10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2012

Commission file number 000-29599

PATRIOT NATIONAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

Connecticut 06-1559137

(State of incorporation) (I.R.S. Employer Identification Number)

900 Bedford Street, Stamford, Connecticut 06901

(Address of principal executive offices)

(203) 324-7500

(Registrant’s telephone number)

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  ¨

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  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes  ¨    No  x

State the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date.

Common stock, $0.01 par value per share, 38,467,073 shares outstanding as of the close of business July 31, 2012.

Table of Contents

	Page
Part I        FINANCIAL INFORMATION
Item 1.     Consolidated Financial Statements		3
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations		45
Item 3.     Quantitative and Qualitative Disclosures about Market Risk		61
Item 4.     Controls and Procedures		62
Part II      OTHER INFORMATION
Item 1.     Legal Proceedings		63
Item 1A.  Risk Factors		63
Item 6.     Exhibits		63

2

PART I—FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Cash and due from banks:
Noninterest bearing deposits and cash	$	3,720,985		$	4,241,552
Interest bearing deposits		58,456,392			50,474,257
Short-term investments		710,157			709,567
Total cash and cash equivalents		62,887,534			55,425,376
Securities:
Available for sale securities, at fair value (Note 2)		56,342,630			66,469,972
Other Investments		3,500,000			3,500,000
Federal Reserve Bank stock, at cost		1,719,550			1,707,000
Federal Home Loan Bank stock, at cost		4,343,800			4,508,300
Total securities		65,905,980			76,185,272
Loans receivable (net of allowance for loan losses: 2012: $6,673,648 2011: $9,384,672) (Note 3)		483,858,072			501,227,297
Loans held for sale		—			250,000
Accrued interest and dividends receivable		2,289,346			2,453,179
Premises and equipment, net		4,712,520			4,108,318
Cash surrender value of life insurance		21,247,568			20,984,604
Other real estate owned		1,517,755			2,762,640
Deferred tax asset (Note 6)		—			—
Other assets		1,848,344			2,419,592
Total assets	$	644,267,119		$	665,816,278
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits (Note 4):
Noninterest bearing deposits	$	71,722,494		$	65,613,374
Interest bearing deposits		450,373,261			479,296,019
Total deposits		522,095,755			544,909,393
Borrowings:
Repurchase agreements		7,000,000			7,000,000
Federal Home Loan Bank borrowings		50,000,000			50,000,000
Total borrowings		57,000,000			57,000,000
Junior subordinated debt owed to unconsolidated trust		8,248,000			8,248,000
Accrued expenses and other liabilities		5,164,509			5,109,225
Total liabilities		592,508,264			615,266,618
Commitments (Note 9)
Shareholders’ equity
Preferred stock, no par value; 1,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.01 par value, 100,000,000 shares authorized; 2012: 38,478,778 shares issued; 38,467,073 shares outstanding. 2011: 38,374,432 shares issued; 38,362,727, shares outstanding		384,787			383,744
Additional paid-in capital		105,182,518			105,050,433
Accumulated deficit		(53,968,019	)		(54,858,831	)
Less: Treasury stock, at cost: 2012 and 2011 11,705 shares		(160,025	)		(160,025	)
Accumulated other comprehensive income		319,594			134,339
Total shareholders’ equity		51,758,855			50,549,660
Total liabilities and shareholders’ equity	$	644,267,119		$	665,816,278

See Accompanying Notes to Consolidated Financial Statements.

3

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Interest and Dividend Income
Interest and fees on loans	$	5,811,733		$	6,538,593		$	12,477,525		$	13,495,154
Interest on investment securities		426,658			486,738			903,688			760,921
Dividends on investment securities		31,879			80,728			65,160			150,629
Interest on federal funds sold		—			2,385			—			6,411
Other interest income		40,160			58,363			50,638			120,253
Total interest and dividend income		6,310,430			7,166,807			13,497,011			14,533,368
Interest Expense
Interest on deposits		1,421,170			1,553,745			2,938,014			3,419,094
Interest on Federal Home Loan Bank borrowings		354,591			423,529			711,428			842,404
Interest on subordinated debt		74,677			71,219			151,244			141,617
Interest on other borrowings		76,927			76,927			153,853			153,009
Total interest expense		1,927,365			2,125,420			3,954,539			4,556,124
Net interest income		4,383,065			5,041,387			9,542,472			9,977,244
								—
Provision for Loan Losses		(1,713,425	)		1,482,798			(2,558,827	)		8,464,427
Net interest income after provision for loan losses		6,096,490			3,558,589			12,101,299			1,512,817
Non-interest Income
Mortgage brokerage referral fees		22,117			1,610			34,537			14,610
Loan application, inspection & processing fees		15,986			23,966			30,713			40,765
Deposit fees and service charges		227,064			248,039			455,732			528,940
Gain on sale of loans		—			79,729			263,646			79,729
Loss on sale of investment securities		—			—			(8,042	)
Earnings on cash surrender value of life insurance		120,294			152,985			262,963			321,245
Other income		69,639			203,984			165,548			307,874
Total non-interest income		455,100			710,313			1,205,097			1,293,163
Non-interest Expense
Salaries and benefits		2,725,721			3,189,311			5,616,445			6,403,826
Occupancy and equipment expense		1,135,113			1,291,826			2,258,697			2,646,393
Data processing		345,704			336,005			691,725			663,809
Advertising and promotional expense		8,234			271,781			25,963			429,755
Professional and other outside services		854,268			1,234,958			1,469,350			2,116,665
Loan administration and processing expense		45,624			48,159			53,904			85,218
Regulatory assessments		462,153			628,476			872,154			1,239,744
Insurance expense		108,775			228,637			278,020			459,411
Other real estate operations		16,351			774,450			(133,896	)		1,044,957
Material and communications		132,734			164,115			263,912			364,253
Restructuring charges and asset disposals (Note 12)		126,730			2,986,441			495,207			2,986,441
Other operating expense		244,901			290,111			524,103			523,474
Total non-interest expense		6,206,308			11,444,270			12,415,584			18,963,946
Income (loss) before income taxes		345,282			(7,175,368	)		890,812			(16,157,966	)
Provision for Income Taxes		—			—			—			—
Net income (loss)	$	345,282		$	(7,175,368	)	$	890,812		$	(16,157,966	)
Basic and diluted income (loss) per share (Note 7)	$	0.01		$	(0.19	)	$	0.02		$	(0.42	)

See Accompanying Notes to Consolidated Financial Statements.

4

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012			2011
Net income (loss)	$	345,282	$	(7,175,368	)	$	890,812		$	(16,157,966	)
Other comprehensive income:
Unrealized holding gains on securities, net of taxes:
Unrealized holding gains arising during the period		122,856		247,521			190,241			250,746
Less reclassification adjustment for losses included in net income		—		—			(4,986	)		—
Total		122,856		247,521			185,255			250,746
Comprehensive income (loss)	$	468,138	$	(6,927,847	)	$	1,076,067		$	(15,907,220	)

See Accompanying Notes to Consolidated Financial Statements.

5

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

	Number of Shares		Common Stock		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income		Total
Six months ended June 30, 2011
Balance at December 31, 2010		38,362,727	$	383,744	$	105,050,433		$	(39,399,345	)	$	(160,025	)	$	1,297,381	$	67,172,188
Comprehensive loss
Net loss		—		—		—			(16,157,966	)		—			—		(16,157,966	)
Unrealized holding gain on available for sale securities, net of taxes		—		—		—			—			—			250,746		250,746
Total comprehensive loss																	(15,907,220	)
Balance, June 30, 2011		38,362,727	$	383,744	$	105,050,433		$	(55,557,311	)	$	(160,025	)	$	1,548,127	$	51,264,968
Six months ended June 30, 2012
Balance at December 31, 2011		38,362,727	$	383,744	$	105,050,433		$	(54,858,831	)	$	(160,025	)	$	134,339	$	50,549,660
Comprehensive income
Net income		—		—		—			890,812			—			—		890,812
Unrealized holding gain on available for sale securities, net of taxes		—		—		—			—			—			185,255		185,255
Total comprehensive income																	1,076,067
Share-based compensation expense						133,128											133,128
Issuance of restricted stock		104,346		1,043		(1,043	)										—
Balance, June 30, 2012		38,467,073	$	384,787	$	105,182,518		$	(53,968,019	)	$	(160,025	)	$	319,594	$	51,758,855

See Accompanying Notes to Consolidated Financial Statements.

6

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Cash Flows from Operating Activities:
Net income (loss)	$	890,812		$	(16,157,966	)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Restructuring charges and asset disposals		(5,049	)		1,996,441
Amortization and accretion of investment premiums and discounts, net		213,178			116,431
Amortization and accretion of purchase loan premiums and discounts, net		7,272			5,028
Provision for loan losses		(2,558,827	)		8,464,427
Gain on sale of loans		(263,646	)		(79,729	)
Loss on sale of investment securities		8,042			—
Amortization of core deposit intangible		6,963			7,506
Earnings on cash surrender value of life insurance		(262,964	)		(321,245	)
Depreciation and amortization		606,350			684,904
(Gain) loss on sale of other real estate owned		(201,355	)		58,215
Impairment writedown on other real estate owned		—			165,764
Share-based compensation		133,128			—
Changes in assets and liabilities:
Decrease in deferred loan costs		36,089			100,958
Decrease in accrued interest and dividends receivable		163,833			182,723
Decrease in other assets		564,285			6,717,760
(Decrease) increase in accrued expenses and other liabilities		(61,423	)		457,203
Net cash (used in) provided by operating activities		(723,312	)		2,398,420
Cash Flows from Investing Activities:
Principal repayments on available for sale securities		5,039,296			3,976,411
Proceeds from the sale (purchases) of available for sale securities		5,165,626			(51,995,480	)
Redemptions of Federal Reserve Bank Stock		—			455,500
Purchases of Federal Reserve Bank Stock		(12,550	)		(1,174,100	)
Proceeds from repurchase of excess Federal Home Loan Bank Stock		164,500			—
Proceeds from sale of loans		67,126,928			55,089,794
Net (increase) decrease in loans		(47,966,735	)		16,308,380
Purchase of other real estate owned		—			(481,165	)
Proceeds from sale of other real estate owned		1,823,435			15,715,973
Capital improvements of other real estate owned		(89,051	)		—
Purchase of bank premises and equipment		(252,341	)		(218,522	)
Net cash provided by investing activities		30,999,108			37,676,791
Cash Flows from Financing Activities:
Net increase (decrease) in demand, savings and money market deposits		7,813,928			(9,443,954	)
Net decrease in time certificates of deposits		(30,627,566	)		(112,860,038	)
Net cash used in financing activities		(22,813,638	)		(122,303,992	)
Net increase in cash and cash equivalents		7,462,158			(82,228,781	)
Cash and Cash Equivalents:
Beginning		55,425,376			146,777,658
Ending	$	62,887,534		$	64,548,877

7

PATRIOT NATIONAL BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

(Unaudited)

	Six Months Ended June 30,
	2012		2011
Supplemental Disclosures of Cash Flow Information
Interest paid	$	3,807,140	$	4,432,799
Income taxes paid	$	—	$	10,534
Supplemental disclosures of noncash operating, investing and financing activities:
Unrealized holding gain on available for sale securities arising during the period	$	306,842	$	459,133
Transfer of loans to other real estate owned	$	1,238,144	$	2,661,330
Transfer of other real estate owned to premises and equipment	$	950,000	$	—

See Accompanying Notes to Consolidated Financial Statements.

8

PATRIOT NATIONAL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1: Basis of Financial Statement Presentation

The Consolidated Balance Sheet at December 31, 2011 has been derived from the audited financial statements of Patriot National Bancorp, Inc. (“Bancorp” or “the Company”) at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The accompanying unaudited financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited financial statements of Bancorp and notes thereto for the year ended December 31, 2011.

The information furnished reflects, in the opinion of management, all normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results of operations that may be expected for the remainder of 2012.

Note 2: Investment Securities

The amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities at June 30, 2012 and December 31, 2011 are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2012:
U. S. Government agency bonds	$	5,000,000	$	16,920	$	—		$	5,016,920
U. S. Government agency mortgage-backed securities		38,624,381		1,020,326		(1,942	)		39,642,765
Corporate bonds		12,202,773		8,553		(528,381	)		11,682,945
	$	55,827,154	$	1,045,799	$	(530,323	)	$	56,342,630
December 31, 2011:
U. S. Government agency bonds	$	5,000,000	$	37,085	$	—		$	5,037,085
U. S. Government agency mortgage-backed securities		49,004,232		1,051,097		(5,900	)		50,049,429
Corporate bonds		12,249,064		25,338		(890,944	)		11,383,458
	$	66,253,296	$	1,113,520	$	(896,844	)	$	66,469,972

9

The following table presents the gross unrealized loss and fair value of Bancorp’s available-for-sale securities, aggregated by the length of time the individual securities have been in a continuous loss position, at June 30, 2012 and December 31, 2011:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2012:
U. S. Government mortgage - backed securities	$	67,729	$	(160	)	$	285,040	$	(1,782	)	$	352,769	$	(1,942	)
Corporate bonds		5,814,060		(185,940	)		2,657,559		(342,441	)		8,471,619		(528,381	)
Totals	$	5,881,789	$	(186,100	)	$	2,942,599	$	(344,223	)	$	8,824,388	$	(530,323	)
December 31, 2011:
U. S. Government mortgage - backed securities	$	4,941,662	$	(5,492	)	$	68,309	$	(408	)	$	5,009,971	$	(5,900	)
Corporate bonds		8,358,120		(890,944	)		—		—			8,358,120		(890,944	)
Totals	$	13,299,782	$	(896,436	)	$	68,309	$	(408	)	$	13,368,091	$	(896,844	)

At June 30, 2012, eight securities had unrealized holding losses with aggregate depreciation of 5.7% from the amortized cost. At December 31, 2011, nine securities had unrealized losses with aggregate depreciation of 6.3% from the amortized cost.

Bancorp performs a quarterly analysis of those securities that are in an unrealized loss position to determine if those losses qualify as other-than-temporary impairments. This analysis considers the following criteria in its determination: the ability of the issuer to meet its obligations, an impairment due to a deterioration in credit, management’s plans and ability to maintain its investment in the security, the length of time and the amount by which the security has been in a loss position, the interest rate environment, the general economic environment and prospects or projections for improvement or deterioration.

Management believes that none of the unrealized losses on available-for-sale securities noted above are other than temporary due to the fact that they relate to market interest rate changes on corporate debt and mortgage-backed securities issued by U.S. Government agencies. Management considers the issuers of the securities to be financially sound, the corporate bonds are investment grade and the Company expects to receive all contractual principal and interest related to these investments. Because the Company does not intend to sell the investments, and it is not more-likely-than-not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2012.

The amortized cost and fair value of available-for-sale debt securities at June 30, 2012 by contractual maturity are presented below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be prepaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary:

10

	Amortized Cost		Fair Value
Maturity:
Over 10 years	$	—	$	—
Corporate bonds < 5 years		3,202,773		3,211,326
Corporate bonds 5 to 10 years		9,000,000		8,471,619
U.S. Government bonds 5 to 10 years		5,000,000		5,016,920
Mortgage-backed securities		38,624,381		39,642,765
Total	$	55,827,154	$	56,342,630

Note 3: Loans Receivable and Allowance for Loan Losses

A summary of the Company’s loan portfolio at June 30, 2012 and December 31, 2011 is as follows:

	June 30, 2012			December 31, 2011
Real Estate
Commercial	$	237,217,702		$	215,659,837
Residential		149,905,067			188,108,855
Construction		6,217,516			12,306,922
Construction to permanent		8,287,915			10,012,022
Commercial		32,379,945			31,810,735
Consumer home equity		53,587,509			49,694,546
Consumer installment		2,125,347			2,164,972
Total Loans		489,721,001			509,757,889
Premiums on purchased loans		223,853			231,125
Net deferred costs		586,866			622,955
Allowance for loan losses		(6,673,648	)		(9,384,672	)
Loans receivable, net	$	483,858,072		$	501,227,297

On March 29, 2012, the Bank completed the sale of $66.4 million of residential loans consummated for a cash purchase price of $66.7 million, which represented 101% of the Bank’s net book value for these assets.

11

The changes in the allowance for loan losses for the periods shown are as follows:

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Balance, beginning of period	$	8,460,943		$	12,208,476		$	9,384,672		$	15,374,101
Provision for loan losses		(1,713,425	)		1,482,798			(2,558,827	)		8,464,427
Loans charged-off		(90,739	)		(3,034,591	)		(193,223	)		(7,188,138	)
Recoveries of loans previously charged-off		16,869			743,044			41,026			763,650
Transferred to loans held-for-sale		—			—			—			(6,014,313	)
Balance, end of period	$	6,673,648		$	11,399,727		$	6,673,648		$	11,399,727

At June 30, 2012 and December 31, 2011, the unpaid balances of loans 90 days or more past maturity, and still accruing interest were $4,234,926 and $9,461,106, respectively. All of the borrowers of said loans at June 30, 2012 continue to make interest payments, but are past maturity where payoff is pending or are in the process of being renewed.

The unpaid principal balances of loans on nonaccrual status and considered impaired were $17.5 million at June 30, 2012 and $20.7 million at December 31, 2011.

If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $274,000 of additional income during the quarter ended June 30, 2012 and $0.5 million during the quarter ended June 30, 2011. If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $584,000 of additional income for the six months ended June 30, 2012 and $1.5 million for the six months ended June 30, 2011.

For the three months ended June 30, 2012 and 2011, the interest collected and recognized as income on impaired loans, which includes non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded, was approximately $0 and $30,000, respectively. For the six months ended June 30, 2012 and 2011, the interest income collected and recognized on impaired loans was approximately $180,000 and $461,000 respectively. The average recorded investment in impaired loans for the three and six months ended June 30, 2012 was $34.0 million and $34.1 million respectively.

At June 30, 2012, there were ten loans totaling $22.9 million that were considered “troubled debt restructurings,” as compared to December 31, 2011 when there were twelve loans totaling $25.5 million, all of which were included in impaired loans. At June 30, 2012, six of the ten loans aggregating $16.0 million were accruing loans and four loans aggregating $6.8 million were non-accruing loans.

The Company’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County, New York City and Long Island, New York. The Company originates commercial real estate loans, commercial business loans and a variety of consumer loans. In addition, the Company had originated loans for the construction of residential homes, residential developments and for land development projects. A moratorium on all new speculative construction loans was instituted by management in July 2008. All residential and commercial mortgage loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent to some degree on the status of the regional economy as well as upon the regional real estate market. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.

12

The Company has established credit policies applicable to each type of lending activity in which it engages, evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 75% of the market value of the collateral for commercial real estate at the date of the credit extension depending on the Company’s evaluation of the borrowers’ creditworthiness and type of collateral and up to 80% for residential 1-4 family real estate. In the case of construction loans, the maximum loan-to-value was 65% of the “as completed” market value. The market value of collateral is monitored on an ongoing basis and additional collateral is obtained when warranted. Real estate is the primary form of collateral. Other important forms of collateral are accounts receivable, inventory, other business assets, marketable securities and time deposits. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower’s ability to generate continuing cash flows on all loans not related to construction.

Risk characteristics of the Company’s portfolio classes include the following:

Commercial Real Estate Loans – In underwriting commercial real estate loans, the Company evaluates both the prospective borrower’s ability to make timely payments on the loan and the value of the property securing the loans. Repayment of such loans may be negatively impacted should the borrower default or should there be a substantial decline in the value of the property securing the loan or a decline in the general economic conditions. Where the owner occupies the property, the Company also evaluates the business’s ability to repay the loan on a timely basis. In addition, the Company may require personal guarantees, lease assignments and/or the guarantee of the operating company when the property is owner occupied. These types of loans may involve some additional risks than in investor owned commercial real estate lending, because payments on such loans are dependent upon the successful operation of the business involved, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions affecting the borrowers’ businesses.

Construction Loans – Construction loans are short-term loans (generally up to 18 months) secured by land for both residential and commercial development. The loans are generally made for acquisition and improvements. Funds are disbursed as phases of construction are completed.

In the past, the Company funded construction of single family homes, when no contract of sale existed, based upon the experience of the builder, the financial strength of the owner, the type and location of the property and other factors. Construction loans are generally personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by the builders’ inability to complete construction, by a downturn in the new construction market, by a significant increase in interest rates or by a decline in general economic conditions. The Company has had a moratorium in place since mid-2008 on new speculative construction loans.

Residential Real Estate Loans – Various loans secured by residential real estate properties are offered by the Company, including 1-4 family residential mortgages, multi-family residential loans and a variety of home equity line of credit products. Repayment of such loans may be negatively impacted should the borrower default, should there be a significant decline in the value of the property securing the loan or should there be a decline in general economic conditions.

Commercial and Industrial Loans – The Company’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are usually made to finance the purchase of inventory, new or used equipment or other short or long-term working capital purposes. These loans are generally secured by corporate assets, often with real estate as secondary collateral, but are also occasionally offered on an unsecured basis. In granting this type of loan, the Company primarily looks to the borrower’s cash flow as the source of repayment with collateral and personal guarantees, where obtained, as a secondary source. Commercial loans are often larger and may involve greater risks than other types of loans offered by the Company. Payments on such loans are often dependent upon the successful operation of the underlying business involved and, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions, management’s inability to effectively manage the business, claims of others against the borrower’s assets which may take priority over the Company’s claims against assets, death or disability of the borrower or loss of market for the borrower’s products or services.

13

Other Loans – The Company also offers installment loans and reserve lines of credit to individuals. Repayments of such loans are often dependent on the personal income of the borrower which may be negatively impacted by adverse changes in economic conditions. The Company does not place an emphasis on originating these types of loans.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.

14

The following table sets forth activity in our allowance for loan losses, by loan type, for the three months ended June 30, 2012. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

Three months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1,094,736		$	4,645,248		$	842,636		$	236,313		$	1,049,555		$	413,724		$	178,731		$	8,460,943
Charge-offs		(44,471	)		—			—			—			(32,150	)		(14,118	)		—			(90,739	)
Recoveries		1,500			14,988			—			—			—			381			—			16,869
Provision		(316,423	)		(877,846	)		(592,125	)		(114,863	)		192,498			103,345			(108,011	)		(1,713,425	)
Ending Balance	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—		$	500,538
Ending balance: collectively evaluated for impairment	$	698,012		$	3,642,539		$	218,991		$	11,405		$	1,179,612		$	351,831		$	70,720		$	6,173,110
Total Allowance for Loan Losses	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—		$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—		$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—		$	455,030,951

15

The following table sets forth activity in our allowance for loan losses, by loan type, for the six months ended June 30, 2012. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

Six months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	882,062		$	4,018,746		$	867,159		$	547,333		$	2,550,588		$	458,762		$	60,022	$	9,384,672
Charge-offs		(44,471	)		(49,922	)		—			—			(84,711	)		(14,119	)		—		(193,223	)
Recoveries		2,500			36,976			—			—			—			1,550			—		41,026
Provision		(104,751	)		(223,410	)		(616,648	)		(425,883	)		(1,255,972	)		57,139			10,698		(2,558,827	)
Ending Balance	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—	$	500,538
Ending balance: collectively evaluated for impairment	$	698,010		$	3,642,539		$	218,991		$	11,405		$	1,179,614		$	351,831		$	70,720	$	6,173,110
Total Allowance for Loan Losses	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—	$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—	$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—	$	455,030,951

16

The Company monitors the credit quality of its loans receivable in an ongoing manner. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that internally assigned risk ratings and loan-to-value ratios (“LTVs”), at period end, are the key credit quality indicators that best help management monitor the credit quality of the Company’s loans receivable. Loan-to-value ratios used by management in monitoring credit quality are based on current period loan balances and original values at time of originations (unless a current appraisal has been obtained as a result of the loan being deemed impaired or the loan is a maturing construction loan).

Appraisals on properties securing impaired loans and Other Real Estate Owned (“OREO”) are updated annually. Additionally, appraisals on construction loans are updated four months in advance of scheduled maturity dates. We update our impairment analysis monthly based on the most recent appraisal as well as other factors (such as senior lien positions, e.g. property taxes). We are subscribers to a national real estate valuation database service and use published information regarding home sales prices in the towns/counties where our collateral is located in CT and NY.

The majority of the Company’s impaired loans have been resolved through courses of action other than via bank liquidations of real estate collateral through OREO. These include normal loan payoffs, the traditional workout process, triggering personal guarantee obligations, and troubled debt restructurings. However, as loan workout efforts progress to a point where the bank’s liquidation of real estate collateral is the likely outcome, the impairment analysis is updated to reflect recent actual experience with bank sales of OREO properties.

A disposition discount is built into our impairment analysis and reflected in our allowance once a property is determined to be a likely OREO (e.g. foreclosure is probable). To determine the discount, we compare the actual sales prices of our OREO properties to the appraised value that was obtained as of the date when we took title to the property. The difference is the bank-owned disposition discount.

The Company has a risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign an Obligor and a Facility risk rating to each loan in their portfolio at origination, which is ratified or modified by the Committee to which the loan is submitted for approval. When the lender learns of important financial developments, the risk rating is reviewed accordingly, and adjusted if necessary. All loans are reviewed annually. Similarly, the Loan Committee can adjust a risk rating.

In addition, the Company engages a third party independent loan reviewer that performs quarterly reviews of a sample of loans, validating the Bank’s risk ratings assigned to such loans. The risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses. Any upgrades to criticized loans must be approved by the Board Loan Committee.

When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven-point risk rating system.

An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories. An asset is considered “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the “distinct possibility” that the Company 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.”

As of this quarter, the Bank implemented enhancements to the allowance methodology, resulting in a reduction of the allowance for loan losses of $1.1 million. In making this transition, the changes serve to update and enhance the methodology to reflect the direction of the current loan portfolio. The changes are threefold:

• First, the Bank adopted a two year, instead of a three year, weighted average historical loss factor as the basis for the calculation of its historical loss experience. This is used to calculate expected losses in the Accounting Standards Codification (“ASC”) (Topic 450-20), “Loss Contingencies” pools prior to the application of qualitative risk adjustment factors. This change was made to be more responsive to the changing credit environment. Net charge-offs have declined, especially in 2012 when they averaged $76,000 per quarter. This shorter average historical loss period will produce results more indicative of the current and expected behavior of the portfolio.

• Second, the Bank adopted an Internal Risk Ratings Based (IRB) approach to calculating historical loss rates. This approach calibrates expected losses with actual risk assessment and equates the likelihood of loss to the level of risk in a credit facility rating. Previously, loss history was applied to categories of loans and qualitative adjustments were apportioned by risk rating within the categories.

• Third, the Bank increased the detail of analysis within the segments, particularly within Commercial Real Estate lending, which is currently the Bank’s largest concentration overall, by expanding the number of ASC 450-20 pools. In all, ten sub-concentrations have been added to the analysis. The greater level of detail enables the Bank to better apply qualitative risk adjustment factors to the segments affected and to monitor changes in credit risk within the portfolio.

17

Charge-off generally commences in the month that the loan is classified “doubtful” and is fully charged off within six months of such classification. If the account is classified “loss” the full balance is charged off immediately. The full balance is charged off regardless of the potential recovery from the sale of the collateral. This amount is recognized as a recovery once the collateral is sold.

In accordance with FFIEC (“Federal Financial Institutions Examination Council”) published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are charged-off when 180 days delinquent and “Closed-end” credits are charged-off when 120 days delinquent. Typically, consumer installment loans are charged off no later than 90 days past due.

18

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at June 30, 2012:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	24,850,034	$	1,456,449	$	176,063,752	$	9,310,101	$	—	$	—	$	2,095,269	$	—	$	100,682,616	$	26,642,690	$	49,265,371	$	1,519,501	$	699,679	$	392,585,462
Special Mention		369,025		170,214		14,315,821		5,683,817		3,135,953		—		—		—		5,313,385		—		99,532		2,711,032		—		31,798,779
Substandard & Doubtful		4,611,015		923,208		18,170,351		13,673,860		1,219,528		1,862,035		—		6,192,646		5,197,208		12,069,168		—		1,417,741		—		65,336,760
	$	29,830,074	$	2,549,871	$	208,549,924	$	28,667,778	$	4,355,481	$	1,862,035	$	2,095,269	$	6,192,646	$	111,193,209	$	38,711,858	$	49,364,903	$	5,648,274	$	699,679	$	489,721,001

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	32,188,570	$	229,248,655	$	3,135,953	$	7,000,270	$	145,976,052	$	54,719,115	$	472,268,615
Non Performing		191,375		7,969,047		3,081,563		1,287,645		3,929,015		993,741		17,452,386
Total	$	32,379,945	$	237,217,702	$	6,217,516	$	8,287,915	$	149,905,067	$	55,712,856	$	489,721,001

19

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at December 31, 2011:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	23,822,200	$	1,737,893	$	151,392,526	$	11,680,310	$	—	$	—	$	903,035	$	—	$	129,132,494	$	34,895,858	$	44,969,963	$	1,531,223	$	636,863	$	400,702,365
Special Mention		1,544,420		170,575		22,426,235		4,585,523		9,210,344		—		—		—		5,316,201		2,400,000		274,365		3,029,362		—		48,957,025
Substandard & Doubtful		4,480,440		55,207		15,981,747		9,593,496		1,243,579		1,852,999		—		9,108,987		3,587,607		12,776,695		—		1,417,742		—		60,098,499
	$	29,847,060	$	1,963,675	$	189,800,508	$	25,859,329	$	10,453,923	$	1,852,999	$	903,035	$	9,108,987	$	138,036,302	$	50,072,553	$	45,244,328	$	5,978,327	$	636,863	$	509,757,889

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	31,521,175	$	206,322,032	$	10,928,343	$	5,808,035	$	183,629,363	$	50,865,776	$	489,074,724
Non Performing		289,560		9,337,805		1,378,579		4,203,987		4,479,492		993,742		20,683,165
Total	$	31,810,735	$	215,659,837	$	12,306,922	$	10,012,022	$	188,108,855	$	51,859,518	$	509,757,889

20

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded balance of these non-accrual loans was $17.5 million and $20.7 million at June 30, 2012, and December 31, 2011 respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, or earlier if deemed appropriate, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status. Additionally, certain loans that cannot demonstrate sufficient global cash flow to continue loan payments in the future and certain troubled debt restructures (TDRs) are placed on non-accrual status.

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at June 30, 2012:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Substandard		—		—		191,375		191,375		—		448,000		639,375
Total Commercial	$	—	$	—	$	191,375	$	191,375	$	—	$	448,000	$	639,375
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		—		304,388		304,388
Substandard	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,482,538	$	11,451,585
Total Commercial Real Estate	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,786,926	$	11,755,973
Construction
Substandard	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Total Construction	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Residential Real Estate
Substandard	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Total Residential Real Estate	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Consumer
Substandard	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total Consumer	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total	$	—	$	371,920	$	12,413,233	$	12,785,153	$	4,667,233	$	4,234,926	$	21,687,312

21

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2011:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2011	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Special Mention	$	—	$	—	$	—	$	—	$	—	$	44,296	$	44,296
Substandard		—		—		289,560		289,560		—		947,847		1,237,407
Total Commercial	$	—	$	—	$	289,560	$	289,560	$	—	$	992,143	$	1,281,703
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	402,663	$	402,663
Special Mention		—		—		—		—		—		2,832,452		2,832,452
Substandard	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	3,515,848	$	12,853,653
Total Commercial Real Estate	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	6,750,963	$	16,088,768
Construction
Substandard	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Total Construction	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Residential Real Estate
Substandard	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Total Residential Real Estate	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Consumer
Substandard	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total Consumer	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total	$	—	$	443,259	$	12,568,524	$	13,011,783	$	7,671,382	$	9,461,105	$	30,144,270

These non-accrual and past due amounts included loans deemed to be impaired of $17.5 million and $20.7 million at June 30, 2012, and December 31, 2011, respectively. Loans past due and still accruing interest were $4.2 million and $9.5 million at June 30, 2012, and December 31, 2011 respectively, and consisted of seven loans at June 30, 2012. All of the borrowers of said loans at June 30, 2012 continue to make interest payments, but are past maturity where payoff is pending or are in the process of being renewed.

22

The following table sets forth the detail and delinquency status of loans receivable, by performing and non-performing loans at June 30, 2012.

	Performing (Accruing) Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	—	$	298,000	$	—	$	298,000	$	26,008,483	$	26,306,483	$	—	$	26,306,483
Special Mention		—		—		—		—		539,239		539,239		—		539,239
Substandard		—		500,000		—		500,000		4,394,848		4,894,848		639,375		5,534,223
Total Commercial	$	—	$	798,000	$	—	$	798,000	$	30,942,570	$	31,740,570	$	639,375	$	32,379,945
Commercial Real Estate
Pass	$	3,990,000	$	—	$	—	$	3,990,000	$	181,383,853	$	185,373,853	$	—	$	185,373,853
Special Mention		—		—		—		—		19,695,250		19,695,250		304,388		19,999,638
Substandard		394,137		—		1,907,661		2,301,798		18,090,828		20,392,626		11,451,585		31,844,211
Total Commercial Real Estate	$	4,384,137	$	—	$	1,907,661	$	6,291,798	$	219,169,931	$	225,461,729	$	11,755,973	$	237,217,702
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		3,135,953		3,135,953		—		3,135,953
Substandard		—		—		—		—		—		—		3,081,563		3,081,563
Total Construction	$	—	$	—	$	—	$	—	$	3,135,953	$	3,135,953	$	3,081,563	$	6,217,516
Construction to Permanent
Pass	$	—	$	—	$	—	$	—	$	2,095,269	$	2,095,269	$	—	$	2,095,269
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		4,905,002		4,905,002		1,287,644		6,192,646
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	7,000,271	$	7,000,271	$	1,287,644	$	8,287,915
Residential Real Estate
Pass	$	—	$	—	$	—	$	—	$	127,325,306	$	127,325,306	$	—	$	127,325,306
Special Mention		—		—		—		—		5,313,385		5,313,385		—		5,313,385
Substandard		1,638,262		—		—		1,638,262		11,699,099		13,337,361		3,929,015		17,266,376
Total Residential Real Estate	$	1,638,262	$	—	$	—	$	1,638,262	$	144,337,790	$	145,976,052	$	3,929,015	$	149,905,067
Consumer
Pass	$	7,953	$	—	$	—	$	7,953	$	51,476,598	$	51,484,551	$	—	$	51,484,551
Special Mention		—		—		—		—		2,810,564		2,810,564		—		2,810,564
Substandard		—		—		—		—		423,999		423,999		993,742		1,417,741
Total Consumer	$	7,953	$	—	$	—	$	7,953	$	54,711,161	$	54,719,114	$	993,742	$	55,712,856
Total	$	6,030,352	$	798,000	$	1,907,661	$	8,736,013	$	459,297,676	$	468,033,689	$	21,687,312	$	489,721,001

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The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2011.

	Performing (Accruing) Loans
2011	31-60 Days Past Due		Greater Than 60 Days		Total Past Due		Current		Total Perfoming Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	10,971	$	—	$	10,971	$	25,504,826	$	25,515,797	$	44,296	$	25,560,093
Special Mention		—		—		—		1,714,995		1,714,995		—		1,714,995
Substandard		233,781		—		233,781		3,064,459		3,298,240		1,237,407		4,535,647
Total Commercial	$	244,752	$	—	$	244,752	$	30,284,280	$	30,529,032	$	1,281,703	$	31,810,735
Commercial Real Estate
Pass	$	—	$	—	$	—	$	162,670,173	$	162,670,173	$	402,663	$	163,072,836
Special Mention		1,915,504		—		1,915,504		22,263,802		24,179,306		2,832,452		27,011,758
Substandard		—		—		—		12,721,590		12,721,590		12,853,653		25,575,243
Total Commercial Real Estate	$	1,915,504	$	—	$	1,915,504	$	197,655,565	$	199,571,069	$	16,088,768	$	215,659,837
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		9,210,344		9,210,344		—		9,210,344
Substandard		—		—		—		—		—		3,096,578		3,096,578
Total Construction	$	—	$	—	$	—	$	9,210,344	$	9,210,344	$	3,096,578	$	12,306,922
Construction to Permanent
Pass	$	—	$	—	$	—	$	903,035	$	903,035	$	—	$	903,035
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		4,905,000		4,905,000		4,203,987		9,108,987
Total Construction to Permanent	$	—	$	—	$	—	$	5,808,035	$	5,808,035	$	4,203,987	$	10,012,022
Residential Real Estate
Pass	$	42,181	$	—	$	42,181	$	163,986,171	$	164,028,352	$	—	$	164,028,352
Special Mention		4,800,000		—		4,800,000		2,916,201		7,716,201		—		7,716,201
Substandard		—		84,225		84,225		11,800,585		11,884,810		4,479,492		16,364,302
Total Residential Real Estate	$	4,842,181	$	84,225	$	4,926,406	$	178,702,957	$	183,629,363	$	4,479,492	$	188,108,855
Consumer
Pass	$	1,459	$	—	$	1,459	$	47,136,590	$	47,138,049	$	—	$	47,138,049
Special Mention		—		—		—		3,303,727		3,303,727		—		3,303,727
Substandard		—		—		—		424,000		424,000		993,742		1,417,742
Total Consumer	$	1,459	$	—	$	1,459	$	50,864,317	$	50,865,776	$	993,742	$	51,859,518
Total	$	7,003,896	$	84,225	$	7,088,121	$	472,525,498	$	479,613,619	$	30,144,270	$	509,757,889

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The following table summarizes impaired loans as of June 30, 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2012
With no related allowance recorded:
Commercial	$	18,167	$	250,893	$	—
Commercial Real Estate		7,927,165		8,755,486		—
Construction		2,946,562		2,946,592		—
Construction to Permanent		4,905,000		4,905,000
Residential		13,730,710		13,730,710		—
Consumer		993,742		993,742		—
Total:	$	30,521,346	$	31,582,423	$	—
With an allowance recorded:
Commercial	$	173,208	$	350,000	$	37,330
Commercial Real Estate		1,479,160		1,595,500		139,851
Construction		135,000		286,625		31,520
Construction to Permanent		1,287,645		1,425,000		110,045
Residential		669,691		669,691		30,291
Consumer		424,000		424,000		151,501
Total:	$	4,168,704	$	4,750,816	$	500,538
Commercial	$	191,375	$	600,893	$	37,330
Commercial Real Estate		9,406,325		10,350,986		139,851
Construction		3,081,562		3,233,217		31,520
Construction to Permanent		6,192,645		6,330,000		110,045
Residential		14,400,401		14,400,401		30,291
Consumer		1,417,742		1,417,742		151,501
Total:	$	34,690,050	$	36,333,239	$	500,538

Impaired loans consist of non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded.

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The following table summarizes impaired loans as of December 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2011
With no related allowance recorded:
Commercial	$	210,091	$	581,974	$	—
Commercial Real Estate		4,444,315		5,174,124		—
Construction		1,243,579		1,247,627		—
Construction to Permanent		6,614,333		6,614,333		—
Residential		9,789,727		9,789,727		—
Consumer		993,742		1,038,640		—
Total:	$	23,295,787	$	24,446,425	$	—
With an allowance recorded:
Commercial	$	79,469	$	130,137	$	61,145
Commercial Real Estate		5,131,655		5,354,025		319,894
Construction		135,000		286,625		31,520
Construction to Permanent		2,494,654		2,634,000		498,254
Residential		5,196,516		5,196,516		197,478
Consumer		424,000		424,000		151,500
Total:	$	13,461,294	$	14,025,303	$	1,259,791
Commercial	$	289,560	$	712,111	$	61,145
Commercial Real Estate		9,575,970		10,528,149		319,894
Construction		1,378,579		1,534,252		31,520
Construction to Permanent		9,108,987		9,248,333		498,254
Residential		14,986,243		14,986,243		197,478
Consumer		1,417,742		1,462,640		151,500
Total:	$	36,757,081	$	38,471,728	$	1,259,791

The recorded investment of impaired loans at June 30, 2012 and December 31, 2011 was $34.7 million and $36.8 million, with related allowances of $501,000 and $1.3 million, respectively.

Included in the tables above at June 30, 2012 and December 31, 2011 are loans with carrying balances of $30.5 million and $23.3 million that required no specific reserves in our allowance for loan losses. Loans that did not require specific reserves at June 30, 2012 and December 31, 2011 have sufficient collateral values, less costs to sell, supporting the carrying balances of the loans. In some cases, there may be no specific reserves because the Company already charged-off the specific impairment. Once a borrower is in default, the Company is under no obligation to advance additional funds on unused commitments.

On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan.

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The following table presents the total troubled debt restructured loans as of June 30, 2012:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	233,817		2	$	4,315,060		3	$	4,548,877
Residential Real Estate		3		10,471,386		—		—		3		10,471,386
Construction		—		—		1		1,219,528		1		1,219,528
Construction to permanent		1		4,905,000		1		1,287,645		2		6,192,645
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,034,203		4	$	6,822,233		10	$	22,856,436

The following table presents the total troubled debt restructured loans as of December 31, 2011:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	238,165		3	$	5,666,882		4	$	5,905,047
Residential Real Estate		3		10,506,751		—		—		3		10,506,751
Construction		—		—		1		1,243,579		1		1,243,579
Construction to permanent		1		4,905,000		2		2,494,654		3		7,399,654
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,073,916		6	$	9,405,115		12	$	25,479,031

One loan was modified in a troubled debt restructuring during the three months ended June 30, 2012. The following table summarizes loans that were modified in a troubled debt restructuring during the six months ended June 30, 2012.

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	Six months ended June 30, 2012
	Number of Relationships		Pre-Modification Outstanding Recorded Investment		Number of Relationships		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		—	$	—		—	$	—
Residential Real Estate		1		4,661,109		1		4,661,109
Construction to permanent		—		—		—		—
Total Troubled Debt Restructurings		1	$	4,661,109		1	$	4,661,109

Substantially all of our troubled debt restructured loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below market rate, an extension of the term of the loan, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. If the borrower had demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

During the six months ended June 30, 2012, one of the troubled debt restructured loans was upgraded and is no longer classified as a troubled debt restructuring as compared to December 31, 2011. The upgrade was a commercial construction loan for $1.2 million where the bank received additional collateral. There was another troubled debt restructuring of a residential loan for $4.7 million that was upgraded to special mention due to increased liquidity of the borrower during the first quarter of 2012, which has since been downgraded to substandard, due to financial hardship of the borrower in the second quarter. One troubled debt restructuring had a payment default on a commercial real estate loan and is currently in OREO.

All troubled debt restructurings are impaired loans, which are individually evaluated for impairment.

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Note 4: Deposits

The following table is a summary of the Company’s deposits at:

	June 30, 2012		December 31, 2011
Non-interest bearing	$	71,722,494	$	65,613,374
Interest bearing
NOW		24,297,309		24,396,210
Savings		66,862,473		59,396,310
Money market		47,227,188		52,889,642
Time certificates, less than $100,000		179,310,667		198,207,998
Time certificates, $100,000 or more		132,675,624		144,405,859
Total interest bearing		450,373,261		479,296,019
Total Deposits	$	522,095,755	$	544,909,393

Included in time certificates are certificates of deposit through the Certificate of Deposit Account Registry Service (CDARS) network of $0 and $1,361,544 at June 30, 2012 and December 31, 2011, respectively. These are considered brokered deposits. Pursuant to the Agreement discussed in Note 10, the Bank’s participation in the CDARS program, as an issuer of deposits to customers of other banks in the CDARS program, may not exceed 10% of total deposits.

Note 5: Share-Based Compensation

The Company maintains the Patriot National Bancorp, Inc. 2012 Stock Plan to provide an incentive by the grant of options, restricted stock awards or phantom stock units to directors and employees of the Company. The Plan provides for the issuance of up to 3,000,000 shares of the Company’s common stock subject to certain Plan limitations. 2,045,654 shares of stock remain available for issuance under the Plan as of June 30, 2012. The vesting of options and restricted stock awards may accelerate in accordance with terms of the plan. The Compensation Committee shall make terms and conditions applicable to the vesting of restricted stock awards and stock options. Restricted stock grants vest in quarterly installments over a four year period from the date of grant. The Compensation Committee accelerated the vesting of the initial grant of restricted stock, whereby the first year of the tranche vested immediately. Stock options were granted at an exercise price equal to $2.20 based on a price determined by the Compensation Committee and all have an expiration period of 10 years. The fair value of stock options granted on January 24, 2012, was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected life of 6.28 years utilizing the simplified method, risk-free rate of return of 1.28%, volatility of 61.29% and no dividend yield. The Company is expensing the grant date fair value of all share-based compensation over the requisite vesting periods on a straight-line basis.

During the three and six months ended June 30, 2012, the Company recorded $53,497 and $133,128 of total stock-based compensation, respectively.

29

The following table is a summary of the Company’s non-vested stock options as of June 30, 2012, and changes therein during the period then ended:

	Number of Stock Options		Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding—December 31, 2011		—	$	—	$	—		—
Granted		850,000		0.90		2.20		10
Exercised		—		—		—		—
Outstanding—June 30, 2012		850,000	$	0.90	$	2.20		10
Exercisable—June 30, 2012		—	$	—	$	—		—

Expected future stock option expense related to the non-vested options outstanding as of June 30, 2012, is $669,877 over an average period of 2.28 years.

The following is a summary of the status of the Company’s restricted shares as of June 30, 2012, and changes therein during the period then ended.

	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		—		$	—
Granted		104,346			1.73
Vested		(25,715	)		1.73
Forfeited		—			—
Non-vested at June 30, 2012		78,631		$	1.73

Expected future stock award expense related to the non-vested restricted awards as of June 30, 2012, is $135,638 over an average period of 3.10 years.

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Note 6: Income Taxes

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. Management has reviewed the deferred tax position of the Company at June 30, 2012. The deferred tax position has been affected by several significant transactions in the past several years. These transactions include increased provision for loan losses, the levels of non-accrual loans and other-than-temporary impairment write-offs of certain investments, as well as a loss on the bulk sale of loans in 2011. As a result, the Company is in a cumulative net loss position at June 30, 2012, and under the applicable accounting guidance, has concluded that it is not more-likely-than-not that the Company will be able to realize its deferred tax assets and, accordingly, has established a full valuation allowance totaling $13.5 million against its deferred tax asset at June 30, 2012. The valuation allowance is analyzed quarterly for changes affecting the deferred tax asset. In the future, if the Company generates taxable income on a sustained basis, management’s conclusion regarding the need for a deferred tax asset valuation allowance could change, resulting in the reversal of all or a portion of the deferred tax asset valuation allowance.

An “ownership change” occurred with respect to the Company in 2010 for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. Consequently, the Company’s ability to claim net operating loss carryforwards attributable to periods prior to the ownership change and certain recognized built-in losses and deductions (“pre-ownership change losses”) against income in years subsequent to the ownership change is limited. The amount of pre-ownership change losses that may be applied against income in a tax year subsequent to the ownership change is generally limited to the product of (x) the Company’s fair market value on the date of the ownership change and (y) the highest federal long-term tax-exempt rate in effect for any month in the three-month period ending with the calendar month in which the ownership change occurred, plus any unused capacity to claim pre-ownership change losses from prior years.

In 2011 the Company calculated the annual limitation on its use of pre-ownership change losses under Section 382 as a result of the 2010 ownership change as $284,000. The Company also determined that the amount of its pre-ownership change losses was $36.2 million. Based on that analysis and a 20-year carryforward period, the Company may utilize approximately $5.7 million of the pre-ownership change losses. Accordingly, the Company wrote-off approximately $10.4 million of deferred tax assets in 2011. The write-off of the deferred tax asset did not affect the consolidated financial statements as there was a full valuation allowance against the deferred tax assets.

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Note 7: Income (loss) per share

The Company is required to present basic income (loss) per share and diluted income (loss) per share in its consolidated statements of operations. Basic income (loss) per share amounts are computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted income (loss) per share reflects additional common shares that would have been outstanding if potentially dilutive common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method. The Company is also required to provide a reconciliation of the numerator and denominator used in the computation of both basic and diluted income (loss) per share.

The stock options and non-vested restricted stock awards did not have an impact on the diluted earnings per share. The following is information about the computation of income (loss) per share for the three and six months ended June 30, 2012 and 2011:

Three months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	345,282			38,381,988	$	0.01
Three months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(7,175,368	)		38,362,727	$	(0.19	)
Six months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	890,812			38,377,166	$	0.02
Six months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(16,157,966	)		38,362,727	$	(0.42	)

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Note 8: Other Comprehensive Income

Other comprehensive income, which is comprised solely of the change in unrealized gains and losses on available-for-sale securities, is as follows:

	Three Months Ended June 30, 2012							Six Months Ended June 30, 2012
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	198,155	$	(75,299	)	$	122,856	$	306,842		$	(116,601	)	$	190,241
Reclassification adjustment for (losses) recognized in income		—		—			—		(8,042	)		3,056			(4,986	)
Unrealized holding gains on available for sale securities, net of taxes	$	198,155	$	(75,299	)	$	122,856	$	298,800		$	(113,545	)	$	185,255
	Three Months Ended June 30, 2011							Six Months Ended June 30, 2011
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746
Reclassification adjustment for gains recognized in income		—		—			—		—			—			—
Unrealized holding gains on available for sale securities, net of taxes	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746

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Note 9: Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The contractual amount of commitments to extend credit and standby letters of credit represent the total amount of potential accounting loss should: the contracts be fully drawn upon; the customers default; and the value of any existing collateral becomes worthless. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments and evaluates each customer’s creditworthiness on a case-by-case basis. Management believes that the Company controls the credit risk of these financial instruments through credit approvals, credit limits, monitoring procedures and the receipt of collateral as deemed necessary.

Financial instruments whose contractual amounts represent credit risk at June 30, 2012 are as follows:

Commitments to extend credit:
Future loan commitments	$	35,782,667
Home equity lines of credit		30,738,527
Unused lines of credit		37,402,837
Undisbursed construction loans		4,304,731
Financial standby letters of credit		7,000
	$	108,235,762

Standby letters of credit are written commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Guarantees that are not derivative contracts are recorded on the Company’s consolidated balance sheet at their fair value at inception.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit generally have fixed expiration dates, or other termination clauses, and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include residential and commercial property, deposits and securities. Based on the growth in the unfunded commitments, the bank has established a reserve of $26,000 as of June 30, 2012.

Note 10: Regulatory and Operational Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). In addition, due to the Bank’s asset profile and current economic conditions in its markets, the Bank’s capital plan targets a minimum 9% Tier 1 leverage capital ratio.

In February 2009 the Bank entered into a formal written agreement (the “Agreement”) with the Office of the Comptroller of the Currency. Under the terms of the Agreement, the Bank has appointed a Compliance Committee of outside directors and the Chief Executive Officer. The Committee must report quarterly to the Board of Directors and to the OCC on the Bank’s progress in complying with the Agreement. The Agreement requires the Bank to review, adopt and implement a number of policies and programs related to credit and operational issues. The Agreement further provides for limitations on the acceptance of certain brokered deposits and the extension of credit to borrowers whose loans are criticized. The Bank may pay dividends during the term of the Agreement only with prior written permission from the OCC. The Agreement also requires that the Bank develop and implement a three-year capital plan. The Bank has taken or put into process many of the steps required by the Agreement, and does not anticipate that the restrictions included within the Agreement will impair its current business plan.

In June 2010 the company entered into a formal written agreement (the “Reserve Bank Agreement”) with the Federal Reserve Bank of New York (the “Reserve Bank”). Under the terms of the Reserve Bank Agreement, the Board of Directors of the Company are required to take appropriate steps to fully utilize the Company’s financial and managerial resources to serve as a source of strength to the Bank including taking steps to insure that the Bank complies with the Agreement with the OCC. The Reserve Bank Agreement requires the Company to submit, adopt and implement a capital plan that is acceptable to the Reserve Bank. The Company must also report to the Reserve Bank quarterly on the Company’s progress in complying with the Reserve Bank Agreement. The Agreement further provides for certain restrictions on the payment or receipt of dividends, distributions of interest or principal on subordinate debentures or trust preferred securities and the Company’s ability to incur debt or to purchase or redeem its stock without the prior written approval of the Reserve Bank. The Company has taken or put into process many of the steps required by the Reserve Bank Agreement, and does not anticipate that the restrictions included within the Reserve Bank Agreement will impair its current business plan.

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The Company’s and the Bank’s actual capital amounts and ratios at June 30, 2012 and December 31, 2011 were:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2012
The Company:
Total Capital (to Risk Weighted Assets)	$	64,556		15.85	%	$	32,583		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		59,439		14.60	%		16,285		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		59,439		9.13	%		26,041		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	62,935		15.43	%	$	32,630		8.00	%	$	40,787		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		57,819		14.18	%		16,310		4.00	%		24,465		6.00	%
Tier 1 Capital (to Average Assets)		57,819		8.88	%		26,045		4.00	%		32,556		5.00	%
December 31, 2011
The Company:
Total Capital (to Risk Weighted Assets)	$	63,658		15.22	%	$	33,469		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		58,377		13.95	%		16,735		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		58,377		9.01	%		25,931		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	61,616		14.75	%	$	33,445		8.00	%	$	41,806		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		56,339		13.48	%		16,722		4.00	%		25,084		6.00	%
Tier 1 Capital (to Average Assets)		56,339		8.69	%		25,929		4.00	%		32,411		5.00	%

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Restrictions on dividends, loans and advances

The Company’s ability to pay dividends is dependent on the Bank’s ability to pay dividends to the Company. Pursuant to the February 9, 2009 Agreement between the Bank and the OCC, the Bank can pay dividends to the Company only pursuant to a dividend policy requiring compliance with the Bank’s OCC-approved capital program, in compliance with applicable law and with the prior written determination of no supervisory objection by the Assistant Deputy Comptroller. In addition to the Agreement, certain other restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. The approval of the OCC is required to pay dividends in excess of the Bank’s earnings retained in the current year plus retained net earnings for the preceding two years. As of June 30, 2012, the Bank had an accumulated deficit; therefore, dividends may not be paid to the Company. The Bank is also prohibited from paying dividends that would reduce its capital ratios below minimum regulatory requirements.

The Company’s ability to pay dividends and incur debt is also restricted by the Reserve Bank Agreement. Under the terms of the Reserve Bank Agreement, the Company has agreed that it shall not declare or pay any dividends or incur, increase or guarantee any debt without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

Loans or advances to the Company from the Bank are limited to 10% of the Bank’s capital stock and surplus on a secured basis.

Recent Legislative Developments

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”) was signed into law on July 21, 2010. The Act is a significant piece of legislation that will continue to have a major impact on the financial services industry, including the organization, financial condition and operations of banks and bank holding companies. Management continues to evaluate the impact of the Act; however, uncertainty remains as to its operational impact, which could have a material adverse impact on the Company’s business, results of operations and financial condition. Many of the provisions of the Act are aimed at financial institutions that are significantly larger than the Company and the Bank. Notwithstanding this, there are many other provisions that the Company and the Bank are subject to and will have to comply with, including any new rules applicable to the Company and the Bank promulgated by the Bureau of Consumer Financial Protection, a new regulatory body dedicated to consumer protection. As rules and regulations are promulgated by the agencies responsible for implementing and enforcing the Act, the Company and the Bank will have to address each to ensure compliance with applicable provisions of the Act and compliance costs are expected to increase.

The Dodd-Frank Act broadens the base for Federal Deposit Insurance Corporation insurance assessments. Under rules issued by the FDIC in February 2011, the base for insurance assessments changed from domestic deposits to consolidated assets less tangible equity. Assessment rates are calculated using formulas that take into account the risks of the institution being assessed. The rule was effective beginning April 1, 2011. This did not have a material impact on the Company.

On June 28, 2011, the Federal Reserve Board approved a final debit-card interchange rule. This primarily impacts larger banks and has not had a material impact on the Company.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on the Company. The financial reform legislation and any implementing rules that are ultimately issued could have adverse implications on the financial industry, the competitive environment, and our ability to conduct business. Management will have to apply resources to ensure compliance with all applicable provisions of the Dodd-Frank Act and any implementing rules, which may increase our costs of operations and adversely impact our earnings.

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Note 11: Fair Value and Interest Rate Risk

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in certain instances, there are no quoted market prices for certain assets or liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability.

Fair value measurements focus on exit prices in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment.

The Company’s fair value measurements are classified into a fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The three categories within the hierarchy are as follows:

• Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 Inputs—Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lower level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.

Cash and due from banks, federal funds sold, short-term investments and accrued interest receivable and payable: The carrying amount is a reasonable estimate of fair value. These financial instruments are not recorded at fair value on a recurring basis.

Available-for-Sale Securities: These financial instruments are recorded at fair value in the financial statements. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using pricing models (i.e., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include U.S. government agency bonds and mortgage-backed securities and corporate bonds. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and sales of investment

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securities. Prices obtained from these sources include prices derived from market quotations and matrix pricings. The fair value measurements considered observable data may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data. Level 3 securities are instruments for which significant unobservable input are utilized. Available-for-sale securities are recorded at fair value on a recurring basis.

Loans: For variable rate loans, which reprice frequently and have no significant change in credit risk, carrying values are a reasonable estimate of fair values, adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using the period end rates, estimated by using local market data, at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent impaired loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral. Fair values estimated in this manner do not fully incorporate an exit-price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Other Real Estate Owned: The fair values of the Company’s other real estate owned (“OREO”) properties are based on the estimated current property valuations less estimated selling costs. When the fair value is based on current observable appraised values, OREO is classified within Level 2. The Company classifies OREO within Level 3 when unobservable adjustments are made to appraised values. The Company does not record other real estate owned at fair value on a recurring basis.

Deposits: The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities, estimated using local market data, to a schedule of aggregated expected maturities on such deposits. The Company does not record deposits at fair value on a recurring basis.

Short-term borrowings: The carrying amounts of borrowings under short-term repurchase agreements and other short-term borrowings maturing within 90 days approximate their fair values. The Company does not record short-term borrowings at fair value on a recurring basis.

Junior Subordinated Debt: Junior subordinated debt reprices quarterly and as a result the carrying amount is considered a reasonable estimate of fair value. The Company does not record junior subordinated debt at fair value on a recurring basis.

Federal Home Loan Bank Borrowings: The fair value of the advances is estimated using a discounted cash flow calculation that applies current Federal Home Loan Bank interest rates for advances of similar maturity to a schedule of maturities of such advances. The Company does not record these borrowings at fair value on a recurring basis.

Other Borrowings: The fair values of longer term borrowings and fixed rate repurchase agreements are estimated using a discounted cash flow calculation that applies current interest rates for transactions of similar maturity to a schedule of maturities of such transactions. The Company does not record these borrowings at fair value on a recurring basis.

Off-balance sheet instruments: Fair values for the Company’s off-balance-sheet instruments (lending commitments) are based on interest rate changes and fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The Company does not record its off-balance-sheet instruments at fair value on a recurring basis.

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The following table details the financial assets measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine fair value:

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2012
U.S. Government agency mortgage- backed securities	$	—	$	39,642,765	$	—	$	39,642,765
U.S. Government bonds		—		5,016,920		—		5,016,920
Corporate bonds		—		11,682,945		—		11,682,945
Securities available for sale	$	—	$	56,342,630	$	—	$	56,342,630
December 31, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
U.S. Government agency mortgage- backed securities	$	—	$	50,049,429	$	—	$	50,049,429
U.S. Government bonds				5,037,085		—		5,037,085
Corporate bonds		—		11,383,458		—		11,383,458
Securities available for sale	$	—	$	66,469,972	$	—	$	66,469,972

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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The following tables reflect financial assets measured at fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Impaired Loans (1)	$	—	$	—	$	4,168,705	$	4,168,705
Other real estate owned (2)	$	—	$	—	$	288,144	$	288,144
December 31, 2011
Impaired Loans (1)	$	—	$	—	$	13,498,177	$	13,498,177
Other real estate owned (2)	$	—	$	—	$	2,762,640	$	2,762,640

⁽¹⁾  Represents carrying value for which adjustments are based on the appraised value of the collateral.

⁽²⁾  Represents carrying value for which adjustments are based on the appraised value of the property.

The Company discloses fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements and, accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The estimated fair value amounts have been measured as of June 30, 2012 and December 31, 2011 and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair value of these financial instruments subsequent to the respective reporting dates may be different than amounts reported on those dates.

The information presented should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other bank holding companies may not be meaningful.

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The following is a summary of the carrying amounts and estimated fair values of the Company’s financial instruments not measured and not reported at fair value on the consolidated balance sheets at June 30, 2012 and December 31, 2011 (in thousands):

		June 30, 2012				December 31, 2011
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banks	Level 1	$	3,721	$	3,721	$	4,242	$	4,242
Interest-bearing deposits due from banks	Level 1		58,456		58,456		50,474		50,474
Short-term investments	Level 1		710		710		710		710
Other investments	Level 2		3,500		3,500		3,500		3,500
Federal Reserve Bank stock	Level 1		1,720		1,720		1,707		1,707
Federal Home Loan Bank stock	Level 1		4,344		4,344		4,508		4,508
Loans receivable, net	Level 3		483,858		491,095		501,477		511,648
Accrued interest receivable	Level 1		2,289		2,289		2,453		2,453
Financial Liabilities:
Demand deposits	Level 1	$	71,722	$	71,722	$	65,613	$	65,613
Savings deposits	Level 1		66,862		66,862		59,396		59,396
Money market deposits	Level 1		47,227		47,227		52,890		52,890
NOW accounts	Level 1		24,297		24,297		24,396		24,396
Time deposits	Level 2		311,986		317,852		342,614		347,246
FHLB Borrowings	Level 2		50,000		52,954		50,000		52,645
Securities sold under repurchase agreements	Level 2		7,000		7,683		7,000		8,173
Subordinated debentures	Level 2		8,248		8,248		8,248		8,248
Accrued interest payable	Level 1		1,096		1,096		949		949

The following are the methods and assumptions that were used to estimate the fair value of other financial assets and liabilities in the table above:

Cash and due from banks and interest deposits with banks: The carrying amount is considered to be a reasonable estimate of fair value due to the short maturity of these items.

Short term investments: The carrying amount is considered to be a reasonable estimate of fair value due to the short maturity of these items.

Other Investments: The redeemable carrying amount of this security, with limited marketability, approximates its fair value.

Federal Reserve Bank and Federal Home Loan Bank stock: The redeemable carrying amount of these securities, with limited marketability, approximates their fair value.

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Loans Receivable: The fair values of loans are estimated by discounting the projected future cash flows using market discount rates, primarily based on the Bank’s current offer rates on comparable products, which reflect credit and interest-rate risk inherent in the loan. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Fair values estimated in this manner do not fully incorporate an exit price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Accrued interest receivable and payable: The carrying amounts of accrued interest approximate their fair value due to the short-term nature of these items.

Deposits: Current carrying amounts approximate estimated fair value of demand deposits, savings, money market and NOW accounts. The fair value of time deposits is based on the discounted value of contractual cash flows using the Bank’s current offer rates on comparable products of similar remaining maturities.

FHLB borrowings and securities sold under repurchase agreements: The fair values of the borrowings are estimated by discounting the estimated future cash flows using current market discount rates of financial instruments with similar characteristics, terms and remaining maturities.

Junior Subordinated Debt: There is no active market for the trust preferred securities issued by the Company’s capital trust. The carrying amount is considered to be a reasonable estimate of fair value because of the frequency they reprice to market rates.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Off-balance sheet instruments

Loan commitments on which the committed interest rate is less than the current market rate were insignificant at June 30, 2012 and December 31, 2011. The estimated fair value of fee income on letters of credit at June 30, 2012 and December 31, 2011 was insignificant.

Note 12. Restructuring Charges and Asset Disposals

The Company recorded restructuring charges of $495,207 for the six months ended June 30, 2012, compared to $2,986,441 in the same period as last year. These costs are included in restructuring charges and asset disposals in the Consolidated Statements of Operations.

During 2011, the Company announced that it would be undertaking a series of initiatives that are designed to transform and enhance its operations. In order to strengthen the Company’s competitive position and return it to its goal of restored health and profitability, it executed one initiative to consolidate four branch locations and vacate other office space, and a second plan to reduce workforce by approximately 10% of employees.

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On March 3, 2011, the Company announced that it would consolidate four branches, effective June 2011, to reduce operating expenses. All customer accounts in the affected branches were transferred to nearby Patriot branches to minimize any inconvenience to customers. The consolidation of these branches resulted in an earnings charge of $1.8 million, which is comprised of lease termination expenses of $1.2 million, lease liabilities charges of $400,000, and severance payments of $200,000 to affected employees. In addition, there was a $600,000 write-off of leasehold improvements and other fixed assets for these branches that were closed.

In order to further reduce operating expenses, the Company announced on May 16, 2011 that it would be executing a workforce reduction plan with employees in the back office operational areas. There were a total of eighteen employees affected by this reduction. This initiative resulted in an earnings charge of $600,000, which is comprised exclusively of severance payments to affected employees.

On September 23, 2011, the Company subleased vacant office space at 900 Bedford Street, Stamford, CT, effective October 1, 2011 for a term of two years.

On March 30, 2012, the Company announced that it would close the NYC branch, effective June 2012, and executed a workforce reduction of back office personnel to further reduce operating expenses. There were twelve employees in total affected by this announcement. For the six months ended June 30, 2012, a restructuring charge of $495,207 was recorded, which was comprised of $445,429 for severance expenses for the branch and back office personnel, asset disposals of $39,445 and $10,333 in lease termination costs.

On June 29, 2012, the Company announced that it would be consolidating three more branches, effective September 2012 in its continued effort to reduce operating expenses.

Restructuring reserves at June 30, 2012 for the restructuring activities taken in connection with these initiatives are comprised of the following:

	Balance at December 31, 2011		Expenses		Cash payments			Non-cash charges			Balance at June 30, 2012
Severance and benefit costs 2011	$	64,132	$	34,616	$	(17,665	)	$	(2,994	)	$	78,089
Lease termination costs 2011		317,808		—		—			(72,404	)		245,404
Severance and benefit costs 2012		—		410,813		(359,537	)		—			51,276
Lease termination costs 2012		—		10,333		—			—			10,333
Asset disposals 2012		—		39,445		—			(39,445	)		—
Total	$	381,940	$	495,207	$	(377,202	)	$	(114,843	)	$	385,102

The restructuring reserves at June 30, 2012 are included in accrued expenses and other liabilities in the Consolidated Balance Sheet.

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Note 13: Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” was issued as a result of the effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU No. 2011-04 is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands the existing disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IFRS No. 13. Many of the requirements for the amendments in ASU No. 2011-04 do not result in a change in the application of the requirements in Topic 820. The Company adopted ASU No. 2011-04 on January 1, 2012 and it did not have a material impact on the consolidated financial statements.

ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income,” requires an entity to present components of comprehensive income either in a single continuous statement of comprehensive income or in two separate consecutive statements. These amendments will make the financial statement presentation of other comprehensive income more prominent by eliminating the alternative to present comprehensive income within the statement of equity. As originally issued, ASU No. 2011-05 required entities to present reclassification adjustments out of accumulated other comprehensive income by component in the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). This requirement was deferred by ASU No.2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards”. ASU No. 2011-05 is effective for all interim and annual periods beginning on or after December 15, 2011. The Company adopted this guidance in the first quarter of 2012 and elected to present comprehensive income in a separate consolidated statement of comprehensive income.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

“SAFE HARBOR” STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in Bancorp’s public reports, including this report, and in particular in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may be forward looking and subject to a variety of risks and uncertainties. These factors include, but are not limited to; (1) changes in prevailing interest rates which would affect the interest earned on Bancorp’s interest earning assets and the interest paid on its interest bearing liabilities; (2) the timing of repricing of Bancorp’s interest earning assets and interest bearing liabilities; (3) the effect of changes in governmental monetary policy; (4) the effect of changes in regulations applicable to Bancorp and the Bank and the conduct of its business; (5) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks; (6) the ability of competitors that are larger than Bancorp to provide products and services which it is impracticable for Bancorp to provide; (7) the state of the economy and real estate values in Bancorp’s market areas, and the consequent effect on the quality of Bancorp’s loans, customers, vendors and communities; (8) recent governmental initiatives that are expected to have a profound effect on the financial services industry and could dramatically change the competitive environment of Bancorp; (9) other legislative or regulatory changes, including those related to residential mortgages, changes in accounting standards, and Federal Deposit Insurance Corporation (“FDIC”) premiums that may adversely affect Bancorp.

Although Bancorp believes that it offers the loan and deposit products and has the resources needed for continued success, future revenues and interest spreads and yields cannot be reliably predicted. These trends may cause Bancorp to adjust its operations in the future. Because of the foregoing and other factors, recent trends should not be considered reliable indicators of future financial results or stock prices.

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for loan losses, the analysis of its investment securities and the valuation of deferred income tax assets, as Bancorp’s most critical accounting policies and estimates in that they are important to the portrayal of Bancorp’s financial condition and results. They require management’s most subjective and complex judgment as a result of the need to make an estimate about the effect of matters that are inherently uncertain. These accounting policies, including the nature of the estimates and types of assumptions used, are described throughout this Management’s Discussion and Analysis.

SUMMARY

Bancorp realized net income of $345,000 ($0.01 basic and diluted income per share) for the quarter ended June 30, 2012, compared to a net loss of $7.2 million ($0.19 basic and diluted loss per share) for the quarter ended June 30, 2011. For the six-month period ended June 30, 2012, Bancorp realized net income of $891,000 ($0.02 basic and diluted income per share) compared to a net loss of $16.2 million ($0.42 basic and diluted loss per share) for the six months ended June 30, 2011. The primary reason for the increase in the quarterly comparison is the $1.7 million benefit from the provision for loan losses and lower operating expenses of $5.2 million. Restructuring charges of $127,000 were $2.9 million lower than the same period last year; associated with the branch closings and reduction-in- force, as discussed in Note 12. Bancorp’s net interest income for the quarter ended June 30, 2012 was $4.4 million compared to $5.0 million for the quarter ended June 30, 2011. Interest income and interest expense decreased by 12% and 9%, respectively, for the quarter ended June 30, 2012 compared to the quarter ended June 30, 2011. The significant decline in interest income is due primarily to the lower interest rate environment and a high level of liquidity. The decline in interest expense is primarily due to the reduction of total deposits and substantially lower interest rates paid on term deposits.

Total assets decreased $21.5 million from $665.8 million at December 31, 2011 to $644.3 million at June 30, 2012. Cash and cash equivalents increased $7.5 million from $55.4 million at December 31, 2011 to $62.9 million at June 30, 2012. Securities decreased $10.3 million from $76.2 million at December 31, 2011 to $65.9 million June 30, 2012. The net loan portfolio decreased $17.4 million from $501.2 million at December 31, 2011 to $483.9 million at June 30, 2012. This decrease is primarily a result of a $66.4 million sale of residential loans, partially offset with loan growth of $27.5 million and $21.6 million in residential and commercial real estate, respectively. As a result of weak loan demand and currently high levels of balance sheet liquidity, the Bank continued to reduce its concentration in high costs of certificates of deposit. The overall cost of deposits decreased from 1.28% at December 31, 2011 to 1.24% at June 30, 2012. Deposits decreased $22.8 million from $544.9 million at December 31, 2011 to $522.1 million at June 30, 2012.

FINANCIAL CONDITION

Cash and Cash Equivalents

Cash and cash equivalents increased $7.5 million, or 13%, to $62.9 million at June 30, 2012 compared to $55.4 million at December 31, 2011. This increase is primarily the result of the proceeds from the residential loan sale on March 29, 2012, which was deposited in short-term investments, and lower outstanding loan balances.

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Investments

The following table is a summary of Bancorp’s available-for-sale securities portfolio, at fair value, at the dates shown:

	June 30, 2012		December 31 2011
U.S. Government bonds	$	5,016,920	$	5,037,085
U.S. Government agency mortgage-backed securities		39,642,765		50,049,429
Corporate bonds		11,682,945		11,383,458
Total Available-for-Sale Securities	$	56,342,630	$	66,469,972

Available-for-sale securities decreased $10.1 million, or 15%, from $66.5 million at December 31, 2011 to $56.3 million at June 30, 2012. This decrease is primarily due to the sale of $5.2 million of government agency mortgage-backed securities and principal pay downs of $4.9 million on mortgage backed securities.

Loans

The following table is a summary of Bancorp’s loan portfolio at the dates shown:

	June 30, 2012			December 31, 2011
Real Estate
Commercial	$	237,217,702		$	215,659,837
Residential		149,905,067			188,108,855
Construction		6,217,516			12,306,922
Construction to permanent		8,287,915			10,012,022
Commercial		32,379,945			31,810,735
Consumer home equity		53,587,509			49,694,546
Consumer installment		2,125,347			2,164,972
Total Loans		489,721,001			509,757,889
Premiums on purchased loans		223,853			231,125
Net deferred costs		586,866			622,955
Allowance for loan losses		(6,673,648	)		(9,384,672	)
Loans receivable, net	$	483,858,072		$	501,227,297

Bancorp’s net loan portfolio decreased $17.4 million, or 3%, from $501.2 million at December 31, 2011 to $483.9 million at June 30, 2012. The decrease is primarily a result of the $66.4 million residential loan sale, partially offset by new loan growth. Residential mortgages decreased by $38.2 million; and construction and construction-to-permanent loans decreased $6.1 million and $1.7 million respectively. Consumer installment loans decreased $40,000. These were partially offset by increases in commercial real estate loans of $21.6 million, consumer home equity loans of $3.9 million and commercial loans of $569,000.

47

At June 30, 2012, the net loan to deposit ratio was 93% and the net loan to total assets ratio was 75%. At December 31, 2011, these ratios were 92% and 76%, respectively.

Allowance for Loan Losses

The allowance for loan losses is established to provide for expected future losses based on the Bank’s loss history and the application of qualitative risk adjustment factors to compensate for estimated differences between anticipated potential losses and those predicted by the bank’s specific loss history. The allowance is established 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 quarterly basis by management and is based upon management’s periodic review of the collectability 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. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance for loan losses decreased $2.7 million from December 31, 2011 to June 30, 2012 primarily due to a reduction in loan balances, improved credit quality of the loan portfolio and a change in methodology in estimating the allowance as described more fully below. These factors resulted in a release of excess reserves of $2.6 million after net charge-offs of $152,000.

Until this quarter, the Bank had used a 12 quarter un-weighted average to calculate loss history. As of this quarter, the Bank implemented changes to the allowance methodology, resulting in a reduction of the allowance for loan losses of $1.1 million. In making this transition, the changes serve to update and enhance the methodology to reflect the direction of the current loan portfolio. The changes are threefold:

• First, the Bank adopted a two year, instead of a three year, weighted average historical loss factor as the basis for the calculation of its historical loss experience. This is used to calculate expected losses in the ASC 450-20 pools prior to the application of qualitative risk adjustment factors. Weightings were allocated 59% to the last four quarters and 41% to the previous four quarters. This change was made to be more responsive to the changing credit environment. Net charge-offs have declined, especially in 2012 when they averaged $76,000 per quarter. This shorter average historical loss period will produce results more indicative of the current and expected behavior of the portfolio.

• Second, the Bank adopted an Internal Risk Ratings Based (IRB) approach to calculating historical loss rates. This approach calibrates expected losses with actual risk assessment and equates the likelihood of loss to the level of risk in a credit facility rating. All loans are reviewed annually. Similarly, the Loan Committee can adjust a risk rating. Previously, loss history was applied to categories of loans and qualitative adjustments were apportioned by risk rating within the categories.

48

• Third, the Bank increased the detail of analysis within the segments, particularly within Commercial Real Estate lending, which is currently the Bank’s largest concentration overall, by expanding the number of ASC 450-20 pools. In all, ten sub-concentrations have been added to the analysis. The greater level of detail enables the Bank to better apply qualitative risk adjustment factors to the segments affected and to monitor changes in credit risk within the portfolio.

The accrual of interest on loans is discontinued at the time the loan is 90 days past due for payment unless the loan is well-secured and in process of collection. Consumer installment loans are typically charged off no later than 180 days past due. 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. All interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income. Any interest paid on these loans is accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Management considers all non-accrual loans, troubled debt restructurings and loans that were previously classified as TDRs that have been upgraded, to be impaired. In most cases, loan payments that are past due less than 90 days, based on contractual terms, are considered collection delays and the related loans are not considered to be impaired. The Bank considers consumer installment loans to be pools of smaller balance homogeneous loans, which are collectively evaluated for impairment.

The changes in the allowance for loan losses for the periods shown are as follows:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
(Thousands of dollars)	2012			2011			2012			2011
Balance at beginning of period	$	8,461		$	12,208		$	9,385		$	15,374
Charge-offs		(91	)		(3,034	)		(193	)		(7,188	)
Recoveries		17			743			41			764
Net Charge-offs		(74	)		(2,291	)		(152	)		(6,424	)
Transferred to loans held-for-sale		—			—			—			(6,014	)
Provision charged to operations		(1,713	)		1,483			(2,559	)		8,464
Balance at end of period	$	6,674		$	11,400		$	6,674		$	11,400
Ratio of net charge-offs during the period to average loans outstanding during the period		0.02	%		0.48	%		0.03	%		1.28	%
Ratio of ALLL / Gross Loans		1.36	%		2.46	%		1.36	%		2.46	%

Based upon the overall assessment and evaluation of the loan portfolio, management believes the allowance for loan losses of $6.7 million, at June 30, 2012, which represents 1.36% of gross loans outstanding, is adequate under prevailing economic conditions, to absorb existing losses in the loan portfolio.

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Non-Accrual, Past Due and Restructured Loans

The following table presents non-accruing loans and loans past due 90 days or more and still accruing:

(Thousands of dollars)	June 30, 2012			December 31, 2011
Loans past due over 90 days	$	4,235		$	9,461
still accruing
Non accruing loans		17,452			20,683
Total	$	21,687		$	30,144
% of Total Loans		4.42	%		5.91	%
% of Total Assets		3.37	%		4.53	%

Loans delinquent over 90 days and still accruing aggregating $4.2 million are comprised of seven loans, all of which have matured and continue to make payments. These loans are currently in the process of being renewed or paid off. Impaired loans, which are comprised of non-accruing loans, troubled debt restructured loans, and loans previously classified as TDRs that have been upgraded, increased by $1.9 million to $34.7 million for the quarter ended June 30, 2012 and decreased $2.1 million for the six months ended June 30, 2012. Impaired loans are attributable to the lingering effects of the downturn in the economy, which has severely impacted the real estate market and placed unprecedented stress on credit markets. Residents of Fairfield County, Connecticut, many of whom are associated with the financial services industry, have been affected by the impact of the poor economy on employment and real estate values.

The $17.5 million of non-accrual loans at June 30, 2012 is comprised of 21 loans, for which a specific reserve of $349,000 has been established. In all cases, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values for estimated selling costs to determine estimated impairment. Of the $17.5 million of non-accrual loans at June 30, 2012 borrowers of 4 loans with aggregate balances of $6.0 million continue to make loan payments and these loans are current within one month as to payments.

Potential Problem Loans

In addition to the above, there are $47.9 million of substandard accruing loans comprised of 37 loans and $31.8 million of special mention loans comprised of 39 loans for which management has a concern as to the ability of the borrowers to comply with the present repayment terms. All but $5.0 million of the substandard accruing loans and all of the special mention loans continue to make timely payments and are within 30 days at June 30, 2012.

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Other Real Estate Owned

The following table is a summary of Bancorp’s other real estate owned at the dates shown:

	June 30, 2012		December 31, 2011
Residential construction	$	1,229,611	$	1,140,560
Commercial		—		1,622,080
Residential		288,144		—
Other real estate owned	$	1,517,755	$	2,762,640

The balance of other real estate owned at June 30, 2012 is comprised of two properties with an aggregate carrying value of $1.5 million that were obtained through loan foreclosure proceedings. During the six months ended June 30, 2012, two OREO properties were sold with an aggregate carrying value of $1.6 million.

Deferred Taxes

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. Management has reviewed the deferred tax position of Bancorp at June 30, 2012. The deferred tax position has been affected by several significant transactions in the past several years. These transactions include the change in ownership, in addition to, the increased provision for loan losses, the levels of non-accrual loans and other-than-temporary impairment write-offs of certain investments. As a result, the Company is in a cumulative net loss position at June 30, 2012, and under the applicable accounting guidance, has concluded that it is not more-likely-than-not that the Company will be able to realize its deferred tax assets and accordingly has established a full valuation allowance totaling $13.5 million against its deferred tax asset at June 30, 2012. The valuation allowance is analyzed quarterly for changes affecting the deferred tax asset. In the future, if the Company generates taxable income on a sustained basis, management’s conclusion regarding the need for a deferred tax asset valuation allowance could change, resulting in the reversal of all or a portion of the deferred tax asset valuation allowance.

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Deposits

The following table is a summary of Bancorp’s deposits at the dates shown:

	June 30, 2012		December 31, 2011
Non-interest bearing	$	71,722,494	$	65,613,374
Interest bearing
NOW		24,297,309		24,396,210
Savings		66,862,473		59,396,310
Money market		47,227,188		52,889,642
Time certificates, less than $100,000		179,310,667		198,207,998
Time certificates, $100,000 or more		132,675,624		144,405,859
Total interest bearing		450,373,261		479,296,019
Total Deposits	$	522,095,755	$	544,909,393

Total deposits decreased $22.8 million, or 4%, from $544.9 million at December 31, 2011 to $522.1 million at June 30, 2012. Interest bearing accounts decreased $28.9 million. This was primarily due to decreases in certificates of deposit (CD’s”) of $30.6 million and money market accounts of $5.7 million due to the low interest rate environment. These were partially offset by a $6.1 million increase in demand deposits primarily as a result of increases in official checks of $7.7 million, partially offset by a decrease in commercial checking accounts of $1.7 million.

Borrowings

At June 30, 2012, total borrowings were $65.2 million and are unchanged compared to December 31, 2011. In addition to the outstanding borrowings disclosed in the consolidated balance sheet, the Bank has the ability to borrow approximately $76.0 million in additional advances from the Federal Home Loan Bank of Boston, including a $2.0 million overnight line of credit. The Bank has also established a line of credit at the Federal Reserve Bank.

The subordinated debentures of $8,248,000 are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the subordinated debentures and the declaration of trust governing the Trust, provides a full and unconditional guarantee of amounts on the capital securities. The subordinated debentures, which bear interest at three-month LIBOR plus 3.15% (3.61160% at June 30, 2012), matures on March 26, 2033. Beginning in the second quarter of 2009, the Company began deferring interest payments on the subordinated debentures as permitted under the terms of the debentures. The deferral in the second quarter of 2012 represented the thirteenth consecutive quarter of deferral. The Company continues to accrue and charge interest to operations. The Company may defer the payment of interest until March 2014, and all accrued interest must be paid prior to or at completion of the deferral period.

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Capital

Capital increased $1.2 million compared to December 31, 2011 primarily as a result of the net income earned of $891,000 for the six months ended June 30, 2012.

Off-Balance Sheet Arrangements

Bancorp’s off-balance sheet arrangements, which primarily consist of commitments to lend, decreased by $32.2 million from $140.4 million at December 31, 2011 to $108.2 million at June 30, 2012, due to decreases of $55.5 million in future loan commitments and $500,000 in financial letters of credit, partially offset by increases of $21.3 million in unused lines of credit and $2.5 million in undisbursed construction loans.

53

RESULTS OF OPERATIONS

Interest and dividend income and expense

The following tables present average balance sheets (daily averages), interest income, interest expense and the corresponding yields earned and rates paid for major balance sheet components:

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	Three months ended June 30,
	2012								2011
				Interest								Interest
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Rate			Balance			Expense		Rate
	(dollars in thousands)
Interest earning assets:
Loans	$	479,545		$	5,812		4.85	%	$	472,761		$	6,539		5.53	%
Investments		67,849			458		2.70	%		77,569			568		2.93	%
Interest bearing deposits in banks		76,144			40		0.21	%		77,734			58		0.30	%
Federal funds sold		—			—		0.00	%		9,890			2		0.08	%
Total interest earning assets		623,538			6,310		4.05	%		637,954			7,167		4.49	%
Cash and due from banks		5,005								19,977
Premises and equipment, net		4,762								4,681
Allowance for loan losses		(8,449	)							(11,746	)
Other assets		26,890								27,842
Total Assets	$	651,746							$	678,708
Interest bearing liabilities:
Deposits	$	466,788		$	1,421		1.22	%	$	492,060		$	1,554		1.26	%
FHLB advances		51,319			354		2.76	%		50,000			424		3.39	%
Subordinated debt		8,248			75		3.64	%		8,248			71		3.44	%
Other borrowings		7,000			77		4.40	%		7,000			77		4.42	%
Total interest bearing liabilities		533,355			1,927		1.45	%		557,308			2,126		1.53	%
Demand deposits		62,056								59,022
Accrued expenses and other liabilities		5,141								5,629
Shareholders’ equity		51,194								56,749
Total liabilities and equity	$	651,746							$	678,708
Net interest income				$	4,383							$	5,041
Interest margin							2.81	%							3.16	%
Interest spread							2.60	%							2.96	%

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	Six months ended June 30,
	2012								2011
				Interest								Interest
	Average			Income/		Average			Average			Income/		Average
	Balance			Expense		Rate			Balance			Expense		Rate
	(dollars in thousands)
Interest earning assets:
Loans	$	501,011		$	12,477		4.98	%	$	502,707		$	13,495		5.37	%
Investments		71,613			969		2.71	%		63,366			912		2.88	%
Interest bearing deposits in banks		57,480			51		0.18	%		88,443			120		0.27	%
Federal funds sold		0			—		0.00	%		9,945			6		0.12	%
Total interest earning assets		630,104			13,497		4.28	%		664,461			14,533		4.37	%
Cash and due from banks		4,999								20,038
Premises and equipment, net		4,345								4,824
Allowance for loan losses		(8,915	)							(13,615	)
Other assets		27,569								36,815
Total Assets	$	658,102							$	712,523
Interest bearing liabilities:
Deposits	$	473,274		$	2,938		1.24	%	$	524,418		$	3,419		1.30	%
FHLB advances		53,247			712		2.67	%		50,000			842		3.37	%
Subordinated debt		8,248			151		3.66	%		8,248			142		3.44	%
Other borrowings		7,000			154		4.40	%		7,000			153		4.39	%
Total interest bearing liabilities		541,770			3,955		1.46	%		589,666			4,556		1.55	%
Demand deposits		60,215								55,977
Accrued expenses and other liabilities		5,192								5,811
Shareholders’ equity		50,926								61,069
Total liabilities and equity	$	658,102							$	712,523
Net interest income				$	9,542							$	9,977
Interest margin							3.03	%							3.00	%
Interest spread							2.82	%							2.82	%

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The following rate volume analysis reflects the impact that changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities had on net interest income during the periods indicated. Information is provided in each category with respect to changes attributable to changes in volume (changes in volume multiplied by prior rate), changes attributable to changes in rates (changes in rates multiplied by prior volume) and the total net change. The change resulting from the combined impact of volume and rate is allocated proportionately to the change due to volume and the change due to rate.

	Three months ended June 30,									Six months ended June 30,
	2012 vs 2011									2012 vs 2011
	Increase (decrease) in Interest									Increase (decrease) in Interest
	Income/Expense									Income/Expense
	Due to change in:									Due to change in:
	Volume			Rate			Total			Volume			Rate			Total
	(dollars in thousands)									(dollars in thousands)
Interest earning assets:
Loans	$	92		$	(819	)	$	(727	)	$	(46	)	$	(972	)	$	(1,018	)
Investments		(67	)		(43	)		(110	)		113			(56	)		57
Interest bearing deposits in banks		(1	)		(17	)		(18	)		(36	)		(33	)		(69	)
Federal funds sold		(1	)		(1	)		(2	)		(3	)		(3	)		(6	)
Total interest earning assets		23			(880	)		(857	)		28			(1,064	)		(1,036	)
Interest bearing liabilities:
Deposits	$	(78	)	$	(55	)	$	(133	)	$	(337	)	$	(144	)	$	(481	)
FHLB advances		11			(80	)		(69	)		52			(182	)		(130	)
Subordinated debt		—			3			3			—			10			10
Other borrowings		—			—			—			—			—			—
Total interest bearing liabilities		(67	)		(132	)		(199	)		(285	)		(316	)		(601	)
Net interest income	$	90		$	(748	)	$	(658	)	$	313		$	(748	)	$	(435	)

For the quarter ended June 30, 2012, average interest earning assets decreased $14.4 million, or 2%, to $623.5 million from $638.0 million for the quarter ended June 30, 2011, resulting in interest income for Bancorp of $6.3 million compared to $7.2 million for the same period in 2011. Interest and fees on loans decreased $727,000 or 11%, from $6.5 million for the quarter ended June 30, 2011 to $5.8 million for the quarter ended June 30, 2012. This decrease is primarily the result of lower average interest rates on new loan growth, partially offset by an increase of $6.8 million in the average balance of the loan portfolio. When compared to the same period last year, interest income on investments decreased by 19% due to an decrease of $9.7 million in the average balance of investments outstanding. Income on interest-bearing deposits in banks decreased 31% for the quarter ended June 30, 2012 compared to the quarter ended June 30, 2011, which is reflective of the decrease in the yields earned on excess funds.

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Total interest expense for the quarter ended June 30, 2012 of $1.9 million represents a decrease of $199,000, or 9%, compared to interest expense of $2.1 million for the same period last year. This decrease in interest expense is the result of a decrease in the average balances of interest-bearing liabilities. Average balances of interest bearing deposit accounts decreased $25.3 million, or 5%, which is comprised primarily of decreases in money market accounts and certificates of deposit of $22.9 million and $9.0 million respectively. These were partially offset by increases in savings accounts and NOW accounts of $5.6 million and $1.0 million, respectively. In addition, lower interest rates contributed to the overall decrease of $133,000 in interest expense on deposits. Average FHLB advances increased by $1.3 million, but lower interest rates resulted in a decrease of $70,000 in interest expense. Interest expense on the junior subordinated debt and borrowed funds increased by $4,000.

As a result of the above, Bancorp’s net interest income decreased $658,000, or 13%, to $4.4 million for the three months ended June 30, 2012 compared to $5.0 million for the same period last year. The net interest margin for the three months ended June 30, 2012 was 2.81% as compared to 3.16% for the three months ended June 30, 2011 as a result of the various reasons mentioned above.

Interest and dividend income was $13.5 million for the six months ended June 30, 2012, which represents a decrease of $1.0 million, or 7%, as compared to interest and dividend income of $14.5 million for the same period last year. This decrease was due primarily to lower interest rates, in addition to the $1.7 million decrease in the average balance of the loan portfolio, resulting in a decrease of $1.0 million in interest and fees on loans. This was combined with a decrease in interest rates on interest bearing deposits in banks, resulting in a decrease of $69,000, partially offset with an increase in interest and dividend income of $57,000 earned on investment securities. The average balance of the investment portfolio increased $8.2 million when compared to the six months ended June 30, 2011.

For the six months ended June 30, 2012, total interest expense decreased $0.6 million, or 13%, to $4.0 million from $4.6 million for the six months ended June 30, 2011. The decrease in interest expense was due primarily to lower interest rates and a $47.9 million reduction in the average balances of interest-bearing liabilities. In addition, interest expense on the FHLB advances decreased $130,000 due to lower interest rates, when compared to the same period last year.

As a result of the above, net interest income decreased $435,000, or 4%, for the six months ended June 30, 2012 to $9.5 million as compared to $10.0 million at June 30, 2011. The net interest margin for the six months ended June 30, 2012 was 3.03% as compared to 3.00% for the six months ended June 30, 2011.

Provision for Loan Losses

Based on management’s most recent evaluation of the adequacy of the allowance for loan losses, the provision for loan losses released from operations for the three months ended June 30, 2012 was $1.7 million due to the reduction of the loan balances, improved credit quality of the loan portfolio, and a change in the methodology in estimating the allowance, as previously discussed, compared to a charge of $1.5 million for the three months ended June 30, 2011. For the six months ended June 30, 2012, the provision for loan losses released from operations was $2.6 million compared to a charge to operations of $8.5 million for the six months ended June 30, 2011 primarily due to the $6.0 million charge related to loans transferred to held-for-sale in connection with the bulk loan sale in the first quarter of 2011. The allowance for loan losses decreased by $2.7 million from December 31, 2011 to June 30, 2012 due primarily to $2.6 million release of excess reserves after net charge-offs of $152,000.

An analysis of the changes in the allowance for loan losses is presented under “Allowance for Loan Losses.”

58

Non-interest income

Non-interest income decreased $255,000 from $710,000 for the quarter ended June 30, 2011 to $455,000 for the quarter ended June 30, 2012. This is primarily due to interest received of $111,000 from federal tax refunds and an $80,000 gain on sale of loans in 2011. Fees and service charges on deposit accounts decreased $21,000 when compared to the same period last year. In addition, there were decreases in earnings on an equity investment and earnings on the cash surrender value of life insurance of $36,000 and $33,000, respectively. These were partially offset with an increase in mortgage brokerage referral fees of $21,000.

For the six months ended June 30, 2012, non-interest income decreased $88,000, or 7%, to $1.2 million as compared to $1.3 million for the six months ended June 30, 2011. This decrease is primarily due to interest of $111,000 from federal tax refunds received in 2011, $73,000 lower fees and service charges on deposit accounts, $58,000 decrease in earnings on the cash surrender value of life insurance and a decrease of $31,000 in earnings on an equity investment. This was partially offset with an increase in gains on sale of loans of $184,000 when compared to the six months ended June 30, 2011.

Non-interest expenses

Non-interest expenses decreased $5.2 million or 46% from $11.4 million to $6.2 million for the quarter ended June 30, 2012 as compared to the quarter ended June 30, 2011. This decrease is primarily due to lower restructuring charges of $2.9 million due to the consolidation of four branches and reduction- in-force of back office personnel initiated in the quarter ended June 30, 2011, compared to $127,000 related to the closing of one branch in the quarter ended June 30, 2012. Other real estate operation expenses decreased $758,000, primarily due to lower operating expenses and costs associated with managing and acquiring fewer properties. Salaries and benefit expense and occupancy expense decreased $464,000 and $157,000 respectively, for the quarter ended June 30, 2012 compared to the same period last year primarily due to the impact of the prior year’s reduction-in-force and branch closings. Professional and other outside services, which are comprised primarily of audit and accounting fees, legal services and consulting fees, decreased $381,000 from $1.2 million for the quarter ended June 30, 2011, to $854,000 for the quarter ended June 30, 2012. Regulatory assessments decreased $166,000 primarily due to decreased FDIC premiums based on the lower assessment base.

For the six months ended June 30, 2012, non-interest expense decreased $6.5 million, or 35% to $12.4 million from $19.0 million for the same period in 2011. This decrease was primarily due to lower restructuring charges and asset disposals of $2.5 million related to branch closings and reduction-in-force of back office personnel of $495,000 as compared to $3.0 million for the same period last year. Other real estate owned operations decreased $1.2 million due to fewer properties managed and gains recognized on the sale of two properties. Salaries and benefit expense and occupancy expense decreased $787,000 and $388,000 respectively, due to the impact of the restructuring activities mentioned above. In addition, professional and outside services and regulatory assessments decreased $647,000 and $368,000 respectively. Insurance expense also decreased $181,000.

LIQUIDITY

Bancorp’s liquidity ratio was 19% at June 30, 2012 compared to 24% at June 30, 2011. The liquidity ratio is defined as the percentage of liquid assets to total assets. The following categories of assets, as described in the accompanying consolidated balance sheets, are considered liquid assets: cash and due from banks, federal funds sold, short-term investments and available-for-sale securities. Liquidity is a measure of Bancorp’s ability to generate adequate cash to meet financial obligations. The principal cash requirements of a financial institution are to cover downward fluctuations in deposit accounts and increases in its loan portfolio. Management believes Bancorp’s short-term assets provide sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash operating requirements.

59

CAPITAL

The following table illustrates Bancorp’s regulatory capital ratios at June 30, 2012 and December 31, 2011 respectively:

	June 30, 2012			December 31, 2011
Tier 1 Leverage Capital		9.13	%		9.01	%
Tier 1 Risk-based Capital		14.60	%		13.95	%
Total Risk-based Capital		15.85	%		15.22	%

The following table illustrates the Bank’s regulatory capital ratios at June 30, 2012 and December 31, 2011 respectively:

	June 30, 2012			December 31, 2011
Tier 1 Leverage Capital		8.88	%		8.69	%
Tier 1 Risk-based Capital		14.18	%		13.48	%
Total Risk-based Capital		15.43	%		14.75	%

IMPACT OF INFLATION AND CHANGING PRICES

Bancorp’s consolidated financial statements have been prepared in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the general levels of inflation. Interest rates do not necessarily move in the same direction or with the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, in particular, real estate. Inflation, or disinflation, could significantly affect Bancorp’s earnings in future periods.

60

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Market risk is defined as the sensitivity of income to fluctuations in interest rates, foreign exchange rates, equity prices, commodity prices and other market-driven rates or prices. Based upon the nature of Bancorp’s business, the primary source of market risk is interest rate risk, which is the impact that changing interest rates have on current and future earnings. In addition, Bancorp’s loan portfolio is primarily secured by real estate in the company’s market area. As a result, the changes in valuation of real estate could also impact Bancorp’s earnings.

Qualitative Aspects of Market Risk

Bancorp’s goal is to maximize long term profitability while minimizing its exposure to interest rate fluctuations. The first priority is to structure and price Bancorp’s assets and liabilities to maintain an acceptable interest rate spread while reducing the net effect of changes in interest rates. In order to accomplish this, the focus is on maintaining a proper balance between the timing and volume of assets and liabilities re-pricing within the balance sheet. One method of achieving this balance is to originate variable rate loans for the portfolio and purchase short-term investments to offset the increasing short term re-pricing of the liability side of the balance sheet. In fact, a number of the interest-bearing deposit products have no contractual maturity. Therefore, deposit balances may run off unexpectedly due to changing market conditions. Additionally, loans and investments with longer term rate adjustment frequencies are matched against longer term deposits and borrowings to lock in a desirable spread.

The exposure to interest rate risk is monitored by the Management Asset and Liability Committee consisting of senior management personnel. The Committee meets on a monthly basis, but may convene more frequently as conditions dictate. The Committee reviews the interrelationships within the balance sheet to maximize net interest income within acceptable levels of risk. This Committee reports to the Board of Directors on a monthly basis regarding its activities. In addition to the Management Asset and Liability Committee, there is a Board Asset and Liability Committee (“ALCO”), which meets quarterly. ALCO monitors the interest rate risk analyses, reviews investment transactions during the period and determines compliance with Bank policies.

Quantitative Aspects of Market Risk

In order to manage the risk associated with interest rate movements, management analyzes Bancorp’s interest rate sensitivity position through the use of interest income simulation and GAP analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest sensitive.” An asset or liability is said to be interest sensitive within a specific time period if it will mature or reprice within that time period.

Management’s goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income. Interest income simulations are completed quarterly and presented to ALCO. The simulations provide an estimate of the impact of changes in interest rates on net interest income under a range of assumptions. Changes to these assumptions can significantly affect the results of the simulations. The simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates.

Simulation analysis is only an estimate of Bancorp’s interest rate risk exposure at a particular point in time. Management regularly reviews the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

The table below sets forth examples of changes in estimated net interest income and the estimated net portfolio value based on projected scenarios of interest rate increases and decreases. The analyses indicate the rate risk embedded in Bancorp’s portfolio at the dates indicated should all interest rates instantaneously rise or fall. The results of these changes are added to or subtracted from the base case; however, there are certain limitations to these types of analyses. Rate changes are rarely instantaneous and these analyses may also overstate the impact of short-term repricings. As a result of the historically low interest rate environment, the

61

calculated effects of the 100 and 200 basis point downward shocks cannot absolutely reflect the risk to earnings and equity since the interest rates on certain balance sheet items have approached their minimums, and, therefore, it is not possible for the analyses to fully measure the true impact of these downward shocks.

June 30, 2012
	Net Interest Income								Net Portfolio Value
Projected Interest Rate Scenario	Estimated Value		$ Change from Base			% Change from Base			Estimated Value		$ Change from Base			% Change from Base
+ 200		20,365		2,083			11.39	%		48,446		(5,035	)		-9.42	%
+ 100		19,504		1,222			6.69	%		51,207		(2,274	)		-4.25	%
BASE		18,282								53,481
- 100		18,084		(198	)		-1.08	%		59,948		6,467			12.08	%
- 200		18,067		(215	)		-1.18	%		74,287		20,806			38.90	%

December 31, 2011
	Net Interest Income							Net Portfolio Value
Projected Interest Rate Scenario	Estimated Value		$ Change from Base		% Change from Base			Estimated Value		$ Change from Base			% Change from Base
+ 200		20,987		1,169		5.90	%		48,458		(9,194	)		-15.95	%
+ 100		20,547		729		3.68	%		53,555		(4,097	)		-7.11	%
BASE		19,818							57,652
- 100		20,504		686		3.46	%		61,109		3,457			6.00	%
- 200		20,604		786		3.97	%		69,915		12,263			21.27	%

Item 4: Controls and Procedures

Based on an evaluation of the effectiveness of Bancorp’s disclosure controls and procedures performed by Bancorp’s management, with the participation of Bancorp’s Chief Executive Officer and its Chief Financial Officer as of the end of the period covered by this report, Bancorp’s Chief Executive Officer and Chief Financial Officer concluded that Bancorp’s disclosure controls and procedures have been effective.

As used herein, “disclosure controls and procedures” means controls and other procedures of Bancorp that are designed to ensure that information required to be disclosed by Bancorp in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by Bancorp in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to Bancorp’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in Bancorp’s internal controls over financial reporting identified in connection with the evaluation described in the preceding paragraph that occurred during Bancorp’s fiscal quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, Bancorp’s internal controls over financial reporting.

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PART II—OTHER INFORMATION.

Item 1: Legal Proceedings

Neither Bancorp nor the Bank has any pending legal proceedings, other than ordinary routine litigation incidental to its business, to which Bancorp or the Bank is a party or any of its property is subject.

Item 1A: Risk Factors

During the three months ended June 30, 2012, there were no material changes to the risk factors relevant to Bancorp’s operations, which are described in the Annual Report on Form 10-K for the year ended December 31, 2011.

Item 6: Exhibits

No.	Description
2	Agreement and Plan of Reorganization dated as of June 28, 1999 between Bancorp and the Bank (incorporated by reference to Exhibit 2 to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).
2.1	Securities Purchase Agreement by and among Patriot National Bancorp, Inc., Patriot National Bank and PNBK Holdings LLC dated as of December 16, 2009 (incorporated by reference to Exhibit 10.1 to Bancorp’s Current Report on Form 8-K dated December 17, 2009).
2.2	Amendment to Securities Purchase Agreement by and among Patriot National Bancorp, Inc., Patriot National Bank and PNBK Holdings LLC dated as of May 3, 2010 (incorporated by reference to Exhibit 10(a) to Bancorp’s Current Report on Form 8-K dated May 4, 2010).
3(i)	Certificate of Incorporation of Bancorp, (incorporated by reference to Exhibit 3(i) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).
3(i)(A)	Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated July 16, 2004 (incorporated by reference to Exhibit 3(i)(A) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2004 (Commission File No. 000-29599)).
3(i)(B)	Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. dated June 15, 2006 (incorporated by reference to Exhibit 3(i)(B) to Bancorp’s Quarterly Report of Form 10-Q for the quarter ended September 30, 2006 (commission File No. 000-29599)).
3(i)(C)	Certificate of Amendment of Certificate of Incorporation of Patriot National Bancorp, Inc. (incorporated by reference to Exhibit 3(i) to Bancorp’s current report Form 8-K dated October 21, 2010.
3(ii)	Amended and Restated By-laws of Bancorp (incorporated by reference to Exhibit 3(ii) to Bancorp’s Current Report on Form 8-K dated November 1, 2010 (Commission File No. 000-29599))
4	Intentionally deleted

63

No.	Description
10(a)(1)	2001 Stock Appreciation Rights Plan of Bancorp (incorporated by reference to Exhibit 10(a)(1) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2001 (Commission File No. 000-29599)).
10(a)(2)	2012 Stock Plan of Bancorp (incorporated by reference from Annex A to the Proxy Statement on Form 14C filed November 1, 2011.
10(a)(3)	Intentionally deleted
10(a)(5)	Employment Agreement dated as of January 1, 2008 among Patriot National Bank, Bancorp and Robert F. O’Connell (incorporated by reference to Exhibit 10(a)(5) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007 (Commission File No. 000-29599)).
10(a)(6)	Change of Control Agreement, dated as of January 1, 2007 among Robert F. O’Connell, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(6) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).
10(a)(9)	License agreement dated July 1, 2003 between Patriot National Bank and L. Morris Glucksman (incorporated by reference to Exhibit 10(a)(9) to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 2003 (Commission File No. 000-29599)).
10(a)(12)	2005 Director Stock Award Plan (incorporated by reference to Exhibit 10(a)(12) to Bancorp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (Commission File No. 000 - 295999)).
10(a)(14)	Change of Control Agreement, dated as of January 1, 2007 among Philip W. Wolford, Patriot National Bank and Bancorp (incorporated by reference to Exhibit 10(a)(14) to Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2006 (Commission File No. 000-29599)).
10(a)(15)	Formal Written Agreement between Patriot National Bank and the Office of the Comptroller of the Currency (incorporated by reference to Exhibit 10(a)(15) to Bancorp’s Current Report on Form 8-K dated February 9, 2009 (Commission File No. 000-29599)).
10(a)(16)	Formal Written Agreement between Patriot National Bank and the Federal Reserve Bank of New York.
10(a)(17)	Financial Services Agreement dated November 8, 2011 of Bancorp (incorporated by reference to Exhibit 10(a)(20) on the Quarterly Report on Form 10-Q dated November 10, 2011.
10(c)	1999 Stock Option Plan of the Bank (incorporated by reference to Exhibit 10(c) to Bancorp’s Current Report on Form 8-K dated December 1, 1999 (Commission File No. 000-29599)).
14	Code of Conduct for Senior Financial Officers (incorporated by reference to Exhibit 14 to Bancorp’s Annual Report on Form 10 -KSB for the year ended December 31, 2004 (Commission File No. 000-29599).

64

No.	Description
21	Subsidiaries of Bancorp (incorporated by reference to Exhibit 21 to Bancorp’s Annual Report on Form 10-KSB for the year ended December 31, 1999 (Commission File No. 000-29599)).
31(1)	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31(2)	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certifications
101.INS#	XBRL Instance Document
101.SCH#	XBRL Schema Document
101.CAL#	XBRL Calculation Linkbase Document
101.LAB#	XBRL Labels Linkbase Document
101.PRE#	XBRL Presentation Linkbase Document
101.DEF#	XBRL Definition Linkbase Document

The exhibits marked with the section symbol (#) are interactive data files. Pursuant to Rule 406T of Regulations S-T, these interactive data files (i) are not deemed filed or part of a registration statement of prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, irrespective of any general incorporation language included in any such filings, and otherwise are not subject to liability under these sections; and (ii) are deemed to have complied with Rule 405 of Regulations S-T (“Rule 405”) and are not subject to liability under the anti-fraud provisions of the Section 17(a)(1) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 or under any other liability provision if we have made a good faith attempt to comply with Rule 405 and, after we become aware that the interactive data files fail to comply with Rule 405, we promptly amend the interactive data files.

65

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PATRIOT NATIONAL BANCORP, INC. (Registrant)
By:	/s/ Robert F. O’Connell
	Robert F. O’Connell,
	Senior Executive Vice President
	Chief Financial Officer
	(On behalf of the registrant and as chief financial officer)

August 13, 2012

66

EX-31.1

EXHIBIT 31 (1)

CERTIFICATION

BY CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14

I, Christopher D. Maher, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Patriot National Bancorp, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Christopher D. Maher

Christopher D. Maher,

Chief Executive Officer

(Principal executive officer)

August 13, 2012

EX-31.2

EXHIBIT 31 (2)

CERTIFICATION

BY PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13A-14

I, Robert F. O’Connell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Patriot National Bancorp, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Robert F. O’Connell

Robert F. O’Connell

Senior Executive Vice President

(Principal financial officer)

August 13, 2012

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PATRIOT NATIONAL BANCORP, INC. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Christopher D. Maher and Robert F. O’Connell, the Chief Executive Officer and the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Christopher D. Maher

Christopher D. Maher

Chief Executive Officer

/s/ Robert F. O’Connell

Robert F. O’Connell

Chief Financial Officer

August 13, 2012

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission and shall not be considered filed as part of the Report.

XML

Loans Receivable and Allowance for Loan Losses (Details 3) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Credit risk exposure of loans receivable
Total	$ 489,721,001	$ 509,757,889
Pass [Member]
Credit risk exposure of loans receivable
Total	392,585,462	400,702,365
Special Mention [Member]
Credit risk exposure of loans receivable
Total	31,798,779	48,957,025
Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	65,336,760	60,098,499
Performing [Member]
Credit risk exposure of loans receivable
Total	472,268,615	489,074,724
Non Performing [Member]
Credit risk exposure of loans receivable
Total	17,452,386	20,683,165
Commercial, Real Estate [Member]
Credit risk exposure of loans receivable
Total	237,217,702	215,659,837
Commercial, Real Estate [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	229,248,655	206,322,032
Commercial, Real Estate [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	7,969,047	9,337,805
Construction [Member]
Credit risk exposure of loans receivable
Total	6,217,516	12,306,922
Construction [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	3,135,953	10,928,343
Construction [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	3,081,563	1,378,759
Construction to Permanent [Member]
Credit risk exposure of loans receivable
Total	8,287,915	10,012,022
Construction to Permanent [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	7,000,270	5,808,035
Construction to Permanent [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	1,287,645	4,203,987
Residential Real Estate [Member]
Credit risk exposure of loans receivable
Total	149,905,067	188,108,855
Residential Real Estate [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	145,976,052	183,629,363
Residential Real Estate [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	3,929,015	4,479,492
Commercial [Member]
Credit risk exposure of loans receivable
Total	32,379,945	31,810,735
Commercial [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	32,188,570	31,521,175
Commercial [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	191,375	289,560
Consumer [Member]
Credit risk exposure of loans receivable
Total	55,712,856	51,859,518
Consumer [Member] | Performing [Member]
Credit risk exposure of loans receivable
Total	54,719,115	50,865,776
Consumer [Member] | Non Performing [Member]
Credit risk exposure of loans receivable
Total	993,741	993,742
Less than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member]
Credit risk exposure of loans receivable
Total	208,549,924	189,800,508
Less than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	176,063,752	151,392,526
Less than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	14,315,821	22,426,235
Less than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	18,170,351	15,981,747
Less than 75% Loan to Value Ratio [Member] | Construction [Member]
Credit risk exposure of loans receivable
Total	4,355,481	10,453,923
Less than 75% Loan to Value Ratio [Member] | Construction [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total
Less than 75% Loan to Value Ratio [Member] | Construction [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	3,135,953	9,210,344
Less than 75% Loan to Value Ratio [Member] | Construction [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	1,219,528	1,243,579
Less than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member]
Credit risk exposure of loans receivable
Total	2,095,269	903,035
Less than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	2,095,269	903,035
Less than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total
Less than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total
Less than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member]
Credit risk exposure of loans receivable
Total	111,193,209	138,036,302
Less than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	100,682,616	129,132,494
Less than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	5,313,385	5,316,201
Less than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	5,197,208	3,587,607
Less than 75% Loan to Value Ratio [Member] | Commercial [Member]
Credit risk exposure of loans receivable
Total	29,830,074	29,847,060
Less than 75% Loan to Value Ratio [Member] | Commercial [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	24,850,034	23,822,200
Less than 75% Loan to Value Ratio [Member] | Commercial [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	369,025	1,544,420
Less than 75% Loan to Value Ratio [Member] | Commercial [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	4,611,015	4,480,440
Less than 75% Loan to Value Ratio [Member] | Consumer [Member]
Credit risk exposure of loans receivable
Total	49,364,903	45,244,328
Less than 75% Loan to Value Ratio [Member] | Consumer [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	49,265,371	44,969,963
Less than 75% Loan to Value Ratio [Member] | Consumer [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	99,532	274,365
Less than 75% Loan to Value Ratio [Member] | Consumer [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total
More than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member]
Credit risk exposure of loans receivable
Total	28,667,778	25,859,329
More than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	9,310,101	11,680,310
More than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	5,683,817	4,585,523
More than 75% Loan to Value Ratio [Member] | Commercial, Real Estate [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	13,673,860	9,593,496
More than 75% Loan to Value Ratio [Member] | Construction [Member]
Credit risk exposure of loans receivable
Total	1,862,035	1,852,999
More than 75% Loan to Value Ratio [Member] | Construction [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total
More than 75% Loan to Value Ratio [Member] | Construction [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total
More than 75% Loan to Value Ratio [Member] | Construction [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	1,862,035	1,852,999
More than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member]
Credit risk exposure of loans receivable
Total	6,192,646	9,108,987
More than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total
More than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total
More than 75% Loan to Value Ratio [Member] | Construction to Permanent [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	6,192,646	9,108,987
More than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member]
Credit risk exposure of loans receivable
Total	38,711,858	50,072,553
More than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	26,642,690	34,895,858
More than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total		2,400,000
More than 75% Loan to Value Ratio [Member] | Residential Real Estate [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	12,069,168	12,776,695
More than 75% Loan to Value Ratio [Member] | Commercial [Member]
Credit risk exposure of loans receivable
Total	2,549,871	1,963,675
More than 75% Loan to Value Ratio [Member] | Commercial [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	1,456,449	1,737,893
More than 75% Loan to Value Ratio [Member] | Commercial [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	170,214	170,575
More than 75% Loan to Value Ratio [Member] | Commercial [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	923,208	55,207
More than 75% Loan to Value Ratio [Member] | Consumer [Member]
Credit risk exposure of loans receivable
Total	5,648,274	5,978,327
More than 75% Loan to Value Ratio [Member] | Consumer [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	1,519,501	1,531,223
More than 75% Loan to Value Ratio [Member] | Consumer [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total	2,711,032	3,029,362
More than 75% Loan to Value Ratio [Member] | Consumer [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total	1,417,741	1,417,742
Loan to Value Ratio Other [Member]
Credit risk exposure of loans receivable
Total	699,679	636,863
Loan to Value Ratio Other [Member] | Pass [Member]
Credit risk exposure of loans receivable
Total	699,679	636,863
Loan to Value Ratio Other [Member] | Special Mention [Member]
Credit risk exposure of loans receivable
Total
Loan to Value Ratio Other [Member] | Substandard & Doubtful [Member]
Credit risk exposure of loans receivable
Total

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Financial Instruments with Off-Balance Sheet Risk (Details) (USD $)	Jun. 30, 2012
Commitments to extend credit:
Total Commitments to extend credit	$ 108,235,762
Future loan commitments [Member]
Commitments to extend credit:
Total Commitments to extend credit	35,782,667
Home equity lines of credit [Member]
Commitments to extend credit:
Total Commitments to extend credit	30,738,527
Unused lines of credit [Member]
Commitments to extend credit:
Total Commitments to extend credit	37,402,837
Undisbursed construction loans [Member]
Commitments to extend credit:
Total Commitments to extend credit	4,304,731
Financial standby letters of credit [Member]
Commitments to extend credit:
Total Commitments to extend credit	$ 7,000

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Share-Based Compensation (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Non-vested stock options [Abstract]
Number of Stock Options, Outstanding - December 31, 2011
Number of Stock Options, Granted	850,000
Number of Stock Options, Exercised
Number of Stock Options, Outstanding - June 30, 2012	850,000
Number of Stock Options, Exercisable - June 30, 2012
Weighted Average Grant Date Fair Value, Outstanding - December 31, 2011
Weighted Average Grant Date Fair Value, Granted	$ 0.90
Weighted Average Grant Date Fair Value, Exercised
Weighted Average Grant Date Fair Value, Outstanding - June 30, 2012	$ 0.90
Weighted Average Grant Date Fair Value, Exercisable - June 30, 2012
Weighted Average Exercise Price, Outstanding - December 31, 2011
Weighted Average Exercise Price, Granted	$ 2.20
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Outstanding - June 30, 2012	$ 2.20
Weighted Average Exercise Price, Exercisable - June 30, 2012
Weighted Average Contractual Life (years), Outstanding - December 31, 2011
Weighted Average Contractual Life (years), Granted	10 years
Weighted Average Contractual Life (years), Exercised
Weighted Average Contractual Life (years), Outstanding - June 30, 2012	10 years
Weighted Average Contractual Life (years), Exercisable - June 30, 2012

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Financial Instruments with Off-Balance Sheet Risk (Details Textual) (USD $)	Jun. 30, 2012
Financial Instruments with Off-Balance Sheet Risk (Textual) [Abstract]
Bank's reserve based on the growth in the unfunded commitments	$ 26,000

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Deposits (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Summary of company's deposits
Non-interest bearing	$ 71,722,494	$ 65,613,374
Interest bearing
NOW	24,297,309	24,396,210
Savings	66,862,473	59,396,310
Money market	47,227,188	52,889,642
Time certificates, less than $100,000	179,310,667	198,207,998
Time certificates, $100,000 or more	132,675,624	144,405,859
Total interest bearing	450,373,261	479,296,019
Total Deposits	$ 522,095,755	$ 544,909,393

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Investment Securities (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Gross unrealized loss and fair value of Bancorp's available-for-sale securities, aggregated by the length of time the individual securities
Less Than 12 Months, Fair Value	$ 5,881,789	$ 13,299,782
Less Than 12 Months, Unrealized Loss Position	(186,100)	(896,436)
12 Months or More, Fair Value	2,942,599	68,309
12 Months or More, Unrealized Loss	(344,223)	(408)
Total, Fair Value	8,824,388	13,368,091
Total, Unrealized Loss	(530,323)	(896,844)
U. S. Government agency mortgage-backed securities [Member]
Gross unrealized loss and fair value of Bancorp's available-for-sale securities, aggregated by the length of time the individual securities
Less Than 12 Months, Fair Value	67,729	4,941,662
Less Than 12 Months, Unrealized Loss Position	(160)	(5,492)
12 Months or More, Fair Value	285,040	68,309
12 Months or More, Unrealized Loss	(1,782)	(408)
Total, Fair Value	352,769	5,009,971
Total, Unrealized Loss	(1,942)	(5,900)
Corporate bonds [Member]
Gross unrealized loss and fair value of Bancorp's available-for-sale securities, aggregated by the length of time the individual securities
Less Than 12 Months, Fair Value	5,814,060	8,358,120
Less Than 12 Months, Unrealized Loss Position	(185,940)	(890,944)
12 Months or More, Fair Value	2,657,559
12 Months or More, Unrealized Loss	(342,441)
Total, Fair Value	8,471,619	8,358,120
Total, Unrealized Loss	$ (528,381)	$ (890,944)

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Regulatory and Operational Matters (Details Textual)	6 Months Ended
	Jun. 30, 2012
Regulatory and Operational Matters (Textual) [Abstract]
Targets a minimum Tier 1 leverage capital ratio	9.00%
Loans or advances to the Company from the Bank limited	10.00%

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Non-vested stock options

The following table is a summary of the Company’s non-vested stock options as of June 30, 2012, and changes therein during the period then ended:

	Number of Stock Options		Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding—December 31, 2011		—	$	—	$	—		—
Granted		850,000		0.90		2.20		10
Exercised		—		—		—		—
Outstanding—June 30, 2012		850,000	$	0.90	$	2.20		10
Exercisable—June 30, 2012		—	$	—	$	—		—

Summary of restricted shares

The following is a summary of the status of the Company’s restricted shares as of June 30, 2012, and changes therein during the period then ended.

	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		—		$	—
Granted		104,346			1.73
Vested		(25,715	)		1.73
Forfeited		—			—
Non-vested at June 30, 2012		78,631		$	1.73

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Share-Based Compensation (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Jun. 30, 2011
Share-Based Compensation [Abstract]
2012 Stock Plan for issuance of common stock	3,000,000	3,000,000
2012 Stock Plan remain available for issuance of common stock	2,045,654	2,045,654
Restricted stock grants vesting period		4 years
Stock options were granted at an exercise price	$ 2.20	$ 2.20
Stock options expiration period		10 years
Fair value of stock options granted method		Black-Scholes option pricing model
Stock options granted date		Jan. 24, 2012
Stock options expected life		6 years 3 months 11 days
Stock options risk-free rate of return		1.28%
Stock options volatility		61.29%
Stock options dividend yield		0.00%
Share-based compensation	$ 53,497	$ 133,128
Expected future stock option expense related to the non-vested options	669,877	669,877
Expected future stock option expense average period	2 years 3 months 11 days	2 years 3 months 11 days
Expected future stock award expense related to the non-vested restricted awards	$ 135,638	$ 135,638
Expected future stock award expense average period	3 years 1 month 6 days	3 years 1 month 6 days

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Loans Receivable and Allowance for Loan Losses (Details 6) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Summarizes impaired loans:
Recorded investment in impaired loans	$ 34,690,050	$ 36,757,081,000,000
Unpaid Principal Balance of impaired loans	36,333,239	38,471,728
Related Allowance of impaired loans	5,005,385	1,259,791
Commercial, Real Estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	9,406,325	9,575,970
Unpaid Principal Balance of impaired loans	10,350,986	10,528,149
Related Allowance of impaired loans	139,851	319,894
Construction [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	3,081,562	1,378,579
Unpaid Principal Balance of impaired loans	3,233,217	1,534,252
Related Allowance of impaired loans	31,520	31,520
Construction to permanent [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	6,192,645	9,108,987
Unpaid Principal Balance of impaired loans	6,330,000	9,248,333
Related Allowance of impaired loans	110,045	498,254
Residential real estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	14,400,401	14,986,243
Unpaid Principal Balance of impaired loans	14,400,401	14,986,243
Related Allowance of impaired loans	30,291	197,478
Commercial [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	191,375	289,560
Unpaid Principal Balance of impaired loans	600,893	712,111
Related Allowance of impaired loans	37,330	61,145
Consumer [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	1,417,742	1,417,742
Unpaid Principal Balance of impaired loans	1,417,742	1,462,640
Related Allowance of impaired loans	151,501	151,500
With no related allowance recorded [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	30,521,346	23,295,787
Unpaid Principal Balance of impaired loans	31,582,423	24,446,425
Related Allowance of impaired loans
With no related allowance recorded [Member] | Commercial, Real Estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	7,927,165	4,444,315
Unpaid Principal Balance of impaired loans	8,755,486	5,174,124
Related Allowance of impaired loans
With no related allowance recorded [Member] | Construction [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	2,946,562	1,243,579
Unpaid Principal Balance of impaired loans	2,946,592	1,247,627
Related Allowance of impaired loans
With no related allowance recorded [Member] | Construction to permanent [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	4,905,000	6,614,333
Unpaid Principal Balance of impaired loans	4,905,000	6,614,333
Related Allowance of impaired loans
With no related allowance recorded [Member] | Residential real estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	13,730,710	9,789,727
Unpaid Principal Balance of impaired loans	13,730,710	9,789,727
Related Allowance of impaired loans
With no related allowance recorded [Member] | Commercial [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	18,167	210,091
Unpaid Principal Balance of impaired loans	250,893	581,974
Related Allowance of impaired loans
With no related allowance recorded [Member] | Consumer [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	993,742	993,742
Unpaid Principal Balance of impaired loans	993,742	1,038,640
Related Allowance of impaired loans
With an allowance recorded [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	4,168,704	13,461,294
Unpaid Principal Balance of impaired loans	4,750,816	14,025,303
Related Allowance of impaired loans	500,538	1,259,791
With an allowance recorded [Member] | Commercial, Real Estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	1,479,160	5,131,655
Unpaid Principal Balance of impaired loans	1,595,500	5,354,025
Related Allowance of impaired loans	139,851	319,894
With an allowance recorded [Member] | Construction [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	135,000	135,000
Unpaid Principal Balance of impaired loans	286,625	286,625
Related Allowance of impaired loans	31,520	31,520
With an allowance recorded [Member] | Construction to permanent [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	1,287,645	2,494,654
Unpaid Principal Balance of impaired loans	1,425,000	2,634,000
Related Allowance of impaired loans	110,045	498,254
With an allowance recorded [Member] | Residential real estate [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	669,691	5,196,516
Unpaid Principal Balance of impaired loans	669,691	5,196,516
Related Allowance of impaired loans	30,291	197,478
With an allowance recorded [Member] | Commercial [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	173,208	79,469
Unpaid Principal Balance of impaired loans	350,000	130,137
Related Allowance of impaired loans	37,330	61,145
With an allowance recorded [Member] | Consumer [Member]
Summarizes impaired loans:
Recorded investment in impaired loans	424,000	424,000
Unpaid Principal Balance of impaired loans	424,000	424,000
Related Allowance of impaired loans	$ 151,501	$ 151,500

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Loans Receivable and Allowance for Loan Losses (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Changes in the allowance for loan losses for the periods
Balance, beginning of period	$ 8,460,943	$ 12,208,476	$ 9,384,672	$ 15,374,101
Provision for loan losses	(1,713,425)	1,482,798		8,464,427
Loans charged-off	(90,739)	(3,034,591)		(7,188,138)
Recoveries of loans previously charged-off	16,869	743,044		763,650
Transferred to loans held-for-sale				(6,014,313)
Balance, end of period	$ 6,673,648	$ 11,399,727	$ 6,673,648	$ 11,399,727

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Income (Loss) Per Share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Computation of income (loss) per share
Net income (loss)	$ 345,282	$ (7,175,368)	$ 890,812	$ (16,157,966)
Weighted average common shares O/S	38,381,988	38,362,727	38,377,166	38,362,727
Amount	$ 0.01	$ (0.19)	$ 0.02	$ (0.42)

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Fair Value and Interest Rate Risk (Details Textual)	6 Months Ended
	Jun. 30, 2012
Fair Value and Interest Rate Risk (Textual) [Abstract]
Short-term borrowings	90 days

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Deposits (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Deposits (Textual) [Abstract]
Certificate of Deposit Account Registry Service	$ 0	$ 1,361,544
Percentage of maximum deposit to customer of other banks in CDARS	10.00%

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Investment Securities

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Investment Securities

Note 2: Investment Securities

The amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities at June 30, 2012 and December 31, 2011 are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2012:
U. S. Government agency bonds	$	5,000,000	$	16,920	$	—		$	5,016,920
U. S. Government agency mortgage-backed securities		38,624,381		1,020,326		(1,942	)		39,642,765
Corporate bonds		12,202,773		8,553		(528,381	)		11,682,945
	$	55,827,154	$	1,045,799	$	(530,323	)	$	56,342,630
December 31, 2011:
U. S. Government agency bonds	$	5,000,000	$	37,085	$	—		$	5,037,085
U. S. Government agency mortgage-backed securities		49,004,232		1,051,097		(5,900	)		50,049,429
Corporate bonds		12,249,064		25,338		(890,944	)		11,383,458
	$	66,253,296	$	1,113,520	$	(896,844	)	$	66,469,972

The following table presents the gross unrealized loss and fair value of Bancorp’s available-for-sale securities, aggregated by the length of time the individual securities have been in a continuous loss position, at June 30, 2012 and December 31, 2011:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2012:
U. S. Government mortgage - backed securities	$	67,729	$	(160	)	$	285,040	$	(1,782	)	$	352,769	$	(1,942	)
Corporate bonds		5,814,060		(185,940	)		2,657,559		(342,441	)		8,471,619		(528,381	)
Totals	$	5,881,789	$	(186,100	)	$	2,942,599	$	(344,223	)	$	8,824,388	$	(530,323	)
December 31, 2011:
U. S. Government mortgage - backed securities	$	4,941,662	$	(5,492	)	$	68,309	$	(408	)	$	5,009,971	$	(5,900	)
Corporate bonds		8,358,120		(890,944	)		—		—			8,358,120		(890,944	)
Totals	$	13,299,782	$	(896,436	)	$	68,309	$	(408	)	$	13,368,091	$	(896,844	)

At June 30, 2012, eight securities had unrealized holding losses with aggregate depreciation of 5.7% from the amortized cost. At December 31, 2011, nine securities had unrealized losses with aggregate depreciation of 6.3% from the amortized cost.

Bancorp performs a quarterly analysis of those securities that are in an unrealized loss position to determine if those losses qualify as other-than-temporary impairments. This analysis considers the following criteria in its determination: the ability of the issuer to meet its obligations, an impairment due to a deterioration in credit, management’s plans and ability to maintain its investment in the security, the length of time and the amount by which the security has been in a loss position, the interest rate environment, the general economic environment and prospects or projections for improvement or deterioration.

Management believes that none of the unrealized losses on available-for-sale securities noted above are other than temporary due to the fact that they relate to market interest rate changes on corporate debt and mortgage-backed securities issued by U.S. Government agencies. Management considers the issuers of the securities to be financially sound, the corporate bonds are investment grade and the Company expects to receive all contractual principal and interest related to these investments. Because the Company does not intend to sell the investments, and it is not more-likely-than-not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2012.

The amortized cost and fair value of available-for-sale debt securities at June 30, 2012 by contractual maturity are presented below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be prepaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary:

	Amortized Cost		Fair Value
Maturity:
Over 10 years	$	—	$	—
Corporate bonds < 5 years		3,202,773		3,211,326
Corporate bonds 5 to 10 years		9,000,000		8,471,619
U.S. Government bonds 5 to 10 years		5,000,000		5,016,920
Mortgage-backed securities		38,624,381		39,642,765
Total	$	55,827,154	$	56,342,630

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Restructuring Charges and Asset Disposals (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Restructuring Reserves
Beginning balance			$ 381,940
Expenses	126,730	2,986,441	495,207	2,986,441
Cash payments			(377,202)
Non-cash charges			(114,843)
Ending balance	385,102		385,102
Severance and benefit costs 2011 [Member]
Restructuring Reserves
Beginning balance			64,132
Expenses			34,616
Cash payments			(17,665)
Non-cash charges			(2,994)
Ending balance	78,089		78,089
Lease termination costs 2011 [Member]
Restructuring Reserves
Beginning balance			317,808
Expenses
Cash payments
Non-cash charges			(72,404)
Ending balance	245,404		245,404
Severance and benefit costs 2012 [Member]
Restructuring Reserves
Beginning balance
Expenses			410,813
Cash payments			(359,537)
Non-cash charges
Ending balance	51,276		51,276
Lease termination costs 2012 [Member]
Restructuring Reserves
Beginning balance
Expenses			10,333
Cash payments
Non-cash charges
Ending balance	10,333		10,333
Assets disposals [Member]
Restructuring Reserves
Beginning balance
Expenses			39,445
Cash payments
Non-cash charges			(39,445)
Ending balance

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Loans Receivable and Allowance for Loan Losses (Details 7) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Total troubled debt restructured loans
Troubled debt restructured loan amount	$ 22,856,436	$ 25,479,031
Number of Loans	10	12
Commercial, Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	4,548,877,000,000	5,905,047
Number of Loans	3	4
Residential Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	10,471,386	10,506,751
Number of Loans	3	3
Construction [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	1,219,528	1,243,579
Number of Loans	1	1
Construction to permanent [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	6,192,645	7,399,654
Number of Loans	2	3
Consumer home equity [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	424,000	424,000
Number of Loans	1	1
Non-accrual Loans [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	6,822,233	9,405,115
Number of Loans	4	6
Non-accrual Loans [Member] | Commercial, Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	4,315,060	5,666,882
Number of Loans	2	3
Non-accrual Loans [Member] | Residential Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount
Number of Loans
Non-accrual Loans [Member] | Construction [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	1,219,528	1,243,579
Number of Loans	1	1
Non-accrual Loans [Member] | Construction to permanent [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	1,287,645	2,494,654
Number of Loans	1	2
Non-accrual Loans [Member] | Consumer home equity [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount
Number of Loans
Accrual of Loans [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	16,034,203	16,073,916
Number of Loans	6	6
Accrual of Loans [Member] | Commercial, Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	233,817	238,165
Number of Loans	1	1
Accrual of Loans [Member] | Residential Real Estate [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	10,471,386	10,506,751
Number of Loans	3	3
Accrual of Loans [Member] | Construction [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount
Number of Loans
Accrual of Loans [Member] | Construction to permanent [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	4,905,000	4,905,000
Number of Loans	1	1
Accrual of Loans [Member] | Consumer home equity [Member]
Total troubled debt restructured loans
Troubled debt restructured loan amount	424,000	424,000
Number of Loans	$ 1	$ 1

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Regulatory and Operational Matters (Tables)

6 Months Ended

Jun. 30, 2012

Deposits Regulatory and Operational Matters [Abstract]

Bank's actual capital amounts and ratios

The Company’s and the Bank’s actual capital amounts and ratios at June 30, 2012 and December 31, 2011 were:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2012
The Company:
Total Capital (to Risk Weighted Assets)	$	64,556		15.85	%	$	32,583		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		59,439		14.60	%		16,285		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		59,439		9.13	%		26,041		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	62,935		15.43	%	$	32,630		8.00	%	$	40,787		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		57,819		14.18	%		16,310		4.00	%		24,465		6.00	%
Tier 1 Capital (to Average Assets)		57,819		8.88	%		26,045		4.00	%		32,556		5.00	%
December 31, 2011
The Company:
Total Capital (to Risk Weighted Assets)	$	63,658		15.22	%	$	33,469		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		58,377		13.95	%		16,735		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		58,377		9.01	%		25,931		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	61,616		14.75	%	$	33,445		8.00	%	$	41,806		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		56,339		13.48	%		16,722		4.00	%		25,084		6.00	%
Tier 1 Capital (to Average Assets)		56,339		8.69	%		25,929		4.00	%		32,411		5.00	%

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Financial Instruments with Off-Balance Sheet Risk (Tables)

6 Months Ended

Jun. 30, 2012

Financial Instruments with Off-Balance-Sheet Risk [Abstract]

Contractual amounts represent credit risk

Financial instruments whose contractual amounts represent credit risk at June 30, 2012 are as follows:

Commitments to extend credit:
Future loan commitments	$	35,782,667
Home equity lines of credit		30,738,527
Unused lines of credit		37,402,837
Undisbursed construction loans		4,304,731
Financial standby letters of credit		7,000
	$	108,235,762

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Regulatory and Operational Matters (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Company's and the Bank's actual capital amounts and ratios
Tier 1 Capital (to Average Assets), Actual Ratio	9.00%
The Company [Member]
Company's and the Bank's actual capital amounts and ratios
Total Capital (to Risk Weighted Assets), Actual Amount	$ 64,556	$ 63,658
Total Capital (to Risk Weighted Assets), Actual Ratio	15.85%	15.22%
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Amount	32,583	33,469
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Ratio	8.00%	8.00%
Tier 1 Capital (to Risk Weighted Assets), Actual Amount	59,439	58,377
Tier 1 Capital (to Risk Weighted Assets), Actual Ratio	14.60%	13.95%
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Amount	16,285	16,735
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier 1 Capital (to Average Assets), Actual Amount	59,439	58,377
Tier 1 Capital (to Average Assets), Actual Ratio	9.13%	9.01%
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes Amount	26,041	25,931
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes Ratio	4.00%	4.00%
The Bank [Member]
Company's and the Bank's actual capital amounts and ratios
Total Capital (to Risk Weighted Assets), Actual Amount	62,935	61,616
Total Capital (to Risk Weighted Assets), Actual Ratio	15.43%	14.75%
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Amount	32,630	33,445
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Ratio	8.00%	8.00%
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	40,787	41,806
Total Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier 1 Capital (to Risk Weighted Assets), Actual Amount	57,819	56,339
Tier 1 Capital (to Risk Weighted Assets), Actual Ratio	14.18%	13.48%
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Amount	16,310	16,722
Tier 1 Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	24,465	25,084
Tier 1 Capital (to Risk Weighted Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	6.00%	6.00%
Tier 1 Capital (to Average Assets), Actual Amount	57,819	56,339
Tier 1 Capital (to Average Assets), Actual Ratio	8.88%	8.69%
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes Amount	26,045	25,929
Tier 1 Capital (to Average Assets), For Capital Adequacy Purposes Ratio	4.00%	4.00%
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Amount	$ 32,556	$ 32,411
Tier 1 Capital (to Average Assets), To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%

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Loans Receivable and Allowance for Loan Losses (Details 8) (USD $)	6 Months Ended
	Jun. 30, 2012
Summarizes loans that were modified in a troubled debt restructuring
Number of Relationships	$ 1
Pre-Modification Outstanding Recorded Investment	4,661,109
Post-Modification Outstanding Recorded Investment	4,661,109
Commercial, Real Estate [Member]
Summarizes loans that were modified in a troubled debt restructuring
Number of Relationships
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Residential real estate [Member]
Summarizes loans that were modified in a troubled debt restructuring
Number of Relationships	1
Pre-Modification Outstanding Recorded Investment	4,661,109
Post-Modification Outstanding Recorded Investment	4,661,109
Construction to permanent [Member]
Summarizes loans that were modified in a troubled debt restructuring
Number of Relationships
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

XML

Fair Value and Interest Rate Risk (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value and Interest Rate Risk [Abstract]

Financial assets measured at fair value on a recurring basis

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2012
U.S. Government agency mortgage- backed securities	$	—	$	39,642,765	$	—	$	39,642,765
U.S. Government bonds		—		5,016,920		—		5,016,920
Corporate bonds		—		11,682,945		—		11,682,945
Securities available for sale	$	—	$	56,342,630	$	—	$	56,342,630
December 31, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
U.S. Government agency mortgage- backed securities	$	—	$	50,049,429	$	—	$	50,049,429
U.S. Government bonds				5,037,085		—		5,037,085
Corporate bonds		—		11,383,458		—		11,383,458
Securities available for sale	$	—	$	66,469,972	$	—	$	66,469,972

Financial assets measured at fair value on a non-recurring basis

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Impaired Loans (1)	$	—	$	—	$	4,168,705	$	4,168,705
Other real estate owned (2)	$	—	$	—	$	288,144	$	288,144
December 31, 2011
Impaired Loans (1)	$	—	$	—	$	13,498,177	$	13,498,177
Other real estate owned (2)	$	—	$	—	$	2,762,640	$	2,762,640

⁽¹⁾  Represents carrying value for which adjustments are based on the appraised value of the collateral.

⁽²⁾  Represents carrying value for which adjustments are based on the appraised value of the property.

Carrying amounts and estimated fair values of financial instruments

		June 30, 2012				December 31, 2011
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banks	Level 1	$	3,721	$	3,721	$	4,242	$	4,242
Interest-bearing deposits due from banks	Level 1		58,456		58,456		50,474		50,474
Short-term investments	Level 1		710		710		710		710
Other investments	Level 2		3,500		3,500		3,500		3,500
Federal Reserve Bank stock	Level 1		1,720		1,720		1,707		1,707
Federal Home Loan Bank stock	Level 1		4,344		4,344		4,508		4,508
Loans receivable, net	Level 3		483,858		491,095		501,477		511,648
Accrued interest receivable	Level 1		2,289		2,289		2,453		2,453
Financial Liabilities:
Demand deposits	Level 1	$	71,722	$	71,722	$	65,613	$	65,613
Savings deposits	Level 1		66,862		66,862		59,396		59,396
Money market deposits	Level 1		47,227		47,227		52,890		52,890
NOW accounts	Level 1		24,297		24,297		24,396		24,396
Time deposits	Level 2		311,986		317,852		342,614		347,246
FHLB Borrowings	Level 2		50,000		52,954		50,000		52,645
Securities sold under repurchase agreements	Level 2		7,000		7,683		7,000		8,173
Subordinated debentures	Level 2		8,248		8,248		8,248		8,248
Accrued interest payable	Level 1		1,096		1,096		949		949

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Restructuring Charges and Asset Disposals (Tables)

6 Months Ended

Jun. 30, 2012

Restructuring and Related Activities [Abstract]

Restructuring reserves

	Balance at December 31, 2011		Expenses		Cash payments			Non-cash charges			Balance at June 30, 2012
Severance and benefit costs 2011	$	64,132	$	34,616	$	(17,665	)	$	(2,994	)	$	78,089
Lease termination costs 2011		317,808		—		—			(72,404	)		245,404
Severance and benefit costs 2012		—		410,813		(359,537	)		—			51,276
Lease termination costs 2012		—		10,333		—			—			10,333
Asset disposals 2012		—		39,445		—			(39,445	)		—
Total	$	381,940	$	495,207	$	(377,202	)	$	(114,843	)	$	385,102

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Basis of Financial Statement Presentation

6 Months Ended

Jun. 30, 2012

Basis of Financial Statement Presentation [Abstract]

Basis of Financial Statement Presentation

Note 1: Basis of Financial Statement Presentation

The Consolidated Balance Sheet at December 31, 2011 has been derived from the audited financial statements of Patriot National Bancorp, Inc. (“Bancorp” or “the Company”) at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The accompanying unaudited financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited financial statements of Bancorp and notes thereto for the year ended December 31, 2011.

The information furnished reflects, in the opinion of management, all normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the results of operations that may be expected for the remainder of 2012.

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Investment Securities (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities
Amortized Cost	$ 55,827,154	$ 66,253,296
Gross Unrealized Gains	306,842	1,113,520	459,133
Gross Unrealized Losses	(530,323)	(896,844)
Fair Value	56,342,630	66,469,972
U. S. Government bonds [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities
Amortized Cost	5,000,000	5,000,000
Gross Unrealized Gains	16,920	37,085
Gross Unrealized Losses
Fair Value	5,016,920	5,037,085
U. S. Government agency mortgage-backed securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities
Amortized Cost	38,624,381	49,004,232
Gross Unrealized Gains	1,020,326	1,051,097
Gross Unrealized Losses	(1,942)	(5,900)
Fair Value	39,642,765	50,049,429
Corporate bonds [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities
Amortized Cost	12,202,773	12,249,064
Gross Unrealized Gains	8,553	25,338
Gross Unrealized Losses	(528,381)	(890,944)
Fair Value	$ 11,682,945	$ 11,383,458

XML

Loans Receivable and Allowance for Loan Losses (Details 4) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Delinquency status, of non-accrual loans and past due loans
Greater than 90 Days Past Due and Accruing	$ 4,234,926	$ 9,461,106
Commercial, Real Estate [Member] | Special Mention [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Greater than 90 Days Past Due and Accruing	304,388
Total Non-Accrual and Past Due Loans	304,388
Non-Accrual Loans [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due	371,920	443,259
Greater Than 90 Days	12,413,233	12,568,524
Total Past Due	12,785,153	13,011,783
Current	4,667,233	7,671,382
Greater than 90 Days Past Due and Accruing	4,234,926	9,461,105
Total Non-Accrual and Past Due Loans	21,687,312	30,144,270
Non-Accrual Loans [Member] | Construction [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	1,862,035	135,000
Total Past Due	1,862,035	135,000
Current	1,219,528	1,243,579
Greater than 90 Days Past Due and Accruing		1,717,999
Total Non-Accrual and Past Due Loans	3,081,563	3,096,578
Non-Accrual Loans [Member] | Construction [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	1,862,035	135,000
Total Past Due	1,862,035	135,000
Current	1,219,528	1,243,579
Greater than 90 Days Past Due and Accruing		1,717,999
Total Non-Accrual and Past Due Loans	3,081,563	3,096,578
Non-Accrual Loans [Member] | Commercial, Real Estate [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due		443,259
Greater Than 90 Days	5,808,987	6,670,730
Total Past Due	5,808,987	7,113,989
Current	2,160,060	2,223,816
Greater than 90 Days Past Due and Accruing	3,786,926	6,750,963
Total Non-Accrual and Past Due Loans	11,755,973	16,088,768
Non-Accrual Loans [Member] | Commercial, Real Estate [Member] | Pass [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Greater than 90 Days Past Due and Accruing		402,663
Total Non-Accrual and Past Due Loans		402,663
Non-Accrual Loans [Member] | Commercial, Real Estate [Member] | Special Mention [Member]
Delinquency status, of non-accrual loans and past due loans
Greater than 90 Days Past Due and Accruing		2,832,452
Total Non-Accrual and Past Due Loans		2,832,452
Non-Accrual Loans [Member] | Commercial, Real Estate [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due		443,259
Greater Than 90 Days	5,808,987	6,670,730
Total Past Due	5,808,987	7,113,989
Current	2,160,060	2,223,816
Greater than 90 Days Past Due and Accruing	3,482,538	3,515,848
Total Non-Accrual and Past Due Loans	11,451,585	12,853,653
Non-Accrual Loans [Member] | Construction to Permanent [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	1,287,645	4,203,987
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	1,287,645	4,203,987
Non-Accrual Loans [Member] | Construction to Permanent [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	1,287,645	4,203,987
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	1,287,645	4,203,987
Non-Accrual Loans [Member] | Residential Real Estate [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due	371,920
Greater Than 90 Days	3,557,095	4,479,492
Total Past Due	3,929,015	4,479,492
Current
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	3,929,015	4,479,492
Non-Accrual Loans [Member] | Residential Real Estate [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due	371,920
Greater Than 90 Days	3,557,095	4,479,492
Total Past Due	3,929,015	4,479,492
Current
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	3,929,015	4,479,492
Non-Accrual Loans [Member] | Commercial [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	191,375	289,560
Total Past Due	191,375	289,560
Current
Greater than 90 Days Past Due and Accruing	448,000	992,143
Total Non-Accrual and Past Due Loans	639,375	1,281,703
Non-Accrual Loans [Member] | Commercial [Member] | Pass [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans
Non-Accrual Loans [Member] | Commercial [Member] | Special Mention [Member]
Delinquency status, of non-accrual loans and past due loans
Greater than 90 Days Past Due and Accruing		44,296
Total Non-Accrual and Past Due Loans		44,296
Non-Accrual Loans [Member] | Commercial [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	191,375	289,560
Total Past Due	191,375	289,560
Current
Greater than 90 Days Past Due and Accruing	44,800	947,847
Total Non-Accrual and Past Due Loans	639,375	1,237,407
Non-Accrual Loans [Member] | Consumer [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	993,741	993,742
Total Past Due	993,741	993,742
Current
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	993,741	993,742
Non-Accrual Loans [Member] | Consumer [Member] | Substandard [Member]
Delinquency status, of non-accrual loans and past due loans
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days	993,741	993,742
Total Past Due	993,741	993,742
Current
Greater than 90 Days Past Due and Accruing
Total Non-Accrual and Past Due Loans	$ 993,741	$ 993,742

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Other Comprehensive Income (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Change in unrealized gains and losses on available-for-sale securities
Unrealized holding gains arising during the period, before tax amount	$ 198,155	$ 453,931	$ 306,842	$ 459,133
Unrealized holding gains arising during the period, Tax Effect	(75,299)	(206,410)	(116,601)	(208,387)
Unrealized holding gains arising during the period, net of Taxes	122,856	247,521	190,241	250,746
Reclassification adjustment for gains (losses) recognized in income, Before Tax Amount			(8,042)
Reclassification adjustment for gains (losses) recognized in income, Tax Effect			3,056
Reclassification adjustment for gains (losses) recognized in income, Net of Tax Amount			(4,986)
Unrealized holding gains on available for sale securities, net of taxes, before tax amount	198,155	453,931	298,800	459,133
Unrealized holding gains on available for sale securities, net of taxes, Tax Effect	(75,299)	(206,410)	(113,545)	(208,387)
Unrealized holding gains on available for sale securities, net of taxes, Net of Tax Amount	$ 122,856	$ 247,521	$ 185,255	$ 250,746

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Consolidated Balance Sheets (USD $)	Jun. 30, 2012	Dec. 31, 2011
Cash and due from banks:
Noninterest bearing deposits and cash	$ 3,720,985	$ 4,241,552
Interest bearing deposits	58,456,392	50,474,257
Short-term investments	710,157	709,567
Total cash and cash equivalents	62,887,534	55,425,376
Securities:
Available for sale securities, at fair value (Note 2)	56,342,630	66,469,972
Other Investments	3,500,000	3,500,000
Federal Reserve Bank stock, at cost	1,719,550	1,707,000
Federal Home Loan Bank stock, at cost	4,343,800	4,508,300
Total securities	65,905,980	76,185,272
Loans receivable (net of allowance for loan losses: 2012: $X,XXX,XXX 2011: $9,384,672) (Note 3)	483,858,072	501,227,297
Loans held for sale		250,000
Accrued interest and dividends receivable	2,289,346	2,453,179
Premises and equipment, net	4,712,520	4,108,318
Cash surrender value of life insurance	21,247,568	20,984,604
Other real estate owned	1,517,755	2,762,640
Deferred tax asset (Note 6)
Other assets	1,848,344	2,419,592
Total assets	644,267,119	665,816,278
Deposits (Note 4):
Noninterest bearing deposits	71,722,494	65,613,374
Interest bearing deposits	450,373,261	479,296,019
Total deposits	522,095,755	544,909,393
Borrowings:
Repurchase agreements	7,000,000	7,000,000
Federal Home Loan Bank borrowings	50,000,000	50,000,000
Total borrowings	57,000,000	57,000,000
Junior subordinated debt owed to unconsolidated trust	8,248,000	8,248,000
Accrued expenses and other liabilities	5,164,509	5,109,225
Total liabilities	592,508,264	615,266,618
Commitments (Note 9)
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares authorized, no shares issued and outstanding
Common stock, $.01 par value, 100,000,000 shares authorized; 2012: 38,478,778 shares issued;38,467,073 shares outstanding. 2011: 38,374,432 shares issued; 38,362,727,shares outstanding	384,787	383,744
Additional paid-in capital	105,182,518	105,050,433
Accumulated deficit	(53,968,019)	(54,858,831)
Less: Treasury stock, at cost: 2012 and 2011 11,705 shares	(160,025)	(160,025)
Accumulated other comprehensive income	319,594	134,339
Total shareholders' equity	51,758,855	50,549,660
Total liabilities and shareholders' equity	$ 644,267,119	$ 665,816,278

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Loans Receivable and Allowance for Loan Losses (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Mar. 29, 2012	Dec. 31, 2011
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	$ 34,690,050		$ 34,690,050			$ 36,757,081,000,000
Troubled debt restructured loan amount	22,856,436		22,856,436			25,479,031
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Accruing interest	4,234,926		4,234,926			9,461,106
Loans on nonaccrual status and considered impaired	17,500,000		17,500,000			20,700,000
Sale of residential loans					66,400,000
Cash purchase price on sale of residential loans					66,700,000
Net book value of bank's assets					101.00%
Non-accrual loans had been performing	274,000	500,000	584,000	1,500,000
Interest collected and recognized as income on impaired loans	0	30,000	180,000	461,000
Average recorded investment in impaired loans	34,000,000		34,100,000
Troubled debt restructured loan amount	22,856,436		22,856,436			25,479,031
Aggregating accruing loans	16,000,000		16,000,000
Aggregating non-accruing loans	6,800,000		6,800,000
Creditworthiness extends credit			75.00%
Borrowers' creditworthiness			80.00%
Construction loans, the maximum loan-to-value			65.00%
Construction loans are short-term loans			18 months
Delinquency status, "Open-end" credits are charged-off			180 days
Delinquent and "Closed-end" credits are charged-off			120 days
Consumer installment loans are charged off no later			90 days
Loans deemed to be impaired	17,500,000		17,500,000			20,700,000
Loans past due still accruing interest	4,200,000		4,200,000			9,500,000
Recorded investment in impaired loans	34,690,050		34,690,050			36,757,081,000,000
Recorded investment of impaired loans related allowances	5,005,385		5,005,385			1,259,791
Reduction in the allowance for loan losses	1,100,000
Decline in Net charge-offs of expected losses	76,000
With no related allowance recorded [Member]
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	30,521,346		30,521,346			23,295,787
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Recorded investment in impaired loans	30,521,346		30,521,346			23,295,787
Recorded investment of impaired loans related allowances
Residential real estate [Member]
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	14,400,401		14,400,401			14,986,243
Troubled debt restructured loan amount	10,471,386		10,471,386			10,506,751
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Troubled debt restructured loan amount	10,471,386		10,471,386			10,506,751
Recorded investment in impaired loans	14,400,401		14,400,401			14,986,243
Recorded investment of impaired loans related allowances	30,291		30,291			197,478
Residential real estate [Member] | With no related allowance recorded [Member]
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	13,730,710		13,730,710			9,789,727
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Recorded investment in impaired loans	13,730,710		13,730,710			9,789,727
Recorded investment of impaired loans related allowances
Commercial, Real Estate [Member]
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	9,406,325		9,406,325			9,575,970
Troubled debt restructured loan amount	4,548,877,000,000		4,548,877,000,000			5,905,047
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Troubled debt restructured loan amount	4,548,877,000,000		4,548,877,000,000			5,905,047
Recorded investment in impaired loans	9,406,325		9,406,325			9,575,970
Recorded investment of impaired loans related allowances	139,851		139,851			319,894
Commercial, Real Estate [Member] | With no related allowance recorded [Member]
Loans Receivable and Allowance for Loan Losses (Textual) [Abstract]
Recorded investment in impaired loans	7,927,165		7,927,165			4,444,315
Loans Receivable and Allowance for Loan Losses (Additional Textual) [Abstract]
Recorded investment in impaired loans	7,927,165		7,927,165			4,444,315
Recorded investment of impaired loans related allowances

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Consolidated Statements of Shareholders' Equity (Unaudited) (USD $)	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Income
Beginning balance at Dec. 31, 2010	$ 67,172,188	$ 383,744	$ 105,050,433	$ (39,399,345)	$ (160,025)	$ 1,297,381
Beginning balance, shares at Dec. 31, 2010		38,362,727
Comprehensive loss/income
Net income (loss)	(16,157,966)			(16,157,966)
Unrealized holding gain on available for sale securities, net of taxes	250,746					250,746
Total comprehensive income (loss)	(15,907,220)
Ending balance at Jun. 30, 2011	51,264,968	383,744	105,050,433	(55,557,311)	(160,025)	1,548,127
Ending balance, shares at Jun. 30, 2011		38,362,727
Beginning balance at Dec. 31, 2011	50,549,660	383,744	105,050,433	(54,858,831)	(160,025)	134,339
Beginning balance, shares at Dec. 31, 2011		38,362,727
Comprehensive loss/income
Net income (loss)	890,812			890,812
Unrealized holding gain on available for sale securities, net of taxes	190,241					185,255
Total comprehensive income (loss)	1,076,067
Share-based compensation expense	(133,128)		(133,128)
Issuance of restricted stock, shares		104,346
Issuance of restricted stock, value		1,043	(1,043)
Ending balance at Jun. 30, 2012	$ 51,758,855	$ 384,787	$ 105,182,518	$ (53,968,019)	$ (160,025)	$ 319,594
Ending balance, shares at Jun. 30, 2012		38,467,073

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Fair Value and Interest Rate Risk (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Financial assets measured at fair value on a non-recurring basis
Impaired Loans	$ 34,690,050	$ 36,757,081,000,000
Fair Value Measurements Non-recurring [Member]
Financial assets measured at fair value on a non-recurring basis
Impaired Loans	4,168,705	13,498,177
Other real estate owned	288,144	2,762,640
Fair Value Measurements Non-recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a non-recurring basis
Impaired Loans
Other real estate owned
Fair Value Measurements Non-recurring [Member] | Significant Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a non-recurring basis
Impaired Loans
Other real estate owned
Fair Value Measurements Non-recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a non-recurring basis
Impaired Loans	4,168,705	13,498,177
Other real estate owned	$ 288,144	$ 2,762,640

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Investment Securities (Details Textual)	Jun. 30, 2012	Dec. 31, 2011 Securities
Investment Securities (Textual) [Abstract]
Unrealized holding losses depreciation	5.70%	6.30%
Number of securities having unrealized holding losses with aggregate depreciation	8	9

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available-for-sale securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2012:
U. S. Government agency bonds	$	5,000,000	$	16,920	$	—		$	5,016,920
U. S. Government agency mortgage-backed securities		38,624,381		1,020,326		(1,942	)		39,642,765
Corporate bonds		12,202,773		8,553		(528,381	)		11,682,945
	$	55,827,154	$	1,045,799	$	(530,323	)	$	56,342,630
December 31, 2011:
U. S. Government agency bonds	$	5,000,000	$	37,085	$	—		$	5,037,085
U. S. Government agency mortgage-backed securities		49,004,232		1,051,097		(5,900	)		50,049,429
Corporate bonds		12,249,064		25,338		(890,944	)		11,383,458
	$	66,253,296	$	1,113,520	$	(896,844	)	$	66,469,972

Gross unrealized loss and fair value of Bancorp's available-for-sale securities, aggregated by the length of time the individual securities

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
June 30, 2012:
U. S. Government mortgage - backed securities	$	67,729	$	(160	)	$	285,040	$	(1,782	)	$	352,769	$	(1,942	)
Corporate bonds		5,814,060		(185,940	)		2,657,559		(342,441	)		8,471,619		(528,381	)
Totals	$	5,881,789	$	(186,100	)	$	2,942,599	$	(344,223	)	$	8,824,388	$	(530,323	)
December 31, 2011:
U. S. Government mortgage - backed securities	$	4,941,662	$	(5,492	)	$	68,309	$	(408	)	$	5,009,971	$	(5,900	)
Corporate bonds		8,358,120		(890,944	)		—		—			8,358,120		(890,944	)
Totals	$	13,299,782	$	(896,436	)	$	68,309	$	(408	)	$	13,368,091	$	(896,844	)

Amortized cost and fair value of available-for-sale debt securities

	Amortized Cost		Fair Value
Maturity:
Over 10 years	$	—	$	—
Corporate bonds < 5 years		3,202,773		3,211,326
Corporate bonds 5 to 10 years		9,000,000		8,471,619
U.S. Government bonds 5 to 10 years		5,000,000		5,016,920
Mortgage-backed securities		38,624,381		39,642,765
Total	$	55,827,154	$	56,342,630

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Loans Receivable and Allowance for Loan Losses (Details) (USD $)	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Company's loan portfolio
Total Loans	$ 489,721,001		$ 509,757,889
Premiums on purchased loans	223,853		231,125
Net deferred costs	586,866		622,955
Allowance for loan losses	(6,673,648)	(8,460,943)	(9,384,672)	(11,399,727)	(12,208,476)	(15,374,101)
Loans receivable, net	483,858,072		501,227,297
Commercial, Real Estate [Member]
Company's loan portfolio
Total Loans	237,217,702		215,659,837
Allowance for loan losses	(3,782,390)	(4,645,248)	(4,018,746)
Residential Real Estate [Member]
Company's loan portfolio
Total Loans	149,905,067		188,108,855
Allowance for loan losses	(1,209,903)	(1,049,555)	(2,550,588)
Construction [Member]
Company's loan portfolio
Total Loans	6,217,516		12,306,922
Allowance for loan losses	(250,511)	(842,636)	(867,159)
Construction to Permanent [Member]
Company's loan portfolio
Total Loans	8,287,915		10,012,022
Allowance for loan losses	(121,450)	(236,313)	(547,333)
Real Estate [Member] | Commercial, Real Estate [Member]
Company's loan portfolio
Total Loans	237,217,702		215,659,837
Real Estate [Member] | Residential Real Estate [Member]
Company's loan portfolio
Total Loans	149,905,067		188,108,855
Real Estate [Member] | Construction [Member]
Company's loan portfolio
Total Loans	6,217,516		12,306,922
Real Estate [Member] | Construction to Permanent [Member]
Company's loan portfolio
Total Loans	8,287,915		10,012,022
Commercial [Member]
Company's loan portfolio
Total Loans	32,379,945		31,810,735
Allowance for loan losses	(735,342)	(1,094,736)	(882,062)
Consumer home equity [Member]
Company's loan portfolio
Total Loans	53,587,509		49,694,546
Consumer installment [Member]
Company's loan portfolio
Total Loans	$ 2,125,347		$ 2,164,972

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Deposits (Tables)

6 Months Ended

Jun. 30, 2012

Deposits Regulatory and Operational Matters [Abstract]

Summary of company's deposits

	June 30, 2012		December 31, 2011
Non-interest bearing	$	71,722,494	$	65,613,374
Interest bearing
NOW		24,297,309		24,396,210
Savings		66,862,473		59,396,310
Money market		47,227,188		52,889,642
Time certificates, less than $100,000		179,310,667		198,207,998
Time certificates, $100,000 or more		132,675,624		144,405,859
Total interest bearing		450,373,261		479,296,019
Total Deposits	$	522,095,755	$	544,909,393

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash Flows from Operating Activities:
Net income (loss)	$ 890,812	$ (16,157,966)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Restructuring charges and asset disposals	(5,049)	1,996,441
Amortization and accretion of investment premiums and discounts, net	213,178	116,431
Amortization and accretion of purchase loan premiums and discounts, net	7,272	5,028
Provision for loan losses	(2,558,827)	8,464,427
Gain on sale of loans	(263,646)	(79,729)
Loss on sale of investment securities	8,042
Amortization of core deposit intangible	6,963	7,506
Earnings on cash surrender value of life insurance	(262,964)	(321,245)
Depreciation and amortization	606,350	684,904
(Gain) loss on sale of other real estate owned	(201,355)	58,215
Impairment writedown on other real estate owned		165,764
Share-based compensation	133,128
Changes in assets and liabilities:
Decrease in deferred loan costs	36,089	100,958
Decrease in accrued interest and dividends receivable	163,833	182,723
(Increase) decrease in other assets	564,285	6,717,760
(Decrease) increase in accrued expenses and other liabilities	(61,423)	457,203
Net cash used in operating activities	(723,312)	2,398,420
Cash Flows from Investing Activities:
Principal repayments on available for sale securities	5,039,296	3,976,411
Proceeds from the sale (purchases) of available for sale securities	5,165,626	(51,995,480)
Redemptions of Federal Reserve Bank Stock		455,500
Purchases of Federal Reserve Bank Stock	(12,550)	(1,174,100)
Proceeds from repurchase of excess Federal Home Loan Bank Stock	164,500
Proceeds from sale of loans	67,126,928	55,089,794
Net (increase) decrease in loans	(47,966,735)	16,308,380
Purchase of other real estate owned		(481,165)
Proceeds from sale of other real estate owned	1,823,435	15,715,973
Capital improvements of other real estate owned	(89,051)
(Purchase) refund of bank premises and equipment	(252,341)	(218,522)
Net cash provided by investing activities	30,999,108	37,676,791
Cash Flows from Financing Activities:
Net decrease in demand, savings and money market deposits	7,813,928	(9,443,954)
Net decrease in time certificates of deposits	(30,627,566)	(112,860,038)
Net cash provided by (used in) financing activities	(22,813,638)	(122,303,992)
Net increase in cash and cash equivalents	7,462,158	(82,228,781)
Cash and Cash Equivalents:
Beginning	55,425,376	146,777,658
Ending	62,887,534	64,548,877
Supplemental Disclosures of Cash Flow Information
Interest paid	3,807,140	4,432,799
Income taxes paid		10,534
Supplemental disclosures of noncash operating, investing and financing activities:
Unrealized holding gain on available for sale securities arising during the period	306,842	459,133
Transfer of loans to other real estate owned	1,238,144	2,661,330
Transfer of other real estate owned to premises and equipment	$ 950,000

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Allowance for loans receivable	$ 6,673,648	$ 9,384,672
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	38,478,778	38,374,432
Common stock, shares outstanding	38,467,073	38,362,727
Treasury stock, shares	11,705	11,705

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Regulatory and Operational Matters

6 Months Ended

Jun. 30, 2012

Deposits Regulatory and Operational Matters [Abstract]

Regulatory and Operational Matters

Note 10: Regulatory and Operational Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). In addition, due to the Bank’s asset profile and current economic conditions in its markets, the Bank’s capital plan targets a minimum 9% Tier 1 leverage capital ratio.

In February 2009 the Bank entered into a formal written agreement (the “Agreement”) with the Office of the Comptroller of the Currency. Under the terms of the Agreement, the Bank has appointed a Compliance Committee of outside directors and the Chief Executive Officer. The Committee must report quarterly to the Board of Directors and to the OCC on the Bank’s progress in complying with the Agreement. The Agreement requires the Bank to review, adopt and implement a number of policies and programs related to credit and operational issues. The Agreement further provides for limitations on the acceptance of certain brokered deposits and the extension of credit to borrowers whose loans are criticized. The Bank may pay dividends during the term of the Agreement only with prior written permission from the OCC. The Agreement also requires that the Bank develop and implement a three-year capital plan. The Bank has taken or put into process many of the steps required by the Agreement, and does not anticipate that the restrictions included within the Agreement will impair its current business plan.

In June 2010 the company entered into a formal written agreement (the “Reserve Bank Agreement”) with the Federal Reserve Bank of New York (the “Reserve Bank”). Under the terms of the Reserve Bank Agreement, the Board of Directors of the Company are required to take appropriate steps to fully utilize the Company’s financial and managerial resources to serve as a source of strength to the Bank including taking steps to insure that the Bank complies with the Agreement with the OCC. The Reserve Bank Agreement requires the Company to submit, adopt and implement a capital plan that is acceptable to the Reserve Bank. The Company must also report to the Reserve Bank quarterly on the Company’s progress in complying with the Reserve Bank Agreement. The Agreement further provides for certain restrictions on the payment or receipt of dividends, distributions of interest or principal on subordinate debentures or trust preferred securities and the Company’s ability to incur debt or to purchase or redeem its stock without the prior written approval of the Reserve Bank. The Company has taken or put into process many of the steps required by the Reserve Bank Agreement, and does not anticipate that the restrictions included within the Reserve Bank Agreement will impair its current business plan.

The Company’s and the Bank’s actual capital amounts and ratios at June 30, 2012 and December 31, 2011 were:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2012
The Company:
Total Capital (to Risk Weighted Assets)	$	64,556		15.85	%	$	32,583		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		59,439		14.60	%		16,285		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		59,439		9.13	%		26,041		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	62,935		15.43	%	$	32,630		8.00	%	$	40,787		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		57,819		14.18	%		16,310		4.00	%		24,465		6.00	%
Tier 1 Capital (to Average Assets)		57,819		8.88	%		26,045		4.00	%		32,556		5.00	%
December 31, 2011
The Company:
Total Capital (to Risk Weighted Assets)	$	63,658		15.22	%	$	33,469		8.00	%		N/A		N/A
Tier 1 Capital (to Risk Weighted Assets)		58,377		13.95	%		16,735		4.00	%		N/A		N/A
Tier 1 Capital (to Average Assets)		58,377		9.01	%		25,931		4.00	%		N/A		N/A
The Bank:
Total Capital (to Risk Weighted Assets)	$	61,616		14.75	%	$	33,445		8.00	%	$	41,806		10.00	%
Tier 1 Capital (to Risk Weighted Assets)		56,339		13.48	%		16,722		4.00	%		25,084		6.00	%
Tier 1 Capital (to Average Assets)		56,339		8.69	%		25,929		4.00	%		32,411		5.00	%

Restrictions on dividends, loans and advances

The Company’s ability to pay dividends is dependent on the Bank’s ability to pay dividends to the Company. Pursuant to the February 9, 2009 Agreement between the Bank and the OCC, the Bank can pay dividends to the Company only pursuant to a dividend policy requiring compliance with the Bank’s OCC-approved capital program, in compliance with applicable law and with the prior written determination of no supervisory objection by the Assistant Deputy Comptroller. In addition to the Agreement, certain other restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. The approval of the OCC is required to pay dividends in excess of the Bank’s earnings retained in the current year plus retained net earnings for the preceding two years. As of June 30, 2012, the Bank had an accumulated deficit; therefore, dividends may not be paid to the Company. The Bank is also prohibited from paying dividends that would reduce its capital ratios below minimum regulatory requirements.

The Company’s ability to pay dividends and incur debt is also restricted by the Reserve Bank Agreement. Under the terms of the Reserve Bank Agreement, the Company has agreed that it shall not declare or pay any dividends or incur, increase or guarantee any debt without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

Loans or advances to the Company from the Bank are limited to 10% of the Bank’s capital stock and surplus on a secured basis.

Recent Legislative Developments

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”) was signed into law on July 21, 2010. The Act is a significant piece of legislation that will continue to have a major impact on the financial services industry, including the organization, financial condition and operations of banks and bank holding companies. Management continues to evaluate the impact of the Act; however, uncertainty remains as to its operational impact, which could have a material adverse impact on the Company’s business, results of operations and financial condition. Many of the provisions of the Act are aimed at financial institutions that are significantly larger than the Company and the Bank. Notwithstanding this, there are many other provisions that the Company and the Bank are subject to and will have to comply with, including any new rules applicable to the Company and the Bank promulgated by the Bureau of Consumer Financial Protection, a new regulatory body dedicated to consumer protection. As rules and regulations are promulgated by the agencies responsible for implementing and enforcing the Act, the Company and the Bank will have to address each to ensure compliance with applicable provisions of the Act and compliance costs are expected to increase.

The Dodd-Frank Act broadens the base for Federal Deposit Insurance Corporation insurance assessments. Under rules issued by the FDIC in February 2011, the base for insurance assessments changed from domestic deposits to consolidated assets less tangible equity. Assessment rates are calculated using formulas that take into account the risks of the institution being assessed. The rule was effective beginning April 1, 2011. This did not have a material impact on the Company.

On June 28, 2011, the Federal Reserve Board approved a final debit-card interchange rule. This primarily impacts larger banks and has not had a material impact on the Company.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on the Company. The financial reform legislation and any implementing rules that are ultimately issued could have adverse implications on the financial industry, the competitive environment, and our ability to conduct business. Management will have to apply resources to ensure compliance with all applicable provisions of the Dodd-Frank Act and any implementing rules, which may increase our costs of operations and adversely impact our earnings.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	PATRIOT NATIONAL BANCORP INC
Entity Central Index Key	0001098146
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		38,467,073

XML

Fair Value and Interest Rate Risk

6 Months Ended

Jun. 30, 2012

Fair Value and Interest Rate Risk [Abstract]

Fair Value and Interest Rate Risk

Note 11: Fair Value and Interest Rate Risk

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in certain instances, there are no quoted market prices for certain assets or liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability.

Fair value measurements focus on exit prices in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment.

The Company’s fair value measurements are classified into a fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The three categories within the hierarchy are as follows:

• Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 Inputs—Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lower level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set forth below.

Cash and due from banks, federal funds sold, short-term investments and accrued interest receivable and payable: The carrying amount is a reasonable estimate of fair value. These financial instruments are not recorded at fair value on a recurring basis.

Available-for-Sale Securities: These financial instruments are recorded at fair value in the financial statements. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using pricing models (i.e., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include U.S. government agency bonds and mortgage-backed securities and corporate bonds. The prices for these instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and sales of investment securities. Prices obtained from these sources include prices derived from market quotations and matrix pricings. The fair value measurements considered observable data may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. Management reviews the data and assumptions used in pricing the securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data. Level 3 securities are instruments for which significant unobservable input are utilized. Available-for-sale securities are recorded at fair value on a recurring basis.

Loans: For variable rate loans, which reprice frequently and have no significant change in credit risk, carrying values are a reasonable estimate of fair values, adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using the period end rates, estimated by using local market data, at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. The Company does not record loans at fair value on a recurring basis. However, from time to time, nonrecurring fair value adjustments to collateral-dependent impaired loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of collateral. Fair values estimated in this manner do not fully incorporate an exit-price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Other Real Estate Owned: The fair values of the Company’s other real estate owned (“OREO”) properties are based on the estimated current property valuations less estimated selling costs. When the fair value is based on current observable appraised values, OREO is classified within Level 2. The Company classifies OREO within Level 3 when unobservable adjustments are made to appraised values. The Company does not record other real estate owned at fair value on a recurring basis.

Deposits: The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities, estimated using local market data, to a schedule of aggregated expected maturities on such deposits. The Company does not record deposits at fair value on a recurring basis.

Short-term borrowings: The carrying amounts of borrowings under short-term repurchase agreements and other short-term borrowings maturing within 90 days approximate their fair values. The Company does not record short-term borrowings at fair value on a recurring basis.

Junior Subordinated Debt: Junior subordinated debt reprices quarterly and as a result the carrying amount is considered a reasonable estimate of fair value. The Company does not record junior subordinated debt at fair value on a recurring basis.

Federal Home Loan Bank Borrowings: The fair value of the advances is estimated using a discounted cash flow calculation that applies current Federal Home Loan Bank interest rates for advances of similar maturity to a schedule of maturities of such advances. The Company does not record these borrowings at fair value on a recurring basis.

Other Borrowings: The fair values of longer term borrowings and fixed rate repurchase agreements are estimated using a discounted cash flow calculation that applies current interest rates for transactions of similar maturity to a schedule of maturities of such transactions. The Company does not record these borrowings at fair value on a recurring basis.

Off-balance sheet instruments: Fair values for the Company’s off-balance-sheet instruments (lending commitments) are based on interest rate changes and fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The Company does not record its off-balance-sheet instruments at fair value on a recurring basis.

The following table details the financial assets measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine fair value:

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2012
U.S. Government agency mortgage- backed securities	$	—	$	39,642,765	$	—	$	39,642,765
U.S. Government bonds		—		5,016,920		—		5,016,920
Corporate bonds		—		11,682,945		—		11,682,945
Securities available for sale	$	—	$	56,342,630	$	—	$	56,342,630
December 31, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
U.S. Government agency mortgage- backed securities	$	—	$	50,049,429	$	—	$	50,049,429
U.S. Government bonds				5,037,085		—		5,037,085
Corporate bonds		—		11,383,458		—		11,383,458
Securities available for sale	$	—	$	66,469,972	$	—	$	66,469,972

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following tables reflect financial assets measured at fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

June 30, 2012	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Impaired Loans (1)	$	—	$	—	$	4,168,705	$	4,168,705
Other real estate owned (2)	$	—	$	—	$	288,144	$	288,144
December 31, 2011
Impaired Loans (1)	$	—	$	—	$	13,498,177	$	13,498,177
Other real estate owned (2)	$	—	$	—	$	2,762,640	$	2,762,640

⁽¹⁾  Represents carrying value for which adjustments are based on the appraised value of the collateral.

⁽²⁾  Represents carrying value for which adjustments are based on the appraised value of the property.

The Company discloses fair value information about financial instruments, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. Certain financial instruments are excluded from disclosure requirements and, accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The estimated fair value amounts have been measured as of June 30, 2012 and December 31, 2011 and have not been reevaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair value of these financial instruments subsequent to the respective reporting dates may be different than amounts reported on those dates.

The information presented should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only required for a limited portion of the Company’s assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other bank holding companies may not be meaningful.

The following is a summary of the carrying amounts and estimated fair values of the Company’s financial instruments not measured and not reported at fair value on the consolidated balance sheets at June 30, 2012 and December 31, 2011 (in thousands):

		June 30, 2012				December 31, 2011
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and noninterest bearing balances due from banks	Level 1	$	3,721	$	3,721	$	4,242	$	4,242
Interest-bearing deposits due from banks	Level 1		58,456		58,456		50,474		50,474
Short-term investments	Level 1		710		710		710		710
Other investments	Level 2		3,500		3,500		3,500		3,500
Federal Reserve Bank stock	Level 1		1,720		1,720		1,707		1,707
Federal Home Loan Bank stock	Level 1		4,344		4,344		4,508		4,508
Loans receivable, net	Level 3		483,858		491,095		501,477		511,648
Accrued interest receivable	Level 1		2,289		2,289		2,453		2,453
Financial Liabilities:
Demand deposits	Level 1	$	71,722	$	71,722	$	65,613	$	65,613
Savings deposits	Level 1		66,862		66,862		59,396		59,396
Money market deposits	Level 1		47,227		47,227		52,890		52,890
NOW accounts	Level 1		24,297		24,297		24,396		24,396
Time deposits	Level 2		311,986		317,852		342,614		347,246
FHLB Borrowings	Level 2		50,000		52,954		50,000		52,645
Securities sold under repurchase agreements	Level 2		7,000		7,683		7,000		8,173
Subordinated debentures	Level 2		8,248		8,248		8,248		8,248
Accrued interest payable	Level 1		1,096		1,096		949		949

The following are the methods and assumptions that were used to estimate the fair value of other financial assets and liabilities in the table above:

Cash and due from banks and interest deposits with banks: The carrying amount is considered to be a reasonable estimate of fair value due to the short maturity of these items.

Short term investments: The carrying amount is considered to be a reasonable estimate of fair value due to the short maturity of these items.

Other Investments: The redeemable carrying amount of this security, with limited marketability, approximates its fair value.

Federal Reserve Bank and Federal Home Loan Bank stock: The redeemable carrying amount of these securities, with limited marketability, approximates their fair value.

Loans Receivable: The fair values of loans are estimated by discounting the projected future cash flows using market discount rates, primarily based on the Bank’s current offer rates on comparable products, which reflect credit and interest-rate risk inherent in the loan. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Fair values estimated in this manner do not fully incorporate an exit price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Accrued interest receivable and payable: The carrying amounts of accrued interest approximate their fair value due to the short-term nature of these items.

Deposits: Current carrying amounts approximate estimated fair value of demand deposits, savings, money market and NOW accounts. The fair value of time deposits is based on the discounted value of contractual cash flows using the Bank’s current offer rates on comparable products of similar remaining maturities.

FHLB borrowings and securities sold under repurchase agreements: The fair values of the borrowings are estimated by discounting the estimated future cash flows using current market discount rates of financial instruments with similar characteristics, terms and remaining maturities.

Junior Subordinated Debt: There is no active market for the trust preferred securities issued by the Company’s capital trust. The carrying amount is considered to be a reasonable estimate of fair value because of the frequency they reprice to market rates.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Off-balance sheet instruments

Loan commitments on which the committed interest rate is less than the current market rate were insignificant at June 30, 2012 and December 31, 2011. The estimated fair value of fee income on letters of credit at June 30, 2012 and December 31, 2011 was insignificant.

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest and Dividend Income
Interest and fees on loans	$ 5,811,733	$ 6,538,593	$ 12,477,525	$ 13,495,154
Interest on investment securities	426,658	486,738	903,688	760,921
Dividends on investment securities	31,879	80,728	65,160	150,629
Interest on federal funds sold		2,385		6,411
Other interest income	40,160	58,363	50,638	120,253
Total interest and dividend income	6,310,430	7,166,807	13,497,011	14,533,368
Interest Expense
Interest on deposits	1,421,170	1,553,745	2,938,014	3,419,094
Interest on Federal Home Loan Bank borrowings	354,591	423,529	711,428	842,404
Interest on subordinated debt	74,677	71,219	151,244	141,617
Interest on other borrowings	76,927	76,927	153,853	153,009
Total interest expense	1,927,365	2,125,420	3,954,539	4,556,124
Net interest income	4,383,065	5,041,387	9,542,472	9,977,244
Provision for Loan Losses	(1,713,425)	1,482,798	(2,558,827)	8,464,427
Net interest income after provision for loan losses	6,096,490	3,558,589	12,101,299	1,512,817
Non-interest Income
Mortgage brokerage referral fees	22,117	1,610	34,537	14,610
Loan application, inspection and processing fees	15,986	23,966	30,713	40,765
Deposit fees and service charges	227,064	248,039	455,732	528,940
Gains on sale of loans		79,729	263,646	79,729
Loss on sale of investment securities			(8,042)
Earnings on cash surrender value of life insurance	120,294	152,985	262,964	321,245
Other income	69,639	203,984	165,548	307,874
Total non-interest income	455,100	710,313	1,205,097	1,293,163
Non-interest Expenses
Salaries and benefits	2,725,721	3,189,311	5,616,445	6,403,826
Occupancy and equipment expense	1,135,113	1,291,826	2,258,697	2,646,393
Data processing	345,704	336,005	691,725	663,809
Advertising and promotional expenses	8,234	271,781	25,963	429,755
Professional and other outside services	854,268	1,234,958	1,469,350	2,116,665
Loan administration and processing expenses	45,624	48,159	53,904	85,218
Regulatory assessments	462,153	628,476	872,154	1,239,744
Insurance expense	108,775	228,637	278,020	459,411
Other real estate operations	16,351	774,450	(133,896)	1,044,957
Material and communications	132,734	164,115	263,912	364,253
Restructuring charges and asset disposals (Note 11)	126,730	2,986,441	495,207	2,986,441
Other operating expenses	244,901	290,111	524,103	523,474
Total non-interest expenses	6,206,308	11,444,270	12,415,584	18,963,946
Loss before income taxes	345,282	(7,175,368)	890,812	(16,157,966)
Provision for Income Taxes
Net loss	$ 345,282	$ (7,175,368)	$ 890,812	$ (16,157,966)
Basic and diluted loss per share (Note 5)	$ 0.01	$ (0.19)	$ 0.02	$ (0.42)

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Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Share-Based Compensation

Note 5: Share-Based Compensation

The Company maintains the Patriot National Bancorp, Inc. 2012 Stock Plan to provide an incentive by the grant of options, restricted stock awards or phantom stock units to directors and employees of the Company. The Plan provides for the issuance of up to 3,000,000 shares of the Company’s common stock subject to certain Plan limitations. 2,045,654 shares of stock remain available for issuance under the Plan as of June 30, 2012. The vesting of options and restricted stock awards may accelerate in accordance with terms of the plan. The Compensation Committee shall make terms and conditions applicable to the vesting of restricted stock awards and stock options. Restricted stock grants vest in quarterly installments over a four year period from the date of grant. The Compensation Committee accelerated the vesting of the initial grant of restricted stock, whereby the first year of the tranche vested immediately. Stock options were granted at an exercise price equal to $2.20 based on a price determined by the Compensation Committee and all have an expiration period of 10 years. The fair value of stock options granted on January 24, 2012, was estimated utilizing the Black-Scholes option pricing model using the following assumptions: an expected life of 6.28 years utilizing the simplified method, risk-free rate of return of 1.28%, volatility of 61.29% and no dividend yield. The Company is expensing the grant date fair value of all share-based compensation over the requisite vesting periods on a straight-line basis.

During the three and six months ended June 30, 2012, the Company recorded $53,497 and $133,128 of total stock-based compensation, respectively.

The following table is a summary of the Company’s non-vested stock options as of June 30, 2012, and changes therein during the period then ended:

	Number of Stock Options		Weighted Average Grant Date Fair Value		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding—December 31, 2011		—	$	—	$	—		—
Granted		850,000		0.90		2.20		10
Exercised		—		—		—		—
Outstanding—June 30, 2012		850,000	$	0.90	$	2.20		10
Exercisable—June 30, 2012		—	$	—	$	—		—

Expected future stock option expense related to the non-vested options outstanding as of June 30, 2012, is $669,877 over an average period of 2.28 years.

The following is a summary of the status of the Company’s restricted shares as of June 30, 2012, and changes therein during the period then ended.

	Number of Shares Awarded			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		—		$	—
Granted		104,346			1.73
Vested		(25,715	)		1.73
Forfeited		—			—
Non-vested at June 30, 2012		78,631		$	1.73

Expected future stock award expense related to the non-vested restricted awards as of June 30, 2012, is $135,638 over an average period of 3.10 years.

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Deposits

6 Months Ended

Jun. 30, 2012

Deposits Regulatory and Operational Matters [Abstract]

Deposits

Note 4: Deposits

The following table is a summary of the Company’s deposits at:

	June 30, 2012		December 31, 2011
Non-interest bearing	$	71,722,494	$	65,613,374
Interest bearing
NOW		24,297,309		24,396,210
Savings		66,862,473		59,396,310
Money market		47,227,188		52,889,642
Time certificates, less than $100,000		179,310,667		198,207,998
Time certificates, $100,000 or more		132,675,624		144,405,859
Total interest bearing		450,373,261		479,296,019
Total Deposits	$	522,095,755	$	544,909,393

Included in time certificates are certificates of deposit through the Certificate of Deposit Account Registry Service (CDARS) network of $0 and $1,361,544 at June 30, 2012 and December 31, 2011, respectively. These are considered brokered deposits. Pursuant to the Agreement discussed in Note 10, the Bank’s participation in the CDARS program, as an issuer of deposits to customers of other banks in the CDARS program, may not exceed 10% of total deposits.

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Loans Receivable and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

Loans Receivable and Allowance for Loan Losses [Abstract]

Company's loan portfolio

	June 30, 2012			December 31, 2011
Real Estate
Commercial	$	237,217,702		$	215,659,837
Residential		149,905,067			188,108,855
Construction		6,217,516			12,306,922
Construction to permanent		8,287,915			10,012,022
Commercial		32,379,945			31,810,735
Consumer home equity		53,587,509			49,694,546
Consumer installment		2,125,347			2,164,972
Total Loans		489,721,001			509,757,889
Premiums on purchased loans		223,853			231,125
Net deferred costs		586,866			622,955
Allowance for loan losses		(6,673,648	)		(9,384,672	)
Loans receivable, net	$	483,858,072		$	501,227,297

Changes in the allowance for loan losses for the periods

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Balance, beginning of period	$	8,460,943		$	12,208,476		$	9,384,672		$	15,374,101
Provision for loan losses		(1,713,425	)		1,482,798			(2,558,827	)		8,464,427
Loans charged-off		(90,739	)		(3,034,591	)		(193,223	)		(7,188,138	)
Recoveries of loans previously charged-off		16,869			743,044			41,026			763,650
Transferred to loans held-for-sale		—			—			—			(6,014,313	)
Balance, end of period	$	6,673,648		$	11,399,727		$	6,673,648		$	11,399,727

Allowance for loan losses to loan portfolio segment

Three months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1,094,736		$	4,645,248		$	842,636		$	236,313		$	1,049,555		$	413,724		$	178,731		$	8,460,943
Charge-offs		(44,471	)		—			—			—			(32,150	)		(14,118	)		—			(90,739	)
Recoveries		1,500			14,988			—			—			—			381			—			16,869
Provision		(316,423	)		(877,846	)		(592,125	)		(114,863	)		192,498			103,345			(108,011	)		(1,713,425	)
Ending Balance	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—		$	500,538
Ending balance: collectively evaluated for impairment	$	698,012		$	3,642,539		$	218,991		$	11,405		$	1,179,612		$	351,831		$	70,720		$	6,173,110
Total Allowance for Loan Losses	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—		$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—		$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—		$	455,030,951

Six months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	882,062		$	4,018,746		$	867,159		$	547,333		$	2,550,588		$	458,762		$	60,022	$	9,384,672
Charge-offs		(44,471	)		(49,922	)		—			—			(84,711	)		(14,119	)		—		(193,223	)
Recoveries		2,500			36,976			—			—			—			1,550			—		41,026
Provision		(104,751	)		(223,410	)		(616,648	)		(425,883	)		(1,255,972	)		57,139			10,698		(2,558,827	)
Ending Balance	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—	$	500,538
Ending balance: collectively evaluated for impairment	$	698,010		$	3,642,539		$	218,991		$	11,405		$	1,179,614		$	351,831		$	70,720	$	6,173,110
Total Allowance for Loan Losses	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—	$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—	$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—	$	455,030,951

Credit risk exposure of loans receivable, by loan type and credit quality indicator

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	24,850,034	$	1,456,449	$	176,063,752	$	9,310,101	$	—	$	—	$	2,095,269	$	—	$	100,682,616	$	26,642,690	$	49,265,371	$	1,519,501	$	699,679	$	392,585,462
Special Mention		369,025		170,214		14,315,821		5,683,817		3,135,953		—		—		—		5,313,385		—		99,532		2,711,032		—		31,798,779
Substandard & Doubtful		4,611,015		923,208		18,170,351		13,673,860		1,219,528		1,862,035		—		6,192,646		5,197,208		12,069,168		—		1,417,741		—		65,336,760
	$	29,830,074	$	2,549,871	$	208,549,924	$	28,667,778	$	4,355,481	$	1,862,035	$	2,095,269	$	6,192,646	$	111,193,209	$	38,711,858	$	49,364,903	$	5,648,274	$	699,679	$	489,721,001

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	32,188,570	$	229,248,655	$	3,135,953	$	7,000,270	$	145,976,052	$	54,719,115	$	472,268,615
Non Performing		191,375		7,969,047		3,081,563		1,287,645		3,929,015		993,741		17,452,386
Total	$	32,379,945	$	237,217,702	$	6,217,516	$	8,287,915	$	149,905,067	$	55,712,856	$	489,721,001

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	23,822,200	$	1,737,893	$	151,392,526	$	11,680,310	$	—	$	—	$	903,035	$	—	$	129,132,494	$	34,895,858	$	44,969,963	$	1,531,223	$	636,863	$	400,702,365
Special Mention		1,544,420		170,575		22,426,235		4,585,523		9,210,344		—		—		—		5,316,201		2,400,000		274,365		3,029,362		—		48,957,025
Substandard & Doubtful		4,480,440		55,207		15,981,747		9,593,496		1,243,579		1,852,999		—		9,108,987		3,587,607		12,776,695		—		1,417,742		—		60,098,499
	$	29,847,060	$	1,963,675	$	189,800,508	$	25,859,329	$	10,453,923	$	1,852,999	$	903,035	$	9,108,987	$	138,036,302	$	50,072,553	$	45,244,328	$	5,978,327	$	636,863	$	509,757,889

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	31,521,175	$	206,322,032	$	10,928,343	$	5,808,035	$	183,629,363	$	50,865,776	$	489,074,724
Non Performing		289,560		9,337,805		1,378,579		4,203,987		4,479,492		993,742		20,683,165
Total	$	31,810,735	$	215,659,837	$	12,306,922	$	10,012,022	$	188,108,855	$	51,859,518	$	509,757,889

Delinquency status, of non-accrual loans and past due loans

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at June 30, 2012:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Substandard		—		—		191,375		191,375		—		448,000		639,375
Total Commercial	$	—	$	—	$	191,375	$	191,375	$	—	$	448,000	$	639,375
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		—		304,388		304,388
Substandard	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,482,538	$	11,451,585
Total Commercial Real Estate	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,786,926	$	11,755,973
Construction
Substandard	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Total Construction	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Residential Real Estate
Substandard	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Total Residential Real Estate	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Consumer
Substandard	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total Consumer	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total	$	—	$	371,920	$	12,413,233	$	12,785,153	$	4,667,233	$	4,234,926	$	21,687,312

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2011:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2011	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Special Mention	$	—	$	—	$	—	$	—	$	—	$	44,296	$	44,296
Substandard		—		—		289,560		289,560		—		947,847		1,237,407
Total Commercial	$	—	$	—	$	289,560	$	289,560	$	—	$	992,143	$	1,281,703
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	402,663	$	402,663
Special Mention		—		—		—		—		—		2,832,452		2,832,452
Substandard	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	3,515,848	$	12,853,653
Total Commercial Real Estate	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	6,750,963	$	16,088,768
Construction
Substandard	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Total Construction	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Residential Real Estate
Substandard	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Total Residential Real Estate	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Consumer
Substandard	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total Consumer	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total	$	—	$	443,259	$	12,568,524	$	13,011,783	$	7,671,382	$	9,461,105	$	30,144,270

Delinquency status of loans receivable, by performing and non-performing loans

The following table sets forth the detail and delinquency status of loans receivable, by performing and non-performing loans at June 30, 2012.

	Performing (Accruing) Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	—	$	298,000	$	—	$	298,000	$	26,008,483	$	26,306,483	$	—	$	26,306,483
Special Mention		—		—		—		—		539,239		539,239		—		539,239
Substandard		—		500,000		—		500,000		4,394,848		4,894,848		639,375		5,534,223
Total Commercial	$	—	$	798,000	$	—	$	798,000	$	30,942,570	$	31,740,570	$	639,375	$	32,379,945
Commercial Real Estate
Pass	$	3,990,000	$	—	$	—	$	3,990,000	$	181,383,853	$	185,373,853	$	—	$	185,373,853
Special Mention		—		—		—		—		19,695,250		19,695,250		304,388		19,999,638
Substandard		394,137		—		1,907,661		2,301,798		18,090,828		20,392,626		11,451,585		31,844,211
Total Commercial Real Estate	$	4,384,137	$	—	$	1,907,661	$	6,291,798	$	219,169,931	$	225,461,729	$	11,755,973	$	237,217,702
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		3,135,953		3,135,953		—		3,135,953
Substandard		—		—		—		—		—		—		3,081,563		3,081,563
Total Construction	$	—	$	—	$	—	$	—	$	3,135,953	$	3,135,953	$	3,081,563	$	6,217,516
Construction to Permanent
Pass	$	—	$	—	$	—	$	—	$	2,095,269	$	2,095,269	$	—	$	2,095,269
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		4,905,002		4,905,002		1,287,644		6,192,646
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	7,000,271	$	7,000,271	$	1,287,644	$	8,287,915
Residential Real Estate
Pass	$	—	$	—	$	—	$	—	$	127,325,306	$	127,325,306	$	—	$	127,325,306
Special Mention		—		—		—		—		5,313,385		5,313,385		—		5,313,385
Substandard		1,638,262		—		—		1,638,262		11,699,099		13,337,361		3,929,015		17,266,376
Total Residential Real Estate	$	1,638,262	$	—	$	—	$	1,638,262	$	144,337,790	$	145,976,052	$	3,929,015	$	149,905,067
Consumer
Pass	$	7,953	$	—	$	—	$	7,953	$	51,476,598	$	51,484,551	$	—	$	51,484,551
Special Mention		—		—		—		—		2,810,564		2,810,564		—		2,810,564
Substandard		—		—		—		—		423,999		423,999		993,742		1,417,741
Total Consumer	$	7,953	$	—	$	—	$	7,953	$	54,711,161	$	54,719,114	$	993,742	$	55,712,856
Total	$	6,030,352	$	798,000	$	1,907,661	$	8,736,013	$	459,297,676	$	468,033,689	$	21,687,312	$	489,721,001

The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2011.

	Performing (Accruing) Loans
2011	31-60 Days Past Due		Greater Than 60 Days		Total Past Due		Current		Total Perfoming Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	10,971	$	—	$	10,971	$	25,504,826	$	25,515,797	$	44,296	$	25,560,093
Special Mention		—		—		—		1,714,995		1,714,995		—		1,714,995
Substandard		233,781		—		233,781		3,064,459		3,298,240		1,237,407		4,535,647
Total Commercial	$	244,752	$	—	$	244,752	$	30,284,280	$	30,529,032	$	1,281,703	$	31,810,735
Commercial Real Estate
Pass	$	—	$	—	$	—	$	162,670,173	$	162,670,173	$	402,663	$	163,072,836
Special Mention		1,915,504		—		1,915,504		22,263,802		24,179,306		2,832,452		27,011,758
Substandard		—		—		—		12,721,590		12,721,590		12,853,653		25,575,243
Total Commercial Real Estate	$	1,915,504	$	—	$	1,915,504	$	197,655,565	$	199,571,069	$	16,088,768	$	215,659,837
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		9,210,344		9,210,344		—		9,210,344
Substandard		—		—		—		—		—		3,096,578		3,096,578
Total Construction	$	—	$	—	$	—	$	9,210,344	$	9,210,344	$	3,096,578	$	12,306,922
Construction to Permanent
Pass	$	—	$	—	$	—	$	903,035	$	903,035	$	—	$	903,035
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		4,905,000		4,905,000		4,203,987		9,108,987
Total Construction to Permanent	$	—	$	—	$	—	$	5,808,035	$	5,808,035	$	4,203,987	$	10,012,022
Residential Real Estate
Pass	$	42,181	$	—	$	42,181	$	163,986,171	$	164,028,352	$	—	$	164,028,352
Special Mention		4,800,000		—		4,800,000		2,916,201		7,716,201		—		7,716,201
Substandard		—		84,225		84,225		11,800,585		11,884,810		4,479,492		16,364,302
Total Residential Real Estate	$	4,842,181	$	84,225	$	4,926,406	$	178,702,957	$	183,629,363	$	4,479,492	$	188,108,855
Consumer
Pass	$	1,459	$	—	$	1,459	$	47,136,590	$	47,138,049	$	—	$	47,138,049
Special Mention		—		—		—		3,303,727		3,303,727		—		3,303,727
Substandard		—		—		—		424,000		424,000		993,742		1,417,742
Total Consumer	$	1,459	$	—	$	1,459	$	50,864,317	$	50,865,776	$	993,742	$	51,859,518
Total	$	7,003,896	$	84,225	$	7,088,121	$	472,525,498	$	479,613,619	$	30,144,270	$	509,757,889

Summarizes impaired loans

The following table summarizes impaired loans as of June 30, 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2012
With no related allowance recorded:
Commercial	$	18,167	$	250,893	$	—
Commercial Real Estate		7,927,165		8,755,486		—
Construction		2,946,562		2,946,592		—
Construction to Permanent		4,905,000		4,905,000
Residential		13,730,710		13,730,710		—
Consumer		993,742		993,742		—
Total:	$	30,521,346	$	31,582,423	$	—
With an allowance recorded:
Commercial	$	173,208	$	350,000	$	37,330
Commercial Real Estate		1,479,160		1,595,500		139,851
Construction		135,000		286,625		31,520
Construction to Permanent		1,287,645		1,425,000		110,045
Residential		669,691		669,691		30,291
Consumer		424,000		424,000		151,501
Total:	$	4,168,704	$	4,750,816	$	500,538
Commercial	$	191,375	$	600,893	$	37,330
Commercial Real Estate		9,406,325		10,350,986		139,851
Construction		3,081,562		3,233,217		31,520
Construction to Permanent		6,192,645		6,330,000		110,045
Residential		14,400,401		14,400,401		30,291
Consumer		1,417,742		1,417,742		151,501
Total:	$	34,690,050	$	36,333,239	$	500,538

The following table summarizes impaired loans as of December 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2011
With no related allowance recorded:
Commercial	$	210,091	$	581,974	$	—
Commercial Real Estate		4,444,315		5,174,124		—
Construction		1,243,579		1,247,627		—
Construction to Permanent		6,614,333		6,614,333		—
Residential		9,789,727		9,789,727		—
Consumer		993,742		1,038,640		—
Total:	$	23,295,787	$	24,446,425	$	—
With an allowance recorded:
Commercial	$	79,469	$	130,137	$	61,145
Commercial Real Estate		5,131,655		5,354,025		319,894
Construction		135,000		286,625		31,520
Construction to Permanent		2,494,654		2,634,000		498,254
Residential		5,196,516		5,196,516		197,478
Consumer		424,000		424,000		151,500
Total:	$	13,461,294	$	14,025,303	$	1,259,791
Commercial	$	289,560	$	712,111	$	61,145
Commercial Real Estate		9,575,970		10,528,149		319,894
Construction		1,378,579		1,534,252		31,520
Construction to Permanent		9,108,987		9,248,333		498,254
Residential		14,986,243		14,986,243		197,478
Consumer		1,417,742		1,462,640		151,500
Total:	$	36,757,081	$	38,471,728	$	1,259,791

Total troubled debt restructured loans

The following table presents the total troubled debt restructured loans as of June 30, 2012:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	233,817		2	$	4,315,060		3	$	4,548,877
Residential Real Estate		3		10,471,386		—		—		3		10,471,386
Construction		—		—		1		1,219,528		1		1,219,528
Construction to permanent		1		4,905,000		1		1,287,645		2		6,192,645
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,034,203		4	$	6,822,233		10	$	22,856,436

The following table presents the total troubled debt restructured loans as of December 31, 2011:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	238,165		3	$	5,666,882		4	$	5,905,047
Residential Real Estate		3		10,506,751		—		—		3		10,506,751
Construction		—		—		1		1,243,579		1		1,243,579
Construction to permanent		1		4,905,000		2		2,494,654		3		7,399,654
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,073,916		6	$	9,405,115		12	$	25,479,031

Summarizes loans that were modified in a troubled debt restructuring

	Six months ended June 30, 2012
	Number of Relationships		Pre-Modification Outstanding Recorded Investment		Number of Relationships		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		—	$	—		—	$	—
Residential Real Estate		1		4,661,109		1		4,661,109
Construction to permanent		—		—		—		—
Total Troubled Debt Restructurings		1	$	4,661,109		1	$	4,661,109

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Restructuring Charges and Asset Disposals

6 Months Ended

Jun. 30, 2012

Restructuring and Related Activities [Abstract]

Restructuring Charges and Asset Disposals

Note 12. Restructuring Charges and Asset Disposals

The Company recorded restructuring charges of $495,207 for the six months ended June 30, 2012, compared to $2,986,441 in the same period as last year. These costs are included in restructuring charges and asset disposals in the Consolidated Statements of Operations.

During 2011, the Company announced that it would be undertaking a series of initiatives that are designed to transform and enhance its operations. In order to strengthen the Company’s competitive position and return it to its goal of restored health and profitability, it executed one initiative to consolidate four branch locations and vacate other office space, and a second plan to reduce workforce by approximately 10% of employees.

On March 3, 2011, the Company announced that it would consolidate four branches, effective June 2011, to reduce operating expenses. All customer accounts in the affected branches were transferred to nearby Patriot branches to minimize any inconvenience to customers. The consolidation of these branches resulted in an earnings charge of $1.8 million, which is comprised of lease termination expenses of $1.2 million, lease liabilities charges of $400,000, and severance payments of $200,000 to affected employees. In addition, there was a $600,000 write-off of leasehold improvements and other fixed assets for these branches that were closed.

In order to further reduce operating expenses, the Company announced on May 16, 2011 that it would be executing a workforce reduction plan with employees in the back office operational areas. There were a total of eighteen employees affected by this reduction. This initiative resulted in an earnings charge of $600,000, which is comprised exclusively of severance payments to affected employees.

On September 23, 2011, the Company subleased vacant office space at 900 Bedford Street, Stamford, CT, effective October 1, 2011 for a term of two years.

On March 30, 2012, the Company announced that it would close the NYC branch, effective June 2012, and executed a workforce reduction of back office personnel to further reduce operating expenses. There were twelve employees in total affected by this announcement. For the six months ended June 30, 2012, a restructuring charge of $495,207 was recorded, which was comprised of $445,429 for severance expenses for the branch and back office personnel, asset disposals of $39,445 and $10,333 in lease termination costs.

On June 29, 2012, the Company announced that it would be consolidating three more branches, effective September 2012 in its continued effort to reduce operating expenses.

Restructuring reserves at June 30, 2012 for the restructuring activities taken in connection with these initiatives are comprised of the following:

	Balance at December 31, 2011		Expenses		Cash payments			Non-cash charges			Balance at June 30, 2012
Severance and benefit costs 2011	$	64,132	$	34,616	$	(17,665	)	$	(2,994	)	$	78,089
Lease termination costs 2011		317,808		—		—			(72,404	)		245,404
Severance and benefit costs 2012		—		410,813		(359,537	)		—			51,276
Lease termination costs 2012		—		10,333		—			—			10,333
Asset disposals 2012		—		39,445		—			(39,445	)		—
Total	$	381,940	$	495,207	$	(377,202	)	$	(114,843	)	$	385,102

The restructuring reserves at June 30, 2012 are included in accrued expenses and other liabilities in the Consolidated Balance Sheet.

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Other Comprehensive Income

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income [Abstract]

Other Comprehensive Income

Note 8: Other Comprehensive Income

Other comprehensive income, which is comprised solely of the change in unrealized gains and losses on available-for-sale securities, is as follows:

	Three Months Ended June 30, 2012							Six Months Ended June 30, 2012
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	198,155	$	(75,299	)	$	122,856	$	306,842		$	(116,601	)	$	190,241
Reclassification adjustment for (losses) recognized in income		—		—			—		(8,042	)		3,056			(4,986	)
Unrealized holding gains on available for sale securities, net of taxes	$	198,155	$	(75,299	)	$	122,856	$	298,800		$	(113,545	)	$	185,255
	Three Months Ended June 30, 2011							Six Months Ended June 30, 2011
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746
Reclassification adjustment for gains recognized in income		—		—			—		—			—			—
Unrealized holding gains on available for sale securities, net of taxes	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746

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Fair Value and Interest Rate Risk (Details 2) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Financial Assets:
Cash and noninterest bearing balances due from banks, Carrying Amount	$ 3,720,985	$ 4,241,552
Interest-bearing deposits due from banks, Carrying Amount	58,456,392	50,474,257
Short-term investments, Carrying Amount	710,157	709,567
Other investments, Carrying Amount	3,500,000	3,500,000
Federal Reserve Bank stock, Carrying Amount	1,719,550	1,707,000
Federal Home Loan Bank stock, Carrying Amount	4,343,800	4,508,300
Loans receivable, net, Carrying Amount	483,858,072	501,227,297
Accrued interest receivable, Carrying Amount	2,289,346	2,453,179
Financial Liabilities:
Savings deposits, Carrying Amount	66,862,473	59,396,310
Money market deposits, Carrying Amount	47,227,188	52,889,642
NOW accounts, Carrying Amount	24,297,309	24,396,210
FHLB Borrowings, Carrying Amount	50,000,000	50,000,000
Securities sold under repurchase agreements, Carrying Amount	7,000,000	7,000,000
Subordinated debentures, Carrying Amount	8,248,000	8,248,000
Level 1 [Member]
Financial Assets:
Cash and noninterest bearing balances due from banks, Carrying Amount	3,721,000	4,242,000
Interest-bearing deposits due from banks, Carrying Amount	58,456,000	50,474,000
Short-term investments, Carrying Amount	710,000	710,000
Federal Reserve Bank stock, Carrying Amount	1,720,000	1,707,000
Federal Home Loan Bank stock, Carrying Amount	4,344,000	4,508,000
Accrued interest receivable, Carrying Amount	2,289,000	2,453,000
Cash and noninterest bearing balances due from banks, Estimated Fair Value	3,721,000	4,242,000
Interest-bearing deposits due from banks, Estimated Fair Value	58,456,000	50,474,000
Short-term investments, Estimated Fair Value	710,000	710,000
Federal Reserve Bank stock, Estimated Fair Value	1,720,000	1,707,000
Federal Home Loan Bank stock, Estimated Fair Value	4,344,000	4,508,000
Accrued interest receivable, Estimated Fair Value	2,289,000	2,453,000
Financial Liabilities:
Demand deposits, Carrying Amount	71,722,000	65,613,000
Savings deposits, Carrying Amount	66,862,000	59,396,000
Money market deposits, Carrying Amount	47,227,000	52,890,000
NOW accounts, Carrying Amount	24,297,000	24,396,000
Accrued interest payable, Carrying Amount	1,096,000	949,000
Demand deposits, Estimated Fair Value	71,722,000	65,613,000
Savings deposits, Estimated Fair Value	66,862,000	59,396,000
Money market deposits, Estimated Fair Value	47,227,000	52,890,000
NOW accounts, Estimated Fair Value	24,297,000	24,396,000
Accrued interest payable, Estimated Fair Value	1,096,000	949,000
Level 2 [Member]
Financial Assets:
Other investments, Carrying Amount	3,500,000	3,500,000
Other investments, Estimated Fair Value	3,500,000	3,500,000
Financial Liabilities:
Time deposits, Carrying Amount	311,986,000	342,614,000
FHLB Borrowings, Carrying Amount	50,000,000	50,000,000
Securities sold under repurchase agreements, Carrying Amount	7,000,000	7,000,000
Subordinated debentures, Carrying Amount	8,248,000	8,248,000
Time deposits, Estimated Fair Value	317,852,000	347,246,000
FHLB Borrowings, Estimated Fair Value	52,954,000	52,645,000
Securities sold under repurchase agreements, Estimated Fair Value	7,683,000	8,173,000
Subordinated debentures, Estimated Fair Value	8,248,000	8,248,000
Level 3 [Member]
Financial Assets:
Loans receivable, net, Carrying Amount	483,858,000	501,477,000
Loans receivable, net, Estimated Fair Value	$ 491,095,000	$ 511,648,000

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 6: Income Taxes

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. Management has reviewed the deferred tax position of the Company at June 30, 2012. The deferred tax position has been affected by several significant transactions in the past several years. These transactions include increased provision for loan losses, the levels of non-accrual loans and other-than-temporary impairment write-offs of certain investments, as well as a loss on the bulk sale of loans in 2011. As a result, the Company is in a cumulative net loss position at June 30, 2012, and under the applicable accounting guidance, has concluded that it is not more-likely-than-not that the Company will be able to realize its deferred tax assets and, accordingly, has established a full valuation allowance totaling $13.5 million against its deferred tax asset at June 30, 2012. The valuation allowance is analyzed quarterly for changes affecting the deferred tax asset. In the future, if the Company generates taxable income on a sustained basis, management’s conclusion regarding the need for a deferred tax asset valuation allowance could change, resulting in the reversal of all or a portion of the deferred tax asset valuation allowance.

An “ownership change” occurred with respect to the Company in 2010 for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. Consequently, the Company’s ability to claim net operating loss carryforwards attributable to periods prior to the ownership change and certain recognized built-in losses and deductions (“pre-ownership change losses”) against income in years subsequent to the ownership change is limited. The amount of pre-ownership change losses that may be applied against income in a tax year subsequent to the ownership change is generally limited to the product of (x) the Company’s fair market value on the date of the ownership change and (y) the highest federal long-term tax-exempt rate in effect for any month in the three-month period ending with the calendar month in which the ownership change occurred, plus any unused capacity to claim pre-ownership change losses from prior years.

In 2011 the Company calculated the annual limitation on its use of pre-ownership change losses under Section 382 as a result of the 2010 ownership change as $284,000. The Company also determined that the amount of its pre-ownership change losses was $36.2 million. Based on that analysis and a 20-year carryforward period, the Company may utilize approximately $5.7 million of the pre-ownership change losses. Accordingly, the Company wrote-off approximately $10.4 million of deferred tax assets in 2011. The write-off of the deferred tax asset did not affect the consolidated financial statements as there was a full valuation allowance against the deferred tax assets.

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Income (Loss) Per Share

6 Months Ended

Jun. 30, 2012

Income (Loss) Per Share [Abstract]

Income (loss) per share

Note 7: Income (loss) per share

The Company is required to present basic income (loss) per share and diluted income (loss) per share in its consolidated statements of operations. Basic income (loss) per share amounts are computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted income (loss) per share reflects additional common shares that would have been outstanding if potentially dilutive common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method. The Company is also required to provide a reconciliation of the numerator and denominator used in the computation of both basic and diluted income (loss) per share.

The stock options and non-vested restricted stock awards did not have an impact on the diluted earnings per share. The following is information about the computation of income (loss) per share for the three and six months ended June 30, 2012 and 2011:

Three months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	345,282			38,381,988	$	0.01
Three months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(7,175,368	)		38,362,727	$	(0.19	)
Six months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	890,812			38,377,166	$	0.02
Six months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(16,157,966	)		38,362,727	$	(0.42	)

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Financial Instruments with Off-Balance Sheet Risk

6 Months Ended

Jun. 30, 2012

Financial Instruments with Off-Balance-Sheet Risk [Abstract]

Financial Instruments with Off-Balance-Sheet Risk

Note 9: Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The contractual amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The contractual amount of commitments to extend credit and standby letters of credit represent the total amount of potential accounting loss should: the contracts be fully drawn upon; the customers default; and the value of any existing collateral becomes worthless. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments and evaluates each customer’s creditworthiness on a case-by-case basis. Management believes that the Company controls the credit risk of these financial instruments through credit approvals, credit limits, monitoring procedures and the receipt of collateral as deemed necessary.

Financial instruments whose contractual amounts represent credit risk at June 30, 2012 are as follows:

Commitments to extend credit:
Future loan commitments	$	35,782,667
Home equity lines of credit		30,738,527
Unused lines of credit		37,402,837
Undisbursed construction loans		4,304,731
Financial standby letters of credit		7,000
	$	108,235,762

Standby letters of credit are written commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Guarantees that are not derivative contracts are recorded on the Company’s consolidated balance sheet at their fair value at inception.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit generally have fixed expiration dates, or other termination clauses, and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include residential and commercial property, deposits and securities. Based on the growth in the unfunded commitments, the bank has established a reserve of $26,000 as of June 30, 2012.

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Restructuring Charges and Asset Disposals (Details Textual) (USD $)	1 Months Ended			6 Months Ended
	Mar. 31, 2012 Employee	May 31, 2011 Employee	Mar. 31, 2011 Branch	Jun. 30, 2012	Jun. 30, 2011
Restructuring Charges and Asset Disposals (Textual) [Abstract]
Restructuring charges				$ 495,207	$ 2,986,441
Reduce workforce by approximately				10.00%
Branches resulted in an earnings charge				1,800,000
Comprised of lease termination expenses				1,200,000
Lease liabilities charges				400,000
Severance payments				200,000
Write-off of leasehold improvements				600,000
Initiative resulted in an earnings charge				445,429	600,000
Total number of employees affected by reduction	12	18
Number of branches consolidated			4
severance expenses				445,429	600,000
Asset disposals				39,445
Least termination costs				$ 10,333

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Investment Securities (Details 2) (USD $)	Jun. 30, 2012
Amortized cost and fair value of available-for-sale debt securities
Total, Amortized Cost	$ 55,827,154
Total, Fair Value	56,342,630
Over 10 years [Member]
Amortized cost and fair value of available-for-sale debt securities
Amortized Cost
Fair Value
Corporate bonds less than 5 years [Member]
Amortized cost and fair value of available-for-sale debt securities
Amortized Cost	3,202,773
Fair Value	3,211,326
Corporate bonds 5 to 10 years [Member]
Amortized cost and fair value of available-for-sale debt securities
Amortized Cost	9,000,000
Fair Value	8,471,619
U.S. Government bonds 5 to 10 years [Member]
Amortized cost and fair value of available-for-sale debt securities
Amortized Cost	5,000,000
Fair Value	5,016,920
Mortgage-backed securities [Member]
Amortized cost and fair value of available-for-sale debt securities
Amortized Cost	38,624,381
Total, Fair Value	$ 39,642,765

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Income Taxes (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Valuation allowance against deferred tax asset	$ 13,500,000
Annual limitation on use of pre-ownership change losses		284,000
Pre-ownership change losses	36,200,000
Carryforward period of ownership	20 years
Utilize pre-ownership change losses	5,700,000
Write-off of deferred tax assets		$ 10,400,000

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Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Fair Value Measurements and Disclosure

Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” was issued as a result of the effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU No. 2011-04 is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands the existing disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IFRS No. 13. Many of the requirements for the amendments in ASU No. 2011-04 do not result in a change in the application of the requirements in Topic 820. The Company adopted ASU No. 2011-04 on January 1, 2012 and it did not have a material impact on the consolidated financial statements.

Presentation of Comprehensive Income

ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income,” requires an entity to present components of comprehensive income either in a single continuous statement of comprehensive income or in two separate consecutive statements. These amendments will make the financial statement presentation of other comprehensive income more prominent by eliminating the alternative to present comprehensive income within the statement of equity. As originally issued, ASU No. 2011-05 required entities to present reclassification adjustments out of accumulated other comprehensive income by component in the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). This requirement was deferred by ASU No.2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards”. ASU No. 2011-05 is effective for all interim and annual periods beginning on or after December 15, 2011. The Company adopted this guidance in the first quarter of 2012 and elected to present comprehensive income in a separate consolidated statement of comprehensive income.

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Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Income (Loss) Per Share [Abstract]

Computation of income (loss) per share

Three months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	345,282			38,381,988	$	0.01
Three months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(7,175,368	)		38,362,727	$	(0.19	)
Six months ended June 30, 2012	Net Income			Weighted Average Common Shares O/S		Amount
Basic and Diluted Income Per Share
Income attributable to common shareholders	$	890,812			38,377,166	$	0.02
Six months ended June 30, 2011	Net Loss			Weighted Average Common Shares O/S		Amount
Basic and Diluted Loss Per Share
Loss attributable to common shareholders	$	(16,157,966	)		38,362,727	$	(0.42	)

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Share-Based Compensation (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2012
Summary of restricted shares [Abstract]
Number of Shares Awarded, Non-vested at December 31, 2011
Number of Shares Awarded, Granted	104,346
Number of Shares Awarded, Vested	(25,715)
Number of Shares Awarded, Forfeited
Number of Shares Awarded, Non-vested at June 30, 2012	78,631
Weighted Average Grant Date Fair Value, Non-vested at December 31, 2011
Weighted Average Grant Date Fair Value, Granted	$ 1.73
Weighted Average Grant Date Fair Value, Vested	$ 1.73
Weighted Average Grant Date Fair Value, Forfeited
Weighted Average Grant Date Fair Value, Non-vested at June 30, 2012	$ 1.73

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Loans Receivable and Allowance for Loan Losses (Details 5) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	$ 489,721,001	$ 509,757,889
Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	392,585,462	400,702,365
Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	31,798,779	48,957,025
Commercial, Real Estate [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	237,217,702	215,659,837
Commercial, Real Estate [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Total Non-Accrual and Past Due Loans	304,388
Construction [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	6,217,516	12,306,922
Construction to Permanent [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	8,287,915	10,012,022
Residential Real Estate [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	149,905,067	188,108,855
Commercial [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	32,379,945	31,810,735
Consumer [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
Total Loans	55,712,856	51,859,518
Performing (Accruing) Loans [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	6,030,352	7,003,896
61-90 Days Past Due	798,000	84,225
Greater Than 90 Days	1,907,661
Total Past Due	8,736,013	7,088,121
Current	459,297,676	472,525,498
Total Performing Loans	468,033,689	479,613,619
Total Non-Accrual and Past Due Loans	21,687,312	30,144,270
Total Loans	489,721,001	509,757,889
Performing (Accruing) Loans [Member] | Commercial, Real Estate [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	4,384,137	1,915,504
61-90 Days Past Due
Greater Than 90 Days	1,907,661
Total Past Due	6,291,798	1,915,504
Current	219,169,931	197,655,565
Total Performing Loans	225,461,729	199,571,069
Total Non-Accrual and Past Due Loans	11,755,973	16,088,768
Total Loans	237,217,702	215,659,837
Performing (Accruing) Loans [Member] | Commercial, Real Estate [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	3,990,000
61-90 Days Past Due
Greater Than 90 Days
Total Past Due	3,990,000
Current	181,383,853	162,670,173
Total Performing Loans	185,373,853	162,670,173
Total Non-Accrual and Past Due Loans		402,663
Total Loans	185,373,853	163,072,836
Performing (Accruing) Loans [Member] | Commercial, Real Estate [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		1,915,504
61-90 Days Past Due
Greater Than 90 Days
Total Past Due		1,915,504
Current	19,695,250	22,263,802
Total Performing Loans	19,695,250	24,179,306
Total Non-Accrual and Past Due Loans	304,388	2,832,452
Total Loans	19,999,638	27,011,758
Performing (Accruing) Loans [Member] | Commercial, Real Estate [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	394,137
61-90 Days Past Due
Greater Than 90 Days	1,907,661
Total Past Due	2,301,798
Current	18,090,828	12,721,590
Total Performing Loans	20,392,626	12,721,590
Total Non-Accrual and Past Due Loans	11,451,585	12,853,653
Total Loans	31,844,211	25,575,243
Performing (Accruing) Loans [Member] | Construction [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	3,135,953	9,210,344
Total Performing Loans	3,135,953	9,210,344
Total Non-Accrual and Past Due Loans	3,081,563	3,096,578
Total Loans	6,217,516	12,306,922
Performing (Accruing) Loans [Member] | Construction [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Total Performing Loans
Total Non-Accrual and Past Due Loans
Total Loans
Performing (Accruing) Loans [Member] | Construction [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	3,135,953	9,210,344
Total Performing Loans	3,135,953	9,210,344
Total Non-Accrual and Past Due Loans
Total Loans	3,135,953	9,210,344
Performing (Accruing) Loans [Member] | Construction [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Total Performing Loans
Total Non-Accrual and Past Due Loans	3,081,563	3,096,578
Total Loans	3,081,563	3,096,578
Performing (Accruing) Loans [Member] | Construction to Permanent [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	7,000,271	5,808,035
Total Performing Loans	7,000,271	5,808,035
Total Non-Accrual and Past Due Loans	1,287,644	4,203,987
Total Loans	8,287,915	10,012,022
Performing (Accruing) Loans [Member] | Construction to Permanent [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	2,095,269	903,035
Total Performing Loans	2,095,269	903,035
Total Non-Accrual and Past Due Loans
Total Loans	2,095,269	903,035
Performing (Accruing) Loans [Member] | Construction to Permanent [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current
Total Performing Loans
Total Non-Accrual and Past Due Loans
Total Loans
Performing (Accruing) Loans [Member] | Construction to Permanent [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	4,905,002	4,905,000
Total Performing Loans	4,905,002	4,905,000
Total Non-Accrual and Past Due Loans	1,287,644	4,203,987
Total Loans	6,192,646	9,108,987
Performing (Accruing) Loans [Member] | Residential Real Estate [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	1,638,262	4,842,181
61-90 Days Past Due		84,225
Greater Than 90 Days
Total Past Due	1,638,262	4,926,406
Current	144,337,790	178,702,957
Total Performing Loans	145,976,052	183,629,363
Total Non-Accrual and Past Due Loans	3,929,015	4,479,492
Total Loans	149,905,067	188,108,855
Performing (Accruing) Loans [Member] | Residential Real Estate [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		42,181
61-90 Days Past Due
Greater Than 90 Days
Total Past Due		42,181
Current	127,325,306	163,986,171
Total Performing Loans	127,325,306	164,028,352
Total Non-Accrual and Past Due Loans
Total Loans	127,325,306	164,028,352
Performing (Accruing) Loans [Member] | Residential Real Estate [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		4,800,000
61-90 Days Past Due
Greater Than 90 Days
Total Past Due		4,800,000
Current	5,313,385	2,916,201
Total Performing Loans	5,313,385	7,716,201
Total Non-Accrual and Past Due Loans
Total Loans	5,313,385	7,716,201
Performing (Accruing) Loans [Member] | Residential Real Estate [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	1,638,262
61-90 Days Past Due		84,225
Greater Than 90 Days
Total Past Due	1,638,262	84,225
Current	11,699,099	11,800,585
Total Performing Loans	13,337,361	11,884,810
Total Non-Accrual and Past Due Loans	3,929,015	4,479,492
Total Loans	17,266,376	16,364,302
Performing (Accruing) Loans [Member] | Commercial [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		244,752
61-90 Days Past Due	798,000
Greater Than 90 Days
Total Past Due	798,000	244,752
Current	30,942,570	30,284,280
Total Performing Loans	31,740,570	30,529,032
Total Non-Accrual and Past Due Loans	639,375	1,281,703
Total Loans	32,379,945	31,810,735
Performing (Accruing) Loans [Member] | Commercial [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		10,971
61-90 Days Past Due	298,000
Greater Than 90 Days
Total Past Due	298,000	10,971
Current	26,008,483	25,504,826
Total Performing Loans	26,306,483	25,515,797
Total Non-Accrual and Past Due Loans		44,296
Total Loans	26,306,483	25,560,093
Performing (Accruing) Loans [Member] | Commercial [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	539,239	1,714,995
Total Performing Loans	539,239	1,714,995
Total Non-Accrual and Past Due Loans
Total Loans	539,239	1,714,995
Performing (Accruing) Loans [Member] | Commercial [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due		233,781
61-90 Days Past Due	500,000
Greater Than 90 Days
Total Past Due	500,000	233,781
Current	4,394,848	3,064,459
Total Performing Loans	4,894,848	3,298,240
Total Non-Accrual and Past Due Loans	639,375	1,237,407
Total Loans	5,534,223	4,535,647
Performing (Accruing) Loans [Member] | Consumer [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	7,953	1,459
61-90 Days Past Due
Greater Than 90 Days
Total Past Due	7,953	1,459
Current	54,711,161	50,864,317
Total Performing Loans	54,719,114	50,865,776
Total Non-Accrual and Past Due Loans	993,742	993,742
Total Loans	55,712,856	51,859,518
Performing (Accruing) Loans [Member] | Consumer [Member] | Pass [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due	7,953	1,459
61-90 Days Past Due
Greater Than 90 Days
Total Past Due	7,953	1,459
Current	51,476,598	47,136,590
Total Performing Loans	51,484,551	47,138,049
Total Non-Accrual and Past Due Loans
Total Loans	51,484,551	47,138,049
Performing (Accruing) Loans [Member] | Consumer [Member] | Special Mention [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	2,810,564	3,303,727
Total Performing Loans	2,810,564	3,303,727
Total Non-Accrual and Past Due Loans
Total Loans	2,810,564	3,303,727
Performing (Accruing) Loans [Member] | Consumer [Member] | Substandard [Member]
Delinquency status of loans receivable, by performing and non-performing loans:
31-60 Days Past Due
61-90 Days Past Due
Greater Than 90 Days
Total Past Due
Current	423,999	424,000
Total Performing Loans	423,999	424,000
Total Non-Accrual and Past Due Loans	993,742	993,742
Total Loans	$ 1,417,741	$ 1,417,742

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net income (loss)	$ 345,282	$ (7,175,368)	$ 890,812	$ (16,157,966)
Unrealized holding gains on securities, net of taxes:
Unrealized holding gains arising during the period	122,856	247,521	190,241	250,746
Less reclassification adjustment for losses included in net income			(4,986)
Total	122,856	247,521	185,255	250,746
Comprehensive income (loss)	$ 468,138	$ (6,927,847)	$ 1,076,067	$ (15,907,220)

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Loans Receivable and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

Loans Receivable and Allowance for Loan Losses [Abstract]

Loans Receivable and Allowance for Loan Losses

Note 3: Loans Receivable and Allowance for Loan Losses

A summary of the Company’s loan portfolio at June 30, 2012 and December 31, 2011 is as follows:

	June 30, 2012			December 31, 2011
Real Estate
Commercial	$	237,217,702		$	215,659,837
Residential		149,905,067			188,108,855
Construction		6,217,516			12,306,922
Construction to permanent		8,287,915			10,012,022
Commercial		32,379,945			31,810,735
Consumer home equity		53,587,509			49,694,546
Consumer installment		2,125,347			2,164,972
Total Loans		489,721,001			509,757,889
Premiums on purchased loans		223,853			231,125
Net deferred costs		586,866			622,955
Allowance for loan losses		(6,673,648	)		(9,384,672	)
Loans receivable, net	$	483,858,072		$	501,227,297

On March 29, 2012, the Bank completed the sale of $66.4 million of residential loans consummated for a cash purchase price of $66.7 million, which represented 101% of the Bank’s net book value for these assets.

The changes in the allowance for loan losses for the periods shown are as follows:

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Balance, beginning of period	$	8,460,943		$	12,208,476		$	9,384,672		$	15,374,101
Provision for loan losses		(1,713,425	)		1,482,798			(2,558,827	)		8,464,427
Loans charged-off		(90,739	)		(3,034,591	)		(193,223	)		(7,188,138	)
Recoveries of loans previously charged-off		16,869			743,044			41,026			763,650
Transferred to loans held-for-sale		—			—			—			(6,014,313	)
Balance, end of period	$	6,673,648		$	11,399,727		$	6,673,648		$	11,399,727

At June 30, 2012 and December 31, 2011, the unpaid balances of loans 90 days or more past maturity, and still accruing interest were $4,234,926 and $9,461,106, respectively. All of the borrowers of said loans at June 30, 2012 continue to make interest payments, but are past maturity where payoff is pending or are in the process of being renewed.

The unpaid principal balances of loans on nonaccrual status and considered impaired were $17.5 million at June 30, 2012 and $20.7 million at December 31, 2011.

If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $274,000 of additional income during the quarter ended June 30, 2012 and $0.5 million during the quarter ended June 30, 2011. If non-accrual loans had been performing in accordance with their contractual terms, the Company would have recorded approximately $584,000 of additional income for the six months ended June 30, 2012 and $1.5 million for the six months ended June 30, 2011.

For the three months ended June 30, 2012 and 2011, the interest collected and recognized as income on impaired loans, which includes non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded, was approximately $0 and $30,000, respectively. For the six months ended June 30, 2012 and 2011, the interest income collected and recognized on impaired loans was approximately $180,000 and $461,000 respectively. The average recorded investment in impaired loans for the three and six months ended June 30, 2012 was $34.0 million and $34.1 million respectively.

At June 30, 2012, there were ten loans totaling $22.9 million that were considered “troubled debt restructurings,” as compared to December 31, 2011 when there were twelve loans totaling $25.5 million, all of which were included in impaired loans. At June 30, 2012, six of the ten loans aggregating $16.0 million were accruing loans and four loans aggregating $6.8 million were non-accruing loans.

The Company’s lending activities are conducted principally in Fairfield and New Haven Counties in Connecticut and Westchester County, New York City and Long Island, New York. The Company originates commercial real estate loans, commercial business loans and a variety of consumer loans. In addition, the Company had originated loans for the construction of residential homes, residential developments and for land development projects. A moratorium on all new speculative construction loans was instituted by management in July 2008. All residential and commercial mortgage loans are collateralized primarily by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent to some degree on the status of the regional economy as well as upon the regional real estate market. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.

The Company has established credit policies applicable to each type of lending activity in which it engages, evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 75% of the market value of the collateral for commercial real estate at the date of the credit extension depending on the Company’s evaluation of the borrowers’ creditworthiness and type of collateral and up to 80% for residential 1-4 family real estate. In the case of construction loans, the maximum loan-to-value was 65% of the “as completed” market value. The market value of collateral is monitored on an ongoing basis and additional collateral is obtained when warranted. Real estate is the primary form of collateral. Other important forms of collateral are accounts receivable, inventory, other business assets, marketable securities and time deposits. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower’s ability to generate continuing cash flows on all loans not related to construction.

Risk characteristics of the Company’s portfolio classes include the following:

Commercial Real Estate Loans – In underwriting commercial real estate loans, the Company evaluates both the prospective borrower’s ability to make timely payments on the loan and the value of the property securing the loans. Repayment of such loans may be negatively impacted should the borrower default or should there be a substantial decline in the value of the property securing the loan or a decline in the general economic conditions. Where the owner occupies the property, the Company also evaluates the business’s ability to repay the loan on a timely basis. In addition, the Company may require personal guarantees, lease assignments and/or the guarantee of the operating company when the property is owner occupied. These types of loans may involve some additional risks than in investor owned commercial real estate lending, because payments on such loans are dependent upon the successful operation of the business involved, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions affecting the borrowers’ businesses.

Construction Loans – Construction loans are short-term loans (generally up to 18 months) secured by land for both residential and commercial development. The loans are generally made for acquisition and improvements. Funds are disbursed as phases of construction are completed.

In the past, the Company funded construction of single family homes, when no contract of sale existed, based upon the experience of the builder, the financial strength of the owner, the type and location of the property and other factors. Construction loans are generally personally guaranteed by the principal(s). Repayment of such loans may be negatively impacted by the builders’ inability to complete construction, by a downturn in the new construction market, by a significant increase in interest rates or by a decline in general economic conditions. The Company has had a moratorium in place since mid-2008 on new speculative construction loans.

Residential Real Estate Loans – Various loans secured by residential real estate properties are offered by the Company, including 1-4 family residential mortgages, multi-family residential loans and a variety of home equity line of credit products. Repayment of such loans may be negatively impacted should the borrower default, should there be a significant decline in the value of the property securing the loan or should there be a decline in general economic conditions.

Commercial and Industrial Loans – The Company’s commercial and industrial loan portfolio consists primarily of commercial business loans and lines of credit to businesses and professionals. These loans are usually made to finance the purchase of inventory, new or used equipment or other short or long-term working capital purposes. These loans are generally secured by corporate assets, often with real estate as secondary collateral, but are also occasionally offered on an unsecured basis. In granting this type of loan, the Company primarily looks to the borrower’s cash flow as the source of repayment with collateral and personal guarantees, where obtained, as a secondary source. Commercial loans are often larger and may involve greater risks than other types of loans offered by the Company. Payments on such loans are often dependent upon the successful operation of the underlying business involved and, therefore, repayment of such loans may be negatively impacted by adverse changes in economic conditions, management’s inability to effectively manage the business, claims of others against the borrower’s assets which may take priority over the Company’s claims against assets, death or disability of the borrower or loss of market for the borrower’s products or services.

Other Loans – The Company also offers installment loans and reserve lines of credit to individuals. Repayments of such loans are often dependent on the personal income of the borrower which may be negatively impacted by adverse changes in economic conditions. The Company does not place an emphasis on originating these types of loans.

The Company does not have any lending programs commonly referred to as subprime lending. Subprime lending generally targets borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burdened ratios.

The following table sets forth activity in our allowance for loan losses, by loan type, for the three months ended June 30, 2012. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

Three months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated			Total
Allowance for loan losses:
Beginning Balance	$	1,094,736		$	4,645,248		$	842,636		$	236,313		$	1,049,555		$	413,724		$	178,731		$	8,460,943
Charge-offs		(44,471	)		—			—			—			(32,150	)		(14,118	)		—			(90,739	)
Recoveries		1,500			14,988			—			—			—			381			—			16,869
Provision		(316,423	)		(877,846	)		(592,125	)		(114,863	)		192,498			103,345			(108,011	)		(1,713,425	)
Ending Balance	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—		$	500,538
Ending balance: collectively evaluated for impairment	$	698,012		$	3,642,539		$	218,991		$	11,405		$	1,179,612		$	351,831		$	70,720		$	6,173,110
Total Allowance for Loan Losses	$	735,342		$	3,782,390		$	250,511		$	121,450		$	1,209,903		$	503,332		$	70,720		$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—		$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—		$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—		$	455,030,951

The following table sets forth activity in our allowance for loan losses, by loan type, for the six months ended June 30, 2012. The following table also details the amount of loans receivable, net, that are evaluated individually, and collectively, for impairment, and the related portion of the allowance for loan losses that is allocated to each loan portfolio segment.

Six months ended June 30, 2012	Commercial			Commercial Real Estate			Construction			Construction to Permanent			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning Balance	$	882,062		$	4,018,746		$	867,159		$	547,333		$	2,550,588		$	458,762		$	60,022	$	9,384,672
Charge-offs		(44,471	)		(49,922	)		—			—			(84,711	)		(14,119	)		—		(193,223	)
Recoveries		2,500			36,976			—			—			—			1,550			—		41,026
Provision		(104,751	)		(223,410	)		(616,648	)		(425,883	)		(1,255,972	)		57,139			10,698		(2,558,827	)
Ending Balance	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Ending balance: individually evaluated for impairment	$	37,330		$	139,851		$	31,520		$	110,045		$	30,291		$	151,501		$	—	$	500,538
Ending balance: collectively evaluated for impairment	$	698,010		$	3,642,539		$	218,991		$	11,405		$	1,179,614		$	351,831		$	70,720	$	6,173,110
Total Allowance for Loan Losses	$	735,340		$	3,782,390		$	250,511		$	121,450		$	1,209,905		$	503,332		$	70,720	$	6,673,648
Total Loans ending balance	$	32,379,945		$	237,217,702		$	6,217,516		$	8,287,915		$	149,905,067		$	55,712,856		$	—	$	489,721,001
Ending balance:
individually evaluated for impairment	$	191,375		$	9,406,325		$	3,081,562		$	6,192,645		$	14,400,401		$	1,417,742		$	—	$	34,690,050
Ending balance :
collectively evaluated for impairment	$	32,188,570		$	227,811,377		$	3,135,954		$	2,095,270		$	135,504,666		$	54,295,114		$	—	$	455,030,951

The Company monitors the credit quality of its loans receivable in an ongoing manner. Credit quality is monitored by reviewing certain credit quality indicators. Management has determined that internally assigned risk ratings and loan-to-value ratios (“LTVs”), at period end, are the key credit quality indicators that best help management monitor the credit quality of the Company’s loans receivable. Loan-to-value ratios used by management in monitoring credit quality are based on current period loan balances and original values at time of originations (unless a current appraisal has been obtained as a result of the loan being deemed impaired or the loan is a maturing construction loan).

Appraisals on properties securing impaired loans and Other Real Estate Owned (“OREO”) are updated annually. Additionally, appraisals on construction loans are updated four months in advance of scheduled maturity dates. We update our impairment analysis monthly based on the most recent appraisal as well as other factors (such as senior lien positions, e.g. property taxes). We are subscribers to a national real estate valuation database service and use published information regarding home sales prices in the towns/counties where our collateral is located in CT and NY.

The majority of the Company’s impaired loans have been resolved through courses of action other than via bank liquidations of real estate collateral through OREO. These include normal loan payoffs, the traditional workout process, triggering personal guarantee obligations, and troubled debt restructurings. However, as loan workout efforts progress to a point where the bank’s liquidation of real estate collateral is the likely outcome, the impairment analysis is updated to reflect recent actual experience with bank sales of OREO properties.

A disposition discount is built into our impairment analysis and reflected in our allowance once a property is determined to be a likely OREO (e.g. foreclosure is probable). To determine the discount, we compare the actual sales prices of our OREO properties to the appraised value that was obtained as of the date when we took title to the property. The difference is the bank-owned disposition discount.

The Company has a risk rating system as part of the risk assessment of its loan portfolio. The Company’s lending officers are required to assign an Obligor and a Facility risk rating to each loan in their portfolio at origination, which is ratified or modified by the Committee to which the loan is submitted for approval. When the lender learns of important financial developments, the risk rating is reviewed accordingly, and adjusted if necessary. All loans are reviewed annually. Similarly, the Loan Committee can adjust a risk rating.

In addition, the Company engages a third party independent loan reviewer that performs quarterly reviews of a sample of loans, validating the Bank’s risk ratings assigned to such loans. The risk ratings play an important role in the establishment of the loan loss provision and to confirm the adequacy of the allowance for loan losses. Any upgrades to criticized loans must be approved by the Board Loan Committee.

When assigning a risk rating to a loan, management utilizes the Bank’s internal eleven-point risk rating system.

An asset is considered “special mention” when it has a potential weakness based on objective evidence, but does not currently expose the Company to sufficient risk to warrant classification in one of the following categories. An asset is considered “substandard” if it is not adequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets have well defined weaknesses based on objective evidence, and are characterized by the “distinct possibility” that the Company 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.”

As of this quarter, the Bank implemented enhancements to the allowance methodology, resulting in a reduction of the allowance for loan losses of $1.1 million. In making this transition, the changes serve to update and enhance the methodology to reflect the direction of the current loan portfolio. The changes are threefold:

• First, the Bank adopted a two year, instead of a three year, weighted average historical loss factor as the basis for the calculation of its historical loss experience. This is used to calculate expected losses in the Accounting Standards Codification (“ASC”) (Topic 450-20), “Loss Contingencies” pools prior to the application of qualitative risk adjustment factors. This change was made to be more responsive to the changing credit environment. Net charge-offs have declined, especially in 2012 when they averaged $76,000 per quarter. This shorter average historical loss period will produce results more indicative of the current and expected behavior of the portfolio.

• Second, the Bank adopted an Internal Risk Ratings Based (IRB) approach to calculating historical loss rates. This approach calibrates expected losses with actual risk assessment and equates the likelihood of loss to the level of risk in a credit facility rating. Previously, loss history was applied to categories of loans and qualitative adjustments were apportioned by risk rating within the categories.

• Third, the Bank increased the detail of analysis within the segments, particularly within Commercial Real Estate lending, which is currently the Bank’s largest concentration overall, by expanding the number of ASC 450-20 pools. In all, ten sub-concentrations have been added to the analysis. The greater level of detail enables the Bank to better apply qualitative risk adjustment factors to the segments affected and to monitor changes in credit risk within the portfolio.

Charge-off generally commences in the month that the loan is classified “doubtful” and is fully charged off within six months of such classification. If the account is classified “loss” the full balance is charged off immediately. The full balance is charged off regardless of the potential recovery from the sale of the collateral. This amount is recognized as a recovery once the collateral is sold.

In accordance with FFIEC (“Federal Financial Institutions Examination Council”) published policies establishing uniform criteria for the classification of retail credit based on delinquency status, “Open-end” credits are charged-off when 180 days delinquent and “Closed-end” credits are charged-off when 120 days delinquent. Typically, consumer installment loans are charged off no later than 90 days past due.

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at June 30, 2012:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	24,850,034	$	1,456,449	$	176,063,752	$	9,310,101	$	—	$	—	$	2,095,269	$	—	$	100,682,616	$	26,642,690	$	49,265,371	$	1,519,501	$	699,679	$	392,585,462
Special Mention		369,025		170,214		14,315,821		5,683,817		3,135,953		—		—		—		5,313,385		—		99,532		2,711,032		—		31,798,779
Substandard & Doubtful		4,611,015		923,208		18,170,351		13,673,860		1,219,528		1,862,035		—		6,192,646		5,197,208		12,069,168		—		1,417,741		—		65,336,760
	$	29,830,074	$	2,549,871	$	208,549,924	$	28,667,778	$	4,355,481	$	1,862,035	$	2,095,269	$	6,192,646	$	111,193,209	$	38,711,858	$	49,364,903	$	5,648,274	$	699,679	$	489,721,001

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	32,188,570	$	229,248,655	$	3,135,953	$	7,000,270	$	145,976,052	$	54,719,115	$	472,268,615
Non Performing		191,375		7,969,047		3,081,563		1,287,645		3,929,015		993,741		17,452,386
Total	$	32,379,945	$	237,217,702	$	6,217,516	$	8,287,915	$	149,905,067	$	55,712,856	$	489,721,001

The following table details the credit risk exposure of loans receivable, by loan type and credit quality indicator at December 31, 2011:

CREDIT RISK PROFILE BY CREDITWORTHINESS CATEGORY

	Commercial				Commercial Real Estate				Construction				Construction to Permanent				Residential Real Estate				Consumer
LTVs:	< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		< 75%		>= 75%		Other		Total
Internal Risk Rating
Pass	$	23,822,200	$	1,737,893	$	151,392,526	$	11,680,310	$	—	$	—	$	903,035	$	—	$	129,132,494	$	34,895,858	$	44,969,963	$	1,531,223	$	636,863	$	400,702,365
Special Mention		1,544,420		170,575		22,426,235		4,585,523		9,210,344		—		—		—		5,316,201		2,400,000		274,365		3,029,362		—		48,957,025
Substandard & Doubtful		4,480,440		55,207		15,981,747		9,593,496		1,243,579		1,852,999		—		9,108,987		3,587,607		12,776,695		—		1,417,742		—		60,098,499
	$	29,847,060	$	1,963,675	$	189,800,508	$	25,859,329	$	10,453,923	$	1,852,999	$	903,035	$	9,108,987	$	138,036,302	$	50,072,553	$	45,244,328	$	5,978,327	$	636,863	$	509,757,889

CREDIT RISK PROFILE

	Commercial		Commercial Real Estate		Construction		Construction to Permanent		Residential Real Estate		Consumer		Totals
Performing	$	31,521,175	$	206,322,032	$	10,928,343	$	5,808,035	$	183,629,363	$	50,865,776	$	489,074,724
Non Performing		289,560		9,337,805		1,378,579		4,203,987		4,479,492		993,742		20,683,165
Total	$	31,810,735	$	215,659,837	$	12,306,922	$	10,012,022	$	188,108,855	$	51,859,518	$	509,757,889

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The recorded balance of these non-accrual loans was $17.5 million and $20.7 million at June 30, 2012, and December 31, 2011 respectively. Generally, loans are placed on non-accruing status when they become 90 days or more delinquent, or earlier if deemed appropriate, and remain on non-accrual status until they are brought current, have six months of performance under the loan terms, and factors indicating reasonable doubt about the timely collection of payments no longer exist. Therefore, loans may be current in accordance with their loan terms, or may be less than 90 days delinquent and still be on a non-accruing status. Additionally, certain loans that cannot demonstrate sufficient global cash flow to continue loan payments in the future and certain troubled debt restructures (TDRs) are placed on non-accrual status.

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at June 30, 2012:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Substandard		—		—		191,375		191,375		—		448,000		639,375
Total Commercial	$	—	$	—	$	191,375	$	191,375	$	—	$	448,000	$	639,375
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		—		304,388		304,388
Substandard	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,482,538	$	11,451,585
Total Commercial Real Estate	$	—	$	—	$	5,808,987	$	5,808,987	$	2,160,060	$	3,786,926	$	11,755,973
Construction
Substandard	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Total Construction	$	—	$	—	$	1,862,035	$	1,862,035	$	1,219,528	$	—	$	3,081,563
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	1,287,645	$	—	$	1,287,645
Residential Real Estate
Substandard	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Total Residential Real Estate	$	—	$	371,920	$	3,557,095	$	3,929,015	$	—	$	—	$	3,929,015
Consumer
Substandard	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total Consumer	$	—	$	—	$	993,741	$	993,741	$	—	$	—	$	993,741
Total	$	—	$	371,920	$	12,413,233	$	12,785,153	$	4,667,233	$	4,234,926	$	21,687,312

The following table sets forth the detail, and delinquency status, of non-accrual loans and past due loans at December 31, 2011:

	Non-Accrual and Past Due Loans
	Non-Accrual Loans
2011	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		>90 Days Past Due and Accruing		Total Non- Accrual and Past Due Loans
Commercial
Special Mention	$	—	$	—	$	—	$	—	$	—	$	44,296	$	44,296
Substandard		—		—		289,560		289,560		—		947,847		1,237,407
Total Commercial	$	—	$	—	$	289,560	$	289,560	$	—	$	992,143	$	1,281,703
Commercial Real Estate
Pass	$	—	$	—	$	—	$	—	$	—	$	402,663	$	402,663
Special Mention		—		—		—		—		—		2,832,452		2,832,452
Substandard	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	3,515,848	$	12,853,653
Total Commercial Real Estate	$	—	$	443,259	$	6,670,730	$	7,113,989	$	2,223,816	$	6,750,963	$	16,088,768
Construction
Substandard	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Total Construction	$	—	$	—	$	135,000	$	135,000	$	1,243,579	$	1,717,999	$	3,096,578
Construction to Permanent
Substandard	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	4,203,987	$	—	$	4,203,987
Residential Real Estate
Substandard	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Total Residential Real Estate	$	—	$	—	$	4,479,492	$	4,479,492	$	—	$	—	$	4,479,492
Consumer
Substandard	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total Consumer	$	—	$	—	$	993,742	$	993,742	$	—	$	—	$	993,742
Total	$	—	$	443,259	$	12,568,524	$	13,011,783	$	7,671,382	$	9,461,105	$	30,144,270

These non-accrual and past due amounts included loans deemed to be impaired of $17.5 million and $20.7 million at June 30, 2012, and December 31, 2011, respectively. Loans past due and still accruing interest were $4.2 million and $9.5 million at June 30, 2012, and December 31, 2011 respectively, and consisted of seven loans at June 30, 2012. All of the borrowers of said loans at June 30, 2012 continue to make interest payments, but are past maturity where payoff is pending or are in the process of being renewed.

The following table sets forth the detail and delinquency status of loans receivable, by performing and non-performing loans at June 30, 2012.

	Performing (Accruing) Loans
2012	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Performing Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	—	$	298,000	$	—	$	298,000	$	26,008,483	$	26,306,483	$	—	$	26,306,483
Special Mention		—		—		—		—		539,239		539,239		—		539,239
Substandard		—		500,000		—		500,000		4,394,848		4,894,848		639,375		5,534,223
Total Commercial	$	—	$	798,000	$	—	$	798,000	$	30,942,570	$	31,740,570	$	639,375	$	32,379,945
Commercial Real Estate
Pass	$	3,990,000	$	—	$	—	$	3,990,000	$	181,383,853	$	185,373,853	$	—	$	185,373,853
Special Mention		—		—		—		—		19,695,250		19,695,250		304,388		19,999,638
Substandard		394,137		—		1,907,661		2,301,798		18,090,828		20,392,626		11,451,585		31,844,211
Total Commercial Real Estate	$	4,384,137	$	—	$	1,907,661	$	6,291,798	$	219,169,931	$	225,461,729	$	11,755,973	$	237,217,702
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		3,135,953		3,135,953		—		3,135,953
Substandard		—		—		—		—		—		—		3,081,563		3,081,563
Total Construction	$	—	$	—	$	—	$	—	$	3,135,953	$	3,135,953	$	3,081,563	$	6,217,516
Construction to Permanent
Pass	$	—	$	—	$	—	$	—	$	2,095,269	$	2,095,269	$	—	$	2,095,269
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		4,905,002		4,905,002		1,287,644		6,192,646
Total Construction to Permanent	$	—	$	—	$	—	$	—	$	7,000,271	$	7,000,271	$	1,287,644	$	8,287,915
Residential Real Estate
Pass	$	—	$	—	$	—	$	—	$	127,325,306	$	127,325,306	$	—	$	127,325,306
Special Mention		—		—		—		—		5,313,385		5,313,385		—		5,313,385
Substandard		1,638,262		—		—		1,638,262		11,699,099		13,337,361		3,929,015		17,266,376
Total Residential Real Estate	$	1,638,262	$	—	$	—	$	1,638,262	$	144,337,790	$	145,976,052	$	3,929,015	$	149,905,067
Consumer
Pass	$	7,953	$	—	$	—	$	7,953	$	51,476,598	$	51,484,551	$	—	$	51,484,551
Special Mention		—		—		—		—		2,810,564		2,810,564		—		2,810,564
Substandard		—		—		—		—		423,999		423,999		993,742		1,417,741
Total Consumer	$	7,953	$	—	$	—	$	7,953	$	54,711,161	$	54,719,114	$	993,742	$	55,712,856
Total	$	6,030,352	$	798,000	$	1,907,661	$	8,736,013	$	459,297,676	$	468,033,689	$	21,687,312	$	489,721,001

The following table sets forth the detail and delinquency status of loans receivable, net, by performing and non-performing loans at December 31, 2011.

	Performing (Accruing) Loans
2011	31-60 Days Past Due		Greater Than 60 Days		Total Past Due		Current		Total Perfoming Loans		Total Non- Accrual and Past Due Loans		Total Loans
Commercial
Pass	$	10,971	$	—	$	10,971	$	25,504,826	$	25,515,797	$	44,296	$	25,560,093
Special Mention		—		—		—		1,714,995		1,714,995		—		1,714,995
Substandard		233,781		—		233,781		3,064,459		3,298,240		1,237,407		4,535,647
Total Commercial	$	244,752	$	—	$	244,752	$	30,284,280	$	30,529,032	$	1,281,703	$	31,810,735
Commercial Real Estate
Pass	$	—	$	—	$	—	$	162,670,173	$	162,670,173	$	402,663	$	163,072,836
Special Mention		1,915,504		—		1,915,504		22,263,802		24,179,306		2,832,452		27,011,758
Substandard		—		—		—		12,721,590		12,721,590		12,853,653		25,575,243
Total Commercial Real Estate	$	1,915,504	$	—	$	1,915,504	$	197,655,565	$	199,571,069	$	16,088,768	$	215,659,837
Construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		9,210,344		9,210,344		—		9,210,344
Substandard		—		—		—		—		—		3,096,578		3,096,578
Total Construction	$	—	$	—	$	—	$	9,210,344	$	9,210,344	$	3,096,578	$	12,306,922
Construction to Permanent
Pass	$	—	$	—	$	—	$	903,035	$	903,035	$	—	$	903,035
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		4,905,000		4,905,000		4,203,987		9,108,987
Total Construction to Permanent	$	—	$	—	$	—	$	5,808,035	$	5,808,035	$	4,203,987	$	10,012,022
Residential Real Estate
Pass	$	42,181	$	—	$	42,181	$	163,986,171	$	164,028,352	$	—	$	164,028,352
Special Mention		4,800,000		—		4,800,000		2,916,201		7,716,201		—		7,716,201
Substandard		—		84,225		84,225		11,800,585		11,884,810		4,479,492		16,364,302
Total Residential Real Estate	$	4,842,181	$	84,225	$	4,926,406	$	178,702,957	$	183,629,363	$	4,479,492	$	188,108,855
Consumer
Pass	$	1,459	$	—	$	1,459	$	47,136,590	$	47,138,049	$	—	$	47,138,049
Special Mention		—		—		—		3,303,727		3,303,727		—		3,303,727
Substandard		—		—		—		424,000		424,000		993,742		1,417,742
Total Consumer	$	1,459	$	—	$	1,459	$	50,864,317	$	50,865,776	$	993,742	$	51,859,518
Total	$	7,003,896	$	84,225	$	7,088,121	$	472,525,498	$	479,613,619	$	30,144,270	$	509,757,889

The following table summarizes impaired loans as of June 30, 2012:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2012
With no related allowance recorded:
Commercial	$	18,167	$	250,893	$	—
Commercial Real Estate		7,927,165		8,755,486		—
Construction		2,946,562		2,946,592		—
Construction to Permanent		4,905,000		4,905,000
Residential		13,730,710		13,730,710		—
Consumer		993,742		993,742		—
Total:	$	30,521,346	$	31,582,423	$	—
With an allowance recorded:
Commercial	$	173,208	$	350,000	$	37,330
Commercial Real Estate		1,479,160		1,595,500		139,851
Construction		135,000		286,625		31,520
Construction to Permanent		1,287,645		1,425,000		110,045
Residential		669,691		669,691		30,291
Consumer		424,000		424,000		151,501
Total:	$	4,168,704	$	4,750,816	$	500,538
Commercial	$	191,375	$	600,893	$	37,330
Commercial Real Estate		9,406,325		10,350,986		139,851
Construction		3,081,562		3,233,217		31,520
Construction to Permanent		6,192,645		6,330,000		110,045
Residential		14,400,401		14,400,401		30,291
Consumer		1,417,742		1,417,742		151,501
Total:	$	34,690,050	$	36,333,239	$	500,538

Impaired loans consist of non-accrual loans, TDRs and loans that were previously classified as TDRs that have been upgraded.

The following table summarizes impaired loans as of December 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Allowance
2011
With no related allowance recorded:
Commercial	$	210,091	$	581,974	$	—
Commercial Real Estate		4,444,315		5,174,124		—
Construction		1,243,579		1,247,627		—
Construction to Permanent		6,614,333		6,614,333		—
Residential		9,789,727		9,789,727		—
Consumer		993,742		1,038,640		—
Total:	$	23,295,787	$	24,446,425	$	—
With an allowance recorded:
Commercial	$	79,469	$	130,137	$	61,145
Commercial Real Estate		5,131,655		5,354,025		319,894
Construction		135,000		286,625		31,520
Construction to Permanent		2,494,654		2,634,000		498,254
Residential		5,196,516		5,196,516		197,478
Consumer		424,000		424,000		151,500
Total:	$	13,461,294	$	14,025,303	$	1,259,791
Commercial	$	289,560	$	712,111	$	61,145
Commercial Real Estate		9,575,970		10,528,149		319,894
Construction		1,378,579		1,534,252		31,520
Construction to Permanent		9,108,987		9,248,333		498,254
Residential		14,986,243		14,986,243		197,478
Consumer		1,417,742		1,462,640		151,500
Total:	$	36,757,081	$	38,471,728	$	1,259,791

The recorded investment of impaired loans at June 30, 2012 and December 31, 2011 was $34.7 million and $36.8 million, with related allowances of $501,000 and $1.3 million, respectively.

Included in the tables above at June 30, 2012 and December 31, 2011 are loans with carrying balances of $30.5 million and $23.3 million that required no specific reserves in our allowance for loan losses. Loans that did not require specific reserves at June 30, 2012 and December 31, 2011 have sufficient collateral values, less costs to sell, supporting the carrying balances of the loans. In some cases, there may be no specific reserves because the Company already charged-off the specific impairment. Once a borrower is in default, the Company is under no obligation to advance additional funds on unused commitments.

On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan.

The following table presents the total troubled debt restructured loans as of June 30, 2012:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	233,817		2	$	4,315,060		3	$	4,548,877
Residential Real Estate		3		10,471,386		—		—		3		10,471,386
Construction		—		—		1		1,219,528		1		1,219,528
Construction to permanent		1		4,905,000		1		1,287,645		2		6,192,645
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,034,203		4	$	6,822,233		10	$	22,856,436

The following table presents the total troubled debt restructured loans as of December 31, 2011:

	Accrual				Non-accrual				Total
	# of Loans		Amount		# of Loans		Amount		# of Loans		Amount
Commercial Real Estate		1	$	238,165		3	$	5,666,882		4	$	5,905,047
Residential Real Estate		3		10,506,751		—		—		3		10,506,751
Construction		—		—		1		1,243,579		1		1,243,579
Construction to permanent		1		4,905,000		2		2,494,654		3		7,399,654
Consumer home equity		1		424,000		—		—		1		424,000
Total Troubled Debt Restructurings		6	$	16,073,916		6	$	9,405,115		12	$	25,479,031

One loan was modified in a troubled debt restructuring during the three months ended June 30, 2012. The following table summarizes loans that were modified in a troubled debt restructuring during the six months ended June 30, 2012.

	Six months ended June 30, 2012
	Number of Relationships		Pre-Modification Outstanding Recorded Investment		Number of Relationships		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		—	$	—		—	$	—
Residential Real Estate		1		4,661,109		1		4,661,109
Construction to permanent		—		—		—		—
Total Troubled Debt Restructurings		1	$	4,661,109		1	$	4,661,109

Substantially all of our troubled debt restructured loan modifications involve lowering the monthly payments on such loans through either a reduction in interest rate below market rate, an extension of the term of the loan, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. If the borrower had demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

During the six months ended June 30, 2012, one of the troubled debt restructured loans was upgraded and is no longer classified as a troubled debt restructuring as compared to December 31, 2011. The upgrade was a commercial construction loan for $1.2 million where the bank received additional collateral. There was another troubled debt restructuring of a residential loan for $4.7 million that was upgraded to special mention due to increased liquidity of the borrower during the first quarter of 2012, which has since been downgraded to substandard, due to financial hardship of the borrower in the second quarter. One troubled debt restructuring had a payment default on a commercial real estate loan and is currently in OREO.

All troubled debt restructurings are impaired loans, which are individually evaluated for impairment.

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Fair Value and Interest Rate Risk (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Financial assets measured at fair value on a recurring basis
Securities available for sale	$ 56,342,630	$ 66,469,972
U. S. Government bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	5,016,920	5,037,085
U. S. Government agency mortgage-backed securities [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	39,642,765	50,049,429
Corporate bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	11,682,945	11,383,458
Fair Value Measurements Recurring [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	56,342,630	66,469,972
Fair Value Measurements Recurring [Member] | U. S. Government bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	5,016,920	5,037,085
Fair Value Measurements Recurring [Member] | U. S. Government agency mortgage-backed securities [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	39,642,765	50,049,429
Fair Value Measurements Recurring [Member] | Corporate bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	11,682,945	11,383,458
Fair Value Measurements Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U. S. Government bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U. S. Government agency mortgage-backed securities [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Significant Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	56,342,630	66,469,972
Fair Value Measurements Recurring [Member] | Significant Observable Inputs (Level 2) [Member] | U. S. Government bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	5,016,920	5,037,085
Fair Value Measurements Recurring [Member] | Significant Observable Inputs (Level 2) [Member] | U. S. Government agency mortgage-backed securities [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	39,642,765	50,049,429
Fair Value Measurements Recurring [Member] | Significant Observable Inputs (Level 2) [Member] | Corporate bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale	11,682,945	11,383,458
Fair Value Measurements Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | U. S. Government bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | U. S. Government agency mortgage-backed securities [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale
Fair Value Measurements Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Corporate bonds [Member]
Financial assets measured at fair value on a recurring basis
Securities available for sale

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Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income [Abstract]

Change in unrealized gains and losses on available-for-sale securities

	Three Months Ended June 30, 2012							Six Months Ended June 30, 2012
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	198,155	$	(75,299	)	$	122,856	$	306,842		$	(116,601	)	$	190,241
Reclassification adjustment for (losses) recognized in income		—		—			—		(8,042	)		3,056			(4,986	)
Unrealized holding gains on available for sale securities, net of taxes	$	198,155	$	(75,299	)	$	122,856	$	298,800		$	(113,545	)	$	185,255
	Three Months Ended June 30, 2011							Six Months Ended June 30, 2011
	Before Tax Amount		Tax Effect			Net of Tax Amount		Before Tax Amount			Tax Effect			Net of Tax Amount
Unrealized holding gains arising during the period	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746
Reclassification adjustment for gains recognized in income		—		—			—		—			—			—
Unrealized holding gains on available for sale securities, net of taxes	$	453,931	$	(206,410	)	$	247,521	$	459,133		$	(208,387	)	$	250,746

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Loans Receivable and Allowance for Loan Losses (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Allowance for loan losses:
Balance, beginning of period	$ 8,460,943	$ 12,208,476	$ 9,384,672	$ 15,374,101
Charge-offs	(90,739)	(3,034,591)		(7,188,138)
Recoveries	16,869	743,044		763,650
Provision	(1,713,425)	1,482,798		8,464,427
Balance, end of period	6,673,648	11,399,727	6,673,648	11,399,727
Ending balance: individually evaluated for impairment	500,538		500,538
Ending balance: collectively evaluated for impairment	6,173,110		6,173,110
Total Allowance for Loan Losses	6,673,648	11,399,727	6,673,648	11,399,727
Total Loans ending balance	489,721,001		489,721,001		509,757,889
Ending balance: individually evaluated for impairment	34,690,050		34,690,050
Ending balance: collectively evaluated for impairment	455,030,951		455,030,951
Commercial, Real Estate [Member]
Allowance for loan losses:
Balance, beginning of period	4,645,248		4,018,746
Charge-offs			(49,922)
Recoveries	14,988		36,976
Provision	(877,846)		(223,410)
Balance, end of period	3,782,390		3,782,390
Ending balance: individually evaluated for impairment	139,851		139,851
Ending balance: collectively evaluated for impairment	3,642,539		3,642,539
Total Allowance for Loan Losses	3,782,390		3,782,390
Total Loans ending balance	237,217,702		237,217,702		215,659,837
Ending balance: individually evaluated for impairment	9,406,325		9,406,325
Ending balance: collectively evaluated for impairment	227,811,377		227,811,377
Construction [Member]
Allowance for loan losses:
Balance, beginning of period	842,636		867,159
Charge-offs
Recoveries
Provision	(592,125)		(616,648)
Balance, end of period	250,511		250,511
Ending balance: individually evaluated for impairment	31,520		31,520
Ending balance: collectively evaluated for impairment	218,991		218,991
Total Allowance for Loan Losses	250,511		250,511
Total Loans ending balance	6,217,516		6,217,516		12,306,922
Ending balance: individually evaluated for impairment	3,081,562		3,081,562
Ending balance: collectively evaluated for impairment	3,135,954		3,135,954
Construction to Permanent [Member]
Allowance for loan losses:
Balance, beginning of period	236,313		547,333
Charge-offs
Recoveries
Provision	(114,863)		(425,883)
Balance, end of period	121,450		121,450
Ending balance: individually evaluated for impairment	110,045		110,045
Ending balance: collectively evaluated for impairment	11,405		11,405
Total Allowance for Loan Losses	121,450		121,450
Total Loans ending balance	8,287,915		8,287,915		10,012,022
Ending balance: individually evaluated for impairment	6,192,645		6,192,645
Ending balance: collectively evaluated for impairment	2,095,270		2,095,270
Residential real estate [Member]
Allowance for loan losses:
Balance, beginning of period	1,049,555		2,550,588
Charge-offs	(32,150)		(84,711)
Recoveries
Provision	192,498		(1,255,972)
Balance, end of period	1,209,903		1,209,903
Ending balance: individually evaluated for impairment	30,291		30,291
Ending balance: collectively evaluated for impairment	1,179,612		1,179,612
Total Allowance for Loan Losses	1,209,903		1,209,903
Total Loans ending balance	149,905,067		149,905,067		188,108,855
Ending balance: individually evaluated for impairment	14,400,401		14,400,401
Ending balance: collectively evaluated for impairment	135,504,666		135,504,666
Commercial [Member]
Allowance for loan losses:
Balance, beginning of period	1,094,736		882,062
Charge-offs	(44,471)		(44,471)
Recoveries	1,500		2,500
Provision	(316,423)		(104,751)
Balance, end of period	735,342		735,342
Ending balance: individually evaluated for impairment	37,330		37,330
Ending balance: collectively evaluated for impairment	698,012		698,012
Total Allowance for Loan Losses	735,342		735,342
Total Loans ending balance	32,379,945		32,379,945		31,810,735
Ending balance: individually evaluated for impairment	191,375		191,375
Ending balance: collectively evaluated for impairment	32,188,570		32,188,570
Consumer [Member]
Allowance for loan losses:
Balance, beginning of period	413,724		458,762
Charge-offs	(14,118)		(14,119)
Recoveries	381		1,550
Provision	103,345		57,139
Balance, end of period	503,332		503,332
Ending balance: individually evaluated for impairment	151,501		151,501
Ending balance: collectively evaluated for impairment	351,831		351,831
Total Allowance for Loan Losses	503,332		503,332
Total Loans ending balance	55,712,856		55,712,856		51,859,518
Ending balance: individually evaluated for impairment	1,417,742		1,417,742
Ending balance: collectively evaluated for impairment	54,295,114		54,295,114
Unallocated [Member]
Allowance for loan losses:
Balance, beginning of period	178,731		60,022
Charge-offs
Recoveries
Provision	(108,011)		10,698
Balance, end of period	70,720		70,720
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	70,720		70,720
Total Allowance for Loan Losses	70,720		70,720
Total Loans ending balance
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 13: Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” was issued as a result of the effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU No. 2011-04 is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands the existing disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IFRS No. 13. Many of the requirements for the amendments in ASU No. 2011-04 do not result in a change in the application of the requirements in Topic 820. The Company adopted ASU No. 2011-04 on January 1, 2012 and it did not have a material impact on the consolidated financial statements.

ASU No. 2011-05, “Comprehensive Income (Topic 220) – Presentation of Comprehensive Income,” requires an entity to present components of comprehensive income either in a single continuous statement of comprehensive income or in two separate consecutive statements. These amendments will make the financial statement presentation of other comprehensive income more prominent by eliminating the alternative to present comprehensive income within the statement of equity. As originally issued, ASU No. 2011-05 required entities to present reclassification adjustments out of accumulated other comprehensive income by component in the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). This requirement was deferred by ASU No.2011-12, “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards”. ASU No. 2011-05 is effective for all interim and annual periods beginning on or after December 15, 2011. The Company adopted this guidance in the first quarter of 2012 and elected to present comprehensive income in a separate consolidated statement of comprehensive income.