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Note 3 - Loans/Leases Receivable

6 Months Ended

Jun. 30, 2011

NOTE 3 – LOANS/LEASES RECEIVABLE

The composition of the loan/lease portfolio as of June 30, 2011 and December 31, 2010 is presented as follows:

	As of June 30,			As of December 31,
	2011			2010

Commercial and industrial loans	$	368,565,026		$	365,625,271
Commercial real estate loans
Owner-occupied commercial real estate		163,115,026			141,411,027
Commercial construction, land development, and other land		62,027,603			65,529,058
Other non owner-occupied commercial real estate		334,634,433			346,777,179
		559,777,062			553,717,264

Direct financing leases *		85,563,743			83,009,647
Residential real estate loans **		86,058,931			82,196,622
Installment and other consumer loans		81,858,293			86,239,944
		1,181,823,055			1,170,788,748
Plus deferred loan/lease orgination costs, net of fees		2,070,904			1,749,855
		1,183,893,959			1,172,538,603
Less allowance for estimated losses on loans/leases		(19,802,632	)		(20,364,656	)
	$	1,164,091,327		$	1,152,173,947


* Direct financing leases:
Net minimum lease payments to be received	$	97,603,108		$	94,921,417
Estimated unguaranteed residual values of leased assets		1,137,794			1,204,865
Unearned lease/residual income		(13,177,159	)		(13,116,635	)
		85,563,743			83,009,647
Plus deferred lease origination costs, net of fees		2,670,346			2,341,628
		88,234,089			85,351,275
Less allowance for estimated losses on leases		(1,591,309	)		(1,530,572	)
	$	86,642,780		$	83,820,703

**Includes residential real estate loans held for sale totaling $2,251,437 and $14,084,859 as of June 30, 2011 and December 31, 2010, respectively.

Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors and management’s expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The large majority of leases with residual values contain a lease options rider which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal.

For the three and six months ended June 30, 2011, there were no losses on residual values. And, for the three months ended June 30, 2010, there were no losses on residual values. During the first quarter of 2010, the Company recognized losses totaling $617,000 in residual values for two direct financing equipment leases. At June 30, 2011, the Company had 45 leases remaining with residual values totaling $1,137,794 that were not protected with a lease end options rider. At December 31, 2010, the Company had 54 leases remaining with residual values totaling $1,204,865 that were not protected with a lease end options rider. Management has performed specific evaluations of these residual values and determined that the valuations are appropriate.

The aging of the loan/lease portfolio by classes of loans/leases as of June 30, 2011 is presented as follows:

Classes of Loans/Leases	Current			30-59 Days Past Due			60-89 Days Past Due			Accruing Past Due 90 Days or More			Nonaccrual Loans/Leases			Total

Commercial and Industrial	$	360,085,874		$	2,321,419		$	22,127		$	-		$	6,135,606		$	368,565,026
Commercial Real Estate
Owner-Occupied Commercial Real Estate		160,349,706			960,665			315,262			-			1,489,393			163,115,026
Commercial Construction, Land Development, and Other Land		58,285,318			-			-			-			3,742,285			62,027,603
Other Non Owner-Occupied Commercial Real Estate		323,311,179			3,069,736			350,938			-			7,902,580			334,634,433
Direct Financing Leases		83,334,047			756,199			135,727			-			1,337,770			85,563,743
Residential Real Estate		84,843,567			-			-			122,567			1,092,797			86,058,931
Installment and Other Consumer		79,574,163			409,785			44,744			235,414			1,594,187			81,858,293
	$	1,149,783,854		$	7,517,804		$	868,798		$	357,981		$	23,294,618		$	1,181,823,055

As a percentage of total loan/lease portfolio		97.29	%		0.64	%		0.07	%		0.03	%		1.97	%		100.00	%

The aging of the loan/lease portfolio by classes of loans/leases as of December 31, 2010 is presented as follows:

Classes of Loans/Leases	Current			30-59 Days Past Due			60-89 Days Past Due			Accruing Past Due 90 Days or More			Nonaccrual Loans/Leases			Total

Commercial and Industrial	$	353,437,063		$	300,224		$	203,722		$	-		$	11,684,262		$	365,625,271
Commercial Real Estate
Owner-Occupied Commercial Real Estate		139,880,634			236,910			-			103,015			1,190,468			141,411,027
Commercial Construction, Land Development, and Other Land		55,552,352			746,545			-			-			9,230,161			65,529,058
Other Non Owner-Occupied Commercial Real Estate		335,171,858			275,000			546,019			70,125			10,714,177			346,777,179
Direct Financing Leases		79,708,979			1,605,836			92,244			-			1,602,588			83,009,647
Residential Real Estate		79,910,279			876,509			-			123,557			1,286,277			82,196,622
Installment and Other Consumer		84,214,010			101,770			182,349			23,139			1,718,676			86,239,944
	$	1,127,875,175		$	4,142,794		$	1,024,334		$	319,836		$	37,426,609		$	1,170,788,748

As a percentage of total loan/lease portfolio		96.33	%		0.35	%		0.09	%		0.03	%		3.20	%		100.00	%

Nonperforming loans/leases by classes of loans/leases as of June 30, 2011 is presented as follows:

Classes of Loans/Leases	Accruing Past Due 90 Days or More		Nonaccrual Loans/Leases *		Troubled Debt Restructures - Accruing		Total Nonperforming Loans/Leases		Percentage of Total Nonperforming Loans/Leases

Commercial and Industrial	$	-	$	6,135,606	$	1,051,818	$	7,187,424		26.38	%
Commercial Real Estate
Owner-Occupied Commercial Real Estate		-		1,489,393		-		1,489,393		5.47	%
Commercial Construction, Land Development, and Other Land		-		3,742,285		961,879		4,704,164		17.27	%
Other Non Owner-Occupied Commercial Real Estate		-		7,902,580		947,643		8,850,223		32.48	%
Direct Financing Leases		-		1,337,770		630,777		1,968,547		7.23	%
Residential Real Estate		122,567		1,092,797		-		1,215,364		4.46	%
Installment and Other Consumer		235,414		1,594,187		-		1,829,601		6.72	%
	$	357,981	$	23,294,618	$	3,592,117	$	27,244,716		100.00	%

*Nonaccrual loans/leases includes $10,995,684 of troubled debt restructures, including $1,675,015 in commercial and industrial loans, $8,435,229 in commercial real estate loans, $412,106 in direct financing leases, and $473,334 in installment and other consumer loans.

Nonperforming loans/leases by classes of loans/leases as of December 31, 2010 is presented as follows:

Classes of Loans/Leases	Accruing Past Due 90 Days or More		Nonaccrual Loans/Leases **		Troubled Debt Restructures - Accruing		Total Nonperforming Loans/Leases		Percentage of Total Nonperforming Loans/Leases

Commercial and Industrial	$	-	$	11,684,262	$	180,228	$	11,864,490		28.83	%
Commercial Real Estate
Owner-Occupied Commercial Real Estate		103,015		1,190,468		-		1,293,483		3.14	%
Commercial Construction, Land Development, and Other Land		-		9,230,161		961,879		10,192,040		24.77	%
Other Non Owner-Occupied Commercial Real Estate		70,125		10,714,177		2,100,837		12,885,139		31.31	%
Direct Financing Leases		-		1,602,588		162,502		1,765,090		4.29	%
Residential Real Estate		123,557		1,286,277		-		1,409,834		3.43	%
Installment and Other Consumer		23,139		1,718,676		-		1,741,815		4.23	%
	$	319,836	$	37,426,609	$	3,405,446	$	41,151,891		100.00	%

**Nonaccrual loans/leases includes $12,631,343 of troubled debt restructures, including $2,200,986 in commercial and industrial loans and $9,407,276 in commercial real estate loans.

Changes in the allowance for estimated losses on loans/leases by portfolio segment for the three and six months ended June 30, 2011 and 2010, respectively, are presented as follows:

	Three Months Ended June 30, 2011

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Balance, beginning	$	8,454,099		$	8,631,699		$	1,467,934		$	706,305		$	1,469,979		$	20,730,016
Provisions charged to expense		224,974			865,054			123,221			50,770			408,202			1,672,221
Loans/leases charged off		(1,593,901	)		(921,407	)		-			-			(176,397	)		(2,691,705	)
Recoveries on loans/leases previously charged off		39,272			27,293			154			-			25,381			92,100
Balance, ending	$	7,124,444		$	8,602,639		$	1,591,309		$	757,075		$	1,727,165		$	19,802,632

	Three Months Ended June 30, 2010

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Balance, beginning	$	5,952,428		$	12,760,945		$	1,849,632		$	618,929		$	1,703,556		$	22,885,490
Provisions charged to expense		1,138,744			109,011			84,189			(51,438	)		95,683			1,376,189
Loans/leases charged off		(1,253,672	)		(1,083,128	)		(226,275	)		-			(327,538	)		(2,890,613	)
Recoveries on loans/leases previously charged off		38,008			121,039			216			-			30,634			189,897
Balance, ending	$	5,875,508		$	11,907,867		$	1,707,762		$	567,491		$	1,502,335		$	21,560,963

	Six Months Ended June 30, 2011

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Balance, beginning	$	7,548,922		$	9,087,315		$	1,530,572		$	748,028		$	1,449,819		$	20,364,656
Provisions charged to expense		1,216,493			392,902			303,885			9,047			817,558			2,739,885
Loans/leases charged off		(1,790,617	)		(921,537	)		(243,446	)		-			(617,032	)		(3,572,632	)
Recoveries on loans/leases previously charged off		149,646			43,959			298			-			76,820			270,723
Balance, ending	$	7,124,444		$	8,602,639		$	1,591,309		$	757,075		$	1,727,165		$	19,802,632


	Six Months Ended June 30, 2010

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Balance, beginning	$	5,425,624		$	12,665,721		$	1,681,376		$	685,732		$	2,046,281		$	22,504,734
Provisions charged to expense		2,194,316			515,868			258,419			(118,241	)		129,056			2,979,418
Loans/leases charged off		(1,841,703	)		(1,398,979	)		(232,843	)		-			(790,089	)		(4,263,614	)
Recoveries on loans/leases previously charged off		97,271			125,257			810			-			117,087			340,425
Balance, ending	$	5,875,508		$	11,907,867		$	1,707,762		$	567,491		$	1,502,335		$	21,560,963

The allowance for estimated losses on loans/leases by impairment evaluation and by portfolio segment as of June 30, 2011 is presented as follows:

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Allowance for loans/leases individually evaluated for impairment	$	2,412,174		$	2,329,093		$	460,000		$	20,750		$	358,504		$	5,580,521
Allowance for loans/leases collectively evaluated for impairment		4,712,270			6,273,546			1,131,309			736,325			1,368,661			14,222,111
	$	7,124,444		$	8,602,639		$	1,591,309		$	757,075		$	1,727,165		$	19,802,632


Loans/leases individually evaluated for impairment	$	4,124,950		$	15,322,729		$	1,968,547		$	1,092,797		$	1,020,709		$	23,529,732
Loans/leases collectively evaluated for impairment		364,440,076			544,454,333			83,595,196			84,966,134			80,837,584			1,158,293,323
	$	368,565,026		$	559,777,062		$	85,563,743		$	86,058,931		$	81,858,293		$	1,181,823,055


Allowance as a percentage of loans/leases individually evaluated for impairment		58.48	%		15.20	%		23.37	%		1.90	%		35.12	%		23.72	%
Allowance as a percentage of loans/leases collectively evaluated for impairment		1.29	%		1.15	%		1.35	%		0.87	%		1.69	%		1.23	%
		1.93	%		1.54	%		1.86	%		0.88	%		2.11	%		1.67	%

The allowance for estimated losses on loans/leases by impairment evaluation and by portfolio segment as of December 31, 2010 is presented as follows:

	Commercial and Industrial			Commercial Real Estate			Direct Financing Leases			Residential Real Estate			Installment and Other Consumer			Total

Allowance for loans/leases individually evaluated for impairment	$	3,331,437		$	3,709,177		$	335,000		$	27,355		$	49,777		$	7,452,746
Allowance for loans/leases collectively evaluated for impairment		4,217,485			5,378,138			1,195,572			720,673			1,400,042			12,911,910
	$	7,548,922		$	9,087,315		$	1,530,572		$	748,028		$	1,449,819		$	20,364,656

Loans/leases individually evaluated for impairment	$	8,824,670		$	24,770,032		$	1,765,090		$	1,286,277		$	1,611,098		$	38,257,167
Loans/leases collectively evaluated for impairment		356,800,601			528,947,232			81,244,557			80,910,345			84,628,846			1,132,531,581
	$	365,625,271		$	553,717,264		$	83,009,647		$	82,196,622		$	86,239,944		$	1,170,788,748

Allowance as a percentage of loans/leases individually evaluated for impairment		37.75	%		14.97	%		18.98	%		2.13	%		3.09	%		19.48	%
Allowance as a percentage of loans/leases collectively evaluated for impairment		1.18	%		1.02	%		1.47	%		0.89	%		1.65	%		1.14	%
		2.06	%		1.64	%		1.84	%		0.91	%		1.68	%		1.74	%

Information for impaired loans/leases by classes of financing receivable as of and for the six months ended June 30, 2011 is as follows:

Classes of Loans/Leases	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized for Cash Payments Received

Impaired Loans/Leases with No Specific Allowance Recorded:
Commercial and Industrial	$	623,595	$	1,951,223	$	-	$	3,981,405	$	-	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,593,926		1,593,926		-		1,812,067		-		-
Commercial Construction, Land Development, and Other Land		-		-		-		1,843,249		-		-
Other Non Owner-Occupied Commercial Real Estate		1,377,489		1,377,489		-		4,159,967		-		-
Direct Financing Leases		1,233,671		1,233,671		-		1,093,833		-		-
Residential Real Estate		953,132		953,132		-		1,044,298		-		-
Installment and Other Consumer		662,205		681,000		-		833,578		-		-
	$	6,444,018	$	7,790,441	$	-	$	14,768,397	$	-	$	-

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	3,501,355	$	3,757,355	$	2,412,174	$	3,010,033	$	15,961	$	15,961
Commercial Real Estate
Owner-Occupied Commercial Real Estate		440,800		440,800		200,800		358,436		42,405		42,405
Commercial Construction, Land Development, and Other Land		4,683,545		4,722,369		1,354,344		4,694,795		-		-
Other Non Owner-Occupied Commercial Real Estate		7,226,969		7,226,969		773,949		6,968,227		-		-
Direct Financing Leases		734,876		734,876		460,000		772,986		-		-
Residential Real Estate		139,665		174,343		20,750		141,877		-		-
Installment and Other Consumer		358,504		358,504		358,504		140,872		-		-
	$	17,085,714	$	17,415,216	$	5,580,521	$	16,087,226	$	58,366	$	58,366

Total Impaired Loans/Leases:
Commercial and Industrial	$	4,124,950	$	5,708,578	$	2,412,174	$	6,991,438	$	15,961	$	15,961
Commercial Real Estate
Owner-Occupied Commercial Real Estate		2,034,726		2,034,726		200,800		2,170,503		42,405		42,405
Commercial Construction, Land Development, and Other Land		4,683,545		4,722,369		1,354,344		6,538,044		-		-
Other Non Owner-Occupied Commercial Real Estate		8,604,458		8,604,458		773,949		11,128,194		-		-
Direct Financing Leases		1,968,547		1,968,547		460,000		1,866,819		-		-
Residential Real Estate		1,092,797		1,127,475		20,750		1,186,175		-		-
Installment and Other Consumer		1,020,709		1,039,504		358,504		974,450		-		-
	$	23,529,732	$	25,205,657	$	5,580,521	$	30,855,623	$	58,366	$	58,366

Impaired loans/leases for which no allowance has been provided have adequate collateral, based on management’s current estimates.

Information for impaired loans/leases by classes of financing receivable for the three months ended June 30, 2011 is as follows:

Classes of Loans/Leases	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized for Cash Payments Received

Impaired Loans/Leases with No Specific Allowance Recorded:
Commercial and Industrial	$	1,455,378	$	-	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,737,998		-		-
Commercial Construction, Land Development, and Other Land		184,693		-		-
Other Non Owner-Occupied Commercial Real Estate		3,840,268		-		-
Direct Financing Leases		1,052,176		-		-
Residential Real Estate		958,303		-		-
Installment and Other Consumer		668,265		-		-
	$	9,897,081	$	-	$	-

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	3,666,049	$	1,705	$	1,705
Commercial Real Estate
Owner-Occupied Commercial Real Estate		370,843		18,145		18,145
Commercial Construction, Land Development, and Other Land		4,688,045		-		-
Other Non Owner-Occupied Commercial Real Estate		7,130,672		-		-
Direct Financing Leases		746,288		-		-
Residential Real Estate		140,332		-		-
Installment and Other Consumer		233,087		-		-
	$	16,975,316	$	19,850	$	19,850

Total Impaired Loans/Leases:
Commercial and Industrial	$	5,121,427	$	1,705	$	1,705
Commercial Real Estate
Owner-Occupied Commercial Real Estate		2,108,841		18,145		18,145
Commercial Construction, Land Development, and Other Land		4,872,738		-		-
Other Non Owner-Occupied Commercial Real Estate		10,970,940		-		-
Direct Financing Leases		1,798,464		-		-
Residential Real Estate		1,098,635		-		-
Installment and Other Consumer		901,352		-		-
	$	26,872,397	$	19,850	$	19,850

Impaired loans/leases for which no allowance has been provided have adequate collateral, based on management’s current estimates.

Information for impaired loans/leases by classes of financing receivable as of December 31, 2010 is as follows:

Classes of Loans/Leases	Recorded Investment		Unpaid Principal Balance		Related Allowance

Impaired Loans/Leases with No Specific Allowance Recorded:
Commercial and Industrial	$	1,459,790	$	3,350,036	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		681,727		681,727		-
Commercial Construction, Land Development, and Other Land		2,538,621		2,872,083		-
Other Non Owner-Occupied Commercial Real Estate		2,942,189		3,792,226		-
Direct Financing Leases		953,994		953,994		-
Residential Real Estate		758,031		758,031		-
Installment and Other Consumer		1,561,322		1,561,322		-
	$	10,895,674	$	13,969,419	$	-

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	7,364,880	$	7,866,634	$	3,331,436
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,074,210		1,074,210		232,194
Commercial Construction, Land Development, and Other Land		7,660,458		7,660,458		1,818,193
Other Non Owner-Occupied Commercial Real Estate		9,872,826		10,091,777		1,658,791
Direct Financing Leases		811,096		811,096		335,000
Residential Real Estate		528,246		528,246		27,355
Installment and Other Consumer		49,777		49,777		49,777
	$	27,361,493	$	28,082,198	$	7,452,746

Total Impaired Loans/Leases:
Commercial and Industrial	$	8,824,670	$	11,216,670	$	3,331,436
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,755,937		1,755,937		232,194
Commercial Construction, Land Development, and Other Land		10,199,079		10,532,541		1,818,193
Other Non Owner-Occupied Commercial Real Estate		12,815,015		13,884,003		1,658,791
Direct Financing Leases		1,765,090		1,765,090		335,000
Residential Real Estate		1,286,277		1,286,277		27,355
Installment and Other Consumer		1,611,099		1,611,099		49,777
	$	38,257,167	$	42,051,617	$	7,452,746

Impaired loans/leases for which no allowance has been provided have adequate collateral, based on management’s current estimates.

For each class of financing receivable, the following presents the recorded investment by credit quality indicator as of June 30, 2011:

			Commercial Real Estate
					Non Owner-Occupied
Internally Assigned Risk Rating	Commercial and Industrial		Owner-Occupied Commercial Real Estate		Commercial Construction, Land Development, and Other Land		Other Commercial Real Estate		Total

Pass (Ratings 1 through 5)	$	321,326,174	$	146,522,521	$	45,455,810	$	302,066,152	$	815,370,657
Special Mention (Rating 6)		16,986,901		1,606,351		9,489,259		13,310,115		41,392,626
Substandard (Rating 7)		28,841,825		14,986,154		7,082,534		19,258,166		70,168,679
Doubtful (Rating 8)		1,410,126		-		-		-		1,410,126
	$	368,565,026	$	163,115,026	$	62,027,603	$	334,634,433	$	928,342,088

	As of June 30, 2011
Delinquency Status *	Direct Financing Leases		Residential Real Estate		Installment and Other Consumer		Total

Performing	$	83,595,196	$	84,843,567	$	80,028,691	$	248,467,454
Nonperforming		1,968,547		1,215,364		1,829,602		5,013,513
	$	85,563,743	$	86,058,931	$	81,858,293	$	253,480,967

*Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual, accruing loans/leases that are greater than or equal to 90 days past due, or troubled debt restructures.

For each class of financing receivable, the following presents the recorded investment by credit quality indicator as of December 31, 2010:

			Commercial Real Estate
					Non Owner-Occupied
Internally Assigned Risk Rating	Commercial and Industrial		Owner-Occupied Commercial Real Estate		Commercial Construction, Land Development, and Other Land		Other Commercial Real Estate		Total

Pass (Ratings 1 through 5)	$	327,875,886	$	120,271,507	$	43,881,561	$	308,631,488	$	800,660,442
Special Mention (Rating 6)		10,457,805		7,510,519		10,338,187		15,244,142		43,550,653
Substandard (Rating 7)		27,270,474		13,629,001		11,309,310		22,901,549		75,110,334
Doubtful (Rating 8)		21,106		-		-		-		21,106
	$	365,625,271	$	141,411,027	$	65,529,058	$	346,777,179	$	919,342,535

	As of December 31, 2010
Delinquency Status *	Direct Financing Leases		Residential Real Estate		Installment and Other Consumer		Total

Performing	$	81,244,557	$	80,786,788	$	84,498,129	$	246,529,474
Nonperforming		1,765,090		1,409,834		1,741,815		4,916,739
	$	83,009,647	$	82,196,622	$	86,239,944	$	251,446,213

For commercial and industrial and commercial real estate loans, the Company’s credit quality indicator is internally assigned risk ratings. Each commercial loan is assigned a risk rating upon origination. The risk rating is reviewed every 15 months, at a minimum, and on an as needed basis depending on the specific circumstances of the loan.

For direct financing leases, residential real estate loans, and installment and other consumer loans, the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.