Note 7 - Other Real Estate Owned

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Real Estate Owned [Text Block]

NOTE 7. OTHER REAL ESTATE OWNED

Other Real Estate Owned – Represents real estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, OREO is recorded at the lower of cost or fair value less costs to sell, which becomes the property’s new basis. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the ALLL. After foreclosure, management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell.

Subsequent valuation adjustments are recognized within net loss of OREO. Revenue and expenses from operations and subsequent adjustments to the carrying amount of the property are included in other noninterest expense in the Consolidated Statements of Operations. In some instances, the Bank may make loans to facilitate the sales of OREO. Management reviews all sales for which it is the lending institution for compliance with sales treatment under provisions established within ASC 360-20, Real Estate Sales. Any gains related to sales of OREO may be deferred until the buyer has a sufficient initial and continuing investment in the property.

At June 30, 2014, and December 31, 2013, the recorded investment in OREO was $826 thousand and $913 thousand, respectively. For the six months ended June 30, 2014, the Company transferred foreclosed property from three loans in the amount of $268 thousand to OREO. During the six months ended June 30, 2014, further impairment was deemed necessary for an improved commercial land property in the amount of $290 thousand. The property was transferred to OREO in 2010 and was written down to its fair value in the first quarter of 2014 in anticipation of its pending sale. During the six months ended June 30, 2014 the Company sold one property with a balance of $65 thousand for a net loss of $15 thousand. The June 30, 2014 OREO balance consists of five properties, of which three are secured with 1-4 family residential real estate in the amount of $204 thousand. One property is secured by a commercial real estate property in the amount of $161 thousand. The remaining property consists of improved commercial land in the amount of $460 thousand.