NOTE 3 - LOANS

12 Months Ended

Dec. 31, 2012

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

3. LOANS

The Company originates loans for business, consumer and real estate activities for equipment purchases. Such loans are concentrated in Yolo, Placer, Sonoma, Shasta, Humboldt, Mendocino, Trinity and Del Norte Counties and neighboring communities. Substantially all loans are collateralized. Generally, real estate loans are secured by real property. Commercial and other loans are secured by bank deposits, real estate or business or personal assets. Leases are generally secured by equipment. The Company’s policy for requiring collateral reflects the Company’s analysis of the borrower, the borrower’s industry and the economic environment in which the loan would be granted. The loans are expected to be repaid from cash flows or proceeds from the sale of selected assets of the borrower.

Major classifications of loans at December 31 were as follows (in thousands):

	2012			2011
Commercial	$	46,078		$	46,160
Real estate - commercial		295,630			276,644
Real estate - construction		23,003			27,463
Real estate - mortgage		74,353			47,362
Installment		6,689			10,925
Other		45,941			47,965
Gross Loans		491,694			456,519
Deferred loan costs (fees), net		517			(304	)
Allowance for loan losses		(10,458	)		(12,656	)
Total loans, net	$	481,753		$	443,559

Salaries and employee benefits totaling $1,263,000, $800,000 and $465,000 have been deferred as loan origination costs for the years ended December 31, 2012, 2011 and 2010, respectively.

Certain real estate loans receivable are pledged as collateral for available borrowings with the FHLB. Pledged loans totaled $116,929,000 and $137,528,000 at December 31, 2012 and 2011, respectively (see Note 9).

The Company did not recognize any interest income on impaired loans for the years ending December 31, 2012, 2011 and 2010. The following table presents impaired loans and the related allowance for loan losses as of the dates indicated (in thousands):

	As of December 31, 2012						As of December 31, 2011
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
With no allocated allowance
Commercial	$	585	$	586	$	—	$	—	$	—	$	—
Real estate - commercial		2,778		2,974		—		1,502		1,556		—
Real estate - construction		1,210		1,273		—		4,128		4,153		—
Real estate - mortgage		684		736		—		643		751		—
Installment		122		138		—		70		75		—
Other		111		120		—		88		91		—
Subtotal		5,490		5,827		—		6,431		6,626		—
With allocated allowance
Commercial		—		—		—		1,788		1,849		450
Real estate - commercial		184		217		171		4,496		5,302		606
Real estate - construction		161		161		18		5,312		5,312		504
Real estate - mortgage		—		—		—		295		314		37
Installment		—		—		—		37		39		13
Other		—		—		—		—		—		—
Subtotal		345		378		189		11,928		12,816		1,610
Total Impaired Loans	$	5,835	$	6,205	$	189	$	18,359	$	19,442	$	1,610

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

	Average Recorded Investment
	December 31,
	2012		2011		2010
Commercial	$	941	$	2,056	$	1,901
Real estate - commercial		3,069		6,354		7,045
Real estate - construction		1,673		9,453		13,572
Real estate - mortgage		681		991		3,242
Installment		139		110		68
Other		122		91		—
Total	$	6,625	$	19,055	$	25,828

Nonperforming loans include all such loans that are either 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. Nonperforming loans at December 31 are summarized as follows (in thousands):

	2012		2011
Nonaccrual loans	$	5,835	$	18,359
Loans 90 days past due but still accruing interest		—		52
Total nonperforming loans	$	5,835	$	18,411

If interest on nonaccrual loans had been accrued, such income would have approximated $575,000, $1,039,000 and $2,096,000 for the years ended December 31, 2012, 2011 and 2010.

At December 31, 2012 there were no commitments to lend additional funds to borrowers whose loans were classified as nonaccrual.

The following table shows an aging analysis of the loan portfolio by the amount of time past due (in thousands):

	As of December 31, 2012
	Accruing Interest
					Greater than
			30-89 Days		90 Days
	Current		Past Due		Past Due		Nonaccrual		Total
Commercial	$	45,473	$	20	$	—	$	585	$	46,078
Real estate - commercial		292,505		163		—		2,962		295,630
Real estate - construction		21,436		196		—		1,371		23,003
Real estate - mortgage		72,907		762		—		684		74,353
Installment		6,529		38		—		122		6,689
Other		45,581		249		—		111		45,941
Total	$	484,431	$	1,428	$	—	$	5,835	$	491,694

	As of December 31, 2011
	Accruing Interest
					Greater than
	30-89 Days				90 Days
	Current		Past Due		Past Due		Nonaccrual		Total
Commercial	$	44,325	$	47	$	—	$	1,788	$	46,160
Real estate - commercial		264,143		6,503		—		5,998		276,644
Real estate - construction		18,023		—		—		9,440		27,463
Real estate - mortgage		45,170		1,254		—		938		47,362
Installment		10,614		152		52		107		10,925
Other		47,877		—		—		88		47,965
Total	$	430,152	$	7,956	$	52	$	18,359	$	456,519

During the year ending December 31, 2012, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan The following table shows information related to Troubled Debt Restructurings as of December 31, 2012 (dollars in thousands):

	Accruing TDRs						Non Accruing TDRs
	Pre-Modification		Post-Modification						Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
	Contracts		Investment		Investment		Contracts		Investment		Investment
Commercial		—	$	—	$	—		1	$	529	$	529
Real estate - commercial		5	$	1,350	$	1,350		—	$	—	$	—
Real estate - construction		1	$	343	$	343		2	$	398	$	398
Real estate - mortgage		2	$	721	$	721		—	$	—	$	—
Installment		—	$	—	$	—		4	$	120	$	120
Other		—	$	—	$	—		1	$	25	$	25

A summary of TDRs by type of loans and by accrual/non-accrual status is shown below (in thousands):

For the year ended December 31, 2012:

	Accruing TDRs
	Rate Reduction and Maturity Extention		Maturity Extention		Total
Real estate - commercial	$	273	$	—	$	273
Real estate - mortgage	$	—	$	423	$	423

	Non Accruing TDRs
	Rate Reduction and Maturity Extention		Maturity Extention		Total
Commercial	$	529	$	—	$	529
Real estate - construction	$	—	$	327	$	327
Installment	$	120	$	—	$	120
Other	$	25	$	—	$	25

At December 31, 2012, there were no specific reserves allocated to customers whose loan terms were modified in troubled debt restructurings. There are no commitments to lend additional amounts at December 31, 2012 to customers with outstanding loans that are classified as troubled debt restructurings. There were no TDR’s that subsequently defaulted during the twelve months following the modification of terms.

At December 31, 2012, there were twelve loans to customers whose loan terms were modified in troubled debt restructurings. Of those twelve loans there were eight modifications involving a reduction of the stated interest rate and extension of the maturity date: two at 5.50% with a one-year extension to the maturity date, one at 4.50% with a 14-month maturity date, one at 3.00% with a 15-year maturity date, one at 8.00% with a three-month extension of the maturity date, one at 7.00% with a 10-year maturity date, and one at 4.00% with a 10-year maturity date; there were two modifications involving an extension only of the maturity dates: one for 90 days and one for 12 months; and there were two loans that did not have modifications during the last twelve months. The recorded investment in the ten loans was reduced in the aggregate amount of $665,000 during the year.

The following table shows information related to Troubled Debt Restructurings as of December 31, 2011 (dollars in thousands):

	Accruing TDRs						Non Accruing TDRs
	Pre-Modification		Post-Modification						Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
	Contracts		Investment		Investment		Contracts		Investment		Investment
Real estate - commercial		3	$	1,097	$	1,097		—	$	—	$	—
Real estate - construction		—	$	—	$	—		3	$	1,179	$	1,179
Real estate - mortgage		2	$	660	$	660		2	$	415	$	415

A summary of TDRs by type of loans and by non-accrual status is shown below (in thousands):

For the year ended December 31, 2011:

	Non Accruing TDRs
	Rate		Maturity
	Reduction		Extention		Total
Real estate - construction	$	—	$	1,179	$	1,179

At December 31, 2011, there were a total of ten TDR’s and there were no modifications involving a reduction of the stated interest rate. There were three modifications involving an extension of the maturity dates; one for 12 months, one for 36 months, and one for 42 months. The recorded investment in three loans was reduced in the aggregate amount of $86,423 during the year. During 2011, one borrower whose loan was classified as a Troubled Debt Restructuring defaulted on loan payments. The loan was in the amount of $1,994,058 and was secured by a First Deed of Trust for light industrial/retail property located in Shasta County. Prior to the borrower’s payment default, the loan was considered an “impaired” asset and subject to individual review for a specific ALLL allocation under ASC 310-10. The net value of the collateral exceeded the loan balance, therefore; there was no specific ALLL allocation for the loan. During the fourth quarter of 2011, the loan collateral was the subject of foreclosure. The collateral property was transferred to OREO with no loan loss and no impact on ALLL.