6. IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

9 Months Ended

Sep. 30, 2012

Loans and Leases Receivable, Nonperforming Loan and Lease, Policy [Policy Text Block]

6. IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

At September 30, 2012 and December 31, 2011, the recorded investment in nonperforming loans and leases was approximately $6,777,000 and $13,423,000, respectively. Nonperforming loans and leases include all such loans and leases that are either placed on nonaccrual status or are 90 days past due as to principal or interest but still accrue interest because such loans are well-secured and in the process of collection. The Company considers a loan to be impaired when, based on current information and events, it is probable that it will be unable to collect all amounts due (principal and interest) according to the contractual terms of the original loan agreement. At September 30, 2012, the recorded investment in loans and leases that were considered to be impaired totaled $28,443,000, which includes $6,777,000 in nonaccrual loans and leases and $21,666,000 in accruing loans and leases. Of the total impaired loans of $28,443,000, loans totaling $14,095,000 were deemed to require no specific reserve and loans totaling $14,348,000 were deemed to require a related valuation allowance of $1,459,000. At December 31, 2011, the recorded investment in loans and leases that were considered to be impaired totaled $30,085,000 and had a related valuation allowance of $1,680,000. If interest had been accruing on the nonperforming loans, such income would have approximated $129,000 and $398,000 for the three months ended September 30, 2012 and 2011, respectively, and approximated $601,000 and $1,288,000 for the nine months ended September 30, 2012 and 2011, respectively.

At September 30, 2012 and December 31, 2011, the recorded investment in other real estate owned (“OREO”) was $13,681,000 and $8,190,000, respectively. In addition, at December 31, 2011, the Company owned one repossessed mobile home classified on the balance sheet in accrued interest receivable and other assets with a book value of $55,000. For the three months ended March 31, 2012, the Company transferred four properties with loan balances in the amount of $3,439,000 to OREO and wrote these balances down by $194,000 to $3,245,000, and sold four properties with balances of $497,000 for a net loss of $30,000. In addition to the $194,000 in write downs, the Company also adjusted balances through charges to the allowance for loan and lease losses of $74,000 and OREO expense of $60,000 for properties obtained in the prior quarter. For the three months ended June 30, 2012, the Company transferred one property into OREO with a loan balance of $244,000 and the Company sold two properties and a mobile home with balances of $406,000 for a loss of $39,000. The property added during the second quarter of 2012 was adjusted to its current carrying value of $212,000, which is equal to fair value less selling costs. The single property added consisted of three contiguous undeveloped parcels in Amador County, which are zoned residential. One parcel is approximately eleven acres and the other two parcels are approximately five acres each. For the three months ended September 30, 2012, the Company acquired six OREO properties with net book values of $3,900,000 and the Company sold three properties with balances of $576,000 for a loss of $12,000. Of the six properties added in the third quarter, four are related to a single client and are carried at $3,138,000, after appropriate write downs and adjustments. These properties include a single use commercial property in Amador County carried at $805,000, two abutting parcels of land in Sacramento County carried at $1,200,000 and a single family residence in Monterey County carried at $1,127,000. The other two properties include a single family residence in Sonoma County carried at $308,000 and commercial retail space in Butte County carried at $439,000. 

The Company periodically obtains property valuations to determine whether the recorded book value is considered fair value. During the third quarter of 2012, this valuation process resulted in the Company reducing the book value of four properties by $272,000. Furthermore, results of legal proceedings caused the Company to increase the value of an existing OREO property by $248,000.

The September 30, 2012 OREO balance of $13,681,000 consists of 23 properties including nine commercial real estate properties in the amount of $8,547,000, five residential land properties in the amount of $1,804,000, three commercial land properties totaling $1,464,000 and six residential real estate properties in the amount of $1,866,000.

Nonperforming loans and leases and OREO at September 30, 2012 and December 31, 2011 are summarized as follows:

(in thousands)	September 30, 2012			December 31, 2011
Nonaccrual loans and leases that are current to terms (less than 30 days past due)	$	1,909		$	396
Nonaccrual loans and leases that are past due		4,868			13,027
Loans and leases past due 90 days and accruing interest		—			—
Other real estate owned		13,681			8,190
Total nonperforming assets	$	20,458		$	21,613
Nonperforming loans and leases to total loans and leases		2.45	%		4.46	%
Total nonperforming assets to total assets		3.50	%		3.73	%

Impaired loans and leases as of and for the periods ended September 30, 2012 and December 31, 2011 are summarized as follows:

(in thousands)	As of September 30, 2012						As of December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial	$	3,113	$	4,886	$	—	$	3,069	$	3,089	$	—
Real estate-commercial		9,679		10,266		—		4,723		6,428		—
Real estate-multi-family		15		15		—		17		17		—
Real estate-construction		74		260		—		—		—		—
Real estate-residential		1,039		1,093		—		180		180		—
Leases		4		4		—		17		17		—
Consumer		171		243		—		133		133		—
Subtotal	$	14,095	$	16,767	$	—	$	8,139	$	9,864	$	—
With an allowance recorded:
Commercial	$	1,718	$	1,718	$	306	$	2,054	$	3,705	$	538
Real estate-commercial		8,245		8,443		661		13,504		13,853		707
Real estate-multi-family		1,689		1,782		128		1,187		1,280		5
Real estate-construction		—		—		—		2,083		2,402		147
Real estate-residential		1,722		1,722		145		1,936		1,936		118
Agriculture		389		591		163		597		597		89
Consumer		585		585		56		585		585		76
Subtotal	$	14,348	$	14,841	$	1,459	$	21,946	$	24,358	$	1,680
Total:
Commercial	$	4,831	$	6,604	$	306	$	5,123	$	6,794	$	538
Real estate-commercial		17,924		18,709		661		18,227		20,281		707
Real estate-multi-family		1,704		1,797		128		1,204		1,297		5
Real estate-construction		74		260		—		2,083		2,402		147
Real estate-residential		2,761		2,815		145		2,116		2,116		118
Leases		4		4		—		17		17		—
Agriculture		389		591		163		597		597		89
Consumer		756		828		56		718		718		76
	$	28,443	$	31,608	$	1,459	$	30,085	$	34,222	$	1,680

The following table presents the average balance related to impaired loans and leases for the periods indicated (in thousands):

	Average Recorded Investments for the three months ended				Average Recorded Investments for the nine months ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Commercial	$	3,193	$	5,704	$	2,703	$	5,403
Real estate-commercial		15,872		21,377		15,846		21,451
Real estate-multi-family		1,356		1,781		1,484		1,665
Real estate-construction		925		4,726		1,356		4,712
Real estate-residential		1,475		4,163		1,407		4,329
Leases		—		—		—		—
Agriculture		494		507		493		525
Consumer		408		442		604		405
Total	$	23,723	$	38,700	$	23,893	$	38,490

The following table presents the interest income recognized on impaired loans and leases for the periods indicated (in thousands):

	Interest Income Recognized for the three months ended						Interest Income Recognized for the nine months ended
	September 30, 2012			September 30, 2011			September 30, 2012		September 30, 2011
Commercial	$	(15	)	$	145		$	59	$	237
Real estate-commercial		86			1,646			416		1,969
Real estate-multi-family		14			15			44		32
Real estate-construction		—			8			—		20
Real estate-residential		(4	)		(35	)		41		32
Leases		—			—			—		—
Agriculture		—			—			—		3
Consumer		7			21			15		34
Total	$	88		$	1,800		$	575	$	2,327