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EX-31.1 - TF FINANCIAL CORP EXHIBIT 31.1 03-31-11 - TF FINANCIAL CORPex31-1.htm
EX-31.2 - TF FINANCIAL CORP EXHIBIT 31.2 03-31-11 - TF FINANCIAL CORPex31-2.htm
EX-32 - TF FINANCIAL CORP EXHIBIT 32 03-31-11 - TF FINANCIAL CORPex32-2.htm



 
 


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the period ended March 31, 2011
   
- 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:  0-24168

TF FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania
 
74-2705050
(State or Other Jurisdiction of Incorporation
 
(I.R.S. Employer Identification No.)
or Organization)
   

3 Penns Trail, Newtown, Pennsylvania
 
18940
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (215) 579-4000

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 o

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 (§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 o  NO o

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 Exchange Act). YES o  NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: May 12, 2011

Class
Outstanding
$.10 par value common stock
2,822,449 shares





 
 

 

CONTENTS

 
     
     
     
     
     
 
     
     
     
     
     
     
     
     
     
Exhibits
   
     
 
     
 
     
 



TF Financial Corporation and Subsidiaries

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
March 31,
2011
   
December 31,
2010
 
   
(in thousands)
 
ASSETS
           
Cash and cash equivalents
 
$
10,668
   
$
7,437
 
Investment securities
   
119,909
     
127,490
 
Loans receivable, net
   
498,664
     
501,528
 
Loans receivable held for sale
   
215
     
130
 
Federal Home Loan Bank stock—at cost
   
8,931
     
9,401
 
Accrued interest receivable
   
2,584
     
2,738
 
Premises and equipment, net
   
6,669
     
6,797
 
Goodwill
   
4,324
     
4,324
 
Bank-owned life insurance
   
18,026
     
17,868
 
Other assets
   
14,231
     
14,044
 
TOTAL ASSETS
 
$
684,221
   
$
691,757
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Liabilities
               
Deposits
 
$
547,753
   
$
550,135
 
Borrowings from the Federal Home Loan Bank
   
55,387
     
61,987
 
Advances from borrowers for taxes and insurance
   
1,824
     
2,166
 
Accrued interest payable
   
2,214
     
1,784
 
Other liabilities
   
2,773
     
2,269
 
Total liabilities
   
609,951
     
618,341
 
                 
Stockholders’ equity
               
Preferred stock, no par value; 2,000,000 shares authorized at March 31, 2011 and December 31, 2010, none issued
   
     
 
Common stock, $0.10 par value; 10,000,000 shares authorized, 5,290,000 shares issued and, 2,822,449 shares outstanding at March 31, 2011 and December 31, 2010, respectively, net of shares in treasury of 2,467,551, respectively
   
529
     
529
 
Additional paid-in capital
   
54,012
     
53,964
 
Unearned ESOP shares
   
(1,186
)
   
(1,217
)
Treasury stock-at cost
   
(51,220
)
   
(51,220
)
Retained earnings
   
71,237
     
70,749
 
Accumulated other comprehensive income
   
898
     
611
 
Total stockholders’ equity
   
74,270
     
73,416
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
684,221
   
$
691,757
 

The accompanying notes are an integral part of these statements


 

 
TF Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

   
For the three months
ended
March 31,
 
   
2011
   
2010
 
                 
Interest income
           
Loans, including fees
 
$
6,584
   
$
7,302
 
Investment securities
               
  Fully taxable
   
896
     
1,075
 
  Exempt from federal taxes
   
355
     
297
 
Interest-bearing deposits and other
   
     
1
 
                 
TOTAL INTEREST INCOME
   
7,835
     
8,675
 
                 
Interest expense
               
Deposits
   
1,460
     
1,995
 
Borrowings
   
559
     
848
 
                 
TOTAL INTEREST EXPENSE
   
2,019
     
2,843
 
                 
NET INTEREST INCOME
   
5,816
     
5,832
 
                 
Provision for loan losses
   
900
     
961
 
                 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
   
4,916
     
4,871
 
                 
Non-interest income
               
Service fees, charges and other operating income
   
465
     
529
 
Bank-owned life insurance
   
157
     
172
 
Gain on sale of loans
   
117
     
60
 
Gain (loss) on sale of foreclosed real estate
   
11
     
(145
)
                 
TOTAL NON-INTEREST INCOME
   
750
     
616
 
                 
Non-interest expense
               
Compensation and benefits
   
2,746
     
2,700
 
Occupancy and equipment
   
818
     
759
 
Professional fees
   
478
     
228
 
Marketing and advertising
   
67
     
120
 
FDIC insurance premiums
   
233
     
194
 
Other operating
   
634
     
591
 
                 
TOTAL NON-INTEREST EXPENSE
   
4,976
     
4,592
 
                 
INCOME BEFORE INCOME TAXES
   
690
     
895
 
                 
Income taxes
   
72
     
178
 
                 
NET INCOME
 
$
618
   
$
717
 
                 
Earnings per share—basic
 
$
0.23
   
$
0.27
 
Earnings per share—diluted
 
$
0.23
   
$
0.27
 
Dividends paid per share
 
$
0.05
   
$
0.19
 

The accompanying notes are an integral part of these statements


TF Financial Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
For the three months
ended
March 31,
 
   
2011
   
2010
 
   
(in thousands)
 
OPERATING ACTIVITIES
           
Net income
 
$
618
   
$
717
 
Adjustments to reconcile net income to net cash provided by operating activities
               
    Amortization of:
               
      Mortgage loan servicing rights                                                                                                  
   
50
     
(3
)
      Deferred loan origination fees                                                                                                     
   
67
     
51
 
      Premiums and discounts on investment securities, net
   
101
     
17
 
      Premiums and discounts on loans, net
   
2
     
43
 
Provision for loan losses
   
900
     
961
 
Depreciation of premises and equipment
   
219
     
212
 
Increase in value of bank-owned life insurance
   
(157
)
   
(172
)
Share-based compensation
   
79
     
73
 
Proceeds from sale of loans originated for sale
   
5,767
     
6,327
 
Origination of loans held for sale
   
(5,785
)
   
(6,114
)
(Gain) loss on sale of:
               
    Loans held for sale                                                                                                     
   
(117
)
   
(60
)
    Foreclosed real estate                                                                                                     
   
(11
)
   
145
 
 Decrease (increase) in:
               
   Accrued interest receivable                                                                                                     
   
154
     
76
 
   Other assets                                                                                                     
   
324
     
(225
Increase (decrease) in:
               
   Accrued interest payable                                                                                                     
   
430
     
71
 
   Other liabilities                                                                                                     
   
408
     
(773
 NET CASH PROVIDED BY OPERATING ACTIVITIES
   
3,049
     
1,346
 
                 
INVESTING ACTIVITIES
               
Loan originations
   
(22,525
)
   
(16,357
)
Loan principal payments
   
23,578
     
20,855
 
Principal repayments on investment securities
   
7,882
     
6,613
 
Purchase of investment securities
   
     
(9,942
)
Redemption of FHLB stock
   
470
     
 
Proceeds from the sale of foreclosed real estate
   
322
     
 
Purchase of premises and equipment
   
(91
)
   
(482
)
NET CASH PROVIDED BY INVESTING ACTIVITIES
   
9,636
     
687
 





   
For the three months ended
March 31,
 
   
2011
   
2010
 
   
(in thousands)
 
FINANCING ACTIVITIES
           
Net (decrease) increase in customer deposits
   
(2,382
)
   
709
 
Proceeds of long-term Federal Home Loan Bank borrowings
   
     
8,000
 
Repayment of long-term Federal Home Loan Bank borrowings
   
(6,600
)
   
(6,503
)
Net decrease in advances from borrowers for taxes and insurance
   
(342
)
   
(268
)
Exercise of stock options
   
     
72
 
Common stock dividends paid
   
(130
)
   
(505
)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
   
(9,454
)
   
1,505
 
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
   
3,231
     
3,538
 
                 
Cash and cash equivalents at beginning of period
   
7,437
     
12,801
 
                 
Cash and cash equivalents at end of period
 
$
10,668
   
$
16,339
 
                 
Supplemental disclosure of cash flow information
               
Cash paid for:
               
Interest on deposits and borrowings
 
$
1,589
   
$
2,772
 
Income taxes
 
$
300
   
$
30
 
Non-cash transactions:
               
Transfers from loans to foreclosed real estate
 
$
843
   
$
 

The accompanying notes are an integral part of these statements



 
TF FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION

The consolidated financial statements as of March 31, 2011 (unaudited) and December 31, 2010 and for the three month period ended March 31, 2011 and 2010 (unaudited) include the accounts of TF Financial Corporation (the “Company”) and its wholly owned subsidiaries Third Federal Bank (the “Bank”), TF Investments Corporation and Penns Trail Development Corporation. The accompanying consolidated balance sheet at December 31, 2010, has been derived from the audited consolidated balance sheet but does not included all of the information and notes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all of the disclosures or footnotes required by US GAAP. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for fair presentation of the consolidated financial statements have been included. The results of operations for the period ended March 31, 2011 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

NOTE 3 - CONTINGENCIES

The Company, from time to time, is a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

NOTE 4 - OTHER COMPREHENSIVE INCOME

Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Total comprehensive income was $905,000 and $908,000 for the three months ended March 31, 2011 and 2010, respectively. The components of other comprehensive income are as follows for the three months ended:

   
March 31, 2011
 
   
Before tax
amount
   
Tax
(expense)
   
Net of tax
amount
 
   
(in thousands)
 
Unrealized gains on securities
                 
Unrealized holding gains arising during period
 
$
404
   
$
(137
)
 
$
267
 
Pension plan benefit adjustment related to actuarial losses
   
29
     
(9
)
   
20
 
                         
Other comprehensive income, net
 
$
433
   
$
(146
)
 
$
287
 

   
March 31, 2010
 
   
Before tax
amount
   
Tax
(expense)
   
Net of tax
amount
 
   
(in thousands)
 
Unrealized gains on securities
                 
Unrealized holding gains arising during period
 
$
257
   
$
(88
)
 
$
169
 
Pension plan benefit adjustment related to actuarial losses
   
33
     
(11
)
   
22
 
                         
Other comprehensive income, net
 
$
290
   
$
(99
)
 
$
191
 
 
NOTE 5—EARNINGS PER SHARE

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (dollars in thousands, except share and per share data):

   
Three months ended March 31, 2011
 
   
Income
(numerator)
 
Weighted
average
shares
(denominator)
 
Per share
Amount
 
Basic earnings per share
             
Income available to common stockholders
 
$
618
 
2,703,380
 
$
0.23
 
Effect of dilutive securities
             
Stock options and grants
 
 
209
 
 
               
Diluted earnings per share
             
Income available to common stockholders plus effect of dilutive securities
 
$
618
 
2,703,589
 
$
0.23
 

 There were 71,010 options to purchase shares of common stock at a price range of $24.12 to $32.51 per share which were outstanding during the three months ended March 31, 2011 that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.

   
Three months ended March 31, 2010
 
   
Income
(numerator)
 
Weighted
average
shares
(denominator)
 
Per share
Amount
 
Basic earnings per share
             
Income available to common stockholders
 
$
717
 
2,669,276
 
$
0.27
 
Effect of dilutive securities
             
Stock options and grants
 
 
 
 
               
Diluted earnings per share
             
Income available to common stockholders plus effect of dilutive securities
 
$
717
 
2,669,276
 
$
0.27
 


There were 269,675 options to purchase shares of common stock at a price range of $19.33 to $32.51 per share which were outstanding during the three months ended March 31, 2010 that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.
 
NOTE 6—INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities at March 31, 2011 and December 31, 2010, are summarized as follows:

   
March 31, 2011
 
   
Amortized
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
   
Fair
value
 
   
(in thousands)
 
Available for sale
                       
U.S. Government and federal agencies
 
$
6,000
   
$
37
   
$
   
$
6,037
 
Corporate debt securities
   
3,340
     
204
     
     
3,544
 
State and political subdivisions
   
47,320
     
1,598
     
(66
)
   
48,852
 
Residential mortgage-backed securities issued by quasi-governmental agencies
   
44,142
     
1,593
     
(19
)
   
45,716
 
Residential mortgage-backed securities privately issued
   
12,451
     
324
     
(1
)
   
12,774
 
Total investment securities available for sale
   
113,253
     
3,756
     
(86
)
   
116,923
 
Held to maturity
                               
Residential mortgage-backed securities issued by quasi-governmental agencies
   
2,986
     
339
     
     
3,325
 
Total investment securities
 
 $
116,239
   
$
4,095
   
$
(86
)
 
 $
120,248
 

   
December 31, 2010
 
   
Amortized
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
   
Fair
value
 
   
(in thousands)
 
Available for sale
                       
U.S. Government and federal agencies
 
$
6,000
   
$
59
   
$
   
$
6,059
 
Corporate debt securities
   
3,340
     
223
     
     
3,563
 
State and political subdivisions
   
47,348
     
1,120
     
(260
)
   
48,208
 
Residential mortgage-backed securities issued by quasi-governmental agencies
   
50,942
     
1,950
     
(6
)
   
52,886
 
Residential mortgage-backed securities, privately issued
   
13,425
     
224
     
(44
)
   
13,605
 
Total investment securities available for sale
   
121,055
     
3,576
     
(310
)
   
124,321
 
Held to maturity
                               
Residential mortgage-backed securities held to maturity issued by quasi-governmental agencies
   
3,169
     
341
     
     
3,510
 
Total investment securities
 
$
124,224
   
$
3,917
   
$
(310
)
 
$
127,831
 
 
         The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2011:

   
Number
   
Less than
12 months
   
12 months
or longer
   
Total
 
Description of Securities
 
of
Securities
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
value
   
Unrealized
Loss
 
   
(in thousands)
 
State and political subdivisions
   
7
   
$
4,352
   
$
(66
)
 
$
   
$
   
$
4,352
   
$
(66
)
Residential mortgage-backed securities issued by quasi-governmental agencies
   
1
     
2,954
     
(19
)
   
     
     
2,954
     
(19
)
Residential mortgage-backed securities privately issued
   
1
     
177
     
(1
)
   
     
     
177
     
(1
)
                                                         
Total temporarily impaired securities
   
9
   
$
7,483
   
$
(86
)
 
$
   
$
   
$
(7,483
)
 
$
(86
)


The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2010:

   
Number
   
Less than
12 months
   
12 months
or longer
   
Total
 
Description of Securities
 
of
Securities
   
Fair
Value
   
Unrealized
Loss
   
Fair
Value
   
Unrealized
Loss
   
Fair
value
   
Unrealized
Loss
 
   
(in thousands)
 
State and political subdivisions
   
17
   
$
14,210
   
$
(260
)
 
$
   
$
   
$
14,210
   
$
(260
)
Residential mortgage-backed securities issued by quasi-governmental agencies
   
1
     
3,027
     
(6
)
   
     
     
3,027
     
(6
)
Residential mortgage-backed securities privately issued
   
3
     
7,048
     
(44
)
   
     
     
7,048
     
(44
)
Total temporarily impaired securities
   
21
   
$
24,285
   
$
(310
)
 
$
   
$
 
 
$
24,285
   
$
(310
)

On a quarterly basis, temporarily impaired securities are evaluated to determine whether such impairment is other-than-temporary impairment (“OTTI”). The Company has performed this evaluation and has determined that the unrealized losses at March 31, 2011 and December 31, 2010, respectively, are not considered other-than-temporary but are the results of changes in interest rates, and are therefore reflected in other comprehensive income.
 
NOTE 7—LOANS RECEIVABLE

Loans receivable are summarized as follows:

       
 
March 31, 2011
 
December 31, 2010
   
 
(in thousands)
   
Held for investment:
               
First mortgage loans
               
Secured by one-to four-family residences
267,265
   
$
269,077
   
Secured by non-residential properties or non—owner occupied residential properties
 
140,905
     
137,307
   
Construction loans
 
18,462
     
18,799
   
Total first mortgage loans
 
426,632
     
425,183
   
                 
Other loans
               
Commercial-business, real estate secured
 
24,628
     
26,603
   
Commercial-business, non-real estate secured
 
5,114
     
5,575
   
Home equity and second mortgage
 
48,150
     
49,430
   
Other consumer
 
2,408
     
2,407
   
Total other loans
 
80,300
     
84,015
   
                 
Total loans
 
506,932
     
509,198
   
Net deferred loan origination costs and unamortized premiums
 
638
     
658
   
Less allowance for loan losses
 
(8,906
)
   
(8,328
)
 
Total loans receivable
$
498,664
   
$
501,528
   
                 
Held for sale:
               
First mortgage loans
               
Secured by one-to four-family residences
$
215
   
$
130
   
 
The following table presents the composition of the commercial loan portfolio by credit quality indicators:


Commercial credit exposure-credit risk profile by internally assigned grade
March 31, 2011
 
     
Pass
     
Special
mention
     
Substandard
     
Doubtful
     
Total
     
(in thousands)
Secured by non-residential properties or
non—owner occupied residential properties
 
$
111,328
   
$
19,561
   
$
10,016
   
$
   
$
140,905
Construction loans
   
3,102
     
5,849
     
9,511
     
     
18,462
Commercial-business, real estate secured
   
13,827
     
1,001
     
9,800
     
     
24,628
Commercial-business, non-real estate secured
   
5,114
     
     
     
     
5,114
  Total
 
$
133,371
   
$
26,411
   
$
29,327
   
$
   
$
189,109
 


Commercial credit exposure-credit risk profile by internally assigned grade
December 31, 2010
 
     
Pass
     
Special
mention
     
Substandard
     
Doubtful
     
Total
     
(in thousands)
Secured by non-residential properties or
non—owner occupied residential properties
 
$
108,484
   
$
19,299
   
$
9,524
   
$
   
$
137,307
Construction loans
   
3,482
     
6,269
     
9,048
     
     
18,799
Commercial-business, real estate secured
   
15,778
     
1,007
     
9,818
     
     
26,603
Commercial-business, non-real estate secured
   
5,531
     
     
     
44
     
5,575
  Total
 
$
133,275
   
$
26,575
   
$
28,390
   
$
44
   
$
188,284
 
In order to assess and monitor the credit risk associated with commercial loans, the Company employs a risk rating methodology whereby each commercial loan is initially assigned a risk grade. At least annually, all risk ratings are reviewed in light of information received such as tax returns, rent rolls, cash flow statements, appraisals, and any other information which may affect the then current risk rating, which is adjusted upward or downward as needed.  At the end of each quarter the risk ratings are summarized and become a component of the evaluation of the allowance for loan losses. The Company’s risk rating definitions mirror those promulgated by banking regulators and are as follows:
 
Pass: Good quality loan characterized by satisfactory liquidity; reasonable debt capacity and coverage; acceptable management in all critical positions and normal operating results for its peer group.  The Company has grades 1 through 6 within the Pass category which reflect the increasing amount of attention paid to the individual loan because of, among other things, trends in debt service coverage, management weaknesses, or collateral values.
 
Special mention:  A loan that has potential weaknesses that deserves management’s close attention.  Although the loan is currently protected, if left uncorrected, potential weaknesses may result in deterioration of the loan’s repayment prospects or in the borrower’s future credit position.  Potential weaknesses include: weakening financial condition; an unrealistic repayment program; inadequate sources of funds; lack of adequate collateral; credit information; or documentation.  There is currently the capacity to meet interest and principal payments, but further adverse business, financial, or economic conditions may impair capacity or willingness to pay interest and repay principal.
 
Substandard:  A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged.  Although no loss of principal or interest is presently apparent, there is the distinct possibility that a partial loss of interest and/or principal will be sustained if the deficiencies are not corrected.  There is a current identifiable vulnerability to default and the dependence upon favorable business, financial, or economic conditions to meet timely payment of interest and repayment of principal.
 
 
Doubtful: A loan which has all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to strengthen the asset, classification as an estimated loss if deferred until a more exact status is determined.  Pending factors include: proposed merger, acquisition, liquidation, capital injection, perfecting liens on additional collateral, and refinancing plans.
 
Loss: Loans which are considered uncollectible and have been charged off. The Company has charged-off all loans classified as loss.
 
Loans classified as special mention, substandard or doubtful are evaluated for potential impairment. All impaired loans are placed on non-accrual status and are classified as substandard or doubtful.
 
The following table presents the composition of the residential mortgage and consumer loan portfolios by credit quality indicators:

Mortgage and consumer credit exposure-credit risk profile by payment activity
March 31, 2011
     
Performing
     
Non-performing
   
Total
     
(in thousands)
Secured by one-to four-family residences
 
$
262,314
   
$
4,951
   
$
267,265
Home equity and second mortgage
   
47,520
     
630
     
48,150
Other
   
2,408
     
     
2,408
  Total
 
$
312,242
   
$
5,581
   
$
317,823
 

 
Mortgage and consumer credit exposure-credit risk profile by payment activity
December 31, 2010
     
Performing
     
Non-performing
   
Total
     
(in thousands)
Secured by one-to four- family residences
 
$
265,459
   
$
3,618
   
$
269,077
Home equity and second mortgage
   
48,018
     
1,412
     
49,430
Other
   
2,404
     
3
     
2,407
  Total
 
$
315,881
   
$
5,033
   
$
320,914
 
In order to assess and monitor the credit risk associated with one-to four-family residential loans and consumer loans which include second mortgage loans and home equity secured lines of credit, the Company relies upon the payment status of the loan. Loans 90 days or more past due are placed on non-accrual status and evaluated for impairment on a pooled basis.

The following table presents non-performing loans including impaired loans and loan balances past due over 90 days for which the accrual of interest has been discontinued by class at:  

     
March  31, 2011
 
December 31, 2010
 
 
(in thousands)
Secured by one-to four-family residences
 
$
4,951
 
$
3,618
 
Secured by non-residential properties or non—owner occupied residential properties
   
4,756
   
4,993
 
Construction loans
   
6,126
   
4,307
 
Commercial-business, real estate secured
   
4,601
   
4,601
 
Commercial-business, non-real estate secured
   
   
44
 
Home equity and second mortgage
   
630
   
1,412
 
Other consumer
   
   
3
 
Total non-performing loans
 
$
21,064
 
$
18,978
 
Total loans past due 90 days as to interest or principal and accruing interest
 
$
 
$
 



The following table presents loans individually evaluated for impairment by class:
 
   
March 31,  2011
     
Recorded investment
     
Unpaid principal balance
     
Related allowance
     
Average recorded investment
     
Interest income recognized
     
(in thousands)
With an allowance recorded:
                                     
Secured by non-residential properties or non—owner occupied residential properties
 
$
2,510
   
$
2,510
   
$
224
   
 $
2,183
   
$
Construction loans
   
5,706
     
5,706
     
2,496
     
4,797
     
Commercial-business, real estate secured
   
2,605
     
2,605
     
467
     
2,605
     
Commercial-business, non-real estate secured
   
     
     
     
21
     
                                       
With no allowance recorded:
                                     
Secured by non-residential properties or non—owner occupied residential properties
 
 $
1,941
   
 $
1,941
   
$
   
$
2,385
     
Construction loans
   
420
     
420
     
     
420
     
Commercial-business, real estate secured
   
1,996
     
1,996
     
     
1,996
     
Total
 
$
15,178
   
$
15,178
   
$
3,187
   
$
14,407
   
$

 
   
December 31, 2010
     
Recorded investment
     
Unpaid principal balance
     
Related allowance
     
Average recorded investment
     
Interest income recognized
     
(in thousands)
With an allowance recorded:
                                     
Secured by non-residential properties or non—owner occupied residential properties
 
$
1,855
   
$
1,855
   
$
218
   
 $
925
   
$
Construction loans
   
3,887
     
3,887
     
1,627
     
3,887
     
Commercial-business, real estate secured
   
2,605
     
2,605
     
373
     
1,563
     
Commercial-business, non-real estate secured
   
44
     
44
     
44
     
18
     
                                       
With no allowance recorded:
                                     
Secured by non-residential properties or non—owner occupied residential properties
   
2,830
     
2,830
     
     
3,479
     
Construction loans
   
420
     
420
     
     
492
     
Commercial-business, real estate secured
   
1,996
     
1,996
     
     
4,717
     
Commercial-business, non-real estate secured
   
     
     
     
22
     
Total
 
$
13,637
   
$
13,637
   
$
2,262
   
$
15,103
   
$



The following table presents the contractual aging of delinquent loans by class at March 31, 2011:
 
   
Current
   
30-59 Days past due
   
60-89 Days past due
   
Loans past due 90 days or more
   
Total past due
   
Total loans
   
Recorded investment over 90 days and accruing interest
 
   
(in thousands)
 
Secured by one-to four- family residences
 
$
263,144
   
$
   
$
   
$
4,121
   
$
4,121
   
$
267,265
   
$
 
Secured by non-residential properties or non—owner occupied residential properties
   
136,149
     
     
     
4,756
     
4,756
     
140,905
     
 
Construction loans
   
14,156
     
     
     
4,306
     
4,306
     
18,462
     
 —
 
Commercial-business, real estate secured
   
20,027
     
     
     
4,601
     
4,601
     
24,628
     
 
Commercial-business, non-real estate secured
   
5,114
     
     
     
     
     
5,114
     
 
Home equity and second mortgage
   
47,492
     
28
     
     
630
     
658
     
48,150
     
 —
 
Other
   
2,408
     
     
     
     
     
2,408
     
 
  Total
 
 $
488,490
   
$
28
   
$
   
$
18,414
   
$
18,442
   
$
506,932
   
$
 


The following table presents the contractual aging of delinquent loans by class at December 31, 2010:
 
   
Current
   
30-59 days past due
   
60-89 days past due
   
Loans past due 90 days or more
   
Total past due
   
Total loans
   
Recorded investment over 90 days and accruing interest
 
   
(in thousands)
 
Secured by one-to four-family residences
 
$
267,885
   
$
424
   
$
26
   
$
742
   
$
1,192
   
$
269,077
   
$
 
Secured by non-residential properties or non—owner occupied residential properties
   
131,566
     
748
     
754
     
4,239
     
5,741
     
137,307
     
 
Construction loans
   
14,492
     
     
     
4,307
     
4,307
     
18,799
         
Commercial-business, real estate secured
   
18,877
     
3,125
     
     
4,601
     
7,726
     
26,603
     
 
Commercial-business, non-real estate secured
   
5,531
     
     
     
44
     
44
     
5,575
     
 
Home equity and second mortgage
   
48,285
     
60
     
9
     
1,076
     
1,145
     
49,430
         
Other
   
2,381
     
13
     
10
     
3
     
26
     
2,407
     
 
  Total
 
 $
489,017
   
$
4,370
   
$
799
   
$
15,012
   
$
20,181
   
$
509,198
   
$
 


Activity in the allowance for loan losses for the three months ended March 31, 2011 is summarized as follows:

     
     
Balance
January 1, 2011
     
Provision
     
Charge- offs
     
Recoveries
     
Balance
March 31, 2011
     
(in thousands)
Secured by one-to four- family residences
 
 $
  1,839
   
 $
  268
   
 $
  (57
 )
 
 $
 —
   
 $
  2,050
Secured by non-residential properties or non—owner occupied residential properties
   
2,124
     
(154
   
 —
     
 —
     
1,970
Construction loans
   
2,479
     
564
     
 —
     
 —
     
3,043
Commercial-business, real estate secured
   
974
     
167
     
 —
     
 —
     
1,141
Commercial-business, non-real estate secured
   
77
     
67
     
(44
)
   
3
     
103
Home equity and second mortgage
   
607
     
193
     
(221
)
           
579
Other consumer
   
16
     
7
     
(7
)
   
4
     
20
Unallocated
   
  212
     
  (212
   
  —
     
  —
     
  —
Total
 
$
8,328
   
$
900
   
$
(329
 
$
7
   
$
8,906

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any portfolio segment. Changes in the allowance for credit losses for the three months ended March 31, 2010 were as follows:

   
2010
 
   
(in thousands)
 
Balance at January 1,
 
$
5,215
 
Provision charged to income
   
961
 
Charge-offs:
       
Commercial-business, non-real estate secured
   
(7
)
Home equity and second mortgage
   
(6
)
Recoveries:
       
Other consumer
   
2
 
Balance at March 31,
 
$
6,165
 


 
The following tables present the ending balance of the allowance for loan losses and ending loan balance by portfolio by class based on impairment method as of March 31, 2011:
 
     
Evaluated for impairment
       
Allowance
   
Individually
     
Collectively
     
Total
     
(in thousands)
Secured by one-to-four family residences
 
$
   
$
2,050
   
 
 
$
2,050
Secured by non-residential properties or non—owner occupied residential properties
   
224
     
1,746
     
1,970
Construction loans
   
2,496
     
547
     
3,043
Commercial-business, real estate secured
   
467
     
674
     
1,141
Commercial-business, non-real estate secured
   
     
103
     
103
Home equity and second mortgage
   
     
579
     
579
Other consumer
   
     
20
     
20
Unallocated
   
     
     
Total
 
$
3,187
   
$
5,719
   
$
8,906

  
     
Evaluated for impairment
       
Loan balance
   
Individually
     
Collectively
     
Total
     
(in thousands)
Secured by one-to-four family residences
 
$
   
$
267,265
   
 
 
$
267,265
Secured by non-residential properties or non—owner occupied residential properties
   
4,451
     
136,454
     
140,905
Construction loans
   
6,127
     
12,335
     
18,462
Commercial-business, real estate secured
   
4,601
     
20,027
     
24,628
Commercial-business, non-real estate secured
   
     
5,114
     
5,114
Home equity and second mortgage
   
     
48,150
     
48,150
Other consumer
   
     
2,408
     
2,408
Total
 
$
15,179
   
$
491,753
   
$
506,932
 
           
 
The following tables present the ending balance of the allowance for loan losses and ending loan balance by portfolio by class based on impairment method as of December 31, 2010:
 
     
Evaluated for impairment
       
Allowance
   
Individually
     
Collectively
     
Total
     
(in thousands)
Secured by one-to-four family residences
 
$
   
$
1,839
   
 
 
$
1,839
Secured by non-residential properties or non—owner occupied residential properties
   
218
     
1,906
     
2,124
Construction loans
   
1,627
     
852
     
2,479
Commercial-business, real estate secured
   
373
     
601
     
974
Commercial-business, non-real estate secured
   
44
     
33
     
77
Home equity and second mortgage
   
     
607
     
607
Other consumer
   
     
16
     
16
Unallocated
   
     
212
     
212
Total
 
$
2,262
   
$
6,066
   
$
8,328

  
     
Evaluated for impairment
       
Loan balance
   
Individually
     
Collectively
     
Total
     
(in thousands)
Secured by one-to-four family residences
 
$
   
$
269,077
   
 
 
$
269,077
Secured by non-residential properties or non—owner occupied residential properties
   
4,685
     
132,622
     
137,307
Construction loans
   
4,307
     
14,492
     
18,799
Commercial-business, real estate secured
   
4,601
     
22,002
     
26,603
Commercial-business, non-real estate secured