XNAS:SIBC State Investors Bancorp Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 

 
FORM 10-Q
(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, 2012
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from
   
to
   
 
Commission file number: 001-35221
 
State Investors Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Louisiana
 
27-5301129
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
     
1041 Veterans Boulevard
Metairie, Louisiana
 
70005
(Address of Principal Executive Offices)
 
(Zip Code)
 
(504) 832-9400
(Registrant’s Telephone Number, Including Area Code)
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
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.                                 x Yes                 o  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).                x Yes                    o 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                                    o                                                   Accelerated filer                                                    o
Non-accelerated filer                                      o                                                   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 Exchange Act).
o Yes                      x No
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of May 14, 2012, 2,909,500 shares of the Registrant’s common stock were issued and outstanding.
 
 
 

 
 
STATE INVESTORS BANCORP, INC.
Form 10-Q
 
Table of Contents
 
PART I - FINANCIAL INFORMATION
Page
     
Item 1 -
Financial Statements
1
     
Item 2 -
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
     
Item 3 -
Quantitative and Qualitative Disclosures About Market Risk
32
     
Item 4 -
Controls and Procedures
32
     
PART II - OTHER INFORMATION
 
     
Item 1 -
Legal Proceedings
32
     
Item 1A -
Risk Factors
32
     
Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds
32
     
Item 3 -
Defaults Upon Senior Securities
33
     
Item 4 -
Mine Safety Disclosures
33
     
Item 5 -
Other Information
33
     
Item 6 -
Exhibits
33
     
Signatures
 
34
 
 
 

 
 
PART I
 
ITEM 1. FINANCIAL STATEMENTS
 
STATE INVESTORS BANCORP, INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
   
March 31, 2012
   
December 31, 2011
 
   
(Unaudited)
 
ASSETS
           
             
Cash – non-interest bearing
  $ 3,123     $ 6,443  
Cash – interest bearing
    989       1,157  
Federal funds sold
    100       100  
Cash and cash equivalents
    4,212       7,700  
                 
Investment securities:
               
Available-for-sale
    51,605       52,876  
Held-to-maturity ($483 and $500 at fair value)
    465       485  
Loans, net
    179,436       175,130  
Federal Home Loan Bank Stock
    2,003       2,487  
Accrued interest receivable
    1,028       1,022  
Premises and equipment, net
    8,504       8,579  
Deferred income taxes
    253       293  
Other assets
    913       1,044  
                 
TOTAL ASSETS
  $ 248,419     $ 249,616  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Liabilities:
               
Deposits
  $ 152,059     $ 157,561  
Advances from Federal Home Loan Bank
    45,992       42,308  
Advance payments by borrowers for taxes and insurance
    903       973  
Accrued interest payable
    75       86  
Other liabilities
    994       717  
                 
TOTAL LIABILITIES
    200,023       201,645  
                 
Stockholders’ Equity:
               
Preferred Stock, $.01 par value – 1,000,000 shares authorized;
               
   none issued
    --       --  
Common Stock, $.01 par value – 9,000,000 shares authorized;
               
   2,909,500 issued and outstanding at March 31, 2012 and
               
   at December 31, 2011
    29       29  
Additional Paid in Capital
    27,942       27,910  
Unallocated ESOP shares
    (2,240 )     (2,269 )
 Unallocated Recognition and Retention Plan (RRP) shares
     (6,200 shares)
    (49 )     --  
Retained earnings-substantially restricted
    22,365       22,155  
Accumulated other comprehensive income
    349       146  
                 
TOTAL STOCKHOLDERS’ EQUITY
    48,396       47,971  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 248,419     $ 249,616  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
1

 
 
STATE INVESTORS BANCORP, INC.
 
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
 
   
For the Three Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(Unaudited)
 
INTEREST INCOME:
           
     Interest and fees on loans
  $ 2,402     $ 2,663  
     Interest on investment securities
    244       54  
     Other interest and dividends
    2       2  
                 
     TOTAL INTEREST INCOME
    2,648       2,719  
                 
INTEREST EXPENSE:
               
     Interest on deposits
    491       680  
     Interest on Federal Home Loan Bank advances
     196       240  
                 
     TOTAL INTEREST EXPENSE
     687       920  
     NET INTEREST INCOME
    1,961       1,799  
                 
PROVISION FOR LOAN LOSSES
     30       30  
     NET INTEREST INCOME AFTER
          PROVISION FOR LOAN LOSSES
    1,931       1,769  
                 
NON-INTEREST INCOME:
               
     Service charges, fees and other
    52        56  
                 
     TOTAL NON-INTEREST INCOME
    52       56  
                 
NON-INTEREST EXPENSES:
               
     Salaries and employee benefits
    836       780  
     Occupancy expense
    179       151  
     Data processing
    124       134  
     Security
    62       58  
     Deposit insurance premiums
    41       79  
     Advertising
    11       23  
     Other real estate owned expenses (income) – net
    --       (7 )
     Professional fees
    100       33  
     Other
    288       220  
                 
     TOTAL NON-INTEREST EXPENSES
    1,641       1,471  
                 
     INCOME BEFORE INCOME TAXES
    342       354  
          INCOME TAX EXPENSE
    132       135  
                 
     NET INCOME
  $ 210     $ 219  
     Earnings Per Common Share
               
          Basic
  $ .07       N/A  
          Diluted
  $ .07       N/A  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
2

 
 
STATE INVESTORS BANCORP, INC.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
 
   
For the Three Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(Unaudited)
 
             
Net income
  $ 210     $ 219  
                 
Unrealized gains (losses) on investment securities:
               
Unrealized holding gains (losses) arising during the period
    203       (6 )
                 
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
    203       (6 )
                 
COMPREHENSIVE INCOME
  $ 413     $ 213  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
3

 
 
STATE INVESTORS BANCORP, INC.
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
 
                                 
Accumulated
       
         
Additional
   
Unallocated
   
Unallocated
         
Other
   
Total
 
   
Common
   
Paid In
   
ESOP
   
RRP
   
Retained
   
Comprehensive
   
Stockholders’
 
   
Stock
   
Capital
   
Shares
   
Shares
   
Earnings
   
Income
   
Equity
 
                     
(Unaudited)
                   
                                           
Balance at December 31, 2010
  $ --     $ --     $ --     $ --     $ 21,105     $ 186     $ 21,291  
                                                         
Comprehensive Income:
                                                       
Net Income
    --       --       --       --       219       --       219  
Other comprehensive
         income, net of tax:
                                                       
Net change in unrealized gain on securities available-for-sale, net of deferred income taxes of $(3)
    --       --       --       --       --       --       (6 )
Other comprehensive income
    --       --       --       --       --       (6 )     (6 )
Total Comprehensive Income
     --       --        --       --        --        --       213  
                                                         
Balance at March 31, 2011
  $ --     $ --     $ --     $ --     $ 21,324     $ 180     $ 21,504  
                                                         
Balance at December 31, 2011
  $ 29     $ 27,910     $ (2,269 )   $ --     $ 22,155     $ 146     $ 47,971  
                                                         
Comprehensive Income:
                                                       
     Net Income
    --       --       --       --       210       --       210  
     Other Comprehensive
       Income (net of tax):
                                                       
Net change in unrealized
    gain/(loss) on securities
    available for sale, net
    of taxes of ($180)
    --       --       --       --       --       --       203  
   Other Comprehensive Income
    --       --       --       --       --       203       203  
Total Comprehensive Income
    --       --       --       --       --       --       413  
Shares purchased for
    Recognition and Retention
    Plan (RRP)
    --       --       --       (72 )     --       --       (72 )
RRP shares released for allocation
    --       1       --       23       --       --       24  
ESOP shares released for allocation
    --       4       29       --       --       --       33  
Share-based Compensation
    --       27       --       --       --       --       27  
                                                         
Balance at March 31, 2012
  $ 29     $ 27,942     $ (2,240 )   $ (49 )   $ 22,365     $ 349     $ 48,396  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
4

 
 
STATE INVESTORS BANCORP, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
   
Three Months Ended March 31,
 
   
2012
   
2011
 
   
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 210     $ 219  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses
    30       30  
Depreciation and amortization
    75       74  
Amortization (accretion) of securities
    109       11  
Stock dividend on FHLB stock
    (2 )     (1 )
Deferred income taxes provision (benefit)
    (54 )     (26 )
Non cash compensation
    84       --  
Changes in operating assets and liabilities:
               
(Increase) decrease in accrued interest receivable
    (6 )     21  
(Increase) decrease in other assets
    131       (171 )
Increase (decrease) in accrued interest payable
    (11 )     (24 )
Increase (decrease) in other liabilities
    267       301  
                 
    NET CASH PROVIDED BY OPERATING ACTIVITIES
    833       434  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net (increase) decrease in loans
    (4,336 )     (1,009 )
Proceeds from sale of investment securities available for sale
    --       (489 )
Proceeds from principal repayments of mortgage-backed securities
    1,489       263  
Purchase of FHLB stock
    (146 )     --  
Redemption of FHLB stock
    632       --  
Purchase of premises and equipment
    --       (1,093 )
                 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    (2,361 )     (2,328 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase (decrease) in deposit accounts
    (5,502 )     5,969  
Increase (decrease) in advances by borrowers for insurance and taxes
    (70 )     (14 )
Advances from FHLB
    23,000       --  
Payments on advances from the FHLB
    (19,316 )     (780 )
Stock purchased for Recognition and Retention Plan
    (72 )     --  
                 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    (1,960 )     5,175  
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (3,488 )     3,281  
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
    7,700        7,031  
                 
CASH AND CASH EQUIVALENTS – END OF PERIOD
  $ 4,212     $ 10,312  
                 
SUPPLEMENTAL DISCLOSURES:
               
Cash paid during the year for:
               
Interest on deposits and borrowings
  $  698     $ 1,006  
                 
Income taxes
  $  --     $ --  
                 
Change in unrealized gain on securities available for sale
  $  383     $ (9 )
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
5

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
Note 1 – Basis of Presentation
 
On July 6, 2011, State-Investors Bank completed its conversion from a federally chartered mutual savings bank to a federally chartered stock savings bank. In connection with the conversion, State-Investors Bank formed State Investors Bancorp, Inc., a Louisiana chartered corporation (the “Company” or “State Investors Bancorp”), which offered and sold 2,909,500 shares of its common stock at a price of $10.00 per share to eligible depositors and borrowers of the Bank. Upon completion of the conversion and the offering, all of State-Investors Bank’s stock is owned by State Investors Bancorp, and all of State Investors Bancorp’s stock is, in turn, owned by the public. The Company raised proceeds of approximately $27.9 million, net of offering expenses, and contributed approximately 50% of the net proceeds to the Bank. All remaining proceeds were retained by State Investors Bancorp for future capital needs.
 
The accompanying unaudited financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three months ended March 31, 2012, are not necessarily indicative of the results which may be expected for the entire fiscal year. For further information, please review the audited financial statements of State-Investors Bank for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K (File No. 001-35221).
 
Principles of Consolidation
 
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, State-Investors Bank.  All significant intercompany balances and transactions between the Company and its wholly owned subsidiary have been eliminated.
 
Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Loans
 
The Bank grants mortgage, commercial and consumer loans to customers. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for unearned income, the allowance for loan losses, and any unamortized deferred fee or costs on originated loans.
 
Loan origination and commitment fees are deferred and amortized as a yield adjustment over the contractual lives of the related loans using the interest method. Discounts on consumer loans are recognized over the contractual lives of the loans using the interest method.
 
 
6

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)
 
Loans (Continued)
 
The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.
 
All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
 
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 and 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 delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by either the present value of expected 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.
 
Allowance for Loan Losses
 
The allowance for loan losses is maintained at a level which, in management’s judgment, is considered to be adequate to absorb credit losses inherent in the loan portfolio. The allowance for loan losses is based upon management’s review and evaluation of the loan portfolio.
 
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
 
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. For loans that are classified as impaired, an allowance is established based on the discounted cash flows for collateral value or observable market price of the impaired loan. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
 
Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated.
 
 
7

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)
 
Other Real Estate
 
Real estate properties acquired through, or in lieu of, loan foreclosure are recorded at fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less cost to sell. Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell.
 
Earnings per Share
 
Amounts reported in earnings per share reflect earnings available to common stockholders’ for the period divided by the weighted average number of shares of common stock outstanding during the period, exclusive of unearned ESOP shares.
 
Recent Accounting Pronouncements
 
In April 2011, the FASB issued ASU No. 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. ASU 2011-02 provides clarification on guidance on a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. The effective date for ASU 2011-02 is for the first interim or annual period beginning on or after June 15, 2011. The adoption of ASU 2011-02 did not have a material impact on the Company’s results of operations, financial position, disclosures or level of troubled debt restructurings.
 
In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements. This update revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The update will be effective for interim and annual reporting periods beginning on or after December 15, 2011, early adoption is prohibited, and the amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
 
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income.  ASU 2011-05 requires entities to present the total of comprehensive income, the components of net income and the components of other comprehensive income in a single continuous statement of comprehensive income or in two separate consecutive statements. The revised financial statement presentation for comprehensive income became effective on January 1, 2012 and has been incorporated into this quarterly report on Form 10-Q.
 
 
8

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)
 
Reclassifications
 
Certain reclassifications have been made to the 2011 financial statements to conform with the 2012 financial statement presentation. Such reclassifications had no effect on net income or retained earnings as previously reported.
 
Subsequent Events
 
The Company evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements.
 
Note 2 – Investment Securities
 
A summary of the amortized cost and fair values of the investment securities is presented below:
 
 
 
Mortgage-backed securities
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
         
(In thousands)
       
March 31, 2012
                       
Held to maturity:
                       
GNMA Certificates                                            
  $ 355     $ 13     $ --     $ 368  
FNMA Certificates                                            
    91       4       --       95  
FHLMC Certificates                                            
    19        1       --       20  
                                 
Total held to maturity securities
    465        18       --       483  
                                 
Available-for-sale:
                               
GNMA Certificates                                            
    51,076        530       (1 )     51,605  
                                 
Total securities                                               
  $ 51,541     $ 548     $ (1 )   $ 52,088  
 
 
 
Mortgage-backed securities
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
         
(In thousands)
       
December 31, 2011
                       
Held to maturity:
                       
GNMA Certificates                                            
  $ 370     $ 12     $ --     $ 382  
FNMA Certificates                                            
    95       3       --       98  
FHLMC Certificates                                            
    20       --       --        20  
                                 
Total held to maturity securities
    485       15       --        500  
                                 
Available-for-sale:
                               
GNMA Certificates                                            
    52,655       326        (105 )     52,876  
                                 
Total securities                                               
  $ 53,140     $ 341     $ (105 )   $ 53,376  
 
 
9

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 2 - Investment Securities (Continued)
 
The amortized cost and fair values of the securities at March 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
   
Held to Maturity
   
Available for Sale
 
 
Mortgage-backed securities
 
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
 
   
(In thousands)
 
March 31, 2012
                       
Amounts maturing in:
                       
One year or less
  $ --     $ --     $ --     $ --  
After one year through five years
    446       463       3,485       3,564  
After five years through ten  years
    19       20       34,419       34,724  
After ten years
    --       --       13,172       13,317  
    $ 465     $ 483     $ 51,076     $ 51,605  
 
There were no sales or calls of available for sale securities during the three months ended March 31, 2012 or 2011.
 
Management evaluates securities for other-than-temporary impairment on a periodic and regular basis, as well as when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
 
In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary.
 
Gross unrealized losses in investment securities at March 31, 2012 and at December 31, 2011, existing for continuous periods of less than 12 months and for continuous periods of 12 months or more are as follows. Due to the nature of the investment and current market prices, these unrealized losses are considered a temporary impairment of these securities.
 
March 31, 2012
                                     
   
Less than 12 Months
   
12 Months or More
   
Totals
 
Security
Description
 
Fair Value
   
Gross
Unrealized
(Loss)
   
Fair Value
   
Gross
Unrealized
(Loss)
   
Fair Value
   
Gross
Unrealized
(Loss)
 
   
(In thousands)
 
Mortgage-backed securities:                                                
GNMA certificates (1 security)
  $ 943     $ (1 )   $ -     $ -     $ 943     $ (1 )
 
 
10

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 2 - Investment Securities (Continued)
 
December 31, 2011
 
   
Less than 12 Months
   
12 Months or More
   
Totals
 
 
Security
Description
 
Fair Value
   
Gross
Unrealized
(Loss)
   
Fair Value
   
Gross
Unrealized
(Loss)
   
Fair Value
   
Gross
Unrealized
(Loss)
 
   
(In thousands)
 
Mortgage-backed securities:                                                
GNMA certificates (4 securities)
  $ 24,059     $ (105 )   $   -     $  -     $ 24,059     $ (105 )
 
Note 3 - Loans and the Allowance for Loan Losses
 
Loans receivable at March 31, 2012 and December 31, 2011 are summarized as follows:
 
   
March 31,
2012
   
December 31,
2011
 
   
(In thousands)
 
Real estate loans:
           
   One-to four-family residential
  $ 128,235     $ 125,154  
   Commercial real estate
    35,280       34,422  
   Multi-family residential
    5,249       4,817  
   Land
    3,323       3,371  
   Home equity lines of credit
    4,690       4,522  
   Residential construction
    2,773       2,874  
                 
Total real estate loans
    179,550       175,160  
Other loans:
               
Consumer non-real estate loans
    1,583       1,636  
Commercial business loans
    --       --  
                 
Total other loans
    1,583       1,636  
                 
Total loans
    181,133       176,796  
Less:
               
Deferred loan fees
    (71 )     (70 )
Allowance for loan losses                                                                             
    (1,626 )     (1,596 )
                 
Net loans                                                               
  $ 179,436     $ 175,130  
 
Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.
 
 
11

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
The following tables set forth, for the three months ended March 31, 2012 and year ended December 31, 2011, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.
 
Allowance for Credit Losses and Recorded Investment in Loans Receivable for the Three Months Ended March 31, 2012 and Year Ended December 31, 2011
 
   
Mortgage-
Construction
   
Mortgage-
Permanent-
1 to 4
Family
   
Mortgage-
Permanent-
Other
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
March 31, 2012
                                   
Allowance for credit losses:
                                   
Beginning balance
  $ 30     $ 1,168     $ 387     $ --     $ 11     $ 1,596  
Charge-offs
    --               --       --       --          
Recoveries
    --       --       --       --       --       --  
Provision
    (3 )     (81 )     107       --       7       30  
Ending balance
  $ 27     $ 1,087     $ 494     $ --     $ 18     $ 1,626  
                                                 
Ending balance:
                                               
Individually evaluated for impairment
  $ --     $ 121     $  --     $ --     $ --     $ 121  
                                                 
Ending balance:
                                               
Collectively evaluated for impairment
  $ 27     $ 966     $ 494     $ --     $ 18     $ 1,505  
                                                 
Loans receivable:                                                
  Ending balance
  $ 2,773     $ 128,235     $ 48,542     $ --     $ 1,583     $ 181,133  
                                                 
Ending balance:                                                
  Individually evaluated for impairment
  $ --     $  1,678     $ 3,078     $ --     $ --     $ 4,756  
    Ending balance:                                                
  Collectively evaluated for impairment
  $ 2,773     $ 126,557     $ 45,464     $ --     $ 1,583     $ 176,377  
 
 
12

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
   
Mortgage-
Construction
   
Mortgage-
Permanent-
1 to 4
Family
   
Mortgage-
Permanent-
Other
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
December 31, 2011
                                   
Allowance for credit losses:
                                   
Beginning balance
  $ 23     $ 947     $ 521     $  --     $ 14     $ 1,505  
Charge-offs
    --       (45 )     (18 )     --       --       (63 )
Recoveries
    --       --       --       --       --       --  
Provision
    7       266       (116 )     --       (3 )     154  
Ending balance
  $ 30     $ 1,168     $  387     $ --     $ 11     $ 1,596  
                                                 
Ending balance:
                                               
Individually evaluated for impairment
  $ --     $ 121     $ --     $  --     $  --     $ 121  
                                                 
Ending balance:
                                               
Collectively evaluated for impairment
  $    30     $  1,047     $ 387     $ --     $    11     $ 1,475  
                                                 
    Loans receivable:                                                
Ending balance
  $ 2,874     $ 129,676     $ 42,610     $ --     $ 1,636     $ 176,796  
                                                 
Ending balance:
                                               
Individually evaluated for impairment
  $    --     $  1,461     $  3,081     $  --     $    --     $  4,542  
                                                 
    Ending balance:                                                
Collectively evaluated for impairment
  $  2,874     $ 128,215     $  39,529     $  --     $  1,636     $ 172,254  
 
Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.
 
As of March 31, 2012 and December 31, 2011, loan balances past due more than 90 days and still accruing interest amounted to $1.8 million and $600,000, respectively. As of March 31, 2012 and December 31, 2011, loan balances on non-accrual status amounted to $2.7 million and $2.8 million, respectively. The Company considers all loans more than 90 days past due as non-performing loans.
 
 
13

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
At March 31, 2012 and December 31, 2011, the credit quality indicators (performing and non-performing loans), disaggregated by class of loan, are as follows:
 
Credit Quality Indicators — Credit Risk Profile Based on Payment Activity as of March 31, 2012 and December 31, 2011
 
   
Performing
   
Non-performing
   
Total
 
   
(In thousands)
 
March 31, 2012
                 
Mortgage Loans:
                 
Construction-Residential
  $ 2,773     $ --     $ 2,773  
Permanent:
                       
1 to 4 Family
    131,106       1,819       132,925  
Multifamily
    3,966       1,283       5,249  
Commercial RE
    33,764       1,516       35,280  
Other
    3,323       --       3,323  
Nonmortgage Loans:
                       
Commercial
    --       --       --  
Consumer
    1,563       20       1,583  
Total
  $ 176,495     $ 4,638     $ 181,133  
 
   
Performing
   
Non-performing
   
Total
 
   
(In thousands)
 
December 31, 2011
                 
Mortgage Loans:
                 
Construction-Residential
  $ 2,874     $ --     $ 2,874  
Permanent:
                       
1 to 4 Family
    128,896       780       129,676  
Multifamily
    3,534       1,283       4,817  
Commercial RE
    33,196       1,226       34,422  
Other
    3,313       58       3,371  
Nonmortgage Loans:
                       
Commercial
    --       --       --  
Consumer
    1,610       26       1,636  
Total
  $ 173,423     $ 3,373     $ 176,796  
 
 
14

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of March 31, 2012 and December 31, 2011:
 
Aged Analysis of Past Due Loans Receivable as of March 31, 2012 and December 31, 2011
  
   
30-59
Days
Past Due
   
60-89
Days
Past Due
   
Greater
Than
90 Days
   
Total
Past Due
   
Current
   
Total
Loans
Receivable
   
Recorded
Investment
Over 90 Days
Past Due and
Still Accruing
 
               
(In thousands)
             
March 31, 2012                                          
Mortgage Loans:
                                         
Construction-
                                         
   Residential
  $ --     $ --     $ --     $ --     $ 2,773     $ 2,773     $ --  
     Permanent:
                                                       
1 to 4 Family
    2,245       1,297       1,819       5,361       127,564       132,925       1,468  
Multifamily
    --       --       1,283       1,283       3,966       5,249       --  
Commercial RE
    --       392       1,516       1,908       33,372       35,280       290  
Other
    57       --       --       57       3,266       3,323       --  
Nonmortgage Loans:
                                                       
Commercial
    --       --       --       --       --       --       --  
Consumer
     8        --        20        28       1,555       1,583       20  
                                                         
Total
  $ 2,310     $ 1,689     $ 4,638     $ 8,637     $ 172,496     $ 181,133     $ 1,778  
  
   
30-59