Loans Receivable

12 Months Ended

Dec. 31, 2011

Receivables [Abstract]

Loans Receivable

Note 4.   Loans Receivable

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

	2011			2010
First mortgage loans:
1-4 Family residential real estate	$	138,581,219		$	141,061,321
Multifamily real estate		48,656,251			57,461,170
Commercial real estate		67,322,328			69,253,792
Construction and land development		2,111,575			4,193,756
Total first mortgage loans		256,671,373			271,970,039
Consumer loans:
Automobile		13,829,186			13,548,710
Second mortgage		43,897,879			51,349,053
Other		3,666,196			4,282,717
Total consumer loans		61,393,261			69,180,480
Total loans		318,064,634			341,150,519
Undisbursed portion of construction loans		(470,938	)		(295,609	)
Unearned premiums, net		22,340			83,528
Net deferred loan origination fees		(392,443	)		(331,010	)
Allowance for loan losses		(5,845,730	)		(6,146,861	)
	$	311,377,863		$	334,460,567

Activity in the allowance for loan losses by segment for the years ended December 31, 2011 and 2010 are summarized in the following tables.

	For the Year Ended December 31, 2011
										1-4 Family
	Commercial			Construction and			Multi-Family			Residential
	Real Estate			Land Development			Real Estate			Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning balance	$	2,555,094		$	354,911		$	803,850		$	1,009,630		$	1,423,376		$	6,146,861
Charge-offs		(1,286,350	)		(70,000	)		(278,387	)		(184,456	)		(647,957	)		(2,467,150	)
Recoveries		10,083			-			-			126			20,810			31,019
Provisions		1,248,455			45,927			(9,356	)		303,018			546,956			2,135,000
Ending balance	$	2,527,282		$	330,838		$	516,107		$	1,128,318		$	1,343,185		$	5,845,730
	For the Year Ended December 31, 2010
										1-4 Family
	Commercial			Construction and			Multi-Family			Residential
	Real Estate			Land Development			Real Estate			Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning balance	$	1,991,889		$	2,510,656		$	620,475		$	679,097		$	1,368,478		$	7,170,595
Charge-offs		(539,000	)		(3,491,360	)		(26,243	)		(511,065	)		(563,920	)		(5,131,588	)
Recoveries		-			-			-			675			16,179			16,854
Provisions		1,102,205			1,335,615			209,618			840,923			602,639			4,091,000
Ending balance	$	2,555,094		$	354,911		$	803,850		$	1,009,630		$	1,423,376		$	6,146,861

Activity in the allowance for loan losses is summarized as follows for the year ended December 31, 2009:

	2009
Balance, beginning	$	5,379,155
Provision charged to income		2,450,000
Loans charged off		(675,926	)
Recoveries		17,366
Balance, ending	$	7,170,595

The following tables present the balance in the allowance for loan losses and recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2011 and 2010.

	December 31, 2011
							1-4 Family
	Commercial		Construction and		Multi-Family		Residential
	Real Estate		Land Development		Real Estate		Real Estate		Consumer		Total
Allowance for Loan Losses:
Individually evaluated for impairment	$	738,650	$	202,000	$	-	$	142,400	$	61,582	$	1,144,632
Collectively evaluated for impairment		1,788,632		128,838		516,107		985,918		1,281,603		4,701,098
Total ending allowance balance	$	2,527,282	$	330,838	$	516,107	$	1,128,318	$	1,343,185	$	5,845,730
Loans:
Individually evaluated for impairment	$	8,421,631	$	1,835,950	$	-	$	4,509,307	$	478,757	$	15,245,645
Collectively evaluated for impairment		58,900,697		275,625		48,656,251		134,071,912		60,914,504		302,818,989
Total ending loan balance	$	67,322,328	$	2,111,575	$	48,656,251	$	138,581,219	$	61,393,261	$	318,064,634
	December 31, 2010
							1-4 Family
	Commercial		Construction and		Multi-Family		Residential
	Real Estate		Land Development		Real Estate		Real Estate		Consumer		Total
Allowance for Loan Losses:
Individually evaluated for impairment	$	1,121,500	$	237,000	$	201,500	$	85,111	$	115,683	$	1,760,794
Collectively evaluated for impairment		1,433,594		117,911		602,350		924,519		1,307,693		4,386,067
Total ending allowance balance	$	2,555,094	$	354,911	$	803,850	$	1,009,630	$	1,423,376	$	6,146,861
Loans:
Individually evaluated for impairment	$	12,194,848	$	3,301,345	$	1,558,628	$	5,167,369	$	607,064	$	22,829,254
Collectively evaluated for impairment		57,058,944		892,411		55,902,542		135,893,952		68,573,416		318,321,265
Total ending loan balance	$	69,253,792	$	4,193,756	$	57,461,170	$	141,061,321	$	69,180,480	$	341,150,519

The following tables summarize the recorded investment in impaired loans by segment, including loans for which no impairment is recorded, loans for which an impairment is recorded, and the resulting allowance for the impairment by segment as of December 31, 2011 and 2010.

	December 31, 2011
			Unpaid Principal		Associated		Average
	Carrying Amount		Balance		Allowance		Balance
With no specific allowance recorded:
Commercial Real Estate	$	-	$	-	$	-
Construction and Land Development		-		-		-
Multi-Family Real Estate		-		-		-
1-4 Family Residential Real Estate		3,764,936		3,764,936		-
Consumer		349,300		349,300		-
With an allowance recorded:
Commercial Real Estate		8,421,631		8,421,631		738,650
Construction and Land Development		1,835,950		1,835,950		202,000
Multi-Family Real Estate		-		-		-
1-4 Family Residential Real Estate		744,371		744,371		142,400
Consumer		129,457		129,457		61,582
Total:
Commercial Real Estate		8,421,631		8,421,631		738,650	$	8,797,584
Construction and Land Development		1,835,950		1,835,950		202,000		2,475,918
Multi-Family Real Estate		-		-		-		389,657
1-4 Family Residential Real Estate		4,509,307		4,509,307		142,400		4,782,398
Consumer		478,757		478,757		61,582		785,557
	$	15,245,645	$	15,245,645	$	1,144,632	$	17,231,114
	December 31, 2010
			Unpaid Principal		Associated		Average
	Carrying Amount		Balance		Allowance		Balance
With no specific allowance recorded:
Commercial Real Estate	$	1,584,352	$	1,852,852	$	-
Construction and Land Development		892,017		2,962,017		-
Multi-Family Real Estate		-		-		-
1-4 Family Residential Real Estate		4,560,823		4,872,752		-
Consumer		433,793		442,786		-
With an allowance recorded:
Commercial Real Estate		10,610,496		10,610,496		1,121,500
Construction and Land Development		2,409,328		2,409,328		237,000
Multi-Family Real Estate		1,558,628		1,558,628		201,500
1-4 Family Residential Real Estate		606,546		606,546		85,111
Consumer		173,271		173,271		115,683
Total:
Commercial Real Estate		12,194,848		12,463,348		1,121,500	$	9,780,378
Construction and Land Development		3,301,345		5,371,345		237,000		7,277,842
Multi-Family Real Estate		1,558,628		1,558,628		201,500		519,543
1-4 Family Residential Real Estate		5,167,369		5,479,298		85,111		5,083,518
Consumer		607,064		616,057		115,683		544,684
	$	22,829,254	$	25,488,676	$	1,760,794	$	23,205,965

Interest income recognized on impaired loans was approximately $617,000, $572,000, and $931,000 for years ended 2011, 2010 and 2009 respectively.

Credit Quality Indicators

Credit quality indicators are used by management in determining the allowance for loan losses.  The primary credit quality indicators used by management include loan classification and delinquency status.  These indicators are used to identify and evaluate trends and deterioration in the loan portfolio.

The primary credit quality indicator used by management in the commercial real estate, construction and land development, and multi-family real estate loan portfolios is the internal classification of the loans.  Loans in these portfolios that are over $500,000 are reviewed annually at which time they are assigned a classification.  Loans may also be reviewed prior to the annual review cycle based on current information that becomes available regarding the borrower's ability to service the loan.  Loans may be classified as watch, special mention, substandard, or doubtful.  An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Substandard assets include those characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.  Assets classified as doubtful have all of the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  Assets that do not expose the bank to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve management's close attention are designated as special mention.  If left uncorrected, these potential weaknesses could increase the level of risk to the Bank in the future.  Commercial loans to borrowers whose most recent financial information shows deterioration in the earliest stages and warrant greater than routine attention and monitoring by management are designated as watch.  Impaired loans and troubled debt restructurings are generally classified as substandard or doubtful.

The primary credit quality indicator used by management in the residential real estate and consumer loan portfolios is the delinquency status of the loans.

The following tables summarize the recorded investment in loan segments by credit quality indicator as of December 31, 2011 and 2010.  Past due status is reported as of December 31, 2011 and 2010.  Internal classification ratings reflect the most recent classification assigned generally based on an annual review performed during the periods reported.

	Commercial Loans
	Credit risk profile by internally assigned grade
	December 31, 2011
	Commercial		Construction and		Multi-Family
	Real Estate		Land Development		Real Estate		Total
Grade:
Pass	$	52,737,956	$	275,625	$	45,239,400	$	98,252,981
Watch		6,162,741		-		3,416,851		9,579,592
Special Mention		-		-		-		-
Substandard		7,682,981		1,633,950		-		9,316,931
Doubtful		738,650		202,000		-		940,650
	$	67,322,328	$	2,111,575	$	48,656,251	$	118,090,154
	December 31, 2010
	Commercial		Construction and		Multi-Family
	Real Estate		Land Development		Real Estate		Total
Grade:
Pass	$	53,092,384	$	892,411	$	53,291,156	$	107,275,951
Watch		3,966,560		-		2,611,386		6,577,946
Special Mention		-		-		-		-
Substandard		11,073,348		3,064,345		1,357,128		15,494,821
Doubtful		1,121,500		237,000		201,500		1,560,000
	$	69,253,792	$	4,193,756	$	57,461,170	$	130,908,718
	Residential Real Estate and Consumer Loans
	Credit risk profile based on delinquency status
	December 31, 2011
	1-4 Family
	Residential		Second		Other Consumer
	Real Estate		Mortgage		Loans		Total
Current	$	136,573,437	$	43,582,655	$	17,201,581	$	197,357,673
Past due 30-89 days		921,298		117,620		233,208		1,272,126
Past due 90 days and greater		1,086,484		197,604		60,593		1,344,681
	$	138,581,219	$	43,897,879	$	17,495,382	$	199,974,480
	December 31, 2010
	1-4 Family
	Residential		Second		Other Consumer
	Real Estate		Mortgage		Loans		Total
Current	$	137,430,650	$	50,136,653	$	17,590,417	$	205,157,720
Past due 30-89 days		1,473,094		786,900		203,341		2,463,335
Past due 90 days and greater		2,157,577		425,500		37,669		2,620,746
	$	141,061,321	$	51,349,053	$	17,831,427	$	210,241,801

An aging analysis of the recorded investment in loans by segment at December 31, 2011 and 2010 are summarized as follows.

	December 31, 2011
	30-89 Days		90 Days Past Due
	Past Due		and Greater		Total Past Due		Current		Total
Commercial Loans:
Commercial Real Estate	$	26,796	$	-	$	26,796	$	67,295,532	$	67,322,328
Construction and Land Development		1,132,119		703,831		1,835,950		275,625		2,111,575
Multi-Family Real Estate		-		-		-		48,656,251		48,656,251
1-4 Family Residential Real Estate		921,298		1,086,484		2,007,782		136,573,437		138,581,219
Consumer:
Second mortgage		117,620		197,604		315,224		43,582,655		43,897,879
Other consumer loans		233,208		60,593		293,801		17,201,581		17,495,382
	$	2,431,041	$	2,048,512	$	4,479,553	$	313,585,081	$	318,064,634
	December 31, 2010
	30-89 Days		90 Days Past Due
	Past Due		and Greater		Total Past Due		Current		Total
Commercial Loans:
Commercial Real Estate	$	-	$	440,193	$	440,193	$	68,813,599	$	69,253,792
Construction and Land Development		-		1,411,752		1,411,752		2,782,004		4,193,756
Multi-Family Real Estate		373,518		1,558,628		1,932,146		55,529,024		57,461,170
1-4 Family Residential Real Estate		1,473,094		2,157,577		3,630,671		137,430,650		141,061,321
Consumer:
Second mortgage		786,900		425,500		1,212,400		50,136,653		51,349,053
Other consumer loans		203,341		37,669		241,010		17,590,417		17,831,427
	$	2,836,853	$	6,031,319	$	8,868,172	$	332,282,347	$	341,150,519

There were no loans greater than 90 days past due and still accruing interest at December 31, 2011 and 2010.  Nonaccrual loans at December 31, 2011 and 2010 by segment are summarized below:

	2011		2010
Commercial Loans:
Commercial Real Estate	$	1,511,299	$	5,408,650
Construction and Land Development		1,835,950		1,679,839
Multi-Family Real Estate		-		1,558,628
1-4 Family Residential Real Estate		1,086,485		2,459,406
Consumer:
Second mortgage		197,603		425,500
Other consumer loans		60,593		37,669
	$	4,691,930	$	11,569,692

TDRs are loans on which, due to the borrower's financial difficulties, a concession has been granted that would not otherwise be considered.  In most cases, modifications of loan terms that could potentially qualify as a TDR include reduction of contractual interest rate, extension of the maturity date or a reduction of the principal balance.  A TDR is placed on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.  All loans classified as TDRs are considered to be impaired.

The following table summarizes loans that have been restructured for year ended December 31, 2011:

	December 31, 2011
	Number of Loans		Pre-restructuring Principal Balance		Post-restructuring Principal Balance
Troubled debt restructurings:
Commercial Real Estate		3	$	5,919,269	$	5,919,269
Construction and Land Development		1		743,761		743,761
Multi-Family Real Estate		-		-		-
1-4 Family Residential Real Estate		15		1,515,061		1,570,377
Consumer		13		377,400		356,785
Total:		32	$	8,555,491	$	8,590,192

The TDRs described above increased the allowance for loan losses by approximately $123,000 for the year ended December 31, 2011 and resulted in charge-offs of $33,500 for the year ended December 31, 2011.  The majority of these TDRs were a result of changes in interest rates and accounted for approximately 90% of the modifications.  The difference between the post-restructuring principal balance compared to the pre-restructuring principal balance is due to charge-offs or capitalization of interest.  One 1-4 family residential real estate loan received an advance of additional funds of approximately $26,000.

A restructured loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.  The following table summarizes, as of December 31, 2011, loans that were restructured within the last 12 months that have subsequently defaulted during the reported period:

	December 31, 2011
	Number of Loans		Principal Balance of Defaulted Loans
Commercial Real Estate		-	$	-
Construction and Land Development		1		703,831
Multi-Family Real Estate		-		-
1-4 Family Residential Real Estate		4		472,363
Consumer		2		31,434
Total:		7	$	1,207,628

The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, executive officers and their immediate families (commonly referred to as related parties), all of which have been made, in the opinion of management, on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated third parties.

Activity in loans receivable from these related parties of the Company consisted of the following for the years ended December 31, 2011 and 2010:

	2011			2010
Beginning balance	$	496,638		$	301,882
New loans		448,000			491,414
Available line of credit balance		-			(155,537	)
Change in status		(378,136	)		(122,925	)
Repayments		(8,339	)		(18,196	)
Ending balance	$	558,163		$	496,638