Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances, adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.

Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Generally, loans are placed on nonaccrual status at 90 days past due and interest is considered a loss, unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

For all loan portfolio segments except one-to-four family residential properties and consumer, the Corporation promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Corporation charges off one-to-four family residential and consumer loans, or portions thereof, when the Corporation reasonably determines the amount of the loss. The Corporation adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of one-to-four family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Corporation can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all loan classes, when loans are placed on nonaccrual, or charged off, interest accrued but not collected is reversed against interest income. Subsequent payments on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. In general, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. However, for impaired loans and troubled debt restructured, which is included in impaired loans, the Corporation requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Corporation records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. 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 regular basis by management and is based upon management’s periodic review of the collectibility 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 consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the prior three years. Management believes the three-year historical loss experience methodology is appropriate in the current economic environment. Other adjustments (qualitative/environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Corporation utilizes the discounted cash flows to determine the level of impairment, the Corporation includes the entire change in the present value of cash flows as provision expense.

Segments of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment measurements.

	June 30, 2012			December 31, 2011
	(Unaudited)
	(In Thousands)
Residential real estate
Construction	$	5,364		$	8,308
One-to-four family residential		109,111			111,198
Multi-family residential		18,528			18,582
Nonresidential real estate and agricultural land		87,384			83,284
Land (not used for agricultural purposes)		17,541			19,081
Commercial		19,025			17,349
Consumer and other		3,502			3,840
		260,455			261,642
Unamortized deferred loan costs		484			481
Undisbursed loans in process		(5,418	)		(5,024	)
Allowance for loan losses		(3,521	)		(4,003	)
Total loans	$	252,000		$	253,096

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Corporation until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest-rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

With respect to residential loans that are secured by one-to-four family residences and are generally owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. This segment also includes residential loans secured by non-owner occupied one-to-four family residences. Management tracks the level of owner-occupied residential loans versus non-owner occupied loans as a portion of our recent loss history relates to these loans. Home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Nonresidential and multi-family residential real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Nonresidential and multi-family residential real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Corporation’s nonresidential and multi-family real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Corporation avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied real estate loans versus non-owner occupied loans.

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2012 and 2011 and information regarding the breakdown of the balance in the allowance for loan losses and the recorded investment in loans, both presented by portfolio segment and impairment method, as of June 30, 2012 and December 31, 2011.

	Residential
	Construction			1-4 Family			Multi-Family		Nonresidential			Land			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended June 30, 2012 Balances at beginning of period:	$	5		$	1,472		$	17	$	1,226		$	425		$	6		$	27		$	3,178
Provision for losses		(1	)		(115	)		266		(135	)		305			2			-			322
Loans charged off		-			(46	)		-		-			-			-			(19	)		(65	)
Recoveries on loans		-			79			-		-			-			-			7			86
Balances at end of period	$	4		$	1,390		$	283	$	1,091		$	730		$	8		$	15		$	3,521
Six Months Ended June 30, 2012 Balances at beginning of period:	$	23		$	1,986		$	65	$	822		$	993		$	70		$	44		$	4,003
Provision for losses		(23	)		286			218		298			77			(62	)		2			796
Loans charged off		-			(962	)		-		(29	)		(340	)		-			(44	)		(1,375	)
Recoveries on loans		4			80			-		-			-			-			13			97
Balances at end of period	$	4		$	1,390		$	283	$	1,091		$	730		$	8		$	15		$	3,521
As of June 30, 2012 Allowance for losses:
Individually evaluated for impairment:	$	-		$	191		$	196	$	-		$	196		$	-		$	-		$	583
Collectively evaluated for impairment:		4			1,199			87		1,091			534			8			15			2,938
Balances at end of period	$	4		$	1,390		$	283	$	1,091		$	730		$	8		$	15		$	3,521
Loans:
Individually evaluated for impairment:	$	-		$	3,255		$	3,086	$	4,224		$	4,784		$	408		$	15		$	15,772
Collectively evaluated for impairment:		5,364			105,856			15,442		83,160			12,757			18,617			3,487			244,683
Balances at end of period	$	5,364		$	109,111		$	18,528	$	87,384		$	17,541		$	19,025		$	3,502		$	260,455

	Residential
	Construction			1-4 Family			Multi- Family			Nonresidential			Land			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended June 30, 2011 Balances at beginning of period:	$	30		$	889		$	138		$	1,469		$	950		$	157		$	75		$	3,708
Provision for losses		2			339			(30	)		16			92			(44	)		(1	)		374
Loans charged off		-			(140	)		-			(259	)		(83	)		-			(22	)		(504	)
Recoveries on loans		-			-			-			-			-			-			11			11
Balances at end of period	$	32		$	1,088		$	108		$	1,226		$	959		$	113		$	63		$	3,589
Six Months Ended June 30, 2011 Balances at beginning of period:	$	35		$	746		$	138		$	1,632		$	976		$	157		$	122		$	3,806
Provision for losses		(3	)		679			(30	)		221			66			(44	)		(41	)		848
Loans charged off		-			(337	)		-			(627	)		(83	)		-			(41	)		(1,088	)
Recoveries on loans		-			-			-			-			-			-			23			23
Balances at end of period	$	32		$	1,088		$	108		$	1,226		$	959		$	113		$	63		$	3,589

	Residential
	Construction		1-4 Family		Multi- Family		Nonresidential		Land		Commercial		Consumer		Total
	(In Thousands)
As of December 31, 2011
Allowance for losses:
Individually evaluated for impairment:	$	-	$	913	$	-	$	-	$	519	$	-	$	-	$	1,432
Collectively evaluated for impairment:		23		1,073		65		822		474		70		44		2,571
Balances at end of period	$	23	$	1,986	$	65	$	822	$	993	$	70	$	44	$	4,003

Loans:
Individually evaluated for impairment:	$	-	$	6,331	$	1,966	$	3,705	$	4,972	$	271	$	17	$	17,262
Collectively evaluated for impairment:		8,308		104,867		16,616		79,579		14,109		17,078		3,823		244,380
Balances at end of period	$	8,308	$	111,198	$	18,582	$	83,284	$	19,081	$	17,349	$	3,840	$	261,642

June 30, 2012	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(Unaudited; In Thousands)
Construction	$	5,364	$	5,197	$	-	$	167	$	-
1-4 family residential		109,111		98,697		4,295		6,119		-
Multi-family residential		18,528		17,399		-		1,129		-
Nonresidential		87,384		79,601		3,425		4,358		-
Land		17,541		12,227		554		4,760		-
Commercial		19,025		18,379		179		467		-
Consumer		3,502		3,448		18		36		-
Total Loans	$	260,455	$	234,948	$	8,471	$	17,036	$	-

December 31, 2011	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(In Thousands)
Construction	$	8,308	$	8,308	$	-	$	-	$	-
1-4 family residential		111,198		100,827		2,891		7,429		51
Multi-family residential		18,582		16,616		-		1,966		-
Nonresidential		83,284		75,966		3,441		3,877		-
Land		19,081		13,457		505		5,119		-
Commercial		17,349		16,685		329		335		-
Consumer		3,840		3,796		22		22		-
Total Loans	$	261,642	$	235,655	$	7,188	$	18,748	$	51

The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually on an ongoing basis by classifying the loans as to credit risk, assigning grade classifications. Loan grade classifications of special mention, substandard, doubtful, or loss are reported to the Corporation’s board of directors monthly. The Corporation uses the following definitions for credit risk grade classifications:

Special Mention: These assets are currently protected, but potentially weak. They have credit deficiencies deserving a higher degree of attention by management. These assets do not presently exhibit a sufficient degree of risk to warrant adverse classification. Concerns may lie with cash flow, liquidity, leverage, collateral, or industry conditions. These are graded special mention so that the appropriate level of attention is administered to prevent a move to a “substandard” rating.

Substandard: By regulatory definition, “substandard” loans are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. These types of loans have well defined weaknesses that jeopardize the liquidation of the debt. A distinct possibility exists that the institution will sustain some loss if the deficiencies are not corrected. These loans are considered workout credits. They exhibit at least one of the following characteristics.

·	An expected loan payment is in excess of 90 days past due (non-performing), or non-earning.

·	The financial condition of the borrower has deteriorated to such a point that close monitoring is necessary. Payments do not necessarily have to be past due.

·	Repayment from the primary source of repayment is gone or impaired.

·	The borrower has filed for bankruptcy protection.

·	The loans are inadequately protected by the net worth and cash flow of the borrower.

·	The guarantors have been called upon to make payments.

·	The borrower has exhibited a continued inability to reduce principal (although interest payment may be current).

·	The Corporation is considering a legal action against the borrower.

·	The collateral position has deteriorated to a point where there is a possibility the Corporation may sustain some loss. This may be due to the financial condition, improper documentation, or to a reduction in the value of the collateral.

·	Although loss may not seem likely, the Corporation has gone to extraordinary lengths (restructuring with extraordinary lengths) to protect its position in order to maintain a high probability of repayment.

·	Flaws in documentation leave the Corporation in a subordinated or unsecured position.

Doubtful: These loans exhibit the same characteristics as those rated “substandard,” plus weaknesses that make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. This would include inadequately secured loans that are being liquidated, and inadequately protected loans for which the likelihood of liquidation is high. This classification is temporary. Pending events are expected to materially reduce the amount of the loss. This means that the “doubtful” classification will result in either a partial or complete loss on the loan (write-down or specific reserve), with reclassification of the asset as “substandard,” or removal of the asset from the classified list, as in foreclosure or full loss.

June 30, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivables		Total Loans 90 Days and Accruing
	(Unaudited; In Thousands)
Construction	$	-	$	-	$	76	$	76	$	5,288	$	5,364	$	-
1-4 family residential		651		136		350		1,137		107,974		109,111		-
Multi-family residential		-		-		-		-		18,528		18,528		-
Nonresidential		-		-		1,615		1,615		85,769		87,384		-
Land		58		72		2,772		2,902		14,639		17,541		-
Commercial		79		-		308		387		18,638		19,025		-
Consumer		39		-		21		60		3,442		3,502		-
	$	827	$	208	$	5,142	$	6,177	$	254,278	$	260,455	$	-

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivables		Total Loans 90 Days and Accruing
	(In Thousands)
Construction	$	335	$	-	$	-	$	335	$	7,973	$	8,308	$	-
1-4 family residential		1,172		26		2,946		4,144		107,054		111,198		-
Multi-family residential		-		-		-		-		18,582		18,582		-
Nonresidential		949		105		1,831		2,885		80,399		83,284		-
Land		8		-		3,080		3,088		15,993		19,081		-
Commercial		41		-		297		338		17,011		17,349		-
Consumer		44		-		3		47		3,793		3,840		-
	$	2,549	$	131	$	8,157	$	10,837	$	250,805	$	261,642	$	-

	June 30, 2012		December 31, 2011
	(Unaudited)
	(In Thousands)
Residential real estate
Construction	$	76	$	-
One-to-four family residential		1,979		4,304
Multi-family residential		1,075		-
Nonresidential real estate and agricultural land		2,414		2,161
Land (not used for agricultural purposes)		4,693		3,080
Commercial		308		297
Consumer and other		21		21
Total nonaccrual loans	$	10,566	$	9,863

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		2,301		2,511		-
Multi-family residential		2,011		2,011		-
Nonresidential		4,224		5,018		-
Land		2,863		3,204		-
Commercial		408		437		-
Consumer		15		15		-
	$	11,822	$	13,196	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		954		954		191
Multi-family residential		1,075		1,075		196
Nonresidential		-		-		-
Land		1,921		1,921		196
Commercial		-		-		-
Consumer		-		-		-
	$	3,950	$	3,950	$	583

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		3,255		3,465		191
Multi-family residential		3,086		3,086		196
Nonresidential		4,224		5,018		-
Land		4,784		5,125		196
Commercial		408		437		-
Consumer		15		15		-
	$	15,772	$	17,146	$	583

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		3,064		3,249		-
Multi-family residential		1,966		1,966		-
Nonresidential		3,705		4,469		-
Land		2,329		2,329		-
Commercial		271		300		-
Consumer		17		17		-
	$	11,352	$	12,330	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		3,267		3,267		913
Multi-family residential		-		-		-
Nonresidential		-		-		-
Land		2,643		2,643		519
Commercial		-		-		-
Consumer		-		-		-
	$	5,910	$	5,910	$	1,432

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction	$	-	$	-	$	-
1-4 family residential		6,331		6,516		913
Multi-family residential		1,966		1,966		-
Nonresidential		3,705		4,469		-
Land		4,972		4,972		519
Commercial		271		300		-
Consumer		17		17		-
	$	17,262	$	18,240	$	1,432

	Six Months Ended June 30, 2012				Six Months Ended June 30, 2011
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction	$	-	$	-	$	187	$	1
1-4 family residential		4,825		52		5,668		114
Multi-family residential		2,534		50		1,806		22
Nonresidential		3,703		33		4,684		70
Land		4,604		1		6,212		85
Commercial		456		17		414		8
Consumer		16		-		1		-
	$	16,138	$	153	$	18,972	$	300

	Three Months Ended June 30, 2012				Three Months Ended June 30, 2011
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction	$	-	$	-	$	166	$	-
1-4 family residential		3,793		31		4,976		55
Multi-family residential		3,086		27		2,295		12
Nonresidential		3,741		15		4,175		37
Land		4,627		1		6,084		46
Commercial		515		9		359		3
Consumer		15		-		1		-
	$	15,777	$	83	$	18,056	$	153

In the course of working with borrowers, the Corporation may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Corporation attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified, whether through a new agreement replacing the old or via changes to an existing loan agreement, are reviewed by the Corporation to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Corporation grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Corporation do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Corporation may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

As a result of adopting the amendments in Accounting Standards Update No. 2011-02, the Corporation reassessed all restructurings that occurred on or after the beginning of its prior fiscal year (January 1, 2011) for identification as troubled debt restructurings. As a result of this reassessment, the Corporation did not identify as troubled debt restructurings any additional receivables for which the allowance for credit losses had previously been measured under a general allowance for credit losses methodology.

Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. For all loan classes, it is the Corporation’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Corporation believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due.

The balance of nonaccrual restructured loans, which is included in total nonaccrual loans, was $5.2 million at June 30, 2012. If the restructured loan is on accrual status prior to being restructured, it is reviewed to determine if the restructured loan should remain on accrual status. The balance of accruing restructured loans was $4.7 million at June 30, 2012. Loans that are considered TDR are classified as performing, unless they are on nonaccrual status or greater than 90 days past due, as of the end of the most recent quarter. All TDRs are considered impaired by the Corporation, unless it is determined that the borrower has met the six month satisfactory performance period under the modified terms. On at least a quarterly basis, the Corporation reviews all TDR loans to determine if the loan meets this criterion.

With regard to determination of the amount of the allowance for credit losses, all accruing restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above.

	At June 30, 2012				For the Three-Month Period Ended June 30, 2012								For the Six-Month Period Ended June 30, 2012
	# of Loans		Total Troubled Debt Restructured		# of Loans		Current Balance		Pre-Modification Recorded Balance		Post-Modification Recorded Balance		# of Loans		Current Balance		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; Dollars In Thousands)
Residential Real Estate
Construction		-	$	-		-	$	-	$	-	$	-		-	$	-	$	-	$	-
One-to-four family residential		12		4,362		2		71		63		71		6		1,167		1,103		1,169
Multi-family residential		1		1,075		-		-		-		-		1		1,083		1,068		1,083
Nonresidential real estate and agricultural land		5		2,360		-		-		-		-		1		40		40		40
Land not agricultural		1		1,921		-		-		-		-		-		-		-		-
Commercial		4		159		1		104		104		104		3		141		169		174
Consumer		1		15		-		-		-		-		-		-		-		-
		24	$	9,892		3	$	175	$	167	$	175		11	$	2,431	$	2,380	$	2,466

Of the loans restructured during the six months ended June 30, 2012, nine loans, totaling $2.3 million, were refinanced primarily to allow the borrowers to overcome current cash flow issues. Of these loans:

·	Three, totaling $1.6 million, were placed on 30-year amortizing schedules.

·	Another, of $46,000, was refinanced with additional collateral and provisioned with a specific valuation allowance for the entirety of the loan.

·	Five were placed on short term, low-rate notes to allow the borrowers to remain current while attempting to liquidate portions of the collateral, or recover. The sum of these five loans was $649,000.

For the three months ended June 30, 2012, three loans, totaling $175,000, were refinanced primarily to allow the borrowers to overcome current cash flow issues. Of these loans:

·	Two were placed on short term, low-rate notes to allow the borrowers to remain current while attempting to liquidate portions of the collateral, or recover. The sum of these two was $147,000.

·	The last loan, in the amount of $28,000, was placed on a 30-year amortizing schedule.

One loan classified as troubled debt restructuring within the last twelve months defaulted during the three and six months ended June 30, 2012. This loan, for a single family residence, was foreclosed upon and is included in real estate owned as of June 30, 2012. That property was sold subsequent to these financials, with a book loss of $1,000. The restructured amount of the loan was $345,000 and the final sale price in July, 2012, was $304,000. The remainder was recorded through the allowance for loan losses as a charge off in June. The Corporation defines default in this instance as being either past due 90 days or more at the end of the quarter or in the legal process of foreclosure.

During the three-month period ended June 30, 2012, one loan, in the amount of $215,000, was removed from the list of troubled debt restructured. This loan was originally restructured at an interest rate that was at or above the current market rate, has performed as agreed continuously for at least six months, and based upon internal review, is expected to perform as agreed through maturity of the loan with no further signs of financial difficulty by the borrower.