income—Gain on sale of investment securities	-	-	34	-
Ending balance	$(219)	$38	$(219)	$38

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Fair Value of Assets and Liabilities

The fair value of assets and liabilities are depicted below:

		September 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	$9,178	$9,178	$10,236	$10,236
Available for sale securities	(1)	9,879	9,879	1,027	1,027
Held to maturity securities	Level 2	-	-	11,895	12,486
Loans, net of allowance for loan losses	(2)	41,506	41,459	40,298	40,325
Accrued interest receivable	Level 2	286	286	310	310
Liabilities:
Demand deposits	Level 2	30,063	30,063	29,851	29,851
Savings deposits	Level 2	13,122	13,122	14,239	14,239
Time deposits	Level 2	15,520	15,523	16,886	16,902
Accrued interest payable	Level 2	15	15	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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6. Loans and Allowance For Loan Losses (Details) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 31, 2013 Commercial And Industrial	Sep. 30, 2012 Commercial And Industrial	Sep. 30, 2013 Commercial And Industrial	Sep. 30, 2012 Commercial And Industrial
Charge-offs	$ (1,000)	$ (106,000)	$ (529,000)	$ (152,000)	$ 340,000	$ (56,000)	$ (524,000)	$ (56,000)

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9. Regulatory (Details)	12 Months Ended
	Dec. 31, 2012	Sep. 30, 2013
Details
Description of Regulatory Requirements, Prompt Corrective Action	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	6.00%	5.83%
Capital to Risk Weighted Assets	11.16%	10.09%

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Sep. 30, 2013		Dec. 31, 2012
Assets:
Cash and due from banks	$ 2,260,991		$ 2,363,166
Interest-bearing deposits with banks	306,603		306,033
Federal funds sold	6,610,000		7,567,000
Cash and cash equivalents	9,177,594		10,236,199
Investment securities:
Available-for-sale, at fair value	9,878,535		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	42,317,856		41,501,555
Less allowance for loan losses	(811,605)		(1,203,942)
Net loans	41,506,251		40,297,613
Bank premises and equipment, net	662,446		562,729
Accrued interest receivable	285,877		309,971
Other real estate owned	481,737		775,407
Intangible assets	2,175		135,733
Prepaid expenses and other assets	350,866		375,524
Total assets	62,345,481		65,615,506
Liabilities:
Demand deposits, noninterest-bearing	14,862,249		14,324,970
Demand deposits, interest-bearing	15,200,433		15,526,344
Savings deposits	13,121,855		14,239,216
Time deposits, under $100,000	6,781,296		7,243,593
Time deposits, $100,000 and over	8,738,400		9,642,620
Total deposits	58,704,233		60,976,743
Accrued interest payable	14,892		30,500
Accrued expenses and other liabilities	216,211		368,278
Total liabilities	58,935,336		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
Additional paid-in-capital	14,749,852		14,749,852
Accumulated deficit	(11,132,283)		(10,556,078)
Accumulated other comprehensive (loss) income	(219,478)		34,157
Total shareholders' equity	3,410,145		4,239,985
Total liabilities and shareholders' equity	62,345,481		65,615,506
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]

[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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6. Loans and Allowance For Loan Losses: Impaired Financing Receivables Additional Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Impaired Loans, Average Recorded Investment	$ 1,882	$ 1,734	$ 1,987	$ 1,701
Impaired Loans, Interest recognized on impaired loans	2	2	3	3
Commercial And Industrial
Impaired Loans, Average Recorded Investment	516	666	688	628
Impaired Loans, Interest recognized on impaired loans		2	1	3
Commercial And Industrial | Commercial
Impaired Loans, Average Recorded Investment	467	479	573	481
Impaired Loans, Interest recognized on impaired loans		1		1
Commercial And Industrial | SBA Loans
Impaired Loans, Average Recorded Investment	49	50	49	22
Impaired Loans, Interest recognized on impaired loans		1	1	2
Commercial And Industrial | Asset Based Loans
Impaired Loans, Average Recorded Investment		137	66	125
Commercial Real Estate | SBA Loans
Impaired Loans, Average Recorded Investment	161		36
Impaired Loans, Interest recognized on impaired loans	2		2
Commercial Real Estate | Commercial Mortgages
Impaired Loans, Average Recorded Investment	559	679	638	673
Commercial Real Estate | Religious Organizations
Impaired Loans, Average Recorded Investment	646	389	625	400
Total Commercial Real Estate
Impaired Loans, Average Recorded Investment	1,366	1,068	1,299	1,073
Impaired Loans, Interest recognized on impaired loans	$ 2		$ 2

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1. Significant Accounting Policies

9 Months Ended

Sep. 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 September 30, 2013 and December 31, 2012 and the consolidated results of its operations and its cash flows for the three and nine months ended September 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, and the determination of other than temporary impairment for securities

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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5. Investment Securities: Investment Portfolio (Details) (USD $)	0 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale Securities, Amortized Cost Basis	$ 10,206,000
Available-for-sale Securities, Gross Unrealized Gain	38,000
Available-for-sale Securities, Gross Unrealized Loss	(365,000)	0
Available-for-sale, at fair value	9,878,535	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)
Held to Maturity Securities, Fair Value	0	12,485,687
US Government Agencies Debt Securities
Available-for-sale Securities, Amortized Cost Basis	4,097,000
Available-for-sale Securities, Gross Unrealized Gain	0
Available-for-sale Securities, Gross Unrealized Loss	(216,000)
Available-for-sale, at fair value	3,881,000
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)
Held to Maturity Securities, Fair Value		3,760,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	5,980,000
Available-for-sale Securities, Gross Unrealized Gain	38,000
Available-for-sale Securities, Gross Unrealized Loss	(149,000)	0
Available-for-sale, at fair value	5,869,000	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)
Held to Maturity Securities, Fair Value		8,726,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	129,000
Available-for-sale Securities, Gross Unrealized Gain	0
Available-for-sale Securities, Gross Unrealized Loss	0	0
Available-for-sale, at fair value	$ 129,000	$ 129,000

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

9 Months Ended

Sep. 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 September 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$446	$288	$44	-	$778
Provision (credit) for loan losses	(40)	65	5	-	30
Charge-offs	-	-	-	(1)	(1)
Recoveries	1	-	3	1	5
Net recoveries	1	-	3	-	4
Ending balance	$407	$353	$52	-	$812

(in 000's)	For the Three months ended September 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$496	$367	$43	-	$906
Provision (credit) for loan losses	63	(6)	1	3	61
Charge-offs	(56)	-	(43)	(7)	(106)
Recoveries	-	3	1	4	8
Net recoveries	(56)	3	(42)	(3)	(98)
Ending balance	$503	$364	$2	-	$869

(in 000’s)	For the Nine months ended September 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision (credit) for loan losses	37	(33)	40	1	45
Charge-offs	(524)	-	-	(5)	(529)
Recoveries	3	78	7	4	92
Net recoveries	(521)	78	7	(1)	(437)
Ending balance	$407	$353	$52	-	$812

(in 000's)	For the Nine months ended September 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$387	$412	$68	-	$867
Provision (credit) for loan losses	172	(56)	-	5	121
Charge-offs	(56)	-	(80)	(16)	(152)
Recoveries	-	8	14	11	33
Net recoveries	(56)	8	(66)	(5)	(119)
Ending balance	$503	$364	$2	-	$869

(in 000's)	September 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	$347	-	-	-	$347
Loans collectively  evaluated for impairment	60	353	52	-	465
	$407	$353	$52	-	$812
Loans, ending balance:
Loans individually evaluated for impairment	$500	$1,435	-	-	$1,935
Loans collectively  evaluated for impairment	2,577	32,237	3,978	1,591	40,383
Total	$3,077	$33,672	$3,978	$1,591	$42,318

(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: Contractual Maturities of Investment Securities (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale Securities, Debt Maturities, Due after five years through ten years, Amortized Cost Basis	$ 4,097,000
Available-for-sale Securities, Debt Maturities, Due after five years through ten years, Fair Value	3,881,000
Available-for-sale Securities, Amortized Cost Basis	10,206,000
Available-for-sale, at fair value	9,878,535	1,027,293
Total debt securities, Amortized Cost Basis	10,077,000
Total debt securities, Fair Value	9,750,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis	5,980,000
Available-for-sale, at fair value	5,869,000	898,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis	129,000
Available-for-sale, at fair value	$ 129,000	$ 129,000

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6. Loans and Allowance For Loan Losses: Financing Receivable Credit Quality Indicators (Tables)

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Financing Receivable Credit Quality Indicators

(In 000's)	Commercial Loans September 30, 2013
	Good/Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$132	$220	$4	$57	$393	$1,056
SBA loans	-	23	-	43	49	-	115
Asset-based	-	1,733	125	48	-	-	1,906
	250	1,888	345	95	106	393	3,077
Commercial real estate:
Commercial mortgages	-	15,552	1,359	-	652	89	17,652
SBA Loans	-	440	-	-	161	-	601
Construction	-	2,550	-	-	-	-	2,550
Religious organizations	-	9,152	2,298	777	642	-	12,869
	-	27,694	3,657	777	1,455	89	33,672
Total commercial loans	$250	$29,582	$4,002	$873	$1,417	$482	$36,749

	Residential Mortgage and Consumer Loans September 30, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,223	$122	$1,345
Home equity line of credit	25	-	25
1-4 family residential mortgages	2,366	242	2,608
	3,614	364	3,978
Consumer Other:
Consumer Installment	19	-	19
Student loans	1,416	-	1,416
Other	156	-	156
	1,591	-	1,591
Total  consumer loans	$5,205	$364	$5,569
Total loans				$ 42,318

(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
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
Home equity
Home equity line of credit	$1,390	$63	$1,453
1-4 family residential mortgages	26	-	26
	2,914	226	3,140
Home equity	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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2. Net Loss Per Share

9 Months Ended

Sep. 30, 2013

Notes

2. Net Loss Per Share

2. Net Loss Per Share

The calculation of net loss per share follows:

	Three Months Ended September 30, 2013	Three Months Ended September 30, 2012	Nine Months Ended September 30, 2013	Nine Months Ended September 30, 2012
Basic:
Net loss available to common shareholders	$(333,359)	$(407,236)	$(576,205)	$(881,941)
Average common shares outstanding-basic	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-basic	$(0.31)	$(0.38)	$(0.54)	$(0.83)
Diluted:
Average common shares-diluted	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-diluted	$(0.31)	$(0.38)	$(0.54)	$(0.83)

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 loss per share calculations.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Held-to-maturity, fair value	$ 0	$ 12,485,687
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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3. Changes in Accumulated Other Comprehensive Income (loss): Changes in Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Changes in Accumulated Other Comprehensive Income (Loss)

(in 000’s)	Three Months ended September 30, 2013	Three Months ended September 30, 2012	Nine Months Ended September 30, 2013	Nine Months Ended September 30, 2012
Beginning Balance	$(188)	$39	$34	$39
Other comprehensive loss before reclassifications-- Unrealized losses on available for sale securities	(31)	(1)	(287)	(1)
Amounts reclassified from accumulated other comprehensive income to net income—Gain on sale of investment securities	-	-	34	-
Ending balance	$(219)	$38	$(219)	$38

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document and Entity Information:
Entity Registrant Name	UNITED BANCSHARES INC /PA
Document Type	10-Q
Document Period End Date	Sep. 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	Q3

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5. Investment Securities: Investment Portfolio (Tables)

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Investment Portfolio

The following is a summary of the Company's investment portfolio: 

(In 000’s)	September 30, 2013
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(216)	$3,881
Government Sponsored Enterprises  residential mortgage-backed securities	5,980	38	(149)	5,869
Investments in money market funds	129	-	-	129
	10,206	$38	$(365)	$9,879

	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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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest income:
Interest and fees on loans	$ 673,937	$ 666,685	$ 1,932,350	$ 1,986,527
Interest on investment securities	59,822	97,097	213,161	349,568
Interest on federal funds sold	3,621	3,847	11,228	12,777
Interest on time deposits with other banks	174	176	578	524
Total interest income	737,554	767,805	2,157,317	2,349,396
Interest expense:
Interest on time deposits	10,478	18,110	38,012	66,242
Interest on demand deposits	6,507	11,612	21,396	36,738
Interest on savings deposits	1,651	1,760	5,063	5,317
Total interest expense	18,636	31,482	64,471	108,297
Net interest income	718,918	736,323	2,092,846	2,241,099
Provision for loan losses	30,000	61,000	45,137	121,000
Net interest income after provision for loan losses	688,918	675,323	2,047,709	2,120,099
Noninterest income:
Customer service fees	101,370	103,435	303,281	296,326
ATM fee income	56,144	77,545	216,301	238,316
Gain on sale of investment securities			378,248
Loan syndication fees			88,300	80,000
Gain (loss) on sale of other real estate owned	2,712	(5,968)	(11,168)	(5,968)
Gain on sale of loans		69,163		69,163
Other income	15,569	15,610	50,375	55,167
Total noninterest income	175,795	259,785	1,025,337	733,004
Noninterest expense:
Salaries, wages and employee benefits	395,598	385,971	1,144,594	1,192,480
Occupancy and equipment	242,853	261,700	750,897	802,297
Office operations and supplies	69,673	81,453	224,481	231,576
Marketing and public relations	22,281	5,186	56,983	28,675
Professional services	115,528	104,666	263,708	256,198
Data processing	114,664	114,602	339,243	352,603
Other real estate expense	17,210	147,051	184,754	204,585
Loan and collection costs	20,083	29,449	78,891	91,142
Deposit insurance assessments	32,000	43,085	106,652	70,509
Other operating	168,182	169,181	499,048	504,979
Total noninterest expense	1,198,072	1,342,344	3,649,251	3,735,044
Net loss before income taxes	(333,359)	(407,236)	(576,205)	(881,941)
Provision for income taxes
Net loss	(333,359)	(407,236)	(576,205)	(881,941)
Net loss per common share-basic and diluted	$ (0.31)	$ (0.38)	$ (0.54)	$ (0.83)
Weighted average number of common shares	1,068,588	1,068,588	1,068,588	1,068,588
Comprehensive loss:
Net loss	(333,359)	(407,236)	(576,205)	(881,941)
Unrealized losses on available for sale securities	(37,549)	(884)	(253,634)	(1,248)
Total comprehensive loss	$ (370,908)	$ (408,120)	$ (829,839)	$ (883,189)

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7. Other Real Estate Owned

9 Months Ended

Sep. 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	Nine Months Ended	Nine Months Ended
	September 30, 2013	September 30, 2012	September 30, 2013	September 30, 2012
Beginning balance	$527	$1,333	775	1,284
Additions, transfers from loans	-	-	-	75
Proceeds from sales	(48)	(28)	(140)	(23)
	479	1,305	635	1,336
Write-downs and net gains (losses) on sales	3	(128)	(153)	(159)
Ending Balance	$482	$1,177	482	1,177

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

(in 000's)	September 30, 2013	December 31, 2012
Commercial real estate	$206	$206
Residential real estate	276	569
Total	$482	$775

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

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
(in 000's)	September 30, 2013	September 30, 2012	September 30, 2013	September 30, 2012
Insurance	$3	$5	$13	$22
Professional fees	-	-	-	3
Real estate taxes	6	11	17	47
Utilities	1	3	3	20
Other	7	-	-	3
Transfer-in write-up	-	1	8	(43)
Impairment charges (net)	-	127	144	153
Total	$17	$147	$185	$205

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6. Loans and Allowance For Loan Losses

9 Months Ended

Sep. 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)	September 30, 2013	December 31, 2012
Commercial and industrial	$3,077	$3,734
Commercial real estate	33,672	31,381
Consumer real estate	3,978	4,619
Consumer loans other	1,591	1,768
Total loans	$42,318	$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 the nine months ended September 30, 2012.  In addition, the average historical loss factor for commercial and industrial loans increased as a result of a $340,000 charge-off during the first quarter of 2013. 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 September 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$446	$288	$44	-	$778
Provision (credit) for loan losses	(40)	65	5	-	30
Charge-offs	-	-	-	(1)	(1)
Recoveries	1	-	3	1	5
Net recoveries	1	-	3	-	4
Ending balance	$407	$353	$52	-	$812

(in 000's)	For the Three months ended September 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$496	$367	$43	-	$906
Provision (credit) for loan losses	63	(6)	1	3	61
Charge-offs	(56)	-	(43)	(7)	(106)
Recoveries	-	3	1	4	8
Net recoveries	(56)	3	(42)	(3)	(98)
Ending balance	$503	$364	$2	-	$869

(in 000’s)	For the Nine months ended September 30, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision (credit) for loan losses	37	(33)	40	1	45
Charge-offs	(524)	-	-	(5)	(529)
Recoveries	3	78	7	4	92
Net recoveries	(521)	78	7	(1)	(437)
Ending balance	$407	$353	$52	-	$812

(in 000's)	For the Nine months ended September 30, 2012
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$387	$412	$68	-	$867
Provision (credit) for loan losses	172	(56)	-	5	121
Charge-offs	(56)	-	(80)	(16)	(152)
Recoveries	-	8	14	11	33
Net recoveries	(56)	8	(66)	(5)	(119)
Ending balance	$503	$364	$2	-	$869

(in 000's)	September 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	$347	-	-	-	$347
Loans collectively  evaluated for impairment	60	353	52	-	465
	$407	$353	$52	-	$812
Loans, ending balance:
Loans individually evaluated for impairment	$500	$1,435	-	-	$1,935
Loans collectively  evaluated for impairment	2,577	32,237	3,978	1,591	40,383
Total	$3,077	$33,672	$3,978	$1,591	$42,318

(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 September 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	$3	-	$451	$454	$602	$1,056
SBA loans	-	-	-	-	115	115
Asset-based	-	-	-	-	1,906	1,906
Total Commercial and industrial	3	-	451	454	2,623	3,077
Commercial real estate:
Commercial mortgages	705	-	632	1,337	16,315	17,652
SBA loans	171	-	160	331	270	601
Construction	-	-	-	-	2,550	2,550
Religious organizations	-	-	642	642	12,227	12,869
Total Commercial real estate	876	-	1,434	2,310	31,362	33,672
Consumer real estate:
Home equity loans	331	-	122	453	892	1,345
Home equity lines of credit	-	-	-	-	25	25
1-4 family residential mortgages	54	-	242	296	2,312	2,608
Total consumer real estate	385	-	364	749	3,229	3,978
Total real estate	1,261	-	1,798	3,059	34,591	37,650
Consumer and other:
Consumer installment	-	-	-	-	19	19
Student loans	83	118	-	201	1,215	1,416
Other	5	-	-	5	151	156
Total consumer and other	88	118	-	206	1,385	1,591
Total loans	$1,352	$118	$2,249	$3,719	$38,599	$42,318

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 September 30, 2013
	Good/Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$132	$220	$4	$57	$393	$1,056
SBA loans	-	23	-	43	49	-	115
Asset-based	-	1,733	125	48	-	-	1,906
	250	1,888	345	95	106	393	3,077
Commercial real estate:
Commercial mortgages	-	15,552	1,359	-	652	89	17,652
SBA Loans	-	440	-	-	161	-	601
Construction	-	2,550	-	-	-	-	2,550
Religious organizations	-	9,152	2,298	777	642	-	12,869
	-	27,694	3,657	777	1,455	89	33,672
Total commercial loans	$250	$29,582	$4,002	$873	$1,417	$482	$36,749

	Residential Mortgage and Consumer Loans September 30, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,223	$122	$1,345
Home equity line of credit	25	-	25
1-4 family residential mortgages	2,366	242	2,608
	3,614	364	3,978
Consumer Other:
Consumer Installment	19	-	19
Student loans	1,416	-	1,416
Other	156	-	156
	1,591	-	1,591
Total  consumer loans	$5,205	$364	$5,569
Total loans				$ 42,318

(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
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
Home equity
Home equity line of credit	$1,390	$63	$1,453
1-4 family residential mortgages	26	-	26
	2,914	226	3,140
Home equity	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 nine months ended September 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 September 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	$451	$52	$399	$451	$298
SBA  loans	49	-	49	49	49
Total commercial and industrial	500	52	448	500	347
Commercial real estate:	632	632	-	632	-
Commercial mortgages	161	161	-	161	-
Religious organizations	642	642	-	642	-
Total commercial real estate	1,435	1,435	-	1,435	-
Total loans	$1,935	$1,487	$448	$1,935	$347

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 nine months ended September 30, 2013 and 2012.

	Three Months Ended		Three Months Ended
(In 000's)	September 30, 2013		September 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$467	-	$479	$1
SBA  loans	49	-	50	1
Asset-based	-	-	137	-
Total commercial and industrial	516	-	666	2
Commercial real estate:
Commercial mortgages	559	-	679	-
SBA loans	161	2	-	-
Religious organizations	646	-	389	-
Total commercial real estate	$1,366	2	1,068	-
Total loans	$1,882	$2	$1,734	$2

	Nine Months Ended		Nine Months Ended
(In 000's)	September 30, 2013		September 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	573	-	$481	1
SBA  loans	49	1	22	2
Asset-based	66	-	125	-
Total commercial and industrial	688	1	628	3
Commercial real estate:
Commercial mortgages	638	-	673	-
SBA loans	36	2	-	-
Religious organizations	625	-	400	-
Total commercial real estate	1,299	2	1,073	-
Total loans	$1,987	$3	$1,701	$3

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 September 30, 2013 and December 31, 2012.

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Past Due Financing Receivables

An age analysis of past due loans, segregated by class of loans, as of September 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	$3	-	$451	$454	$602	$1,056
SBA loans	-	-	-	-	115	115
Asset-based	-	-	-	-	1,906	1,906
Total Commercial and industrial	3	-	451	454	2,623	3,077
Commercial real estate:
Commercial mortgages	705	-	632	1,337	16,315	17,652
SBA loans	171	-	160	331	270	601
Construction	-	-	-	-	2,550	2,550
Religious organizations	-	-	642	642	12,227	12,869
Total Commercial real estate	876	-	1,434	2,310	31,362	33,672
Consumer real estate:
Home equity loans	331	-	122	453	892	1,345
Home equity lines of credit	-	-	-	-	25	25
1-4 family residential mortgages	54	-	242	296	2,312	2,608
Total consumer real estate	385	-	364	749	3,229	3,978
Total real estate	1,261	-	1,798	3,059	34,591	37,650
Consumer and other:
Consumer installment	-	-	-	-	19	19
Student loans	83	118	-	201	1,215	1,416
Other	5	-	-	5	151	156
Total consumer and other	88	118	-	206	1,385	1,591
Total loans	$1,352	$118	$2,249	$3,719	$38,599	$42,318

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

9 Months Ended

Sep. 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 September 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	3,881
Government Sponsored Enterprises residential mortgage-backed securities	5,980	5,869
Total debt securities	10,077	9,750
Investments in money market funds	129	129
	$10,206	$9,879

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1. Significant Accounting Policies (Policies)

9 Months Ended

Sep. 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, and the determination of other than temporary impairment for securities

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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8. Fair Value

9 Months Ended

Sep. 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 September 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	$3,881	-	$3,881	-
Government Sponsored Enterprises residential mortgage-backed securities	5,869	-	5,869	-
Money Market Funds	129	129	-	-
Total	$9,879	$129	$9,750	-

(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 $9,879,000 and $1,027,000 at September 30, 2013, and December 31, 2012, respectively.  In May 2013, the Bank transferred its investment securities held-to-maturity to available-for-sale.  At September 30, 2013, approximately 59% of the portfolio consisted of residential mortgage-backed securities, which had a fair value of approximately $5,869,000.  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 September 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 September 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 September 30, 2013 and December 31, 2012, for which a nonrecurring change in fair value has been recorded during the nine months ended September 30, 2013 and year ended December 31, 2012.

Carrying Value at September 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 9 months ended
Impaired loans	$1,588	-	-	$1,588	-
Other real estate owned (“OREO”)	482	-	-	482	-

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
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 September 30, 2013 was approximately $ 347,000.  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:

		September 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	$9,178	$9,178	$10,236	$10,236
Available for sale securities	(1)	9,879	9,879	1,027	1,027
Held to maturity securities	Level 2	-	-	11,895	12,486
Loans, net of allowance for loan losses	(2)	41,506	41,459	40,298	40,325
Accrued interest receivable	Level 2	286	286	310	310
Liabilities:
Demand deposits	Level 2	30,063	30,063	29,851	29,851
Savings deposits	Level 2	13,122	13,122	14,239	14,239
Time deposits	Level 2	15,520	15,523	16,886	16,902
Accrued interest payable	Level 2	15	15	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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9. Regulatory

9 Months Ended

Sep. 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 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 September 30, 2013 and December 31, 2012, the Bank’s tier one leverage capital ratio was 5.83% and 6.00%, respectively, and its total risk based capital ratio was 10.09% and 11.16%, respectively.   Year-to-date losses continue to erode capital.  Also, 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.     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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2. Net Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended September 30, 2013	Three Months Ended September 30, 2012	Nine Months Ended September 30, 2013	Nine Months Ended September 30, 2012
Basic:
Net loss available to common shareholders	$(333,359)	$(407,236)	$(576,205)	$(881,941)
Average common shares outstanding-basic	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-basic	$(0.31)	$(0.38)	$(0.54)	$(0.83)
Diluted:
Average common shares-diluted	1,068,588	1,068,588	1,068,588	1,068,588
Net loss per share-diluted	$(0.31)	$(0.38)	$(0.54)	$(0.83)

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3. Changes in Accumulated Other Comprehensive Income (loss): Changes in Accumulated Other Comprehensive Income (Loss) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Details
Beginning Balance	$ (188,000)	$ 39,000	$ 34,157	$ 39,000
Other comprehensive loss before reclassifications-- Unrealized losses on available for sale securities	(31,000)	(1,000)	(287,000)	(1,000)
Amounts reclassified from accumulated other comprehensive income to net income-Gain on sale of investment securities			34,000
Ending Balance	$ (219,478)	$ 38,000	$ (219,478)	$ 38,000

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8. Fair Value (Details) (USD $)			9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Maximum
Fair Value Inputs, Discount Rate			10.00%
Impaired Loans, Related Allowance	$ 347,000	$ 843,000

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Schedule of Bank's Loan Portfolio

(Dollars in thousands)	September 30, 2013	December 31, 2012
Commercial and industrial	$3,077	$3,734
Commercial real estate	33,672	31,381
Consumer real estate	3,978	4,619
Consumer loans other	1,591	1,768
Total loans	$42,318	$41,502

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

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Impaired Financing Receivables Additional Information

The following tables present additional information about impaired loans for the three and nine months ended September 30, 2013 and 2012.

	Three Months Ended		Three Months Ended
(In 000's)	September 30, 2013		September 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	$467	-	$479	$1
SBA  loans	49	-	50	1
Asset-based	-	-	137	-
Total commercial and industrial	516	-	666	2
Commercial real estate:
Commercial mortgages	559	-	679	-
SBA loans	161	2	-	-
Religious organizations	646	-	389	-
Total commercial real estate	$1,366	2	1,068	-
Total loans	$1,882	$2	$1,734	$2

	Nine Months Ended		Nine Months Ended
(In 000's)	September 30, 2013		September 30, 2012
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	loans	Investment	loans
Commercial and industrial:
Commercial	573	-	$481	1
SBA  loans	49	1	22	2
Asset-based	66	-	125	-
Total commercial and industrial	688	1	628	3
Commercial real estate:
Commercial mortgages	638	-	673	-
SBA loans	36	2	-	-
Religious organizations	625	-	400	-
Total commercial real estate	1,299	2	1,073	-
Total loans	$1,987	$3	$1,701	$3

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8. Fair Value: Schedule of Fair Value Assets Measured on Recurring Basis (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale, at fair value	$ 9,878,535	$ 1,027,293
US Government Agencies Debt Securities
Available-for-sale, at fair value	3,881,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	5,869,000	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 | US Government Agencies Debt Securities
Available-for-sale, at fair value	0
Fair Value, Inputs, Level 1 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	0	0
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	9,750,000	898,000
Fair Value, Inputs, Level 2 | US Government Agencies Debt Securities
Available-for-sale, at fair value	3,881,000
Fair Value, Inputs, Level 2 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	5,869,000	898,000
Fair Value, Inputs, Level 2 | Money Market Funds
Available-for-sale, at fair value		0
Fair Value, Inputs, Level 3
Available-for-sale, at fair value	0	0
Fair Value, Inputs, Level 3 | US Government Agencies Debt Securities
Available-for-sale, at fair value	0
Fair Value, Inputs, Level 3 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale, at fair value	0	0
Fair Value, Inputs, Level 3 | Money Market Funds
Available-for-sale, at fair value	$ 0	$ 0

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6. Loans and Allowance For Loan Losses: Allowance for Credit Losses on Financing Receivables (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Beginning balance		$ 1,204,000	$ 906,000	$ 1,204,000	$ 867,000
Provision (credit) for loan losses	30,000		61,000	45,000	121,000
Provision (credit) for loan losses	30,000		61,000	45,000	121,000
Charge-offs	(1,000)		(106,000)	(529,000)	(152,000)
Charge-offs	(1,000)		(106,000)	(529,000)	(152,000)
Recoveries	5,000		8,000	92,000	33,000
Recoveries	5,000		8,000	92,000	33,000
Net recoveries	4,000		(98,000)	(437,000)	(119,000)
Net recoveries	4,000		(98,000)	(437,000)	(119,000)
Ending balance	812,000		869,000	812,000	869,000
Period-end amount allocated to loans individually evaluated for impairment	347,000			347,000		843,000
Period-end amount allocated to loans collectively evaluated for impairment	465,000			465,000		361,000
Loans, ending balance: Loans individually evaluated for impairment	1,935,000			1,935,000		2,344,000
Loans, ending balance: Loans collectively evaluated for impairment	40,383,000			40,383,000		39,158,000
Total	42,317,856			42,317,856		41,501,555
Commercial And Industrial
Beginning balance	446,000	891,000	496,000	891,000	387,000
Provision (credit) for loan losses	(40,000)		63,000	37,000	172,000
Provision (credit) for loan losses	(40,000)		63,000	37,000	172,000
Charge-offs		340,000	(56,000)	(524,000)	(56,000)
Charge-offs		340,000	(56,000)	(524,000)	(56,000)
Recoveries	1,000			3,000
Recoveries	1,000			3,000
Net recoveries	1,000		(56,000)	(521,000)	(56,000)
Net recoveries	1,000		(56,000)	(521,000)	(56,000)
Ending balance	407,000		503,000	407,000	503,000
Period-end amount allocated to loans individually evaluated for impairment	347,000			347,000		843,000
Period-end amount allocated to loans collectively evaluated for impairment	60,000			60,000		48,000
Loans, ending balance: Loans individually evaluated for impairment	500,000			500,000		1,021,000
Loans, ending balance: Loans collectively evaluated for impairment	2,577,000			2,577,000		2,713,000
Total	3,077,000			3,077,000		3,734,000
Commercial Real Estate
Beginning balance	288,000	308,000	367,000	308,000	412,000
Provision (credit) for loan losses	65,000		(6,000)	(33,000)	(56,000)
Provision (credit) for loan losses	65,000		(6,000)	(33,000)	(56,000)
Recoveries			3,000	78,000	8,000
Recoveries			3,000	78,000	8,000
Net recoveries			3,000	78,000	8,000
Net recoveries			3,000	78,000	8,000
Ending balance	353,000		364,000	353,000	364,000
Period-end amount allocated to loans collectively evaluated for impairment	353,000			353,000		308,000
Loans, ending balance: Loans individually evaluated for impairment	1,435,000			1,435,000		1,323,000
Loans, ending balance: Loans collectively evaluated for impairment	32,237,000			32,237,000		30,058,000
Total	33,672,000			33,672,000		31,381,000
Consumer Real Estate
Beginning balance	44,000	5,000	43,000	5,000	68,000
Provision (credit) for loan losses	5,000		1,000	40,000
Provision (credit) for loan losses	5,000		1,000	40,000
Charge-offs			(43,000)		(80,000)
Charge-offs			(43,000)		(80,000)
Recoveries	3,000		1,000	7,000	14,000
Recoveries	3,000		1,000	7,000	14,000
Net recoveries	3,000		(42,000)	7,000	(66,000)
Net recoveries	3,000		(42,000)	7,000	(66,000)
Ending balance	52,000		2,000	52,000	2,000
Period-end amount allocated to loans collectively evaluated for impairment	52,000			52,000		5,000
Loans, ending balance: Loans collectively evaluated for impairment	3,978,000			3,978,000		4,619,000
Total	3,978,000			3,978,000		4,619,000
Consumer And Other Loans
Beginning balance	0
Provision (credit) for loan losses			3,000	1,000	5,000
Provision (credit) for loan losses			3,000	1,000	5,000
Charge-offs	(1,000)		(7,000)	(5,000)	(16,000)
Charge-offs	(1,000)		(7,000)	(5,000)	(16,000)
Recoveries	1,000		4,000	4,000	11,000
Recoveries	1,000		4,000	4,000	11,000
Net recoveries			(3,000)	(1,000)	(5,000)
Net recoveries			(3,000)	(1,000)	(5,000)
Ending balance	0			0
Loans, ending balance: Loans collectively evaluated for impairment	1,591,000			1,591,000		1,768,000
Total	$ 1,591,000			$ 1,591,000		$ 1,768,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net loss	$ (576,205)	$ (881,941)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses	45,137	121,000
Loss on sale of other real estate	11,168	5,968
Amortization of premiums on investments	51,985	90,818
Amortization of core deposit intangible	133,558	133,559
Depreciation on fixed assets	118,089	167,930
Gain on sale of loans		(69,163)
Gain on sale of investment securities	(378,248)
Write-down of other real estate owned	142,506	153,298
Increase in accrued interest receivable and other assets	48,752	80,745
Decrease in accrued interest payable and other liabilities	(167,675)	(124,481)
Net cash used in operating activities	(570,933)	(322,267)
Cash flows from investing activities:
Purchase of held-to-maturity investment securities		(4,860,337)
Purchase of available-for-sale investment securities	(7,699,797)
Proceeds from sale of available-for-sale investment securities	7,731,845
Proceeds from maturity and principal reductions of available-for-sale investment securities	3,084,375	188,107
Proceeds from maturity and principal reductions of held-to-maturity investment securities		9,583,837
Proceeds from the sale of other real estate owned	139,996	22,832
Proceeds from sale of loans		637,621
Net (increase) decrease in loans	(1,253,775)	66,285
Purchase of bank premises and equipment	(217,806)	(32,190)
Net cash provided by investing activities	1,784,838	5,606,155
Cash flows from financing activities:
Net decrease in deposits	(2,272,510)	(8,078,056)
Net cash used in financing activities	(2,272,510)	(8,078,056)
Net decrease in cash and cash equivalents	(1,058,605)	(2,794,168)
Cash and cash equivalents at beginning of period	10,236,199	14,497,329
Cash and cash equivalents at end of period	9,177,594	11,703,161
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	80,079	140,121
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
Noncash transfer of bank premises to assets held for sale		$ 356,758

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5. Investment Securities

9 Months Ended

Sep. 30, 2013

Notes

5. Investment Securities

5.  Investment Securities

The following is a summary of the Company's investment portfolio: 

(In 000’s)	September 30, 2013
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(216)	$3,881
Government Sponsored Enterprises  residential mortgage-backed securities	5,980	38	(149)	5,869
Investments in money market funds	129	-	-	129
	10,206	$38	$(365)	$9,879

	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 September 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	3,881
Government Sponsored Enterprises residential mortgage-backed securities	5,980	5,869
Total debt securities	10,077	9,750
Investments in money market funds	129	129
	$10,206	$9,879

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 September 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	$3,881	$(216)	-	-	$3,881	$(216)
Government Sponsored Enterprises residential mortgage-backed securities	20	4,479	(149)	-	-	4,479	(149)
Total temporarily
Impaired investment
securities	35	$8,359	$( 365)	-	-	$8,360	$(365)

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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7. Other Real Estate Owned: Other Real Estate, Roll Forward (Tables)

9 Months Ended

Sep. 30, 2013

Tables/Schedules

Other Real Estate, Roll Forward

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

(in 000's)	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2013	September 30, 2012	September 30, 2013	September 30, 2012
Beginning balance	$527	$1,333	775	1,284
Additions, transfers from loans	-	-	-	75
Proceeds from sales	(48)	(28)	(140)	(23)
	479	1,305	635	1,336
Write-downs and net gains (losses) on sales	3	(128)	(153)	(159)
Ending Balance	$482	$1,177	482	1,177

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5. Investment Securities: Schedule of Unrealized Loss on Investments (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	35	5
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 8,359	$ 999
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(365)	(5)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	8,360	999
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(365)	(5)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0	0
US Government Agencies Debt Securities
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	15	3
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	3,881	746
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(216)	(4)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,881	746
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(216)	(4)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0	0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	20	2
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	4,479	253
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(149)	(1)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	4,479	253
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(149)	(1)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	$ 0	$ 0

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

9 Months Ended

Sep. 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 September 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	$3,881	$(216)	-	-	$3,881	$(216)
Government Sponsored Enterprises residential mortgage-backed securities	20	4,479	(149)	-	-	4,479	(149)
Total temporarily
Impaired investment
securities	35	$8,359	$( 365)	-	-	$8,360	$(365)

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)