LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31, 2016 and December 31, 2015 was as follows:



(Dollars in thousands)	March 31, 2016		December 31, 2015
Commercial real estate:
Owner-occupied	$	106,464	$	103,578
Non-owner occupied	154,731		145,401
Multi-family	37,664		35,109
Non-owner occupied residential	54,834		54,175
Acquisition and development:
1-4 family residential construction	7,270		9,364
Commercial and land development	42,245		41,339
Commercial and industrial	77,277		73,625
Municipal	62,302		57,511
Residential mortgage:
First lien	125,706		126,022
Home equity - term	16,578		17,337
Home equity - lines of credit	111,770		110,731
Installment and other loans	7,862		7,521
	$	804,703	$	781,713

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, 2016 and December 31, 2015:



(Dollars in thousands)	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		Total
March 31, 2016
Commercial real estate:
Owner-occupied	$	98,959	$	1,771	$	3,705	$	2,029	$	0	$	106,464
Non-owner occupied	134,518		12,419		108		7,686		0		154,731
Multi-family	34,863		1,763		813		225		0		37,664
Non-owner occupied residential	51,490		1,282		1,231		792		39		54,834
Acquisition and development:
1-4 family residential construction	7,270		0		0		0		0		7,270
Commercial and land development	41,105		215		922		3		0		42,245
Commercial and industrial	74,651		1,352		560		714		0		77,277
Municipal	62,302		0		0		0		0		62,302
Residential mortgage:
First lien	120,882		0		44		4,780		0		125,706
Home equity - term	16,478		0		1		99		0		16,578
Home equity - lines of credit	110,850		251		102		567		0		111,770
Installment and other loans	7,846		0		0		9		7		7,862
	$	761,214	$	19,053	$	7,486	$	16,904	$	46	$	804,703
December 31, 2015
Commercial real estate:
Owner-occupied	$	96,715	$	1,124	$	3,630	$	2,109	$	0	$	103,578
Non-owner occupied	125,043		12,394		108		7,856		0		145,401
Multi-family	31,957		1,779		1,140		233		0		35,109
Non-owner occupied residential	50,601		1,305		1,374		895		0		54,175
Acquisition and development:
1-4 family residential construction	9,364		0		0		0		0		9,364
Commercial and land development	40,181		219		934		5		0		41,339
Commercial and industrial	70,967		1,380		544		734		0		73,625
Municipal	57,511		0		0		0		0		57,511
Residential mortgage:
First lien	121,214		0		0		4,808		0		126,022
Home equity - term	17,234		0		0		103		0		17,337
Home equity - lines of credit	109,731		230		180		590		0		110,731
Installment and other loans	7,504		0		0		17		0		7,521
	$	738,022	$	18,431	$	7,910	$	17,350	$	0	$	781,713

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, 2016 and December 31, 2015. The recorded investment in loans excludes accrued interest receivable due to insignificance. Related 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, 2016
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	2,029	$	3,301
Non-owner occupied	0		0		0		7,686		8,521
Multi-family	0		0		0		225		381
Non-owner occupied residential	39		39		39		792		1,080
Acquisition and development:
Commercial and land development	0		0		0		3		18
Commercial and industrial	0		0		0		714		768
Residential mortgage:
First lien	1,357		1,392		103		3,423		4,133
Home equity - term	0		0		0		99		106
Home equity - lines of credit	0		0		0		567		712
Installment and other loans	7		8		7		9		35
	$	1,403	$	1,439	$	149	$	15,547	$	19,055
December 31, 2015
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	2,109	$	3,344
Non-owner occupied	0		0		0		7,856		8,600
Multi-family	0		0		0		233		385
Non-owner occupied residential	0		0		0		895		1,211
Acquisition and development:
Commercial and land development	0		0		0		5		19
Commercial and industrial	0		0		0		734		780
Residential mortgage:
First lien	1,952		1,984		271		2,856		3,369
Home equity - term	0		0		0		103		110
Home equity - lines of credit	22		23		10		568		688
Installment and other loans	8		9		8		9		35
	$	1,982	$	2,016	$	289	$	15,368	$	18,541

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 months ended March 31, 2016 and 2015:



	2016				2015
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	2,069	$	0	$	3,159	$	0
Non-owner occupied	7,771		0		1,658		0
Multi-family	229		0		521		0
Non-owner occupied residential	875		0		1,303		0
Acquisition and development:
Commercial and land development	4		0		392		2
Commercial and industrial	724		0		2,346		0
Residential mortgage:
First lien	4,776		9		5,241		9
Home equity - term	101		0		93		0
Home equity - lines of credit	589		0		512		0
Installment and other loans	17		0		25		0
	$	17,155	$	9	$	15,250	$	11

Troubled Debt Restructurings

The following table presents impaired loans that are TDRs, with the recorded investment as of March 31, 2016 and December 31, 2015.



	March 31, 2016			December 31, 2015
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Accruing:
Residential mortgage:
First lien	9	$	1,044	8	$	793
	9	1,044		8	793
Nonaccruing:
Residential mortgage:
First lien	12	1,128		12	1,153
Installment and other loans	1	9		1	10
	13	1,137		13	1,163
	22	$	2,181	21	$	1,956

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, 2016 and 2015:



	2016					2015
(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	$	257	$	0	1	$	59	$	59
	1	$	257	$	0	1	$	59	$	59

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 months ended March 31, 2016 and 2015:



	2016			2015
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three Months Ended March 31,
Residential mortgage:
First lien	0	$	0	5	$	323
	0	$	0	5	$	323

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, 2016 and December 31, 2015:



			Days Past Due
(Dollars in thousands)	Current		30-59		60-89		90+ (still accruing)		Total Past Due		Non- Accrual		Total Loans
March 31, 2016
Commercial real estate:
Owner-occupied	$	104,251	$	184	$	0	$	0	$	184	$	2,029	$	106,464
Non-owner occupied	146,986		59		0		0		59		7,686		154,731
Multi-family	37,439		0		0		0		0		225		37,664
Non-owner occupied residential	53,970		34		0		0		34		830		54,834
Acquisition and development:
1-4 family residential construction	7,270		0		0		0		0		0		7,270
Commercial and land development	42,241		1		0		0		1		3		42,245
Commercial and industrial	76,563		0		0		0		0		714		77,277
Municipal	62,302		0		0		0		0		0		62,302
Residential mortgage:
First lien	121,180		746		43		0		789		3,737		125,706
Home equity - term	16,478		0		0		1		1		99		16,578
Home equity - lines of credit	110,902		301		0		0		301		567		111,770
Installment and other loans	7,823		23		0		0		23		16		7,862
	$	787,405	$	1,348	$	43	$	1	$	1,392	$	15,906	$	804,703
December 31, 2015
Commercial real estate:
Owner-occupied	$	101,395	$	74	$	0	$	0	$	74	$	2,109	$	103,578
Non-owner occupied	137,545		0		0		0		0		7,856		145,401
Multi-family	34,876		0		0		0		0		233		35,109
Non-owner occupied residential	53,280		0		0		0		0		895		54,175
Acquisition and development:
1-4 family residential construction	9,364		0		0		0		0		0		9,364
Commercial and land development	41,236		0		98		0		98		5		41,339
Commercial and industrial	72,846		24		21		0		45		734		73,625
Municipal	57,511		0		0		0		0		0		57,511
Residential mortgage:
First lien	120,119		1,844		44		0		1,888		4,015		126,022
Home equity - term	17,200		34		0		0		34		103		17,337
Home equity - lines of credit	109,740		286		91		24		401		590		110,731
Installment and other loans	7,488		16		0		0		16		17		7,521
	$	762,600	$	2,278	$	254	$	24	$	2,556	$	16,557	$	781,713

Activity in Allowance for Loan Losses

Activity in the allowance for loan losses for the three months ended March 31, 2016 and 2015 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
March 31, 2016
Balance, beginning of period	$	7,883		$	850		$	1,012		$	58		$	9,803		$	2,870		$	121		$	2,991		$	774		$	13,568
Provision for loan losses	33			(111		)	37			4			(37		)	45			102			147			(110		)	0
Charge-offs	0			0			(21		)	0			(21		)	(244		)	(64		)	(308		)	0			(329		)
Recoveries	80			0			2			0			82			6			20			26			0			108
Balance, end of period	$	7,996		$	739		$	1,030		$	62		$	9,827		$	2,677		$	179		$	2,856		$	664		$	13,347
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

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 March 31, 2016 and December 31, 2015:



	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, 2016
Loans allocated by:
Individually evaluated for impairment	$	10,771	$	3	$	714	$	0	$	11,488	$	5,446	$	16	$	5,462	$	0	$	16,950
Collectively evaluated for impairment	342,922		49,512		76,563		62,302		531,299		248,608		7,846		256,454		0		787,753
	$	353,693	$	49,515	$	77,277	$	62,302	$	542,787	$	254,054	$	7,862	$	261,916	$	0	$	804,703
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	39	$	0	$	0	$	0	$	39	$	103	$	7	$	110	$	0	$	149
Collectively evaluated for impairment	7,957		739		1,030		62		9,788		2,574		172		2,746		664		13,198
	$	7,996	$	739	$	1,030	$	62	$	9,827	$	2,677	$	179	$	2,856	$	664	$	13,347
December 31, 2015
Loans allocated by:
Individually evaluated for impairment	$	11,093	$	5	$	734	$	0	$	11,832	$	5,501	$	17	$	5,518	$	0	$	17,350
Collectively evaluated for impairment	327,170		50,698		72,891		57,511		508,270		248,589		7,504		256,093		0		764,363
	$	338,263	$	50,703	$	73,625	$	57,511	$	520,102	$	254,090	$	7,521	$	261,611	$	0	$	781,713
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	0	$	281	$	8	$	289	$	0	$	289
Collectively evaluated for impairment	7,883		850		1,012		58		9,803		2,589		113		2,702		774		13,279
	$	7,883	$	850	$	1,012	$	58	$	9,803	$	2,870	$	121	$	2,991	$	774	$	13,568