Since the end of 2010, FHLB borrowings remained unchanged at $87.0 million, subordinated debentures remained unchanged at $6.0 million and other borrowings remained unchanged at $5.0 million.

Stockholders' equity was $30.7 million, or 7% of the Company’s total assets, at June 30, 2011. At June 30, 2011, the Bank’s Total Risk-Based Capital ratio was 13.26%, its Tier 1 Risk-Based Capital ratio was 11.94%, and its Core Capital and Tangible Capital ratios were 8.87%.

As previously announced, the Company is currently implementing a Recapitalization Plan to increase capital and reduce debt and senior securities, including a sale of additional common stock and exchanges of preferred stock for common stock at a discount to the liquidation amount, to further strengthen the Company’s capital ratios, and position the Bank for future growth.

Asset Quality

Non-performing assets (“NPAs”), comprised of non-performing loans (“NPLs”) and REO, were $56.0 million, or 12.53% of total assets, at June 30, 2011, compared to $46.5 million, or 9.60% of total assets, at December 31, 2010. During the first six months of 2011, NPLs, including non-performing loans held for sale, increased by $5.9 million to $49.3 million from $43.4 million at the end of 2010. These loans consist of delinquent loans that are 90 days or more past due and certain loans and troubled debt restructurings (“TDRs”) that do not qualify for accrual status. Despite the increase in NPAs during the first six months of 2011, our total delinquencies and our total classified loans, which include NPLs, decreased in number and dollar amount during the first six months of 2011. In addition, at June 30, 2011, approximately $20.8 million, or 42.2%, of our NPLs were paying currently.

The NPLs included 31 church loans totaling $25.3 million, 13 commercial real estate loans totaling $9.1 million, 19 one-to-four family residential real estate loans totaling $5.8 million, 10 multi-family residential real estate loans totaling $4.2 million, four commercial loans totaling $4.6 million, and one land loan of $0.3 million. In addition to the NPLs discussed above, there were $20.6 million and $22.5 million of accruing TDRs at June 30, 2011 and December 31, 2010. These TDRs are on accrual status as the loans have complied with the terms of their restructured agreements for a period of six months or longer. Our progress in working with these borrowers is evidenced by the improvement in the performance of our TDRs since the end of 2009, when only $6.2 million of our TDRs were on accrual status.

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