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EX-32.1 - EXHIBIT 32.1 - STATE INVESTORS BANCORP, INC.ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - STATE INVESTORS BANCORP, INC.ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - STATE INVESTORS BANCORP, INC.ex31-1.htm


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

 
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 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: 333-172659
 
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) 834-9400
(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. o 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   o Yes  o No
 
          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
   
 
          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o  Yes            x  No
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of June 23, 2011, no shares of the Registrant’s common stock were issued and outstanding.*
 

*
The issuer became subject to the filing requirements of Sections 13 and 15(d) when its Form S-1 was declared effective by the SEC on May 11, 2011.
 
 
 

 
 
STATE-INVESTORS BANK
Form 10-Q
 
Table of Contents
 
PART I - FINANCIAL INFORMATION
 
Page
       
Item 1 -
Financial Statements
 
1
       
Item 2 -
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
22
       
Item 3 -
Quantitative and Qualitative Disclosures About Market Risk
 
29
       
Item 4 -
Controls and Procedures
 
29
       
PART II - OTHER INFORMATION
   
       
Item 1 -
Legal Proceedings
 
30
       
Item 1A -
Risk Factors
 
30
       
Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds
 
30
       
Item 3 -
Defaults Upon Senior Securities
 
30
       
Item 4 -
(Removed and Reserved)
 
30
       
Item 5 -
Other Information
 
30
       
Item 6 -    
Exhibits
 
30
       
Signatures
 
31
 
 
 

 
 
ITEM 1. FINANCIAL STATEMENTS

STATE-INVESTORS BANK

BALANCE SHEETS
(In thousands)

   
March 31,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
             
Cash – non-interest bearing
  $ 7,475     $ 3,724  
Cash – interest bearing
    2,737       3,207  
Federal funds sold
    100       100  
                 
Cash and cash equivalents
    10,312       7,031  
Investment securities:
               
Available for sale
    9,030       8,802  
Held to maturity
    554       577  
Loans, net
    181,610       180,631  
Federal Home Loan Bank Stock
    1,362       1,361  
Accrued interest receivable
    1,000       1,020  
Premises and equipment, net
    8,792       7,773  
Other real estate, net
    167       167  
Deferred income taxes
    332       303  
Other assets
     1,194       1,023  
                 
TOTAL ASSETS
  $ 214,353     $ 208,688  
                 
LIABILITIES AND EQUITY
               
                 
Liabilities:
               
Deposits
  $ 165,099     $ 159,130  
Advances from Federal Home Loan Bank
    25,703       26,483  
Advance payments by borrowers for taxes and insurance
    821       834  
Accrued interest payable
    94       119  
Other liabilities
    1,132       831  
                 
TOTAL LIABILITIES
    192,849       187,397  
                 
Commitments and contingencies
               
Equity:
               
Retained earnings-substantially restricted
    21,324       21,105  
Accumulated other comprehensive income
    180       186  
                 
TOTAL EQUITY
    21,504       21,291  
                 
TOTAL LIABILITIES AND EQUITY
  $ 214,353     $ 208,688  

The accompanying notes are an integral part of the financial statements.

 
1

 

STATE-INVESTORS BANK

STATEMENTS OF INCOME
(In thousands)

   
For the Three Months Ended
 
   
March 31,
 
   
2011
   
2010
 
   
(Unaudited)
 
INTEREST INCOME:
           
     Interest and fees on loans
  $ 2,663     $ 2,872  
     Interest on investment securities
    54       75  
     Other interest and dividends
    2       5  
                 
TOTAL INTEREST INCOME
    2,719       2,952  
                 
INTEREST EXPENSE:
               
     Interest on deposits
    680       741  
     Interest on Federal Home Loan Bank advances
    240       430  
                 
TOTAL INTEREST EXPENSE
    920       1,171  
                 
NET INTEREST INCOME
    1,799       1,781  
PROVISION FOR LOAN LOSSES
    30       45  
                 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    1,769       1,736  
NON-INTEREST INCOME:
               
     Net (loss) on sale of available-for-sale securities
    --       (23 )
     Service charges, fees and other
    56       40  
                 
TOTAL NON-INTEREST INCOME
    56       17  
NON-INTEREST EXPENSES:
               
     Salaries and employee benefits
    780       738  
     Occupancy expense
    151       126  
     Data processing
    134       110  
     Security
    58       50  
     Deposit insurance premiums
    79       57  
     Advertising
    23       35  
     Other real estate owned expenses (income) - net
    (7 )     16  
     Other
    253       210  
                 
TOTAL NON-INTEREST EXPENSES
    1,471       1,342  
                 
INCOME BEFORE INCOME TAXES
    354       411  
INCOME TAX EXPENSE
    135       148  
                 
NET INCOME
  $ 219     $ 263  

The accompanying notes are an integral part of the financial statements.

 
2

 

STATE-INVESTORS BANK

STATEMENTS OF CHANGES IN EQUITY
(In thousands)
(Unaudited)

         
Accumulated
       
         
Other
       
   
Retained
   
Comprehensive
   
Total
 
   
Earnings
   
Income (Loss)
   
Equity
 
         
(Unaudited)
       
Balance at December 31, 2009(1)
  $ 20,129     $ 55     $ 20,184  
Comprehensive Income:
                       
Net Income
    263       --       263  
Other comprehensive income, net of tax:
                       
Net change in unrealized gain on securities available-for-sale, net of deferred income taxes of $19 and reclassification adjustment of $(23)
      --         35         35  
                         
Total Comprehensive Income
     --        --        298  
                         
Balance at March 31, 2010
  $ 20,392     $ 90     $ 20,482  
 
Balance at December 31, 2010(1)
  $ 21,105     $ 186     $ 21,291  
Comprehensive Income:
                       
Net Income
    219       --       219  
Other comprehensive income, net of tax:
                       
Net change in unrealized gain on securities available-for-sale, net of deferred income taxes of $(3)
    --       (6 )     (6 )
                         
Total Comprehensive Income
    --       --        213  
                         
Balance at March 31, 2011
  $ 21,324     $ 180     $ 21,504  
 

(1)    Balances as of December 31, 2009 and December 31, 2010 are audited.
 
The accompanying notes are an integral part of the financial statements.

 
3

 

STATE-INVESTORS BANK

STATEMENTS OF CASH FLOWS
(In thousands)
 
   
Three Months Ended March 31,
 
   
2011
   
2010
 
   
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 219     $ 263  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Loss on sale of investment securities available for sale
    --       23  
Provision for loan losses
    30       45  
Depreciation and amortization
    74       52  
Amortization (accretion) of securities
    11       --  
Stock dividend on FHLB stock
    (1 )     (3 )
Deferred income taxes provision (benefit)
    (26 )     --  
Changes in operating assets and liabilities
               
(Increase) decrease in accrued interest receivable
    21       1  
(Increase) decrease in other assets
    (171 )     (80 )
Increase (decrease) in accrued interest payable
    (24 )     (18 )
Increase (decrease) in other liabilities
    301       78  
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES
    434       361  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net (increase) decrease in loans
    (1,009 )     4,167  
Purchase of securities available for sale
    (489 )     --  
Proceeds from sale of investment securities available for sale
    --       65  
Proceeds from principal repayments of mortgage-backed securities
    263       271  
Redemption of FHLB stock
    --       345  
Purchase of premises and equipment
    (1,093 )      (275 )
                 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    (2,328 )     4,573  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net increase in deposit accounts
    5,969       7,442  
Increase (decrease) in advances by borrowers for insurance and taxes
    (14 )     (20 )
Payments on advances from the FHLB
    (780 )     (903 )
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    5,175       6,519  
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    3,281       11,453  
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
    7,031       3,454  
                 
CASH AND CASH EQUIVALENTS – END OF PERIOD
  $ 10,312     $ 14,907  
                 
SUPPLEMENTAL DISCLOSURES:
               
Cash paid during the year for:
               
Interest on deposits and borrowings
  $ 1,006     $ 1,190  
                 
Income taxes
  $ --     $ 250  
                 
Non-cash investing and financing transactions:
               
Transfer from loans to other real estate
  $ --     $ 257  
                 
Change in unrealized gain on securities available for sale
  $ (9 )   $ 54  

The accompanying notes are an integral part of the financial statements.
 
 
4

 
 
NOTES TO FINANCIAL STATEMENTS  (Unaudited)
 
Note 1 – Basis of Presentation

State Investors Bancorp, Inc., a Louisiana Corporation (the “Company”), was organized by State-Investors Bank (the “Bank”) in February 2011 to facilitate the conversion of the Bank from the mutual to the stock form (the “Conversion”) of ownership. The Conversion is expected to be completed in late June or early July 2011, at which time the Company will become the holding company for the Bank, with the Company owning all of the to-be issued and outstanding shares of the Bank’s common stock, and shares of the Company’s common stock will be issued and sold in an offering to certain depositors of the Bank and others. The Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) on March 7, 2011 (File No. 333-172659), which was declared effective by the SEC on May 11, 2011. The registrant is in organization, has engaged in no operations to date and has not issued any shares of stock. Accordingly, no financial statements of the Company have been included herein.

The accompanying unaudited financial statements of the Bank were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three months ended March 31, 2011, are not necessarily indicative of the results which may be expected for the entire fiscal year. For further information, please review the audited financial statements of State-Investors Bank for the year ended December 31, 2010 included in the Company’s registration statement on Form S-1 (File No. 333-172659).

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Loans

The Bank grants mortgage, commercial and consumer loans to customers. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for unearned income, the allowance for loan losses, and any unamortized deferred fee or costs on originated loans.

Loan origination and commitment fees are deferred and amortized as a yield adjustment over the contractual lives of the related loans using the interest method. Discounts on consumer loans are recognized over the contractual lives of the loans using the interest method.

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.
 
 
5

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)

Loans (Continued)

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 uncollectibility 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 collectibility 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.
 
 
6

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 1 – Basis of Presentation (Continued)

Other Real Estate

Real estate properties acquired through, or in lieu of, loan foreclosure are recorded at fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less cost to sell. Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell.

Recent Accounting Pronouncements

In January 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. ASU 2011-01 temporarily delays the effective date of the disclosures surrounding troubled debt restructurings in ASU 2010-20 for public companies. The effective date of the new disclosures is effective for interim and annual periods ending after June 15, 2011. The adoption of ASU 2011-01 will not have a material impact on the Bank’s results of operations or financial position.

In April 2011, the FASB issued ASU No. 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. ASU 2011-02 provides clarification on guidance on a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. The effective date for ASU 2011-02 is for the first interim or annual period beginning on or after June 15, 2011. The adoption of ASU 2011-02 is not expected to have a material impact on the Bank’s results of operations, financial position, disclosures or level of troubled debt restructurings.

Reclassifications

Certain reclassifications have been made to the 2010 financial statements to conform with the 2011 financial statement presentation. Such reclassifications had no effect on net income or retained earnings as previously reported.

Subsequent Events

The Bank evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements.
 
 
7

 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)

Note 2 – Investment Securities

A summary of the amortized cost and fair values of the investment securities is presented below:

 
 
Mortgage-backed securities
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
         
(In thousands)
       
March 31, 2011
                       
Held to maturity:
                       
GNMA Certificates                                            
  $ 416     $ 12     $ --     $ 428  
FNMA Certificates                                            
    114       2       --       116  
FHLMC Certificates                                            
    24       --       --       24  
                                 
Total held to maturity securities
    554       14       --       568  
                                 
Available-for-sale:
                               
GNMA Certificates                                            
    8,758       272       --       9,030  
                                 
Total available-for-sale                                               
    8,758       272       --       9,030  
                                 
Total securities                                               
  $ 9,312     $ 286     $ --     $ 9,598  

 
 
Mortgage-backed securities
 
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
         
(In thousands)
       
December 31, 2010
                       
Held to maturity:
                       
GNMA Certificates                                            
  $ 433     $ 14     $ --     $ 447  
FNMA Certificates                                            
    118       3       --       121  
FHLMC Certificates                                            
    26       --       --        26  
                                 
Total held to maturity securities
    577       17       --        594  
                                 
Available-for-sale:
                               
GNMA Certificates                                            
    8,520       282       --       8,802  
                                 
Total available-for-sale                                               
    8,520       282       --       8,802  
                                 
Total securities                                               
  $ 9,097     $ 299     $ --     $ 9,396  

 
8

 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 2 - Investment Securities (Continued)
 
The amortized cost and fair values of the securities at March 31, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
Held to Maturity
   
Available for Sale
 
 
Mortgage-backed securities
 
Amortized
Cost
   
Fair
Value
   
Amortized
Cost
   
Fair
Value
 
   
(In thousands)
 
March 31, 2011
                       
Amounts maturing in:
                       
After five years through ten  years
  $ 212     $ 217     $ 164     $ 173  
After ten years
    342       351       8,594       8,857  
                                 
    $ 554     $ 568     $ 8,758     $ 9,030  
 

There were no sales or calls of available for sale securities during the three months ended March 31, 2011.  During the three months ended March 31, 2010 the Bank sold available for sale securities resulting in gross realized losses of approximately $23,000.

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 Bank 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 Bank 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.

At March 31, 2011 and December 31, 2010, there were no unrealized losses in investment securities.
 
 
9

 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses

Loans receivable at March 31, 2011 and December 31, 2010 are summarized as follows:

   
March 31,
2011
   
December 31,
2010
 
   
(In thousands)
 
Real estate loans:
           
   One-to four-family residential                                                                                
  $ 129,962     $ 128,056  
   Commercial real estate                                                                                
    37,710       37,050  
   Multi-family residential                                                                                
    5,364       5,653  
   Land                                                                                
    2,894       2,743  
   Home equity lines of credit                                                                                
    4,158       4,360  
   Residential construction                                                                                
     1,722       2,904  
                 
Total real estate loans                                                                       
    181,810       180,766  
Other loans:
               
Consumer non-real estate loans                                                                             
    1,375       1,390  
Commercial business loans                                                                             
    5       6  
                 
Total other loans                                                                       
    1,380       1,396  
                 
Total loans                                                               
    183,190       182,162  
Less:
               
Deferred loan fees                                                                             
    (45 )     (26 )
Allowance for loan losses                                                                             
    (1,535 )     (1,505 )
                 
Net loans                                                               
  $ 181,610     $ 180,631  
 
Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank 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 three months ended March 31, 2011 and year ended December 31, 2010, 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.
 
 
10

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
Allowance for Credit Losses and Recorded Investment in Loans Receivable for the Three Months Ended March 31, 2011 and Year Ended December 31, 2010

   
Mortgage-
Construction
   
Mortgage-
Permanent-
1 to 4
Family
   
Mortgage-
Permanent-
Other
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
March 31, 2011
                                   
                                     
Allowance for credit losses:
                                   
Beginning balance
  $ 23     $ 947     $ 521     $ --     $ 14     $ 1,505  
 Charge-offs
    --       --       --       --       --       --  
 Recoveries
    --       --       --       --       --       --  
 Provision
    (5 )     81       (46 )     --       --       30  
Ending balance
  $ 18     $ 1,028     $ 475     $ --     $ 14     $ 1,535  
                                                 
Ending balance:
                                               
 Individually evaluated for impairment
  $ --     $ 150     $ --     $ --     $ --     $ 150  
                                                 
Ending balance:
                                               
 Collectively evaluated for impairment
  $ 18     $ 878     $  475     $ --     $ 14     $ 1,385  
                                                 
Loans receivable:
                                               
 Ending balance
  $ 1,722     $ 129,962     $ 50,126     $ 5     $ 1,375     $ 183,190  
                                                 
Ending balance:
                                               
         Individually evaluated for impairment
  $  --     $    403     $  --     $  --     $  --     $  403  
                                                 
    Ending balance:                                                
         Collectively evaluated for impairment
  $ 1,722     $ 129,559     $ 50,126     $  5     $ 1,375     $ 182,787  
 
 
11

 
 
NOTES TO 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, 2010
                                   
                                     
Allowance for credit losses:
                                   
Beginning balance
  $ 8     $ 1,068     $ 359     $ --     $ 10     $ 1,445  
Charge-offs
    --       (33 )     --       --       --       (33 )
Recoveries
    --       --       --       --       --       --  
Provision
    15       (88 )     162       --       4       93  
Ending balance
  $ 23     $ 947     $ 521     $ --     $ 14     $ 1,505  
                                                 
Ending balance:
                                               
 Individually evaluated for impairment
  $ --     $ 100     $  50     $ --     $ --     $ 150  
                                                 
Ending balance:
                                               
 Collectively evaluated for impairment
  $ 23     $ 847     $  471     $ --     $ 14     $ 1,355  
                                                 
     Loans receivable:                                                
 Ending balance
  $ 2,904     $ 128,056     $ 49,806     $ 6     $ 1,390     $ 182,162  
                                                 
     Ending balance:                                                
         Individually evaluated for impairment
  $ --     $ 305     $ 197     $ --     $ --     $ 502  
                                                 
      Ending balance:                                                
         Collectively evaluated for impairment
  $ 2,904     $ 127,751     $ 49,609     $ 6     $ 1,390     $ 181,660  
 
Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.

As of March 31, 2011 and December 31, 2010, loan balances past due more than 90 days and still accruing interest amounted to $1.6 million and $1.1 million, respectively. As of March 31, 2011 and December 31, 2010, loan balances on non-accrual status amounted to $403,000 and $178,000, respectively. The Bank considers all loans more than 90 days past due as nonperforming loans.

 
12

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)

At March 31, 2011 and December 31, 2010, the credit quality indicators (performing and nonperforming loans), disaggregated by class of loan, are as follows:

Credit Quality Indicators — Credit Risk Profile Based on Payment Activity as of March 31, 2011 and December 31, 2010
 
   
Performing
   
Nonperforming
   
Total
 
   
(In thousands)
 
March 31, 2011
                 
Mortgage Loans:
                 
Construction-Residential                                                    
  $ 1,722     $ --     $ 1,722  
Permanent:
                       
1 to 4 Family                                                 
    128,369       1,593       129,962  
Multifamily                                                 
    5,364       --       5,364  
Commercial RE                                                 
    37,274       436       37,710  
Other                                                 
    7,052       --       7,052  
Nonmortgage Loans:
                       
Commercial                                                     
    5       --       5  
Consumer                                                     
    1,365       10       1,375  
Total                                                  
  $ 181,151     $ 2,039     $ 183,190  
 
   
Performing
   
Nonperforming
   
Total
 
   
(In thousands)
 
December 31, 2010
                 
Mortgage Loans:
                 
Construction-Residential                                                    
  $  2,904     $ --     $  2,904  
Permanent:
                       
1 to 4 Family                                                 
    126,780       1,276       128,056  
Multifamily                                                 
    5,653       --       5,653  
Commercial RE                                                 
    37,050       --       37,050  
Other                                                 
    7,103       --       7,103  
Nonmortgage Loans:
                       
Commercial                                                     
    6       --       6  
Consumer                                                     
    1,370       20       1,390  
Total                                                  
  $ 180,866     $ 1,296     $ 182,162  
 
 
13

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)

 
The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of March 31, 2011 and December 31, 2010:

Aged Analysis of Past Due Loans Receivable as of March 31, 2011 and December 31, 2010
 

   
30-59
Days
Past Due
   
60-89
Days
Past Due
   
Greater
Than
90 Days
   
Total
Past Due
   
Current
   
Total
Loans
Receivable
   
Recorded
Investment
Over 90 Days
Past Due and
Still Accruing
 
               
(In thousands)
             
March 31, 2011
Mortgage Loans:
                                         
        Construction-Residential
  $ --     $ --     $ --     $ --     $ 1,722     $ 1,722     $ --  
     Permanent:
                                                       
1 to 4 Family
    1,625       1,454       1,494       4,573       129,547       134,120       1,190  
Multifamily
    --       --       --       --       5,364       5,364       --  
Commercial RE
    262       1,860       436       2,558       35,152       37,710       436  
Other
    --       61       --       61       2,833       2,894       --  
Nonmortgage Loans:
                                                       
Commercial
    --       --       --       --       5       5       --  
Consumer
     4        --        10        14        1,361        1,375        10  
                                                         
Total
  $ 1,891     $ 3,375     $ 1,940     $ 7,206     $ 175,984     $ 183,190     $ 1,636  
 

   
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)
             
December 31, 2010
Mortgage Loans:
                                         
       Construction-Residential
  $ --     $ --     $ --     $ --     $ 2,904     $ 2,904     $ --  
     Permanent:
                                                       
1 to 4 Family
    1,559       978       1,276       3,813       124,243       128,056       1,098  
Multifamily
    --       --       --       --       5,653       5,653       --  
Commercial RE
    --       462       --       462       36,588       37,050       --  
Other
    --       62       --       62       7,041       7,103       --  
Nonmortgage Loans:
                                                       
Commercial
    --       --       --       --       6       6       --  
Consumer
     5       --       20       25       1,365       1,390       20  
                                                         
Total
  $ 1,564     $ 1,502     $ 1,296     $ 4,362     $ 177,800     $ 182,162     $ 1,118  
 
 
14

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
Loan Receivables on Nonaccrual Status

   
March 31, 2011
 
   
(In thousands)
 
       
Mortgage Loans                                                                         
  $ 403  
     Permanent, Secured  by 1 to 4 Family                                                                         
       
Total                                                                         
  $ 403  
 
   
December 31, 2010
 
   
(In thousands)
 
       
Mortgage Loans                                                                         
  $ 178  
     Permanent, Secured  by 1 to 4 Family                                                                         
       
Total                                                                         
  $ 178  
 
 
15

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)
 
All impaired loans had a related allowance, and a summary of the impaired loans by class of loans as of and for the three months ended March 31, 2011 and year ended December 31, 2010, is as follows:
 
Impaired Loans as of and for the Three Months Ended March 31, 2011 and Year Ended December 31, 2010
 

   
Recorded
Investment
   
Unpaid
Principal
Balance
   
Related
Allowance
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
   
(In thousands)
 
March 31, 2011
                             
With an allowance recorded:
                             
Mortgage Loans:
                             
Construction – Residential
  $ --     $ --     $ --     $ --     $ --  
Permanent, Secured by:
                                       
1-4 Family
    403       403       150       337       2  
Multifamily
    --       --       --       --       --  
Commercial RE
    --       --       --       --       --  
Other
    --       --       --       --       --  
Nonmortgage Loans:
                                       
Commercial
    --       --       --       --       --  
Consumer
    --       --       --       --       --  
                                         
Total:
                                       
Mortgage Loans:
                                       
Construction
    --       --       --       --       --  
Permanent
    403       403       150       337       2  
Nonmortgage Loans:
                                       
Commercial
    --       --       --       --       --  
Consumer
    --       --       --       --       --  
    $ 403     $ 403     $ 150     $ 337     $ 2  
 
 
16

 
 
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (Unaudited)
 
Note 3 - Loans and the Allowance for Loan Losses (Continued)