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Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2013
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
4. Loans and Allowance for Loan Losses

 

Loans consisted of the following as of:

 

    March 31,     December 31,  
(Dollars in thousands)   2013     2012  
             
One-to-four family residential real estate   $ 91,380     $ 88,454  
Construction and land     24,194       23,435  
Commercial real estate     93,092       88,790  
Commercial loans     59,040       64,570  
Agriculture loans     31,776       31,935  
Municipal loans     6,525       9,857  
Consumer loans     12,681       13,417  
Total gross loans     318,688       320,458  
Net deferred loan costs and loans in process     215       37  
Allowance for loan losses     (4,634 )     (4,581 )
Loans, net   $ 314,269     $ 315,914  

 

The following tables provide information on the Company’s allowance for loan losses by loan class and allowance methodology:

 

    Three months ended March 31, 2013  
(Dollars in thousands)   One-to-four
family
residential
real estate		     Construction
and land		     Commercial
real estate		     Commercial
loans		     Agriculture
loans		     Municipal
loans		     Consumer
loans		     Total  
                                                 
Allowance for loan losses:                                                                
Balance at December 31, 2012   $ 714     $ 1,214     $ 1,313     $ 707     $ 367     $ 107     $ 159     $ 4,581  
Charge-offs     (23 )     -       -       (199 )     -       -       (47 )     (269 )
Recoveries     8       2       -       1       -       -       11       22  
Net charge-offs     (15 )     2       -       (198 )     -       -       (36 )     (247 )
Provision for loan losses     (121 )     (82 )     295       106       140       (6 )     (32 )     300  
Balance at March 31, 2013     578       1,134       1,608       615       507       101       91       4,634  
                                                                 
Allowance for loan losses:                                                                
Individually evaluated for loss     28       332       -       49       -       65       -       474  
Collectively evaluated for loss     550       802       1,608       566       507       36       91       4,160  
Total     578       1,134       1,608       615       507       101       91       4,634  
                                                                 
Loan balances:                                                                
Individually evaluated for loss     757       8,603       2,833       236       5       772       27       13,233  
Collectively evaluated for loss     90,623       15,591       90,259       58,804       31,771       5,753       12,654       305,455  
Total   $ 91,380     $ 24,194     $ 93,092     $ 59,040     $ 31,776     $ 6,525     $ 12,681     $ 318,688  

 

    Three months ended March 31, 2012  
(Dollars in thousands)   One-to-four
family
residential
real estate		     Construction
and land		     Commercial
real estate		     Commercial
loans		     Agriculture
loans		     Municipal
loans		     Consumer
loans		     Total  
                                                 
Allowance for loan losses:                                                                
Balance at December 31, 2011     560       928       1,791       745       433       130       120       4,707  
Charge-offs     -       -       -       -       -       -       (44 )     (44 )
Recoveries     2       1       -       4       38       -       6       51  
Net charge-offs     2       1       -       4       38       -       (38 )     7  
Provision for loan losses     129       133       106       (21 )     (63 )     5       11       300  
Balance at March 31, 2012     691       1,062       1,897       728       408       135       93       5,014  
                                                                 
Allowance for loan losses:                                                                
Individually evaluated for loss     66       10       -       34       -       65       18       193  
Collectively evaluated for loss     625       1,052       1,897       694       408       70       75       4,821  
Total     691       1,062       1,897       728       408       135       93       5,014  
                                                                 
Loan balances:                                                                
Individually evaluated for loss     1,277       25       227       648       12       784       39       3,012  
Collectively evaluated for loss     75,173       20,519       92,261       55,451       35,030       9,281       13,001       300,716  
Total   $ 76,450     $ 20,544     $ 92,488     $ 56,099     $ 35,042     $ 10,065     $ 13,040     $ 303,728  

 

The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. The accrual of interest on non-performing loans is discontinued at the time the loan is 90 days delinquent, unless the credit is well secured and in process of collection. There were no loans 90 days delinquent and accruing interest at March 31, 2013 or December 31, 2012. The following tables present information on the Company’s past due and non-accrual loans by loan class:

 

(Dollars in thousands)   As of March 31, 2013  
    30-59 days
delinquent
and
accruing		     60-89 days
delinquent
and
accruing		     90 days or
more
delinquent
and accruing		     Total past
due loans
accruing		     Non-accrual
loans		     Total  
                                     
One-to-four family residential real estate   $ 2,038     $ -     $ -     $ 2,038     $ 749     $ 2,787  
Construction and land     40       -       -       40       3,859       3,899  
Commercial real estate     568       -       -       568       2,833       3,401  
Commercial loans     118       -       -       118       236       354  
Agriculture loans     170       -       -       170       5       175  
Municipal loans     -       -       -       -       131       131  
Consumer loans     120       63       -       183       27       210  
Total   $ 3,054     $ 63     $ -     $ 3,117     $ 7,840     $ 10,957  
                                                 
Percent of gross loans     0.96 %     0.02 %     0.00 %     0.98 %     2.46 %     3.44 %

 

    As of December 31, 2012  
    30-59 days
delinquent
and 
accruing		     60-89 days
delinquent
and 
accruing		     90 days or
more
delinquent
and accruing		     Total past
due loans
accruing		     Non-accrual
loans		     Total  
                                     
One-to-four family residential real estate   $ 282     $ 1,362     $ -     $ 1,644     $ 731     $ 2,375  
Construction and land     18       -       -       18       3,915       3,933  
Commercial real estate     166       82       -       248       2,833       3,081  
Commercial loans     62       17       -       79       1,475       1,554  
Agriculture loans     -       -       -       -       5       5  
Municipal loans     -       -       -       -       131       131  
Consumer loans     142       65       -       207       18       225  
Total   $ 670     $ 1,526     $ -     $ 2,196     $ 9,108     $ 11,304  
                                                 
Percent of gross loans     0.21 %     0.48 %     0.00 %     0.69 %     2.84 %     3.53 %

 

The Company’s impaired loans decreased from $14.5 million at December 31, 2012 to $13.2 million at March 31, 2013. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at March 31, 2013 and December 31, 2012, was related to troubled debt restructurings (“TDR”) that are current and accruing interest, but still classified as impaired. The following tables present information on impaired loans:

 

(Dollars in thousands)                                          
    As of March 31, 2013  
    Unpaid
contractual
principal		     Impaired loan
balance		     Impaired
loans
without an
allowance		     Impaired
loans with
an
allowance		     Related
allowance
recorded		     Year-to-date
average loan
balance		     Year-to-date
 interest
income
recognized		  
                                           
One-to-four family residential real estate   $ 1,047     $ 757     $ 563     $ 194     $ 28     $ 769     $ -  
Construction and land     10,337       8,603       6,301       2,302       332       8,656       60  
Commercial real estate     2,833       2,833       2,833       -       -       2,833       -  
Commercial loans     236       236       3       233       49       238       -  
Agriculture loans     5       5       5       -       -       5       -  
Municipal loans     772       772       641       131       65       772       5  
Consumer loans     27       27       27       -       -       28       -  
Total impaired loans   $ 15,257     $ 13,233     $ 10,373     $ 2,860     $ 474     $ 13,301     $ 65  

 

    As of December 31, 2012  
    Unpaid
contractual
principal		     Impaired loan
balance		     Impaired
loans
without an
allowance		     Impaired
loans with
an
allowance		     Related
allowance
recorded		     Year-to-date
average loan
balance		     Year-to-date
interest
income
recognized		  
                                           
One-to-four family residential real estate   $ 1,029     $ 739     $ 57     $ 682     $ 165     $ 767     $ 19  
Construction and land     10,425       8,691       6,334       2,357       388       9,211       302  
Commercial real estate     2,833       2,833       2,833       -       -       3,352       -  
Commercial loans     1,475       1,475       395       1,080       268       1,621       3  
Agriculture loans     5       5       5       -       -       8       -  
Municipal loans     772       772       641       131       65       779       20  
Consumer loans     18       18       3       15       15       20       -  
Total impaired loans   $ 16,557     $ 14,533     $ 10,268     $ 4,265     $ 901     $ 15,758     $ 344  

 

At March 31, 2013, the Company had seven loan relationships consisting of eleven outstanding loans that were classified as TDRs compared to eight relationships consisting of thirteen outstanding loans at December 31, 2012. During 2012, the Company classified a commercial loan relationship consisting of two commercial loans as a TDR after agreeing to extend the maturity of the loans while the borrower liquidated the business assets securing the loans. The loans were repaid in the first quarter of 2013 and resulted in a net charge-off of $6,000. The Company did not classify any loan restructurings as TDRs during the first quarter of 2013.

 

The Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans as of March 31, 2013 that had been modified as TDRs and then subsequently defaulted. At March 31, 2013 and December 31, 2012, there was $13,000 and $15,000, respectively, of commitments to lend additional funds to a land loan classified as a TDR. As of March 31, 2013, the Company had $332,000 of allowance recorded against loans classified as TDRs compared to $521,000 recorded at December 31, 2012.

 

The following table presents information on loans that are classified as TDRs:

 

(Dollars in thousands)                        
    As of March 31, 2013     As of December 31, 2012  
    Number of
loans		     Loan balance     Number of
loans		     Loan balance  
                         
One-to-four family residential real estate     2     $ 474       2     $ 493  
Construction and land     7       6,928       7       7,077  
Commerical loans     -       -       2       196  
Municipal loans     2       641       2       641  
Total troubled debt restructurings     11     $ 8,043       13     $ 8,407  

 

The Company services one-to-four family residential real estate loans for others with outstanding principal balances of $277.8 million and $263.5 million at March 31, 2013 and December 31, 2012, respectively. Gross service fee income related to such loans was $169,000 and $119,000 for the quarters ended March 31, 2013 and 2012, respectively, and is included in fees and service charges in the consolidated statements of earnings.

 

The Company had a mortgage repurchase reserve of $418,000 at March 31, 2013 and December 31, 2012, which represents the Company’s best estimate of probable losses that the Company has incurred related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. Because the level of mortgage repurchase losses depends upon economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, mortgage repurchase losses are difficult to estimate and require considerable judgment. The Company did not make any provisions or charge any losses against the reserve during the first three months of 2013. As of March 31, 2013, the Company did not have any outstanding mortgage repurchase requests.