NOTE 6. Troubled Debt Restructurings

All loans deemed a troubled debt restructuring, or “TDR”, are considered impaired, and are evaluated for collateral and cash-flow sufficiency. A loan is considered a TDR when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. All of the following factors are indicators that the Bank has granted a concession (one or multiple items may be present):


•	The borrower receives a reduction of the stated interest rate to a rate less than the institution is willing to accept at the time of the restructure for a new loan with comparable risk.


•	The borrower receives an extension of the maturity date or dates at a stated interest rate lower than the current market interest rate for new debt with similar risk characteristics.


•	The borrower receives a reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement.


•	The borrower receives a deferral of required payments (principal and/or interest).


•	The borrower receives a reduction of the accrued interest.

There were twenty-three (23) troubled debt restructured loans totaling $8.1 million at June 30, 2013. At December 31, 2012, there were twenty-three (23) troubled debt restructured loans totaling $8.2 million. There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at June 30, 2013.

The following tables set forth information on the Company’s troubled debt restructurings by class of financing receivable occurring during the three and six months ended June 30, 2013 and June 30, 2012:



		Three Months Ended
		June 30, 2013
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued

	0	$	—	$	—	$	—
	0	$	—	$	—	$	—

		Three Months Ended
		June 30, 2012
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Commercial Real Estate
Owner Occupied	1	$	162	$	162	$	—
	1	$	162	$	162	$	—

		Six Months Ended
		June 30, 2013
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Residential
Equity lines	1	$	184	$	184	$	—
Total	1	$	184	$	184	$	—

		Six Months Ended
		June 30, 2012
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Commercial Real Estate
Owner Occupied	1	$	162	$	162	$	—
Residential
Single family	1	91		91		—
Total	2	$	253	$	253	$	—

During the three months ended June 30, 2013 , the Company had no new restructured loans. During the six months ended June 30, 2013, the Company restructured one loan by granting concessions to borrowers experiencing financial difficulties. A residential loan was modified by changing payments to interest-only in order to reduce the monthly payment for a period of time.

During the three months ended June 30, 2012, the Company restructured one loan by granting concessions to a borrower experiencing financial difficulties. An owner-occupied commercial real estate loan was modified by changing the amortization period to reduce the payment amount. During the six months ended June 30, 2012, the Company restructured two loans by granting concessions to borrowers experiencing financial difficulties. One residential loan was modified by granting an interest rate reduction. In addition, one owner-occupied commercial real estate loan was modified by changing the amortization period to reduce the payment amount.

Loans by class of financing receivable modified as TDRs within the previous 12 months and for which there was a payment default during the stated periods were:



	Three Months Ended
	June 30, 2013
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Owner occupied	1	$	138
Non-owner occupied	1	557
Residential
Single family	4	954
Total	6	$	1,649

	Three Months Ended
	June 30, 2012
	(in thousands)
	Number of Contracts	Recorded Investment
Residential
Single Family	2	$	555
Total	2	$	555


	Six Months Ended
	June 30, 2013
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Owner occupied	2	$	298
Non-owner occupied	1	557
Residential
Single family	4	$	954
Total	7	$	1,809

	Six Months Ended
	June 30, 2012
	(in thousands)
	Number of Contracts	Recorded Investment
Residential
Single family	2	$	555
Total	2	$	555

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.