Note 3 - Loans Receivable

9 Months Ended

Sep. 30, 2014

Receivables [Abstract]

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

 Note 3. Loans Receivable

The major classifications of loans in the consolidated balance sheets at September 30, 2014 and December 31, 2013 were as follows:

(Dollars In Thousands)	September 30, 2014			December 31, 2013
Construction loans:
Residential	$	10,517		$	6,768
Land acquisition, development & commercial		22,149			20,904
Real estate:
Residential		82,519			72,934
Commercial		132,691			126,100
Commercial, industrial & agricultural		39,762			42,155
Equity lines		23,523			20,374
Consumer		8,203			8,698
Total		319,364			297,933
Less allowance for loan losses		(3,522	)		(3,721	)
Loans, net	$	315,842		$	294,212

The past due and nonaccrual status of loans as of September 30, 2014 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	$	-	$	-	$	-	$	-	$	10,517	$	10,517	$	-
Land acquisition, development & commercial		-		-		-		-		22,149		22,149		-
Real estate:
Residential		141		-		480		621		81,898		82,519		480
Commercial		-		-		152		152		132,539		132,691		784
Commercial, industrial & agricultural		20		-		10		30		39,732		39,762		10
Equity lines		180		-		-		180		23,343		23,523		-
Consumer		1		37		-		38		8,165		8,203		24
Total	$	342	$	37	$	642	$	1,021	$	318,343	$	319,364	$	1,298

The past due and nonaccrual status of loans as of December 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	$	-	$	-	$	-	$	-	$	6,768	$	6,768	$	-
Land acquisition, development & commercial		-		-		-		-		20,904		20,904		-
Real estate:
Residential		-		-		931		931		72,003		72,934		707
Commercial		-		-		-		-		126,100		126,100		-
Commercial, industrial & agricultural		270		44		36		350		41,805		42,155		193
Equity lines		203		-		59		262		20,112		20,374		59
Consumer		16		-		30		46		8,652		8,698		30
Total	$	489	$	44	$	1,056	$	1,589	$	296,344	$	297,933	$	989

There were no loans that were past due ninety days or more and still accruing interest as of September 30, 2014. There was one loan of $223 thousand that was past due ninety days or more and still accruing interest at December 31, 2013.

Impaired loans, which include TDR’s of $6.8 million, and the related allowance at September 30, 2014, were as follows:

September 30, 2014 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		1,282		1,282		-		1,346		49
Real estate:
Residential		480		656		-		480		8
Commercial		9,461		9,461		-		10,680		351
Commercial, industrial & agricultural		495		495		-		498		21
Equity lines		-		-		-		-		-
Consumer		-		-		-		-		-
Total loans with no allowance	$	11,718	$	11,894	$	-	$	13,004	$	429

September 30, 2014 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		-		-		-		-		-
Commercial		152		152		146		153		3
Commercial, industrial & agricultural		-		-		-		-		-
Equity lines		-		-		-		-		-
Consumer		-		-		-		-		-
Total loans with an allowance	$	152	$	152	$	146	$	153	$	3

Impaired loans, which include TDR’s of $6.3 million, and the related allowance at December 31, 2013, were as follows:

December 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		1,550		1,550		-		1,550		67
Real estate:
Residential		412		412		-		415		18
Commercial		9,266		9,266		-		9,365		442
Commercial, industrial & agricultural		283		283		-		733		46
Equity lines		-		-		-		-		-
Consumer		-		-		-		-		-
Total loans with no allowance	$	11,511	$	11,511	$	-	$	12,063	$	573

December 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		438		438		163		439		16
Commercial		-		-		-		-		-
Commercial, industrial & agricultural		41		41		10		34		1
Equity lines		-		-		-		-		-
Consumer		-		-		-		-		-
Total loans with an allowance	$	479	$	479	$	173	$	473	$	17

Troubled Debt Restructurings

Troubled debt restructurings (“TDR’s”) were comprised of four loans totaling $6.8 million at September 30, 2014.  This compares with $6.3 million in total restructured loans at December 31, 2013.

In September 2014, the Company agreed to take ownership via a deed-in-lieu of foreclosure of a commercial property pledged to a loan. The property is included in other real estate owned. The remaining balance is reported as a loan modified as a TDR. The following table presents by class of loan, information related to the loan modified in a TDR during 2014:

	Loans modified as TDR's For the nine months ended September 30, 2014
Class of Loan	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
			(Dollars in Thousands)
Construction loans:
Residential		-	$	-	$	-
Land acquisition, development & commercial		-		-		-
Real estate loans:
Residential		-		-		-
Commercial		1		1,932		632
Commercial, industrial, agricultural		-		-		-
Equity lines		-		-		-
Consumer		-		-		-
Total Loans		1	$	1,932	$	632

For the nine months ended September 30, 2013, no loans were modified as TDR’s.

Two of the four loans totaling $6.1 million were performing in accordance with their restructured terms and were not on nonaccrual status at September 30, 2014. The other two loans totaling $656 thousand were on nonaccrual status at the end of the third quarter of 2014.  One of the loans on nonaccrual status at September 30, 2014 was the loan that was modified as a TDR during the third quarter of 2014. The other was a TDR that was classified as a substandard non-accruing loan at September 30, 2014 and 2013. The outstanding balance of this loan was $24 thousand and $39 thousand at September 30, 2014 and September 30, 2013, respectively.

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. The three TDR’s, modified prior to 2014, have not had any defaults during the twelve month period ended September 30, 2014, and the TDR modified in 2014 has remained current subsequent to modification. 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, if a specific reserve is associated with the loan it 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.