4. LOANS RECEIVABLE

Loans receivable at March 31, 2012 and December 31, 2011 are summarized as follows:

	March 31, 2012			December 31, 2011
First mortgage loans:
1-4 family residential real estate	$	140,660,968		$	138,581,219
Multifamily real estate		47,450,183			48,656,251
Commercial real estate		71,256,893			67,322,328
Construction and land development		1,926,822			2,111,575
Total first mortgage loans		261,294,866			256,671,373

Consumer loans:
Automobile		13,495,516			13,829,186
Second mortgage		41,452,940			43,897,879
Other		3,393,423			3,666,196
Total consumer loans		58,341,879			61,393,261

Total loans		319,636,745			318,064,634

Undisbursed portion of construction loans		(166,893	)		(470,938	)
Unearned premiums, net		16,061			22,340
Net deferred loan origination fees		(432,522	)		(392,443	)
Allowance for loan losses		(5,984,083	)		(5,845,730	)
	$	313,069,308		$	311,377,863

Activity in the allowance for loan losses by segment for the three months ended March 31, 2012 and 2011 is summarized in the following table.

	For the Three Months Ended March 31, 2012
										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	$	2,527,282		$	330,838		$	516,107		$	1,128,318		$	1,343,185		$	5,845,730
Charge-offs		-			-			-			(18,834	)		(46,379	)		(65,213	)
Recoveries		15,000			-			-			37,851			715			53,566
Provisions		233,583			24,545			(20,996	)		18,713			(105,845	)		150,000
Ending balance	$	2,775,865		$	355,383		$	495,111		$	1,166,048		$	1,191,676		$	5,984,083

	For the Three Months Ended March 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		(101,123	)		(70,000	)		-			(14,955	)		(25,349	)		(211,427	)
Recoveries		-			-			-			127			5,513			5,640
Provisions		36,191			4,349			66,587			20,653			172,220			300,000
Ending balance	$	2,490,162		$	289,260		$	870,437		$	1,015,455		$	1,575,760		$	6,241,074

The following table presents the balance in the allowance for loan losses and recorded investment in loans by portfolio segment based on impairment method as of March 31, 2012 and December 31, 2011.

	March 31, 2012
							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	$	897,850	$	202,000	$	-	$	177,929	$	64,450	$	1,342,229
Collectively evaluated for impairment		1,878,015		153,383		495,111		988,119		1,127,226		4,641,854
Total ending allowance balance	$	2,775,865	$	355,383	$	495,111	$	1,166,048	$	1,191,676	$	5,984,083

Loans:
Individually evaluated for impairment	$	8,393,925	$	1,652,254	$	-	$	5,073,295	$	397,883	$	15,517,357
Collectively evaluated for impairment		62,862,968		274,568		47,450,183		135,587,673		57,943,996		304,119,388
Total ending loan balance	$	71,256,893	$	1,926,822	$	47,450,183	$	140,660,968	$	58,341,879	$	319,636,745

	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

The following table summarizes 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 March 31, 2012 and December 31, 2011.

	March 31, 2012

			Unpaid Principal		Associated		Average
	Carrying Amount		Balance		Allowance		Balance
With no specific allowance recorded:
Commercial Real Estate	$	-	$	-	$	-
Construction and Land Development		-		-		-
Multi-Family Real Esate		-		-		-
1-4 Family Residential Real Estate		4,153,069		4,153,069		-
Consumer		273,721		273,721		-
With an allowance recorded:
Commercial Real Estate		8,393,925		8,393,925		897,850
Construction and Land Development		1,652,254		1,652,254		202,000
Multi-Family Real Esate		-		-		-
1-4 Family Residential Real Estate		920,226		920,226		177,929
Consumer		124,162		124,162		64,450
Total:
Commercial Real Estate		8,393,925		8,393,925		897,850	$	8,403,139
Construction and Land Development		1,652,254		1,652,254		202,000		1,690,426
Multi-Family Real Esate		-		-		-		-
1-4 Family Residential Real Estate		5,073,295		5,073,295		177,929		4,803,098
Consumer		397,883		397,883		64,450		438,252
	$	15,517,357	$	15,517,357	$	1,342,229	$	15,334,915


	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 Esate		-		-		-
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 Esate		-		-		-
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 Esate		-		-		-		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

Interest income recognized on impaired loans was approximately $184,000 and $200,000 for the three months ended March 31, 2012 and 2011, 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 Company through its banking subsidiary 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 Company 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 Company 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 TDRs 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 table summarizes the recorded investment in loan segments by credit quality indicator as of March 31, 2012 and December 31, 2011. Past due status is reported as of March 31, 2012 and December 31, 2011. Internal classification ratings reflect the most recent classification assigned generally based on an annual review.

Commercial Loans
Credit risk profile by internally assigned grade

	March 31, 2012								December 31, 2011
	Commercial		Construction and		Multi-Family				Commercial		Construction and		Multi-Family
	Real Estate		Land Development		Real Estate		Total		Real Estate		Land Development		Real Estate		Total
Grade:
Pass	$	56,730,750	$	274,568	$	43,947,518	$	100,952,836	$	52,737,956	$	275,625	$	45,239,400	$	98,252,981
Watch		6,936,355		-		3,502,665		10,439,020		6,162,741		-		3,416,851		9,579,592
Special Mention		5,008,889		-		-		5,008,889		-		-		-		-
Substandard		1,984,049		1,450,254		-		3,434,303		7,682,981		1,633,950		-		9,316,931
Doubtful		596,850		202,000		-		798,850		738,650		202,000		-		940,650
	$	71,256,893	$	1,926,822	$	47,450,183	$	120,633,898	$	67,322,328	$	2,111,575	$	48,656,251	$	118,090,154


Residential Real Estate and Consumer Loans
Credit risk profile based on delinquency status

	March 31, 2012								December 31, 2011
	1-4 Family								1-4 Family
	Residential		Second		Other Consumer				Residential		Second		Other Consumer
	Real Estate		Mortgage		Loans		Total		Real Estate		Mortgage		Loans		Total
Current	$	138,908,965	$	41,344,535	$	16,726,304	$	196,979,804	$	136,573,437	$	43,582,655	$	17,201,581	$	197,357,673
Past due 30-89 days		453,680		41,587		87,699		582,966		921,298		117,620		233,208		1,272,126
Past due 90 days and greater		1,298,323		66,818		74,936		1,440,077		1,086,484		197,604		60,593		1,344,681
	$	140,660,968	$	41,452,940	$	16,888,939	$	199,002,847	$	138,581,219	$	43,897,879	$	17,495,382	$	199,974,480

An aging analysis of the recorded investment in loans by segment at March 31, 2012 and December 31, 2011 is summarized as follows.

	30-89 Days		90 Days Past Due
	Past Due		and Greater		Total Past Due		Current		Total
March 31, 2012
Commercial Loans:
Commercial Real Estate	$	-	$	1,364,250	$	1,364,250	$	69,892,643	$	71,256,893
Construction and Land Development		-		1,132,119		1,132,119		794,703		1,926,822
Multi-Family Real Estate		-		-		-		47,450,183		47,450,183
1-4 Family Residential Real Estate		453,680		1,298,323		1,752,003		138,908,965		140,660,968
Consumer:
Second mortgage		41,587		66,818		108,405		41,344,535		41,452,940
Other consumer loans		87,699		74,936		162,635		16,726,304		16,888,939
	$	582,966	$	3,936,446	$	4,519,412	$	315,117,333	$	319,636,745

December 31, 2011
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

Nonaccrual loans at March 31, 2012 and December 31, 2011 by segment are summarized below:

	March 31, 2012		December 31, 2011
Commercial Loans:
Commercial Real Estate	$	1,508,299	$	1,511,299
Construction and Land Development		1,652,254		1,835,950
Multi-Family Real Estate		-		-
1-4 Family Residential Real Estate		1,570,293		1,086,485
Consumer:
Second mortgage		66,818		197,603
Other consumer loans		74,936		60,593
	$	4,872,600	$	4,691,930

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 during the three months ended March 31, 2012:

	Three Months Ended March 31, 2012
	Number of Loans		Pre-restructuring Outstanding Recorded Investment		Post-restructuring Outstanding Recorded Investment
Troubled debt restructurings:
Commercial Real Estate		-	$	-	$	-
Construction and Land Development		-		-		-
Multi-Family Real Estate		-		-		-
1-4 Family Residential Real Estate		4		189,740		193,464
Consumer		1		25,982		25,982
Total:		5	$	215,722	$	219,446

The TDRs described above have not had a material impact on the allowance for loan losses. The majority of these TDRs were a result of changes in interest rates and accounted for approximately 80% 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.

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 March 31, 2012, loans that were restructured within the last 12 months that have subsequently defaulted during the reported period:


	March 31, 2012
	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		3		191,531
Consumer		2		31,434
Total:		6	$	926,796