Note 9. Troubled Debt Restructuring

6 Months Ended

Jun. 30, 2012

9. Troubled Debt Restructuring

A troubled debt restructuring (“TDR”) includes a loan modification where a borrower is experiencing financial difficulty and the Bank grants a concession to that borrower that the Bank would not otherwise consider except for the borrower’s financial difficulties. Modifications include below market interest rate, interest-only terms, forgiveness of principal, or an exceptionally long amortization period. Most of the Bank’s modifications are below market interest rates. A TDR may be either on accrual or nonaccrual status based upon the performance of the borrower and management’s assessment of collectability. If a TDR is placed on nonaccrual status, it remains there until it performs under the restructured terms for six consecutive months at which time it is returned to accrual status.

A summary of troubled debt restructurings as of June 30, 2012 and December 31, 2011 is noted in the table below. All troubled debt restructurings are considered impaired loans and, as of June 30, 2012, the ALL associated with those loans was $2.2 million.

	June 30, 2012
	Number of Modifications		Total Troubled Debt Restructurings		ALL Allocation		Recorded Investment
Commercial		-	$	-		-	$	-
Real estate
Construction		3		674,351		43,815		630,536
Commercial		22		11,930,925		677,842		11,253,083
Residential		101		16,229,455		1,215,781		15,013,674
Multifamily		2		588,088		219,953		368,135
Installment and other		11		202,623		22,275		180,348
Total Loans		139	$	29,625,442		2,179,666	$	27,445,776

	December 31, 2011
	Number of Modifications		Total Troubled Debt Restructurings		ALL Allocation		Recorded Investment
Commercial		-	$	-	$	-	$	-
Real estate
Construction		4		1,291,616		46,081		1,245,535
Commercial		13		7,360,189		790,410		6,569,779
Residential		86		15,950,281		923,937		15,026,344
Multifamily		2		541,192		170,295		370,897
Installment and other		9		127,437		11,844		115,593
Total Loans		114	$	25,270,715	$	1,942,567	$	23,328,148

The following is a summary of troubled debt restructurings as of June 30, 2012 and December 31, 2011 that were in default. Troubled debt restructurings in default are past due 90 days or more at the end of the period.

	June 30, 2012				December 31, 2011
	Number of Modifications		Total in Default		Number or Modifications		Total in Default
Commercial		-	$	-		-	$	-
Real estate
Construction		-		-		-		-
Commercial		-		-		-		-
Residential		19		3,413,078		18		2,860,627
Multifamily		1		465,479		-		-
Installment and other		3		29,358		-		-
Total Loans		23	$	3,907,915		18	$	2,860,627

A summary of the type of modifications made on troubled debt restructurings that occurred during the first six months of 2012 and 2011 is noted in the table below.

	For the Six Months Ended June 30, 2012
	Modification of Terms				Reduction of Interest Rate				Interest-only Payments				Forgiveness of Debt				Total
	Count		Balance		Count		Balance		Count		Balance		Count		Balance		Count		Balance
Commercial		-	$	-		-	$	-		-	$	-		-	$	-		-	$	-
Real estate
Construction		-		-		-		-		-		-		-		-		-		-
Commercial		-		-		4		2,387,610		6		2,279,191		-		-		10		4,666,801
Residential		3		206,980		16		1,539,525		1		14,023		-		-		20		1,760,528
Multifamily		-		-		-		-		-		-		-		-		-		-
Installment & Other		-		-		2		82,374		-		-		-		-		2		82,374
Total Loans		3	$	206,980		22		4,009,509		7	$	2,293,214		-	$	-		32	$	6,509,703

	For the Six Months Ended June 30, 2011
	Modification of Terms				Reduction of Interest Rate				Interest-only Payments				Forgiveness of Debt				Total
	Count		Balance		Count		Balance		Count		Balance		Count		Balance		Count		Balance
Commercial		-	$	-		-	$	-		-	$	-		-	$	-		-	$	-
Real estate
Construction		-		-		-		-		-		-		-		-		-		-
Commercial		-		-		-		-		-		-		-		-		-		-
Residential		1		60,827		21		2,760,872		4		2,354,170		-		-		26		5,175,869
Multifamily		-		-		-		-		-		-		-		-		-		-
Installment & Other		2		31,526		3		19,116		-		-		-		-		5		50,642
Total Loans		3	$	92,353		24		2,779,988		4	$	2,354,170		-	$	-		31	$	5,226,511