Note 3 - Note Receivable

6 Months Ended

Jun. 30, 2015

Note Receivable [Abstract]

Note Receivable [Text Block]

NOTE 3. NOTE RECEIVABLE

Pursuant to the terms of a note receivable held by the Company in conjunction with the Company’s disposal of the former mortgage subsidiary, the Company received note payments (the “Note”) that commenced in 2013 and were due quarterly over a consecutive five year period. The Note carried a zero rate of interest and the obligation was guaranteed by the continuing shareholder of the Mortgage Company. As of March 31, 2014, the Company had received all principal amounts due through that date under the original Note agreement, and the Note carried an outstanding principal balance of $2.7 million.

During the first quarter of 2014, the Company’s management became increasingly concerned about whether remaining principal due under the original terms of the Note would be collectible. As a result, during April 2014, the Company executed a promissory note compromise settlement agreement (the “Agreement”) with the Mortgage Company. The Agreement settled and determined all the respective rights and obligations under the Note.

Under the terms of the Agreement, the Mortgage Company paid cash in the amount of $686 thousand and transferred a 1-4 family mortgage note with a principal balance of $560 thousand to the Company. Simultaneously, the Company applied a portion of the cash proceeds to pay off the outstanding balance of the Mortgage Company’s warehouse line of credit held with the Bank. The Mortgage Company’s line of credit was subsequently closed during 2014. As a result of the Agreement, the Company recognized a loss of $1.4 million in full and complete satisfaction of the Note during the first quarter of 2014.

The table below presents the details of the closing transaction:

(Amounts in thousands)	Amount
Proceeds:
Cash received	$	686
1-4 family mortgage note (fair value)		560
Net proceeds received		1,246
Assets derecognized:
Note due from the mortgage company		2,753
Discount on the note		(374	)
Warehouse line of credit		259
Total assets derecognized		2,638
Loss on settlement of the note	$	1,392