Note 10 - Allowance for Loan Losses and Credit Quality Information

9 Months Ended

Sep. 30, 2013

Allowance For Loan Losses And Credit Quality Information [Abstract]

Allowance For Loan Losses And Credit Quality Information [Text Block]

(10) Allowance for Loan Losses and Credit Quality Information

The allowance for loan losses is summarized as follows: 

(Dollars in thousands)	1-4 Family			Commercial Real Estate			Consumer			Commercial Business			Total
For the three months ended September 30, 2013:
Balance, June 30, 2013	$	2,059			14,089			1,431			2,780			20,359
Provision for losses		(675	)		(3,512	)		(58	)		(85	)		(4,330	)
Charge-offs		0			(2	)		(374	)		(50	)		(426	)
Recoveries		0			711			14			177			902
Balance, September 30, 2013	$	1,384			11,286			1,013			2,822			16,505
For the nine months ended September 30, 2013:
Balance, December 31, 2012	$	2,821			13,588			1,146			4,053			21,608
Provision for losses		(1,250	)		(2,646	)		256			(1,210	)		(4,850	)
Charge-offs		(200	)		(911	)		(475	)		(606	)		(2,192	)
Recoveries		13			1,255			86			585			1,939
Balance, September 30, 2013	$	1,384			11,286			1,013			2,822			16,505
Allocated to:
Specific reserves	$	571			2,591			537			1,114			4,813
General reserves		2,250			10,997			609			2,939			16,795
Balance, December 31, 2012	$	2,821			13,588			1,146			4,053			21,608
Allocated to:
Specific reserves	$	309			5,218			335			690			6,552
General reserves		1,075			6,068			678			2,132			9,953
Balance, September 30, 2013	$	1,384			11,286			1,013			2,822			16,505
Loans receivable at December 31, 2012:
Individually reviewed for impairment	$	4,687			28,195			1,823			2,395			37,100
Collectively reviewed for impairment		92,350			216,712			52,152			77,459			438,673
Ending balance	$	97,037			244,907			53,975			79,854			475,773
Loans receivable at September 30, 2013:
Individually reviewed for impairment	$	3,423			22,569			746			1,399			28,137
Collectively reviewed for impairment		75,158			184,892			52,668			68,984			381,702
Ending balance	$	78,581			207,461			53,414			70,383			409,839

(Dollars in thousands)	1-4 Family			Commercial Real Estate			Consumer			Commercial Business			Total
For the three months ended September 30, 2012:
Balance, June 30, 2012	$	3,665			11,553			1,268			4,033			20,519
Provision for losses		(621	)		2,246			4			(45	)		1,584
Charge-offs		0			(1,535	)		(164	)		(167	)		(1,866	)
Recoveries		0			47			94			84			225
Balance, September 30, 2012	$	3,044			12,311			1,202			3,905			20,462
For the nine months ended September 30, 2012:
Balance, December 31, 2011	$	3,718			13,622			1,159			5,389			23,888
Provision for losses		(674	)		3,037			851			(670	)		2,544
Charge-offs		0			(5,719	)		(921	)		(1,996	)		(8,636	)
Recoveries		0			1,371			113			1,182			2,666
Balance, September 30, 2012	$	3,044			12,311			1,202			3,905			20,462

The following table summarizes the amount of classified and unclassified loans at September 30, 2013 and December 31, 2012:

	September 30, 2013
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
1-4 family	$	746		8,904		0		0		9,650		68,931		78,581
Commercial real estate:
Residential developments		0		26,094		0		0		26,094		11,331		37,425
Other		17,513		22,038		0		0		39,551		130,485		170,036
Consumer		0		439		60		247		746		52,668		53,414
Commercial business:
Construction industry		0		325		0		0		325		6,355		6,680
Other		574		8,711		0		0		9,285		54,418		63,703
	$	18,833		66,511		60		247		85,651		324,188		409,839

	December 31, 2012
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
1-4 family	$	1,004		13,915		33		0		14,952		82,085		97,037
Commercial real estate:
Residential developments		744		36,210		0		0		36,954		9,389		46,343
Other		17,170		30,365		0		0		47,535		151,029		198,564
Consumer		0		1,543		123		157		1,823		52,152		53,975
Commercial business:
Construction industry		0		320		0		0		320		2,346		2,666
Other		1,224		12,628		134		0		13,986		63,202		77,188
	$	20,142		94,981		290		157		115,570		360,203		475,773

Classified loans represent special mention, substandard, doubtful and loss loans. Loans classified as substandard are loans that are generally inadequately protected by the current net worth and paying capacity of the obligor, or by the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have the weaknesses of those classified as substandard, with additional characteristics that make collection in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. A loan classified as loss is considered uncollectible and of such little value that continuance as an asset on the balance sheet is not warranted. Loans classified as substandard or doubtful require the Bank to perform an analysis of the individual loan and charge-off any loans, or portion thereof, that are deemed uncollectible.

The aging of past due loans at September 30, 2013 and December 31, 2012 is summarized 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 Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
September 30, 2013
1-4 family	$	878		930		0		1,808		76,773		78,581		0
Commercial real estate:
Residential developments		256		0		739		995		36,430		37,425		0
Other		101		0		0		101		169,935		170,036		0
Consumer		355		98		3		456		52,958		53,414		0
Commercial business:
Construction industry		0		0		0		0		6,680		6,680		0
Other		0		0		0		0		63,703		63,703		0
	$	1,590		1,028		742		3,360		406,479		409,839		0
December 31, 2012
1-4 family	$	1,172		240		0		1,412		95,625		97,037		0
Commercial real estate:
Residential developments		0		0		0		0		46,343		46,343		0
Other		49		0		289		338		198,226		198,564		0
Consumer		591		80		0		671		53,304		53,975		0
Commercial business:
Construction industry		45		0		79		124		2,542		2,666		0
Other		1,441		106		7,467		9,014		68,174		77,188		7,423
	$	3,298		426		7,835		11,559		464,214		475,773		7,423

Impaired loans include loans that are non-performing (non-accruing) and loans that have been modified in a troubled debt restructuring (TDR). The following table summarizes impaired loans and related allowances as of September 30, 2013 and December 31, 2012:

	September 30, 2013						December 31, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Loans with no related allowance recorded:
1-4 family	$	1,583		1,583		0		1,617		1,617		0
Commercial real estate:
Residential developments		8,754		11,946		0		10,714		15,530		0
Other		335		335		0		640		640		0
Consumer		287		293		0		393		400		0
Commercial business:
Construction industry		96		171		0		102		1,038		0
Other		0		0		0		34		534		0
Loans with an allowance recorded:
1-4 family		1,840		1,884		309		3,070		3,114		571
Commercial real estate:
Residential developments		12,109		14,400		4,943		14,061		16,545		1,669
Other		1,371		1,454		275		2,780		3,133		921
Consumer		459		459		335		1,430		1,430		537
Commercial business:
Construction industry		0		0		0		74		74		62
Other		1,303		2,055		690		2,185		2,936		1,053
Total:
1-4 family		3,423		3,467		309		4,687		4,731		571
Commercial real estate:
Residential developments		20,863		26,346		4,943		24,775		32,075		1,669
Other		1,706		1,789		275		3,420		3,773		921
Consumer		746		752		335		1,823		1,830		537
Commercial business:
Construction industry		96		171		0		176		1,112		62
Other		1,303		2,055		690		2,219		3,470		1,053
	$	28,137		34,580		6,552		37,100		46,991		4,813

The following tables summarize average recorded investment and interest income recognized on impaired loans during the three and nine months ended September 30, 2013 and 2012.

	For the three months ended September 30, 2013				For the nine months ended September 30, 2013
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded:
1-4 family	$	1,589		31		1,608		46
Commercial real estate:
Residential developments		9,127		29		9,338		43
Other		335		16		424		18
Consumer		309		5		315		8
Commercial business:
Construction industry		98		0		90		0
Other		0		0		9		0
Loans with an allowance recorded:
1-4 family		2,272		6		2,571		19
Commercial real estate:
Residential developments		12,031		27		13,519		41
Other		1,856		228		2,249		232
Consumer		998		7		1,221		18
Commercial business:
Construction industry		0		0		36		0
Other		1,332		17		1,791		28
Total:
1-4 family		3,861		37		4,179		65
Commercial real estate:
Residential developments		21,158		56		22,857		84
Other		2,191		244		2,673		250
Consumer		1,307		12		1,536		26
Commercial business:
Construction industry		98		0		126		0
Other		1,332		17		1,800		28
	$	29,947		366		33,171		453

	For the three months ended September 30, 2012				For the nine months ended September 30, 2012
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded:
1-4 family	$	3,214		20		3,312		70
Commercial real estate:
Residential developments		11,737		60		10,752		370
Other		2,540		4		3,177		22
Consumer		355		3		390		6
Commercial business:
Construction industry		99		0		269		0
Other		1,620		2		1,556		8
Loans with an allowance recorded:
1-4 family		3,491		13		3,780		52
Commercial real estate:
Residential developments		14,521		37		14,627		111
Other		2,577		2		4,272		4
Consumer		1,672		32		1,269		75
Commercial business:
Construction industry		243		0		164		0
Other		2,604		9		3,847		40
Total:
1-4 family		6,705		33		7,092		122
Commercial real estate:
Residential developments		26,258		97		25,379		481
Other		5,117		6		7,449		26
Consumer		2,027		35		1,659		81
Commercial business:
Construction industry		342		0		433		0
Other		4,224		11		5,403		48
	$	44,673		182		47,415		758

At September 30, 2013 and December 31, 2012, non-accruing loans totaled $22.4 million and $30.0 million, respectively, for which the related allowance for loan losses was $6.1 million and $3.2 million, respectively. The increase in the related allowances is due primarily to the decline in estimated values of collateral securing several non-accruing loans. All of the interest income that was recognized for non-accruing loans was recognized using the cash basis method of income recognition. Non-accruing loans for which no specific allowance has been recorded, because management determined that the value of the collateral was sufficient to repay the loan, totaled $8.0 million and $10.3 million at September 30, 2013 and December 31, 2012, respectively. Non-accrual loans also include certain loans that have had terms modified in a TDR.

The non-accrual loans at September 30, 2013 and December 31, 2012 are summarized as follows:

(Dollars in thousands)	September 30, 2013		December 31, 2012
1-4 family	$	1,626	$	2,492
Commercial real estate:
Residential developments		18,950		23,652
Other		628		1,891
Consumer		442		300
Commercial business:
Construction industry		97		176
Other		614		1,464
	$	22,357	$	29,975

At September 30, 2013 and December 31, 2012 there were loans included in loans receivable, net, with terms that had been modified in a TDR totaling $25.7 million and $33.1 million, respectively. The $0.5 million in loans that were modified in the third quarter of 2013, were non-performing at September 30, 2013. None of the loans that were modified in the third quarter of 2013 were classified but performing.

The following table summarizes TDRs at September 30, 2013 and December 31, 2012:

	September 30, 2013						December 31, 2012
(Dollars in thousands)	Accrual		Non-Accrual		Total		Accrual		Non-Accrual		Total
1-4 Family	$	1,798		814		2,612		2,196		1,404		3,600
Commercial real estate		2,990		18,301		21,291		2,653		23,222		25,875
Consumer		304		257		561		1,522		292		1,814
Commercial business		689		561		1,250		754		1,012		1,766
	$	5,781		19,933		25,714		7,125		25,930		33,055

There were no material commitments to lend additional funds to customers whose loans were restructured or classified as nonaccrual at September 30, 2013 or December 31, 2012.

TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal and/or interest due, or acceptance of real estate or other assets in full or partial satisfaction of the debt. Loan modifications are not reported as TDRs after 12 months if the loan was modified at a market rate of interest for comparable risk loans, and the loan is performing in accordance with the terms of the restructured agreement for the entire 12 month period. All loans classified as TDRs are considered to be impaired.

When a loan is modified as a TDR, there may be a direct, material impact on the loans within the balance sheet, as principal balances may be partially forgiven. The financial effects of TDRs are presented in the following tables and represent the difference between the outstanding recorded balance pre-modification and post-modification, for the three month and nine month periods ended September 30, 2013 and 2012.

	Three Months Ended September 30, 2013						Nine Months Ended September 30, 2013
(Dollars in thousands)	Number of Contracts		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment		Number of Contracts		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Troubled debt restructurings:
1-4 family		0	$	0	$	0		1	$	193	$	200
Commercial real estate:
Other		1		679		254		3		754		329
Consumer		12		131		144		17		249		263
Commercial business:
Construction industry		0		0		0		1		41		41
Other		4		194		218		5		193		218
Total		17	$	1,004	$	616		27	$	1,430	$	1,051

	Three Months Ended September 30, 2012						Nine Months Ended September 30, 2012
(Dollars in thousands)	Number of Contracts		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment		Number of Contracts		Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Troubled debt restructurings:
1-4 family		4	$	452	$	439		31	$	3,666	$	3,643
Commercial real estate:
Residential developments		3		2,565		1,702		10		14,044		11,524
Other		0		0		0		6		2,814		2,587
Consumer		4		183		205		15		1,413		1,435
Commercial business:
Construction industry		0		0		0		1		80		80
Other		2		211		211		4		471		471
Total		13	$	3,411	$	2,557		67	$	22,488	$	19,740

None of the loans that were restructured within the 12 months preceding September 30, 2013 defaulted during the three and nine months ended September 30, 2013. Loans that were restructured within the 12 months preceding September 30, 2012 that defaulted during the three and nine month periods ended September 30, 2012 are presented in the following table:

	Three Months Ended September 30, 2012				Nine Months Ended September 30, 2012
(Dollars in thousands)	Number of Contracts		Outstanding Recorded Investment		Number of Contracts		Outstanding Recorded Investment
Troubled debt restructurings that subsequently defaulted:
1-4 family		0	$	0		2	$	940
Commercial real estate:
Other		0		0		2		159
Consumer		1		71		1		71
Commercial business:
Other		2		227		5		3,004
Total		3	$	298		10	$	4,174

The Company considers a loan to have defaulted when it becomes 90 or more days past due under the modified terms, when it is placed in non-accrual status, when it becomes other real estate owned, or when it becomes non-compliant with some other material requirement of the modification agreement.

Loans that were non-accrual prior to modification remain on non-accrual status for at least six months following modification. Non-accrual TDR loans that have performed according to the modified terms for six months may be returned to accrual status. Loans that were accruing prior to modification remain on accrual status after the modification as long as the loan continues to perform under the new terms.

TDRs are reviewed for impairment following the same methodology as other impaired loans. For loans that are collateral dependent, the value of the collateral is reviewed and additional reserves may be added as needed. Loans that are not collateral dependent may have additional reserves established if deemed necessary. The allowance for loan losses on TDRs was $5.8 million, or 34.9%, of the total $16.5 million in loan loss reserves at September 30, 2013 and $3.7 million, or 17.2%, of the total $21.6 million in loan loss reserves at December 31, 2012.