
	11.	LOANS

Loans consist of the following:


	June 30, 2013	December 31, 2012

Commercial real estate	$ 434,616,482	$ 419,667,312
Residential first mortgages	165,433,554	177,663,354
Construction and land development	29,119,080	31,818,782
Home equity and second mortgage	21,769,081	21,982,375
Commercial loans	84,992,780	88,157,606
Consumer loans	937,147	995,206
Commercial equipment	17,347,472	16,267,684
	754,215,596	756,552,319
Less:
Deferred loan fees	930,439	664,610
Allowance for loan loss	8,033,553	8,246,957
	8,963,992	8,911,567

	$ 745,251,604	$ 747,640,752

At June 30, 2013, the Bank’s allowance for loan losses totaled $8,033,553, or 1.07% of loan balances, as compared to $8,246,957, or 1.09% of loan balances, at December 31, 2012. Management’s determination of the adequacy of the allowance is based on a periodic evaluation of the portfolio with consideration given to the overall loss experience, current economic conditions, size, growth and composition of the loan portfolio, financial condition of the borrowers and other relevant factors that, in management’s judgment, warrant recognition in providing an adequate allowance.

At June 30, 2013 and December 31, 2012, gross loans included $1,437,828 and $1,454,757, respectively, from the sale of an OREO property that the Bank financed during 2011 that did not qualify for full accrual sales treatment under ASC Topic 360-20-40 “Property Plant and Equipment – Derecognition”. The Bank utilized the cost recovery method and deferred a gain of $225,000. The deferred gain balance was $225,000 at June 30, 2013 and December 31, 2012, respectively.

Risk Characteristics of Portfolio Segments

The Company manages its credit products and exposure to credit losses (credit risk) by the following specific portfolio segments (classes), which are levels at which the Company develops and documents its allowance for loan loss methodology. These segments are:

Commercial Real Estate (“CRE”)

Commercial and other real estate projects include office buildings, retail locations, churches, other special purpose buildings and commercial construction. Commercial construction balances were below 5% of the CRE portfolio at June 30, 2013 and December 31, 2012. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. The primary security on a commercial real estate loan is the real property and the leases that produce income for the real property. The Bank generally limits its exposure to a single borrower to 15% of the Bank’s capital. Loans secured by commercial real estate are generally limited to 80% of the lower of the appraised value or sales price at origination and have an initial contractual loan payment period ranging from three to 20 years.

Loans secured by commercial real estate are larger and involve greater risks than one-to-four family residential mortgage loans. Because payments on loans secured by such properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.

Residential First Mortgages

Residential first mortgage loans made by the Bank are generally long term loans, amortized on a monthly basis, with principal and interest due each month. The initial contractual loan payment period for residential loans typically ranges from ten to 30 years. The Bank’s experience indicates that real estate loans remain outstanding for significantly shorter time periods than their contractual terms. Borrowers may refinance or prepay loans at their option, without penalty. The Bank originates both fixed-rate and adjustable-rate residential first mortgages.

The annual and lifetime limitations on interest rate adjustments may limit the increases in interest rates on these loans. There are also unquantifiable credit risks resulting from potential increased costs to the borrower as a result of repricing of adjustable-rate mortgage loans. During periods of rising interest rates, the risk of default on adjustable-rate mortgage loans may increase due to the upward adjustment of interest cost to the borrower.

Construction and Land Development

The Bank offers loans for the construction of one-to-four family dwellings. Generally, these loans are secured by the real estate under construction as well as by guarantees of the principals involved. In addition, the Bank offers loans to acquire and develop land, as well as loans on undeveloped, subdivided lots for home building by individuals.

A decline in demand for new housing might adversely affect the ability of borrowers to repay these loans. Construction and land development loans are inherently riskier than providing financing on owner-occupied real estate. The Bank’s risk of loss is affected by the accuracy of the initial estimate of the market value of the completed project as well as the accuracy of the cost estimates made to complete the project. In addition, the volatility of the real estate market has made it increasingly difficult to ensure that the valuation of land associated with these loans is accurate. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, a project’s value might be insufficient to assure full repayment. As a result of these factors, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the project rather than the ability of the borrower or guarantor to repay principal and interest. If the Bank forecloses on a project, there can be no assurance that the Bank will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Home Equity and Second Mortgage Loans

The Bank maintains a portfolio of home equity and second mortgage loans. These products contain a higher risk of default than residential first mortgages as in the event of foreclosure, the first mortgage would need to be paid off prior to collection of the second mortgage. This risk has been heightened as the market value of residential property has declined.

Commercial Loans

The Bank offers commercial loans to its business customers. The Bank offers a variety of commercial loan products including term loans and lines of credit. Such loans are generally made for terms of five years or less. The Bank offers both fixed-rate and adjustable-rate loans under these product lines. When making commercial business loans, the Bank considers the financial condition of the borrower, the borrower’s payment history of both corporate and personal debt, the projected cash flows of the business, the viability of the industry in which the consumer operates, the value of the collateral, and the borrower’s ability to service the debt from income. These loans are primarily secured by equipment, real property, accounts receivable, or other security as determined by the Bank.

Commercial loans are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself.

Consumer Loans

The Bank has developed a number of programs to serve the needs of its customers with primary emphasis upon loans secured by automobiles, boats, recreational vehicles and trucks. The Bank also makes home improvement loans and offers both secured and unsecured personal lines of credit. Consumer loans entail greater risk from other loan types due to being secured by rapidly depreciating assets or the reliance on the borrower’s continuing financial stability.

Commercial Equipment Loans

These loans consist primarily of fixed-rate, short-term loans collateralized by a commercial customer’s equipment. When making commercial equipment loans, the Bank considers the same factors it considers when underwriting a commercial business loan. Commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. In the case of business failure, collateral would need to be liquidated to provide repayment for the loan. In many cases, the highly specialized nature of collateral equipment would make full recovery from the sale of collateral problematic.

Non-accrual and Past Due Loans

Non-accrual loans as of June 30, 2013 and December 31, 2012 were as follows:



	June 30, 2013
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans

Commercial real estate	$ 3,163,457	8	$ 3,727,138	2	$ 6,890,595	10
Residential first mortgages	2,979,534	9	562,994	3	3,542,528	12
Construction and land development	-	-	-	-	-	-
Home equity and second mortgage	-	-	-	-	-	-
Commercial loans	6,009,421	11	-	-	6,009,421	11
Consumer loans	-	-	41,498	1	41,498	1
Commercial equipment	151,793	2	-	-	151,793	2
	$ 12,304,205	30	$ 4,331,630	6	$ 16,635,835	36



	December 31, 2012
	90 or Greater Days Delinquent	Number of Loans	Non-accrual Performing Loans	Number of Loans	Total Dollars	Total Number of Loans

Commercial real estate	$ 1,527,844	7	$ 3,802,947	2	$ 5,330,791	9
Residential first mortgages	3,169,404	10	569,693	3	3,739,097	13
Construction and land development	-	-	-	-	-	-
Home equity and second mortgage	71,296	2	-	-	71,296	2
Commercial loans	3,732,090	11	-	-	3,732,090	11
Consumer loans	-	-	51,748	1	51,748	1
Commercial equipment	216,383	4	-	-	216,383	4
	$ 8,717,017	34	$ 4,424,388	6	$ 13,141,405	40

The Bank categorized six performing loans totaling $4,331,630 and $4,424,388 as non-accrual loans at June 30, 2013 and December 31, 2012, respectively. These six loans represent one well-secured commercial relationship with no specific reserves in the allowance due to the Bank's superior credit position with underlying collateral. It is management’s belief that there is no current risk of loss to the Bank for this relationship. These loans were classified as non-accrual loans due to the customer’s operating results. In accordance with the Company’s policy, interest income is recognized on a cash-basis for these loans.

Non-accrual loans on which the recognition of interest has been discontinued, which did not have a specific allowance for impairment, amounted to $14,549,064 and $11,371,542 at June 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at June 30, 2013 and December 31, 2012 was $518,722 and $443,856, respectively. Non-accrual loans with a specific allowance for impairment on which the recognition of interest has been discontinued amounted to $2,086,771 and $1,769,863 at June 30, 2013 and December 31, 2012, respectively. Interest due but not recognized on these balances at June 30, 2013 and December 31, 2012 was $207,561 and $182,106, respectively.

An analysis of past due loans as of June 30, 2013 and December 31, 2012 was as follows:


June 30, 2013	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
Commercial real estate	$ 431,168,815	$ -	$ 284,210	$ 3,163,457	$ 3,447,667	$ 434,616,482
Residential first mortgages	161,686,085	-	767,935	2,979,534	3,747,469	165,433,554
Construction and land dev.	29,119,080	-	-	-	-	29,119,080
Home equity and second mtg.	21,617,047	94,710	57,324	-	152,034	21,769,081
Commercial loans	78,893,319	90,040	-	6,009,421	6,099,461	84,992,780
Consumer loans	936,737	410	-	-	410	937,147
Commercial equipment	17,144,025	26,656	24,998	151,793	203,447	17,347,472
Total	$ 740,565,108	$ 211,816	$ 1,134,467	$ 12,304,205	$ 13,650,488	$ 754,215,596


December 31, 2012
Commercial real estate	$ 416,721,658	$ -	$ 1,417,810	$ 1,527,844	$ 2,945,654	$ 419,667,312
Residential first mortgages	173,593,886	97,307	802,757	3,169,404	4,069,468	177,663,354
Construction and land dev.	31,818,782	-	-	-	-	31,818,782
Home equity and second mtg.	21,499,018	350,715	61,346	71,296	483,357	21,982,375
Commercial loans	84,384,426	-	41,090	3,732,090	3,773,180	88,157,606
Consumer loans	983,094	9,363	2,749	-	12,112	995,206
Commercial equipment	15,659,007	371,921	20,373	216,383	608,677	16,267,684
Total	$ 744,659,871	$ 829,306	$ 2,346,125	$ 8,717,017	$ 11,892,448	$ 756,552,319

There were no accruing loans 90 days or greater past due at June 30, 2013 and December 31, 2012, respectively.

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses at and for the three and six months ended June 30, 2013 and June 30, 2012, respectively, and the year ended December 31, 2012 and loan receivable balances at June 30, 2013 and June 30, 2012, respectively, and at December 31, 2012. An allocation of the allowance to one category of loans does not prevent the Company’s ability to utilize the allowance to absorb losses in a different category. The loan receivables are disaggregated on the basis of the Company’s impairment methodology.



	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended June 30, 2013
Allowance for loan losses:
Balance at April 1,	$ 3,539,930	$ 1,985,165	$ 497,078	$ 318,271	$ 1,823,540	$ 17,086	$ 168,930	$ 8,350,000
Charge-offs	-	(98)	(59)	(110,883)	(405,573)	(15)	(21,977)	(538,605)
Recoveries	-	9,908	-	-	10,899	990	(66)	21,731
Provisions	(181,929)	(34,093)	103,506	156,893	90,466	(4,089)	69,673	200,427
Balance at June 30,	$ 3,358,001	$ 1,960,882	$ 600,525	$ 364,281	$ 1,519,332	$ 13,972	$ 216,560	$ 8,033,553
At and For the Six Months Ended June 30, 2013
Allowance for loan losses:
Balance at January 1,	$ 4,089,834	$ 1,083,228	$ 533,430	$ 279,819	$ 1,949,024	$ 19,341	$ 292,281	$ 8,246,957
Charge-offs	-	(58,938)	(35,962)	(110,883)	(405,573)	(8,991)	(21,977)	(642,324)
Recoveries	-	10,900	-	-	11,891	1,982	49,547	74,320
Provisions	(731,833)	925,692	103,057	195,345	(36,010)	1,640	(103,291)	354,600
Balance at June 30,	$ 3,358,001	$ 1,960,882	$ 600,525	$ 364,281	$ 1,519,332	$ 13,972	$ 216,560	$ 8,033,553
Ending balance: individually evaluated for impairment	$ 613,757	$ 406,966	$ 169,710	$ -	$ 39,871	$ -	$ 3,364	$ 1,233,668
Ending balance: collectively evaluated for impairment	$ 2,744,244	$ 1,553,916	$ 430,815	$ 364,281	$ 1,479,461	$ 13,972	$ 213,196	$ 6,799,885
Loan receivables:
Ending balance	$ 434,616,482	$ 165,433,554	$ 29,119,080	$ 21,769,081	$ 84,992,780	$ 937,147	$ 17,347,472	$ 754,215,596
Ending balance: individually evaluated for impairment	$ 20,473,659	$ 5,236,064	$ 5,705,211	$ 214,000	$ 11,387,777	$ 41,498	$ 155,157	$ 43,213,366
Ending balance: collectively evaluated for impairment	$ 414,142,823	$ 160,197,490	$ 23,413,869	$ 21,555,081	$ 73,605,003	$ 895,649	$ 17,192,315	$ 711,002,230



	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Year Ended December 31, 2012
Allowance for loan losses:
Balance at January 1,	$ 2,525,199	$ 539,205	$ 354,385	$ 143,543	$ 3,850,294	$ 19,119	$ 223,296	$ 7,655,041
Charge-offs	(486,431)	(10,987)	(140,835)	(210,753)	(1,003,824)	(4,994)	(168,802)	(2,026,626)
Recoveries	-	37,524	-	-	51,350	987	-	89,861
Provisions	2,051,066	517,486	319,880	347,029	(948,796)	4,229	237,787	2,528,681
Balance at December 31,	$ 4,089,834	$ 1,083,228	$ 533,430	$ 279,819	$ 1,949,024	$ 19,341	$ 292,281	$ 8,246,957
Ending balance: individually evaluated for impairment	$ 785,878	$ 403,475	$ -	$ -	$ 353,883	$ -	$ 4,421	$ 1,547,657
Ending balance: collectively evaluated for impairment	$ 3,303,956	$ 679,753	$ 533,430	$ 279,819	$ 1,595,141	$ 19,341	$ 287,860	$ 6,699,300
Loan receivables:
Ending balance	$ 419,667,312	$ 177,663,354	$ 31,818,782	$ 21,982,375	$ 88,157,606	$ 995,206	$ 16,267,684	$ 756,552,319
Ending balance: individually evaluated for impairment	$ 21,618,890	$ 3,367,827	$ 4,877,868	$ 291,000	$ 8,778,681	$ 51,748	$ 4,421	$ 38,990,435
Ending balance: collectively evaluated for impairment	$ 398,048,422	$ 174,295,527	$ 26,940,914	$ 21,691,375	$ 79,378,925	$ 943,458	$ 16,263,263	$ 717,561,884



	Commercial Real Estate	Residential First Mortgage	Construction and Land Development	Home Equity and Second Mtg.	Commercial Loans	Consumer Loans	Commercial Equipment	Total
At and For the Three Months Ended June 30, 2012
Allowance for loan losses:
Balance at April 1,	$ 3,385,036	$ 644,008	$ 448,406	$ 265,138	$ 2,793,049	$ 18,350	$ 361,811	$ 7,915,798
Charge-offs	(85,381)	-	-	(41,942)	(649,699)	(14)	(149,794)	(926,830)
Recoveries	-	37,247	-	-	1,491	-	-	38,738
Provisions	178,803	220,250	148,448	(10,405)	(176,350)	(20)	75,705	436,431
Balance at June 30,	$ 3,478,458	$ 901,505	$ 596,854	$ 212,791	$ 1,968,491	$ 18,316	$ 287,722	$ 7,464,137
At and For the Six Months Ended June 30, 2012
Allowance for loan losses:
Balance at January 1,	$ 2,525,199	$ 539,205	$ 354,385	$ 143,543	$ 3,850,294	$ 19,119	$ 223,296	$ 7,655,041
Charge-offs	(121,833)	-	-	(41,942)	(693,048)	(999)	(149,794)	(1,007,616)
Recoveries	-	37,247	-	-	1,960	-	-	39,207
Provisions	1,075,092	325,053	242,469	111,190	(1,190,715)	196	214,220	777,505
Balance at June 30,	$ 3,478,458	$ 901,505	$ 596,854	$ 212,791	$ 1,968,491	$ 18,316	$ 287,722	$ 7,464,137
Ending balance: individually evaluated for impairment	$ 604,063	$ 247,408	$ 134,500	$ 47,200	$ 484,937	$ -	$ -	$ 1,518,108
Ending balance: collectively evaluated for impairment	$ 2,874,395	$ 654,097	$ 462,354	$ 165,591	$ 1,483,554	$ 18,316	$ 287,722	$ 5,946,029
Loan receivables:
Ending balance	$ 398,017,392	$ 178,459,492	$ 32,405,839	$ 22,525,909	$ 93,096,685	$ 1,007,453	$ 17,151,518	$ 742,664,288
Ending balance: individually evaluated for impairment	$ 38,727,469	$ 6,328,588	$ 7,812,520	$ 409,348	$ 18,536,881	$ 68,192	$ 803,700	$ 72,686,698
Ending balance: collectively evaluated for impairment	$ 359,289,923	$ 172,130,904	$ 24,593,319	$ 22,116,561	$ 74,559,804	$ 939,261	$ 16,347,818	$ 669,977,590

Credit Quality Indicators

A risk grading scale is used to assign grades to commercial real estate, construction and land development, commercial loans and commercial equipment loans. Loans are graded at inception, annually thereafter when financial statements are received and at other times when there is an indication that a credit may have weakened or improved. Only commercial loan relationships with an aggregate exposure to the Bank of $750,000 or greater are subject to being risk rated.

Residential first mortgages, home equity and second mortgages and consumer loans are evaluated for creditworthiness in underwriting and are monitored based on borrower payment history. These loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an Other Assets Especially Mentioned (“OAEM”) or higher risk rating due to a delinquent payment history.

Management regularly reviews credit quality indicators as part of its individual loan reviews and on a monthly and quarterly basis. The overall quality of the Bank’s loan portfolio is assessed using the Bank’s risk grading scale, the level and trends of net charge-offs, nonperforming loans and delinquencies, the performance of troubled debt restructured loans and the general economic conditions in the Company’s geographical market. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators and allowance factors are adjusted based on management’s judgment during the monthly and quarterly review process.

Loans subject to risk ratings are graded on a scale of one to 10. The Company considers loans classified substandard, doubtful and loss as classified assets for regulatory and financial reporting.

Ratings 1 thru 6 - Pass

Ratings 1 thru 6 have asset risks ranging from excellent low risk to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks.

Rating 7 - OAEM (Other Assets Especially Mentioned) – Special Mention

These credits, while protected by the financial strength of the borrowers, guarantors or collateral, have reduced quality due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. OAEM loans are the first adversely classified assets on our watch list. These relationships will be reviewed at least quarterly.

Rating 8 - Substandard

Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor strength or operating losses. When a loan is assigned to this category the Bank may estimate a specific reserve in the loan loss allowance analysis. These assets listed may include assets with histories of repossessions or some that are non-performing bankruptcies. These relationships will be reviewed at least quarterly.

Rating 9 - Doubtful

Doubtful assets have many of the same characteristics of Substandard with the exception that the Bank has determined that loss is not only possible but is probable and the risk is close to certain that loss will occur. When a loan is assigned to this category the Bank will identify the probable loss and it will receive a specific reserve in the loan loss allowance analysis. These relationships will be reviewed at least quarterly.

Rating 10 - Loss

Once an asset is identified as a definite loss to the Bank, it will receive the classification of “loss”. There may be some future potential recovery; however it is more practical to write off the loan at the time of classification. Losses will be taken in the period in which they are determined to be uncollectable.

Credit quality indicators as of June 30, 2013 and December 31, 2012 were as follows:



Credit Risk Profile by Internally Assigned Grade

	Commercial Real Estate		Construction and Land Dev.
	6/30/2013	12/31/2012	6/30/2013	12/31/2012

Unrated	$ 60,706,137	$ 59,930,126	$ 4,367,952	$ 4,330,321
Pass	343,428,754	329,882,941	16,260,390	19,752,749
Special mention	5,331,812	4,880,758	-	-
Substandard	25,149,779	24,973,487	8,490,738	7,735,712
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$ 434,616,482	$ 419,667,312	$ 29,119,080	$ 31,818,782

	Commercial Loans		Commercial Equipment
	6/30/2013	12/31/2012	6/30/2013	12/31/2012

Unrated	$ 12,568,790	$ 11,627,726	$ 5,692,755	$ 5,082,713
Pass	57,485,149	64,436,809	8,651,353	11,180,550
Special mention	710,755	-	3,000,000	-
Substandard	14,228,086	12,093,071	3,364	4,421
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$ 84,992,780	$ 88,157,606	$ 17,347,472	$ 16,267,684

Credit Risk Profile Based on Payment Activity

	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
	6/30/2013	12/31/2012	6/30/2013	12/31/2012	6/30/2013	12/31/2012

Performing	$ 162,454,020	$ 174,493,950	$ 21,769,081	$ 21,911,079	$ 937,147	$ 995,206
Nonperforming	2,979,534	3,169,404	-	71,296	-	-
Total	$ 165,433,554	$ 177,663,354	$ 21,769,081	$ 21,982,375	$ 937,147	$ 995,206

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at June 30, 2013 and June 30, 2012, respectively, and at December 31, 2012 were as follows:


June 30, 2013	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Six Month Average Recorded Investment	Six Month Interest Income Recognized
Commercial real estate	$ 20,473,659	$ 16,089,286	$ 4,384,373	$ 20,473,659	$ 613,757	$ 20,560,641	$ 234,676	$ 20,624,814	$ 435,435
Residential first mortgages	5,236,064	4,328,414	907,651	5,236,064	406,966	5,277,858	46,226	5,282,785	94,488
Construction and land dev.	5,705,211	4,497,201	1,208,010	5,705,211	169,710	5,573,948	71,379	5,295,158	146,806
Home equity and second mtg.	214,000	214,000	-	214,000	-	232,667	2,179	264,833	4,530
Commercial loans	11,387,777	11,230,906	156,871	11,387,777	39,871	11,378,533	148,950	11,320,953	227,171
Consumer loans	41,498	41,498	-	41,498	-	44,160	1,285	46,603	1,647
Commercial equipment	174,058	151,793	3,364	155,157	3,364	174,211	60	174,439	353
Total	$ 43,232,267	$ 36,553,098	$ 6,660,269	$ 43,213,366	$ 1,233,668	$ 43,242,018	$ 504,755	$ 43,009,585	$ 910,430


December 31, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized
Commercial real estate	$ 21,618,890	$ 18,804,478	$ 2,814,412	$ 21,618,890	$ 785,878	$ 22,501,842	$ 1,119,715
Residential first mortgages	3,367,827	2,362,062	1,005,765	3,367,827	403,475	3,388,867	157,595
Construction and land dev.	4,877,868	4,877,868	-	4,877,868	-	4,792,982	276,260
Home equity and second mtg.	291,000	291,000	-	291,000	-	221,000	6,783
Commercial loans	8,778,681	8,330,442	448,238	8,778,681	353,883	9,153,074	284,095
Consumer loans	51,748	51,748	-	51,748	-	64,459	5,284
Commercial equipment	4,421	-	4,421	4,421	4,421	5,112	318
Total	$ 38,990,435	$ 34,717,598	$ 4,272,836	$ 38,990,435	$ 1,547,657	$ 40,127,336	$ 1,850,050


June 30, 2012	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Three Month Average Recorded Investment	Three Month Interest Income Recognized	Six Month Average Recorded Investment	Six Month Interest Income Recognized
Commercial real estate	$ 7,809,718	$ 5,097,362	$ 2,304,706	$ 7,402,068	$ 604,063	$ 7,821,751	$ 91,009	$ 7,836,028	$ 225,935
Residential first mortgages	2,579,409	907,147	1,672,261	2,579,409	247,408	2,583,098	26,312	2,585,146	58,717
Construction and land dev.	1,851,415	1,716,915	134,500	1,851,415	134,500	2,020,582	12,947	2,189,748	29,988
Home equity and second mtg.	101,518	-	101,518	101,518	47,200	101,518	-	101,518	-
Commercial loans	2,670,650	1,894,390	776,260	2,670,650	484,937	2,671,025	23,628	2,664,394	51,967
Total	$ 15,012,710	$ 9,615,814	$ 4,989,245	$ 14,605,060	$ 1,518,108	$ 15,197,974	$ 153,896	$ 15,376,834	$ 366,607

TDRs, included in the impaired loan schedules above, as of June 30, 2013 and December 31, 2012, respectively were as follows:



	June 30, 2013		December 31, 2012
	Dollars	Number of Loans	Dollars	Number of Loans

Commercial real estate	$ 3,093,043	7	$ 3,097,214	7
Residential first mortgages	1,489,247	4	1,418,229	3
	$ 4,582,290	11	$ 4,515,443	10

At June 30, 2013 and December 31, 2012, all TDRs were performing according to the terms of their restructured agreements. Interest income in the amount of $95,873 and $220,326 was recognized on these loans for the six months ended June 30, 2013 and the year ended December 31, 2012, respectively. The specific reserve of the allowance for loan losses included $12,000 related to TDR loans at June 30, 2013. There were no amounts specifically reserved for TDRs at December 31, 2012.

During the six months ended June 30, 2013, the Bank entered into one TDR for $77,165 for a residential first mortgage. During the year ended December 31, 2012, the Bank entered into TDRs for eight commercial real estate loans totaling $3,212,894 and three residential first mortgages totaling $1,419,657. For the year ended December 31, 2012, two commercial real estate TDR loans were charged-off in the amount of $415,995. One of the two charged-off commercial real estate loans was transferred to OREO with a balance of $382,500.