FORECLOSED REAL ESTATE (OREO)

9 Months Ended

Sep. 30, 2012

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

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.

	Nine Months Ended September 30,
	2012			2011
Balance at beginning of year	$	5,028,513		$	10,469,302
Additions to underlying property		2,165,375			7,273,206
Disposals of  underlying property		(441,429	)		(9,582,484	)
Valuation allowance		(657,226	)		(658,583	)
Balance at end of period	$	6,095,233		$	7,501,441

During the nine months ended September 30, 2012, the Bank disposed of three OREO properties resulting in proceeds of $344,512 and recognized net losses of $96,917. Current year OREO additions include two construction and land development projects valued at $1,038,000 that the Bank utilized the deposit method to account for the sale and transfer of legal title to the borrower. Payments of principal and interest will be recorded as a deposit (liability) until the transaction qualifies for full accrual or installment accounting treatment. As of September 30, 2012, the Bank has received $154,480 in payments on these projects. OREO carrying amounts reflect management’s estimate of the realizable value of these properties incorporating current appraised values, local real estate market conditions and related costs.

Expenses applicable to foreclosed assets include the following.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Valuation allowance	$	31,050	$	342,700	$	657,226	$	658,583
Operating expenses		54,529		71,373		85,374		365,823
	$	85,579	$	414,073	$	742,600	$	1,024,406