LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2015

Summary of Loan Portfolio, Excluding Residential Loans Held for Sale, Broken Out by Classes

The loan portfolio, excluding residential loans held for sale, broken out by classes, as of March 31, 2015 and December 31, 2014 was as follows:



(Dollars in thousands)	March 31, 2015		December 31, 2014
Commercial real estate:
Owner-occupied	$	111,399	$	100,859
Non-owner occupied	150,921		144,301
Multi-family	28,943		27,531
Non-owner occupied residential	48,806		49,315
Acquisition and development:
1-4 family residential construction	5,883		5,924
Commercial and land development	26,239		24,237
Commercial and industrial	48,742		48,995
Municipal	60,661		61,191
Residential mortgage:
First lien	125,752		126,491
Home equity - term	19,912		20,845
Home equity - lines of credit	94,623		89,366
Installment and other loans	5,872		5,891
	$	727,753	$	704,946

Bank's Ratings Based on its Internal Risk Rating System

The following summarizes the Bank’s ratings based on its internal risk rating system as of March 31, 2015 and December 31, 2014:



(Dollars in thousands)	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		Total
March 31, 2015
Commercial real estate:
Owner-occupied	$	100,189	$	2,529	$	5,457	$	3,224	$	0	$	111,399
Non-owner occupied	128,162		13,700		7,424		414		1,221		150,921
Multi-family	25,547		1,367		1,308		721		0		28,943
Non-owner occupied residential	43,174		2,870		1,800		962		0		48,806
Acquisition and development:
1-4 family residential construction	5,883		0		0		0		0		5,883
Commercial and land development	24,352		230		1,319		338		0		26,239
Commercial and industrial	43,679		958		1,889		2,216		0		48,742
Municipal	60,661		0		0		0		0		60,661
Residential mortgage:
First lien	120,619		0		0		5,133		0		125,752
Home equity - term	19,751		0		0		161		0		19,912
Home equity - lines of credit	93,272		654		127		570		0		94,623
Installment and other loans	5,848		0		0		24		0		5,872
	$	671,137	$	22,308	$	19,324	$	13,763	$	1,221	$	727,753
December 31, 2014
Commercial real estate:
Owner-occupied	$	89,815	$	2,686	$	5,070	$	3,288	$	0	$	100,859
Non-owner occupied	120,829		20,661		1,131		1,680		0		144,301
Multi-family	24,803		1,086		1,322		320		0		27,531
Non-owner occupied residential	43,020		2,968		1,827		1,500		0		49,315
Acquisition and development:
1-4 family residential construction	5,924		0		0		0		0		5,924
Commercial and land development	22,261		233		1,333		410		0		24,237
Commercial and industrial	43,794		850		1,914		2,437		0		48,995
Municipal	61,191		0		0		0		0		61,191
Residential mortgage:
First lien	121,160		9		0		5,290		32		126,491
Home equity - term	20,775		0		0		70		0		20,845
Home equity - lines of credit	88,164		630		93		479		0		89,366
Installment and other loans	5,865		0		0		26		0		5,891
	$	647,601	$	29,123	$	12,690	$	15,500	$	32	$	704,946

Impaired Loans by Class

The following table summarizes impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required as of March 31, 2015 and December 31, 2014. The recorded investment in loans excludes accrued interest receivable due to insignificance. Allowances established generally pertain to those loans in which loan forbearance agreements were in the process of being negotiated or updated appraisals were pending, and the partial charge-off will be recorded when final information is received.



	Impaired Loans with a Specific Allowance						Impaired Loans with No Specific Allowance
(Dollars in thousands)	Recorded Investment (Book Balance)		Unpaid Principal Balance (Legal Balance)		Related Allowance		Recorded Investment (Book Balance)		Unpaid Principal Balance (Legal Balance)
March 31, 2015
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	3,224	$	4,548
Non-owner occupied	1,221		1,326		487		415		2,073
Multi-family	408		408		166		313		352
Non-owner occupied residential	0		0		0		962		1,276
Acquisition and development:
Commercial and land development	0		0		0		338		1,024
Commercial and industrial	0		0		0		2,216		2,307
Residential mortgage:
First lien	1,241		1,289		142		3,892		4,379
Home equity - term	0		0		0		160		163
Home equity - lines of credit	0		0		0		570		772
Installment and other loans	12		12		12		12		36
	$	2,882	$	3,035	$	807	$	12,102	$	16,930
December 31, 2014
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	3,288	$	4,558
Non-owner occupied	0		0		0		1,680		3,420
Multi-family	0		0		0		320		356
Non-owner occupied residential	198		203		2		1,302		1,570
Acquisition and development:
Commercial and land development	0		0		0		410		1,077
Commercial and industrial	0		0		0		2,437		2,500
Residential mortgage:
First lien	982		982		149		4,340		4,968
Home equity - term	0		0		0		70		71
Home equity - lines of credit	24		40		24		455		655
Installment and other loans	13		13		13		13		36
	$	1,217	$	1,238	$	188	$	14,315	$	19,211

Average Recorded Investment in Impaired Loans and Related Interest Income

The following table summarizes the average recorded investment in impaired loans and related interest income recognized on loans deemed impaired, generally on a cash basis, for the three months ended March 31, 2015 and 2014:



	2015				2014
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	3,159	$	0	$	4,249	$	10
Non-owner occupied	1,658		0		7,049		4
Multi-family	521		0		371		1
Non-owner occupied residential	1,303		0		3,300		8
Acquisition and development:
Commercial and land development	392		2		2,288		2
Commercial and industrial	2,346		0		2,088		3
Residential mortgage:
First lien	5,241		9		3,364		1
Home equity - term	93		0		108		0
Home equity - lines of credit	512		0		121		0
Installment and other loans	25		0		0		0
	$	15,250	$	11	$	22,938	$	29

Troubled Debt Restructurings

The following table presents impaired loans that are TDRs, with the recorded investment as of March 31, 2015 and December 31, 2014.



	March 31, 2015			December 31, 2014
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Accruing:
Acquisition and development:
Commercial and land development	1	$	287	1	$	287
Residential mortgage:
First lien	8	809		8	813
	9	1,096		9	1,100
Nonaccruing:
Residential mortgage:
First lien	14	1,652		13	1,715
Installment and other loans	1	12		1	13
	15	1,664		14	1,728
	24	$	2,760	23	$	2,828

Number of Loans Modified and Their Pre-Modification and Post-Modification Investment Balances

The following table presents the number of loans modified, and their pre-modification and post-modification investment balances for the three months ended March 31, 2015 and 2014:



	2015					2014
(Dollars in thousands)	Number of Contracts	Pre- Modification Recorded Investment		Post Modification Recorded Investment		Number of Contracts	Pre- Modification Recorded Investment		Post Modification Recorded Investment
Three Months Ended March 31,
Residential mortgage:
First lien	1	$	59	$	59	0	$	0	$	0
	1	$	59	$	59	0	$	0	$	0

Restructured Loans Included in Nonaccrual Status were Modified as Troubled Debt Restructurings within Previous 12 Months and for which There was Payment Default

The following table presents restructured loans, included in nonaccrual status, that were modified as TDRs within the previous 12 months and for which there was a payment default during the three months ended March 31, 2015 and 2014:



	2015			2014
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three Months Ended March 31,
Residential mortgage:
First lien	5	$	323	0	$	0
	5	$	323	0	$	0

Loan Portfolio Summarized by Aging Categories of Performing Loans and Nonaccrual Loans

The following table presents the classes of the loan portfolio summarized by aging categories of performing loans and nonaccrual loans as of March 31, 2015 and December 31, 2014:



			Days Past Due
	Current		30-59		60-89		90+ (still accruing)		Total Past Due		Non- Accrual		Total Loans
March 31, 2015
Commercial real estate:
Owner-occupied	$	108,175	$	0	$	0	$	0	$	0	$	3,224	$	111,399
Non-owner occupied	149,212		73		0		0		73		1,636		150,921
Multi-family	28,222		0		0		0		0		721		28,943
Non-owner occupied residential	47,799		0		45		0		45		962		48,806
Acquisition and development:
1-4 family residential construction	5,883		0		0		0		0		0		5,883
Commercial and land development	26,158		30		0		0		30		51		26,239
Commercial and industrial	46,526		0		0		0		0		2,216		48,742
Municipal	60,661		0		0		0		0		0		60,661
Residential mortgage:
First lien	120,451		930		47		0		977		4,324		125,752
Home equity - term	19,543		209		0		0		209		160		19,912
Home equity - lines of credit	93,769		284		0		0		284		570		94,623
Installment and other loans	5,835		13		0		0		13		24		5,872
	$	712,234	$	1,539	$	92	$	0	$	1,631	$	13,888	$	727,753
December 31, 2014
Commercial real estate:
Owner-occupied	$	97,571	$	0	$	0	$	0	$	0	$	3,288	$	100,859
Non-owner occupied	142,621		0		0		0		0		1,680		144,301
Multi-family	27,211		0		0		0		0		320		27,531
Non-owner occupied residential	47,706		109		0		0		109		1,500		49,315
Acquisition and development:
1-4 family residential construction	5,924		0		0		0		0		0		5,924
Commercial and land development	24,114		0		0		0		0		123		24,237
Commercial and industrial	46,558		0		0		0		0		2,437		48,995
Municipal	61,191		0		0		0		0		0		61,191
Residential mortgage:
First lien	120,806		776		400		0		1,176		4,509		126,491
Home equity - term	20,640		135		0		0		135		70		20,845
Home equity - lines of credit	88,745		142		0		0		142		479		89,366
Installment and other loans	5,815		41		9		0		50		26		5,891
	$	688,902	$	1,203	$	409	$	0	$	1,612	$	14,432	$	704,946

Activity in Allowance for Loan Losses

Activity in the allowance for loan losses for the three months ended March 31, 2015 and 2014 is as follows:



	Commercial															Consumer
(Dollars in thousands)	Commercial Real Estate			Acquisition and Development			Commercial and Industrial			Municipal			Total			Residential Mortgage			Installment and Other			Total			Unallocated			Total
March 31, 2015
Balance, beginning of period	$	9,462		$	697		$	806		$	183		$	11,148		$	2,262		$	119		$	2,381		$	1,218		$	14,747
Provision for loan losses	(63		)	(87		)	(137		)	(62		)	(349		)	494			15			509			(160		)	0
Charge-offs	(66		)	(22		)	(26		)	0			(114		)	(201		)	(20		)	(221		)	0			(335		)
Recoveries	13			0			22			0			35			12			2			14			0			49
Balance, end of period	$	9,346		$	588		$	665		$	121		$	10,720		$	2,567		$	116		$	2,683		$	1,058		$	14,461
March 31, 2014
Balance, beginning of period	$	13,215		$	670		$	864		$	244		$	14,993		$	3,780		$	124		$	3,904		$	2,068		$	20,965
Provision for loan losses	738			(196		)	60			0			602			(481		)	44			(437		)	(165		)	0
Charge-offs	(259		)	0			(9		)	0			(268		)	(193		)	(67		)	(260		)	0			(528		)
Recoveries	25			0			4			0			29			6			25			31			0			60
Balance, end of period	$	13,719		$	474		$	919		$	244		$	15,356		$	3,112		$	126		$	3,238		$	1,903		$	20,497

Summary of Allowance for Loan Loss Allocation

The following table summarizes the ending loan balance individually evaluated for impairment based upon loan segment, as well as the related allowance for loan losses allocation for each at March 31, 2015 and December 31, 2014:



	Commercial										Consumer
(Dollars in thousands)	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Municipal		Total		Residential Mortgage		Installment and Other		Total		Unallocated		Total
March 31, 2015
Loans allocated by:
Individually evaluated for impairment	$	6,542	$	338	$	2,216	$	0	$	9,096	$	5,864	$	24	$	5,888	$	0	$	14,984
Collectively evaluated for impairment	333,527		31,784		46,526		60,661		472,498		234,423		5,848		240,271		0		712,769
	$	340,069	$	32,122	$	48,742	$	60,661	$	481,594	$	240,287	$	5,872	$	246,159	$	0	$	727,753
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	653	$	0	$	0	$	0	$	653	$	142	$	12	$	154	$	0	$	807
Collectively evaluated for impairment	8,693		588		665		121		10,067		2,425		104		2,529		1,058		13,654
	$	9,346	$	588	$	665	$	121	$	10,720	$	2,567	$	116	$	2,683	$	1,058	$	14,461
December 31, 2014
Loans allocated by:
Individually evaluated for impairment	$	6,788	$	410	$	2,437	$	0	$	9,635	$	5,871	$	26	$	5,897	$	0	$	15,532
Collectively evaluated for impairment	315,218		29,751		46,558		61,191		452,718		230,831		5,865		236,696		0		689,414
	$	322,006	$	30,161	$	48,995	$	61,191	$	462,353	$	236,702	$	5,891	$	242,593	$	0	$	704,946
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	2	$	0	$	0	$	0	$	2	$	173	$	13	$	186	$	0	$	188
Collectively evaluated for impairment	9,460		697		806		183		11,146		2,089		106		2,195		1,218		14,559
	$	9,462	$	697	$	806	$	183	$	11,148	$	2,262	$	119	$	2,381	$	1,218	$	14,747