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Note 7. Allowance for Loan Losses
3 Months Ended
Sep. 30, 2011
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]
7.    Allowance for Loan Losses

The allowance for loan losses reflected in the accompanying consolidated financial statements represents the allowance available to absorb probable losses inherent in the loan portfolio.  An analysis of changes in the allowance is presented in the following table:

ALLOWANCE FOR LOAN LOSSES

   
For Three Months Ended
September 30,
 
   
2011
   
2010
 
Balance at beginning of period
 
$
9,874,383
   
$
8,276,228
 
   Charge-offs
   
(2,103,273
)
   
(1,205,759
)
   Recoveries
   
78,484
     
44,031
 
Net loans charged-off
   
(2,024,789
)
   
(1,161,728
)
Additions to allowance charged to expense
   
2,050,000
     
1,400,000
 
Balance at end of period
 
$
9,899,594
   
$
8,514,500
 

   
For Nine Months Ended
September 30,
 
   
2011
   
2010
 
Balance at beginning of period
 
$
9,526,592
   
$
6,034,187
 
   Charge-offs
   
(5,154,796
)
   
(2,669,593
)
   Recoveries
   
157,798
     
1,019,906
 
Net loans charged-off
   
(4,996,998
)
   
(1,649,687
)
Additions to allowance charged to expense
   
5,370,000
     
4,130,000
 
Balance at end of period
 
$
9,899,594
   
$
8,514,500
 

Consistent with regulatory guidance, charge-offs are taken when specific loans, or portions thereof, are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. The Bank’s policy is to promptly charge these loans off in the period the uncollectible loss amount is reasonably determined.  The Bank promptly charges-off commercial and real estate 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.  All consumer loans 120 days past due and all other loans with principal and interest 180 days or more past due will be reviewed for potential charge-off at least quarterly.