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

6 Months Ended

Jun. 30, 2013

Impaired and Receivable Non Performing Loan and Lease and Other Real Estate Owned [Abstract]

IMPAIRED AND NONPERFORMING LOANS AND LEASES AND OTHER REAL ESTATE OWNED

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

At June 30, 2013 and December 31, 2012, the recorded investment in nonperforming loans and leases was approximately $5,364,000 and $5,474,000, 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 June 30, 2013, the recorded investment in loans and leases that were considered to be impaired totaled $20,603,000, which includes $5,288,000 in nonaccrual loans and leases and $15,315,000 in performing loans and leases. Of the total impaired loans of $20,603,000, loans totaling $9,259,000 were deemed to require no specific reserve and loans totaling $11,344,000 were deemed to require a related valuation allowance of $1,495,000. At December 31, 2012, the recorded investment in loans and leases that were considered to be impaired totaled $26,553,000 and had a related valuation allowance of $1,595,000. If interest had been accruing on the nonperforming loans, such income would have approximated $109,000 and $200,000 for the three months ended June 30, 2013 and 2012, respectively, and approximated $168,000 and $472,000 for the six months ended June 30, 2013 and 2012, respectively.

At June 30, 2013 and December 31, 2012, the recorded investment in other real estate owned (“OREO”) was $8,120,000 and $12,237,000, respectively. For the three months ended March 31, 2013, the Company sold six properties with balances of $3,743,000 for a loss of $93,000 and added a single property to OREO with a net book value totaling $432,000. The single property is improved land with a long-term lease for a self-storage facility in Sonoma County. For the three months ended June 30, 2013, the Company sold one property with a balance of $805,000 for a gain of $22,000 and did not add any new OREO property.

The Company periodically obtains property valuations to determine whether the recorded book value is considered fair value. During the second quarter of 2013, this valuation process resulted in the Company reducing the book value of four properties by $137,000 all of which was charged to OREO expense.

The June 30, 2013 OREO balance of $8,120,000 consists of fourteen properties including four commercial real estate properties in the total amount of $3,265,000, six residential land properties in the total amount of $3,896,000, two commercial land properties in the total amount of $689,000 and two residential real estate properties in the total amount of $270,000.

Nonperforming loans and leases and OREO at June 30, 2013 and December 31, 2012 are summarized as follows:

(in thousands)	June 30, 2013			December 31, 2012
Nonaccrual loans and leases that are current to terms (less than 30 days past due)	$	1,183		$	1,514
Nonaccrual loans and leases that are past due		4,181			3,960
Loans and leases past due 90 days and accruing interest		—			—
Other real estate owned		8,120			12,237
Total nonperforming assets	$	13,484		$	17,111
Nonperforming loans and leases to total loans and leases		2.12	%		2.12	%
Total nonperforming assets to total assets		2.33	%		2.97	%

Impaired loans and leases as of and for the periods ended June 30, 2013 and December 31, 2012 are summarized as follows:

(in thousands)	As of June 30, 2013						As of December 31, 2012
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
With no related allowance recorded:
Commercial	$	670	$	690	$	—	$	1,248	$	1,407	$	—
Real estate-commercial		8,297		9,082		—		10,882		11,603		—
Real estate-construction		256		256		—		263		263		—
Consumer		36		109		—		37		109		—
Subtotal	$	9,259	$	10,137	$	—	$	12,430	$	13,382	$	—
With an allowance recorded:
Commercial	$	1,588	$	1,588	$	543	$	1,580	$	1,580	$	480
Real estate-commercial		5,586		5,902		593		8,223		8,287		786
Real estate-multi-family		1,666		1,758		118		1,681		1,774		122
Real estate-residential		2,370		2,461		217		2,429		2,483		179
Consumer		134		134		24		210		210		28
Subtotal	$	11,344	$	11,843	$	1,495	$	14,123	$	14,334	$	1,595
Total:
Commercial	$	2,258	$	2,277	$	543	$	2,828	$	2,987	$	480
Real estate-commercial		13,883		14,985		593		19,105		19,890		786
Real estate-multi-family		1,666		1,758		118		1,681		1,774		122
Real estate-construction		256		256		—		263		263		—
Real estate-residential		2,370		2,461		217		2,429		2,483		179
Consumer		170		243		24		247		319		28
	$	20,603	$	21,980	$	1,495	$	26,553	$	27,716	$	1,595

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

	Average Recorded Investments				Average Recorded Investments
	for the three months ended				for the six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Commercial	$	2,388	$	5,256	$	2,339	$	5,123
Real estate-commercial		15,877		17,743		14,146		15,899
Real estate-multi-family		1,675		1,187		1,673		1,228
Real estate-construction		260		1,937		259		1,852
Real estate-residential		2,403		2,253		2,400		1,543
Leases		—		4		—		—
Agriculture		—		395		—		495
Consumer		210		457		175		212
Total	$	22,813	$	29,232	$	20,992	$	26,352

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

	Interest Income Recognized				Interest Income Recognized
	for the three months ended				for the six months ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Commercial	$	16	$	23	$	32	$	74
Real estate-commercial		85		210		293		330
Real estate-multi-family		20		15		39		30
Real estate-construction		4		—		7		—
Real estate-residential		29		25		52		45
Consumer		1		3		2		8
Total	$	155	$	276	$	425	$	487