Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

Loans and Allowance for Loan Losses [Abstract]

Major classifications of loans are as follows:

	June 30, 2012		December 31, 2011
Real estate mortgages
Construction, land development, and land	$	14,258,481	$	13,162,460
Residential 1 to 4 family, 1st liens		82,783,813		85,772,367
Residential 1 to 4 family, subordinate liens		1,983,536		2,015,355
Commercial properties		121,756,428		113,010,943
Commercial		14,308,510		12,507,978
Consumer		1,729,588		1,737,297
Total Loans		236,820,356		228,206,400
Allowance for loan losses		763,308		672,261
Loans, net	$	236,057,048	$	227,534,139

Composition of nonperforming assets

Nonperforming loans are loans past due 90 or more days and still accruing plus nonaccrual loans. Nonperforming assets are comprised of nonperforming loans combined with real estate acquired in foreclosure and held for sale. The following table details the composition of nonperforming assets:

	June 30,		December 31,
	2012		2011
Loans 90 days or more past due and still accruing
Real estate mortgages
Construction, land development, and land	$	233,411	$	-
Commercial properties		684,422		684,422
Total		917,833		684,422

Nonaccruing loans
Real estate mortgages
Construction, land development, and land		588,954		965,708
Residential 1 to 4 family		246,127		-
Total current		835,081		965,708

Real estate mortgages
Construction, land development, and land		333,414		255,081
Residential 1 to 4 family		614,138		1,214,516
Commercial properties		911,967		932,966
Total past due 30 days or more		1,859,519		2,402,563
Total nonaccruing loans		2,694,600		3,368,271
Total nonperforming loans		3,612,433		4,052,693
Other real estate owned		1,659,260		1,715,138
Total nonperforming assets	$	5,271,693	$	5,767,831

Allowance for loan losses by type of loan

The following is a schedule of transactions in the allowance for loan losses by type of loan. The Company did not acquire any loans with deteriorated credit quality during the periods presented.

	Real estate mortgages
	Construction
June 30, 2012	and Land			Residential			Commercial			Commercial			Consumer			Unallocated			Total
Beginning balance	$	160,392		$	42,064		$	193,570		$	197,353		$	60,487		$	18,395		$	672,261
Loans charged off		(45,081	)		(172,884	)		-			(363	)		(8,110	)		-			(226,438	)
Recoveries		-			15,000			-			3			4,982			-			19,985
Provision charged to operations		51,570			227,150			30,220			(18,702	)		(7,597	)		14,859			297,500
Ending balance	$	166,881		$	111,330		$	223,790		$	178,291		$	49,762		$	33,254		$	763,308

Individually evaluated for impairment:
Balance in allowance	$	-		$	-		$	-		$	-		$	-					$	-
Related loan balance	$	922,369		$	860,264		$	1,596,388		$	-		$	-					$	3,379,021

Collectively evaluated for impairment:
Balance in allowance	$	166,881		$	111,330		$	223,790		$	178,291		$	49,762		$	33,254		$	763,308
Related loan balance	$	13,336,112		$	83,907,085		$	120,160,040		$	14,308,510		$	1,729,588					$	233,441,335

December 31, 2011
Beginning balance	$	235,437		$	50,602		$	356,993		$	194,946		$	119,228		$	25,972		$	983,178
Loans charged off		(227,197	)		(353,238	)		(865,683	)		(18,492	)		(19,650	)		-			(1,484,260	)
Recoveries		39,072			300			-			410			6,261			-			46,043
Provision charged to operations		113,080			344,400			702,260			20,489			(45,352	)		(7,577	)		1,127,300
Ending balance	$	160,392		$	42,064		$	193,570		$	197,353		$	60,487		$	18,395		$	672,261

Individually evaluated for impairment:
Balance in allowance	$	-		$	-		$	-		$	-		$	-					$	-
Related loan balance	$	1,220,789		$	1,188,260		$	1,617,388		$	-		$	-					$	4,026,437

Collectively evaluated for impairment:
Balance in allowance	$	160,392		$	42,064		$	193,570		$	197,353		$	60,487		$	18,395		$	672,261
Related loan balance	$	11,941,671		$	86,599,462		$	111,393,555		$	12,507,978		$	1,737,297					$	224,179,963

June 30, 2011
Beginning balance	$	235,437		$	50,602		$	356,993		$	194,946		$	119,228		$	25,972		$	983,178
Loans charged off		(11,553	)		-			-			(2,946	)		(9,105	)		-			(23,604	)
Recoveries		39,072			300			-			400			2,588			-			42,360
Provision charged to operations		197,989			254,000			500,000			53,729			(58,872	)		2,054			948,900
Ending balance	$	460,945		$	304,902		$	856,993		$	246,129		$	53,839		$	28,026		$	1,950,834

Individually evaluated for impairment:
Balance in allowance	$	193,672		$	234,000		$	850,000		$	-		$	-					$	1,277,672
Related loan balance	$	1,421,290		$	786,510		$	2,549,520		$	-		$	-					$	4,757,320

Collectively evaluated for impairment:
Balance in allowance	$	267,273		$	70,902		$	6,993		$	246,129		$	53,839		$	28,026		$	673,162
Related loan balance	$	13,217,717		$	91,862,588		$	115,044,495		$	15,118,015		$	1,620,628					$	236,863,443

Relationship of net loans charged off (recovered) and allowance to gross loans and average loans

The table below shows the relationship of net charged-off loans and the balance in the allowance to gross loans and average loans.

Allowance for Loan Losses
	For six months ended						For the year ended
	June 30						December 31
	2012			2011			2011

Net loans charged off (recovered)	$	206,453		$	(18,756	)	$	1,438,217

Balance at end of period	$	763,308		$	1,950,834		$	672,261

Gross loans outstanding at the end of the period	$	236,820,356		$	241,620,763		$	228,206,400
Allowance for loan loses to gross loans outstanding at the end of the period		0.32	%		0.81	%		0.29	%

Average loans outstanding during the period	$	232,737,626		$	246,535,270		$	237,757,026
Annualized net charge-offs as a percentage of average loans outstanding during the period		0.18	%		-0.02	%		0.60	%

Age analysis of past due loans

Loans are considered past due when either principal or interest is not paid by the date on which payment is due. The following table is an analysis of past due loans by days past due and type of loan.

Age Analysis of Past Due Loans
					90 Days								90 Days Past
	30-59 Days		60-89 Days		Past Due		Total				Total		Due or Greater
June 30, 2012	Past Due		Past Due		or Greater		Past Due		Current		Loans		and Accruing
Real Estate
Construction, land development, and land	$	333,415	$	-	$	233,411	$	566,826	$	13,691,655	$	14,258,481	$	233,411
Residential 1 to 4 family, 1st lien		772,482		1,933,473		583,324		3,289,279		79,494,534		82,783,813		-
Residential 1 to 4 family, subordinate		-		-		-		-		1,983,536		1,983,536		-
Commercial properties		-		519,766		1,596,389		2,116,155		119,640,273		121,756,428		684,422
Commercial		-		-		-		-		14,308,510		14,308,510		-
Consumer		-		19,276		-		19,276		1,710,312		1,729,588		-
Total	$	1,105,897	$	2,472,515	$	2,413,124	$	5,991,536	$	228,845,284	$	236,820,356	$	917,833

December 31, 2011
Real Estate
Construction, land development, and land	$	-	$	232,655	$	255,081	$	487,736	$	12,674,724	$	13,162,460	$	-
Residential 1 to 4 family, 1st lien		177,908		827,281		968,570		1,973,759		83,798,608		85,772,367		-
Residential 1 to 4 family, subordinate		-		-		-		-		2,015,355		2,015,355
Commercial properties		627,117		32,953		1,617,388		2,277,458		110,733,485		113,010,943		684,422
Commercial		-		-		-		-		12,507,978		12,507,978		-
Consumer		-		2,302		-		2,302		1,734,995		1,737,297		-
Total	$	805,025	$	1,095,191	$	2,841,039	$	4,741,255	$	223,465,145	$	228,206,400	$	684,422

Impaired loans and their average balances

Loans are considered impaired when management considers it unlikely that collection of principal and interest payments will be made according to contractual terms, including principal and interest payments. A performing loan may be categorized as impaired based on knowledge of circumstances that are deemed relevant to loan collection. Not all impaired loans are past due nor are losses expected for every impaired loan. If a loss is expected, an impaired loan may have specific reserves allocated to it in the allowance for loan losses. A schedule of impaired loans at period ends and their average balances for the year follows:

	Unpaid				Average		Interest Income
	Principal		Related		Recorded		Recognized
June 30, 2012	Balance		Allowance		Investment		During Impairment
With no related allowance recorded
Construction, land development, and land	$	922,369	$	-	$	934,454	$	-
Residential 1 to 4 family		860,264		-	$	921,820		-
Commercial properties		1,596,388		-	$	1,606,888		17,620
Total	$	3,379,021	$	-	$	3,463,162	$	17,620

December 31, 2011
With no related allowance recorded
Construction, land development, and land	$	1,220,789	$	-	$	1,322,323	$	-
Residential 1 to 4 family		1,214,516		-		1,329,911		-
Commercial properties		1,617,388		-		2,072,269		44,469
Total	$	4,052,693	$	-	$	4,724,503	$	44,469

Summary of loans by credit quality indicator

Credit risk is measured based on an internally designed grading scale. The grades correspond to regulatory rating categories of pass, special mention, substandard, and doubtful. Evaluation of grades assigned to individual loans is completed no less than quarterly. Credit quality, as measured by internally assigned grades, is an important component in the calculation of an adequate allowance for loan losses. The following table summarizes loans by credit quality indicator.

	June 30, 2012		December 31, 2011
Real Estate Credit Risk Profile by Internally Assigned Grade Construction, land development, and land
Pass	$	13,336,112	$	11,941,671
Doubtful
Less than 90 days past due		588,954		-
Nonperforming: 90 days or more past due and/or non-accruing		333,415		1,220,789
Total	$	14,258,481	$	13,162,460

Residential 1 to 4 family
Pass	$	81,213,154	$	83,934,669
Substandard		2,693,931		2,638,537
Doubtful
Less than 90 days past due		246,126		-
Nonperforming: 90 days or more past due and/or non-accruing		614,138		1,214,516
Total	$	84,767,349	$	87,787,722

Commercial properties
Pass	$	114,853,706	$	106,062,119
Substandard		5,306,334		5,331,436
Doubtful
Nonperforming: 90 days or more past due and/or non-accruing		1,596,388		1,617,388
Total	$	121,756,428	$	113,010,943

Commercial Credit Risk Profile by Internally Assigned Grade
Pass	$	14,299,274	$	12,507,978
Special Mention		9,236		-
Total	$	14,308,510	$	12,507,978

Consumer Credit Risk Profile by Internally Assigned Grade
Pass	$	1,718,076	$	1,737,297
Special Mention		11,512		-
Total	$	1,729,588	$	1,737,297

Troubled debt restructurings

The following table details information about troubled debt restructurings during the periods presented.

	At the time of restructuring						Subsequent to restructuring
	Number of		Balance prior to		Balance after		Number of		Defaults on		Other principal
June 30, 2012	contracts		restructuring		restructuring		defaults		restructures		reductions
Real Estate
Residential 1-4 family, 1st liens		1	$	337,727	$	337,727		-	$	-	$	-
Commercial properties		1		604,997		604,997		-		-		-
Total		2	$	942,724	$	942,724		-	$	-	$	-

December 31, 2011
Real Estate
Residential 1-4 family, 1st liens		5	$	1,851,393	$	1,851,393		-	$	-	$	-
Commercial properties		1		517,998		517,998		-		-		-
Total		6	$	2,369,391	$	2,369,391		-	$	-	$	-

Troubled debt restructurings with outstanding principal balances as of June 30, 2012 were as follows:

	Troubled				Paying as agreed				Past due 30 days or
	Debt Restructurings				under modified terms				more or non-accruing
	Number of		Current		Number of		Current		Number of		Current
	contracts		Balance		contracts		Balance		contracts		Balance
Real Estate
Construction, land development, and land		1	$	333,415		-	$	-		1	$	333,415
Residential 1 to 4 family		14		3,107,597		11		1,629,106		3		1,478,491
Commercial properties		9		6,218,300		7		4,786,567		2		1,431,733
Total		24	$	9,659,312		18	$	6,415,673		6	$	3,243,639