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Note 3 - Loans/Leases Receivable

3 Months Ended

Mar. 31, 2012

NOTE 3 – LOANS/LEASES RECEIVABLE

The composition of the loan/lease portfolio as of March 31, 2012 and December 31, 2011 is presented as follows:

	As of March 31, 2012			As of December 31, 2011

Commercial and industrial loans	$	352,748,727		$	350,794,278
Commercial real estate loans
Owner-occupied commercial real estate		182,274,459			167,790,621
Commercial construction, land development, and other land		50,706,381			60,384,738
Other non owner-occupied commercial real estate		347,964,861			349,628,491
		580,945,701			577,803,850

Direct financing leases *		96,314,214			93,212,362
Residential real estate loans **		103,527,892			98,107,051
Installment and other consumer loans		75,546,187			78,223,080
		1,209,082,721			1,198,140,621
Plus deferred loan/lease orgination costs, net of fees		2,646,710			2,604,876
		1,211,729,431			1,200,745,497
Less allowance for estimated losses on loans/leases		(19,006,644	)		(18,789,262	)
	$	1,192,722,787		$	1,181,956,235


* Direct financing leases:
Net minimum lease payments to be received	$	109,729,721		$	106,389,988
Estimated unguaranteed residual values of leased assets		1,110,604			1,043,326
Unearned lease/residual income		(14,526,111	)		(14,220,952	)
		96,314,214			93,212,362
Plus deferred lease origination costs, net of fees		3,404,964			3,217,011
		99,719,178			96,429,373
Less allowance for estimated losses on leases		(1,366,529	)		(1,339,496	)
	$	98,352,649		$	95,089,877

**Includes residential real estate loans held for sale totaling $3,330,110 and $3,832,760 as of March 31, 2012, and December 31, 2011, 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 months ended March 31, 2012 and 2011, there were no losses on residual values. At March 31, 2012, the Company had 38 leases remaining with residual values totaling $1,110,604 that were not protected with a lease end options rider. At December 31, 2011, the Company had 39 leases remaining with residual values totaling $1,043,326 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 March 31, 2012 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	$	349,266,599		$	279,066		$	685,751		$	120,000		$	2,397,311		$	352,748,727
Commercial Real Estate
Owner-Occupied Commercial Real Estate		181,555,172			-			-			-			719,287			182,274,459
Commercial Construction, Land Development, and Other Land		46,183,612			-			1,037,225			-			3,485,544			50,706,381
Other Non Owner-Occupied Commercial Real Estate		329,018,336			2,321,894			6,398,902			548,566			9,677,163			347,964,861
Direct Financing Leases		94,594,385			876,827			122,271			-			720,731			96,314,214
Residential Real Estate		101,992,447			559,933			-			-			975,512			103,527,892
Installment and Other Consumer		73,959,016			301,889			195,397			51,967			1,037,918			75,546,187
	$	1,176,569,567		$	4,339,609		$	8,439,546		$	720,533		$	19,013,466		$	1,209,082,721

As a percentage of total loan/lease portfolio		97.31	%		0.36	%		0.70	%		0.06	%		1.57	%		100.00	%

The aging of the loan/lease portfolio by classes of loans/leases as of December 31, 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	$	347,417,683		$	226,394		$	239,991		$	120,000		$	2,790,210		$	350,794,278
Commercial Real Estate
Owner-Occupied Commercial Real Estate		166,632,318			146,847			-			-			1,011,456			167,790,621
Commercial Construction, Land Development, and Other Land		55,741,827			211,878			486,802			968,919			2,975,312			60,384,738
Other Non Owner-Occupied Commercial Real Estate		336,080,128			522,323			3,732,935			-			9,293,105			349,628,491
Direct Financing Leases		91,273,406			826,187			396,344			-			716,425			93,212,362
Residential Real Estate		95,456,433			1,127,465			389,678			-			1,133,475			98,107,051
Installment and Other Consumer		76,376,399			737,543			12,122			22,160			1,074,856			78,223,080
	$	1,168,978,194		$	3,798,637		$	5,257,872		$	1,111,079		$	18,994,839		$	1,198,140,621

As a percentage of total loan/lease portfolio		97.57	%		0.32	%		0.44	%		0.09	%		1.59	%		100.00	%

Nonperforming loans/leases by classes of loans/leases as of March 31, 2012 is presented as follows:

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

Commercial and Industrial	$	120,000	$	2,397,311	$	186,359	$	2,703,670		8.83	%
Commercial Real Estate
Owner-Occupied Commercial Real Estate		-		719,287		-		719,287		2.35	%
Commercial Construction, Land Development, and Other Land		-		3,485,544		4,213,314		7,698,858		25.16	%
Other Non Owner-Occupied Commercial Real Estate		548,566		9,677,163		6,284,647		16,510,376		53.95	%
Direct Financing Leases		-		720,731		-		720,731		2.36	%
Residential Real Estate		-		975,512		167,739		1,143,251		3.74	%
Installment and Other Consumer		51,967		1,037,918		16,043		1,105,928		3.61	%
	$	720,533	$	19,013,466	$	10,868,102	$	30,602,101		100.00	%

*Nonaccrual loans/leases includes $8,777,102 of troubled debt restructurings, including $178,386 in commercial and industrial loans, $8,255,316 in commercial real estate loans, $64,726 in direct financing leases, and $278,674 in installment loans.

Nonperforming loans/leases by classes of loans/leases as of December 31, 2011 is presented as follows:

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

Commercial and Industrial	$	120,000	$	2,790,210	$	187,407	$	3,097,617		9.68	%
Commercial Real Estate
Owner-Occupied Commercial Real Estate		-		1,011,456		-		1,011,456		3.16	%
Commercial Construction, Land Development, and Other Land		968,919		2,975,312		6,076,143		10,020,374		31.30	%
Other Non Owner-Occupied Commercial Real Estate		-		9,293,105		5,049,795		14,342,900		44.81	%
Direct Financing Leases		-		716,425		590,238		1,306,663		4.08	%
Residential Real Estate		-		1,133,475		-		1,133,475		3.54	%
Installment and Other Consumer		22,160		1,074,856		-		1,097,016		3.43	%
	$	1,111,079	$	18,994,839	$	11,903,583	$	32,009,501		100.00	%

**Nonaccrual loans/leases includes $8,622,874 of troubled debt restructurings, including $198,697 in commercial and industrial loans, $8,074,777 in commercial real estate loans, $64,726 in direct financing leases, and $284,674 in installment loans.

Changes in the allowance for estimated losses on loans/leases by portfolio segment for the three months ended March 31, 2012 and 2011, respectively, are presented as follows:

	Three Months Ended March 31, 2012

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

Balance, beginning	$	4,878,006		$	10,596,958	$	1,339,496		$	704,946		$	1,269,856		$	18,789,262
Provisions charged to expense		(90,900	)		257,864		315,446			262,968			35,068			780,446
Loans/leases charged off		(376,408	)		-		(315,721	)		(4,757	)		(127,866	)		(824,752	)
Recoveries on loans/leases previously charged off		174,769			620		27,307			-			58,992			261,688
Balance, ending	$	4,585,467		$	10,855,442	$	1,366,528		$	963,157		$	1,236,050		$	19,006,644

	Three Months Ended March 31, 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		991,519			(472,152	)		180,664			(41,723	)		409,356			1,067,664
Loans/leases charged off		(196,716	)		(130	)		(243,446	)		-			(440,635	)		(880,927	)
Recoveries on loans/leases previously charged off		110,374			16,666			144			-			51,439			178,623
Balance, ending	$	8,454,099		$	8,631,699		$	1,467,934		$	706,305		$	1,469,979		$	20,730,016

The allowance for estimated losses on loans/leases by impairment evaluation and by portfolio segment as of March 31, 2012 and December 31, 2011 is presented as follows:

	As of March 31, 2012
	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	$	371,974		$	3,824,121		$	35,000		$	155,102		$	19,911		$	4,406,108
Allowance for loans/leases collectively evaluated for impairment		4,213,493			7,031,321			1,331,528			808,055			1,216,139			14,600,536
	$	4,585,467		$	10,855,442		$	1,366,528		$	963,157		$	1,236,050		$	19,006,644


Loans/leases individually evaluated for impairment	$	1,799,183		$	24,246,328		$	720,731		$	1,143,251		$	971,342		$	28,880,835
Loans/leases collectively evaluated for impairment		350,949,544			556,699,373			95,593,483			102,384,641			74,574,845			1,180,201,886
	$	352,748,727		$	580,945,701		$	96,314,214		$	103,527,892		$	75,546,187		$	1,209,082,721


Allowance as a percentage of loans/leases individually evaluated for impairment		20.67	%		15.77	%		4.86	%		13.57	%		2.05	%		15.26	%
Allowance as a percentage of loans/leases collectively evaluated for impairment		1.20	%		1.26	%		1.39	%		0.79	%		1.63	%		1.24	%
		1.30	%		1.87	%		1.42	%		0.93	%		1.64	%		1.57	%

	As of December 31, 2011
	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	$	903,187		$	4,297,738		$	66,675		$	55,884		$	22,819		$	5,346,303
Allowance for loans/leases collectively evaluated for impairment		3,974,819			6,299,220			1,272,821			649,062			1,247,037			13,442,959
	$	4,878,006		$	10,596,958		$	1,339,496		$	704,946		$	1,269,856		$	18,789,262

Loans/leases individually evaluated for impairment	$	2,152,855		$	24,281,365		$	1,306,663		$	1,133,474		$	984,806		$	29,859,163
Loans/leases collectively evaluated for impairment		348,641,423			553,522,485			91,905,699			96,973,577			77,238,274			1,168,281,458
	$	350,794,278		$	577,803,850		$	93,212,362		$	98,107,051		$	78,223,080		$	1,198,140,621

Allowance as a percentage of loans/leases individually evaluated for impairment		41.95	%		17.70	%		5.10	%		4.93	%		2.32	%		17.91	%
Allowance as a percentage of loans/leases collectively evaluated for impairment		1.14	%		1.14	%		1.38	%		0.67	%		1.61	%		1.15	%
		1.39	%		1.83	%		1.44	%		0.72	%		1.62	%		1.56	%

Information for impaired loans/leases is presented in the tables below. The recorded investment represents customer balances net of any partial charge-offs recognized on the loan/lease. The unpaid principal balance represents the recorded balance outstanding on the loan/lease prior to any partial charge-offs.

Information for impaired loans/leases by classes of financing receivable as of and for the three months ended March 31, 2012 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	$	358,028	$	1,005,019	$	-	$	396,127	$	-	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		581,747		581,747		-		637,245		-		-
Commercial Construction, Land Development, and Other Land		337,500		337,500		-		112,500		2,168		2,168
Other Non Owner-Occupied Commercial Real Estate		3,735,092		3,735,092		-		4,367,673		894		894
Direct Financing Leases		602,456		602,456		-		922,197		-		-
Residential Real Estate		676,244		676,244		-		815,292		1,673		1,673
Installment and Other Consumer		951,431		951,431		-		950,111		23		23
	$	7,242,498	$	7,889,489	$	-	$	8,201,145	$	4,758	$	4,758

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	1,441,155	$	1,791,155	$	371,974	$	1,648,384	$	1,980	$	1,980
Commercial Real Estate
Owner-Occupied Commercial Real Estate		199,427		199,427		30,279		199,427		-		-
Commercial Construction, Land Development, and Other Land		7,941,358		7,941,358		2,166,666		7,891,719		-		-
Other Non Owner-Occupied Commercial Real Estate		11,451,204		11,951,204		1,627,176		11,496,658		67,551		67,551
Direct Financing Leases		118,275		118,275		35,000		91,501		-		-
Residential Real Estate		467,007		467,007		155,102		383,095		-		-
Installment and Other Consumer		19,911		19,911		19,911		20,021		-		-
	$	21,638,337	$	22,488,337	$	4,406,108	$	21,730,805	$	69,531	$	69,531

Total Impaired Loans/Leases:
Commercial and Industrial	$	1,799,183	$	2,796,174	$	371,974	$	2,044,511	$	1,980	$	1,980
Commercial Real Estate
Owner-Occupied Commercial Real Estate		781,174		781,174		30,279		836,672		-		-
Commercial Construction, Land Development, and Other Land		8,278,858		8,278,858		2,166,666		8,004,219		2,168		2,168
Other Non Owner-Occupied Commercial Real Estate		15,186,296		15,686,296		1,627,176		15,864,331		68,445		68,445
Direct Financing Leases		720,731		720,731		35,000		1,013,698		-		-
Residential Real Estate		1,143,251		1,143,251		155,102		1,198,387		1,673		1,673
Installment and Other Consumer		971,342		971,342		19,911		970,132		23		23
	$	28,880,835	$	30,377,826	$	4,406,108	$	29,931,950	$	74,289	$	74,289

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 March 31, 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	$	1,729,347	$	-	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,316,373		-		-
Commercial Construction, Land Development, and Other Land		1,797,506		-		-
Other Non Owner-Occupied Commercial Real Estate		1,361,650		-		-
Direct Financing Leases		912,337		-		-
Residential Real Estate		1,012,629		-		-
Installment and Other Consumer		998,891		-		-
	$	9,128,733	$	-	$	-

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	7,184,670	$	14,256	$	14,256
Commercial Real Estate
Owner-Occupied Commercial Real Estate		627,335		24,260		24,260
Commercial Construction, Land Development, and Other Land		3,828,871		-		-
Other Non Owner-Occupied Commercial Real Estate		12,500,772		-		-
Direct Financing Leases		784,398		-		-
Residential Real Estate		496,979		-		-
Installment and Other Consumer		48,652		-		-
	$	25,471,677	$	38,516	$	38,516

Total Impaired Loans/Leases:
Commercial and Industrial	$	8,914,017	$	14,256	$	14,256
Commercial Real Estate
Owner-Occupied Commercial Real Estate		1,943,708		24,260		24,260
Commercial Construction, Land Development, and Other Land		5,626,377		-		-
Other Non Owner-Occupied Commercial Real Estate		13,862,422		-		-
Direct Financing Leases		1,696,735		-		-
Residential Real Estate		1,509,608		-		-
Installment and Other Consumer		1,047,543		-		-
	$	34,600,410	$	38,516	$	38,516

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, 2011 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	$	360,947	$	979,901	$	-
Commercial Real Estate
Owner-Occupied Commercial Real Estate		736,610		736,610		-
Commercial Construction, Land Development, and Other Land		-		-		-
Other Non Owner-Occupied Commercial Real Estate		3,936,826		3,986,820		-
Direct Financing Leases		1,094,178		1,094,178		-
Residential Real Estate		788,685		862,298		-
Installment and Other Consumer		593,987		593,987		-
	$	7,511,233	$	8,253,794	$	-

Impaired Loans/Leases with Specific Allowance Recorded:
Commercial and Industrial	$	1,791,908	$	1,791,908	$	903,187
Commercial Real Estate
Owner-Occupied Commercial Real Estate		217,059		217,059		47,911
Commercial Construction, Land Development, and Other Land		9,051,455		9,051,455		3,002,450
Other Non Owner-Occupied Commercial Real Estate		10,339,415		10,839,415		1,247,377
Direct Financing Leases		212,485		212,485		66,675
Residential Real Estate		344,789		344,789		55,884
Installment and Other Consumer		390,819		390,819		22,819
	$	22,347,930	$	22,847,930	$	5,346,303

Total Impaired Loans/Leases:
Commercial and Industrial	$	2,152,855	$	2,771,809	$	903,187
Commercial Real Estate
Owner-Occupied Commercial Real Estate		953,669		953,669		47,911
Commercial Construction, Land Development, and Other Land		9,051,455		9,051,455		3,002,450
Other Non Owner-Occupied Commercial Real Estate		14,276,241		14,826,235		1,247,377
Direct Financing Leases		1,306,663		1,306,663		66,675
Residential Real Estate		1,133,474		1,207,087		55,884
Installment and Other Consumer		984,806		984,806		22,819
	$	29,859,163	$	31,101,724	$	5,346,303

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 March 31, 2012 and December 31, 2011:

	As of March 31, 2012
			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)	$	328,755,702	$	174,905,504	$	39,557,845	$	308,585,328	$	851,804,379
Special Mention (Rating 6)		5,039,559		4,744,199		647,499		10,643,329		21,074,586
Substandard (Rating 7)		18,953,466		2,624,756		10,501,037		28,736,204		60,815,463
Doubtful (Rating 8)		-		-		-		-		-
	$	352,748,727	$	182,274,459	$	50,706,381	$	347,964,861	$	933,694,428

	As of March 31, 2012
Delinquency Status *	Direct Financing Leases		Residential Real Estate		Installment and Other Consumer		Total

Performing	$	95,593,483	$	102,384,641	$	74,440,259	$	272,418,383
Nonperforming		720,731		1,143,251		1,105,928		2,969,910
	$	96,314,214	$	103,527,892	$	75,546,187	$	275,388,293

*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, and accruing troubled debt restructurings.

	As of December 31, 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)	$	324,225,905	$	158,955,618	$	46,268,554	$	310,401,972	$	839,852,049
Special Mention (Rating 6)		8,814,497		2,700,496		764,586		13,754,798		26,034,377
Substandard (Rating 7)		17,753,876		6,134,507		13,351,598		25,471,721		62,711,702
Doubtful (Rating 8)		-		-		-		-		-
	$	350,794,278	$	167,790,621	$	60,384,738	$	349,628,491	$	928,598,128

	As of December 31, 2011
Delinquency Status *	Direct Financing Leases		Residential Real Estate		Installment and Other Consumer		Total

Performing	$	91,905,699	$	96,973,576	$	77,126,064	$	266,005,339
Nonperforming		1,306,663		1,133,475		1,097,016		3,537,154
	$	93,212,362	$	98,107,051	$	78,223,080	$	269,542,493

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.

As of March 31, 2012 and December 31, 2011, troubled debt restructurings totaled $19,645,204 and $20,526,457, respectively.

For each class of financing receivable, the following presents the number and recorded investment of troubled debt restructurings, by type of concession, that were restructured during the three months ended March 31, 2012 and 2011.

	For the three months ended March 31, 2012								For the three months ended March 31, 2011
Classes of Loans/Leases	Number of Loans / Leases		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Specific Allowance		Number of Loans / Leases		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Specific Allowance

CONCESSION - Significant payment delay
Commercial and Industrial		-	$	-	$	-	$	-		4	$	1,175,819	$	1,175,819	$	-
Commercial Construction, Land Development, and Other Land		2		200,000		200,000		144,000		-		-		-		-
		2	$	200,000	$	200,000	$	144,000		4	$	1,175,819	$	1,175,819	$	-

CONCESSION - Interest rate adjusted below market
Commercial Construction, Land Development, and Other Land		1	$	337,500	$	337,500	$	-		-	$	-	$	-	$	-
Residential Real Estate		1		167,739		167,739		-		-		-		-		-
Installment and Other Consumer		1		16,043		16,043		-		-		-		-		-
		3	$	521,282	$	521,282	$	-		-	$	-	$	-	$	-

TOTAL		5	$	721,282	$	721,282	$	144,000		4	$	1,175,819	$	1,175,819	$	-

Of the troubled debt restructurings reported above, two with post-modification recorded investments totaling $200,000 were on nonaccrual as of March 31, 2012. None of the troubled debt restructurings reported above had partial charge-offs.

For the three months ended March 31, 2012, none of the Company’s troubled debt restructurings has redefaulted within 12 months subsequent to restructure where default is defined as delinquency of 90 days or more and/or placement on nonaccrual status.