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-nine (29) troubled debt restructured loans totaling $8.5 million at September 30, 2013. At December 31, 2012, there were twenty-three (23) troubled debt restructured loans totaling $8.2 million. Three loans, totaling $377 thousand, were in nonaccrual status at September 30, 2013. Two loans, totaling $311 thousand, were in nonaccrual status at December 31, 2012. There were no outstanding commitments to lend additional amounts to troubled debt restructured borrowers at September 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 nine months ended September 30, 2013 and September 30, 2012:



		Three Months Ended
		September 30, 2013
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Commercial Real Estate
Owner Occupied	1	$	514	$	368	$	—
Construction and Farmland
Commercial	1	87		87		50
Residential
Single family	5	1,197		1,197		—
	7	$	1,798	$	1,652	$	50

		Three Months Ended
		September 30, 2012
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Construction and Farmland
Commercial	1	$	95	$	95	$	—
	1	$	95	$	95	$	—

		Nine Months Ended
		September 30, 2013
		(in thousands)
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Impairment Accrued
Commercial Real Estate
Owner Occupied	1	$	514	$	368	$	—
Construction and Farmland
Commercial	1	87		87		50
Residential
Equity	1	184		184		—
Single family	5	1,197		1,197		—
Total	8	$	1,982	$	1,836	$	50

		Nine Months Ended
		September 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	$	—
Construction and Farmland
Commercial	1	95		95		—
Residential
Single family	1	91		91		—
Total	3	$	348	$	348	$	—

During the three months ended September 30, 2013, the Company had seven new restructured loans. One owner occupied commercial real estate loan was modified by restructuring the loan and granting a lower interest rate. One commercial construction and farmland loan was modified by granting a lower interest rate. Four single family residential loans were modified by changing the amortization period and granting a lower interest rate. One single family residential loan was modified by changing the amortization period.

During the nine months ended September 30, 2013, the Company restructured eight loan by granting concessions to borrowers experiencing financial difficulties. In addition to those restructured during the third quarter, one residential equity 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 September 30, 2012, the Company restructured one loan by granting concessions to a borrower experiencing financial difficulties. One construction and farmland loan was modified by changing the amortization period to reduce the payment amount.

During the nine months ended September 30, 2012, the Company restructured three loans by granting concessions to borrowers experiencing financial difficulties. In addition to the one loan restructured during the third quarter, one residential loan was modified by granting an interest rate reduction and 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
	September 30, 2013
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Owner occupied	2	$	495
Non-owner occupied	1	557
Residential:
Single family	4	946
Total	7	$	1,998

	Three Months Ended
	September 30, 2012
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Non-owner occupied	1	$	93
Residential:
Single Family	3	512
Total	4	$	605


	Nine Months Ended
	September 30, 2013
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Owner occupied	3	$	654
Non-owner occupied	1	557
Residential:
Single family	4	$	946
Total	8	$	2,157

	Nine Months Ended
	September 30, 2012
	(in thousands)
	Number of Contracts	Recorded Investment
Commercial Real Estate:
Non-owner occupied	1	$	93
Residential:
Single family	4	870
Total	5	$	963

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