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BEAR STATE FINANCIAL, INC. 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
ffbh_10q-033113.htm


UNITED STATES
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 quarterly period ended March 31, 2013

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 No.:  0-28312

                 First Federal Bancshares of Arkansas, Inc.             
(Exact name of registrant as specified in its charter)
 
  Arkansas   71-0785261  
  (State or other jurisdiction   (I.R.S. Employer  
  of incorporation or organization)   Identification Number)  
         
 
1401 Highway 62-65 North
     
  Harrison, Arkansas   72601  
  (Address of principal executive offices)   (Zip Code)  
 
Registrant's telephone number, including area code:  (870) 741-7641


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 x   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
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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:  As of May 1, 2013, there were issued and outstanding 19,897,603 shares of the Registrant's Common Stock, par value $.01 per share.
 
 
 

 
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

TABLE OF CONTENTS

Part I.
Financial Information
Page
     
Item 1.
Financial Statements
 
     
 
Condensed Consolidated Statements of Financial Condition as of March 31, 2013 and December 31, 2012 (unaudited)
1
     
 
Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2013 and 2012 (unaudited)
2
     
 
Condensed Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2013 (unaudited)
3
     
 
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (unaudited)
4
     
 
Notes to Unaudited Condensed Consolidated Financial Statements
6
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
18
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29
     
Item 4.
Controls and Procedures
29
     
Part II.
Other Information
 
     
Item 1.
Legal Proceedings
29
Item 1A.
Risk Factors
29
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
30
Item 6.
Exhibits
30
     
Signatures
   
     
Exhibit Index
 
 
 
 
 

 
 
 
Part I.  Financial Information
 
Item 1.  Financial Statements
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
(Unaudited)
 
   
March 31,
2013
   
December 31,
2012
 
ASSETS            
             
Cash and cash equivalents
  $ 67,421     $ 42,607  
Interest-bearing time deposits in banks
    29,094       29,592  
Investment securities available for sale
    51,328       53,325  
Federal Home Loan Bank stock—at cost
    375       375  
Loans receivable, net of allowance of $15,597 and $15,676, respectively
    333,746       337,328  
Loans held for sale
    4,815       4,435  
Accrued interest receivable
    1,544       1,501  
Real estate owned - net
    14,445       16,658  
Office properties and equipment - net
    20,895       20,634  
Cash surrender value of life insurance
    23,201       23,003  
Prepaid expenses and other assets
    598       937  
                 
TOTAL
  $ 547,462     $ 530,395  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
LIABILITIES:
               
Deposits
  $ 448,601     $ 455,051  
Deposits held for sale     21,758       --  
Other borrowings
    3,053       3,109  
Advance payments by borrowers for taxes and insurance
    762       676  
Other liabilities
    1,572       1,899  
                 
Total liabilities
    475,746       460,735  
                 
STOCKHOLDERS’ EQUITY:
               
Preferred stock, no par value—5,000,000 shares authorized; none issued at March 31, 2013 and December 31, 2012
    --       --  
Common stock, $.01 par value—30,000,000 shares authorized; 19,897,603 and 19,302,603 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
    199       193  
Additional paid-in capital
    92,541       90,719  
Accumulated other comprehensive income
    688       763  
Accumulated deficit
    (21,712 )     (22,015 )
 
               
Total stockholders’ equity
    71,716       69,660  
                 
TOTAL
  $ 547,462     $ 530,395  
 
See notes to unaudited condensed consolidated financial statements.
 
 
1

 
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except earnings per share)
(Unaudited)
   
Three Months Ended
 
   
March 31,
2013
   
March 31,
2012
 
INTEREST INCOME:
           
Loans receivable
  $ 4,081     $ 4,641  
Investment securities:
               
Taxable
    53       178  
Nontaxable
    314       268  
Other
    133       124  
Total interest income
    4,581       5,211  
                 
INTEREST EXPENSE:
               
Deposits
    846       1,221  
Other borrowings
    13       33  
                 
Total interest expense
    859       1,254  
                 
NET INTEREST INCOME
    3,722       3,957  
                 
PROVISION FOR LOAN LOSSES
    --       16  
                 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    3,722       3,941  
                 
NONINTEREST INCOME:
               
Deposit fee income
    770       1,094  
Earnings on life insurance policies
    198       193  
Gain on sale of loans
    197       198  
Other
    89       201  
                 
Total noninterest income
    1,254       1,686  
                 
NONINTEREST EXPENSES:
               
Salaries and employee benefits
    2,678       2,875  
Net occupancy expense
    618       690  
Real estate owned, net
    (96 )     (35 )
FDIC insurance
    171       298  
Supervisory assessments
    53       75  
Data processing
    336       476  
Professional fees
    259       398  
Advertising and public relations
    70       69  
Postage and supplies
    109       131  
Other
    475       458  
                 
Total noninterest expenses
    4,673       5,435  
                 
INCOME BEFORE INCOME TAXES
    303       192  
                 
INCOME TAX
    --       --  
                 
NET INCOME
  $ 303       192  
                 
Basic earnings per common share
  $ 0.02     $ 0.01  
                 
Diluted earnings per common share
  $ 0.01     $ 0.01  
                 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
               
                 
Unrealized holding (losses) gains arising during the period
  $ (75 )   $ 61  
Reclassification adjustments for (gain) loss included in net income
    --       --  
COMPREHENSIVE INCOME
  $ 228     $ 253  
 
See notes to unaudited condensed consolidated financial statements.
 
 
2

 
 
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(In thousands, except share data)
(Unaudited)
 
 
   
Issued
Common Stock
    Additional Paid-In    
Accumulated
Other 
Comprehensive
     
Accumulated
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Capital
   
Income
   
 Deficit
   
 Equity
 
BALANCE – January 1, 2013
    19,302,603     $ 193     $ 90,719     $ 763     $ (22,015 )   $ 69,660  
                                                 
Net income
    --       --       --       --       303       303  
Other comprehensive loss
    --       --       --       (75 )     --       (75 )
Exercise of warrants
    595,000       6       1,779       --       --       1,785  
Stock compensation expense
    --       --       43       --       --       43  
                                                 
BALANCE – March 31, 2013
    19,897,603     $ 199     $ 92,541     $ 688     $ (21,712 )   $ 71,716  

See notes to unaudited condensed consolidated financial statements.
 
 
3

 
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
             
OPERATING ACTIVITIES:
           
Net income
  $ 303     $ 192  
Adjustments to reconcile net income to net cash used in operating activities:
               
Provision for loan losses
    --       16  
Provision for real estate losses
    186       28  
Deferred tax provision
    654       (103 )
Deferred tax valuation allowance
    (654 )     103  
Net (accretion) amortization of investment securities
    (3 )     3  
Federal Home Loan Bank stock dividends
    --       (1 )
Gain on sale of fixed assets, net
    (36 )     (126 )
Gain on sale of real estate owned, net
    (344 )     (65 )
Originations of loans held for sale
    (10,719 )     (9,873 )
Proceeds from sales of loans held for sale
    10,536       9,731  
Gain on sale of loans originated to sell
    (197 )     (198 )
Depreciation
    359       390  
Amortization of deferred loan costs, net
    16       8  
Stock compensation
    43       41  
Earnings on life insurance policies
    (198 )     (193 )
Changes in operating assets and liabilities:
               
Accrued interest receivable
    (43 )     (257 )
Prepaid expenses and other assets
    339       316  
Other liabilities
    (327 )     (467 )
                 
Net cash used in operating activities
    (85 )     (455 )
                 
INVESTING ACTIVITIES:
               
Purchases of interest-bearing time deposits in banks
    --       (496 )
Redemptions of interest-bearing time deposits in banks
    498       --  
Purchases of investment securities available for sale
    --       (6,475 )
Proceeds from maturities and calls of investment securities available for sale
    1,925       7,926  
Loan repayments, net of originations
    3,146       444  
Proceeds from sales of real estate owned
    2,803       1,684  
Improvements to real estate owned
    (12 )     (64 )
Proceeds from sales of office properties and equipment
    140       239  
Purchases of office properties and equipment
    (724 )     (26 )
                 
Net cash provided by investing activities
    7,776       3,232  
                 
           
(Continued)
 
 
 
4

 

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
   
Three Months Ended
March 31,
 
   
2013
   
2012
 
FINANCING ACTIVITIES:
           
Net increase (decrease) in deposits
  $ 15,308     $ (8,205 )
Repayment of advances from Federal Home Loan Bank
    (56 )     (177 )
Net increase in advance payments by borrowers for taxes and insurance
    86       112  
Proceeds from exercise of warrants
    1,785       --  
                 
Net cash provided by (used in) financing activities
    17,123       (8,270 )
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    24,814       (5,493 )
                 
CASH AND CASH EQUIVALENTS:
               
Beginning of period
    42,607       79,799  
 
               
End of period
  $ 67,421     $ 74,306  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—
               
Cash paid for:
               
Interest
  $ 854     $ 1,273  
                 
Income taxes
  $ --     $ --  
                 
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
               
Real estate and other assets acquired in settlement of loans
  $ 954     $ 2,816  
 
               
Sales of real estate owned financed by the Bank
  $ 534     $ 715  
 
               
Investment securities purchased—not settled
  $ --     $ 2,804  
 
               
Transfers from deposits to deposits held for sale in probable branch sale   $ 21,758     $ --  
                 
See notes to unaudited condensed consolidated financial statements.
         
(Concluded)
 
 
 
5

 
 
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation—>First Federal Bancshares of Arkansas, Inc. (the “Company”) is a unitary holding company that owns all of the stock of First Federal Bank (the “Bank”). The Company, through its ownership of the Bank, is principally in the business of community banking and therefore is considered a banking operation with no separately reportable segments. The Bank provides a broad line of financial products to individuals and small- to medium-sized businesses. The consolidated financial statements also include the accounts of the Bank’s wholly owned subsidiary, First Harrison Service Corporation, which is inactive.
 
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  However, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and the Bank.  Intercompany transactions have been eliminated in consolidation.  Certain reclassifications of prior period amounts have been made to conform with the current period presentation. These reclassifications had no impact on previously reported net income.

The results of operations for the three months ended March 31, 2013, are not necessarily indicative of the results to be expected for the year ending December 31, 2013.  The unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2012, contained in the Company’s 2012 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”).
 
2.         RECENT ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. In December 2011, FASB issued ASU 2011-12, which defers certain provisions of ASU 2011-05. One of ASU 2011-05’s provisions requires the Company to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. ASU 2011-12 deferred this requirement indefinitely. All other requirements in ASU 2011-05 were not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The ASU did not amend the components that must be reported in other comprehensive income. Both ASUs were effective for the Company’s reporting periods beginning after December 15, 2011. The Company adopted this ASU beginning in the quarter ended March 31, 2012. As this ASU amended only the disclosure requirements for fair value measurements, the adoption of this ASU did not have a material impact on the Company’s financial statements. In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires disclosure, either in a single footnote or parenthetically on the face of the financial statements, of the effect of significant items reclassified from accumulated other comprehensive income to their respective line items in the statement of net income. The effective date of ASU 2013-02 is for reporting periods beginning after December 15, 2012. The Company adopted this ASU effective January 1, 2013.  The adoption of this ASU did not have a material impact on the Company’s financial statements.

3.         INVESTMENT SECURITIES AVAILABLE FOR SALE
Investment securities available for sale consisted of the following as of the dates indicated (in thousands):

   
March 31, 2013
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
Municipal securities
  $ 42,640     $ 734     $ (29 )   $ 43,345  
Corporate debt securities
    8,000       5       (22 )     7,983  
                                 
Total
  $ 50,640     $ 739     $ (51 )   $ 51,328  
 
 
6

 
 

   
December 31, 2012
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair
Value
 
                         
Municipal securities
  $ 44,562     $ 849     $ (18 )   $ 45,393  
Corporate debt securities
    8,000       --       (68 )     7,932  
                                 
Total
  $ 52,562     $ 849     $ (86 )   $ 53,325  

The following tables summarize the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired (“OTTI”) (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

   
March 31, 2013
 
   
Less than 12 Months
   
12 Months or More
   
Total
 
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
                                     
Municipal securities
  $ 2,512     $ 27     $ 124     $ 2     $ 2,636     $ 29  
Corporate debt securities
    998       2       1,980       20       2,978       22  
                                                 
Total
  $ 3,510     $ 29     $ 2,104     $ 22     $ 5,614     $ 51  


   
December 31, 2012
 
   
Less than 12 Months
   
12 Months or More
   
Total
 
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
                                     
Municipal securities
  $ 4,033     $ 18     $ --     $ --     $ 4,033     $ 18  
Corporate debt securities
    3,980       20       3,952       48       7,932       68  
                                                 
Total
  $ 8,013     $ 38     $ 3,952     $ 48     $ 11,965     $ 86  

On a quarterly basis, management conducts a formal review of securities for the presence of OTTI.  Management assesses whether an OTTI is present when the fair value of a security is less than its amortized cost basis at the balance sheet date.  For such securities, OTTI is considered to have occurred if the Company intends to sell the security, if it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis or if the present values of expected cash flows is not sufficient to recover the entire amortized cost.

The unrealized losses are primarily a result of increases in market yields since the time of purchase.  In general, as market yields rise, the fair value of securities will decrease; as market yields fall, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired.  Additionally, the unrealized losses are also considered temporary because scheduled coupon payments have been made, it is anticipated that the entire principal balance will be collected as scheduled, and management neither intends to sell the securities nor is it more likely than not that the Company will be required to sell the securities before the recovery of the remaining amortized cost amount.

The Company has pledged investment securities available for sale with carrying values of approximately $1.6 million as of March 31, 2013 and December 31, 2012, as collateral for certain deposits in excess of $250,000.  In addition, at March 31, 2013 and December 31, 2012 the Company has pledged investment securities available for sale with carrying values of approximately $8.0 million and $7.9 million, respectively, as collateral for the primary discount window.
 
 
7

 

The scheduled contractual maturities of debt securities at March 31, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
March 31, 2013
 
   
Amortized
Cost
   
Fair
Value
   
Weighted
Average Rate
 
                   
Within one year
  $ 276     $ 276       3.37%  
Due from one year to five years
    19,539       19,636       2.17%  
Due from five years to ten years
    19,504       19,838       2.73%  
Due after ten years
    11,321       11,578       3.78%  
                         
Total
  $ 50,640     $ 51,328       2.75%  


As of March 31, 2013 and December 31, 2012, investments with amortized cost of approximately $34.8 million and $36.8 million, respectively, have call options held by the issuer, of which approximately $7.8 million and $9.2 million, respectively, are or were callable within one year.

4.         LOANS RECEIVABLE
Loans receivable consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):

   
March 31,
2013
   
December 31,
2012
 
Real estate:
           
One- to four-family residential
  $ 151,553     $ 157,936  
Multifamily residential
    21,138       20,790  
Nonfarm nonresidential
    142,624       138,014  
Construction and land development
    13,158       14,551  
Commercial and industrial
    15,833       16,083  
Consumer
    5,214       5,818  
Total loans receivable
    349,520       353,192  
Unearned discounts and net deferred loan costs
    (177 )     (188 )
Allowance for loan and lease losses
    (15,597 )     (15,676 )
                 
Loans receivable—net
  $ 333,746     $ 337,328  

Mortgage loans serviced for others are not included in the accompanying consolidated statements of financial condition.  The unpaid principal balances of such loans at March 31, 2013 and December 31, 2012 were $4.2 million and $8.7 million, respectively.  Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing.   Servicing income for the three months ended March 31, 2013 and 2012 was $1,000 and $2,000, respectively.

As of March 31, 2013 and December 31, 2012, qualifying loans collateralized by first lien one- to four-family mortgages with balances totaling approximately $62.9 million and $67.3 million, respectively, were held in custody by the Federal Home Loan Bank of Dallas (“FHLB”) and were pledged for outstanding advances or available for future advances.

The FHLB has custody and endorsement of the loans that collateralize the Bank’s outstanding borrowings with the FHLB.  Qualifying loans (i) must not be 90 days or more past due; (ii) must not have been in default within the most recent twelve-month period, unless such default has been cured in a manner acceptable to the FHLB; (iii) must relate to real property that is covered by fire and hazard insurance in an amount at least sufficient to discharge the mortgage loan in case of loss and as to which all real estate taxes are current; (iv) must not have been classified as substandard, doubtful, or loss by the Bank or its regulatory authority; and (v) must not secure the indebtedness to any director, officer, employee, attorney, or agent of the Bank or of any FHLB.  The FHLB currently allows an aggregate lendable value on the qualifying loans of approximately 90% of the collateral value of loans pledged to the FHLB.

As of March 31, 2013 and December 31, 2012, qualifying loans collateralized by commercial real estate with balances of $8.9 million and $9.4 million, respectively, were pledged at the Federal Reserve Bank (“FRB”).  The Bank uses qualifying investment securities and qualifying commercial real estate loans as collateral for the discount window.
 
 
8

 

The following tables present age analyses of loans, including both accruing and nonaccrual loans, as of the dates indicated (in thousands):

March 31, 2013
 
30-89 Days
Past Due
   
90 Days or
More Past Due
   
Current
   
Total (1)
 
                         
One- to four-family residential
  $ 5,293     $ 4,123     $ 142,137     $ 151,553  
Multifamily residential
    --       --       21,138       21,138  
Nonfarm nonresidential
    18       3,666       138,940       142,624  
Construction and land development
    375       3,212       9,571       13,158  
Commercial
    --       402       15,431       15,833  
Consumer
    9       25       5,180       5,214  
Total (1)
  $ 5,695     $ 11,428     $ 332,397     $ 349,520  

December 31, 2012
 
30-89 Days
Past Due
   
90 Days or
More Past Due
   
Current
   
Total (1)
 
                         
One- to four-family residential
  $ 7,411     $ 3,982     $ 146,543     $ 157,936  
Multifamily residential
    3,459       --       17,331       20,790  
Nonfarm nonresidential
    --       4,523       133,491       138,014  
Construction and land development
    241       3,145       11,165       14,551  
Commercial
    341       402       15,340       16,083  
Consumer
    15       25       5,778       5,818  
Total
  $ 11,467     $ 12,077     $ 329,648     $ 353,192  
 

 
(1)
Gross of unearned discounts and net deferred loan costs and the allowance for loan and lease losses.

There were no loans over 90 days past due and still accruing at March 31, 2013 or December 31, 2012.  Restructured loans totaled $7.4 million and $9.2 million as of March 31, 2013 and December 31, 2012, respectively, with $3.4 million of such restructured loans on nonaccrual status at both March 31, 2013 and December 31, 2012, respectively.

The following table presents age analyses of nonaccrual loans as of the dates indicated (in thousands):

March 31, 2013
 
30-89 Days
Past Due
   
90 Days or
More Past Due
   
Current
   
Total
 
                         
One- to four-family residential
  $ 1,036     $ 4,123     $ 2,063     $ 7,222  
Multifamily residential
    --       --       --       --  
Nonfarm nonresidential
    --       3,666       2,863       6,529  
Construction and land development
    325       3,212       271       3,808  
Commercial
    --       402       --       402  
Consumer
    --       25       5       30  
Total
  $ 1,361     $ 11,428     $ 5,202     $ 17,991  

December 31, 2012
 
30-89 Days
Past Due
   
90 Days or
 More Past Due
   
Current
   
Total
 
                         
One- to four-family residential
  $ 1,070     $ 3,982     $ 1,975     $ 7,027  
Multifamily residential
    --       --       --       --  
Nonfarm nonresidential
    --       4,523       2,713       7,236  
Construction and land development
    241       3,145       747       4,133  
Commercial
    --       402       --       402  
Consumer
    1       25       --       26  
Total
  $ 1,312     $ 12,077     $ 5,435     $ 18,824  
 
 
9

 
 
The following tables summarize information pertaining to impaired loans as of March 31, 2013 and December 31, 2012 and for quarters ended March 31, 2013 and 2012 (in thousands):

   
March 31, 2013
   
Three Months Ended March 31, 2013
 
   
Unpaid Principal
Balance
   
Recorded
Investment
   
Valuation
Allowance
   
Average Recorded Investment
   
Interest Income
Recognized
 
Impaired loans with a valuation allowance:
                       
One- to four-family residential
  $ 2,992     $ 2,479     $ 513     $ 1,814     $ 6  
Multifamily residential
    3,428       2,958       470       1,479       40  
Nonfarm nonresidential
    3,312       2,114       1,198       2,466       --  
Construction and land development
    1,808       1,306       502       957       --  
Commercial
    381       --       381       --       --  
Consumer
    6       --       6       2       --  
      11,927       8,857       3,070       6,718       46  
                                         
Impaired loans without a valuation allowance:
                                       
One- to four-family residential
    4,737       4,737       --       6,538       --  
Multifamily residential
    --       --       --       2,785       --  
Nonfarm nonresidential
    3,217       3,217       --       5,423       --  
Construction and land development
    2,001       2,001       --       2,918       --  
Commercial
    21       21       --       150       --  
Consumer
    25       25       --       26       --  
      10,001       10,001       --       17,840       --  
Total impaired loans
  $ 21,928     $ 18,858     $ 3,070     $ 24,558     $ 46  
                                         
Interest based on original terms
                                  $ 344  
                                         
Interest income recognized on a cash basis on impaired loans
                                  $ --  
 
 
   
December 31, 2012
   
Three Months Ended March 31, 2012
 
   
Unpaid Principal Balance
   
Recorded Investment
   
Valuation Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
Impaired loans with a valuation allowance:
           
One- to four-family residential
  $ 1,424     $ 1,149     $ 275     $ 3,437     $ 9  
Multifamily residential
    --       --       --       1,128       --  
Nonfarm nonresidential
    3,596       2,817       778       2,287       4  
Construction and land development
    737       607       130       1,393       9  
Commercial
    380       --       380       --       --  
Consumer
    5       4       2       13       --  
      6,142       4,577       1,565       8,258       22  
                                         
Impaired loans without a valuation allowance:
                                       
One- to four-family residential
    6,718       6,718       --       8,663       29  
Multifamily residential
    3,459       3,459       --       4,474       46  
Nonfarm nonresidential
    4,876       4,876       --       8,099       50  
Construction and land development
    3,396       3,396       --       2,240       5  
Commercial
    22       22       --       278       --  
Consumer
    27       27       --       52       1  
      18,498       18,498       --       23,806       131  
Total impaired loans
  $ 24,640     $ 23,075     $ 1,565     $ 32,064     $ 153  
                                         
Interest based on original terms
                                  $ 477  
                                         
Interest income recognized on a cash basis on impaired loans
                                  $ 69  
 
 
10

 
 
Credit Quality Indicators. >As part of the on-going monitoring of the credit quality of the loan portfolio, the Bank assigns loans into risk categories based on the ability of borrowers to service their debt as determined by available and relevant information such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank assigns a credit risk rating to certain non-homogeneous loans over $250,000 on at least an annual basis.  Homogeneous loans and non-homogeneous loans under $250,000 are generally not risk rated.  The Bank uses the following definitions for risk ratings:

Pass (Grades 1 to 5). >Loans rated as pass generally meet or exceed normal credit standards and are rated on a scale from 1 to 5, with 1 being the highest quality loan and 5 being a pass/watch loan.  Factors influencing the level of pass grade include repayment source and strength, collateral value, borrower cash flows, existence of and strength of guarantors, industry/business sector, financial trends, performance history, etc.

Special Mention (Grade 6). >Loans rated as special mention, while still adequately protected by the borrower’s repayment capability, exhibit distinct weakening trends. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management’s close attention so as to avoid becoming adversely classified credits.

Substandard (Grade 7). >Loans rated as substandard are inadequately protected by the current sound net worth and paying capacity of the borrower or the collateral pledged, if any. These assets must have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (Grade 8). >Loans rated as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

Loss (Grade 9). >Loans rated as a loss are considered uncollectible and of such little value that continuance as an asset is not warranted. A loss classification does not mean that an asset has no recovery or salvage value, but that it is not practical or desirable to defer writing off all or a portion of the asset, even though partial recovery may be effected in the future.

Based on analyses performed at March 31, 2013 and December 31, 2012, the risk categories of loans are as follows:

   
March 31, 2013
 
   
Pass
   
Special
Mention
   
Substandard
   
Not Rated
   
Total (1)
 
One- to four-family residential
  $ 31,888     $ 3,121     $ 12,898     $ 103,646     $ 151,553  
Multifamily residential
    17,349       --       3,775       14       21,138  
Nonfarm nonresidential
    123,545       7,104       11,090       885       142,624  
Construction and land development
    4,789       397       4,600       3,372       13,158  
Commercial
    14,933       --       747       153       15,833  
Consumer
    157       --       47       5,010       5,214  
Total (1)
  $ 192,661     $ 10,622     $ 33,157     $ 113,080     $ 349,520  

   
December 31, 2012
 
   
Pass
   
Special
Mention
   
Substandard
   
Not Rated
   
Total (1)
 
One- to four-family residential
  $ 30,216     $ 3,698     $ 12,993     $ 111,029     $ 157,936  
Multifamily residential
    16,695       --       4,078       17       20,790  
Nonfarm nonresidential
    117,604       7,445       12,045       920       138,014  
Construction and land development
    5,298       867       4,934       3,452       14,551  
Commercial
    15,127       340       425       191       16,083  
Consumer
    159       --       45       5,614       5,818  
Total (1)
  $ 185,099     $ 12,350     $ 34,520     $ 121,223     $ 353,192  
 

 
(1)
Gross unearned discounts and net deferred loan costs and the allowance for loan and lease losses.

As of March 31, 2013 and December 31, 2012, the Bank did not have any loans categorized as subprime or classified as doubtful or loss.
 
 
11

 
 
Troubled Debt Restructurings. >Troubled debt restructurings (“TDRs”) are loans where the contractual terms have been modified and both of the following conditions exist: (i) the borrower is experiencing financial difficulty and (ii) the restructuring constitutes a concession that the Bank would not otherwise make. The Bank assesses all loan modifications to determine if the modifications constitute a TDR.  Restructurings resulting in an insignificant delay in payment are not considered to be TDRs.  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 and the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
 
All TDRs are considered impaired loans. Impairment is measured on a loan-by-loan basis by either the present value of expected future 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.
 
The following table summarizes TDRs as of March 31, 2013 and December 31, 2012: (dollars in thousands)

March 31, 2013
 
Number of
 Accruing
TDR Loans
   
Balance
   
Number of
Nonaccrual
TDR Loans
   
Balance
   
Total
Number of
TDR Loans
   
Total Balance
 
One- to four-family residential
    5     $ 508       12     $ 1,555       17     $ 2,063  
Multifamily residential
    1       3,428       --       --       1       3,428  
Nonfarm nonresidential
    --       --       3       595       3       595  
Construction and land development
    --       --       6       1,283       6       1,283  
Consumer
    --       --       1       5       1       5  
                                                 
Total
    6     $ 3,936       22     $ 3,438       28     $ 7,374  

December 31, 2012
 
Number of
Accruing
TDR Loans
   
Balance
   
Number of
Nonaccrual
TDR Loans
   
Balance
   
Total
Number of
TDR Loans
   
Total Balance
 
One- to four-family residential
    12     $ 1,115       9     $ 1,461       21     $ 2,576  
Multifamily residential
    1       3,459       --       --       1       3,459  
Nonfarm nonresidential
    1       1,235       3       606       4       1,841  
Construction and land development
    --       --       6       1,315       6       1,315  
Consumer
    3       7       --       --       3       7  
                                                 
Total
    17     $ 5,816       18     $ 3,382       35     $ 9,198  

The Bank restructured one loan as a TDR during the three months ended March 31, 2013 in the amount of $6,000. The Bank did not restructure any loans receivable that were TDRs during the three months ended March 31, 2012.

The Bank had no loans receivable for which a payment default occurred during the three months ended March 31, 2013 or 2012 and that had been modified as a TDR within 12 months or less of the payment default.
 
 
12

 
 
5.        ALLOWANCES FOR LOAN AND LEASE LOSSES AND REAL ESTATE LOSSES
The tables below provide a rollforward of the allowance for loan and lease losses (“ALLL”) by portfolio segment for the three months ended March 31, 2013 and 2012 (in thousands):

   
Three Months Ended March 31, 2013
 
   
One- to Four-
Family
Residential
   
Multifamily Residential
   
Nonfarm Nonresidential
   
Construction
and Land
Development
   
Commercial
   
Consumer
   
Total
 
                                           
Balance, beginning of year
  $ 5,099     $ 1,319     $ 6,949     $ 1,130     $ 956     $ 223     $ 15,676  
Provision charged to expense
    1,724       (245 )     (1,475 )     (24 )     25       (5 )     --  
Losses charged off
    (87 )     --       (134 )     --       --       (29 )     (250 )
Recoveries
    42       --       1       84       19       25       171  
Balance, end of year
  $ 6,778     $ 1,074     $ 5,341     $ 1,190     $ 1,000     $ 214     $ 15,597  

   
Three Months Ended March 31, 2012
 
   
One- to Four-
Family
Residential
   
Multifamily Residential
   
Nonfarm Nonresidential
   
Construction
and Land
Development
   
Commercial
   
Consumer
   
Total
 
                                           
Balance, beginning of year
  $ 6,999     $ 3,332     $ 7,316     $ 1,973     $ 972     $ 226     $ 20,818  
Provision charged to expense
    (134 )     427       646       (440 )     (487 )     4       16  
Losses charged off
    (436 )     (997 )     (1,736 )     --       --       (96 )     (3,265 )
Recoveries
    18       17       4       702       6       24       771  
Balance, end of year
  $ 6,447     $ 2,779     $ 6,230     $ 2,235     $ 491     $ 158     $ 18,340  
 
The tables below present the allocation of the ALLL and the related loans receivable balances disaggregated on the basis of impairment method by portfolio segment as of March 31, 2013 and December 31, 2012 (in thousands):

   
March 31, 2013
 
   
One- to Four-
Family
Residential
   
Multifamily Residential
   
Nonfarm Nonresidential
   
Construction
and Land
Development
   
Commercial
   
Consumer
   
Total
 
ALLL Balances:
                                         
Individually evaluated for impairment
  $ 513     $ 470     $ 1,198     $ 502     $ 381     $ 6     $ 3,070  
Collectively evaluated for impairment
    6,265       604