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:     March 31, 2014

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 June 9, 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 June 9, 2014.

EXPLANATORY NOTE

The sole purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014, originally filed with the Securities and Exchange Commission on May 15, 2014, 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)
June 9, 2014	/s/ Evelyn F. Smalls
Date	Evelyn F. Smalls
	President and Chief Executive Officer
June 9, 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: Analysis of the activity in the allowance for loan losses (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Beginning balance	$ 839,000	$ 1,204,000
Provision for loan losses	40,000	70,000
Charge-offs	(260,000)	(340,000)
Recoveries	7,000	3,000
Net recoveries	(253,000)	(337,000)
Ending balance	626,000	937,000
Net (charge-offs) recoveries	(253,000)	(337,000)
Period-end amount allocated to loans individually evaluated for impairment	150,000		378,000
Period-end amount allocated to loans collectively evaluated for impairment	476,000		461,000
Total allocation	626,000	937,000
Loans, ending balance: Loans individually evaluated for impairment	1,983,000		1,882,000
Loans, ending balance: Loans collectively evaluated for impairment	41,056,000		40,829,000
Total	43,039,090		42,710,625
Commercial And Industrial
Beginning balance	483,000	891,000
Provision for loan losses	64,000	62,000
Charge-offs	(253,000)	(340,000)
Recoveries	2,000	1,000
Net recoveries	(251,000)	(339,000)
Ending balance	296,000	614,000
Net (charge-offs) recoveries	(251,000)	(339,000)
Period-end amount allocated to loans individually evaluated for impairment	123,000		378,000
Period-end amount allocated to loans collectively evaluated for impairment	173,000		105,000
Total allocation	296,000	614,000
Loans, ending balance: Loans individually evaluated for impairment	234,000		492,000
Loans, ending balance: Loans collectively evaluated for impairment	4,033,000		3,818,000
Total	4,267,000		4,310,000
Commercial Real Estate Portfolio Segment
Beginning balance	280,000	308,000
Provision for loan losses	17,000	(33,000)
Charge-offs	0	0
Recoveries	0	0
Net recoveries	0	0
Ending balance	297,000	275,000
Net (charge-offs) recoveries	0	0
Period-end amount allocated to loans individually evaluated for impairment	27,000		0
Period-end amount allocated to loans collectively evaluated for impairment	270,000		280,000
Total allocation	297,000	275,000
Loans, ending balance: Loans individually evaluated for impairment	1,749,000		1,390,000
Loans, ending balance: Loans collectively evaluated for impairment	31,693,000		31,572,000
Total	33,442,000		32,962,000
Consumer Real Estate
Beginning balance	59,000	5,000
Provision for loan losses	(40,000)	41,000
Charge-offs	0	0
Recoveries	1,000	2,000
Net recoveries	1,000	2,000
Ending balance	20,000	48,000
Net (charge-offs) recoveries	1,000	2,000
Period-end amount allocated to loans individually evaluated for impairment	0		0
Period-end amount allocated to loans collectively evaluated for impairment	20,000		59,000
Total allocation	20,000	48,000
Loans, ending balance: Loans individually evaluated for impairment	0		0
Loans, ending balance: Loans collectively evaluated for impairment	3,833,000		3,909,000
Total	3,833,000		3,909,000
Consumer And Other Loans
Beginning balance	17,000	0
Provision for loan losses	(1,000)	0
Charge-offs	(7,000)	0
Recoveries	4,000	0
Net recoveries	(3,000)	0
Ending balance	13,000	0
Net (charge-offs) recoveries	(3,000)	0
Period-end amount allocated to loans individually evaluated for impairment	0		0
Period-end amount allocated to loans collectively evaluated for impairment	13,000		17,000
Total allocation	13,000	0
Loans, ending balance: Loans individually evaluated for impairment	0		0
Loans, ending balance: Loans collectively evaluated for impairment	1,497,000		1,530,000
Total	$ 1,497,000		$ 1,530,000

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8. Fair Value: Fair Value Measurement Inputs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Assets, Fair Value Disclosure, Recurring	$ 9,632	$ 9,580
Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring
Loans Held at Fair Value
Assets, Fair Value Disclosure, Recurring	446	447
Loans Held at Fair Value | Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring	$ 446	$ 447
Loans Held at Fair Value | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Fair Value Inputs, Discount Rate	8.03%
Fair Value Inputs, Probability of Default	18.00%	18.00%
Loans Held at Fair Value | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Minimum
Fair Value Inputs, Discount Rate		9.11%
Fair Value Assumptions, Expected Term	4 years 11 days	4 years 29 days
Loans Held at Fair Value | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Maximum
Fair Value Inputs, Discount Rate		9.11%
Fair Value Assumptions, Expected Term	4 years 25 days	4 years 1 month 10 days

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7. Other Real Estate Owned: Components Of Net Expense Of Other Real Estate (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Professional fees	$ 71,606	$ 70,834
Other	0	(30,000)
Impairment charges (net)	396	30,538
Other Real Estate
Insurance	5,000	6,000
Professional fees	0	0
Real estate taxes	7,000	6,000
Utilities	1,000	2,000
Other	0	0
Transfer-in write up	0	0
Impairment charges (net)	0	30,000
Total	$ 13,000	$ 44,000

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2. Net Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Basic:
Net loss available to common shareholders	$ (221,253)	$ (338,787)
Average common shares outstanding-basic	1,068,588	1,068,588
Net loss per share-basic	$ (0.21)	$ (0.32)
Diluted:
Average common shares-diluted	1,068,588	1,068,588
Net loss per share-diluted	$ (0.21)	$ (0.32)

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Impaired Loans

(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	$437	$45	$141	$186	$75
SBA Loans	48	-	48	48	48
Total commercial and industrial	485	45	189	234	123
Commercial real estate:
Commercial mortgages	1,000	624	376	1,000	27
SBA Loans	127	127	-	127	-
Religious organizations	622	622	-	622	-
Total commercial real estate	1,749	1,373	376	1,749	27
Total loans	$2,234	$1,418	$565	$1,983	$150

Impaired loans as of December 31, 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	$444	$47	$397	$444	$330
SBA  loans	48	-	48	48	48
Asset-based	-	-	-	-	-
Total Commercial and industrial	492	47	445	492	378
Commercial real estate:
Commercial mortgages	630	630	-	630	-
SBA  Loans	130	130	-	130	-
Religious Organizations	630	630	-	630	-
Total Commercial real estate	1,390	1,390	-	1,390	-
Total loans	$1,882	$1,437	$445	$1,882	$378

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8. Fair Value: Fair Value Assets Measured on Nonrecurring Basis (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Impaired Loans, Carrying Value
Total fair value gain (loss) during the period	$ (27)	$ (59)
Assets, Fair Value Disclosure, Nonrecurring	1,833	1,304
Other Real Estate Owned
Total fair value gain (loss) during the period	0	(157)
Assets, Fair Value Disclosure, Nonrecurring	433	433
Fair Value, Inputs, Level 1 | Impaired Loans, Carrying Value
Assets, Fair Value Disclosure, Nonrecurring		0
Fair Value, Inputs, Level 1 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring		0
Fair Value, Inputs, Level 2 | Impaired Loans, Carrying Value
Assets, Fair Value Disclosure, Nonrecurring	1,833	0
Fair Value, Inputs, Level 2 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring	433	0
Fair Value, Inputs, Level 3 | Impaired Loans, Carrying Value
Assets, Fair Value Disclosure, Nonrecurring		1,304
Fair Value, Inputs, Level 3 | Other Real Estate Owned
Assets, Fair Value Disclosure, Nonrecurring		$ 433

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6. Loans and Allowance For Loan Losses: Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Impaired Financing Receivable, Unpaid Principal Balance	$ 1,882
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,437
Impaired Financing Receivable, with Related Allowance, Recorded Investment	445
Impaired Financing Receivable, Recorded Investment	1,882
Impaired Financing Receivable, Related Allowance	378
Commercial And Industrial
Impaired Financing Receivable, Unpaid Principal Balance	492
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	47
Impaired Financing Receivable, with Related Allowance, Recorded Investment	445
Impaired Financing Receivable, Recorded Investment	492
Impaired Financing Receivable, Related Allowance	378
Commercial And Industrial | Commercial
Impaired Financing Receivable, Unpaid Principal Balance	444
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	47
Impaired Financing Receivable, with Related Allowance, Recorded Investment	397
Impaired Financing Receivable, Recorded Investment	444
Impaired Financing Receivable, Related Allowance	330
Commercial And Industrial | SBA Loans
Impaired Financing Receivable, Unpaid Principal Balance	48
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	48
Impaired Financing Receivable, Recorded Investment	48
Impaired Financing Receivable, Related Allowance	48
Commercial And Industrial | Asset Based Loans
Impaired Financing Receivable, Unpaid Principal Balance	0
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0
Impaired Financing Receivable, Recorded Investment	0
Impaired Financing Receivable, Related Allowance	0
Commercial Real Estate Portfolio Segment
Impaired Financing Receivable, Unpaid Principal Balance	1,390
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,390
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0
Impaired Financing Receivable, Recorded Investment	1,390
Impaired Financing Receivable, Related Allowance	0
Commercial Real Estate Portfolio Segment | SBA Loans
Impaired Financing Receivable, Unpaid Principal Balance	130
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	130
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0
Impaired Financing Receivable, Recorded Investment	130
Impaired Financing Receivable, Related Allowance	0
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Impaired Financing Receivable, Unpaid Principal Balance	630
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	630
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0
Impaired Financing Receivable, Recorded Investment	630
Impaired Financing Receivable, Related Allowance	0
Commercial Real Estate Portfolio Segment | Religious Organizations
Impaired Financing Receivable, Unpaid Principal Balance	630
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	630
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0
Impaired Financing Receivable, Recorded Investment	630
Impaired Financing Receivable, Related Allowance	$ 0

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5. Investment Securities: Scheduled of Unrealized Loss on Investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	34	36
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 7,998	$ 8,353
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(303)	(498)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	8,456	8,578
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(343)	(523)
US Government Agencies Debt Securities
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	15	15
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	3,673	3,576
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(174)	(270)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	225
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0	(25)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	3,905	3,801
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	(192)	(295)
Collateralized Mortgage Backed Securities
Held-to-maturity, Securities in Unrealized Loss Positions, Number of securities	19	21
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	4,325	4,777
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	(129)	(228)
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	4,551	4,777
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	$ (152)	$ (228)

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9. Regulatory (Details)	12 Months Ended
	Dec. 31, 2012
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;

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8. Fair Value: Fair Value, Assets Measured on Recurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Assets, Fair Value Disclosure, Recurring	$ 9,632	$ 9,580
US Government Agencies Debt Securities
Assets, Fair Value Disclosure, Recurring	3,905	3,802
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets, Fair Value Disclosure, Recurring	5,598	5,649
Money Market Funds
Assets, Fair Value Disclosure, Recurring	129	129
Loans Held at Fair Value
Assets, Fair Value Disclosure, Recurring	446	447
Loans Held for Sale
Assets, Fair Value Disclosure, Recurring		1,646
Fair Value, Inputs, Level 1
Assets, Fair Value Disclosure, Recurring	129	129
Fair Value, Inputs, Level 1 | US Government Agencies Debt Securities
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 1 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 1 | Money Market Funds
Assets, Fair Value Disclosure, Recurring	129	129
Fair Value, Inputs, Level 1 | Loans Held at Fair Value
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 1 | Loans Held for Sale
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 2
Assets, Fair Value Disclosure, Recurring	9,503	9,541
Fair Value, Inputs, Level 2 | US Government Agencies Debt Securities
Assets, Fair Value Disclosure, Recurring	3,905	3,802
Fair Value, Inputs, Level 2 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets, Fair Value Disclosure, Recurring	5,598	5,649
Fair Value, Inputs, Level 2 | Money Market Funds
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 2 | Loans Held for Sale
Assets, Fair Value Disclosure, Recurring		1,646
Fair Value, Inputs, Level 3
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 3 | US Government Agencies Debt Securities
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 3 | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 3 | Money Market Funds
Assets, Fair Value Disclosure, Recurring
Fair Value, Inputs, Level 3 | Loans Held at Fair Value
Assets, Fair Value Disclosure, Recurring	446	447
Fair Value, Inputs, Level 3 | Loans Held for Sale
Assets, Fair Value Disclosure, Recurring

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4. New Authoritative Accounting Guidance

3 Months Ended

Mar. 31, 2014

Notes

4. New Authoritative Accounting Guidance

4. New Authoritative Accounting Guidance

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 adoption of this amendment on January 1, 2014 had no impact on the Company’s financial statement disclosures.

ASU 2014-04, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. ASU 2014-04 clarifies that an in substance repossession or foreclosure occurs and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (a) the creditor obtaining legal title to residential real estate property upon completion of a foreclosure or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan though completion of a deed in lieu of foreclosure or through a similar legal agreement.  The amendments require interim and annual disclosure of both the amount of the foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company is currently evaluating the impact of this amendment.

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6. Loans and Allowance For Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Impaired Financing Receivable, Average Recorded Investment	$ 1,763	$ 2,121
Impaired Financing Receivable, Interest Income, Accrual Method	2	6
Commercial And Industrial
Impaired Financing Receivable, Average Recorded Investment	405	908
Impaired Financing Receivable, Interest Income, Accrual Method	0	2
Commercial And Industrial | Commercial
Impaired Financing Receivable, Average Recorded Investment	357	749
Impaired Financing Receivable, Interest Income, Accrual Method	0	1
Commercial And Industrial | SBA Loans
Impaired Financing Receivable, Average Recorded Investment	48	49
Impaired Financing Receivable, Interest Income, Accrual Method	0	1
Commercial And Industrial | Asset Based Loans
Impaired Financing Receivable, Average Recorded Investment	0	110
Impaired Financing Receivable, Interest Income, Accrual Method	0	0
Commercial Real Estate Portfolio Segment
Impaired Financing Receivable, Average Recorded Investment	1,358	1,213
Impaired Financing Receivable, Interest Income, Accrual Method	2	4
Commercial Real Estate Portfolio Segment | SBA Loans
Impaired Financing Receivable, Average Recorded Investment	161	0
Impaired Financing Receivable, Interest Income, Accrual Method	0	0
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Impaired Financing Receivable, Average Recorded Investment	573	642
Impaired Financing Receivable, Interest Income, Accrual Method	0	4
Commercial Real Estate Portfolio Segment | Religious Organizations
Impaired Financing Receivable, Average Recorded Investment	624	571
Impaired Financing Receivable, Interest Income, Accrual Method	$ 2	$ 0

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets Measured at  Fair Value at  December 31, 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	$3,905	-	$3,905	-
Government Sponsored Enterprises residential mortgage-backed securities	5,598	-	5,598	-
Money Market Funds	129	129	-	-
Total	$9,632	$129	$9,503	-
Loans held at fair value	$446	-	-	$446

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets Measured at  Fair Value at   December 31, 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	$3,802	$-	$3,802	-
Government Sponsored Enterprises residential mortgage-backed securities	5,649	-	$5,649	-
Money Market Funds	129	129	-	-
Total	$9,580	$129	$9,541	-
Loans held for sale	$1,646	$-	$1,646	-
Loans held at fair value	$447	$-	$-	$447

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Components Of Net Expense Of Other Real Estate

	Three Months Ended	Three Months Ended
(in 000's)	March 31, 2014	March 31, 2013
Insurance	$5	$6
Professional fees	-	-
Real estate taxes	7	6
Utilities	1	2
Other	-	-
Transfer-in write-up	-	-
Impairment charges (net)	-	30
Total	$13	$44

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7. Other Real Estate Owned: Other Real Estate Owned (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Details
Other Real Estate, Beginning Balance	$ 433,087	$ 775,407
Additions, transfers from loans	0	0
Proceeds from sales	0	(27,000)
Other Real Estate, Period Increase (Decrease)	433,000	748,000
Write-downs and net gains (losses) on sales	0	(30,000)
Other Real Estate, Ending Balance	$ 432,691	$ 717,869

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8. Fair Value: Fair Value Measurement Inputs (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Fair Value Measurement Inputs

(in 000’s)

Assets measured at fair value	March 31,  2014 Fair value	December 31, 2013 Fair Value	Principal valuation techniques	Significant observable inputs	March 31,  2014 Range of inputs	December 31, 2013 Range of inputs
Loans held at fair value:	$446	$447	Discounted cash flow	Constant prepayment rate	7.194% to 7.456%	7.74% to 7.985%
				Weighted average discount rate	8.03%	9.106% to 9.111%
				Weighted average life	4.03 yrs to 4.07 yrs	4.08 yrs to 4.11 yrs
				Average projected default rate	18%	18%

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Fair Value Assets Measured on Nonrecurring Basis

Carrying Value at March 31, 2014:

(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 3 months ended
Impaired Loans	$1,833	-	-	$1,833	$(27)
Other real estate owned	433	-	-	433	-

Carrying Value at December 31, 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 12 months ended
Impaired Loans	$1,304	-	-	$1,304	(59)
Other real estate owned	433	-	-	433	( 157)

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3. Changes in Accumulated Other Comprehensive Income (loss)

3 Months Ended

Mar. 31, 2014

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):

	March 31, 2014
	Before tax	Tax	Net of tax
(in (000’s)	Amount	expense	Amount
Unrealized loss on securities:
Unrealized holding gain arising during period	$183	$(60)	$123
Less: reclassification adjustment for gains (losses)
realized in net loss	-	-	-
Other comprehensive gain, net	$183	$60	$123

	March 31, 2013
	Before tax	Tax	Net of tax
(in (000’s)	Amount	benefit	Amount
Unrealized loss on securities:
Unrealized holding gain arising during period	$(9)	$3	$(6)
Less: reclassification adjustment for gains (losses)
realized in net loss	-	-	-
Other comprehensive gain, net	$(9)	$3	$(6)

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Schedule of Fair Value of Assets and Liabilities

		March 31, 2014		December 31, 2013
(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	$5,047	$5,047	$5,790	$5,790
Available for sale securities	(1)	9,632	9,632	9,580	9,580
Loans held for sale	Level 2	-	-	1,646	1,646
Loans, net of allowance for loan losses	(2)	42,413	42,358	42,711	43,304
Accrued interest receivable	Level 2	282	282	256	256
Liabilities:
Demand deposits	Level 2	27,355	27,355	28,658	28,658
Savings deposits	Level 2	12,764	12,764	12,988	12,988
Time deposits	Level 2	15,396	15,413	15,463	15,472
Accrued interest payable	Level 2	17	17	13	13

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6. Loans and Allowance For Loan Losses: Past Due Financing Receivables (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	$ 659
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	114
Financing Receivable, Recorded Investment, Nonaccrual Status	2,668
Financing Receivable, Recorded Investment, Past Due	3,441
Financing Receivable, Recorded Investment, Current	39,598
Total Loans	43,039
Commercial And Industrial
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	268
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	313
Financing Receivable, Recorded Investment, Past Due	581
Financing Receivable, Recorded Investment, Current	3,686
Total Loans	4,267
Commercial And Industrial | Commercial
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	220
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	186
Financing Receivable, Recorded Investment, Past Due	406
Financing Receivable, Recorded Investment, Current	1,064
Total Loans	1,470
Commercial And Industrial | SBA Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	48
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	127
Financing Receivable, Recorded Investment, Past Due	175
Financing Receivable, Recorded Investment, Current	379
Total Loans	554
Commercial And Industrial | Asset Based Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	0
Financing Receivable, Recorded Investment, Current	2,243
Total Loans	2,243
Commercial Real Estate Portfolio Segment
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	285
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	1,622
Financing Receivable, Recorded Investment, Past Due	1,907
Financing Receivable, Recorded Investment, Current	31,535
Total Loans	33,442
Commercial Real Estate Portfolio Segment | SBA Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	171
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	171
Financing Receivable, Recorded Investment, Current	387
Total Loans	558
Commercial Real Estate Portfolio Segment | Commercial Mortgages
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	114
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	1,000
Financing Receivable, Recorded Investment, Past Due	1,114
Financing Receivable, Recorded Investment, Current	16,240
Total Loans	17,354
Commercial Real Estate Portfolio Segment | Construction
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	0
Financing Receivable, Recorded Investment, Current	3,307
Total Loans	3,307
Commercial Real Estate Portfolio Segment | Religious Organizations
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	622
Financing Receivable, Recorded Investment, Past Due	622
Financing Receivable, Recorded Investment, Current	11,601
Total Loans	12,223
Consumer Real Estate
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	733
Financing Receivable, Recorded Investment, Past Due	733
Financing Receivable, Recorded Investment, Current	3,100
Total Loans	3,833
Consumer Real Estate | Home Equity Line of Credit
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	0
Financing Receivable, Recorded Investment, Current	24
Total Loans	24
Consumer Real Estate | Home Equity Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	424
Financing Receivable, Recorded Investment, Past Due	424
Financing Receivable, Recorded Investment, Current	730
Total Loans	1,154
Consumer Real Estate | Family Residential Mortgage
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	309
Financing Receivable, Recorded Investment, Past Due	309
Financing Receivable, Recorded Investment, Current	2,346
Total Loans	2,655
Total Real Estate
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	285
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	2,355
Financing Receivable, Recorded Investment, Past Due	2,640
Financing Receivable, Recorded Investment, Current	34,635
Total Loans	37,275
Consumer And Other Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	106
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	114
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	220
Financing Receivable, Recorded Investment, Current	1,277
Total Loans	1,497
Consumer And Other Loans | Consumer Installment
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	0
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	0
Financing Receivable, Recorded Investment, Current	12
Total Loans	12
Consumer And Other Loans | Student Loans
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	95
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	114
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	209
Financing Receivable, Recorded Investment, Current	1,106
Total Loans	1,315
Consumer And Other Loans | Other
Financing Receivable Recorded Investment Thirty To Eighty Nine Days Past Due	11
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	0
Financing Receivable, Recorded Investment, Nonaccrual Status	0
Financing Receivable, Recorded Investment, Past Due	11
Financing Receivable, Recorded Investment, Current	159
Total Loans	$ 170

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Mar. 31, 2014		Dec. 31, 2013
Assets:
Cash and due from banks	$ 1,951,357		$ 2,340,002
Interest-bearing deposits with banks	309,597		306,776
Federal funds sold	2,786,000		3,143,000
Cash and cash equivalents	5,046,954		5,789,778
Investment securities:
Available-for-sale, at fair value	9,632,391		9,579,979
Loans held for sale, at fair value			1,645,832
Loans, net of unearned discounts and deferred fees ($446,108 and $446,523 at fair value at March 31, 2014 and December 31, 2013, respectively)	43,039,090		42,710,625
Less allowance for loan losses	(626,050)		(839,133)
Net loans	42,413,040		41,871,492
Bank premises and equipment, net	627,000		649,159
Accrued interest receivable	281,872		256,262
Other real estate owned	432,691		433,087
Prepaid expenses and other assets	523,032		525,466
Total assets	58,956,980		60,751,055
Liabilities:
Demand deposits, noninterest-bearing	13,527,120		14,526,988
Demand deposits, interest-bearing	13,827,602		14,131,452
Savings deposits	12,763,983		12,988,388
Time deposits, under $100,000	6,866,753		6,683,499
Time deposits, $100,000 and over	8,529,257		8,779,518
Total deposits	55,514,715		57,109,845
Accrued interest payable	16,550		12,722
Accrued expenses and other liabilities	313,711		418,604
Total liabilities	55,844,976		57,541,171
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	(11,446,229)		(11,224,976)
Accumulated other comprehensive loss	(203,673)		(327,046)
Total shareholders' equity	3,112,004		3,209,884
Total liabilities and shareholders' equity	58,956,980		60,751,055
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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7. Other Real Estate Owned: Components of Other Real Estate Owned (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Other real estate owned	$ 432,691	$ 433,087	$ 717,869	$ 775,407
Other Real Estate, Ending Balance	432,691	433,087	717,869	775,407
Commercial Real Estate
Other real estate owned	191,000	191,000
Other Real Estate, Ending Balance	191,000	191,000
Residential Real Estate
Other real estate owned	242,000	242,000
Other Real Estate, Ending Balance	$ 242,000	$ 242,000

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1. Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

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, 2013 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 March 31, 2014 and December 31, 2013 and the consolidated results of its operations and its cash flows for the three months ended March 31, 2014 and 2013.

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.

Loans Held for Sale

From time to time, the Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are classified as held-for-sale and carried at estimated fair value based on a loan-by-loan valuation using actual market bids in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments. 

Loans

The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.

Loans Held at Fair Value

From time to time, the Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value.  Fair value of these loans is estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

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 Loan-to-Value 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: Summary of Available-for-sale Securities (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Available-for-sale Securities, Amortized Cost Basis		$ 10,067,000
Available-for-sale Securities, Gross Unrealized Gain	39,000	36,000
Available-for-sale Securities, Gross Unrealized Loss	(343,000)	(523,000)
Available-for-sale, at fair value	9,632,391	9,579,979
US Government Agencies Debt Securities
Available-for-sale Securities, Amortized Cost Basis	4,097,000	4,097,000
Available-for-sale Securities, Gross Unrealized Gain
Available-for-sale Securities, Gross Unrealized Loss	(192,000)	(295,000)
Available-for-sale, at fair value	3,905,000	3,802,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis		5,841,000
Available-for-sale Securities, Gross Unrealized Gain	39,000	36,000
Available-for-sale Securities, Gross Unrealized Loss	(152,000)	(228,000)
Available-for-sale, at fair value		5,649,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis		129,000
Available-for-sale Securities, Gross Unrealized Gain
Available-for-sale Securities, Gross Unrealized Loss
Available-for-sale, at fair value		$ 129,000

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6. Loans and Allowance For Loan Losses: Analysis of the activity in the allowance for loan losses (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Analysis of the activity in the allowance for loan losses

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

(in 000's)	For the Three months ended March 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$483	$280	$59	$17	$839
Provision for loan losses	64	17	(40)	(1)	40
Charge-offs	(253)	-	-	(7)	(260)
Recoveries	2	-	1	4	7
Net recoveries	(251)	-	1	(3)	(253)
Ending balance	$296	$297	$20	$13	$626

(in 000's)	For the Three months ended March 31, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision for loan losses	62	(33)	41	-	70
Charge-offs	(340)	-	-	-	(340)
Recoveries	1	-	2	-	3
Net (charge-offs) recoveries	(339)	-	2	-	(337)
Ending balance	$614	$275	$48	-	$937

(in 000's)	March 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$123	$27	-	-	$150
Loans collectively  evaluated for impairment	173	270	20	13	476
	$296	$297	$20	$13	$626
Loans, ending balance:
Loans individually evaluated for impairment	$234	$1,749	-	-	$1,983
Loans collectively  evaluated for impairment	4,033	31,693	3,833	1,497	41,056
Total	$4,267	$33,442	$3,833	$1,497	$43,039

	December 31, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$378	-	-	-	$378
Loans collectively  evaluated for impairment	105	280	59	17	461
	$483	$280	$59	$17	$839
Loans, ending balance:
Loans individually evaluated for impairment	$492	$1,390	-	-	$1,882
Loans collectively  evaluated for impairment	3,818	31,572	3,909	1,530	40,829
Total	$4,310	$32,962	$3,909	$1,530	$42,711

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5. Investment Securities: Investments Classified by Contractual Maturity Date (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Amortized Cost, due after one year through five years
Fair Value, due after one year through five years
Amortized Cost, due after five years through ten years
Fair Value, due after five years through ten years
Available-for-sale Securities, Amortized Cost Basis		10,067,000
Available-for-sale, at fair value	9,632,391	9,579,979
Total debt securities, Amortized Cost Basis
Total debt securities, Fair Value
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises
Available-for-sale Securities, Amortized Cost Basis		5,841,000
Available-for-sale, at fair value		5,649,000
Money Market Funds
Available-for-sale Securities, Amortized Cost Basis		129,000
Available-for-sale, at fair value		$ 129,000

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6. Loans and Allowance For Loan Losses: Bank Loans by Class (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Bank Loans by Class

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

(In 000's)	Commercial Loans March 31, 2014
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$814	$220	-	$47	$139	$1,470
SBA loans	-	2,073	125	46	-	-	2,244
Asset-based	-	465	-	40	48	-	553
	250	3,352	345	86	95	139	4,267
Commercial real estate:
Commercial mortgages	-	14,888	869	-	1,281	316	17,354
SBA Loans	-	260	171	-	127	-	558
Construction	-	3,307	-	-	-	-	3,307
Religious organizations	-	10,061	919	621	622	-	12,223
	-	28,516	1,959	621	2,030	316	33,442
Total commercial loans	$250	$31,868	$2,304	$707	$2,125	$455	$37,709

	Residential Mortgage and Consumer Loans March 31, 2014
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$730	$424	$1,154
Home equity line of credit	24	-	24
1-4 family residential mortgages	2,346	309	2,655
	3,100	733	3,833
Consumer Other:
Consumer Installment	12	-	12
Student loans	1,315	-	1,315
Other	170	-	170
	1,497	-	1,497
Total  consumer loans	$4,597	$733	$5,330
Total loans				$43,039

(In 000's)	Commercial Loans, December 31, 2013
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$743	$220	-	$52	$393	$1,658
SBA loans	-	497	-	40	48	-	585
Asset-based	-	1,897	124	46	-	-	2,067
	250	3,137	344	86	100	393	$4,310
Commercial real estate:
Commercial mortgages	-	15,232	883	-	912	316	17,343
SBA Loans	-	265	171	-	130	-	566
Construction	-	2,456	-	-	-	-	2,456
Religious organizations	-	10,414	931	623	629	-	12,597
	-	28,367	1,985	623	1,671	316	32,962
Total commercial loans	$250	$31,504	$2,329	$709	$1,771	$709	$37,272

	Residential Mortgage and Consumer Loans December 31, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,061	$115	$1,176
Home equity line of credit	24	-	24
1-4 family residential mortgages	2,467	242	2,709
	3,552	357	3,909
Consumer Other:
Consumer Installment	16	-	16
Student loans	1,366	-	1,366
Other	148	-	148
	1,530	-	1,530
Total  consumer loans	$5,082	$357	$5,439
Total loans				$  42,711

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2. Net Loss Per Share

3 Months Ended

Mar. 31, 2014

Notes

2. Net Loss Per Share

2. Net Loss Per Share

The calculation of net loss per share follows:

	Three Months Ended  March 31, 2014	Three Months Ended March 31, 2013
Basic:
Net loss available to common shareholders	(221,253)	(338,789)
Average common shares outstanding-basic	1,068,588	1,068,588
Net loss per share-basic	(0.21)	(0.32)
Diluted:
Average common shares-diluted	1,068,588	1,068,588
Net loss per share-diluted	(0.21)	(0.32)

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 $)	Mar. 31, 2014	Dec. 31, 2013
Loans, fair value	$ 446,108	$ 446,523
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): Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Comprehensive Income (Loss)

	March 31, 2014
	Before tax	Tax	Net of tax
(in (000’s)	Amount	expense	Amount
Unrealized loss on securities:
Unrealized holding gain arising during period	$183	$(60)	$123
Less: reclassification adjustment for gains (losses)
realized in net loss	-	-	-
Other comprehensive gain, net	$183	$60	$123

	March 31, 2013
	Before tax	Tax	Net of tax
(in (000’s)	Amount	benefit	Amount
Unrealized loss on securities:
Unrealized holding gain arising during period	$(9)	$3	$(6)
Less: reclassification adjustment for gains (losses)
realized in net loss	-	-	-
Other comprehensive gain, net	$(9)	$3	$(6)

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 01, 2014
Document and Entity Information:
Entity Registrant Name	UNITED BANCSHARES INC /PA
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
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	2014
Document Fiscal Period Focus	Q1
Entity Incorporation, Date of Incorporation	Apr. 08, 1993

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5. Investment Securities: Summary of Available-for-sale Securities (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Summary of Available-for-sale Securities

(In 000’s)	March 31, 2014
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(192)	$3,905
Government Sponsored Enterprises  residential mortgage-backed securities	5,710	39	(152)	5,598
Investments in money market funds	129	-	-	129
	$9,936	$39	$(343)	9,632

	December 31, 2013
		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
	Cost	Gains	Losses	Value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(295)	$3,802
Government Sponsored Enterprises residential mortgage-backed securities	5,841	36	(228)	5,649
Investments in money market funds	129	-	-	129
	$10,067	$36	$(523)	$9,580

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest income:
Interest and fees on loans	$ 647,286	$ 628,176
Interest on investment securities	60,935	86,618
Interest on federal funds sold	2,337	4,394
Interest on time deposits with other banks	2,823	230
Total interest income	713,381	719,418
Interest expense:
Interest on time deposits	9,775	15,207
Interest on demand deposits	6,601	8,744
Interest on savings deposits	1,575	1,734
Total interest expense	17,951	25,685
Net interest income	695,430	693,733
Provision for loan losses	40,000	70,137
Net interest income after provision for loan losses	655,430	623,596
Noninterest income:
Customer service fees	95,812	100,608
ATM fee income	41,955	79,648
Loss on sale of other real estate owned		(396)
Other income	33,242	15,619
Total noninterest income	171,009	195,479
Noninterest expense:
Salaries, wages and employee benefits	417,089	377,464
Occupancy and equipment	254,525	243,899
Office operations and supplies	64,123	78,355
Marketing and public relations	18,424	15,980
Professional services	71,606	70,834
Data processing	112,842	120,865
Other real estate expense	12,583	43,505
Loan and collection costs	18,656	19,903
Deposit insurance assessments	34,000	36,999
Other operating	43,844	150,058
Total noninterest expense	1,047,692	1,157,862
Net loss before income taxes	(221,253)	(338,787)
Net loss	(221,253)	(338,787)
Net loss per common share-basic and diluted	$ (0.21)	$ (0.32)
Weighted average number of common shares	1,068,588	1,068,588
Comprehensive loss:
Net loss	(221,253)	(338,787)
Unrealized gains (losses) on available for sale securities	123,373	(6,141)
Total comprehensive loss	$ (97,879)	$ (344,928)

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7. Other Real Estate Owned

3 Months Ended

Mar. 31, 2014

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
	March 31, 2014	March 31, 2013
Beginning balance	$433	$775
Additions, transfers from loans	-	-
Proceeds from sales	-	(27)
	433	748
Write-downs and net gains (losses) on sales	-	(30)
Ending Balance	$433	$718

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

(in 000's)	March 31, 2014	December 31, 2013
Commercial real estate	$191	$191
Residential real estate	242	242
Total	$433	$433

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

	Three Months Ended	Three Months Ended
(in 000's)	March 31, 2014	March 31, 2013
Insurance	$5	$6
Professional fees	-	-
Real estate taxes	7	6
Utilities	1	2
Other	-	-
Transfer-in write-up	-	-
Impairment charges (net)	-	30
Total	$13	$44

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6. Loans and Allowance For Loan Losses

3 Months Ended

Mar. 31, 2014

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)	March 31, 2014	December 31, 2013
Commercial and industrial	$4,267	$4,310
Commercial real estate	33,442	32,962
Consumer real estate	3,833	3,909
Consumer loans other	1,497	1,530
Total loans	$43,039	$42,711

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.  During the quarter ended March 31, 2014, the Bank increased the qualitative factor for its commercial industrial loans because of charge-off trends and delinquencies in this segment of the loan portfolio.  In addition, the average historical loss factor for this sector increased as a result of  net charge-offs totaling approximately $251,000 during the quarter. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.

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

(in 000's)	For the Three months ended March 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$483	$280	$59	$17	$839
Provision for loan losses	64	17	(40)	(1)	40
Charge-offs	(253)	-	-	(7)	(260)
Recoveries	2	-	1	4	7
Net recoveries	(251)	-	1	(3)	(253)
Ending balance	$296	$297	$20	$13	$626

(in 000's)	For the Three months ended March 31, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer loans other	Total
Beginning balance	$891	$308	$5	-	$1,204
Provision for loan losses	62	(33)	41	-	70
Charge-offs	(340)	-	-	-	(340)
Recoveries	1	-	2	-	3
Net (charge-offs) recoveries	(339)	-	2	-	(337)
Ending balance	$614	$275	$48	-	$937

(in 000's)	March 31, 2014
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$123	$27	-	-	$150
Loans collectively  evaluated for impairment	173	270	20	13	476
	$296	$297	$20	$13	$626
Loans, ending balance:
Loans individually evaluated for impairment	$234	$1,749	-	-	$1,983
Loans collectively  evaluated for impairment	4,033	31,693	3,833	1,497	41,056
Total	$4,267	$33,442	$3,833	$1,497	$43,039

	December 31, 2013
	Commercial and industrial	Commercial real estate	Consumer real estate	Consumer and other loans	Total
Period-end amount allocated to:
Loans individually evaluated for impairment	$378	-	-	-	$378
Loans collectively  evaluated for impairment	105	280	59	17	461
	$483	$280	$59	$17	$839
Loans, ending balance:
Loans individually evaluated for impairment	$492	$1,390	-	-	$1,882
Loans collectively  evaluated for impairment	3,818	31,572	3,909	1,530	40,829
Total	$4,310	$32,962	$3,909	$1,530	$42,711

Nonperforming and Nonaccrual and Past Due Loans

An age analysis of past due loans, segregated by class of loans, as of March 31, 2014 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	$220	-	$186	$406	$1,064	$1,470
SBA loans	48	-	127	175	379	554
Asset-based	-	-	-	-	2,243	2,243
Total Commercial and industrial	268	-	313	581	3,686	4,267
Commercial real estate:
Commercial mortgages	114	-	1,000	1,114	16,240	17,354
SBA loans	171	-	-	171	387	558
Construction	-	-	-	-	3,307	3,307
Religious organizations	-	-	622	622	11,601	12,223
Total Commercial real estate	285	-	1,622	1,907	31,535	33,442
Consumer real estate:
Home equity loans	-	-	424	424	730	1,154
Home equity lines of credit	-	-	-	-	24	24
1-4 family residential mortgages	-	-	309	309	2,346	2,655
Total consumer real estate	-	-	733	733	3,100	3,833
Total real estate	285	-	2,355	2,640	34,635	37,275
Consumer and other:
Consumer installment	-	-	-	-	12	12
Student loans	95	114	-	209	1,106	1,315
Other	11	-	-	11	159	170
Total consumer and other	106	114	-	220	1,277	1,497
Total loans	$659	$114	$2,668	$3,441	$39,598	$43,039

 An age analysis of past due loans, segregated by class of loans, as of December 31, 2013 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	-	-	$444	$444	$1,214	$1,658
SBA loans	-	-	130	130	455	585
Asset-based	-	-	-	-	2,067	2,067
Total Commercial and industrial	-	-	574	574	3,736	4,310
Commercial real estate:
Commercial mortgages	2	442	630	1,094	16,249	17,343
SBA loans	184	-	-	184	382	566
Construction	-	-	-	-	2,456	2,456
Religious organizations	-	-	629	629	11,968	12,597
Total Commercial real estate	206	442	1,259	1,907	31,055	32,962
Consumer real estate:
Home equity loans	209	147	115	471	705	1,176
Home equity lines of credit	-	-	-	-	24	24
1-4 family residential mortgages	125	-	242	367	2,342	2,709
Total consumer real estate	334	147	357	838	3,071	3,909
Total real estate	540	589	1,616	2,745	34,126	36,871
Consumer and other:
Consumer installment	-	-	-	-	16	16
Student loans	87	141	-	228	1,138	1,366
Other	5	-	-	5	143	148
Total consumer and other	92	141	-	233	1,297	1,530
Total loans	$632	$730	$2,190	$3,552	$39,159	$42,711

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 indicators discussed above.

(In 000's)	Commercial Loans March 31, 2014
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$814	$220	-	$47	$139	$1,470
SBA loans	-	2,073	125	46	-	-	2,244
Asset-based	-	465	-	40	48	-	553
	250	3,352	345	86	95	139	4,267
Commercial real estate:
Commercial mortgages	-	14,888	869	-	1,281	316	17,354
SBA Loans	-	260	171	-	127	-	558
Construction	-	3,307	-	-	-	-	3,307
Religious organizations	-	10,061	919	621	622	-	12,223
	-	28,516	1,959	621	2,030	316	33,442
Total commercial loans	$250	$31,868	$2,304	$707	$2,125	$455	$37,709

	Residential Mortgage and Consumer Loans March 31, 2014
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$730	$424	$1,154
Home equity line of credit	24	-	24
1-4 family residential mortgages	2,346	309	2,655
	3,100	733	3,833
Consumer Other:
Consumer Installment	12	-	12
Student loans	1,315	-	1,315
Other	170	-	170
	1,497	-	1,497
Total  consumer loans	$4,597	$733	$5,330
Total loans				$43,039

(In 000's)	Commercial Loans, December 31, 2013
	Good/ Excellent	Satisfactory	Pass	Special Mention	Substandard	Doubtful	Total
Commercial and industrial:
Commercial	$250	$743	$220	-	$52	$393	$1,658
SBA loans	-	497	-	40	48	-	585
Asset-based	-	1,897	124	46	-	-	2,067
	250	3,137	344	86	100	393	$4,310
Commercial real estate:
Commercial mortgages	-	15,232	883	-	912	316	17,343
SBA Loans	-	265	171	-	130	-	566
Construction	-	2,456	-	-	-	-	2,456
Religious organizations	-	10,414	931	623	629	-	12,597
	-	28,367	1,985	623	1,671	316	32,962
Total commercial loans	$250	$31,504	$2,329	$709	$1,771	$709	$37,272

	Residential Mortgage and Consumer Loans December 31, 2013
	Performing	Nonperforming	Total
Consumer Real Estate:
Home equity	$1,061	$115	$1,176
Home equity line of credit	24	-	24
1-4 family residential mortgages	2,467	242	2,709
	3,552	357	3,909
Consumer Other:
Consumer Installment	16	-	16
Student loans	1,366	-	1,366
Other	148	-	148
	1,530	-	1,530
Total  consumer loans	$5,082	$357	$5,439
Total loans				$  42,711

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 months ended March 31, 2014, the Bank charged off approximately $253,000 related to one impaired loan for which specific reserves had been previously allocated.

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 March 31, 2014 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	$437	$45	$141	$186	$75
SBA Loans	48	-	48	48	48
Total commercial and industrial	485	45	189	234	123
Commercial real estate:
Commercial mortgages	1,000	624	376	1,000	27
SBA Loans	127	127	-	127	-
Religious organizations	622	622	-	622	-
Total commercial real estate	1,749	1,373	376	1,749	27
Total loans	$2,234	$1,418	$565	$1,983	$150

Impaired loans as of December 31, 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	$444	$47	$397	$444	$330
SBA  loans	48	-	48	48	48
Asset-based	-	-	-	-	-
Total Commercial and industrial	492	47	445	492	378
Commercial real estate:
Commercial mortgages	630	630	-	630	-
SBA  Loans	130	130	-	130	-
Religious Organizations	630	630	-	630	-
Total Commercial real estate	1,390	1,390	-	1,390	-
Total loans	$1,882	$1,437	$445	$1,882	$378

 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 months ended March 31, 2014 and 2013.

		Three Months Ended		Three Months Ended
(In 000's)		March 31, 2014		March 31, 2013
	Average	Interest recognized	Average	Interest recognized
	Recorded	on impaired	Recorded	on impaired
	Investment	Loans	Investment	loans
Commercial and industrial:
Commercial	$357	-	$749	$1
SBA  loans	48	-	49	1
Asset-based	-	-	110	-
Total Commercial and industrial	405	-	908	2
Commercial real estate:
Commercial mortgages	573	-	642	4
SBA  Loans	161	-	-	-
Religious Organizations	624	2	571	-
Total Commercial real estate	1,358	2	1,213	4
Total loans	$1,763	$2	$2,121	$6

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 March 31, 2014 and December 31, 2013.

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Past Due Financing Receivables

		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	$220	-	$186	$406	$1,064	$1,470
SBA loans	48	-	127	175	379	554
Asset-based	-	-	-	-	2,243	2,243
Total Commercial and industrial	268	-	313	581	3,686	4,267
Commercial real estate:
Commercial mortgages	114	-	1,000	1,114	16,240	17,354
SBA loans	171	-	-	171	387	558
Construction	-	-	-	-	3,307	3,307
Religious organizations	-	-	622	622	11,601	12,223
Total Commercial real estate	285	-	1,622	1,907	31,535	33,442
Consumer real estate:
Home equity loans	-	-	424	424	730	1,154
Home equity lines of credit	-	-	-	-	24	24
1-4 family residential mortgages	-	-	309	309	2,346	2,655
Total consumer real estate	-	-	733	733	3,100	3,833
Total real estate	285	-	2,355	2,640	34,635	37,275
Consumer and other:
Consumer installment	-	-	-	-	12	12
Student loans	95	114	-	209	1,106	1,315
Other	11	-	-	11	159	170
Total consumer and other	106	114	-	220	1,277	1,497
Total loans	$659	$114	$2,668	$3,441	$39,598	$43,039

 An age analysis of past due loans, segregated by class of loans, as of December 31, 2013 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	-	-	$444	$444	$1,214	$1,658
SBA loans	-	-	130	130	455	585
Asset-based	-	-	-	-	2,067	2,067
Total Commercial and industrial	-	-	574	574	3,736	4,310
Commercial real estate:
Commercial mortgages	2	442	630	1,094	16,249	17,343
SBA loans	184	-	-	184	382	566
Construction	-	-	-	-	2,456	2,456
Religious organizations	-	-	629	629	11,968	12,597
Total Commercial real estate	206	442	1,259	1,907	31,055	32,962
Consumer real estate:
Home equity loans	209	147	115	471	705	1,176
Home equity lines of credit	-	-	-	-	24	24
1-4 family residential mortgages	125	-	242	367	2,342	2,709
Total consumer real estate	334	147	357	838	3,071	3,909
Total real estate	540	589	1,616	2,745	34,126	36,871
Consumer and other:
Consumer installment	-	-	-	-	16	16
Student loans	87	141	-	228	1,138	1,366
Other	5	-	-	5	143	148
Total consumer and other	92	141	-	233	1,297	1,530
Total loans	$632	$730	$2,190	$3,552	$39,159	$42,711

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5. Investment Securities: Investments Classified by Contractual Maturity Date (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Investments Classified by Contractual Maturity Date

(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	3,905
Government Sponsored Enterprises residential mortgage-backed securities	5,710	,5,598
Total debt securities	9,807	9,503
Investments in money market funds	129	129
	$9,936	$9,632

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1. Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

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.

Loans Held For Sale

Loans Held for Sale

From time to time, the Bank originates SBA loans for which the guaranteed portion is intended to be sold within a short period of time in the secondary market.  These loans are classified as held-for-sale and carried at estimated fair value based on a loan-by-loan valuation using actual market bids in accordance with the irrevocable option permitted under Accounting Standards Codification (“ASC”) 825-10-25 Financial Instruments. 

Loans

Loans

The Bank has both the positive intent and ability to hold the majority of its loans to maturity.  These loans are stated at the amount of unpaid principal, reduced by net unearned discount and an allowance for loan losses.  Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding and accretion of discount.

Loans Held At Fair Value

Loans Held at Fair Value

From time to time, the Bank originates SBA loans for which the un-guaranteed portion is retained after the guaranteed portion is sold in the secondary market.  Management has elected to carry these loans at fair value.  Fair value of these loans is estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

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 Loan-to-Value 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

3 Months Ended

Mar. 31, 2014

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.

Loans Held for Sale. Fair values are estimated by using actual quoted market bids on a loan by loan basis.

Loans Held at Fair Value. Fair values are estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, discount rates, default and voluntary prepayments as well as assumptions for losses and recoveries.

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  December 31, 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	$3,905	-	$3,905	-
Government Sponsored Enterprises residential mortgage-backed securities	5,598	-	5,598	-
Money Market Funds	129	129	-	-
Total	$9,632	$129	$9,503	-
Loans held at fair value	$446	-	-	$446

(in 000’s)		Fair Value Measurements at Reporting Date Using:
	Assets Measured at  Fair Value at   December 31, 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	$3,802	$-	$3,802	-
Government Sponsored Enterprises residential mortgage-backed securities	5,649	-	$5,649	-
Money Market Funds	129	129	-	-
Total	$9,580	$129	$9,541	-
Loans held for sale	$1,646	$-	$1,646	-
Loans held at fair value	$447	$-	$-	$447

The fair value of the Bank’s AFS securities portfolio was approximately $9,632,000 and $9,580,000 at March 31, 2014, and December 31, 2013, respectively. At March 31, 2014, approximately 58% of the portfolio consisted of residential mortgage-backed securities, which had a fair value of approximately $5,598,000.  At December 31, 2013, approximately 59%

of the portfolio consisted of residential mortgage-backed securities, which had a fair value of approximately $5,649,000.  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 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 March 31, 2014 and year ended December 31, 2013.

When estimating the fair value of Level 3 financial instruments, management uses various observable and unobservable inputs.  These inputs include estimated cashflows, prepayment speeds, average projected default rate and discount rates as follows:

(in 000’s)

Assets measured at fair value	March 31,  2014 Fair value	December 31, 2013 Fair Value	Principal valuation techniques	Significant observable inputs	March 31,  2014 Range of inputs	December 31, 2013 Range of inputs
Loans held at fair value:	$446	$447	Discounted cash flow	Constant prepayment rate	7.194% to 7.456%	7.74% to 7.985%
				Weighted average discount rate	8.03%	9.106% to 9.111%
				Weighted average life	4.03 yrs to 4.07 yrs	4.08 yrs to 4.11 yrs
				Average projected default rate	18%	18%

Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available market value, fair value as determined by management may fluctuate from period to period.

The following table summarizes additional information about assets measured at fair value on a recurring basis for which level 3 inputs were utilized to determine fair value:

(in 000’s)	Loans held at fair value
Balance at December 31, 2013	$447
Origination of loans	-
Principal repayments	-
Change in fair value of financial instruments	(1)
Balance at March 31, 2014	$446

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 March 31, 2014 and December 31, 2013, for which a nonrecurring change in fair value has been recorded during the three months ended March 31, 2014 and year ended December 31, 2013.

Carrying Value at March 31, 2014:

(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 3 months ended
Impaired Loans	$1,833	-	-	$1,833	$(27)
Other real estate owned	433	-	-	433	-

Carrying Value at December 31, 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 12 months ended
Impaired Loans	$1,304	-	-	$1,304	(59)
Other real estate owned	433	-	-	433	( 157)

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.

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 Held at Fair Value: The fair value of loans was estimated based on the present value of future cashflows for each asset based on their unique characteristics, market-based assumptions for prepayment speeds, default and voluntary prepayments as well as loan specific assumptions for losses and recoveries.

Loans Held for Sale. Fair values for loans held for sale are estimated by using actual quoted market bids on a loan by loan basis.

Loans (other than impaired 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 rates.

 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:

		March 31, 2014		December 31, 2013
(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	$5,047	$5,047	$5,790	$5,790
Available for sale securities	(1)	9,632	9,632	9,580	9,580
Loans held for sale	Level 2	-	-	1,646	1,646
Loans, net of allowance for loan losses	(2)	42,413	42,358	42,711	43,304
Accrued interest receivable	Level 2	282	282	256	256
Liabilities:
Demand deposits	Level 2	27,355	27,355	28,658	28,658
Savings deposits	Level 2	12,764	12,764	12,988	12,988
Time deposits	Level 2	15,396	15,413	15,463	15,472
Accrued interest payable	Level 2	17	17	13	13

(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, Level 3 for $446,000 and $447,000 held at fair value at March 31, 2014 and December 31, 2013, respectively.

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9. Regulatory

3 Months Ended

Mar. 31, 2014

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.
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 as required.
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 as required.
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 as required.
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 as required.
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 March 31, 2014 and December 31, 2013, the Bank’s tier one leverage capital ratio was 5.40% and 5.67%, respectively, and its total risk based capital ratio was 9.26% and 9.48%, 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 help the Bank generate external capital investments.

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)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended  March 31, 2014	Three Months Ended March 31, 2013
Basic:
Net loss available to common shareholders	(221,253)	(338,789)
Average common shares outstanding-basic	1,068,588	1,068,588
Net loss per share-basic	(0.21)	(0.32)
Diluted:
Average common shares-diluted	1,068,588	1,068,588
Net loss per share-diluted	(0.21)	(0.32)

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3. Changes in Accumulated Other Comprehensive Income (loss): Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Details
Unrealized holding loss arising during period, before tax amount	$ 183	$ (9)
Unrealized holding loss arising during period, tax	(60)	3
Unrealized holding loss arising during period, net of tax amount	123	(6)
Less: reclassification adjustment for gains (losses) realized in net loss, before tax amount	0	0
Less: reclassification adjustment for gains (losses) realized in net loss, tax benefit	0	0
Less: reclassification adjustment for gains (losses) realized in net loss, net of tax amount	0	0
Other comprehensive loss, net, before tax amount	183	(9)
Other comprehensive loss, net, tax (expense) benefit	60	3
Other comprehensive loss, net, net after tax amount	$ 123	$ (6)

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8. Fair Value: Schedule of Fair Value of Assets and Liabilities (Details) (USD $)	Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2013	Dec. 31, 2012
Assets:
Cash and cash equivalents	$ 5,046,954		$ 5,789,778		$ 8,360,797	$ 10,236,199
Available for sale securities	9,632,391		9,579,979
Loans held for sale, at fair value			1,645,832
Loans, net of allowance for loan losses	43,039,090		42,710,625
Accrued Interest receivable	281,872		256,262
Liabilities:
Savings deposits	12,763,983		12,988,388
Accrued interest payable	16,550		12,722
Carrying Amount
Assets:
Available for sale securities	9,632,000	[1]	9,580,000	[1]
Loans, net of allowance for loan losses	42,413,000	[2]	42,711,000	[2]
Carrying Amount | Fair Value, Inputs, Level 1
Assets:
Cash and cash equivalents	5,047,000
Cash and cash equivalents			5,790,000
Carrying Amount | Fair Value, Inputs, Level 2
Assets:
Loans held for sale, at fair value			1,645,832
Accrued Interest receivable	282,000		256,000
Liabilities:
Demand Deposits	27,355,000		28,658,000
Savings deposits	12,764,000		12,988,000
Time deposits	15,396,000		15,463,000
Accrued interest payable	17,000		13,000
Fair Value
Assets:
Available for sale securities	9,632,000	[1]	9,580,000	[1]
Loans, net of allowance for loan losses	42,358,000	[2]	43,304,000	[2]
Fair Value | Fair Value, Inputs, Level 1
Assets:
Cash and cash equivalents	5,047,000		5,790,000
Fair Value | Fair Value, Inputs, Level 2
Assets:
Loans held for sale, at fair value			1,645,832
Accrued Interest receivable	282,000		256,000
Liabilities:
Demand Deposits	27,355,000		28,658,000
Savings deposits	12,764,000		12,988,000
Time deposits	15,413,000		15,472,000
Accrued interest payable	$ 17,000		$ 13,000

[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; Level 3 for $447,000 held at fair value.

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6. Loans and Allowance For Loan Losses: Schedule of Accounts, Notes, Loans and Financing Receivable (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Schedule of Accounts, Notes, Loans and Financing Receivable

(Dollars in thousands)	March 31, 2014	December 31, 2013
Commercial and industrial	$4,267	$4,310
Commercial real estate	33,442	32,962
Consumer real estate	3,833	3,909
Consumer loans other	1,497	1,530
Total loans	$43,039	$42,711

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Other Real Estate Owned

(in 000's)	Three Months Ended	Three Months Ended
	March 31, 2014	March 31, 2013
Beginning balance	$433	$775
Additions, transfers from loans	-	-
Proceeds from sales	-	(27)
	433	748
Write-downs and net gains (losses) on sales	-	(30)
Ending Balance	$433	$718

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8. Fair Value (Details) (Loans Held at Fair Value, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Loans Held at Fair Value
Balance, Starting	$ 447
Origination of loans	0
Principal repayments	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Change in fair value of financial instruments	(1)
Balance, Ending	$ 446

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6. Loans and Allowance For Loan Losses: Bank Loans by Class (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Commercial real estate	$ 33,442	$ 32,962
Consumer real estate	3,833	3,909
Consumer loans other	1,497	1,530
Loans, net	43,039	42,711
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
Good Excellent | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	0	0
Good Excellent | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	0	0
Good Excellent | Commercial Real Estate Portfolio Segment
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Good Excellent | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	0	0
Satisfactory
Loans and Leases Receivable, Gross, Commercial	31,868	31,504
Satisfactory | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	3,352	3,137
Satisfactory | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	814	743
Satisfactory | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	2,073	497
Satisfactory | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	465	1,897
Satisfactory | Commercial Real Estate Portfolio Segment
Commercial real estate	28,516	28,367
Satisfactory | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	260	265
Satisfactory | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	14,888	15,232
Satisfactory | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	3,307	2,456
Satisfactory | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	10,061	10,414
Pass
Loans and Leases Receivable, Gross, Commercial	2,304	2,329
Pass | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	345	344
Pass | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	220	220
Pass | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	125	0
Pass | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	0	124
Pass | Commercial Real Estate Portfolio Segment
Commercial real estate	1,959	1,985
Pass | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	171	171
Pass | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	869	883
Pass | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Pass | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	919	931
Special Mention
Loans and Leases Receivable, Gross, Commercial	707	709
Special Mention | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	86	86
Special Mention | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	0	0
Special Mention | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	46	40
Special Mention | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	40	46
Special Mention | Commercial Real Estate Portfolio Segment
Commercial real estate	621	623
Special Mention | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	0	0
Special Mention | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	0	0
Special Mention | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Special Mention | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	621	623
Substandard
Loans and Leases Receivable, Gross, Commercial	2,125	1,771
Substandard | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	95	100
Substandard | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	47	52
Substandard | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	0	48
Substandard | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	48	0
Substandard | Commercial Real Estate Portfolio Segment
Commercial real estate	2,030	1,671
Substandard | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	127	130
Substandard | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	1,281	912
Substandard | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Substandard | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	622	629
Doubtful
Loans and Leases Receivable, Gross, Commercial	455	709
Doubtful | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	139	393
Doubtful | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	139	393
Doubtful | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	0	0
Doubtful | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	0	0
Doubtful | Commercial Real Estate Portfolio Segment
Commercial real estate	316	316
Doubtful | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	0	0
Doubtful | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	316	316
Doubtful | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	0	0
Doubtful | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	0	0
Total
Loans and Leases Receivable, Gross, Commercial	37,709	37,272
Consumer real estate	3,833	3,909
Consumer loans other	1,497	1,530
Total consumer loans	5,330	5,439
Total | Commercial And Industrial
Loans and Leases Receivable, Gross, Commercial	4,267	4,310
Total | Commercial And Industrial | Commercial
Loans and Leases Receivable, Gross, Commercial	1,470	1,658
Total | Commercial And Industrial | SBA Loans
Loans and Leases Receivable, Gross, Commercial	2,244	585
Total | Commercial And Industrial | Asset Based
Loans and Leases Receivable, Gross, Commercial	553	2,067
Total | Commercial Real Estate Portfolio Segment
Commercial real estate	33,442	32,962
Total | Commercial Real Estate Portfolio Segment | SBA Loans
Commercial real estate	558	566
Total | Commercial Real Estate Portfolio Segment | Commercial Mortgages
Commercial real estate	17,354	17,343
Total | Commercial Real Estate Portfolio Segment | Construction
Commercial real estate	3,307	2,456
Total | Commercial Real Estate Portfolio Segment | Religious Organizations
Commercial real estate	12,223	12,597
Total | Consumer Real Estate | Home Equity
Consumer real estate	1,154	1,176
Total | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	24	24
Total | Consumer Real Estate | 1-4 Family Residential Mortgages
Consumer real estate	2,655	2,709
Total | Consumer And Other Loans | Consumer Installment
Consumer loans other	12	16
Total | Consumer And Other Loans | Student Loans
Consumer loans other	1,315	1,366
Total | Consumer And Other Loans | Other
Consumer loans other	170	148
Performing
Consumer real estate	3,100	3,552
Consumer loans other	1,497	1,530
Total consumer loans	4,597	5,082
Performing | Consumer Real Estate | Home Equity
Consumer real estate	730	1,061
Performing | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	24	24
Performing | Consumer Real Estate | 1-4 Family Residential Mortgages
Consumer real estate	2,346	2,467
Performing | Consumer And Other Loans | Consumer Installment
Consumer loans other	12	16
Performing | Consumer And Other Loans | Student Loans
Consumer loans other	1,315	1,366
Performing | Consumer And Other Loans | Other
Consumer loans other	170	148
Nonperforming
Consumer real estate	733	357
Consumer loans other	0	0
Total consumer loans	733	357
Nonperforming | Consumer Real Estate | Home Equity
Consumer real estate	424	115
Nonperforming | Consumer Real Estate | Home Equity Line Of Credit
Consumer real estate	0	0
Nonperforming | Consumer Real Estate | 1-4 Family Residential Mortgages
Consumer real estate	309	242
Nonperforming | Consumer And Other Loans | Consumer Installment
Consumer loans other	0	0
Nonperforming | Consumer And Other Loans | Student Loans
Consumer loans other	0	0
Nonperforming | Consumer And Other Loans | Other
Consumer loans other	$ 0	$ 0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net loss	$ (221,253)	$ (338,787)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses	40,000	70,137
Loss on sale of other real estate		396
Amortization of premiums on investments	5,614	23,043
Amortization of core deposit intangible		44,519
Depreciation on fixed assets	43,910	38,526
Write-down of other real estate owned	396	30,538
Net change in fair value of financial instruments	604
Increase in accrued interest receivable and other assets	(83,953)	(31,591)
Decrease in accrued interest payable and other liabilities	(101,065)	(137,857)
Net cash used in operating activities	(315,747)	(301,076)
Cash flows from investing activities:
Purchase of held-to-maturity investment securities		(754,054)
Proceeds from maturity and principal reductions of available-for-sale investment securities	126,125	131,161
Proceeds from maturity and principal reductions of held-to-maturity investment securities		1,695,657
Proceeds from the sale of other real estate owned		26,606
Proceeds from sale of loans	1,645,832
Net (increase) decrease in loans	(582,152)	186,522
Purchase of bank premises and equipment	(21,752)	(40,114)
Net cash provided by investing activities	1,168,054	1,245,778
Cash flows from financing activities:
Net decrease in deposits	(1,595,130)	(2,820,104)
Net cash used in financing activities	(1,595,130)	(2,820,104)
Net decrease in cash and cash equivalents	(742,824)	(1,875,402)
Cash and cash equivalents at beginning of period	5,789,778	10,236,199
Cash and cash equivalents at end of period	5,046,954	8,360,797
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$ 14,123	$ 24,644

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5. Investment Securities

3 Months Ended

Mar. 31, 2014

Notes

5. Investment Securities

5.  Investment Securities

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

(In 000’s)	March 31, 2014
		Gross	Gross
	Amortized	Unrealized	unrealized	Fair
	Cost	Gains	losses	value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(192)	$3,905
Government Sponsored Enterprises  residential mortgage-backed securities	5,710	39	(152)	5,598
Investments in money market funds	129	-	-	129
	$9,936	$39	$(343)	9,632

	December 31, 2013
		Gross	Gross
	Amortized	Unrealized	Unrealized	Fair
	Cost	Gains	Losses	Value
Available-for-sale:
U.S. Government agency securities	$4,097	-	$(295)	$3,802
Government Sponsored Enterprises residential mortgage-backed securities	5,841	36	(228)	5,649
Investments in money market funds	129	-	-	129
	$10,067	$36	$(523)	$9,580

The amortized cost and fair value of debt securities classified as available-for-sale and held-to-maturity, by contractual maturity, as of March 31, 2014, 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	3,905
Government Sponsored Enterprises residential mortgage-backed securities	5,710	,5,598
Total debt securities	9,807	9,503
Investments in money market funds	129	129
	$9,936	$9,632

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.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014:

	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	3,673	(174)	232	(18)	3,905	(192)
Government Sponsored Enterprises residential
mortgage-backed securities	19	4,325	(129)	226	(22)	4,551	(152)
Total temporarily
Impaired investment
securities	34	7,998	(303)	458	(40)	8,456	(343)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 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	$3,576	$(270)	$225	$(25)	$3,801	$(295)
Government Sponsored Enterprises residential
mortgage-backed securities	21	$4,777	$(228)	-	-	$4,777	$(228)
Total temporarily
Impaired investment
securities	36	$8,353	$(498)	-	-	$8,578	$(523)

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: Components of Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Components of Other Real Estate Owned

(in 000's)	March 31, 2014	December 31, 2013
Commercial real estate	$191	$191
Residential real estate	242	242
Total	$433	$433

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6. Loans and Allowance For Loan Losses: Schedule of Accounts, Notes, Loans and Financing Receivable (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Details
Commercial and industrial	$ 4,267	$ 4,310
Commercial real estate	33,442	32,962
Consumer real estate	3,833	3,909
Consumer loans other	1,497	1,530
Total loans	$ 43,039	$ 42,711

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

3 Months Ended

Mar. 31, 2014

Tables/Schedules

Scheduled of Unrealized Loss on Investments

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014:

	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	3,673	(174)	232	(18)	3,905	(192)
Government Sponsored Enterprises residential
mortgage-backed securities	19	4,325	(129)	226	(22)	4,551	(152)
Total temporarily
Impaired investment
securities	34	7,998	(303)	458	(40)	8,456	(343)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 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	$3,576	$(270)	$225	$(25)	$3,801	$(295)
Government Sponsored Enterprises residential
mortgage-backed securities	21	$4,777	$(228)	-	-	$4,777	$(228)
Total temporarily
Impaired investment
securities	36	$8,353	$(498)	-	-	$8,578	$(523)