LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 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 class, as of September 30, 2015 and December 31, 2014 was as follows:



(Dollars in thousands)	September 30, 2015		December 31, 2014
Commercial real estate:
Owner-occupied	$	103,550	$	100,859
Non-owner occupied	149,022		144,301
Multi-family	29,531		27,531
Non-owner occupied residential	53,853		49,315
Acquisition and development:
1-4 family residential construction	8,061		5,924
Commercial and land development	35,483		24,237
Commercial and industrial	69,017		48,995
Municipal	58,270		61,191
Residential mortgage:
First lien	125,142		126,491
Home equity - term	17,629		20,845
Home equity - lines of credit	105,886		89,366
Installment and other loans	7,414		5,891
	$	762,858	$	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 September 30, 2015 and December 31, 2014:



(Dollars in thousands)	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		Total
September 30, 2015
Commercial real estate:
Owner-occupied	$	94,502	$	1,218	$	5,575	$	2,255	$	0	$	103,550
Non-owner occupied	128,216		12,502		110		8,194		0		149,022
Multi-family	26,342		2,137		810		242		0		29,531
Non-owner occupied residential	49,849		1,599		1,490		915		0		53,853
Acquisition and development:
1-4 family residential construction	8,061		0		0		0		0		8,061
Commercial and land development	34,087		222		968		206		0		35,483
Commercial and industrial	66,229		1,455		548		785		0		69,017
Municipal	58,270		0		0		0		0		58,270
Residential mortgage:
First lien	121,257		0		0		3,885		0		125,142
Home equity - term	17,463		0		0		166		0		17,629
Home equity - lines of credit	104,875		273		141		597		0		105,886
Installment and other loans	7,395		0		0		19		0		7,414
	$	716,546	$	19,406	$	9,642	$	17,264	$	0	$	762,858
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 September 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)
September 30, 2015
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	2,255	$	3,449
Non-owner occupied	0		0		0		8,194		10,448
Multi-family	0		0		0		242		389
Non-owner occupied residential	0		0		0		915		1,221
Acquisition and development:
Commercial and land development	0		0		0		206		220
Commercial and industrial	0		0		0		785		869
Residential mortgage:
First lien	1,119		1,149		111		2,766		3,351
Home equity - term	0		0		0		166		168
Home equity - lines of credit	0		0		0		597		713
Installment and other loans	8		9		8		11		35
	$	1,127	$	1,158	$	119	$	16,137	$	20,863
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 nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,
	2015				2014
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	2,336	$	0	$	3,681	$	1
Non-owner occupied	2,900		0		7,361		46
Multi-family	369		0		98		0
Non-owner occupied residential	866		0		1,905		0
Acquisition and development:
Commercial and land development	224		132		1,286		9
Commercial and industrial	797		0		1,263		0
Residential mortgage:
First lien	4,280		15		4,772		15
Home equity - term	174		0		72		0
Home equity - lines of credit	599		0		49		0
Installment and other loans	20		0		10		1
	$	12,565	$	147	$	20,497	$	72



	Nine Months Ended September 30,
	2015				2014
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	2,749	$	0	$	3,965	$	9
Non-owner occupied	2,120		0		7,205		137
Multi-family	452		0		234		0
Non-owner occupied residential	1,055		0		2,603		2
Acquisition and development:
Commercial and land development	313		137		1,787		20
Commercial and industrial	1,346		0		1,676		2
Residential mortgage:
First lien	4,771		33		4,068		45
Home equity - term	139		0		90		0
Home equity - lines of credit	562		0		85		0
Installment and other loans	23		0		5		1
	$	13,530	$	170	$	21,718	$	216

Troubled Debt Restructurings

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



	September 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	798		8	813
	9	999		9	1,100
Nonaccruing:
Residential mortgage:
First lien	12	1,173		13	1,715
Installment and other loans	1	11		1	13
	13	1,184		14	1,728
	22	$	2,183	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 nine months ended September 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 September 30,
Residential mortgage:
First lien	0	$	0	$	0	4	$	285	$	285
Installment and other loans	0	0		0		1	36		14
	0	$	0	$	0	5	$	321	$	299
Nine Months Ended September 30,
Residential mortgage:
First lien	1	$	59	$	0	18	$	1,808	$	1,741
Installment and other loans	0	0		0		1	36		14
	1	$	59	$	0	19	$	1,844	$	1,755

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 loans, that were modified as TDRs within the previous 12 months and for which there was a payment default during the three and nine months ended September 30, 2015 and 2014:



	2015			2014
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three Months Ended September 30,
Acquisition and development:
Commercial and land development	0	$	0	1	$	544
Residential mortgage:
First lien	0	0		2	180
	0	$	0	3	$	724
Nine Months Ended September 30,
Commercial real estate:
Non-owner occupied	0	$	0	1	$	3,495
Acquisition and development:
Commercial and land development	0	0		1	544
Residential mortgage:
First lien	4	308		2	180
	4	$	308	4	$	4,219

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 September 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
September 30, 2015
Commercial real estate:
Owner-occupied	$	101,295	$	0	$	0	$	0	$	0	$	2,255	$	103,550
Non-owner occupied	140,828		0		0		0		0		8,194		149,022
Multi-family	29,289		0		0		0		0		242		29,531
Non-owner occupied residential	52,786		47		105		0		152		915		53,853
Acquisition and development:
1-4 family residential construction	8,061		0		0		0		0		0		8,061
Commercial and land development	35,443		12		23		0		35		5		35,483
Commercial and industrial	67,982		250		0		0		250		785		69,017
Municipal	58,270		0		0		0		0		0		58,270
Residential mortgage:
First lien	121,040		947		68		0		1,015		3,087		125,142
Home equity - term	17,260		203		0		0		203		166		17,629
Home equity - lines of credit	105,011		160		118		0		278		597		105,886
Installment and other loans	7,363		19		12		0		31		20		7,414
	$	744,628	$	1,638	$	326	$	0	$	1,964	$	16,266	$	762,858
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 September 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
September 30, 2015
Balance, beginning of period	$	8,132		$	720		$	844		$	119		$	9,815		$	2,918		$	182		$	3,100		$	937		$	13,852
Provision for loan losses	9			(684		)	151			(2		)	(526		)	(54		)	8			(46		)	(31		)	(603		)
Charge-offs	(170		)	0			(27		)	0			(197		)	(222		)	(18		)	(240		)	0			(437		)
Recoveries	64			604			17			0			685			34			6			40			0			725
Balance, end of period	$	8,035		$	640		$	985		$	117		$	9,777		$	2,676		$	178		$	2,854		$	906		$	13,537
September 30, 2014
Balance, beginning of period	$	14,053		$	852		$	993		$	178		$	16,076		$	2,362		$	186		$	2,548		$	1,801		$	20,425
Provision for loan losses	(2,593		)	(284		)	(387		)	9			(3,255		)	72			66			138			217			(2,900		)
Charge-offs	(1,840		)	(33		)	(1		)	0			(1,874		)	(286		)	(78		)	(364		)	0			(2,238		)
Recoveries	382			0			317			0			699			6			27			33			0			732
Balance, end of period	$	10,002		$	535		$	922		$	187		$	11,646		$	2,154		$	201		$	2,355		$	2,018		$	16,019

Activity in the allowance for loan losses for the nine months ended September 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
September 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	(804		)	(639		)	202			(66		)	(1,307		)	919			97			1,016			(312		)	(603		)
Charge-offs	(711		)	(22		)	(77		)	0			(810		)	(574		)	(47		)	(621		)	0			(1,431		)
Recoveries	88			604			54			0			746			69			9			78			0			824
Balance, end of period	$	8,035		$	640		$	985		$	117		$	9,777		$	2,676		$	178		$	2,854		$	906		$	13,537
September 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	(1,210		)	(73		)	(552		)	(57		)	(1,892		)	(1,150		)	192			(958		)	(50		)	(2,900		)
Charge-offs	(2,514		)	(67		)	(64		)	0			(2,645		)	(495		)	(200		)	(695		)	0			(3,340		)
Recoveries	511			5			674			0			1,190			19			85			104			0			1,294
Balance, end of period	$	10,002		$	535		$	922		$	187		$	11,646		$	2,154		$	201		$	2,355		$	2,018		$	16,019

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 September 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
September 30, 2015
Loans allocated by:
Individually evaluated for impairment	$	11,606	$	206	$	785	$	0	$	12,597	$	4,648	$	19	$	4,667	$	0	$	17,264
Collectively evaluated for impairment	324,350		43,338		68,232		58,270		494,190		244,009		7,395		251,404		0		745,594
	$	335,956	$	43,544	$	69,017	$	58,270	$	506,787	$	248,657	$	7,414	$	256,071	$	0	$	762,858
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	0	$	111	$	8	$	119	$	0	$	119
Collectively evaluated for impairment	8,035		640		985		117		9,777		2,565		170		2,735		906		13,418
	$	8,035	$	640	$	985	$	117	$	9,777	$	2,676	$	178	$	2,854	$	906	$	13,537
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