XNAS:VBFC Village Bank and Trust Financial Corp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________

FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT

For the transition period from ______ to ______

__________
 
Commission file number: 0-50765

VILLAGE BANK AND TRUST FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
 
Virginia
 
16-1694602
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
     
  15521 Midlothian Turnpike, Midlothian, Virginia  
23113
  (Address of principal executive offices)  
(Zip code)
     
804-897-3900
(Registrant’s telephone number, including area code)
 
Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No £.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes S     No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer £
Accelerated Filer £
Non-Accelerated Filer £  (Do not check if smaller reporting company)
Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
 
4,251,795 shares of common stock, $4.00 par value, outstanding as of May 8, 2012



Village Bank and Trust Financial Corp.
Form 10-Q


Part I – Financial Information
     
 
Item 1.  Financial Statements
 
     
 
Consolidated Balance Sheets
 
 
March 31, 2012 (unaudited) and December 31, 2011
3
     
 
Consolidated Statements of Income
 
 
For the Three Months Ended
 
 
March 31, 2012 and 2011 (unaudited)
4
     
 
Consolidated Statements of Changes in Comprehensive Income
 
 
For the Three Months Ended
 
 
March 31, 2012 and 2011 (unaudited)
5
     
 
Consolidated Statements of Stockholders’ Equity
 
 
For the Three Months Ended
 
 
March 31, 2012 and 2011 (unaudited)
6
     
 
Consolidated Statements of Cash Flows
 
 
For the Three Months Ended
 
 
March 31, 2012 and 2011 (unaudited)
7
     
 
Notes to Condensed Consolidated Financial Statements (unaudited)
8
     
 
Item 2.  Management’s Discussion and Analysis of Financial Condition
 
 
  and Results of Operations
28
     
 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
47
     
 
Item 4. Controls and Procedures
47
     
Part II – Other Information
     
 
Item 1.  Legal Proceedings
49
     
 
Item 1A.  Risk Factors
49
     
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
49
     
 
Item 3.  Defaults Upon Senior Securities
49
     
 
Item 4.  Mine Safety Disclosures
49
     
 
Item 5.  Other Information
49
     
 
Item 6.  Exhibits
49
     
Signatures
50
 

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS
Village Bank and Trust Financial Corp. and Subsidiary
 
Consolidated Balance Sheet
 
March 31, 2012 (Unaudited) and December 31, 2011
 
             
             
   
March 31,
   
December 31,
 
   
2012
   
2011
 
Assets
           
Cash and due from banks
  $ 41,056,595     $ 55,557,541  
Federal funds sold
    1,540,477       7,228,475  
   Total cash and cash equivalents
    42,597,072       62,786,016  
Investment securities available for sale
    35,359,604       30,163,292  
Loans held for sale
    17,191,828       16,168,405  
Loans
               
Outstandings
    411,927,432       427,870,716  
Allowance for loan losses
    (14,361,953 )     (16,071,424 )
Deferred fees
    805,495       767,775  
      398,370,974       412,567,067  
Premises and equipment, net
    26,527,119       26,826,524  
Accrued interest receivable
    1,899,781       2,046,524  
Bank owned life insurance
    6,115,697       6,065,305  
Other real estate owned
    14,590,465       9,177,167  
Restricted equity securities
    2,986,643       2,989,286  
Other assets
    9,727,383       12,914,733  
                 
    $ 555,366,566     $ 581,704,319  
                 
Liabilities and Stockholders' Equity
               
Liabilities
               
Deposits
               
Noninterest bearing demand
  $ 66,383,144     $ 66,534,956  
Interest bearing
    399,009,915       418,986,096  
  Total deposits
    465,393,059       485,521,052  
Long-term debt - trust preferred securities
    8,764,000       8,764,000  
Federal Home Loan Bank advances
    36,750,000       37,750,000  
Other borrowings
    5,207,569       5,778,661  
Accrued interest payable
    666,771       592,283  
Other liabilities
    4,275,321       7,050,681  
Total liabilities
    521,056,720       545,456,677  
                 
Stockholders' equity
               
Preferred stock, $4 par value, $1,000 liquidation preference
               
  1,000,000 shares authorized, 14,738 shares issued and outstanding
    58,952       58,952  
Common stock, $4 par value - 10,000,000 shares authorized;
               
  4,238,416 shares issued and outstanding at March 31, 2012
               
  4,243,378 shares issued and outstanding at December 31, 2011
    17,007,180       16,973,512  
Additional paid-in capital
    40,700,099       40,732,178  
Retained earnings
    (23,516,385 )     (21,895,557 )
Common stock warrant
    732,479       732,479  
Discount on preferred stock
    (309,744 )     (346,473 )
Accumulated other comprehensive loss
    (362,735 )     (7,449 )
Total stockholders' equity
    34,309,846       36,247,642  
                 
    $ 555,366,566     $ 581,704,319  
                 
See accompanying notes to consolidated financial statements
               
 
 
Village Bank and Trust Financial Corp. and Subsidiary
 
Consolidated Statements of Operations
 
Three Months Ended March 31, 2012 and 2011
 
(Unaudited)
 
             
             
   
Three Months Ended March 31,
 
   
2012
   
2011
 
Interest income
           
Loans
  $ 5,899,208     $ 7,040,768  
Investment securities
    150,349       300,326  
Federal funds sold
    20,932       18,323  
Total interest income
    6,070,489       7,359,417  
                 
Interest expense
               
Deposits
    1,358,238       2,038,876  
Borrowed funds
    290,986       282,691  
Total interest expense
    1,649,224       2,321,567  
                 
Net interest income
    4,421,265       5,037,850  
Provision for loan losses
    1,735,000       1,003,000  
Net interest income after provision
               
for loan losses
    2,686,265       4,034,850  
                 
Noninterest income
               
Service charges and fees
    507,643       372,950  
Gain on sale of loans
    1,750,663       1,372,678  
Gain on sale of securities
    164,207       63,125  
Rental income
    176,496       151,937  
Other
    89,644       94,518  
Total noninterest income
    2,688,653       2,055,208  
                 
Noninterest expense
               
Salaries and benefits
    3,098,224       3,050,116  
Occupancy
    546,367       493,224  
Equipment
    205,364       220,070  
Supplies
    91,902       116,159  
Professional and outside services
    635,382       566,354  
Advertising and marketing
    76,063       122,839  
Expenses related to foreclosed real estate
    1,118,775       462,316  
Other operating expenses
    1,003,221       866,860  
Total noninterest expense
    6,775,298       5,897,938  
                 
Net income (loss) before income taxes
    (1,400,380 )     192,120  
Income tax expense
    -       109,400  
                 
Net income (loss)
    (1,400,380 )     82,720  
                 
Preferred stock dividends and amortization of discount
    220,449       218,058  
                 
Net income (loss) available to common shareholders
  $ (1,620,829 )   $ (135,338 )
                 
Earnings (loss) per share, basic
  $ (0.38 )   $ (0.03 )
Earnings (loss) per share, diluted
  $ (0.38 )   $ (0.03 )
                 
See accompanying notes to consolidated financial statements.
               
 
 
Village Bank and Trust Financial Corp. and Subsidiary
 
Consolidated Statements of Comprehensive Income (Loss)
 
(unaudited)
 
   
   
For the three months ended March 31,
 
   
2012
   
2011
 
         
Tax
               
Tax
       
         
Expense
               
Expense
       
   
Amount
   
(Benefit)
   
Total
   
Amount
   
(Benefit)
   
Total
 
                                     
Net Income
    (1,400,380 )     -       (1,400,380 )     192,120       109,400       82,720  
                                                 
Other comprehensive income:
                                               
Unrealized holding gains arising during the period
    (377,355 )     (128,301 )     (249,054 )     (78,192 )     (26,585 )     (51,607 )
Reclassification adjustment for gains realized in income
(164,207 )     (55,830 )     (108,377 )     (63,532 )     (21,601 )     (41,931 )
Minimum pension adjustment
    3,250       1,105       2,145       3,250       1,105       2,145  
Total other comprehensive income
    (538,312 )     (183,026 )     (355,286 )     (138,474 )     (47,081 )     (91,393 )
                                                 
        Total comprehensive income
    (1,938,692 )     (183,026 )     (1,755,666 )     53,646       62,319       (8,673 )







Village Bank and Trust Financial Corp. and Subsidiary
 
Consolidated Statements of Stockholders' Equity
 
Three Months Ended March 31, 2012 and 2011
 
(Unaudited)
 
                                                 
                                       
Accumulated
       
               
Additional
   
Retained
         
Discount on
   
Other
       
   
Preferred
   
Common
   
Paid-in
   
Earnings
         
Preferred
   
Comprehensive
       
   
Stock
   
Stock
   
Capital
   
(Deficit)
   
Warrant
   
Stock
   
Income (loss)
   
Total
 
                                                 
Balance, December 31, 2011
  $ 58,952     $ 16,973,512     $ 40,732,178     $ (21,895,557 )   $ 732,479     $ (346,473 )   $ (7,449 )   $ 36,247,642  
Amortization of preferred stock
                                                    -       -  
discount
    -                       (36,729 )     -       36,729               -  
Preferred stock dividend
    -       -               (183,719 )     -       -       -       (183,719 )
Issuance of common stock
    -       33,668       (33,668 )     -       -       -       -       -  
Stock based compensation
                    1,589                                       1,589  
Minimum pension adjustment
                                                               
(net of income taxes of $2,917)
    -       -       -       -       -       -       2,145       2,145  
Net income
    -       -       -       (1,400,380 )     -       -       -       (1,400,380 )
Change in unrealized gain on
                                                               
investment securities available-for-sale,
                                                           
net of reclassification and tax effect
-       -       -       -       -       -       (357,431 )     (357,431 )
                                                                 
Balance, March 31, 2012
  $ 58,952     $ 17,007,180     $ 40,700,099     $ (23,516,385 )   $ 732,479     $ (309,744 )   $ (362,735 )   $ 34,309,846  
                                                                 
Balance, December 31, 2010
  $ 58,952     $ 16,953,664     $ 40,633,581     $ (9,192,552 )   $ 732,479     $ (492,456 )   $ (373,474 )   $ 48,320,194  
Amortization of preferred stock
                                                    -       -  
discount
    -       -               (36,357 )     -       36,357               -  
Preferred stock dividend
    -       -               (181,701 )     -       -       -       (181,701 )
Issuance of common stock
    -       19,848       (19,848 )     -       -       -       -       -  
Stock based compensation
                    29,612                                       29,612  
Minimum pension adjustment
                                                            -  
(net of income taxes of $2,917)
    -       -       -       -       -       -       2,145       2,145  
Net income
    -       -       -       82,720       -       -       -       82,720  
Change in unrealized gain on
                                                               
investment securities available-for-sale,
                                                           
net of reclassification and tax effect
-       -       -       -       -       -       (93,538 )     (93,538 )
                                                                 
Balance, March 31, 2011
  $ 58,952     $ 16,973,512     $ 40,643,345     $ (9,327,890 )   $ 732,479     $ (456,099 )   $ (464,867 )   $ 48,159,432  
                                                                 
See accompanying notes to consolidated financial statements.
                                                 











Village Bank and Trust Financial Corp. and Subsidiary
 
Consolidated Statements of Cash Flows
 
Three Months Ended March 31, 2012 and 2011
 
(Unaudited)
 
             
   
2012
   
2011
 
Cash Flows from Operating Activities
           
Net income (loss)
  $ (1,400,380 )   $ 82,720  
Adjustments to reconcile net income (loss) to net
               
cash provided by (used in) operating activities:
               
Depreciation and amortization
    344,244       350,499  
Deferred income taxes
    1,104       (3,710,085 )
Valuation allowance
    476,129       -  
Provision for loan losses
    1,735,000       1,003,000  
Write-down of other real estate owned
    670,023       362,237  
Gain on securities sold
    (164,207 )     (63,125 )
Gain on loans sold
    (1,750,663 )     (1,372,678 )
(Gain) loss on sale of other real estate owned
    4,355       (6,467 )
Stock compensation expense
    1,589       29,612  
Proceeds from sale of mortgage loans
    64,848,047       55,513,663  
Origination of mortgage loans for sale
    (64,120,807 )     (42,898,800 )
Amortization of premiums and accrection of discounts on securities, net
    39,306       26,737  
(Increase) decrease in interest receivable
    146,743       (189,750 )
Increase in bank owned life insurance
    (50,392 )     (46,187 )
(Increase) decrease  in other assets
    2,899,037       4,840,536  
Increase in interest payable
    74,487       49,911  
Decrease in other liabilities
    (2,959,078 )     (609,823 )
Net cash provided by operating activities
    794,537       13,362,000  
                 
Cash Flows from Investing Activities
               
Purchases of available for sale securities
    (20,764,694 )     (54,960,337 )
Proceeds from the sale or calls of available for sale securities
    14,277,005       803,100  
Proceeds from maturities and principal payments of  available for sale securities
    874,715       25,838,844  
Net decrease in loans
    5,847,047       7,211,973  
Proceeds from sale of other real estate owned
    526,370       555,152  
Purchases of premises and equipment
    (44,839 )     (329,962 )
Net cash provided by (used in) investing activities
    715,604       (20,881,230 )
                 
Cash Flows from Financing Activities
               
Net increase (decrease) in deposits
    (20,127,993 )     5,947,124  
Net increase (decrease) in Federal Home Loan Bank Advances
    (1,000,000 )     10,000,000  
Net increase (decrease) in other borrowings
    (571,092 )     1,076,069  
Net cash provided by (used in) financing activities
    (21,699,085 )     17,023,193  
                 
Net increase (decrease) in cash and cash equivalents
    (20,188,944 )     9,503,963  
Cash and cash equivalents, beginning of period
    62,786,016       12,012,311  
                 
Cash and cash equivalents, end of period
  $ 42,597,072     $ 21,516,274  
                 
Supplemental Schedule of Non Cash Activities
               
Real estate owned assets acquired in settlement of loans
  $ 6,614,046     $ 7,097,681  
Dividends on preferred stock accrued
  $ 183,719     $ -  
                 
See accompanying notes to consolidated financial statements.
               
 

Village Bank and Trust Financial Corp. and Subsidiary
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2012 and 2011
(Unaudited)

Note 1 - Principles of presentation

Village Bank and Trust Financial Corp. (the “Company”) is the holding company of Village Bank (the “Bank”).  The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s subsidiaries.  All material intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying condensed consolidated financial statements of the Company have been prepared on the accrual basis in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  However, all adjustments that are, in the opinion of management, necessary for a fair presentation have been included.  The results of operations for the three month period ended March 31, 2012 is not necessarily indicative of the results to be expected for the full year ending December 31, 2012.  The unaudited interim financial statements should be read in conjunction with the audited financial statements and notes to financial statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission.

Note 2 - Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the statements of financial condition and revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.  A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses and the related provision.

Note 3 – Earnings (loss) per common share

The following table presents the basic and diluted earnings per share computations:


   
Three Months Ended March 31,
 
   
2012
   
2011
 
Numerator
           
Net income (loss) - basic and diluted
  $ (1,400,380 )   $ 82,720  
Preferred stock dividend and accretion
    220,449       218,058  
Net income (loss) available to common
               
shareholders
  $ (1,620,829 )   $ (135,338 )
                 
Denominator
               
Weighted average shares outstanding - basic
    4,249,336       4,241,945  
Dilutive effect of common stock options and
               
      restricted stock awards
    -       -  
                 
Weighted average shares outstanding - diluted
    4,249,336       4,241,945  
                 
Earnings (loss) per share - basic and diluted
               
Earnings (loss) per share - basic
  $ (0.38 )   $ (0.03 )
Effect of dilutive common stock options
    -       -  
                 
Earnings (loss) per share - diluted
  $ (0.38 )   $ (0.03 )
                 


Outstanding options and warrants to purchase common stock were considered in the computation of diluted earnings per share for the periods presented.  Stock options for 264,530 and 310,205 shares of common stock were not included in computing diluted earnings per share for the three months ended March 31, 2012 and 2011, respectively, because their effects were anti-dilutive.  Warrants for 499,029 shares of common stock were not included in computing earnings per share in 2012 and 2011 because their effects were also anti-dilutive.

Note 4 – Investment securities

At March 31, 2012 and December 31, 2011, all of our securities were classified as available for sale.  The following table presents the composition of our investment portfolio at the dates indicated (dollars in thousands).


               
Gross
   
Gross
   
Estimated
       
   
Par
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
   
Average
 
   
Value
   
Cost
   
Gains
   
Losses
   
Value
   
Yield
 
March 31, 2012
                                   
US Government Agencies
                                   
Five to ten years
  $ 4,000     $ 4,055     $ -     $ (128 )   $ 3,927       2.22 %
More than ten years
    7,000       7,483       -       (245 )     7,238       2.96 %
      11,000       11,538       -       (373 )     11,165       2.70 %
Mortgage-backed securities
                                               
One to five years
    7       7       -       -       7       0.01 %
More than ten years
    20,029       20,785       31       (42 )     20,774       2.09 %
Total
    20,036       20,792       31       (42 )     20,781       2.09 %
                                                 
Other investments
                                               
More than ten years
    3,298       3,427       -       (13 )     3,414       1.44 %
                                                 
Total investment securities
  $ 34,334     $ 35,757     $ 31     $ (428 )   $ 35,360       1.62 %
                                                 
December 31, 2011
                                               
US Government Agencies
                                               
More than ten years
  $ 2,000     $ 2,000     $ 1     $ -     $ 2,001       3.81 %
                                                 
Mortgage-backed securities
                                               
One to five years
    11       11       -       -       11       0.01 %
More than ten years
    19,870       20,621       220       (49 )     20,792       1.83 %
Total
    19,881       20,632       220       (49 )     20,803       1.83 %
                                                 
Other investments
                                               
More than ten years
    7,356       7,386       -       (27 )     7,359       0.55 %
                                                 
Total investment securities
  $ 29,237     $ 30,018     $ 221     $ (76 )   $ 30,163       1.65 %
 
Investment securities available for sale that have an unrealized loss position at March 31, 2012 and December 31, 2011 are detailed below.

   
Securities in a loss
   
Securities in a loss
             
   
Position for less than
   
Position for more than
             
   
12 Months
   
12 Months
   
Total
 
   
Fair
   
Unrealized
   
Fair Value
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
(Loss)
   
Losses
   
Value
   
Losses
 
March 31, 2012
 
(in thousands)
 
Investment Securities
                                   
available for sale
                                   
US Treasuries
  $ 13,473     $ (377 )   $ 199     $ (1 )   $ 13,672     $ (378 )
Municipals
    1,105       (10 )     -       -       1,105       (10 )
Mortgage-backed securities
    16,286       (40 )     -       -       16,286       (40 )
                                                 
Total
  $ 30,864     $ (427 )   $ 199     $ (1 )   $ 31,063     $ (428 )
                                                 
                                                 
December 31, 2011
                                               
Investment Securities
                                               
available for sale
                                               
US Treasuries
  $ 7,358     $ (27 )   $ -     $ -     $ 7,358     $ (27 )
Mortgage-backed securities
    10,221       (47 )     205       (2 )     10,426       (49 )
                                                 
Total
  $ 17,579     $ (74 )   $ 205     $ (2 )   $ 17,784     $ (76 )
                                                 
 
 
Management does not believe that any individual unrealized loss as of March 31, 2012 and December 31, 2011 is other than a temporary impairment.  These unrealized losses are primarily attributable to changes in interest rates.  As of March 31, 2012, management does not have the intent to sell any of the securities classified as available for sale and management believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

Note 5 – Loans and allowance for loan losses

The following table presents the composition of our loan portfolio (excluding mortgage loans held for sale) at the dates indicated (in thousands).

   
March 31, 2012
   
December 31, 2011
 
   
Amount
   
%
   
Amount
   
%
 
                         
Commercial
  $ 37,959       9.2 %   $ 37,734       8.8 %
Real estate - Construction, land
                               
development & other loans
    73,238       17.8 %     80,527       18.8 %
Real estate - Commercial
    166,832       40.5 %     168,796       39.5 %
Real estate - 1-4 Residential
    129,634       31.5 %     135,948       31.8 %
Consumer
    4,265       1.0 %     4,865       1.1 %
                                 
Total loans
    411,928       100.0 %     427,870       100.0 %
Deferred loan cost (unearned income), net
    805               768          
Less: Allowance for loan losses
    (14,362 )             (16,071 )        
                                 
    $ 398,371             $ 412,567          

The Company assigns risk rating classifications to its loans.  These risk ratings are divided into the following groups:

 
·
Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating.  1-4 assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral;
 
·
Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close attention;
 
·
Risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any, and;
 
·
Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following tables provide information on the risk rating of loans at the dates indicated:

   
March 31, 2012
 
   
Risk Rated
   
Risk Rated
   
Risk Rated
   
Risk Rated
   
Total
 
      1-4       5       6       7    
Loans
 
                                       
Commercial
  $ 29,632,099     $ 5,298,691     $ 2,027,778     $ 1,000,192     $ 37,958,760  
Real estate - Construction, land
                                       
development and other loans
    51,892,156       -       20,279,724       1,066,215       73,238,095  
Real estate - Commercial
    80,527,146       28,425,404       57,279,335       600,000       166,831,885  
Real estate - 1-4 Residential
    107,270,433       10,399,116       11,964,876       -       129,634,425  
Consumer
    3,126,942       225,449       464,174       447,702       4,264,267  
                                         
    $ 272,448,776     $ 44,348,660     $ 92,015,887     $ 3,114,109     $ 411,927,432  
 
 
   
December 31, 2011
 
   
Risk Rated
   
Risk Rated
   
Risk Rated
   
Risk Rated
   
Total
 
      1-4       5       6       7    
Loans
 
                                       
Commercial
  $ 31,322,834     $ 4,289,037     $ 2,122,645     $ -     $ 37,734,516  
Real estate - Construction, land
                                       
development and other loans
    49,258,535       -       31,268,467       -       80,527,002  
Real estate - Commercial
    92,517,583       19,389,807       56,888,216       -       168,795,606  
Real estate - 1-4 Residential
    117,035,665       8,131,614       10,780,808       -       135,948,087  
Consumer
    3,508,768       384,387       972,350       -       4,865,505  
                                         
    $ 293,643,385     $ 32,194,845     $ 102,032,486     $ -     $ 427,870,716  
 
The following table presents the aging of the recorded investment in past due loans and leases as of the dates indicated:
 
March 31, 2012
 
                                       
Recorded
 
               
Greater
                     
Investment >
 
   
30-59 Days
   
60-89 Days
   
Than
   
Total Past
         
Total
   
90 Days and
 
   
Past Due
   
Past Due
   
90 Days
   
Due
   
Current
   
Loans
   
Accruing
 
                                           
Commercial
  $ 3,048,005     $ 225,528     $ -     $ 3,273,533     $ 34,685,227     $ 37,958,760     $ -  
Real estate - Construction, land
                                                       
development and other loans
    558,287       113,856       -       672,143       72,565,952       73,238,095       -  
Real estate - Commercial
    1,116,440       1,190,613       -       2,307,053       164,524,832       166,831,885       -  
Real estate - 1-4 Residential
    1,465,877       2,243,839       -       3,709,716       125,924,709       129,634,425       -  
Consumer
    26,411       -       -       26,411       4,237,856       4,264,267       -  
                                                         
    $ 6,215,020     $ 3,773,836     $ -     $ 9,988,856     $ 401,938,576     $ 411,927,432     $ -  
 
December 31, 2011
 
                                       
Recorded
 
               
Greater
                     
Investment >
 
   
30-59 Days
   
60-89 Days
   
Than
   
Total Past
         
Total
   
90 Days and
 
   
Past Due
   
Past Due
   
90 Days
   
Due
   
Current
   
Loans
   
Accruing
 
                                           
Commercial
  $ 46,392     $ 3,313     $ 57,918     $ 104,623     $ 37,326,893     $ 37,734,516     $ 54,918  
Real estate - Construction, land
                                                       
development and other loans
    1,942,560       659,799       36,770       2,639,129       77,887,873       80,527,002       36,770  
Real estate - Commercial
    765,286       965,729       -       1,731,015       167,064,591       168,795,606       -  
Real estate - 1-4 Residential
    1,321,138       1,805,394       1,080,549       4,207,081       131,741,006       135,948,087       1,080,549  
Consumer
    59,697       3,176       -       62,873       4,802,632       4,865,505       -  
                                                         
    $ 4,135,073     $ 3,437,411     $ 1,172,237     $ 8,744,721     $ 419,125,995     $ 427,870,716     $ 1,172,237  
 
Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments.  Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management.  The evaluations are based upon discounted expected cash flows or collateral valuations.  If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the
 
12

 
amount of impairment.  Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans.  If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.  Impaired loans, or portions thereof, are charged off when deemed uncollectible.  March 31, 2012 and year-end impaired loans are set forth in the following table.
 
         
Unpaid
         
Average
   
Interest
 
   
Recorded
   
Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
March 31, 2012
                             
                               
With no related allowance recorded
                             
Commercial
  $ 931,358     $ 1,043,858     $ -     $ 1,255,796     $ 8,612  
Real estate - Construction, land
                                 
development & other loans
    15,817,069       16,231,069       -       15,357,338       129,657  
Real estate - Commercial
    17,912,352       17,941,352       -       18,227,752       282,273  
Real estate - 1-4 Residential
    13,925,086       14,573,506       -       11,966,681       118,157  
Consumer
    174,003       174,003       -       361,260       648  
                                         
    $ 48,759,868     $ 49,963,788     $ -     $ 47,168,827     $ 539,347  
                                         
With an allowance recorded
                                       
Commercial
  $ 1,595,010     $ 1,595,010     $ 925,641     $ 493,239     $ 7,516  
Real estate - Construction, land
                                 
development & other loans
    10,750,499       10,779,499       3,560,602       10,735,005       37,116  
Real estate - Commercial
    8,060,118       8,060,118       2,055,556       5,634,960       -  
Real estate - 1-4 Residential
    2,851,116       2,851,116       435,060       2,566,039       10,533  
Consumer
    -       -       -       -       -  
                                         
    $ 23,256,743     $ 23,285,743     $ 6,976,859     $ 19,429,243     $ 55,165  
                                         
Total
                                       
Commercial
  $ 2,526,368     $ 2,638,868     $ 925,641     $ 1,749,035     $ 16,128  
Real estate - Construction, land
                                 
development & other loans
    26,567,568       27,010,568       3,560,602       26,092,343       166,773  
Real estate - Commercial
    25,972,470       26,001,470