Note 3. Loans Receivable

6 Months Ended

Jun. 30, 2012

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3. Loans Receivable

The major classifications of loans in the consolidated balance sheets at June 30, 2012 and December 31, 2011 were as follows:

(Dollars In Thousands)	June 30, 2012			December 31, 2011
Construction:
Residential	$	4,756		$	3,695
Land acquisition, development & commercial		19,920			23,911
Real Estate:
Residential		66,445			58,070
Commercial		106,696			102,312
Commercial, industrial & agricultural		38,809			36,297
Equity lines		19,802			19,018
Consumer		5,247			5,776
Total		261,675			249,079
Less allowance for loan losses		(4,019	)		(3,979	)
Loans, net	$	257,656		$	245,100

The past due and nonaccrual status of loans as of June 30, 2012 was as follows:

(Dollars In Thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans
Construction:
Residential	$	—	$	—	$	—	$	—	$	4,756	$	4,756	$	—
Land acquisition, development & commercial		416		—		—		416		19,504		19,920		506
Real Estate:
Residential		—		349		532		881		65,564		66,445		716
Commercial		—		—		1,575		1,575		105,121		106,696		1,575
Commercial, industrial & agricultural		9		—		—		9		38,800		38,809		—
Equity lines		60		25		272		357		19,445		19,802		475
Consumer		—		4		—		4		5,243		5,247		—
Total	$	485	$	378	$	2,379	$	3,242	$	258,433	$	261,675	$	3,272

The past due and nonaccrual status of loans as of December 31, 2011 was as follows:

(Dollars In Thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans
Construction:
Residential	$	—	$	—	$	—	$	—	$	3,695	$	3,695	$	—
Land acquisition, development & commercial		—		464		632		1,096		22,815		23,911		632
Real Estate:										—
Residential		—		535		179		714		57,356		58,070		714
Commercial		—		—		—		—		102,312		102,312		—
Commercial, industrial & agricultural		55		—		43		98		36,199		36,297		43
Equity lines		—		—		643		643		18,375		19,018		643
Consumer		—		—		—		—		5,776		5,776		—
Total	$	55	$	999	$	1,497	$	2,551	$	246,528	$	249,079	$	2,032

There were no loans past due ninety days or more and still accruing at June 30, 2012 or December 31, 2011.

Impaired loans and the related allowance at June 30, 2012, were as follows:

With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	—	$	—	$	—	$	—	$	—
Land acquisition, development & commercial		835		878		—		630		16
Real Estate:
Residential		58		58		—		122		6
Commercial		6,185		6,664		—		5,149		100
Commercial, industrial & agricultural		1,536		1,536		—		1,217		30
Equity lines		272		440		—		136		—
Consumer		—		—		—		—		—
Total loans with no allowance	$	8,886	$	9,576	$	—	$	7,254	$	152

With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	—	$	—	$	—	$	—	$	—
Land acquisition, development & commercial		1,550		1,550		38		1,783		53
Real Estate:
Residential		658		658		152		596		3
Commercial		3,095		3,095		285		4,053		132
Commercial, industrial & agricultural		—		—		—		—		—
Equity lines		202		202		150		420		8
Consumer		—		—		—		—		—
Total loans with an allowance	$	5,505	$	5,505	$	625	$	6,852	$	196

Impaired loans and the related allowance at December 31, 2011 were as follows:

With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	—	$	—	$	—	$	917	$	—
Land acquisition, development & commercial		2,174		3,300		—		2,815		100
Real Estate:
Residential		714		714		—		1,868		27
Commercial		8,508		8,508		—		7,201		383
Commercial, industrial & agricultural		—		—		—		218		—
Equity lines		439		439		—		175		5
Consumer		—		—		—		—		—
Total loans with no allowance	$	11,835	$	12,961	$	—	$	13,194	$	515

With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	—	$	—	$	—	$	288	$	—
Land acquisition, development & commercial		801		801		249		3,024		38
Real Estate:
Residential		—		—		—		137		—
Commercial		3,080		3,080		292		2,386		183
Commercial, industrial & agricultural		—		—		—		—		—
Equity lines		203		203		88		108		5
Consumer		—		—		—		—		—
Total loans with an allowance	$	4,084	$	4,084	$	629	$	5,943	$	226

Included in certain loan categories are troubled debt restructurings (“TDRs”). At June 30, 2012 and December 31, 2011 there were 3 loans classified as TDRs totaling $7.9 million. At June 30, 2012, one of the loans was past due over 90 days and on nonaccrual status.  The others were performing in accordance with their restructured terms. At December 31, 2011, all were performing in accordance with their restructured terms and none were on nonaccrual status. The amount of the valuation allowance related to total TDRs was $0 at June 30, 2012, and $277 thousand as of December 31, 2011. For the six months ended June 30, 2012, no loans were modified in a TDR.

As a result of adopting the amendments in ASU 2011-02, “Receivables (Topic 310) – A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” The Company reassessed all restructurings that occurred on or after the beginning of the fiscal year of adoption (January 1, 2011) to determine whether they are considered TDRs under the amended guidance using review procedures in effect at that time.

Management considers troubled debt restructurings and subsequent defaults in restructured loans in the determination of the adequacy of the Company’s allowance for loan losses. When identified as a TDR, a loan is evaluated for potential loss based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs if the loan is collateral dependent. Loans identified as TDRs frequently are on non-accrual status at the time of the restructuring and, in some cases, partial charge-offs may have already been taken against the loan and a specific allowance may have already been established for the loan. As a result of any modification as a TDR, the specific reserve associated with the loan may be increased. Additionally, loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future defaults. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. As a result, any specific allowance may be increased, adjustments may be made in the allocation of the total allowance balance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Management exercises significant judgment in developing estimates for potential losses associated with TDRs.