Note 5 - Other Real Estate Owned

6 Months Ended

Jun. 30, 2015

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

Note 5. Other Real Estate Owned

The following table presents the composition of OREO at June 30, 2015 and December 31, 2014:

	June 30,		December 31,
(in thousands)	2015		2014
Land/lots	$	925	$	1,287
Commercial real estate		788		941
Residential real estate		27		27
Total other real estate owned	$	1,740	$	2,255

The following table presents the activity in OREO for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2015			2014			2015			2014
Balance, beginning of period	$	2,369		$	3,422		$	2,255		$	4,246
Property foreclosures		-			13			149			13
Bank premises transferred to OREO		-			1,749			-			1,749
Valuation adjustments		(118	)		(1,717	)		(130	)		(1,770	)
Carrying value of OREO sold		(511	)		(285	)		(534	)		(1,056	)
Balance, end of period	$	1,740		$	3,182		$	1,740		$	3,182

Due to a change in strategic purpose, the Company transferred the Stroudsburg office from bank premises and equipment to OREO for disposition during the six months ended June 30, 2014. The Company retained this facility and was initially planning to use it for other bank-related purposes. This property with a carrying value of $1.7 million was written down to its appraised value less cost to sell of $0.8 million at the time of transfer. A valuation adjustment of $0.9 million, included in non-interest expense, was recorded at the time of transfer.

In addition, there were four properties held in OREO for a significant amount of time that were approaching the regulatory holding period threshold of five years. In an effort to aggressively dispose of these properties, management requested independent appraisals using a liquidation value basis for each of the properties. Accordingly, the Company incurred valuation adjustments to those four properties totaling $0.7 million for the six months ended June 30, 2014. Total valuation adjustments to the carrying value of OREO included in non-interest expense for the six months ended June 30, 2014 amounted to $1.8 million. As of June 30, 2015, all but one of the four properties had been sold. The Company has established a full valuation allowance for the one remaining property.

The following table presents the components of net expense of OREO for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2015			2014			2015			2014
Insurance	$	18		$	13		$	32		$	40
Legal fees		19			15			39			24
Maintenance		3			5			3			15
Professional fees		1			68			1			78
Real estate taxes		(13	)		46			13			95
Utilities		3			1			13			4
Other		(1	)		-			17			5
Valuation adjustments		118			1,717			130			1,770
Total expense		148			1,865			248			2,031
Income from the operation of foreclosed properties		(1	)		(47	)		(1	)		(50	)
Net expense of OREO	$	147		$	1,818		$	247		$	1,981

There were two consumer mortgage loans that were in the process of foreclosure at June 30, 2015 with a total carrying value of $70 thousand. There was one residential real estate property with a carrying value of $149 thousand that was foreclosed upon during the six months ended June 30, 2015. There were two residential properties with an aggregate carrying value of $27 thousand included in OREO at June 30, 2015 and December 31, 2014.