4. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at December 31, 2011 and December 31, 2010 are summarized as follows. Net deferred loan costs were $563 at December 31, 2011, and $523 at December 31, 2010.

December 31	2011		2010
Commercial	$	160,828	$	112,526
Real estate:
Commercial		145,554		136,910
Residential		118,125		119,424
Consumer		20,596		21,912
Total	$	445,103	$	390,772

Fixed-rate loans totaled $96,587 and $109,212, while loans with adjustable interest rates were $348,516 and $281,560, respectively, at December 31, 2011 and 2010. Loans outstanding to directors, executive officers, principal stockholders or to their affiliates totaled $2,568 and $2,251 at December 31, 2011 and 2010, respectively. Advances and repayments during 2011 totaled $1,468 and $1,151 respectively. These loans are made during the ordinary course of business at the Company's normal credit terms. There were no related party loans that were classified as nonaccrual, past due, or restructured or were considered a potential credit risk at December 31, 2011 and 2010.

At December 31, 2011, the majority of the Company's loans were at least partially secured by real estate in Northeastern Pennsylvania. Therefore, a primary concentration of credit risk is directly related to the real estate market in this area. Changes in the general economy, local economy or in the real estate market could affect the ultimate collectability of this portion of the loan portfolio. Management does not believe there are any other significant concentrations of credit risk that could affect the loan portfolio.

The analysis of changes affecting the allowance for loan losses for each of the years in the three-year period ended December 31, 2011, is summarized as follows:

	2011			2010			2009
Beginning balance, January 1	$	4,100		$	3,337		$	3,002
Charge-offs		(599	)		(1,489	)		(1,547	)
Recoveries		54			50			147
Provisions		1,794			2,202			1,735
Ending balance, December 31	$	5,349		$	4,100		$	3,337

The changes in the allowance for loan losses account by major category of loan for the year ended December 31, 2011, were as follows:

				Real estate
December 31, 2011	Commercial			Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Beginning balance, January 1. 2011	$	1,696		$	1,384		$	726		$	243		$	51	$	4,100
Charge-offs		(374	)		(77	)		(9	)		(139	)				(599	)
Recoveries		1			2			1			50					54
Provisions		724			206			43			44			777		1,794
Ending balance	$	2,047		$	1,515		$	761		$	198		$	828	$	5,349
Ending balance: individually evaluated for impairment		698			40			71			1					810
Ending balance: collectively evaluated for impairment	$	1,349		$	1,475		$	690		$	197		$	828	$	4,539
Loans receivable:
Ending balance	$	160,828		$	145,554		$	118,125		$	20,596				$	445,103
Ending balance: individually evaluated for impairment		8,433			7,832			1,226			1					17,492
Ending balance: collectively evaluated for impairment	$	152,395		$	137,722		$	116,899		$	20,595				$	427,611
The allowance for loan losses account by major category of loan at December 31, 2010, is summarized as follows:
				Real estate
December 31, 2010	Commercial			Commercial			Residential			Consumer			Unallocated		Total
Allowance for loan losses:
Ending balance	$	1,696		$	1,384		$	726		$	243		$	51	$	4,100
Ending balance: individually evaluated for impairment		663			122			9			31					825
Ending balance: collectively evaluated for impairment	$	1,033		$	1,262		$	717		$	212		$	51	$	3,275
Loans receivable:
Ending balance	$	112,526		$	136,910		$	119,424		$	21,912				$	390,772
Ending balance: individually evaluated for impairment		5,916			8,923			674			47					15,560
Ending balance: collectively evaluated for impairment	$	106,610		$	127,987		$	118,750		$	21,865				$	375,212

The following tables present the major categories of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system at December 31, 2011 and 2010:

December 31, 2011:	Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	145,145	$	7,262	$	2,550	$	5,871	$	160,828
Real estate:
Commercial		136,166		3,223		4,995		1,170		145,554
Residential		117,236						889		118,125
Consumer		20,587		9						20,596
Total	$	419,134	$	10,494	$	7,545	$	7,930	$	445,103

December 31, 2010:	Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	105,869	$	986	$	181	$	5,490	$	112,526
Real estate:
Commercial		118,972		8,836		8,731		371		136,910
Residential		118,794						630		119,424
Consumer		21,890						22		21,912
Total	$	365,525	$	9,822	$	8,912	$	6,513	$	390,772

Information concerning nonaccrual loans by major loan category at December 31, 2011 and 2010, is summarized as follows:

December 31,	2011		2010
Commercial	$	5,871	$	5,490
Real estate:
Commercial		1,170		371
Residential		889		630
Consumer				22
Total	$	7,930	$	6,513

The major categories of the loan portfolio by past due status are summarized as follows:

December 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans > 90 Days and Accruing
Commercial	$	408	$	324	$	12	$	744	$	160,084	$	160,828	$	12
Real estate:
Commercial		2,177						2,177		143,377		145,554
Residential		976		217		362		1,555		116,570		118,125		337
Consumer		335		98		311		744		19,852		20,596		311
Total	$	3,896	$	639	$	685	$	5,220	$	439,883	$	445,103	$	660

December 31, 2010	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Loans > 90 Days and Accruing
Commercial	$	192	$	81	$	754	$	1,027	$	111,499	$	112,526	$	123
Real estate:
Commercial		1,431				1,049		2,480		134,430		136,910
Residential		1,260		358		626		2,244		117,180		119,424
Consumer		293		133		291		717		21,195		21,912		269
Total	$	3,176	$	572	$	2,720	$	6,468	$	384,304	$	390,772	$	392

The following tables summarize information in regards to impaired loans at December 31, 2011 and 2010 by loan portfolio class:

							For the Year Ended
December 31, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	4,316	$	4,316			$	5,759	$	198
Real estate:
Commercial		4,136		4,136				4,123		187
Residential		889		889				948
Consumer								10		1
Total		9,341		9,341				10,840		386

With an allowance recorded:
Commercial		4,117		4,117	$	698		3,504		46
Real estate:
Commercial		3,696		3,696		40		2,940		233
Residential		337		337		71		108		11
Consumer		1		1		1		8
Total		8,151		8,151		810		6,560		290

Commercial		8,433		8,433		698		9,263		244
Real estate:
Commercial		7,832		7,832		40		7,063		420
Residential		1,226		1,226		71		1,056		11
Consumer		1		1		1		18		1
Total	$	17,492	$	17,492	$	810	$	17,400	$	676

							For the Year Ended
December 31, 2010	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial	$	304	$	304			$	264	$	12
Real estate:
Commercial		6,263		6,263				6,394		392
Residential		383		383				384		2
Consumer		16		16				20		2
Total		6,966		6,966				7,062		408

With an allowance recorded:
Commercial		5,612		5,612	$	663		5,629		165
Real estate:
Commercial		2,660		2,660		122		2,714		166
Residential		291		291		9		292		5
Consumer		31		31		31		31
Total		8,594		8,594		825		8,666		336

Commercial		5,916		5,916		663		5,893		177
Real estate:
Commercial		8,923		8,923		122		9,108		558
Residential		674		674		9		676		7
Consumer		47		47		31		51		2
Total	$	15,560	$	15,560	$	825	$	15,728	$	744

Included in the commercial loan and commerical real estate categories are troubled debt restructurings that were classified as impaired. Trouble debt restructurings totaled $3,961 at December 31, 2011, and $4,185 at December 31, 2010.

Information concerning troubled debt restructurings by major loan category at December 31, 2011 is summarized as follows:

December 31, 2011	Number of Contracts		Accrual Status		Nonaccrual Status		Total Modifications
Commercial		2			$	2,294	$	2,294
Real estate:
Commercial		1	$	1,667				1,667
Residential
Consumer
Total		3	$	1,667	$	2,294	$	3,961

There were no defaults of loans considered troubled debt restructurings for the period ended December 31, 2011. There were no charge-offs as a result of the troubled debt restructurings and the impact on interest income was minimal.

The following table summarizes loans modified as troubled debt restructurings by major loan category for the year ended December 31, 2011. The commercial loan disclosed in the table was modified with respect to its interest rate.

December 31, 2011	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial
Real estate:
Commercial		1	$	1,682	$	1,682
Residential
Consumer
Total		1	$	1,682	$	1,682