Note 3 - Loans Receivable

3 Months Ended

Mar. 31, 2013

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

 Note 3. Loans Receivable

The major classifications of loans in the consolidated balance sheets at March 31, 2013 and December 31, 2012 were as follows:

(Dollars In Thousands)	March 31, 2013			December 31, 2012
Construction loans:
Residential	$	5,882		$	5,036
Land acquisition, development & commercial		21,934			20,198
Real estate:
Residential		69,757			69,691
Commercial		107,892			109,302
Commercial, Industrial & agricultural		43,763			42,382
Equity lines		19,465			20,504
Consumer		8,566			7,824
Total		277,259			274,937
Less allowance for loan losses		(3,799	)		(3,790	)
Loans, net	$	273,460		$	271,147

The past due and nonaccrual status of loans as of March 31, 2013 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 loans:
Residential	$	—	$	—	$	—	$	—	$	5,882	$	5,882	$	—
Land acquisition, development & commercial		41		—		1,731		1,772		20,162		21,934		1,731
Real estate:
Residential		190		—		219		409		69,348		69,757		408
Commercial		—		—		—		—		107,892		107,892		—
Commercial, Industrial & agricultural		5		—		157		162		43,601		43,763		157
Equity lines		105		—		60		165		19,300		19,465		60
Consumer		—		—		—		—		8,566		8,566		—
Total	$	341	$	—	$	2,167	$	2,508	$	274,751	$	277,259	$	2,356

The past due and nonaccrual status of loans as of December 31, 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 loans:
Residential	$	–	$	–	$	–	$	–	$	5,036	$	5,036	$	–
Land acquisition, development & commercial		–		723		1,034		1,757		18,441		20,198		1,756
Real estate:
Residential		–		562		184		746		68,945		69,691		582
Commercial		–		–		236		236		109,066		109,302		236
Commercial, Industrial & agricultural		–		157		–		157		42,225		42,382		–
Equity lines		60		–		115		175		20,329		20,504		115
Consumer		–		–		–		–		7,824		7,824		–
Total	$	60	$	1,442	$	1,569	$	3,071	$	271,866	$	274,937	$	2,689

There were no loans past due ninety days or more and still accruing at March 31, 2013 or December 31, 2012.

Impaired loans and the related allowance at March 31, 2013, were as follows:

March 31, 2013 With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	—	$	—	$	—	$	—	$	—
Land acquisition, development & commercial		3,203		3,263		—		3,203		38
Real estate:
Residential		446		483		—		483		3
Commercial		8,762		8,762		—		8,762		129
Commercial, Industrial & agricultural		1,098		1,098		—		1,098		17
Equity lines		—		—		—		—		—
Consumer		—		—		—		—		—
Total loans with no allowance	$	13,509	$	13,606	$	—	$	13,546	$	187

March 31, 2013 With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	—	$	—	$	—	$	—	$	—
Land acquisition, development & commercial		—		—		—		—		—
Real estate:
Residential		189		189		137		189		3
Commercial		1,135		1,135		87		1,135		25
Commercial, Industrial & agricultural		—		—		—		—		—
Equity lines		—		—		—		—		—
Consumer		—		—		—		—		—
Total loans with an allowance	$	1,324	$	1,324	$	224	$	1,324	$	28

Impaired loans and the related allowance at December 31, 2012 were as follows:

December 31, 2012 With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	–	$	–	$	–	$	–	$	–
Land acquisition, development & commercial		3,632		3,692		–		3,647		187
Real estate:
Residential		611		611		–		611		23
Commercial		9,018		9,018		–		9,018		440
Commercial, Industrial & agricultural		916		916		–		916		33
Equity lines		115		439		–		115		–
Consumer		–		–		–		–		–
Total loans with no allowance	$	14,292	$	14,676	$	–	$	14,307	$	683

December 31, 2012 With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	–	$	–	$	–	$	–	$	–
Land acquisition, development & commercial		–		–		–		–		–
Real estate:
Residential		199		199		137		199		13
Commercial		1,139		1,139		71		1,139		74
Commercial, Industrial & agricultural		–		–		–		–		–
Equity lines		–		–		–		–		–
Consumer		–		–		–		–		–
Total loans with an allowance	$	1,338	$	1,338	$	208	$	1,338	$	87

Troubled Debt Restructurings

Included in certain loan categories are troubled debt restructurings (“TDRs”). At March 31, 2013 and at December 31, 2012, there were 3 loans classified as TDRs totaling $6.5 million.  One TDR was classified as a substandard non-accruing loan at March 31, 2013 and at the end of 2012.  The loan is not past due, and the outstanding balance of this loan was $189 thousand and $199 thousand at March 31, 2013 and December 31, 2012, respectively.  The valuation allowance related to total TDRs was $137 thousand at March 31, 2013 and December 31, 2012.

For the three months ended March 31, 2013 and March 31, 2012, no loans were modified as a TDR.

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 or 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.  No loans restructured in the twelve months prior to March 31, 2013 or December 31, 2012 have subsequently defaulted.