LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2015 and December 31, 2014 was as follows:



(Dollars in thousands)	June 30, 2015		December 31, 2014
Commercial real estate:
Owner-occupied	$	112,419	$	100,859
Non-owner occupied	149,022		144,301
Multi-family	25,376		27,531
Non-owner occupied residential	51,585		49,315
Acquisition and development:
1-4 family residential construction	6,961		5,924
Commercial and land development	33,721		24,237
Commercial and industrial	60,286		48,995
Municipal	59,366		61,191
Residential mortgage:
First lien	123,775		126,491
Home equity - term	18,952		20,845
Home equity - lines of credit	103,187		89,366
Installment and other loans	6,880		5,891
	$	751,530	$	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 June 30, 2015 and December 31, 2014:



(Dollars in thousands)	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		Total
June 30, 2015
Commercial real estate:
Owner-occupied	$	103,197	$	1,233	$	5,551	$	2,438	$	0	$	112,419
Non-owner occupied	128,046		12,616		7,356		1,004		0		149,022
Multi-family	22,085		1,524		1,295		472		0		25,376
Non-owner occupied residential	47,019		1,853		1,875		838		0		51,585
Acquisition and development:
1-4 family residential construction	6,961		0		0		0		0		6,961
Commercial and land development	31,924		228		1,327		242		0		33,721
Commercial and industrial	57,495		933		1,050		808		0		60,286
Municipal	59,366		0		0		0		0		59,366
Residential mortgage:
First lien	119,111		0		0		4,664		0		123,775
Home equity - term	18,775		0		0		177		0		18,952
Home equity - lines of credit	102,170		275		141		601		0		103,187
Installment and other loans	6,859		0		0		21		0		6,880
	$	703,008	$	18,662	$	18,595	$	11,265	$	0	$	751,530
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 June 30, 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)
June 30, 2015
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	2,438	$	3,647
Non-owner occupied	0		0		0		1,004		3,251
Multi-family	385		394		144		87		122
Non-owner occupied residential	0		0		0		838		1,044
Acquisition and development:
Commercial and land development	0		0		0		242		871
Commercial and industrial	0		0		0		808		883
Residential mortgage:
First lien	1,129		1,157		117		3,535		4,180
Home equity - term	0		0		0		177		178
Home equity - lines of credit	0		0		0		601		711
Installment and other loans	9		10		9		12		36
	$	1,523	$	1,561	$	270	$	9,742	$	14,923
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 tables summarize the average recorded investment in impaired loans and related interest income recognized on loans deemed impaired, generally on a cash basis, for the three and six months ended June 30, 2015 and 2014:



	Three Months Ended June 30,
	2015				2014
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	2,793	$	0	$	4,069	$	8
Non-owner occupied	1,403		0		9,641		91
Multi-family	537		0		260		0
Non-owner occupied residential	919		0		2,139		2
Acquisition and development:
Commercial and land development	313		3		1,360		11
Commercial and industrial	978		0		2,004		2
Residential mortgage:
First lien	4,856		9		3,964		30
Home equity - term	164		0		90		0
Home equity - lines of credit	587		0		59		0
Installment and other loans	22		0		2		0
	$	12,572	$	12	$	23,588	$	144



	Six Months Ended June 30,
	2015				2014
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	2,941	$	0	$	4,233	$	18
Non-owner occupied	1,515		0		8,800		95
Multi-family	502		0		280		1
Non-owner occupied residential	1,132		0		2,923		10
Acquisition and development:
Commercial and land development	354		5		1,966		13
Commercial and industrial	1,583		0		2,003		5
Residential mortgage:
First lien	5,037		18		3,768		31
Home equity - term	124		0		96		0
Home equity - lines of credit	546		0		99		0
Installment and other loans	24		0		1		0
	$	13,758	$	23	$	24,169	$	173

Troubled Debt Restructurings

The following table presents impaired loans that are TDRs, with the recorded investment as of June 30, 2015 and December 31, 2014.



	June 30, 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	$	201	1	$	287
Residential mortgage:
First lien	8	803		8	813
	9	1,004		9	1,100
Nonaccruing:
Residential mortgage:
First lien	14	1,627		13	1,715
Installment and other loans	1	11		1	13
	15	1,638		14	1,728
	24	$	2,642	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 and six months ended June 30, 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 June 30,
Residential mortgage:
First lien	0	$	0	$	0	14	$	1,523	$	1,456
	0	$	0	$	0	14	$	1,523	$	1,456
Six Months Ended June 30,
Residential mortgage:
First lien	1	$	59	$	59	14	$	1,523	$	1,456
	1	$	59	$	59	14	$	1,523	$	1,456

Restructured Loans Included in Nonaccrual Status Modified as Troubled Debt Restructurings Within the 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 and six months ended June 30, 2015 and 2014:



	2015			2014
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three Months Ended June 30,
Commercial real estate:
Non-owner occupied	0	$	0	1	$	3,495
Residential mortgage:
First lien	3	249		1	111
	3	$	249	2	$	3,606
Six Months Ended June 30,
Commercial real estate:
Non-owner occupied	0	$	0	1	$	3,495
Residential mortgage:
First lien	4	308		1	111
	4	$	308	2	$	3,606

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 June 30, 2015 and December 31, 2014:



			Days Past Due
(Dollars in thousands)	Current		30-59		60-89		90+ (still accruing)		Total Past Due		Non- Accrual		Total Loans
June 30, 2015
Commercial real estate:
Owner-occupied	$	109,961	$	20	$	0	$	0	$	20	$	2,438	$	112,419
Non-owner occupied	148,018		0		0		0		0		1,004		149,022
Multi-family	24,904		0		0		0		0		472		25,376
Non-owner occupied residential	50,583		164		0		0		164		838		51,585
Acquisition and development:
1-4 family residential construction	6,961		0		0		0		0		0		6,961
Commercial and land development	33,660		20		0		0		20		41		33,721
Commercial and industrial	59,206		272		0		0		272		808		60,286
Municipal	59,366		0		0		0		0		0		59,366
Residential mortgage:
First lien	118,874		869		0		171		1,040		3,861		123,775
Home equity - term	18,468		301		6		0		307		177		18,952
Home equity - lines of credit	102,277		309		0		0		309		601		103,187
Installment and other loans	6,836		14		9		0		23		21		6,880
	$	739,114	$	1,969	$	15	$	171	$	2,155	$	10,261	$	751,530
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 June 30, 2015 and 2014 was 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
June 30, 2015
Balance, beginning of period	$	9,346		$	588		$	665		$	121		$	10,720		$	2,567		$	116		$	2,683		$	1,058		$	14,461
Provision for loan losses	(750		)	132			188			(2		)	(432		)	479			74			553			(121		)	0
Charge-offs	(475		)	0			(24		)	0			(499		)	(151		)	(9		)	(160		)	0			(659		)
Recoveries	11			0			15			0			26			23			1			24			0			50
Balance, end of period	$	8,132		$	720		$	844		$	119		$	9,815		$	2,918		$	182		$	3,100		$	937		$	13,852
June 30, 2014
Balance, beginning of period	$	13,719		$	474		$	919		$	244		$	15,356		$	3,112		$	126		$	3,238		$	1,903		$	20,497
Provision for loan losses	645			407			(224		)	(66		)	762			(741		)	81			(660		)	(102		)	0
Charge-offs	(415		)	(34		)	(55		)	0			(504		)	(16		)	(54		)	(70		)	0			(574		)
Recoveries	104			5			353			0			462			7			33			40			0			502
Balance, end of period	$	14,053		$	852		$	993		$	178		$	16,076		$	2,362		$	186		$	2,548		$	1,801		$	20,425

Activity in the allowance for loan losses for the six months ended June 30, 2015 and 2014 was 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
June 30, 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	(813		)	45			51			(64		)	(781		)	973			89			1,062			(281		)	0
Charge-offs	(541		)	(22		)	(50		)	0			(613		)	(352		)	(29		)	(381		)	0			(994		)
Recoveries	24			0			37			0			61			35			3			38			0			99
Balance, end of period	$	8,132		$	720		$	844		$	119		$	9,815		$	2,918		$	182		$	3,100		$	937		$	13,852
June 30, 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	1,383			211			(164		)	(66		)	1,364			(1,222		)	125			(1,097		)	(267		)	0
Charge-offs	(674		)	(34		)	(64		)	0			(772		)	(209		)	(121		)	(330		)	0			(1,102		)
Recoveries	129			5			357			0			491			13			58			71			0			562
Balance, end of period	$	14,053		$	852		$	993		$	178		$	16,076		$	2,362		$	186		$	2,548		$	1,801		$	20,425

Summary of Ending Loan Balances Individually Evaluated for Impairment Based on Loan Segment

The following table summarizes the ending loan balances individually evaluated for impairment based upon loan segment, as well as the related allowance for loan losses allocation for each at June 30, 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
June 30, 2015
Loans allocated by:
Individually evaluated for impairment	$	4,752	$	242	$	808	$	0	$	5,802	$	5,442	$	21	$	5,463	$	0	$	11,265
Collectively evaluated for impairment	333,650		40,440		59,478		59,366		492,934		240,472		6,859		247,331		0		740,265
	$	338,402	$	40,682	$	60,286	$	59,366	$	498,736	$	245,914	$	6,880	$	252,794	$	0	$	751,530
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	144	$	0	$	0	$	0	$	144	$	117	$	9	$	126	$	0	$	270
Collectively evaluated for impairment	7,988		720		844		119		9,671		2,801		173		2,974		937		13,582
	$	8,132	$	720	$	844	$	119	$	9,815	$	2,918	$	182	$	3,100	$	937	$	13,852
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