LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2011

LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

NOTE 6 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

Major classifications of loans receivable are summarized as follows:

	June 30,		December 31,
	2011		2010
Real estate – construction	$	13,654,980	$	12,674,197
Real estate – mortgage		73,318,790		76,149,357
Commercial and industrial		8,293,690		11,602,305
Consumer and other		5,089,844		4,871,825
Total gross loans	$	100,357,304	$	105,297,684

The loan portfolio consisted of loans having :

	June 30,		December 31,
	2011		2010
Variable rates loans	$	2,018,931	$	1,556,700
Fixed rates		98,338,373		103,740,984
Total gross loans	$	100,357,304	$	105,297,684

A summary of the allowance for loan losses for the six months ended June 30, 2011 and year ended December 31, 2010 is as follows:

	June 30,			December 31,
	2011			2010
Balance, beginning of year	$	2,019,497		$	2,053,340
Provision charged to operations		538,000			1,866,000
Recoveries on loans previously charged-off		6,188			11,932
Loans charged-off		(650,475	)		(1,911,775	)
Balance, end of period	$	1,913,210		$	2,019,497

The following is an analysis of the allowance for loan losses by class of loans for the six months ended June 30, 2011 and the year ended December 31, 2010

June 30, 2011

				Real Estate Loans
										Total
										Real
										Estate						Consumer
(Dollars in Thousands)	Total			Construction			Mortgage			Loans			Commercial			and Other
Beginning Balance	$	2,019		$	807		$	404		$	1,211		$	606		$	202
Provisions		538			412			64			476			50			12
Recoveries		6			-			3			3			-			3
Charge-offs		(650	)		(498	)		(77	)		(575	)		(60	)		(15	)
Ending balance	$	1,913		$	721		$	394		$	1,115		$	596		$	202

December 31, 2010

				Real Estate Loans
										Total
										Real
(Dollars in Thousands)										Estate						Consumer
	Total			Construction			Mortgage			Loans			Commercial			And Other
Beginning Balance	$	2,053		$	826		$	413		$	1,239		$	616		$	198
Provisions		1,866			746			373			1,119			560			187
Recoveries		12			-			-			-			4			8
Charge-offs		(1,912	)		(765	)		(382	)		(1,147	)		(574	)		(191	)
Ending balance	$	2,019		$	807		$	404		$	1,211		$	606		$	202

At June 30, 2011 and December 31, 2010 the allocation of the allowance for loan losses and the recorded investment in loans summarized on the basis of the Company’s impairment methodology was as follows:

June 30, 2011

			Real Estate Loans
							Total
							Real
(Dollars in Thousands)							Estate				Consumer
	Total		Construction		Mortgage		Loans		Commercial		and Other
Allowance for Loan Losses

Examined for Impairment
Individually	$	411	$	30	$	35	$	65	$	326	$	20
Collectively		1,502		691		359		1050		270		182
Allowance for Loan Losses	$	1,913	$	721	$	394	$	1,115	$	596	$	202

Total Loans

Examined for Impairment
Individually	$	8,338	$	1,708	$	1,141	$	2,849	$	5,311	$	178
Collectively		92,019		11,947		72,178		84,125		2,982		4,912
Total Loans	$	100,357	$	13,655	$	73,319	$	86,974	$	8,293	$	5,090

December 31, 2010

			Real Estate Loans
							Total
							Real
(Dollars in Thousands)							Estate				Consumer
	Total		Construction		Mortgage		Loans		Commercial		and Other
Allowance for Loan Losses

Examined for Impairment
Individually	$	373	$	296	$	25	$	321	$	40	$	12
Collectively		1,646		511		379		890		566		190
Allowance for Loan Losses	$	2,019	$	807	$	404	$	1,211	$	606	$	202

Total Loans

Examined for Impairment
Individually	$	7,703	$	3,162	$	4,121	$	7,283	$	303	$	117
Collectively		97,595		9,512		72,029		81,541		11,299		4,755
Total Loans	$	105,298		12,674		76,150		88,824		11,602		4,872

The Company identifies impaired loans through its normal internal loan review process. Loans on the Company’s problem loan watch list are considered potentially impaired loans. These loans are evaluated in determining whether all outstanding principal and interest are expected to be collected. Loans are not considered impaired if a minimal delay occurs and all amounts due including accrued interest at the contractual interest rate for the period of delay are expected to be collected.

The following summarizes the Company’s impaired loans by class as of June 30, 2011 and December 31, 2010.

June 30, 2011
			Unpaid
(Dollars in Thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Real estate
Construction	$	1,578	$	1,578	$	-
Mortgage		829		865		-
Total real estate loans		2,407		2,443		-
Commercial		3,686		4,486		-
Consumer and other		126		126		-
		6,219		7,055		-

With an allowance recorded:
Real estate
Construction		130		315		30
Mortgage		312		466		35
Total real estate loans		442		781		65
Commercial		1,625		4,080		326
Consumer and other		52		52		20
		2,119		4,913		411

Total
Real estate
Construction		1,708		1,893		30
Mortgage		1,141		1,331		35
Total real estate loans		2,849		3,224		65
Commercial		5,311		8,566		326
Consumer and other		178		178		20
Total	$	8,338	$	11,968	$	411

December 31, 2010
			Unpaid
(Dollars in Thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:

Real estate
Construction	$	1,326	$	1,294	$	-
Mortgage		4,016		4,196		-
Total real estate loans		5,342		5,490		-
Commercial		218		249		-
Consumer and other		62		61		-
		5,622		5,800		-
With an allowance recorded:

Real estate
Construction		1,836		1,879		296
Mortgage		105		103		25
Total real estate loans		1,941		1,982		321
Commercial		85		741		40
Consumer and other		55		53		12
		2,081		2,776		373

			Unpaid
(Dollars in Thousands)	Recorded		Principal		Related
	Investment		Balance		Allowance

Total

Real estate
Construction	$	3,162	$	3,173	$	296
Mortgage		4,121		4,299		25
Total real estate loans		7,283		7,472		321
Commercial		303		990		40
Consumer and other		117		114		12
Total	$	7,703	$	8,576		373

The average recorded investment in impaired loans for the six months and year ended June 30, 2011 and December 31, 2010, was $7,787,247 and $8,512,074, respectively.

Nonaccrual loans were $4,403,484 and $4,805,658 at June 30, 2011 and December 31, 2010, respectively.

Interest income on impaired loans other than nonaccrual loans is recognized on an accrual basis. Interest income on nonaccrual loans is recognized only as collected. During the six months ended June 30, 2011 and for the year ended December 31, 2010, interest income recognized on nonaccrual loans was $16,913 and $30,674, respectively. If the nonaccrual loans had been accruing interest at their original contracted rates, related income would have been $147,828 and $275,415 for the six months ended June 30, 2011 and for the year ended December 31, 2010, respectively.

A summary of current, past due and nonaccrual loans as of June 30, 2011 and December 31, 2010 were as follows:

June 30, 2011
	Past Due		Past Due Over 90 days
(Dollars in Thousands)	30-89		And		Non-		Total				Total
	Days		Accruing		Accruing		Past Due		Current		Loans
Real estate
Construction	$	749	$	-	$	2,364	$	3,113	$	10,542	$	13,655
Mortgage		823		-		1,912		2,735		70,584		73,319
Total real estate loans		1,572		-		4,276		5,848		81,126		86,974
Commercial		166		-		68		234		8,059		8,293
Consumer and other		49		2		59		110		4,980		5,090
Totals	$	1,787	$	2	$	4,403	$	6,192	$	94,165	$	100,357

December 31, 2010
	Past Due		Past Due Over 90 days
(Dollars in Thousands)	30-89		and		Non-		Total				Total
	Days		Accruing		Accruing		Past Due		Current		Loans
Real estate
Construction	$	397	$	-	$	3,010	$	3,407	$	9,267	$	12,674
Mortgage		768		-		1,533		2,301		73,849		76,150
Total real estate loans		1,165		-		4,543		5,708		83,116		88,824
Commercial		99		-		203		302		11,300		11,602
Consumer and other		63		-		60		123		4,749		4,872
Totals	$	1,327	$	-	$	4,806	$	6,133	$	99,165	$	105,298

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance:

Special Mention - Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of June 30, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

June 30, 2011
			Real Estate Loans
							Total
							Real
(Dollars in Thousands)							Estate				Consumer
	Total		Construction		Mortgage		Loans		Commercial		and Other
Pass	$	93,652	$	12,458	$	72,261	$	84,719	$	3,950	$	4,983
Special mention		179		28		41		69		66		44
Substandard		6,526		1,169		1,017		2,186		4,277		63
Doubtful		-		-		-		-		-		-
Total	$	100,357	$	13,655	$	73,319	$	86,974	$	8,293	$	5,090

December 31, 2010
			Real Estate Loans
							Total
							Real
(Dollars in Thousands)							Estate				Consumer
	Total		Construction		Mortgage		Loans		Commercial		and Other
Pass	$	98,620	$	8,847	$	76,150	$	84,997	$	9,793	$	3,830
Special mention		1,378		681		-		681		551		146
Substandard		5,300		3,146		-		3,146		1,258		896
Doubtful		-		-		-		-		-
Total	$	105,298	$	12,674	$	76,150	$	88,824	$	11,602	$	4,872

The Company enters into financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other parties to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments. Letters of credit are conditional commitments issued to guarantee a customer’s performance to a third party and have essentially the same credit risk as other lending facilities.

Collateral held for commitments to extend credit and standby letters of credit varies but may include accounts receivable, inventory, property, plant, equipment, and income-producing commercial properties.

The following table summarizes the Company’s off-balance sheet financial instruments as of June 30, 2011 and December 31, 2010 whose contract amounts represent credit risk:

	June 30,		December 31,
	2011		2010
Commitments to extend credit	$	5,463,000	$	5,855,857
Standby letters of credit		847,000		850,000

- Definition

The entire disclosure for claims held for amounts due a company. Examples include trade accounts receivables, notes receivables, loans receivables.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5066-111524

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 03
-Paragraph 7
-Article 9

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 01-6
-Paragraph 13
-Subparagraph d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5162-111524

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 3, 4
-Article 5

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(k))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.3,4)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 4
-Section 08
-Paragraph k

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6965416&loc=d3e5074-111524

+ Details

COMMUNITYCORP 10-Q