8. TROUBLED DEBT RESTRUCTURINGS

9 Months Ended

Sep. 30, 2011

Troubled Debt Restructuring, Debtor, Other

8. TROUBLED DEBT RESTRUCTURINGS

At September 30, 2011, there were 45 loans and leases that were considered to be troubled debt restructurings. Of these loans and leases, 30 were modified and are currently performing (less than ninety days past due) totaling $14,958,000 and 15 are considered nonperforming (and included in the $20,965,000 noted above), totaling $7,148,000. At September 30, 2011 and December 31, 2010, there were no unfunded commitments on those loans considered troubled debt restructures. See also “Impaired Loans and Leases” in Item 2.

The Company has allocated $291,000 and $1,428,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of September 30, 2011 and December 31, 2010. The Company has not committed to lend additional amounts to these borrowers as of September 30, 2011 and December 31, 2010.

During the nine-month period ended September 30, 2011, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications not considered troubled debt restructurings involving a reduction of the stated interest rate of the loan were for periods ranging from ten years to thirteen years. Modifications not considered troubled debt restructurings involving an extension of the maturity date were for periods ranging from ten months to ten years. The following table presents loans by class modified as troubled debt restructurings that occurred during the nine-month period ended September 30, 2011:

		Pre-Modification		Post-Modification
	Number of	Outstanding Recorded		Outstanding Recorded
	Loans	Investment		Investment
Troubled Debt Restructurings:
Commercial	2	$	2,711,000	$	2,683,000
Real estate
Commercial	5		2,960,000		2,719,000
Multi-family	1		78,000		78,000
Construction	1		683,000		683,000
Consumer	2		855,000		855,000
Total	11	$	7,288,000	$	7,019,000

The troubled debt restructurings described above increased the allowance for loan losses by $164,000 and resulted in charge offs of $269,000 during the nine-month period ended September 30, 2011.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine-month period ended September 30, 2011:

	Number of Loans	Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Commercial	3	$	207,000
Real estate
Commercia1	3		1,450,000
Residential	1		357,000
Agriculture	1		597,000
Consumer	1		68,000
Total	9	$	2,679,000

A loan is considered to be in payment default once it is ninety days contractually past due under the modified terms.

The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $97,000 and resulted in no charge offs during the nine-month period ended September 30, 2011.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.