XNAS:SIBC State Investors Bancorp Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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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 June 30, 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.
 
      Large accelerated filer  o
Accelerated filer                       o
      Non-accelerated filer    o  (Do not check if a smaller reporting company)
Smaller reporting company     x
 
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 August 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
 
   
Page
PART I - FINANCIAL INFORMATION
 
     
Item 1 -
Financial Statements
1
     
Item 2 -
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
     
Item 3 -
Quantitative and Qualitative Disclosures About Market Risk
35
     
Item 4 -
Controls and Procedures
35
     
PART II - OTHER INFORMATION
 
     
Item 1 -
Legal Proceedings
35
     
Item 1A -
Risk Factors
36
     
Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds
36
     
Item 3 -
Defaults Upon Senior Securities
36
     
Item 4 -
Mine Safety Disclosures
36
     
Item 5 -
Other Information
36
     
Item 6 -
Exhibits
37
     
Signatures
38
 
 
 

 
 
PART I
 
ITEM 1. FINANCIAL STATEMENTS
 
STATE INVESTORS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
   
June 30, 2012
   
December 31, 2011
 
    (Unaudited)     (Audited)  
ASSETS
           
             
Cash – non-interest bearing
  $ 3,055     $ 6,443  
Cash – interest bearing
    5,330       1,157  
Federal funds sold
    --       100  
Cash and cash equivalents
    8,385       7,700  
                 
Investment securities:
               
Available-for-sale
    49,906       52,876  
Held-to-maturity ($462 and $500 at fair value)
    445       485  
Loans, net
    179,477       175,130  
Federal Home Loan Bank Stock
    2,202       2,487  
Accrued interest receivable
    1,027       1,022  
Premises and equipment, net
    8,428       8,579  
Deferred income taxes
    214       293  
Other assets
    826       1,044  
                 
TOTAL ASSETS
  $ 250,910     $ 249,616  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Liabilities:
               
Deposits
  $ 152,296     $ 157,561  
Advances from Federal Home Loan Bank
    47,780       42,308  
Advance payments by borrowers for taxes and insurance
    1,180       973  
Accrued interest payable
    77       86  
Other liabilities
    908       717  
                 
TOTAL LIABILITIES
    202,241       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 June 30, 2012 and at December 31, 2011
    29       29  
Additional Paid in Capital
    27,962       27,910  
Unallocated ESOP shares
    (2,211 )     (2,269 )
Unallocated Recognition and Retention Plan (RRP) shares
    (168 )     --  
Retained earnings-substantially restricted
    22,601       22,155  
Accumulated other comprehensive income
    456       146  
                 
TOTAL STOCKHOLDERS’ EQUITY
    48,669       47,971  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 250,910     $ 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
   
For the Six Months Ended
 
   
June 30,
   
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
INTEREST INCOME:
                       
     Interest and fees on loans
  $ 2,417     $ 2,701     $ 4,819     $ 5,364  
     Interest on investment securities
    212       58       456       112  
     Other interest and dividends
    3       3       5       5  
                                 
TOTAL INTEREST INCOME
    2,632       2,762       5,280       5,481  
                                 
INTEREST EXPENSE:
                               
     Interest on deposits
    473       652       964       1,332  
     Interest on Federal Home Loan Bank advances
    196       231        392        471  
                                 
TOTAL INTEREST EXPENSE
    669       883       1,356       1,803  
                                 
NET INTEREST INCOME
    1,963       1,879       3,924       3,678  
PROVISION FOR LOAN LOSSES
    32       64       62        94  
                                 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    1,931       1,815       3,862       3,584  
                                 
NON-INTEREST INCOME:
                               
     Service charges and fees
    76        54       128       111  
                                 
TOTAL NON-INTEREST INCOME
    76       54       128       111  
                                 
NON-INTEREST EXPENSES:
                               
     Salaries and employee benefits
    828       732       1,664       1,512  
     Occupancy expense
    161       152       340       303  
     Data processing
    89       134       213       268  
     Security
    60       62       122       120  
     Deposit insurance premiums
    73       92       114       171  
     Advertising
    13       32       24       55  
     Other real estate owned expenses (income) – net
    -       -       -       (7 )
     Professional fees
    136       44       236       77  
     Office supplies and postage
    38       24       77       77  
     Other
    235       174       484       341  
                                 
TOTAL NON-INTEREST EXPENSES
    1,633       1,446       3,274       2,917  
                                 
INCOME BEFORE INCOME TAXES
    374       423       716       778  
     INCOME TAX EXPENSE
    138       153       270       289  
                                 
NET INCOME
  $ 236     $ 270     $ 446     $ 489  
Earnings Per Common Share
                               
Basic
  $ 0.08       N/A     $ 0.15       N/A  
Diluted
  $ 0.08       N/A     $ 0.15       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)
 
   
For the Six Months Ended
 
   
June 30,
 
   
2012
   
2011
 
   
(Unaudited)
 
             
Net income
  $ 446     $ 489  
                 
Unrealized gains (losses) on investment securities:
               
Unrealized holding gains (losses) arising during the period
    310       13  
                 
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
    310       13  
                 
COMPREHENSIVE INCOME
  $ 756     $ 502  
 
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
    Unearned          
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
    --       --       --       --       489       --       489  
    Other Comprehensive Income
        (net of tax):
                                                       
Net change in unrealized gain (loss) on securities available-for-sale, net of taxes of $(6)
    --       --       --       --       --       --       13  
    Other Comprehensive Income     --       --       --       --       --       13       13  
Total Comprehensive Income
     --       --        --       --        --        --       502  
                                                         
Balance at June 30, 2011
  $ --     $ --     $ --     $ --     $ 21,594     $ 199     $ 21,793  
                                                         
Balance at December 31, 2011
  $ 29     $ 27,910     $ (2,269 )   $ --     $ 22,155     $ 146     $ 47,971  
                                                         
Comprehensive Income:
                                                       
Net Income     
    --       --       --       --       446       --       446  
Other Comprehensive Income (net of tax):
                                                       
Net change in unrealized gain (loss) on securities available for sale, net of taxes of ($160)
    --       --       --       --       --       --        310  
     Other Comprehensive Income
    --       --       --       --       --       310       310  
Total Comprehensive Income
    --       --       --       --       --       --       756  
Shares purchased for Recognition and Retention Plan (RRP)
    --       --       --       (229 )     --       --       (229 )
Amortization of awards under RRP
    --       (1 )     --       61       --       --       60  
ESOP shares released for allocation
    --       11       58       --       --       --       69  
Stock option expense
    --       42       --       --       --       --       42  
                                                         
Balance at June 30, 2012
  $ 29     $ 27,962     $ (2,211 )   $ (168 )   $ 22,601     $ 456     $ 48,669  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
4

 
 
STATE INVESTORS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
   
Six Months Ended June 30,
 
   
2012
   
2011
 
   
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 446     $ 489  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses
    62       94  
Depreciation and amortization
    151       147  
Amortization (accretion) of securities
    229       27  
Stock dividend on FHLB stock
    (4 )     (2 )
Deferred income taxes provision (benefit)
    (80 )     (47 )
Non cash compensation
    171       --  
Changes in operating assets and liabilities:
               
(Increase) decrease in accrued interest receivable
    (5 )     (44 )
(Increase) decrease in other assets
    218       (358 )
Increase (decrease) in accrued interest payable
    (9 )     (34 )
Increase (decrease) in other liabilities
    191       185  
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES
    1,370        457  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net (increase) decrease in loans
    (4,409 )     (299 )
Purchase of securities available for sale
    --       (9,203 )
Proceeds from principal repayments of mortgage-backed securities
    3,250       520  
Redemption of FHLB stock
    632       --  
Purchase of FHLB stock
    (343 )     --  
Proceeds from sale of real estate owned
    --       145  
Purchase of premises and equipment
    --       (1,107 )
                 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    (870 )     (9,944 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase (decrease) in deposit accounts
    (5,265 )     77,613  
Increase (decrease) in advances by borrowers for insurance and taxes
    207       201  
Advances from FHLB
    51,000       --  
Payments on advances from the FHLB
    (45,528 )     (3,070 )
Stock purchased for Recognition and Retention Plan
    (229 )     --  
                 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    185       74,744  
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    685       65,257  
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
    7,700        7,031  
                 
CASH AND CASH EQUIVALENTS – END OF PERIOD
  $ 8,385     $ 72,288  
                 
SUPPLEMENTAL DISCLOSURES:
               
Cash paid during the year for:
               
Interest on deposits and borrowings
  $ 1,365     $ 1,899  
                 
Income taxes
  $ 213     $ 280  
                 
Change in unrealized gain on securities available for sale
  $ 469     $ 19  
 
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. 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 six months ended June 30, 2012, are not necessarily indicative of the results which may be expected for the entire fiscal year. For further information, please review the audited, consolidated financial statements of State Investors Bancorp 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 fees 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. 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. 2011-03, 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 is effective for interim and annual reporting periods beginning on or after December 15, 2011, 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 did not have a material impact on the Company’s financial position or results of operations.
 
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement. ASU 2011-04 amends the fair value measurement and disclosure requirements in order to gain consistency between the generally accepted accounting principles in the United States and the International Financial Reporting Standards. The guidance, which became effective on January 1, 2012, did not have a material impact on the Company’s results of operations, financial position or disclosures.
 
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 Form10-Q.
 
 
8

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)
 
In June 2012, the FASB issued Exposure Draft 2012-200, Financial Instruments (Topic 825), Disclosures about Liquidity Risk and Interest Rate Risk.  The proposed ASU would require financial institutions to include liquidity risk tabular disclosure of the carrying amounts of classes of financial assets and liabilities segregated by their expected maturities, including off-balance sheet financial commitments and obligations.  In addition, interest rate risk disclosures would provide information about the exposure of the entity’s financial assets and liabilities to fluctuations in market interest rates.  The proposed ASU does not include a proposed effective date.
 
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)  
June 30, 2012
                       
Held to maturity:
                       
GNMA Certificates                                            
  $ 343     $ 12     $ --     $ 355  
FNMA Certificates                                            
    85       4       --       89  
FHLMC Certificates                                            
    17        1       --       18  
                                 
Total held to maturity securities
    445        17       --       462  
                                 
Available-for-sale:
                               
GNMA Certificates                                            
    49,215        691       --       49,906  
                                 
Total securities                                               
  $ 49,660     $ 708     $ --     $ 50,368  
 
 
9

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 2 – Investment Securities (Continued)
 
 
 
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  
 
 
The amortized cost and fair values of the securities at June 30, 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)
 
June 30, 2012
                       
Amounts maturing in:
                       
One year or less
  $ --     $ --     $ --     $ --  
After one year through five years
    382       397       9,617       9,759  
After five years through ten  years
    63       65       38,495       39,003  
After ten years
    --       --       1,103       1,144  
    $ 445     $ 462     $ 49,215     $ 49,906  
 
There were no sales or calls of available for sale securities during the six months ended June 30, 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.
 
 
10

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 2 – Investment Securities (Continued)
 
Gross unrealized losses in investment securities 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. There were no gross unrealized losses in investment securities at June 30, 2012. Due to the nature of the investment and current market prices, these unrealized losses are considered a temporary impairment of these securities.
 
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 June 30, 2012 and December 31, 2011 are summarized as follows:
 
   
June 30,
2012
   
December 31,
2011
 
   
(In thousands)
 
Real estate loans:
           
   One-to four-family residential                                                                                
  $ 128,031     $ 125,154  
   Commercial real estate                                                                                
    35,031       34,422  
   Multi-family residential                                                                                
    5,530       4,817  
   Land                                                                                
    3,466       3,371  
   Home equity lines of credit                                                                                
    4,824       4,522  
   Residential construction                                                                                
    2,095       2,874  
                 
Total real estate loans                                                                       
    178,977       175,160  
Other loans:
               
Consumer non-real estate loans                                                                             
    1,541       1,636  
Commercial business loans                                                                             
    700       --  
                 
Total other loans                                                                       
    2,241       1,636  
                 
Total loans                                                               
    181,218       176,796  
Less:
               
Deferred loan fees                                                                             
    (95 )     (70 )
Allowance for loan losses                                                                             
    (1,646 )     (1,596 )
                 
Net loans                                                               
  $ 179,477     $ 175,130  
 
 
11

 
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
Management segregates the loan portfolio into portfolio segments which are 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.
 
The following tables set forth, for the six months ended June 30, 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 Six Months Ended June 30, 2012 and Year Ended December 31, 2011
 
   
Mortgage-
Construction
   
Mortgage-
Permanent-
1 to 4
Family
   
Mortgage-
Permanent-
Other
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
June 30, 2012
                                   
Allowance for credit losses:
                                   
Beginning balance
  $ 30     $ 1,168     $ 387     $ --     $ 11     $ 1,596  
Charge-offs
    --       12       --       --       --       12  
Recoveries
    --       --       --       --       --       --  
Provision
    (5 )      (84 )     118       3       6       38  
Ending balance
  $ 25     $ 1,096     $ 505     $ 3     $  17     $ 1,646  
                                                 
Ending balance:
                                               
Individually evaluated for impairment
  $ --     $ 121     $ --     $ --     $ --     $ 121  
                                                 
Ending balance:
                                               
Collectively evaluated for impairment
  $ 25     $ 975     $ 505     $ 3     $ 17     $ 1,525  
                                                 
Loans receivable:                                                
Ending balance
  $ 2,095     $ 128,031     $ 49,550     $ 1     $ 1,541     $ 181,218  
                                                 
Ending balance:                                                
Individually evaluated for impairment
  $ --     $ 1,364     $  3,217     $ --     $ --     $ 4,581  
                                                 
Ending balance:                                                 
Collectively evaluated for impairment
  $  2,095     $ 126,667     $ 46,333     $ 1     $ 1,541     $ 176,637  
 
 
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 June 30, 2012 and December 31, 2011, loan balances past due more than 90 days and still accruing interest amounted to $226,000 and $606,000, respectively. As of June 30, 2012 and December 31, 2011, loan balances on non-accrual status amounted to $3.5 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 June 30, 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 June 30, 2012 and December 31, 2011
 
   
Performing
   
Non-performing
   
Total
 
   
(In thousands)
 
June 30, 2012
                 
Mortgage Loans:
                 
Construction-Residential
  $ 2,095     $ --     $ 2,095  
Permanent:
                       
1 to 4 Family
    131,930       925       132,855  
Multifamily
    3,956       1,574       5,530  
Commercial RE
    33,805       1,226       35,031  
Other
    3,466       --       3,466  
Nonmortgage Loans:
                       
Commercial
    700       --       700  
Consumer
    1,531       10       1,541  
Total
  $ 177,483     $ 3,735     $ 181,218  
                         
                         
   
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 June 30, 2012 and December 31, 2011:
 
Aged Analysis of Past Due Loans Receivable as of June 30, 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)
             
June 30, 2012