LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015 was as follows:



(Dollars in thousands)	September 30, 2016		December 31, 2015
Commercial real estate:
Owner-occupied	$	111,437	$	103,578
Non-owner occupied	192,449		145,401
Multi-family	39,394		35,109
Non-owner occupied residential	56,759		54,175
Acquisition and development:
1-4 family residential construction	6,379		9,364
Commercial and land development	28,030		41,339
Commercial and industrial	87,492		73,625
Municipal	54,241		57,511
Residential mortgage:
First lien	134,498		126,022
Home equity - term	14,896		17,337
Home equity - lines of credit	114,274		110,731
Installment and other loans	7,212		7,521
	$	847,061	$	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 September 30, 2016 and December 31, 2015:



(Dollars in thousands)	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		Total
September 30, 2016
Commercial real estate:
Owner-occupied	$	99,563	$	8,318	$	2,077	$	1,479	$	0	$	111,437
Non-owner occupied	168,158		12,261		5,127		6,253		650		192,449
Multi-family	37,108		1,284		795		207		0		39,394
Non-owner occupied residential	53,777		1,308		1,167		507		0		56,759
Acquisition and development:
1-4 family residential construction	5,859		364		156		0		0		6,379
Commercial and land development	27,371		11		646		2		0		28,030
Commercial and industrial	86,184		711		34		339		224		87,492
Municipal	54,241		0		0		0		0		54,241
Residential mortgage:
First lien	130,139		0		0		4,359		0		134,498
Home equity - term	14,802		0		0		94		0		14,896
Home equity - lines of credit	113,704		188		52		330		0		114,274
Installment and other loans	7,203		0		0		9		0		7,212
	$	798,109	$	24,445	$	10,054	$	13,579	$	874	$	847,061
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 September 30, 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)
September 30, 2016
Commercial real estate:
Owner-occupied	$	0	$	0	$	0	$	1,479	$	2,673
Non-owner occupied	6,095		6,428		650		808		1,405
Multi-family	0		0		0		207		372
Non-owner occupied residential	0		0		0		507		755
Acquisition and development:
Commercial and land development	0		0		0		2		17
Commercial and industrial	224		227		158		339		392
Residential mortgage:
First lien	781		781		64		3,578		4,261
Home equity - term	0		0		0		94		104
Home equity - lines of credit	0		0		0		330		432
Installment and other loans	2		3		2		7		34
	$	7,102	$	7,439	$	874	$	7,351	$	10,445
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 and nine months ended September 30, 2016 and 2015:



	Three Months Ended September 30,
	2016				2015
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	1,650	$	0	$	2,336	$	0
Non-owner occupied	6,979		0		2,900		0
Multi-family	212		0		369		0
Non-owner occupied residential	525		0		866		0
Acquisition and development:
Commercial and land development	2		0		224		132
Commercial and industrial	494		0		797		0
Residential mortgage:
First lien	4,366		8		4,280		15
Home equity - term	95		0		174		0
Home equity - lines of credit	334		0		599		0
Installment and other loans	10		0		20		0
	$	14,667	$	8	$	12,565	$	147



	Nine Months Ended September 30,
	2016				2015
(Dollars in thousands)	Average Impaired Balance		Interest Income Recognized		Average Impaired Balance		Interest Income Recognized
Commercial real estate:
Owner-occupied	$	1,891	$	0	$	2,749	$	0
Non-owner occupied	7,334		0		2,120		0
Multi-family	221		0		452		0
Non-owner occupied residential	700		0		1,055		0
Acquisition and development:
Commercial and land development	3		0		313		137
Commercial and industrial	577		0		1,346		0
Residential mortgage:
First lien	4,587		25		4,771		33
Home equity - term	98		0		139		0
Home equity - lines of credit	474		0		562		0
Installment and other loans	14		0		23		0
	$	15,899	$	25	$	13,530	$	170

Troubled Debt Restructurings

The following table presents impaired loans that are TDRs, with the recorded investment as of September 30, 2016 and December 31, 2015.



	September 30, 2016			December 31, 2015
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Accruing:
Residential mortgage:
First lien	8	$	901	8	$	793
	8	901		8	793
Nonaccruing:
Commercial real estate:
Non-owner occupied	1	6,095		0	0
Residential mortgage:
First lien	12	1,057		12	1,153
Installment and other loans	1	7		1	10
	14	7,159		13	1,163
	22	$	8,060	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 and nine months ended September 30, 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 September 30,
Commercial real estate:
Non-owner occupied	1	$	6,095	$	6,095	0	$	0	$	0
	1	$	6,095	$	6,095	0	$	0	$	0
Nine Months Ended September 30,
Commercial real estate:
Non-owner occupied	1	$	6,095	$	6,095	0	$	0	$	0
Residential mortgage:
First lien	1	257		257		1	59		0
	2	$	6,352	$	6,352	1	$	59	$	0

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, 2016 and 2015:



	2016			2015
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Three Months Ended September 30,
Residential mortgage:
First lien	0	$	0	0	$	0
	0	$	0	0	$	0
Nine Months Ended September 30,
Residential mortgage:
First lien	0	$	0	4	$	308
	0	$	0	4	$	308

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, 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
September 30, 2016
Commercial real estate:
Owner-occupied	$	109,958	$	0	$	0	$	0	$	0	$	1,479	$	111,437
Non-owner occupied	185,546		0		0		0		0		6,903		192,449
Multi-family	39,187		0		0		0		0		207		39,394
Non-owner occupied residential	56,252		0		0		0		0		507		56,759
Acquisition and development:
1-4 family residential construction	6,379		0		0		0		0		0		6,379
Commercial and land development	28,028		0		0		0		0		2		28,030
Commercial and industrial	86,828		100		0		0		100		564		87,492
Municipal	54,241		0		0		0		0		0		54,241
Residential mortgage:
First lien	130,243		345		453		0		798		3,457		134,498
Home equity - term	14,772		21		9		0		30		94		14,896
Home equity - lines of credit	113,448		382		75		39		496		330		114,274
Installment and other loans	7,187		7		9		0		16		9		7,212
	$	832,069	$	855	$	546	$	39	$	1,440	$	13,552	$	847,061
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 September 30, 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
September 30, 2016
Balance, beginning of period	$	8,133		$	587		$	1,148		$	61		$	9,929		$	2,706		$	180		$	2,886		$	625		$	13,440
Provision for loan losses	215			89			76			(7		)	373			(119		)	(3		)	(122		)	(1		)	250
Charge-offs	0			0			0			0			0			(57		)	(47		)	(104		)	0			(104		)
Recoveries	124			0			2			0			126			96			42			138			0			264
Balance, end of period	$	8,472		$	676		$	1,226		$	54		$	10,428		$	2,626		$	172		$	2,798		$	624		$	13,850
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

Activity in the allowance for loan losses for the nine months ended September 30, 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
September 30, 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	236			(174		)	225			(4		)	283			(8		)	125			117			(150		)	250
Charge-offs	(26		)	0			(21		)	0			(47		)	(381		)	(159		)	(540		)	0			(587		)
Recoveries	379			0			10			0			389			145			85			230			0			619
Balance, end of period	$	8,472		$	676		$	1,226		$	54		$	10,428		$	2,626		$	172		$	2,798		$	624		$	13,850
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

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, 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
September 30, 2016
Loans allocated by:
Individually evaluated for impairment	$	9,096	$	2	$	563	$	0	$	9,661	$	4,783	$	9	$	4,792	$	0	$	14,453
Collectively evaluated for impairment	390,943		34,407		86,929		54,241		566,520		258,885		7,203		266,088		0		832,608
	$	400,039	$	34,409	$	87,492	$	54,241	$	576,181	$	263,668	$	7,212	$	270,880	$	0	$	847,061
Allowance for loan losses allocated by:
Individually evaluated for impairment	$	650	$	0	$	158	$	0	$	808	$	64	$	2	$	66	$	0	$	874
Collectively evaluated for impairment	7,822		676		1,068		54		9,620		2,562		170		2,732		624		12,976
	$	8,472	$	676	$	1,226	$	54	$	10,428	$	2,626	$	172	$	2,798	$	624	$	13,850
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