liquidated the business assets securing the loans. The Company did not charge-off any of the loan balances as the anticipated proceeds were expected to exceed the loan balances. As of December 31, 2012, the outstanding balances of these loans totaled $196,000 and were classified as non-accrual and impaired. Also in 2012, a $3.3 million land loan was subject to a troubled debt restructuring. The loan was restructured into two land loans totaling $2.2 million, which were classified as non-accrual and impaired at December 31, 2012, while the remaining balance was charged off. Another land loan relationship totaling $1.6 million was restructured resulting in a $708,000 charge-off. The remaining loan balances of $896,000 were current and accruing interest at December 31, 2012, but still classified as impaired. A third land loan relationship totaling $3.9 million was classified as a troubled debt restructuring in 2012 when the loan was renewed after the development stalled. As part of the restructuring agreement, the Company agreed to renew the loan and allow the borrower to attempt to sell the properties over the next year. Because the value of the collateral securing the loan exceeded the outstanding balances, no charge-off was recorded. As of December 31, 2012, the loan balances of $3.9 million were current and accruing interest, but still classified as impaired. 

During 2011, we restructured three loan relationships that we identified as troubled debt restructurings. One of the restructurings was a construction and land loan relationship totaling $599,000 which was secured by raw land which had experienced a severe decline in value. We agreed to reduce the outstanding loan balance to $250,000 in exchange for a $50,000 principal payment in 2011 with the remaining $200,000 to be received during the first quarter of 2012. We had charged-off $141,000 of the loan during 2010 and an additional $208,000 during 2011, with the remaining $200,000 loan balance classified as non-accrual and impaired as of December 31, 2011. The loan was paid off during the first quarter of 2012. Another loan relationship totaling $110,000 to a municipal sanitary and improvement district was also restructured in 2011 to extend the maturity and lower the interest rate to allow the district more time to develop the taxable valuation that will provide cash flow for repayment of the loan. The loan was returned to accrual status during 2012 after a payment history was established. The outstanding balance of $98,000 was current and accruing interest as December 31, 2012, but still classified as impaired. The restructuring did not impact our allowance for loan losses. Also during 2011, a one-to-four family residential real estate loan totaling $10,000 was classified as a troubled debt restructuring as a result of the customer receiving a zero interest rate loan. The balance on this loan at December 31, 2012 was $8,000. This loan was classified as impaired as of December 31, 2012 and December 31, 2011. 

During 2010, we restructured two loan relationships that were identified as troubled debt restructurings. One of the relationships was an $853,000 real estate loan which was secured by real estate which was deficient based on the appraised value. The relationship was restructured into two 1-4 family residential real estate loans to a borrower who was experiencing financial difficulty and to whom we granted concessions at renewal. The value of the real estate supported $563,000 of the loan relationship. The $290,000 collateral deficiency of the real estate had previously been included in our allowance on impaired loans. The loan was returned to accrual status during 2010 after a payment history was established, while the collateral deficiency was charged-off. After the death of the borrower during 2012, the loan was placed back on non-accrual until the estate is settled. The outstanding balance of the loan was $485,000 and $518,000 at December 31, 2012 and December 31, 2011, respectively. A second loan relationship totaling $527,000 to another municipal sanitary and improvement district was restructured in 2010 to extend the maturity and lower the interest rate to allow the district more time to develop the taxable valuation that will provide cash flow for repayment of the loan. As of December 31, 2012 and December 31, 2011, the outstanding balance of the loan was $543,000. The restructuring did not impact our allowance for loan losses. This loan was current and accruing interest at December 30, 2012 and 2011, but still classified as impaired. 

As part of our credit risk management, we continue to aggressively manage the loan portfolio to identify problem loans and have placed additional emphasis on commercial real estate and construction and land relationships. We are aggressively working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At December 31, 2012, we had $2.4 million of real estate owned as compared to $2.3 million at December 31, 2011. Real estate owned primarily consists of a residential subdivision development we took possession of after the development slowed and the borrower was unable to comply with the contractual terms of the loan, a commercial real estate building resulting from a loan settlement, land previously acquired by the Bank for expansion and a few residential real estate properties. The Company is currently marketing all of the properties in real estate owned. 

Many financial institutions, including us, experienced a general increase in non-performing assets during recent years, as even well-established business borrowers developed cash flow, profitability and other business-related problems as a result of economic conditions. Despite an increase in our non-performing loans during 2012, we believe that our allowance for loan losses at December 31, 2012 was appropriate, however, there can be no assurances that loan losses will 

