FORECLOSED REAL ESTATE (OREO)

3 Months Ended

Mar. 31, 2012

FORECLOSED REAL ESTATE (OREO)

10. FORECLOSED REAL ESTATE (OREO)

Foreclosed assets are presented net of an allowance for losses. An analysis of the activity in foreclosed assets is as follows.

	Three Months Ended March 31,
	2012			2011
Balance at beginning of year	$	5,028,513		$	10,469,302
Additions to underlying property		135,270			1,348,107
Disposals of  underlying property		(395,949	)		(462,146	)
Valuation allowance		(300,000	)		(315,883	)
Balance at end of period	$	4,467,834		$	11,039,380

During the three months ended March 31, 2012, the Bank disposed of two OREO properties for proceeds of $299,032 and recognized net losses of $96,917.

Expenses applicable to foreclosed assets include the following.

	Three Months Ended March 31,
	2012			2011
Valuation allowance	$	300,000		$	315,883
Operating expenses		(1,701	)		143,868
	$	298,299		$	459,751

Operating expenses for the three months ended March 31, 2012 included $7,600 in deposits refunded on sold foreclosed real estate.