OTHER REAL ESTATE OWNED

12 Months Ended

Dec. 31, 2013

OTHER REAL ESTATE OWNED [Abstract]

OTHER REAL ESTATE OWNED

NOTE 6 – OTHER REAL ESTATE OWNED

OREO declined $3.8 million from $13.4 million at December 31, 2012 to $9.6 million at December 31, 2013.  During 2013 there was a shift in OREO composition from real estate acquired through, or in lieu of foreclosure in settlement of loans to real estate acquired through foreclosure related to tax liens.  Set forth below is a table which details the changes in OREO from December 31, 2012 to December 31, 2013.

	For the year ended December 31, 2013
(In thousands)	Loans			Tax Liens			Total
Beginning balance	$	11,365		$	2,070		$	13,435
Net proceeds from sales		(8,869	)		(3,910	)		(12,779	)
Net gain on sales		228			1,199			1,427
Assets acquired on non-accrual loans		100			8,951			9,051
Impairment charge		(1,099	)		(418	)		(1,517	)
Ending balance	$	1,725		$	7,892		$	9,617

At December 31, 2013, OREO was comprised of $7.9 million in tax liens, $769,000 in land, $521,000 in commercial real estate, and a residential condominium project with a fair value of $435,000.  During 2013 the Company sold five separate land parcels and sold residential real estate properties related to five loan relationships. The Company received $6.0 million in net proceeds and recorded a net loss of $194,000 as a result of these sales.  Additionally, the Company sold a commercial real estate property, which was a hotel construction project in Minneapolis, Minnesota in which the Company was a participant. The Company received its pro rata share of net proceeds in the amount of $2.5 million and recorded a net gain of $262,000.  The Company also sold 42 condominiums related to the construction project in Minneapolis, Minnesota. The Company received its pro rata share of net proceeds in the amount of $330,000 and recorded net gains of $160,000.  During 2013 the Company recorded impairment charges of $628,000 on three land properties.  Due to the length of time that these properties have been classified as OREO and the inability to close on prior agreements of sales, the Company decided to a make a steep reduction in the selling prices of these three properties.  In addition the Company recorded impairment charges of $325,000 and $146,000 related to commercial real estate and residential real estate properties due to updated annual appraisals or agreements of sale.

In 2013 as the composition of the OREO assets evolved to properties acquired through the tax lien portfolio, the Company transferred $9.0 million to OREO which represents 84 separate properties.  During 2013, the Company sold 49 of the tax lien properties, received proceeds of $3.9 million, and recorded net gains of $1.2 million as a result of these sales. Additionally, the Company recorded impairment charges of $418,000 in 2013 related to the tax lien properties.  At December 31, 2012, OREO assets acquired through the tax lien portfolio were $2.1 million and were comprised of 30 properties.

The Company is working to satisfactorily sell the remaining OREO properties.  However the Company recognizes that the successful disposition of the properties, specifically the land, will likely take considerable time.