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

Effective Date 3/31/2012

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• 10-Q • EX-31.1 • EX-31.2 • EX-32.1 • EX-101.INS • EX-101.SCH • EX-101.CAL • EX-101.DEF • EX-101.LAB • EX-101.PRE

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

Table of Contents

Village Bank and Trust Financial Corp.

Form 10-Q

TABLE OF CONTENTS

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

Table of Contents

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

Table of Contents

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.

Table of Contents

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	)

Table of Contents

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.

Table of Contents

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.

Table of Contents

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:

Table of Contents

	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).

Table of Contents

					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	)

Table of Contents

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:

Table of Contents

	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

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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		2,055,556		23,862,712		282,273
Real estate - 1-4 Residential	</