Note 10 - Allowance for Loan Losses and Credit Quality Information

6 Months Ended

Jun. 30, 2014

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 following tables summarize the allowance for loan losses for the periods ending June 30, 2014 and 2013:

(Dollars in thousands)	1-4 Family			Commercial Real Estate			Consumer			Commercial Business			Total
For the three months ended June 30, 2014:
Balance, March 31, 2014	$	1,712			4,543			1,186			1,649			9,090
Provision for losses		465			(2,409	)		(1	)		(233	)		(2,178	)
Charge-offs		(92	)		0			(29	)		0			(121	)
Recoveries		0			1,689			8			208			1,905
Balance, June 30, 2014	$	2,085			3,823			1,164			1,624			8,696
For the six months ended June 30, 2014:
Balance, December 31, 2013		1,628			6,458			1,106			2,209			11,401
Provision for losses		549			(3,602	)		99			(834	)		(3,788	)
Charge-offs		(92	)		(936	)		(60	)		(1	)		(1,089	)
Recoveries		0			1,903			19			250			2,172
Balance, June 30, 2014	$	2,085			3,823			1,164			1,624			8,696
Allocated to:
Specific reserves	$	404			2,403			382			589			3,778
General reserves		1,224			4,055			724			1,620			7,623
Balance, December 31, 2013	$	1,628			6,458			1,106			2,209			11,401
Allocated to:
Specific reserves	$	761			387			449			757			2,354
General reserves		1,324			3,436			715			867			6,342
Balance, June 30, 2014	$	2,085			3,823			1,164			1,624			8,696
Loans receivable at December 31, 2013:
Individually reviewed for impairment	$	1,888			17,190			917			1,281			21,276
Collectively reviewed for impairment		74,579			177,260			52,506			70,428			374,773
Ending balance	$	76,467			194,450			53,423			71,709			396,049
Loans receivable at June 30, 2014:
Individually reviewed for impairment	$	2,338			9,804			947			1,364			14,453
Collectively reviewed for impairment		69,252			178,211			53,884			60,579			361,926
Ending balance	$	71,590			188,015			54,831			61,943			376,379

(Dollars in thousands)	1-4 Family			Commercial Real Estate			Consumer			Commercial Business			Total
For the three months ended June 30, 2013:
Balance, March 31, 2013	$	2,352			14,581			1,344			3,664			21,941
Provision for losses		(293	)		85			133			(445	)		(520	)
Charge-offs		(13	)		(759	)		(55	)		(556	)		(1,383	)
Recoveries		13			182			9			117			321
Balance, June 30, 2013	$	2,059			14,089			1,431			2,780			20,359
For the six months ended June 30, 2013:
Balance, December 31, 2012		2,821			13,588			1,146			4,053			21,608
Provision for losses		(575	)		866			315			(1,126	)		(520	)
Charge-offs		(200	)		(910	)		(101	)		(556	)		(1,767	)
Recoveries		13			545			71			409			1,038
Balance, June 30, 2013	$	2,059			14,089			1,431			2,780			20,359

The following table summarizes the amount of classified and unclassified loans at June 30, 2014 and December 31, 2013:

	June 30, 2014
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
1-4 family	$	0		5,470		856		0		6,326		65,264		71,590
Commercial real estate:
Residential developments		0		10,319		0		0		10,319		13,898		24,217
Other		229		9,171		0		0		9,400		154,398		163,798
Consumer		0		495		151		301		947		53,884		54,831
Commercial business:
Construction industry		0		445		0		0		445		5,463		5,908
Other		671		2,198		0		0		2,869		53,166		56,036
	$	900		28,098		1,007		301		30,306		346,073		376,379

	December 31, 2013
	Classified										Unclassified
(Dollars in thousands)	Special Mention		Substandard		Doubtful		Loss		Total		Total		Total Loans
1-4 family	$	738		6,987		322		0		8,047		68,420		76,467
Commercial real estate:
Residential developments		0		19,229		0		0		19,229		13,755		32,984
Other		5,337		13,092		0		0		18,429		143,037		161,466
Consumer		0		524		152		240		916		52,507		53,423
Commercial business:
Construction industry		0		401		0		0		401		5,933		6,334
Other		1,419		6,433		0		0		7,852		57,523		65,375
	$	7,494		46,666		474		240		54,874		341,175		396,049

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 June 30, 2014 and December 31, 2013 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
June 30, 2014
1-4 family	$	654		436		240		1,330		70,260		71,590		0
Commercial real estate:
Residential developments		0		0		0		0		24,217		24,217		0
Other		0		0		0		0		163,798		163,798		0
Consumer		545		182		105		832		53,999		54,831		0
Commercial business:
Construction industry		7		0		0		7		5,901		5,908		0
Other		0		0		540		540		55,495		56,035		0
	$	1,206		618		885		2,709		373,670		376,379		0
December 31, 2013
1-4 family	$	1,542		128		322		1,992		74,475		76,467		0
Commercial real estate:
Residential developments		0		1,426		0		1,426		31,558		32,984		0
Other		0		0		0		0		161,466		161,466		0
Consumer		418		256		57		731		52,692		53,423		0
Commercial business:
Construction industry		0		1,934		0		1,934		4,400		6,334		0
Other		800		104		0		904		64,471		65,375		0
	$	2,760		3,848		379		6,987		389,062		396,049		0

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 June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
(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	$	165		165		0		88		88		0
Commercial real estate:
Residential developments		7,795		10,448		0		8,257		13,636		0
Other		51		236		0		52		52		0
Consumer		443		447		0		487		491		0
Commercial business:
Construction industry		87		247		0		93		296		0
Other		0		0		0		0		0		0
Loans with an allowance recorded:
1-4 family		2,173		2,217		761		1,800		1,844		404
Commercial real estate:
Residential developments		1,089		1,096		229		7,994		12,725		2,260
Other		869		869		158		888		888		143
Consumer		504		520		449		429		429		382
Commercial business:
Construction industry		0		0		0		0		0		0
Other		1,277		1,829		757		1,188		1,984		589
Total:
1-4 family		2,338		2,382		761		1,888		1,932		404
Commercial real estate:
Residential developments		8,884		11,544		229		16,251		26,361		2,260
Other		920		1,105		158		940		940		143
Consumer		947		967		449		916		920		382
Commercial business:
Construction industry		87		247		0		93		296		0
Other		1,277		1,829		757		1,188		1,984		589
	$	14,453		18,074		2,354		21,276		32,433		3,778

The following table summarizes the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2014 and 2013:

	For the three months ended June 30, 2014				For the six months ended June 30, 2014
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average  Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded:
1-4 family	$	508		0		368		1
Commercial real estate:
Residential developments		7,454		26		7,722		34
Other		51		0		51		0
Consumer		457		1		467		2
Commercial business:
Construction industry		89		0		90		0
Other		0		0		0		0
Loans with an allowance recorded:
1-4 family		1,883		6		1,855		17
Commercial real estate:
Residential developments		2,437		0		4,289		0
Other		872		8		877		16
Consumer		506		3		480		7
Commercial business:
Construction industry		0		0		0		0
Other		1,043		7		1,091		17
Total:
1-4 family		2,391		6		2,223		18
Commercial real estate:
Residential developments		9,891		26		12,011		34
Other		923		8		928		16
Consumer		963		4		947		9
Commercial business:
Construction industry		89		0		90		0
Other		1,043		7		1,091		17
	$	15,300		51		17,290		94

	For the three months ended June 30, 2013				For the six months ended June 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	$	1,617		15		1,617		31
Commercial real estate:
Residential developments		8,942		14		9,533		29
Other		361		4		454		7
Consumer		291		2		325		5
Commercial business:
Construction industry		82		0		88		0
Other		2		0		12		0
Loans with an allowance recorded:
1-4 family		2,687		8		2,815		16
Commercial real estate:
Residential developments		13,953		14		13,989		27
Other		2,422		1		2,541		4
Consumer		1,498		3		1,475		13
Commercial business:
Construction industry		35		0		48		0
Other		1,838		11		1,953		19
Total:
1-4 family		4,304		23		4,432		47
Commercial real estate:
Residential developments		22,895		28		23,522		56
Other		2,783		5		2,995		11
Consumer		1,789		5		1,800		18
Commercial business:
Construction industry		117		0		136		0
Other		1,840		11		1,965		19
	$	33,728		72		34,850		151

At June 30, 2014 and December 31, 2013, non-accruing loans totaled $12.3 million and $17.5 million, respectively, for which the related allowance for loan losses was $1.9 million and $3.4 million, respectively. The decrease in the related allowance is due primarily to two related commercial real estate loans that were charged down and paid off during the first quarter of 2014. 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 $7.8 million at June 30, 2014 and December 31, 2013, respectively. Non-accrual loans also include certain loans that have had terms modified in a TDR.

The non-accrual loans at June 30, 2014 and December 31, 2013 are summarized as follows:

(Dollars in thousands)	June 30, 2014		December 31, 2013
1-4 family	$	2,056	$	1,602
Commercial real estate:
Residential developments		8,340		14,146
Other		463		403
Consumer		707		737
Commercial business:
Construction industry		87		93
Other		638		515
	$	12,291	$	17,496

At June 30, 2014 and December 31, 2013 there were loans included in loans receivable, net, with terms that had been modified in a TDR totaling $12.8 million and $19.2 million, respectively. For the loans that were restructured in the second quarter of 2014, no loans were classified but performing and $0.7 million were non-performing at June 30, 2014. Of the $0.2 million in loans that were restructured in the second quarter of 2013, no loans were classified but performing, and $0.2 million were non-performing at June 30, 2013.

The following table summarizes TDRs at June 30, 2014 and December 31, 2013:

	June 30, 2014						December 31, 2013
(Dollars in thousands)	Accrual		Non- Accrual		Total		Accrual		Non- Accrual		Total
1-4 family	$	282		1,188		1,470		285		624		909
Commercial real estate		1,000		8,689		9,689		2,642		13,817		16,459
Consumer		240		527		767		180		533		713
Commercial business		640		232		872		673		475		1,148
	$	2,162		10,636		12,798		3,780		15,449		19,229

There were no material commitments to lend additional funds to customers whose loans were restructured or classified as nonaccrual at June 30, 2014 or December 31, 2013.

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 table and represent the difference between the outstanding recorded balance pre-modification and post-modification, for the three month and six month periods ending June 30, 2014 and June 30, 2013.

	Three Months Ended June 30, 2014						Six Months Ended June 30, 2014
(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		2	$	760		760		2	$	760		760
Commercial real estate:
Other		0		0		0		0		0		0
Consumer		2		62		46		4		155		140
Commercial business:
Construction industry		0		0		0		0		0		0
Total		4	$	822		806		6	$	915		900

	Three Months Ended June 30, 2013				Six Months Ended June 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	1	$	193	200	1	$	193	200
Commercial real estate:
Other	0		0	0	2		75	75
Consumer	1		3	3	5		117	118
Commercial business:
Construction industry	1		41	41	1		41	41
Total	3	$	237	244	9	$	426	434

Loans that were restructured within the 12 months preceding June 30, 2014 and June 30, 2013 and defaulted during the three and six months ended June 30, 2014 and June 30, 2013 are presented in the table below.

	Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
(Dollars in thousands)	Number of Contracts		Outstanding Recorded Investment		Number of Contracts		Outstanding Recorded Investment
Troubled debt restructurings that subsequently defaulted:
1-4 family		1	$	640		1	$	640
Commercial real estate:
Residential developments		0		0		0		0
Other		0		0		0		0
Consumer		0		0		0		0
Commercial business:
Construction industry		0		0		0		0
Other		0		0		0		0
Total		1	$	640		1	$	640

	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
(Dollars in thousands)	Number of Contracts		Outstanding Recorded Investment		Number of Contracts		Outstanding Recorded Investment
Troubled debt restructurings that subsequently defaulted:
1-4 family		2	$	187		2	$	187
Commercial real estate:
Residential developments		2		608		2		608
Other		0		0		0		0
Consumer		0		0		0		0
Commercial business:
Construction industry		0		0		0		0
Other		0		0		0		0
Total		4	$	795		4	$	795

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 reserves for TDRs were $1.2 million, or 13.6%, of the total $8.7 million in loan loss reserves at June 30, 2014 and $2.9 million, or 25.6%, of the total $11.4 million in loan loss reserves at December 31, 2013.