During the six months ended June 30, 2011, REO increased by $3.7 million to $6.7 million from $3.0 million at the end of 2010. At June 30, 2011 the Bank’s REO consisted of three one-to-four family residential properties, two multi-family residential properties and seven commercial real estate properties, four of which are church buildings. As part of our efforts to reduce non-performing assets, we sold nine REO properties for total proceeds of $2.4 million, and recorded a corresponding net loss of $49 thousand, during the first six months of 2011.
At June 30, 2011 our allowance for loan losses was $22.2 million, or 5.83% of our gross loans receivable, compared to $20.5 million, or 5.08% of our gross loans, at year-end 2010. The ratio of the allowance for loan losses to NPLs, excluding loans held for sale, decreased to 52.27% at June 30, 2011, compared to 54.53% at year-end 2010. Our allowances for losses after considering reserves for loans held for sale and REO totaled $23.8 million at June 30, 2011, compared to $21.8 million at year-end 2010.
Net loan charge-offs during the second quarter of 2011 were $2.2 million, or 2.28% of average loans on an annualized basis, compared to $2.0 million, or 1.76% during the second quarter of 2010. Consumer loans represented 84% of the charge-offs during the second quarter of 2011, primarily because of one write-off related to the settlement of litigation concerning a consumer loan secured by a deposit account. We had reserved for the full amount of this loan during the first quarter of 2011. As previously announced, we believe that settling this litigation, which was initiated in 2008, was the best course of action for our shareholders because the settlement eliminates any uncertainty regarding the matter and avoids any further drain on our management’s time and resources. As of June 30, 2011, the consumer loan and the deposit account securing the loan have been closed and no additional losses are expected to be incurred on this matter. Church, multi-family and one-to-four family residential real estate loans, combined, represented 16% of the charge-offs during the second quarter of 2011.