XNAS:FABK Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

FABK Fair Value Estimate
Premium
FABK Consider Buying
Premium
FABK Consider Selling
Premium
FABK Fair Value Uncertainty
Premium
FABK Economic Moat
Premium
FABK Stewardship
Premium
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 10-Q

[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

 
[   ]        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: 001-33682


FIRST ADVANTAGE BANCORP
(Exact name of registrant as specified in its charter)
 
 
Tennessee
(State or other jurisdiction of
incorporation or organization)
26-0401680
(I.R.S. Employer Identification No.)
1430 Madison Street, Clarksville, Tennessee
 (Address of principal executive offices)
37040
(Zip Code)

Registrant’s telephone number, including area code:  (931) 552-6176

Former name, former address and former fiscal year, if changed since last report.  N/A

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 Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) 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 definitions of “accelerated filer,” “large 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 ]

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes ___     No    X  


The number of shares outstanding of the registrant’s common stock as of August 13, 2012 was 4,326,535.
 

 
 

 
 
FIRST ADVANTAGE BANCORP

Table of Contents

   
Page
 
Part I. Financial Information
 
     
Item 1.
Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011
1
 
Unaudited - Condensed Consolidated Statements of Income for the Three Months and   Six Months Ended June 30, 2012 and 2011
2
  Unaudited - Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2012 and 2011 3
 
Unaudited - Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2012 and 2011
4
 
Unaudited - Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011
5
 
Notes to Condensed Consolidated Financial Statements (unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
36
Item 4.
Controls and Procedures                                                                                                     
36
 
Part II.  Other Information
 
Item 1.
Legal Proceedings                                                                                                     
37
Item 1A.
Risk Factors                                                                                                     
37
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
37
Item 3.
Defaults Upon Senior Securities                                                                                                     
38
Item 4.
Mine Safety Disclosures                                                                                                     
38
Item 5.
Other Information                                                                                                     
38
Item 6.
Exhibits                                                                                                     
38
     
 
SIGNATURES                                                                                                     
39


 
 

 

First Advantage Bancorp
           
Condensed Consolidated Balance Sheets
       
(Dollars in thousands, except share and per share amounts)
       
   
June 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
Assets
           
Cash and due from banks
  $ 4,185     $ 7,651  
Interest-bearing demand deposits with banks
    12,388       1,680  
Federal funds sold
    4,100       1,425  
Cash and cash equivalents
    20,673       10,756  
                 
Available-for-sale securities, at fair value
    66,684       70,279  
Loans held for sale
    2,346       5,509  
Loans, net of allowance for loan losses of $4,369 and $4,316 at
  June 30, 2012 and December 31, 2011, respectively
    256,751       259,534  
Premises and equipment, net
    7,458       7,504  
Other real estate owned
    1,285       1,391  
Federal Home Loan Bank stock, at cost
    2,988       2,988  
Accrued interest receivable
    1,445       1,571  
Income taxes refundable
    2,830       2,789  
Deferred tax asset
    1,146       1,927  
Other assets
    2,054       1,901  
Total assets
  $ 365,660     $ 366,149  
                 
Liabilities and Shareholders' Equity
               
                 
Liabilities
               
Deposits
               
Demand
  $ 26,589     $ 28,062  
Savings, checking and money market
    135,684       134,360  
Time certificates
    85,548       70,162  
Total deposits
    247,821       232,584  
                 
Short-term borrowings
    12,022       14,676  
Federal Home Loan Bank advances
    13,000       13,000  
Long-term debt
    25,000       35,000  
Other liabilities
    1,748       4,414  
Total liabilities
    299,591       299,674  
Commitments and contingencies
    -       -  
                 
Shareholders' Equity
               
Preferred stock, $0.01 par value, 10,000,000 shares authorized
   no shares outstanding at June 30, 2012 or December 31, 2011
    -       -  
Common stock, $0.01 par value 50,000,000 shares authorized,
  4,326,535 shares issued and 3,900,660 outstanding at
  June 30, 2012 and 4,459,135 shares issued and
   4,038,260 outstanding at December 31, 2011
    43       45  
Additional paid-in-capital
    43,258       44,579  
Common stock held by:
               
Nonqualified Deferred Compensation Plan
    (1,879 )     (1,845 )
Employee Stock Ownership Plan
    (2,860 )     (2,860 )
2008 Equity Incentive Plan
    (1,107 )     (1,107 )
Retained earnings
    25,981       24,900  
Accumulated other comprehensive income
    2,633       2,763  
Total shareholders' equity
    66,069       66,475  
Total liabilities and shareholders' equity
  $ 365,660     $ 366,149  
                 
See accompanying notes to unaudited condensed consolidated financial statements.
 

 
 
1

 

 
First Advantage Bancorp
                       
Unaudited - Condensed Consolidated Statements of Income
(Dollars in thousands, except share and per share data)
       
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Interest and dividend income
                       
Loans
  $ 3,794     $ 3,649     $ 7,623     $ 7,176  
Investment securities
    646       729       1,308       1,506  
Other
    54       59       119       125  
Total interest and dividend income
    4,494       4,437       9,050       8,807  
Interest expense
                               
Deposits
    461       553       918       1,144  
Borrowings
    364       444       796       882  
Total interest expense
    825       997       1,714       2,026  
Net interest income
    3,669       3,440       7,336       6,781  
Provision for loan losses
    239       233       466       488  
Net interest income after provision for loan losses
    3,430       3,207       6,870       6,293  
Non-interest income
                               
Service charges on deposit accounts and other fees
    307       328       605       610  
Loan servicing and other fees
    35       24       73       41  
Net gains on sales of mortgage loans held for sale
    264       292       469       499  
Net gain (loss) on sales of other real estate owned
    (3 )     -       (3 )     44  
Net realized gain on sales of available-for-sale securities
    -       -       474       -  
Insurance and brokerage commissions
    51       30       74       56  
Other
    15       9       21       12  
Total non-interest income
    669       683       1,713       1,262  
Non-interest expense
                               
Salaries and employee benefits
    1,637       1,595       3,179       3,327  
Net occupancy expense
    185       171       344       337  
Equipment expense
    195       169       357       356  
Data processing fees
    234       222       495       445  
Professional fees
    197       174       362       358  
Marketing expense
    104       176       184       252  
Supplies and communication
    92       76       184       148  
Loan collection and repossession expense
    41       -       56       -  
Other
    463       483       943       960  
Total non-interest expense
    3,148       3,066       6,104       6,183  
Income before income taxes
    951       824       2,479       1,372  
Provision for income taxes
    356       338       959       528  
Net income
  $ 595     $ 486     $ 1,520     $ 844  
Per common share:
                               
Basic net income per common share
  $ 0.15     $ 0.12     $ 0.38     $ 0.21  
Diluted net income per common share
  $ 0.14     $ 0.11     $ 0.36     $ 0.20  
Dividends declared per common share
  $ 0.05     $ 0.05     $ 0.10     $ 0.10  
Basic weighted average common shares outstanding
    3,904,960       4,105,910       3,951,636       4,106,856  
Diluted weighted average common shares outstanding
    4,180,714       4,290,171       4,215,620       4,298,744  
                                 
See accompanying notes to unaudited condensed consolidated financial statements.
 

 
2

 
 
 
First Advantage Bancorp
                       
Unaudited - Condensed Consolidated Statements of Other Comprehensive Income
 
(Dollars in thousands)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 595     $ 486     $ 1,520     $ 844  
                                 
Unrealized gain (loss) on available-for-sale securities
    (33 )     647       (685 )     752  
Less reclassification adjustment for realized gains included in income
    -       -       (474 )     -  
Other comprehensive gains (losses), before tax effect
    (33 )     647       (211 )     752  
Tax (benefit) expense
    (13 )     248       (81 )     288  
Other comprehensive (loss) income
    (20 )     399       (130 )     464  
Comprehensive income
  $ 575     $ 885     $ 1,390     $ 1,308  
 
See accompanying notes to unaudited condensed consolidated financial statements.
 
 
 
3

 

 
First Advantage Bancorp
                                         
Unaudited - Condensed Consolidated Statements of Shareholders' Equity
 
Six Months Ended June 30, 2012 and 2011
 
(Dollars in thousands, except share and per share amounts)
 
                           
Common
   
Accumulated
       
     Common          
Additional
         
Stock
   
Other
   
Total
 
   
Stock
         
Paid-in
   
Retained
   
Acquired by
   
Comprehensive
   
Shareholders'
 
   
Shares
   
Stock
   
Capital
   
Earnings
   
Benefit Plans
   
Income
   
Equity
 
Balance at January 1, 2011
    4,632,494     $ 46     $ 46,626     $ 23,923     $ (6,442 )   $ 2,574     $ 66,727  
Comprehensive income, net of tax:
                                                       
  Net income
            -       -       844       -       -       844  
Change in unrealized appreciation of
 available-for-sale securities, net of tax
      -       -       -       -       464       464  
Treasury stock purchase/retire
    (20,200 )     -       (259 )     -       -       -       (259 )
Dividends paid ($0.10 per common share)
            -       -       (465 )     -       -       (465 )
Purchase of shares by employee benefit plans
            -       62       -       (62 )     -       -  
Stock-based compensation
            -       432       -       -       -       432  
Balance at June 30, 2011
    4,612,294     $ 46     $ 46,861     $ 24,302     $ (6,504 )   $ 3,038     $ 67,743  
                                                         
Balance at January 1, 2012
    4,459,135     $ 45     $ 44,579     $ 24,900     $ (5,812 )   $ 2,763     $ 66,475  
Comprehensive income, net of tax:
                                                       
  Net income
            -       -       1,520       -       -       1,520  
Change in unrealized appreciation of
 available-for-sale securities, net of tax
      -       -       -       -       (130 )     (130 )
Treasury stock purchase/retire
    (132,600 )     (2 )     (1,718 )     -       -       -       (1,720 )
Dividends paid ($0.10 per common share)
            -       -       (439 )     -       -       (439 )
Purchase of shares by employee benefit plans
            -       34       -       (34 )     -       -  
Stock-based compensation
            -       363       -       -       -       363  
Balance at June 30, 2012
    4,326,535     $ 43     $ 43,258     $ 25,981     $ (5,846 )   $ 2,633     $ 66,069  
                                                         
See accompanying notes to unaudited condensed consolidated financial statements.
                         


 
4

 

First Advantage Bancorp
           
Unaudited - Condensed Consolidated Statements of Cash Flows
           
(Dollars in thousands)
           
   
Six Months Ended
 
   
June 30,
 
   
2012
   
2011
 
Operating activities
           
Net income
  $ 1,520     $ 844  
Adjustments to reconcile net income to net cash
  provided by operating activities
               
Provision for loan losses
    466       488  
Depreciation, amortization and accretion
    439       389  
Deferred income taxes
    781       -  
Funding of mortgage loans held for sale
    (19,695 )     (20,549 )
Proceeds from sales of mortgage loans held for sale
    23,327       21,417  
Net gains on sales of mortgage loans held for sale
    (469 )     (499 )
Net gains on sale of available-for-sale securities
    (474 )     -  
Stock-based compensation
    363       432  
Increase in other assets
    311       91  
Decrease in other liabilities
    (2,666 )     (995 )
Net cash provided by operating activities
    3,903       1,618  
                 
Investing activities
               
Proceeds from maturities of other investments
    -       1,743  
Purchases of securities available for sale
    (7,481 )     (850 )
Proceeds from call/maturities and repayments of securities available-for-sale
    10,485       8,517  
Proceeds from sales of securities available-for-sale
    474       -  
Net decrease (increase) in loans
    1,653       (3,891 )
Purchases of premises and equipment
    (250 )     (206 )
Proceeds from sale of other real estate owned and repossessed assets
    709       13  
Net cash provided by investing activities
    5,590       5,326  
                 
Financing activities
               
Net (decrease) increase in demand deposits, savings, checking, and money market accounts
    (149 )     13,268  
Net increase (decrease) in time deposits
    15,386       (7,330 )
Net decrease in short-term borrowings
    (2,654 )     (1,106 )
Net decrease in long-term debt
    (10,000 )     -  
Cash paid for dividends
    (439 )     (465 )
Stock repurchased/retired  - repurchase program
    (1,720 )     (259 )
Net cash provided by financing activities
    424       4,108  
Increase in cash and cash equivalents
    9,917       11,052  
Cash and cash equivalents, beginning of period
    10,756       7,788  
Cash and cash equivalents, end of period
  $ 20,673     $ 18,840  
Supplemental cash flow information:
               
Other real estate owned acquired through foreclosure of real estate loans
    633       140  
Transfer of other real estate to loans
    -       28  
See accompanying notes to unaudited condensed consolidated financial statements.
               
 
 
 
5

 
 
Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements include the accounts of First Advantage Bancorp (the “Company”), First Advantage Bank (the “Bank”) and the Bank’s subsidiaries.  First Advantage Bank is a Tennessee-chartered commercial bank originally founded in 1953 and is headquartered in Clarksville, Tennessee.  The Company uses the premises, equipment and other property of the Bank with the payment of appropriate rental fees, as required by applicable laws and regulations, under the terms of an expense allocation agreement.   Accordingly, the information set forth in this interim report, including the condensed consolidated financial statements and related financial data contained herein relates primarily to the Bank.  These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for reporting the interim periods have been included.    The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full fiscal year or any other interim period.  The condensed consolidated financial statements and notes thereto included in this report should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the United States Securities and Exchange Commission (the “SEC”) on March 9, 2012.

Certain reclassifications considered to be immaterial have been made to prior period consolidated financial statements to conform to the current period consolidated financial statements.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period.  Actual results could differ significantly from those estimates.

NOTE 2 – RECENT ACCOUNTING UPDATES

ASU 2011-11, “Balance Sheet (Topic 210) - “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company’s consolidated financial position, results of operation, cash flows, or disclosures.
 
ASU 2011-12 “Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 defers changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12. ASU 2011-12 is effective for annual and interim periods beginning after December 15, 2011.  In connection with the adoption of ASU No. 2011-12, in the first quarter of 2012, the company presented condensed consolidated statements of other comprehensive income in the accompanying financial statements.
 
 
6

 
 
NOTE 3 – EARNINGS PER COMMON SHARE

Basic earnings per share (“EPS”) is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock) were vested during the period.  The weighted average  common shares outstanding equals the gross number of common shares issued less unallocated shares held by the First Advantage Bank Employee Stock Ownership Plan (“ESOP”), nonvested restricted stock awards under the Company’s 2007 Deferred Compensation Plan and nonvested restricted stock awards under the Company’s 2008 Equity Incentive Plan.  Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares to be issued include any restricted shares authorized under the Company’s 2007 Deferred Compensation Plan and the 2008 Equity Incentive Plan.  Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are included in the weighted-average number of common shares outstanding for diluted EPS calculations as they are committed to be released.

Basic and diluted earnings per share are computed as follows:
 

(Dollars in thousands, except share and per share amounts)
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 595     $ 486     $ 1,520     $ 844  
                                 
                                 
Weighted-average shares - Basic EPS
    3,904,960       4,105,910       3,951,636       4,106,856  
Weighted-average restricted shares -
                               
2007 Deferred Compensation Plan
    -       20,133       -       20,101  
2008 Equity Incentive Plan
    160,495       65,759       149,371       74,059  
Weighted-average shares -
                               
ESOP committed to be released
    115,259       98,369       114,613       97,728  
Weighted-average shares - Diluted EPS
    4,180,714       4,290,171       4,215,620       4,298,744  
Basic earnings per common share
  $ 0.15     $ 0.12     $ 0.38     $ 0.21  
Diluted earnings per common share
  $ 0.14     $ 0.11     $ 0.36     $ 0.20  

 
7

 
 
NOTE 4 –LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans

The Company’s primary lending activity is the origination of loans secured by real estate.  The Company originates one-to-four family mortgage loans, multi-family loans, nonresidential real estate loans, commercial business loans and construction loans.  To a lesser extent, the company also originates land loans and consumer loans.

The following table summarizes the composition of total net loans receivable at June 30, 2012 and December 31, 2011:
 

                         
   
June 30, 2012
   
December 31, 2011
 
 
 
Amount
   
Percent
   
Amount
   
Percent
 
   
(Dollars in thousands)
 
Real estate loans:
                       
Permanent loans:
                       
One-to-four family
  $ 46,289       17.7 %   $ 44,813       17.0 %
Multi-family
    18,784       7.2       16,695       6.3  
Nonresidential
    95,238       36.5       98,278       37.3  
Construction loans:
                               
One-to-four family
    18,879       7.2       18,618       7.1  
Multi-family
    1,951       0.8       2,357       0.9  
Nonresidential
    9,328       3.6       6,753       2.5  
Land loans
    22,752       8.7       25,409       9.6  
Total real estate loans
    213,221       81.7       212,923       80.7  
                                 
Consumer:
                               
Home equity loans and lines of credit
    19,323       7.4       19,722       7.5  
Auto loans
    418       0.2       429       0.2  
Deposit loans
    236       0.1       321       0.1  
Overdrafts
    26       -       77       -  
Other
    1,560       0.6       1,828       0.7  
Total consumer loans
    21,563       8.3       22,377       8.5  
                                 
Commercial loans
    26,212       10.0       28,462       10.8  
                                 
Total loans
    260,996       100.0 %     263,762       100.0 %
Allowance for loan losses
    (4,369 )             (4,316 )        
Net deferred loan costs
    124               88          
Loans receivable, net
  $ 256,751             $ 259,534          
 
 
8

 
 
The following table sets forth certain information at June 30, 2012 and December 31, 2011 regarding the dollar amount of loan principal repayments becoming due during the periods indicated.  The table does not include any estimate of prepayments which may significantly shorten the average life of loans and may cause our actual repayment experience to differ from that shown below.  Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.
 

     
At June 30, 2012
 
                                             
             Multi-family                                
             and                                
       One- to    
Nonresidential
                             Total  
     
Four-Family
   
Real Estate
   
Construction
   
Land
   
Consumer
   
Commercial
   
Loans
 
     
(Dollars in thousands)
                                             
Amounts due in:
                                           
One year or less
    $ 11,651     $ 25,502     $ 29,746     $ 9,026     $ 12,203     $ 14,698     $ 102,826  
More than one year to three years
      7,814       36,136       412       10,250       1,041       4,900       60,553  
More than three years to five years
      12,880       45,626       -       3,373       822       3,044       65,745  
More than five years to fifteen years
      8,903       6,758       -       103       7,497       3,570       26,831  
More than fifteen years
      5,041       -       -       -       -       -       5,041  
Total
    $ 46,289     $ 114,022     $ 30,158     $ 22,752     $ 21,563     $ 26,212     $ 260,996  
                                                           
                                                           
     
At December 31, 2011
 
                                                           
           
 
                               
             Multi-family                                
             and                                
      One- to      Nonresidential                             Total  
     
Four-Family
   
Real Estate
   
Construction
   
Land
   
Consumer
   
Commercial
   
Loans
 
     
(Dollars in thousands)
                                                           
Amounts due in:
                                                         
One year or less
    $ 9,942     $ 12,231     $ 25,977     $ 14,289     $ 11,637     $ 17,041     $ 91,117  
More than one year to three years
      10,457       56,586       1,751       7,610       1,645       7,651       85,700  
More than three years to five years
      11,244       40,319       -       3,032       1,011       3,448       59,054  
More than five years to fifteen years
      6,675       5,837       -       478       8,084       322       21,396  
More than fifteen years
      6,495       -       -       -       -       -       6,495  
Total
    $ 44,813     $ 114,973     $ 27,728     $ 25,409     $ 22,377     $ 28,462     $ 263,762  
                                                           
 
 
9

 
 
The following tables set forth the dollar amount of all loans at June 30, 2012 that are due after June 30, 2013, and at December 31, 2011 that are due after December 31, 2012, and have either fixed interest rates or floating or adjustable interest rates.

 
As of June 30, 2012
       
Floating or
       
 
 
Fixed Rates
   
Adjustable Rates
   
Total
 
   
(Dollars in thousands)
One-to-four family
  $ 32,821     $ 1,817     $ 34,638  
Multi-family and nonresidential
    81,350       7,170       88,520  
Construction
    412       -       412  
Land
    2,577       11,149       13,726  
Consumer
    2,320       7,040       9,360  
Commercial
    10,777       737       11,514  
Total
  $ 130,257     $ 27,913     $ 158,170  
                         
                         
 As of December 31, 2011
         
Floating or
         
 
 
Fixed Rates
   
Adjustable Rates
   
Total
 
   
(Dollars in thousands)
One-to-four family
  $ 33,873     $ 998     $ 34,871  
Multi-family and nonresidential
    93,484       9,258       102,742  
Construction
    213       1,538       1,751  
Land
    3,045       8,076       11,121  
Consumer
    3,293       7,446       10,739  
Commercial
    10,061       1,360       11,421  
Total
  $ 143,969     $ 28,676     $ 172,645  
 

Our adjustable-rate mortgage loans do not adjust downward below the initial discounted contract rate.  When market rates rise, as has occurred in recent periods, the interest rates on these loans may increase based on the contract rate (the index plus the margin) exceeding the initial interest rate floor.

Nonperforming Assets

We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets.  Loans are placed on non-accrual status when, in management’s opinion, the borrower is unable to meet payment obligations, which typically occurs when principal and interest payments are 90 days delinquent at which time the accrual of interest ceases and uncollectible interest is reversed against interest income.  Typically, payments received on a non-accrual loan are first applied to the outstanding principal balance.  At June 30, 2012 and December 31, 2011, non-accruing loans totaled $3.6 million and $2.8 million, respectively.  Had non-accrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income, net of tax, of approximately $90,000 for the first six months of 2012.  No interest income was recognized on non-accrual loans on a cash basis during the first six months of 2012 or 2011.

Other real estate owned and repossessed assets which are acquired through, or in lieu, of foreclosure are held for sale and initially recorded at fair value less estimated selling cost when acquired, establishing a new cost basis.  Costs after acquisition are generally expensed.  Any reductions in fair value of the asset are recorded through expense.  The valuations of other real estate owned and repossessed assets are subjective in nature and may be adjusted in the future because of changes in economic conditions.
 
 
10

 
 
The following table provides information with respect to our nonperforming assets at the dates indicated.

 
Nonperforming Assets
 
At June 30,
   
At December 31,
 
   
2012
   
2011
 
   
(Dollars in thousands)
 
             
Non-accrual loans:
           
   One- to four-family
  $ 866     $ 2,135  
   Multi-family and nonresidential
    1,952       -  
   Construction
    -       -  
   Land
    44       -  
   Consumer
    227       254  
   Commercial
    513       399  
      Total
    3,602       2,788  
                 
Accruing loans past due 90 days or more:
               
   One- to four-family
    -       -  
   Multi-family and nonresidential
    -       -  
   Construction
    -       -  
   Land
    -       -  
   Consumer
    -       -  
   Commercial
    -       -  
      Total
    -       -  
         Total of non-accrual and 90 days or
    3,602       2,788  
            more past due loans
               
                 
Real estate owned
    1,285       1,391  
Other nonperforming assets
    -       -  
         Total nonperforming assets
  $ 4,887     $ 4,179  
                 
Total nonperforming loans to total loans
    1.38 %     1.06 %
Total nonperforming loans to total assets
    0.99 %     0.76 %
Total nonperforming assets to total assets     1.34 %     1.14 %

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable credit losses in the loan portfolio and represents management’s best estimate of known and inherent losses in the loan portfolio, based upon management’s evaluation of the portfolio’s collectability. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. The recommendations for increases or decreases to the allowance are approved by the Asset Quality Review Committee and presented to the Board of Directors.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific allowance on identified problem loans; and (2) a general valuation allowance on the remainder of the loan portfolio. Management estimates a range of losses and then makes its best estimate of potential credit losses within that range. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.
 
 
11

 
 
Specific Allowance Required for Identified Problem Loans. We establish an allowance on certain identified problem loans based on such factors as: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; and (6) the borrower’s effort to cure the delinquency.

General Valuation Allowance on the Remainder of the Loan Portfolio. We establish a general allowance for loans that are not currently classified in order to recognize the inherent losses associated with lending activities. This general valuation allowance is determined through two steps. First, we estimate potential losses on the portfolio by analyzing historical losses for each loan category. Second, we look at additional significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures; international, national, regional and local economic conditions; changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management; changes in the volume of past dues, non-accruals and classified assets; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; concentrations of credit, and other factors.

We also identify loans that may need to be charged-off as a loss by reviewing all delinquent loans, classified loans and other loans for which management may have concerns about collectability. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan or a shortfall in collateral value, if the loan is collateral dependent, would result in our allocating a portion of the allowance to the loan that was impaired.

At June 30, 2012, our allowance for loan losses represented 1.7% of total gross loans and 121.3% of nonperforming loans.  At December 31, 2011, our allowance for loan losses represented 1.6% of total gross loans and 154.8% of nonperforming loans.  The allowance for loan losses increased $53,000 to $4.4 million at June 30, 2012 from $4.3 million at December 31, 2011 primarily due to increases in non-performing loans and classified loans.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.
 

   
At June 30,
   
At December 31,
 
 
 
2012
   
2011
 
               
% of
               
% of
 
         
% of
   
Loans in
         
% of
   
Loans in
 
         
Allowance
   
Category
         
Allowance
   
Category
 
         
to Total
   
to Total
         
to Total
   
to Total
 
   
Amount
   
Allowance
   
Loans
   
Amount
   
Allowance
   
Loans
 
   
(Dollars in thousands)
   
(Dollars in thousands)
 
One-to-four family
  $ 354       8.1 %     17.7 %   $ 476       11.0 %     17.0 %
Multi-family and nonresidential
    1,358       31.1       43.7       1,063       24.6       43.6  
Construction
    500       11.4       11.6       400       9.3       10.5  
Land
    692       15.8       8.7       614       14.2       9.6  
Consumer
    252       5.8       8.3       296       6.9       8.5  
Commercial
    1,213       27.8       10.0       1,467       34.0       10.8  
Total allowance for loan losses
  $ 4,369       100.0 %     100.0 %   $ 4,316       100.0 %     100.0 %
 
 
12

 
 
Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with accepted accounting principles, there can be no assurance that our regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. Our regulators may require us to increase our allowance for loan losses based on judgments different from ours. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

Analysis of Loan Loss Experience

The following table details allowance for loan losses and recorded investment in loans by portfolio segment for the six months ended June 30, 2012 and 2011:


Allowance for Loan Losses and Recorded Investment in Loans
                   
For the Six Months Ended June 30, 2012
                                     
(Dollars in thousands)
                                           
 
 
One-to-Four
   
Multi-family/
               
Consumer
                   
   
Family
   
Nonresidential
   
Construction
   
Land
   
and Other
   
Commercial
   
Unallocated
   
Total
 
                                                 
Allowance for loan losses:
                                           
                                                 
Beginning balance
  $ 476     $ 1,063     $ 400     $ 614     $ 296     $ 1,467     $ -     $ 4,316  
Charge offs
    (235 )     -       (31 )     -       (25 )     (132 )     -       (423 )
Recoveries
    -       6       -       -       2       2       -       10  
Provision (Credit)
    113       289       131       78       (21 )     (124 )     -       466  
Ending balance
  $ 354     $ 1,358     $ 500     $ 692     $ 252     $ 1,213     $ -     $ 4,369  
                                                                 
Ending balance individually
  evaluated for impairment
  $ -     $ -     $ -     $ -     $ -     $ 321     $ -     $ 321  
                                                                 
Ending balance collectively
  evaluated for impairment
  $ 354     $ 1,358     $ 500     $ 692     $ 252     $ 892     $ -     $ 4,048  
                                                                 
Loans:
                                                               
                                                                 
Ending balance
  $ 46,289     $ 114,022     $ 30,158     $ 22,752     $ 21,563     $ 26,212     $ -     $ 260,996  
                                                                 
Ending balance individually
  evaluated for impairment
  $ 915     $ 233     $ -     $ -     $ 287     $ 781     $ -     $ 2,216  
                                                                &#