10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

Commission File Number      000-22787      

FOUR OAKS FINCORP, INC.

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	56-2028446
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification Number)

6114 U.S. 301 SOUTH, FOUR OAKS, NC  27524

(Address of principal executive office, including zip code)

(919) 963-2177

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYES   oNO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) xYES   oNO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o	Accelerated filer o
Non-accelerated filer    o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

oYES   xNO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock,	33,780,206
par value $1.00 per share	(Number of shares outstanding
(Title of Class)	November 9, 2016)

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TABLE OF CONTENTS		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements
	Consolidated Balance Sheets
	September 30, 2016 (Unaudited) and December 31, 2015	3
	Consolidated Statements of Operations (Unaudited)
	Three and Nine Months Ended September 30, 2016 and 2015	4
	Consolidated Statements of Comprehensive Income (Unaudited)
	Three and Nine Months Ended September 30, 2016 and 2015	5
	Consolidated Statements of Shareholders’ Equity (Unaudited)
	Nine Months Ended September 30, 2016 and 2015	6
	Consolidated Statements of Cash Flows (Unaudited)
	Nine Months Ended September 30, 2016 and 2015	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2 -	Managements' Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4 -	Controls and Procedures	42
Part II.	OTHER INFORMATION
Item 1 -	Legal Proceedings	42
Item1A -	Risk Factors	42
Item 6 -	Exhibits	43

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Part I. FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

FOUR OAKS FINCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	September 30, 2016			December 31, 2015
	(Unaudited)			(*)
ASSETS
Cash and due from banks	$	18,123		$	17,375
Interest-earning deposits	31,327			9,380
Cash and cash equivalents	49,450			26,755
Certificates of deposits held for investment	21,805			23,520
Investment securities available-for-sale, at fair value	62,380			70,281
Investment securities held-to-maturity, at amortized cost	54,576			65,354
Total investment securities	116,956			135,635
Loans held for sale	832			1,145
Loans	489,359			458,313
Allowance for loan losses	(9,673		)	(9,616		)
Net loans	479,686			448,697
Accrued interest receivable	1,584			1,594
Bank premises and equipment, net	12,283			12,293
FHLB stock	3,596			3,288
Investment in life insurance	14,916			14,777
Foreclosed assets	2,144			1,760
Deferred tax assets, net	14,404			16,679
Other assets	5,200			5,244
TOTAL ASSETS	$	722,856		$	691,387
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	145,157		$	132,044
Money market, NOW accounts and savings accounts	200,672			180,214
Time deposits, $250,000 and over	65,981			65,718
Other time deposits	148,433			164,358
Total deposits	560,243			542,334
Borrowings	70,000			60,000
Subordinated debentures	12,372			12,372
Subordinated promissory notes	11,500			11,500
Accrued interest payable	378			437
Other liabilities	3,436			4,338
TOTAL LIABILITIES	657,929			630,981
Commitments and Contingencies (Note F)
Shareholders’ equity:
Common stock, $1.00 par value, 80,000,000 shares authorized; 33,780,206 and 33,595,812 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	33,780			33,596
Additional paid-in capital	31,817			31,666
Accumulated deficit	(1,920		)	(4,571		)
Accumulated other comprehensive income (loss)	1,250			(285		)
Total shareholders' equity	64,927			60,406
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	722,856		$	691,387

(*)  Derived from audited consolidated financial statements.

The accompanying notes are an integral part of the consolidated financial statements.

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FOUR OAKS FINCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Interest and dividend income:
Loans, including fees	$	6,507	$	6,365	$	18,902	$	19,013
Taxable investments	675		842		2,291		2,467
Dividends and other investments	82		76		263		242
Interest-earning deposits	117		106		342		414
Total interest and dividend income	7,381		7,389		21,798		22,136
Interest expense:
Deposits	575		608		1,768		1,851
Borrowings	367		787		1,111		2,334
Subordinated debentures	64		96		185		196
Subordinated promissory notes	184		257		583		763
Total interest expense	1,190		1,748		3,647		5,144
Net interest income	6,191		5,641		18,151		16,992
Provision for loan losses	—		—		—		—
Net interest income after provision for loan losses	6,191		5,641		18,151		16,992
Non-interest income:
Service charges on deposit accounts	363		401		1,081		1,198
Other service charges, commissions and fees	906		877		2,553		2,710
Gains on sale of investment securities available-for-sale, net	—		209		266		265
Gains on sale of loans held for sale	—		100		—		100
Income from investment in life insurance	54		45		139		143
Indemnification from third party payment processor clients	—		5		—		348
Other non-interest income	24		47		52		140
Total non-interest income	1,347		1,684		4,091		4,904
Non-interest expense:
Salaries	2,746		2,892		8,094		8,284
Employee benefits	580		454		1,803		1,546
Occupancy expenses	358		328		1,029		1,019
Equipment expenses	131		163		421		585
Professional and consulting fees	513		562		1,736		1,944
FDIC assessments	123		232		373		611
Foreclosed asset-related costs, net	74		80		231		341
Collection expenses	29		156		118		301
Other operating expenses	1,403		1,632		4,192		4,547
Total non-interest expense	5,957		6,499		17,997		19,178
Income before income taxes	1,581		826		4,245		2,718
Income tax expense (benefit)	633		92		1,594		(16,480		)
Net income	$	948	$	734	$	2,651	$	19,198
Basic net income per common share	$	0.03	$	0.02	$	0.08	$	0.60
Diluted net income per common share	$	0.03	$	0.02	$	0.08	$	0.60
Weighted Average Shares Outstanding, Basic	32,442,866		32,135,465		32,383,650		32,089,950
Weighted Average Shares Outstanding, Diluted	32,965,572		32,395,315		32,775,442		32,244,253

The accompanying notes are an integral part of the consolidated financial statements.

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FOUR OAKS FINCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Net income	$	948		$	734		$	2,651		$	19,198
Other comprehensive income (loss):
Securities available-for-sale:
Unrealized holding gains on available-for-sale securities	35			714			2,696			15
Tax effect	(1		)	—			(878		)	—
Reclassification of gains recognized in net income	—			(209		)	(266		)	(265		)
Tax effect	—			—			—			—
Amortization of unrealized losses on investment securities transferred from available-for-sale to held-to-maturity	(7		)	(15		)	(27		)	(46		)
Tax effect	3			—			10			—
Total other comprehensive income (loss)	30			490			1,535			(296		)
Comprehensive income	$	978		$	1,224		$	4,186		$	18,902

The accompanying notes are an integral part of the consolidated financial statements.

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 FOUR OAKS FINCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands, except share data)

	Common stock					Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive income			Total shareholders' equity
	Shares		Amount
BALANCE, DECEMBER 31, 2014	32,032,327		$	32,032		$	32,520		$	(24,579	)	$	756		$	40,729
Net income	—		—			—			19,198			—			19,198
Other comprehensive loss	—		—			—			—			(296		)	(296		)
Stock based compensation	—		—			426			—			—			426
Issuance of common stock	109,309		110			48			—			—			158
Issuance of restricted stock	1,461,000		1,461			(1,461		)	—			—			—
Forfeiture of restricted stock	(60,000	)	(60		)	60			—			—			—
BALANCE, SEPTEMBER 30, 2015	33,542,636		$	33,543		$	31,593		$	(5,381	)	$	460		$	60,215

	Common stock					Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive (loss) income			Total shareholders' equity
	Shares		Amount
BALANCE, DECEMBER 31, 2015	33,595,812		$	33,596		$	31,666		$	(4,571	)	$	(285	)	$	60,406
Net income	—		—			—			2,651			—			2,651
Other comprehensive income	—		—			—			—			1,535			1,535
Stock based compensation	—		—			227			—			—			227
Issuance of common stock	105,382		105			72			—			—			177
Excess income tax benefit	—		—			2			—			—			2
Issuance of restricted stock	210,000		210			(210		)	—			—			—
Forfeiture of restricted stock	(93,500	)	(94		)	94			—			—			—
Stock withheld for payment of taxes	(37,488	)	(37		)	(34		)	—			—			(71		)
BALANCE, SEPTEMBER 30, 2016	33,780,206		$	33,780		$	31,817		$	(1,920	)	$	1,250		$	64,927

The accompanying notes are an integral part of the consolidated financial statements.

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FOUR OAKS FINCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Nine Months Ended
	September 30,
	2016			2015
Cash flows from operating activities:
Net income	$	2,651		$	19,198
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	1,407			(16,480		)
Provision for depreciation and amortization	509			206
Net amortization of bond premiums and discounts	695			896
Stock based compensation	227			426
Excess tax benefits from stock options	2			—
Gain on sale of investment securities	(266		)	(265		)
Loss on disposition of bank premises and equipment	10			24
Gain on sale of foreclosed assets, net	(19		)	(34		)
Valuation adjustment on foreclosed assets	67			283
Earnings on investment in bank-owned life insurance	(139		)	(143		)
Gain on sale of mortgage loans held for sale	(404		)	(476		)
Gain on sale of problem loans held for sale	—			(100		)
Originations of mortgage loans held for sale	(16,733		)	(22,274		)
Proceeds from sale of loans held for sale	17,450			26,032
Changes in assets and liabilities:
Other assets	44			721
Accrued interest receivable	10			(85		)
Other liabilities	(902		)	568
Accrued interest payable	(59		)	(929		)
Net cash provided by operating activities	4,550			7,568
Cash flows from investing activities:
Proceeds from sales and calls of investment securities available-for-sale	5,198			8,324
Proceeds from maturities and calls of investment securities held-to-maturity	100			—
Proceeds from paydowns of investment securities available-for-sale	5,350			4,801
Proceeds from paydowns of investment securities held-to-maturity	10,255			11,965
Purchases of investment securities available-for-sale	(250		)	(21,197		)
Redemption of certificates of deposits held for investment	1,715			3,774
(Purchase) redemption of FHLB stock	(308		)	224
Net increase in loans outstanding	(32,006		)	(3,181		)
Purchases of bank premises and equipment	(509		)	(143		)
Proceeds from sales of foreclosed assets	585			2,614
Net cash (used in) provided by investing activities	(9,870		)	7,181
Cash flows from financing activities:
Net proceeds from borrowings	10,000			—
Net increase (decrease) in deposit accounts	17,909			(125,421		)
Proceeds from issuance of common stock	177			158
Shares withheld for payment of taxes	(71		)	—
Net cash provided by (used in) financing activities	28,015			(125,263		)
Change in cash and cash equivalents	22,695			(110,514		)
Cash and cash equivalents at beginning of period	26,755			158,527
Cash and cash equivalents at end of period	$	49,450		$	48,013

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FOUR OAKS FINCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Nine Months Ended
	September 30,
	2016			2015
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings	$	3,706		$	6,073
Supplemental disclosures of noncash investing and financing activities:
Unrealized gains (losses) on investment securities available-for-sale	$	2,430		$	(250	)
Amortization of net losses on investment securities transferred to held-to-maturity	(27		)	(46		)
Transfer of loans to foreclosed assets	1,017			1,169
Loans transferred from held for sale to held for investment	—			109
Loans transferred from held for investment to held for sale	—			2,509

The accompanying notes are an integral part of the consolidated financial statements.

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FOUR OAKS FINCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

The organization and business of Four Oaks Fincorp, Inc., a bank holding company incorporated under the laws of the State of North Carolina (the "Company"), accounting policies followed by the Company, and other information are contained in the notes to the consolidated financial statements filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. This Quarterly Report should be read in conjunction with such Annual Report.

The accompanying unaudited consolidated financial statements are prepared in accordance with instructions for Form 10-Q and the applicable rules and regulations of the Securities and Exchange Commission. In management’s opinion, the financial information contained in the accompanying unaudited consolidated financial statements reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the nine months endedSeptember 30, 2016 and 2015, in conformity with accounting principles generally accepted in the United States of America.  The consolidated financial statements include the accounts and transactions of the Company, and its wholly-owned subsidiary, Four Oaks Bank & Trust Company (the "Bank").  Operating results for the nine months endedSeptember 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016.

Certain amounts previously presented in the Company's Consolidated Financial Statements for the prior periods have been reclassified to conform to current classifications. All such reclassifications had no impact on the prior periods' Statements of Operations, Comprehensive Income, or Shareholders' Equity as previously reported.

Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific classification issues in an effort to reduce the diversity in practice in how these certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update replaces the incurred loss impairment methodology with one that reflects current expected credit losses (CECL) and requires consideration of a broader range of reasonable and supportable forecasted information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update amends several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of this guidance is not believed to be material to the Company's financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to be recorded as an asset on the balance sheet for the right to use the leased asset and a liability for the corresponding lease obligation for leases with terms of more than 12 months. The accounting treatment for lessors will remain relatively unchanged. The ASU also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

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In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting treatment related to classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Upon adoption, investments in equity securities, except those accounted for under the equity method or that result in the consolidation of the investee, will be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have a readily determinable fair value may be measured at cost minus impairment, plus or minus changes from observable price changes in an orderly transaction. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of certain provisions is permitted. The Company does not believe the adoption of this ASU will have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs are not affected by this update. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. We adopted ASU No. 2015-03 and there was no impact to the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. On August 12, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year. Based on ASU 2015-14, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date (i.e., interim and annual reporting periods beginning after December 15, 2016). The Company continues to evaluate the impact of adopting the new standard on its consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

From time to time the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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NOTE B - NET INCOME PER SHARE

Basic net income per share represents earnings credited to common shareholders divided by the weighted average number of common shares outstanding during the period.  Diluted net income per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  Potential common shares that may be issued by the Company relate to outstanding stock options.

Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below (amounts in thousands, except share data): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net income available to common shareholders	$	948	$	734	$	2,651	$	19,198
Weighted average number of common shares - basic	32,442,866		32,135,465		32,383,650		32,089,950
Effect of dilutive stock options	39,415		17,040		37,586		15,683
Effect of dilutive restricted stock awards	483,291		242,810		354,206		138,620
Weighted average number of common shares - dilutive	32,965,572		32,395,315		32,775,442		32,244,253
Basic earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Diluted earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Anti-dilutive awards	12,305		155,455		12,305		155,455

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NOTE C – INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of securities available-for-sale and securities held-to-maturity as of September 30, 2016 and December 31, 2015 are as follows (amounts in thousands):

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	19,849	$	1,256	$	—	$	21,105
Mortgage-backed securities
GNMA	12,324		263		4		12,583
FNMA & FHLMC	27,582		360		—		27,942
Other debt securities	750		—		—		750
Total	$	60,505	$	1,879	$	4	$	62,380

	September 30, 2016
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,393	$	85	$	—	$	3,478
Mortgage-backed securities
GNMA	49,142		1,312		—		50,454
FNMA	2,041		67		—		2,108
Total	$	54,576	$	1,464	$	—	$	56,040

	December 31, 2015
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	24,789	$	225	$	447	$	24,567
Mortgage-backed securities
GNMA	13,512		68		50		13,530
FNMA & FHLMC	32,024		—		351		31,673
Other debt securities	500		—		—		500
Equity securities	11		—		—		11
Total	$	70,836	$	293	$	848	$	70,281

	December 31, 2015
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,531	$	1	$	20	$	3,512
Mortgage-backed securities
GNMA	59,185		509		230		59,464
FNMA	2,638		19		—		2,657
Total	$	65,354	$	529	$	250	$	65,633

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The following tables show gross unrealized losses and fair values of investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2016 and December 31, 2015(amounts in thousands). There were no unrealized losses on held to maturity securities at September 30, 2016.

	September 30, 2016
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Mortgage-backed securities
GNMA	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4
Total temporarily impaired securities	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	20	$	16,888	$	447	—	$	—	$	—	$	16,888	$	447
Mortgage-backed securities
GNMA	3	10,010		50		—	—		—		10,010		50
FNMA & FHLMC	11	31,673		351		—	—		—		31,673		351
Total temporarily impaired securities	34	$	58,571	$	848	—	$	—	$	—	$	58,571	$	848

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Held-to-Maturity:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	9	$	3,325	$	20	—	$	—	$	—	$	3,325	$	20
Mortgage-backed securities
GNMA	14	20,784		116		3	5,130		114		25,914		230
Total temporarily impaired securities	23	$	24,109	$	136	3	$	5,130	$	114	$	29,239	$	250

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not that the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market's perception of the issuer's financial health and the security's credit quality.  If it is determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

The unrealized gains and losses on securities at September 30, 2016 resulted from changing market interest rates compared to the yields available at the time the underlying securities were purchased. As of September 30, 2016, there was 1 of 54 Government National Mortgage Association ("GNMA") mortgage-backed securities ("MBS") that contained a net unrealized loss. Management identified no impairment related to credit quality. For debt securities in an unrealized loss position, the Company does not intend to sell and it is not likely that the Company will be required to sell these securities before the anticipated recovery of the amortized cost basis. As a result, no other than temporary impairment losses were recognized during the three and nine months endedSeptember 30, 2016.

-13-

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2016 by expected maturities are shown on the following table (amounts in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Fair Value
Taxable municipal securities:
Due after ten years	$	19,849	$	21,105
Total taxable municipal securities	19,849		21,105
Mortgage-backed securities - GNMA/FNMA & FHLMC:
Due after ten years	39,906		40,525
Total mortgage-backed securities - GNMA/FNMA & FHLMC	39,906		40,525
Other debt securities:
Due after five years through ten years	750		750
Total other debt securities	750		750
Total available-for-sale securities	$	60,505	$	62,380
Securities Held-to-Maturity:
Taxable municipal securities:
Due within one year	$	156	$	156
Due after one year through five years	2,183		2,221
Due after five years through ten years	1,054		1,101
Total taxable municipal securities	3,393		3,478
Mortgage-backed securities - GNMA/FNMA:
Due after five years through ten years	7,675		7,943
Due after ten years	43,508		44,619
Total mortgage-backed securities - GNMA/FNMA	51,183		52,562
Total held-to-maturity securities	$	54,576	$	56,040

Securities with a carrying value of approximately $43.8 million and $61.1 million at September 30, 2016 and December 31, 2015, respectively, were pledged to secure public deposits, borrowing lines, and for other purposes required or permitted by law. Sales and calls of securities available-for-sale for the nine months ended September 30, 2016 and 2015 of $5.2 million and $8.3 million generated net realized gains of $266,000 and $265,000, respectively, and no gross realized losses for either period. Sales and calls of securities available-for-sale for the three months ended September 30, 2015 of $4.7 million generated net realized gains of $209,000 and no gross realized losses for the period. There were no sales and calls of securities available-for-sale for the three months ended September 30, 2016.

-14-

NOTE D – LOANS AND ALLOWANCE FOR LOAN LOSSES

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures, which are reviewed on a regular basis. Each class of loans is subject to risks that could have an adverse impact on the credit quality of the loan portfolio. Loans are primarily made in the Company's market area in North Carolina, principally Johnston, Wake, Harnett, Duplin, and Sampson counties. There have been no significant changes to the loan class definitions outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The classification of loan segments as of September 30, 2016 and December 31, 2015 are summarized as follows (amounts in thousands):

	September 30, 2016			December 31, 2015
Commercial and industrial	$	22,108		$	23,163
Commercial construction and land development	44,364			50,510
Commercial real estate	237,195			208,737
Residential construction	41,047			36,618
Residential mortgage	134,501			128,442
Consumer	6,992			6,638
Consumer credit cards	1,951			2,240
Business credit cards	1,266			1,168
Other	762			1,257
Gross loans	490,186			458,773
Less:
Net deferred loan fees	(827		)	(460		)
Net loans before allowance	489,359			458,313
Allowance for loan losses	(9,673		)	(9,616		)
Total net loans	$	479,686		$	448,697
Loans held for sale	$	832		$	1,145

-15-

Allowance for Loan Losses and Recorded Investment in Loans

The allowance for loan losses represents management’s estimate of an amount adequate to provide for known and inherent losses in the loan portfolio in the normal course of business.  Management evaluates the adequacy of this allowance on at least a quarterly basis, which includes a review of loans both specifically and collectively evaluated for impairment.

The following tables are an analysis of the allowance for loan losses by loan segment as of and for the three and nine months endedSeptember 30, 2016 and 2015 and as of and for the twelve months ended December 31, 2015(amounts in thousands).

	Three Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate		Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	182		$	4,816		$	2,492	$	271	$	1,147		$	101		$	60		$	9,069
Provision for loan losses	(153		)	(425		)	493		29		19			58			(21		)	—
Loans charged-off	(5		)	(132		)	—		—		(25		)	(54		)	—			(216		)
Recoveries	38			714			19		—		35			14			—			820
Net recoveries (charge-offs)	33			582			19		—		10			(40		)	—			604
Balance, end of period	$	62		$	4,973		$	3,004	$	300	$	1,176		$	119		$	39		$	9,673

	Nine Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Provision for loan losses	(182		)	(1,044		)	1,280			(26		)	(46		)	29			(11		)	—
Loans charged-off	(64		)	(229		)	(565		)	—			(25		)	(124		)	—			(1,007		)
Recoveries	87			776			21			21			56			101			2			1,064
Net recoveries (charge-offs)	23			547			(544		)	21			31			(23		)	2			57
Balance, end of period	$	62		$	4,973		$	3,004		$	300		$	1,176		$	119		$	39		$	9,673
Ending balance: individually evaluated for impairment	$	1		$	345		$	393		$	—		$	35		$	—		$	—		$	774
Ending balance: collectively evaluated for impairment (1)	$	61		$	4,628		$	2,611		$	300		$	1,141		$	119		$	39		$	8,899
Loans:
Balance, end of period	$	23,374		$	44,364		$	237,195		$	41,047		$	134,501		$	8,943		$	762		$	490,186
Ending balance: individually evaluated for impairment	$	27		$	563		$	2,371		$	—		$	1,510		$	—		$	—		$	4,471
Ending balance: collectively evaluated for impairment (1)	$	23,347		$	43,801		$	234,824		$	41,047		$	132,991		$	8,943		$	762		$	485,715

⁽¹⁾At September 30, 2016, there were $239,000 in impaired loans collectively evaluated for impairment with $34,000 in reserves established.

-16-

	Three Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	153		$	5,306		$	2,669		$	318	$	1,224		$	112		$	30		$	9,812
Provision for loan losses	(102		)	(209		)	(210		)	79		409			(18		)	51			—
Loans charged-off	—			(160		)	7			—		(261		)	(38		)	(28		)	(480		)
Recoveries	73			590			198			—		44			35			—			940
Net recoveries (charge-offs)	73			430			205			—		(217		)	(3		)	(28		)	460
Balance, end of period	$	124		$	5,527		$	2,664		$	397	$	1,416		$	91		$	53		$	10,272

	Nine Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(161		)	(493		)	93			(39		)	469			50			81			—
Loans charged-off	(47		)	(179		)	(199		)	—			(426		)	(136		)	(70		)	(1,057		)
Recoveries	213			1,094			388			—			167			88			2			1,952
Net recoveries (charge-offs)	166			915			189			—			(259		)	(48		)	(68		)	895
Balance, end of period	$	124		$	5,527		$	2,664		$	397		$	1,416		$	91		$	53		$	10,272
Ending balance: individually evaluated for impairment	$	—		$	494		$	111		$	—		$	—		$	3		$	—		$	608
Ending balance: collectively evaluated for impairment (1)	$	124		$	5,033		$	2,553		$	397		$	1,416		$	88		$	53		$	9,664
Loans:
Balance, end of period	$	25,103		$	50,469		$	206,548		$	31,577		$	130,588		$	8,396		$	832		$	453,513
Ending balance: individually evaluated for impairment	$	—		$	2,357		$	3,427		$	437		$	1,778		$	3		$	12		$	8,014
Ending balance: collectively evaluated for impairment (1)	$	25,103		$	48,112		$	203,121		$	31,140		$	128,810		$	8,393		$	820		$	445,499

⁽¹⁾At September 30, 2015, there were $416,000 impaired loans collectively evaluated for impairment with $34,000 in reserves established.

-17-

	Twelve Months Ended
	December 31, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(58		)	(615		)	71			(90		)	497			121			74			—
Loans charged-off	(74		)	(196		)	(578		)	(41		)	(713		)	(210		)	(69		)	(1,881		)
Recoveries	234			1,176			393			—			201			113			3			2,120
Net recoveries (charge-offs)	160			980			(185		)	(41		)	(512		)	(97		)	(66		)	239
Balance, end of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Ending balance: individually evaluated for impairment	$	2		$	989		$	228		$	—		$	—		$	—		$	—		$	1,219
Ending balance: collectively evaluated for impairment (1)	$	219		$	4,481		$	2,040		$	305		$	1,191		$	113		$	48		$	8,397
Loans:
Balance, end of period	$	24,331		$	50,510		$	208,737		$	36,618		$	128,442		$	8,878		$	1,257		$	458,773
Ending balance: individually evaluated for impairment	$	84		$	2,564		$	3,957		$	721		$	1,305		$	—		$	—		$	8,631
Ending balance: collectively evaluated for impairment (1)	$	24,247		$	47,946		$	204,780		$	35,897		$	127,137		$	8,878		$	1,257		$	450,142

⁽¹⁾ At December 31, 2015, there were $295,000 in impaired loans collectively evaluated for impairment with $42,000 in reserves established.

-18-

Credit Risk

The Company uses an internal grading system to assign the degree of inherent risk on each individual loan and monitors trends in portfolio quality. The grade is initially assigned by the lending officer or credit administration and reviewed by the loan administration function throughout the life of the loan. There have been no significant changes in credit grade definitions as outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The following tables are an analysis of the creditworthiness by loan class and credit card portfolio exposure as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,193	$	—	$	—	$	—	$	—	$	1,364	$	—	$	2,557
2 - Strong	866		933		4,557		105		14,424		530		98		21,513
3 - Standard	10,113		11,781		106,284		11,717		56,882		1,200		622		198,599
4 - Acceptable	9,598		28,091		116,463		29,225		56,195		3,811		42		243,425
5 - Special Mention	283		2,913		7,172		—		5,040		87		—		15,495
6-8 - Substandard	56		645		2,719		—		1,960		—		—		5,380
	$	22,109	$	44,363	$	237,195	$	41,047	$	134,501	$	6,992	$	762	$	486,969

	Consumer -  Credit Card		Business- Credit Card
Performing	$	1,947	$	1,266
Nonperforming	4		—
Total	$	1,951	$	1,266
Total Loans			$	490,186

	December 31, 2015
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,942	$	—	$	—	$	—	$	—	$	1,773	$	—	$	3,715
2 - Strong	971		749		2,280		—		15,187		386		7		19,580
3 - Standard	10,530		11,262		94,357		4,296		56,493		1,250		469		178,657
4 - Acceptable	9,297		33,832		103,740		31,431		50,226		3,170		757		232,453
5 - Special Mention	304		2,486		4,444		170		5,231		59		—		12,694
6-8 - Substandard	119		2,181		3,916		721		1,305		—		24		8,266
	$	23,163	$	50,510	$	208,737	$	36,618	$	128,442	$	6,638	$	1,257	$	455,365

	Consumer- Credit Card		Business- Credit Card
Performing	$	2,211	$	1,133
Non Performing	29		35
Total	$	2,240	$	1,168
Total Loans			$	458,773

-19-

Asset Quality

The following tables are an age analysis of past due loans, including those on nonaccrual by loan class, as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	2	$	—	$	50	$	52	$	22,056	$	22,108
Commercial construction & land development	—		—		603		603		43,761		44,364
Commercial real estate	94		—		1,649		1,743		235,452		237,195
Residential construction	—		—		—		—		41,047		41,047
Residential mortgage	525		—		1,452		1,977		132,524		134,501
Consumer	21		3		—		24		6,968		6,992
Consumer credit cards	41		4		—		45		1,906		1,951
Business credit cards	22		—		—		22		1,244		1,266
Other loans	—		—		—		—		762		762
Total	$	705	$	7	$	3,754	$	4,466	$	485,720	$	490,186

	December 31, 2015
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	56	$	—	$	119	$	175	$	22,988	$	23,163
Commercial construction & land development	211		—		1,626		1,837		48,673		50,510
Commercial real estate	—		—		2,929		2,929		205,808		208,737
Residential construction	133		—		721		854		35,764		36,618
Residential mortgage	499		—		1,203		1,702		126,740		128,442
Consumer	71		—		—		71		6,567		6,638
Consumer credit cards	95		29		—		124		2,116		2,240
Business credit cards	107		36		—		143		1,025		1,168
Other loans	—		—		—		—		1,257		1,257
Total	$	1,172	$	65	$	6,598	$	7,835	$	450,938	$	458,773

Nonperforming assets

Nonperforming assets at September 30, 2016 and December 31, 2015 consist of the following (amounts in thousands):

	September 30, 2016		December 31, 2015
Loans past due ninety days or more and still accruing	$	7	$	65
Nonaccrual loans	3,754		6,598
Foreclosed assets	2,144		1,760
Total nonperforming assets	$	5,905	$	8,423

-20-

Impaired Loans

The following tables illustrate the impaired loans by loan class as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	21	$	21	$	—	$	21	$	—
Commercial construction & land development	147		265		—		248		1
Commercial real estate	1,164		1,669		—		1,206		38
Residential mortgage	1,464		1,540		—		1,522		16
Subtotal:	2,796		3,495		—		2,997		55
With an allowance recorded:
Commercial and industrial	29		29		4		26		1
Commercial construction & land development	456		573		350		468		—
Commercial real estate	1,208		1,208		394		1,205		9
Residential mortgage	221		300		60		249		11
Subtotal:	1,914		2,110		808		1,948		21
Totals:
Commercial	3,025		3,765		748		3,174		49
Residential	1,685		1,840		60		1,771		27
Grand Total	$	4,710	$	5,605	$	808	$	4,945	$	76

-21-

	December 31, 2015
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	67	$	67	$	—	$	63	$	3
Commercial construction & land development	737		1,706		—		1,031		19
Commercial real estate	2,258		2,614		—		2,020		50
Residential construction	721		722		—		408		8
Residential mortgage	1,305		1,312		—		1,191		51
Subtotal:	5,088		6,421		—		4,713		131
With an allowance recorded:
Commercial and industrial	52		63		7		58		4
Commercial construction & land development	1,948		3,020		1,006		2,086		122
Commercial real estate	1,699		1,699		228		1,713		79
Residential mortgage	139		217		20		183		8
Subtotal:	3,838		4,999		1,261		4,040		213
Totals:
Commercial	6,761		9,169		1,241		6,971		277
Residential	2,165		2,251		20		1,782		67
Grand Total:	$	8,926	$	11,420	$	1,261	$	8,753	$	344

-22-

Troubled Debt Restructurings

Loans are classified as a troubled debt restructuring ("TDR") when, for economic or legal reasons which result in a debtor experiencing financial difficulties, the Bank grants a concession through a modification of the original loan agreement that would not otherwise be considered. Generally concessions are granted as a result of a borrower's inability to meet the contractual repayment obligations of the initial loan terms and in the interest of improving the likelihood of recovery of the loan. We may grant these concessions by a number of means such as (1) forgiving principal or interest, (2) reducing the stated interest rate to a below market rate, (3) deferring principal payments, (4) changing repayment terms from amortizing to interest only, (5) extending the repayment period, or (6) accepting a change in terms based upon a bankruptcy plan. However, the Bank only restructures loans for borrowers that demonstrate the willingness and capacity to repay the loan under reasonable terms and where the Bank has sufficient protection provided by the cash flow of the underlying collateral or business.

The Bank's policy with respect to accrual of interest on loans restructured in a TDR process follows relevant supervisory guidance. If a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is considered and the loan is considered performing. If the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status. If the borrower was materially delinquent on payments prior to the restructuring but shows the capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual and nonperforming until such time as continued performance has been demonstrated, which is typically a period of at least six consecutive payments.

The following table provides a summary of loans modified as TDRs at September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial & industrial	$	—	$	27	$	27	$	1
Commercial real estate	723		683		1,406		40
Residential mortgage	215		126		341		—
Total modifications	$	938	$	836	$	1,774	$	41

	December 31, 2015
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial construction and land development	$	1,059	$	557	$	1,616	$	447
Commercial real estate	1,028		574		1,602		20
Residential mortgage	226		—		226		—
Total modifications	$	2,313	$	1,131	$	3,444	$	467

-23-

There were six new TDRs made to borrowers for the three and nine months endedSeptember 30, 2016 and there were no TDR loans modified during the previous twelve months that had a payment default for the three and nine months endedSeptember 30, 2016.

	September 30, 2016
	Three Months Ended					Nine Months Ended
	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Extended payment terms:
Commercial & industrial	3	$	26,750	$	26,750	3	$	26,750	$	26,750
Commercial real estate	2	591,487		591,487		2	591,487		591,487
Subtotal	5	$	618,237	$	618,237	5	$	618,237	$	618,237
Other:									—
Residential mortgage	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Subtotal	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Total	6	$	744,244	$	744,244	6	$	744,244	$	744,244

The table below details TDRs that the Bank has entered into during the twelve months ended September 30, 2016.

	Twelve Months Ended September 30, 2016
	Paid in full			Paying as restructured			Converted to nonaccrual			Foreclosure/Default
	Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment
	(amounts in thousands, except number of loans)
Extended payment terms	—	$	—	5	$	618,237	—	$	—	—	$	—
Other	—	—		1	126,007		—	—		—	—
Total	—	$	—	6	$	744,244	—	$	—	—	$	—

-24-

NOTE E – BORROWINGS

At September 30, 2016 and December 31, 2015, borrowed funds included the following Federal Home Loan Bank ("FHLB") advances (amounts in thousands):

Maturity	Interest Rate		September 30, 2016
August 9, 2017	0.73%	Fixed	$	10,000
February 5, 2018	2.06%	Fixed	10,000
May 25, 2018	1.13%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
September 18, 2018	2.71%	Fixed	10,000
April 29, 2019	2.54%	Fixed	5,000
April 29, 2019	2.62%	Fixed	5,000
April 29, 2019	2.83%	Fixed	10,000
			$	70,000

Maturity	Interest Rate		December 31, 2015
February 22, 2016	0.48%	Fixed	$	10,000
August 14, 2017	3.94%	Fixed	5,000
February 5, 2018	2.06%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
June 5, 2018	3.03%	Fixed	5,000
September 10, 2018	3.14%	Fixed	10,000
September 18, 2018	2.71%	Fixed	10,000
			$	60,000

FHLB advances are secured by a floating lien covering the Company's loan portfolio of qualifying mortgage loans, as well as specific bonds in the investment portfolio. At September 30, 2016, the Company had available lines of credit totaling $107.9 million with the FHLB for borrowing dependent on adequate collateralization. The weighted average rates for the above borrowings at September 30, 2016 and December 31, 2015 were 2.06% and 2.38%, respectively.

In addition to the above advances, the Company has lines of credit of $37.0 million from various financial institutions to purchase federal funds on a short-term basis. The Company has no federal funds purchases outstanding as of September 30, 2016.

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NOTE F - COMMITMENTS AND CONTINGENCIES

Commitments

The following table presents loan commitments at September 30, 2016(amounts in thousands).

	September 30, 2016
Commitments to extend credit	$	32,767
Undisbursed lines of credit	103,200
Financial stand-by letters of credit	439
Performance stand-by letters of credit	451
Legally binding commitments	136,857
Unused credit card lines	16,220
Total	$	153,077

Pledged Assets

Certain assets are pledged to secure municipal deposits, borrowings, and borrowing capacity, subject to certain limits, at the FHLB and the Federal Reserve Bank of Richmond (the "FRB"), as well as for other purposes as required or permitted by law. FHLB borrowings are secured by securities and a floating lien covering the Company's loan portfolio of qualifying residential (1-4 units) first mortgage and commercial real estate loans. The following table provides the total market value of pledged assets by asset type at September 30, 2016(amounts in thousands).

	September 30, 2016
Securities	$	43,753
Loans	85,333

Litigation Proceedings

In October 2013, multiple putative class action lawsuits were filed in United States district courts across the country against a number of different banks based on the banks' alleged role in "payday lending". Four of these lawsuits, filed in the Northern District of Georgia, the Middle District of North Carolina, the District of Maryland, and the Southern District of Florida, named the Bank as one of the defendants. The lawsuits allege that, by processing Automatic Clearing House transactions indirectly on behalf of "payday" lenders, the Bank is illegally participating in an enterprise to collect unlawful debts and is therefore liable to plaintiffs for damages under the federal Racketeer Influenced and Corrupt Organizations Act. The lawsuits also allege a variety of state law claims. The Bank moved to dismiss each of these lawsuits. As previously reported, the Georgia action was voluntarily dismissed by the plaintiffs and the District of Maryland granted the motion and dismissed the case, which the parties subsequently settled while on appeal to the United States Court of Appeals for the Fourth Circuit. Of the two remaining lawsuits, there are no updates to the lawsuit in the Southern District of Florida, which, as previously reported, has been stayed pending arbitration of the plaintiff's claims against the Bank's co-defendants. The Middle District of North Carolina granted the Bank’s motion to dismiss in part and denied it in part; the case against the Bank has been stayed (except for limited discovery) pending an appeal by the Bank’s co-defendants.

Additionally, the Company is party to certain legal actions in the ordinary course of its business. The Company believes these actions are routine in nature and incidental to the operation of its business. While the outcome of these actions cannot be predicted with certainty, management’s present judgment is that the ultimate resolution of these matters will not have a material adverse impact on its business, financial condition, results of operations, cash flows or prospects. If, however, the Company's assessment of these actions is inaccurate, or there are any significant adverse developments in these actions, its business, financial condition, results of operations, cash flows and prospects could be adversely affected.

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NOTE G – FAIR VALUEMEASUREMENT

Fair Value Measured on a Recurring Basis.

The Company measures certain assets at fair value on a recurring basis, as described below.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities have historically included equity securities traded on an active exchange, such as the New York Stock Exchange. As of September 30, 2016, there were no Level 1 securities. Level 2 securities include taxable municipalities and mortgage-backed securities issued by government sponsored entities. The Company’s mortgage-backed securities were primarily issued by GNMA, the Federal National Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"). As of September 30, 2016, all of the Company’s mortgage-backed securities were agency issued and designated as Level 2 securities. Securities classified as Level 3 include other debt securities in less liquid markets and with no quoted market price.

The following table presents information about assets measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices  in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	21,105	$	21,105	$	—	$	21,105	$	—
Mortgage-backed securities:
GNMA	12,583		12,583		—		12,583		—
FNMA & FHLMC	27,942		27,942		—		27,942		—
Other debt securities	750		750		—		—		750
Total available-for-sale securities	$	62,380	$	62,380	$	—	$	61,630	$	750

					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	24,567	$	24,567	$	—	$	24,567	$	—
Mortgage-backed securities:
GNMA	13,530		13,530		—		13,530		—
FNMA & FHLMC	31,673		31,673		—		31,673		—
Other debt securities	500		500		—		—		500
Equity securities	11		11		—		11		—
Total available-for-sale securities	$	70,281	$	70,281	$	—	$	69,781	$	500

-27-

The following table presents the reconciliation for the three and nine months endedSeptember 30, 2016 and 2015 for all Level 3 assets that are measured at fair value on a recurring basis (amounts in thousands).

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Securities Available-for-Sale:	2016		2015		2016		2015
Beginning Balance	$	750	$	—	$	500	$	—
Total realized and unrealized gains or (losses):
Included in earnings	—		—		—		—
Included in other comprehensive income	—		—		—		—
Purchases, issuances and settlements	—		—		250		—
Ending Balance	$	750	$	—	$	750	$	—

Fair Value Measured on a Nonrecurring Basis.

The Company measures certain assets at fair value on a nonrecurring basis, as described below.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans held for sale as a Level 2 valuation.

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, when a loan is considered impaired, it is evaluated for impairment and written down to its estimated fair value or an allowance for loan losses is established. When the fair value of an impaired loan is based on an observable market price or a current appraised value with no adjustments, the Company records the impaired loan as nonrecurring Level 2. When there is no observable market prices, an appraised value is not available, or the Company determines the fair value of the collateral is further impaired below the appraised value, the impaired loan is classified as nonrecurring Level 3.

Foreclosed Assets

Foreclosed assets are adjusted to fair value less estimated selling costs upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Given the lack of observable market prices for identical properties, the Company records foreclosed assets as non-recurring Level 3.

Assets measured at fair value on a non-recurring basis are included in the tables below at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	832	$	832	$	—	$	832	$	—
Impaired loans	2,030		2,030		—		—		2,030
Foreclosed assets	2,144		2,144		—		—		2,144

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					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical  Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	1,145	$	1,145	$	—	$	1,145	$	—
Impaired loans	3,540		3,540		—		—		3,540
Foreclosed assets	1,760		1,760		—		—		1,760

Quantitative Information about Level 3 Fair Value Measurements

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring and nonrecurring basis at September 30, 2016 (amounts in thousands, except percentages).

	Total Carrying Amount at September 30, 2016		Valuation Methodology	Range of Inputs
Recurring measurements:
Other debt securities	$	750	Probability of default	0%
			Loss given default	100%
Nonrecurring measurements:
Impaired loans	$	2,030	Collateral discounts	9 - 50%
Foreclosed assets	$	2,144	Discounted appraisals	10 - 30%

Collateral discounts to determine fair value on impaired loans varies widely and result from the consideration of the following factors: the age of the most recent appraisal, the type of asset serving as collateral, the expected marketability of the asset, its material or environmental condition, and comparisons to actual sales data of similar assets from both internal and external sources.

The following table reflects the general range of collateral discounts for impaired loans by segment.

Loan Segment:	Range of Percentages
Commercial construction and land development	10% - 40%
Commercial real estate	9% - 50%
Residential construction	9% - 30%
Residential mortgage	9% - 20%
All other segments	9% - 20%

As foreclosed assets are brought into other real estate owned through a process which requires a fair market valuation, further discounts typically reflect market conditions specific to the asset. These conditions are usually captured in subsequent appraisals which are required on an annual basis, and depending upon asset type and marketability demonstrate a more restrained variance than that noted above.

-29-

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents are equal to the fair value due to the liquid nature of the financial instruments.

Certificate of Deposits

These investments are valued at carrying amounts for fair value purposes.

Securities Available-for-Sale and Securities Held-to-Maturity

Fair values of investment securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans Held For Sale

The fair value of mortgage loans held for sale is based on commitments on hand from investors within the secondary market for loans with similar characteristics.

Loans

The fair value of loans has been estimated utilizing the net present value of future cash flows based upon contractual balances, prepayment assumptions, and applicable weighted average interest rates, adjusted for a 3% current liquidity and market discount assumption. The Company has assigned no fair value to off-balance sheet financial instruments since they are either short term in nature or subject to immediate repricing.

FHLB Stock

The carrying amount of FHLB stock approximates fair value.

Deposits

The fair value of non-maturing deposits such as noninterest-bearing demand, money market, NOW, and savings accounts, are by definition, equal to the amount payable on demand. Fair value for maturing deposits such as CDs and IRAs are estimated using a discounted cash flow approach that applies current interest rates to expected maturities.

Borrowings, Subordinated Debentures, and Subordinated Promissory Notes

The fair value of borrowings, subordinated debentures, and subordinated promissory notes, is based on discounting expected cash flows at the interest rate from debt with the same or similar remaining maturities and collection requirements. 

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximates fair value.

-30-

The following table presents information for financial assets and liabilities as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Carrying Value		Estimated  Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	49,450	$	49,450	$	49,450	$	—	$	—
Certificates of deposit	21,805		21,805		—		21,805		—
Securities available-for-sale	62,380		62,380		—		61,630		750
Securities held-to-maturity	54,576		56,040		—		56,040		—
Loans held for sale	832		832		—		832		—
Loans, net	479,686		462,669		—		—		462,669
FHLB stock	3,596		3,596		—		3,596		—
Accrued interest receivable	1,584		1,584		—		1,584		—
Financial liabilities:
Deposits	$	560,243	$	560,529	$	—	$	560,529	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	70,000		71,466		—		71,466		—
Accrued interest payable	378		378		—		378		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	26,755	$	26,755	$	26,755	$	—	$	—
Certificates of deposit	23,520		23,520		—		23,520		—
Securities available-for-sale	70,281		70,281		—		69,781		500
Securities held-to-maturity	65,354		65,633		—		65,633		—
Loans held for sale	1,145		1,145		—		1,145		—
Loans, net	448,697		423,285		—		—		423,285
FHLB stock	3,288		3,288		—		3,288		—
Accrued interest receivable	1,594		1,594		—		1,594		—
Financial liabilities:
Deposits	$	542,334	$	541,818	$	—	$	541,818	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	60,000		61,709		—		61,709		—
Accrued interest payable	437		437		—		437		—

-31-

NOTE H - CAPITAL & REGULATORY INFORMATION

North Carolina banking law requires that the Bank may not pay a dividend that would reduce its capital below the applicable required capital. In addition, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure the financial soundness of the Bank. Although not currently limited by regulatory authorities, there were no dividends paid to the Company by the Bank during the nine months ended September 30, 2016.

Current federal regulations require that the Company and the Bank maintain a minimum ratio of total capital to risk weighted assets of 8.0%, with at least 6.0% being in the form of Tier 1 capital, as defined in the regulations. In addition, the Company and the Bank must maintain a common equity Tier 1 capital ratio of 4.5% and a leverage ratio of 4.0%. For the Bank to be categorized as well capitalized, the Bank must maintain minimum amounts and ratios as set forth in the table below. There is no such category for well capitalized at the Company level. At September 30, 2016, the Bank was classified as well capitalized for regulatory capital purposes.

Capital ratios for the Bank and the Company are presented in the table below.

	Actual Ratio				Minimum For Capital Adequacy Purposes		Minimum to be Well Capitalized under Prompt Corrective Action Provisions
	9/30/2016		12/31/2015		Ratio		Ratio
Bank
Total Capital (to Risk Weighted Assets)	15.7	%	15.6	%	8.0	%	10.0	%
Tier I Capital (to Risk Weighted Assets)	14.5	%	14.4	%	6.0	%	8.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	14.5	%	14.4	%	4.5	%	6.5	%
Tier I Capital (to Average Assets)	10.8	%	10.2	%	4.0	%	5.0	%
Company
Total Capital (to Risk Weighted Assets)	16.0	%	16.0	%	8.0	%	N/A
Tier I Capital (to Risk Weighted Assets)	12.5	%	12.4	%	6.0	%	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	10.9	%	11.3	%	4.5	%	N/A
Tier I Capital (to Average Assets)	9.3	%	8.8	%	4.0	%	N/A

In July 2015, the Bank entered into a Written Agreement (the "2015 Written Agreement") with the FRB replacing the Written Agreement the Company and the Bank entered into with the FRB and the North Carolina Office of the Commissioner of Banks in 2011. Under the terms of the 2015 Written Agreement, the Bank submitted and implemented the following plans:

•a written plan to assure ongoing board oversight of the Bank's management and operations;

•a written program for the review of new products, services, or business lines; and

• an enhanced written program for conducting appropriate levels of customer due diligence by the Bank.

In addition, the Bank agreed that it will within 30 days after the end of each calendar quarter following the date of the 2015 Written Agreement, submit to FRB written progress reports detailing the form and manner of all actions taken to secure compliance with the 2015 Written Agreement and the results thereof.

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NOTE I - RESTRICTED STOCK

A summary of the activity of the Company's restricted stock awards for the nine months endedSeptember 30, 2016 is presented below:

	Restricted Stock		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015:	1,363,175		$	1.64
Granted	210,000		1.90
Vested	(149,325	)	1.53
Forfeited	(93,500	)	1.66
Unvested at September 30, 2016:	1,330,350		$	1.69

The Company measures the fair value of restricted shares based on the price of the Company's common stock on the grant date, and compensation expense is recorded over the vesting period. The related compensation expense recognized for restricted stock awards for the nine months endedSeptember 30, 2016 and 2015 was $225,000 and $405,000, respectively. At September 30, 2016, the Company estimates there was $2.2 million of total unrecognized compensation cost related to unvested restricted stock granted under the plan. That cost is expected to be recognized over the next three years. The grant-date fair value of restricted stock grants vested during the nine months endedSeptember 30, 2016 was $1.53.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the major components of the financial condition and results of operations of Four Oaks Fincorp, Inc. (the “Company”) and its subsidiaries and should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto in Part I, Item 1 of this Quarterly Report.  Unless the context otherwise indicates, references in this report to "we," "us" and "our" refer to the Company and its subsidiaries.

Comparison of Financial Condition at September 30, 2016 and December 31, 2015

The Company’s total assets increased$31.5 million or 4.6% from $691.4 million at December 31, 2015 to $722.9 million at September 30, 2016. Cash, cash equivalents, and investments were $191.8 million at September 30, 2016 compared to $189.2 million at December 31, 2015, an increase of $2.6 million or 1.4%. Strong loan demand resulted in balance growth of $31.1 million or 6.8% as outstanding gross loans grew to $489.4 million at September 30, 2016 compared to $458.3 million at December 31, 2015.

Total liabilities were $657.9 million at September 30, 2016, an increase of $26.9 million or 4.3%, from $631.0 million at December 31, 2015. Total deposits increased$17.9 million or 3.3% during the nine month period ended September 30, 2016, from $542.3 million at December 31, 2015, to $560.2 million at September 30, 2016. Non-time deposits grew $33.5 million or 10.8% to $345.8 million at September 30, 2016 from $312.3 million at December 31, 2015 as we strive to reduce high cost time deposits for non-relationship customers. Long-term borrowings were $70.0 million at September 30, 2016 compared to $60.0 million at December 31, 2015, an increase of $10.0 million or 16.7%. Total shareholders’ equity increased$4.5 million or 7.5%, from $60.4 million at December 31, 2015, to $64.9 million at September 30, 2016.

Results of Operations for the Three Months EndedSeptember 30, 2016 and 2015

Net Income.  Pre-tax net income for the three months ended September 30, 2016 was $1.6 million compared to $826,000 for the same period in 2015, an increase of $755,000 or 91.4%. Net income for the three months ended September 30, 2016 was $948,000, or $0.03 net income per basic and diluted share, as compared to net income of $734,000, or $0.02 net income per basic and diluted share, for the three months ended September 30, 2015. For the quarter ended September 30, 2016, the Company reported a provision for income taxes totaling $633,000 compared to $92,000 for the same period in 2015. The year-over-year $214,000 increase in net income was due to a number of factors including an increase in net interest income and reductions in non-interest expense, offset by a decrease in non-interest income and an increase in income tax expense.

Net Interest Income.  Net interest income is the difference between interest income, principally from loan and investment securities, and interest expense, largely on customer deposits and borrowings.  Changes in net interest income result from changes in volume, spread, and margin.  For this purpose, volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities, spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities, and margin refers to net interest income divided by average interest-earning assets.  Margin is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities, as well as by levels of non-interest-bearing liabilities and capital.

Net interest income increased to $6.2 million for the three months ended September 30, 2016 compared to $5.6 million as of this same period in 2015, an increase of $550,000. Interest income remained flat at $7.4 million for the third quarter of 2016 and 2015. Although interest income increased due to loan balance growth, this was offset by declines in investment portfolio balances and the absence of lost interest recoveries on nonaccrual loans compared to this same period in 2015. Interest expense totaled $1.2 million for the three months ended September 30, 2016 compared to $1.7 million for the same period in 2015. Interest expense for the period ended September 30, 2016 improved $558,000 as a result of the balance sheet strategies executed in 2015, which entailed reducing high cost Federal Home Loan Bank ("FHLB") borrowings and refinancing the Company's subordinated debt. Net interest margin improved 33 basis points to 3.76% for the quarter ended September 30, 2016, as compared to 3.43% for the same period ended September 30, 2015.

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Provision for Loan Losses.  The provision for loan losses is charged to bring the allowance for loan losses to the level deemed appropriate by management after adjusting for recoveries of amounts previously charged off.  Loans are charged against the allowance for loan losses when management believes that the uncollectibility of a loan balance is confirmed.  The allowance for loan losses is maintained at a level deemed adequate to absorb probable losses inherent in the loan portfolio and results from management’s consideration of such factors as the financial condition of borrowers, past and expected loss experience, current economic conditions, and other factors management feels deserve recognition in establishing an appropriate reserve. During the three months ended September 30, 2016 and September 30, 2015, no provision for the allowance for loan losses was recognized in earnings.

Non-Interest Income.  Non-interest income decreased$337,000 to $1.3 million for the quarter ended September 30, 2016, as compared to $1.7 million for the quarter ended September 30, 2015. For the three months ended September 30, 2015, there was $309,000 in gains from the sale of loans and investments that were not present for the three months ended September 30, 2016, contributing to most of the decline in non-interest income.

Non-Interest Expense.  Non-interest expense decreased$542,000 to $6.0 million for the quarter ended September 30, 2016, as compared to $6.5 million for the quarter ended September 30, 2015. This decrease was largely attributable to declines in operating expenses of $229,000, collection expenses of $127,000, and FDIC insurance premiums of $109,000, as well as professional and consulting fees of $49,000. These declines are a result of a continued focus on expense management, as well as improvements in asset quality measures, overall reductions in the number and amount of foreclosed assets, and the absence of technology conversion related expenses that were present during 2015.

Income Taxes. The Company recorded a provision for income taxes totaling $633,000 for the quarter ended September 30, 2016, as compared to $92,000 for the same period in 2015. The recorded income tax expense in the third quarter of 2015 was due to a reduction in the North Carolina state tax rate and its impact on the Company's deferred tax asset. The North Carolina state tax rate was again reduced in 2016 and consequently the deferred tax asset was revalued, increasing tax expense for the third quarter of 2016 by approximately this same amount.

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Results of Operations for the Nine Months EndedSeptember 30, 2016 and 2015

Net Income.  Pre-tax net income for the nine months ended September 30, 2016 was $4.2 million compared to $2.7 million for the same period in 2015, an increase of $1.5 million or 56.2%. Net income for the nine months endedSeptember 30, 2016 was $2.7 million, or $0.08 net income per basic and diluted share, as compared to net income of $19.2 million, or $0.60 net income per basic and diluted share, for the nine months endedSeptember 30, 2015. For the nine months ended September 30, 2016, the Company reported a provision for income taxes totaling $1.6 million compared to an income tax benefit of $16.5 million for the same period in 2015. The prior year income tax benefit resulted from the partial reversal of the valuation allowance against the Company's deferred tax assets executed in the second quarter of 2015 and is consequently the main contributor to the year-over-year $16.5 milliondecrease in net income.

Net Interest Income.  Net interest income for the nine months endedSeptember 30, 2016 was $18.2 million, as compared to $17.0 million for the nine months endedSeptember 30, 2015, an increase of $1.2 million. Cost of funds continues to be favorable as compared to 2015 and improved $1.5 million for the nine month period ended September 30, 2016, which was primarily a result of the balance sheet strategies executed in 2015 that entailed reducing high cost long term borrowings and refinancing the Company's subordinated debt at lower rates. This improvement in funding costs was partially offset by declines in interest income on investment securities due to declining balances and on loans as there was limited recovery of lost interest on nonaccrual loans compared to this same period in 2015. Net interest margin improved 48 basis points to 3.73% for the nine month period ended September 30, 2016, as compared to 3.25% for the same period ended September 30, 2015.

Provision for Loan Losses.  The provision for loan losses is charged to bring the allowance for loan losses to the level deemed appropriate by management after adjusting for recoveries of amounts previously charged off. Loans are charged against the allowance for loan losses when management believes that the uncollectibility of a loan balance is confirmed. The allowance for loan losses is maintained at a level deemed adequate to absorb probable losses inherent in the loan portfolio and results from management's consideration of such factors as the financial condition of borrowers, past and expected loss experience, current economic conditions, and other factors management feels deserve recognition in establishing an appropriate reserve. During the nine months endedSeptember 30, 2016 and September 30, 2015, no provision for the allowance for loan losses was recognized in earnings.

Non-Interest Income.  Non-interest income for the nine months endedSeptember 30, 2016 was $4.1 million, as compared to $4.9 million for the nine months endedSeptember 30, 2015, a decrease of $813,000. The primary driver for the decline was the absence of $348,000 in ACH third party payment processor indemnification income as the Company exited this business line in 2015 and the absence of $100,000 from gains on sale of loans held for sale. Additional factors contributing to the overall decline include reductions in service charges on deposit accounts and reduced premium income from the sale of government guaranteed loans.

Non-Interest Expenses.  Non-interest expense for the nine months endedSeptember 30, 2016 was $18.0 million, as compared to $19.2 million for the nine months endedSeptember 30, 2015, a decrease of $1.2 million with declines continuing in various expense categories as the Company strives to increase efficiency and reduce the overall expense base. Ongoing improvements in asset quality led to declines in FDIC assessment rates, as well as collection and foreclosure related expenses. Another contributor to the decline was the reduction in technology conversion related expenses that were present during the nine month period ended September 30, 2015.

Income Taxes. The Company began recording income tax expense during the first quarter of 2016 and reported a provision for income taxes totaling $1.6 million for the nine months ended September 30, 2016, as compared to an income tax benefit of $16.5 million for the same period in 2015, which resulted from the partial reversal of the valuation allowance against the Company's deferred tax assets executed in the second quarter of 2015. Since the $16.6 million partial reversal of the valuation allowance in 2015, the Company has experienced continued improvements in quarterly earnings and asset quality. These factors along with forecasted future profitability continue to support the Company's belief that it is more likely than not that sufficient taxable income will be generated to realize the remaining portion of its deferred tax asset. The Company is in the process of evaluating a reversal of the remaining valuation allowance on its deferred tax asset. If during this process the Company determines that it is more likely than not that sufficient taxable income will be generated to realize the remaining portion of its deferred tax assets, we will move forward with the release of the remaining valuation allowance.

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Asset Quality

Asset quality continued to improve during the quarter ended September 30, 2016. The Company completed its asset resolution plan in 2015 and management believes problem assets are at a manageable level in which resolution can occur in the normal course of business. Classified assets as of September 30, 2016, which include loans risk graded substandard or lower and foreclosed assets, totaled $7.5 million compared to $10.1 million at December 31, 2015, a decline of $2.6 million. The classified assets to capital ratio totaled 8.8% as of September 30, 2016 compared to 12.5% at year end 2015.

Nonperforming Assets

Nonperforming assets are comprised of nonperforming loans, accruing loans which are past due 90 days or more, repossessed assets, and other real estate owned ("foreclosed assets"). As of September 30, 2016, nonperforming assets declined$2.5 million or 29.9% when compared to December 31, 2015.

The following table describes our nonperforming asset portfolio by loan class as of September 30, 2016 and December 31, 2015(amounts in thousands, except ratios).

	September 30, 2016			December 31, 2015
Nonaccrual loans:
Commercial and industrial	$	50		$	119
Commercial construction and land development	603			1,626
Commercial real estate	1,649			2,929
Residential construction	—			721
Residential mortgage	1,452			1,203
Total nonaccrual loans	3,754			6,598
Past due 90 days or more and still accruing:
Consumer	3			—
Consumer credit cards	4			29
Business credit cards	—			36
Total past due 90 days and still accruing	7			65
Foreclosed assets:
Commercial and industrial	3			3
Commercial construction and land development	1,142			1,493
Commercial real estate	945			82
Residential construction	—			69
Residential mortgage	54			113
Total foreclosed assets	2,144			1,760
Total nonperforming assets	$	5,905		$	8,423
Nonperforming loans to gross loans	0.8		%	1.4		%
Nonperforming assets to total assets	0.8		%	1.2		%
Allowance coverage of nonperforming loans	257.2		%	144.3		%

Nonaccrual Loans

Loans are moved to nonaccrual status and recognition of interest income ceases when it is probable that full collectibility of principal and interest in accordance with the terms of the loan agreement may not occur. Nonaccrual loans as a percentage of gross loans decreased to 0.8% as of September 30, 2016 compared to 1.4% as of December 31, 2015. At September 30, 2016, there were 30 nonaccrual loans totaling $3.8 million compared to 42 loans totaling $6.6 million at December 31, 2015. The amount of interest income for the nine months endedSeptember 30, 2016 that would have been reported on loans in nonaccrual status as of September 30, 2016 totaled $133,000.

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Foreclosed Assets

At September 30, 2016, there were 28 foreclosed properties valued at a total of $2.1 million compared to 35 foreclosed properties valued at $1.8 million as of December 31, 2015. The primary driver of the increase in value of foreclosed properties was due to the addition of one property in the amount of $863,000 in the first quarter of 2016.

Troubled Debt Restructurings

Loans are classified as a troubled debt restructuring ("TDR") when, for economic or legal reasons which result in a debtor experiencing financial difficulties, the Bank grants a concession through a modification of the original loan agreement that would not otherwise be considered. Generally concessions are granted as a result of a borrower's inability to meet the contractual repayment obligations of the initial loan terms and in the interest of improving the likelihood of recovery of the loan. We may grant these concessions by a number of means such as (1) forgiving principal or interest, (2) reducing the stated interest rate to a below market rate, (3) deferring principal payments, (4) changing repayment terms from amortizing to interest only, (5) extending the repayment period, or (6) accepting a change in terms based upon a bankruptcy plan. However, the Bank only restructures loans for borrowers that demonstrate the willingness and capacity to repay the loan under reasonable terms and where the Bank has sufficient protection provided by the cash flow of the underlying collateral or business.

The Bank's policy with respect to accrual of interest on loans restructured in a TDR process follows relevant supervisory guidance. If a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is considered and the loan is considered performing. If the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status. If the borrower was materially delinquent on payments prior to the restructuring but shows the capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual and nonperforming until such time as continued performance has been demonstrated, which is typically a period of at least six consecutive payments.

As of September 30, 2016, there were five restructured loans in accrual status compared to eight as of December 31, 2015. Regardless of whether any individual TDR is performing, all TDRs are considered to be impaired and are evaluated as such in the allowance for loan losses calculation.  As of September 30, 2016, the recorded investment in performing TDRs and their related allowance for loan losses totaled $938,000 and $0, respectively.  Outstanding nonperforming TDRs totaled $836,000 with $41,000 in specific reserves as of September 30, 2016. The amount of interest recognized for performing and nonperforming TDRs during the first nine months of 2016 were approximately $45,000 and $10,000, respectively.

The following table presents performing and nonperforming TDRs at September 30, 2016 and December 31, 2015(amounts in thousands).

Performing TDRs:	September 30, 2016		December 31, 2015
Commercial construction and land development	$	—	$	1,059
Commercial real estate	723		1,028
Residential mortgage	215		226
Total performing TDRs	$	938	$	2,313

Nonperforming TDRs:	September 30, 2016		December 31, 2015
Commercial and industrial	$	27	$	—
Commercial construction and land development	—		557
Commercial real estate	683		574
Residential mortgage	126		—
Total nonperforming TDRs	$	836	$	1,131

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Allowance for Loan Losses and Summary of Loss Experience

The allowance for loan losses is established through periodic charges to earnings in the form of a provision for loan losses.  Increases to the allowance for loan losses occur as a result of provisions charged to operations and recoveries of amounts previously charged-off, and decreases to the allowance occur when loans are charged-off because management believes that the uncollectibility of a loan balance is confirmed.  Management evaluates the adequacy of our allowance for loan losses on at least a quarterly basis.  The evaluation of the adequacy of the allowance for loan losses involves the consideration of loan growth, loan portfolio composition and industry diversification, historical loan loss experience, current delinquency levels, adverse conditions that might affect a borrower’s ability to repay the loan, estimated value of underlying collateral, prevailing economic conditions and all other relevant factors derived from our history of operations. Additionally, regulatory agencies review our allowance for loan losses and may require additional provisions for estimated losses based on judgments that differ from those of management.   

The following table summarizes the Company's loan loss experience by class for the three and nine months endedSeptember 30, 2016 and 2015(amounts in thousands, except ratios).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Balance at beginning of period	$	9,069		$	9,812		$	9,616		$	9,377
Charge-offs:
Commercial and industrial	5			—			64			47
Commercial construction and land development	132			160			229			179
Commercial real estate	—			(7		)	565			199
Residential mortgage	25			261			25			426
Consumer	54			38			124			136
Other	—			28			—			70
Total charge-offs	216			480			1,007			1,057
Recoveries:
Commercial and industrial	38			73			87			213
Commercial construction and land development	714			590			776			1,094
Commercial real estate	19			198			21			388
Residential construction	—			—			21			—
Residential mortgage	35			44			56			167
Consumer	14			35			101			88
Other	—			—			2			2
Total recoveries	820			940			1,064			1,952
Net recoveries	604			460			57			895
Provision for loan losses	—			—			—			—
Balance at end of period	$	9,673		$	10,272		$	9,673		$	10,272
Ratio of net charge-offs to average gross loans	—		%	—		%	—		%	—		%

The allowance for loan losses at September 30, 2016 was $9.7 million, which represents 1.98% of total loans held for investment compared to $10.3 million or 2.27% as of September 30, 2015.  The decrease in amount and percentage to total loans is due to loan growth of $31.1 millionfor the nine months endedSeptember 30, 2016. Additionally, for the nine months ended September 30, 2016, recoveries outpaced charge-offs resulting in a net loan recovery of $57,000 compared with net recoveries of $895,000 for the prior year period.

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The allowance for loan losses on individually reviewed impaired loans totaled $774,000 as of September 30, 2016, compared to $1.2 million as of December 31, 2015, a 37%decrease. The primary driver of the reduction is the absence of one relationship that was refinanced with additional collateral and removed from impaired status. The allowance for loan losses on the loans reviewed collectively increased slightly from $8.4 million as of December 31, 2015 to $8.9 million as of September 30, 2016.

Because of the nature of the Company’s primary markets and business, a significant portion of the loan portfolio is secured by commercial real estate, including residential and commercial acquisition, development, and construction properties.  As of September 30, 2016, approximately 93% of the loan portfolio had real estate as a primary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower. Real estate values in many of our markets have improved. The Company continues to thoroughly review and monitor its construction and commercial real estate concentrations and the associated allowance and sets limits by sector and region based on this internal review.

The following table summarizes the Company’s allowance for loan losses by category and percent of loans within each category at September 30, 2016, and December 31, 2015(amounts in thousands, except ratios).

	September 30, 2016				December 31, 2015
	Amount		% of loans in each category		Amount		% of loans in each category
Commercial and industrial	$	62	5	%	$	221	5	%
Commercial construction and land development	4,973		9	%	5,470		11	%
Commercial real estate	3,004		48	%	2,268		46	%
Residential construction	300		8	%	305		8	%
Residential mortgage	1,176		28	%	1,191		28	%
Consumer	119		2	%	113		2	%
Other	39		—	%	48		—	%
Total	$	9,673	100	%	$	9,616	100	%

Liquidity and Capital Resources

Market and public confidence in our financial strength and in the strength of financial institutions in general will largely determine our access to appropriate levels of liquidity. This confidence is significantly dependent on our ability to maintain sound asset quality and appropriate levels of capital resources.  The term "liquidity" refers to our ability to generate adequate amounts of cash to meet our needs for funding loan originations, deposit withdrawals, maturities of borrowings and operating expenses. Management measures our liquidity position by giving consideration to both on and off-balance sheet sources of, and demands for, funds on a daily and weekly basis.

Sources of liquidity include cash and cash equivalents (net of federal requirements to maintain reserves against deposit liabilities), investment securities eligible for pledging to secure borrowings, investments available-for-sale, loan repayments, loan sales, deposits and borrowings from the FHLB secured with pledged loans and securities, and from correspondent banks under overnight federal funds credit lines. During the first nine months of 2016, the Company's primary use of its excess liquidity was to fund growth in the loan portfolio.

The Company sold $11.5 million aggregate principal amount of subordinated promissory notes to certain accredited investors in December 2015. These notes are due on November 30, 2025 and the Company is obligated to pay interest at an annualized rate of 6.25% payable in quarterly installments commencing on March 1, 2016. The Company may prepay the notes at any time after November 30, 2020, subject to compliance with applicable law. The proceeds were used to refinance the Company's outstanding subordinated promissory notes issued in 2009.   

Management believes that the Company’s liquidity sources are adequate to meet its operating needs for at least the next 12 months.  Total shareholders’ equity was $64.9 million at September 30, 2016 and $60.4 million at December 31, 2015. Supplementing customer deposits as a source of funding, we have available lines of credit from various correspondent banks to purchase federal funds on a short-term basis of approximately $37.0 million that remain unused at September 30, 2016. As of September 30, 2016, the Bank has the credit capacity to borrow up to $177.9 million from the FHLB with $70.0 million outstanding.

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The Bank had total risk based capital of 15.7%, Tier 1 risk based capital of 14.5%, a leverage ratio of 10.8%, and common equity Tier 1 capital of 14.5% at September 30, 2016, as compared to 15.6%, 14.4%, 10.2%, and 14.4%, respectively, at December 31, 2015. The Company had total risk based capital of 16.0%, Tier 1 risk based capital of 12.5%, a leverage ratio of 9.3%, and common equity Tier 1 capital of 10.9% at September 30, 2016, as compared to 16.0%, 12.4%, 8.8%, and 11.3%, respectively, at December 31, 2015.

The Company has not paid any cash dividends on its common stock since it suspended dividends in the fourth quarter of 2010. As a bank holding company, the Company’s ability to declare and pay dividends depends on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. A decision to pay any dividend in the future would be determined based on a number of factors including capital position and capital adequacy, ongoing operations and profitability, the risk profile of the institution and general market conditions, among other things.  

Regulatory Update

In July 2015, the Bank entered into a Written Agreement (the "2015 Written Agreement") with the Federal Reserve Bank of Richmond (the "FRB") replacing the Written Agreement the Company and the Bank entered into with the FRB and the North Carolina Office of the Commissioner of Banks in 2011. Under the terms of the 2015 Written Agreement, the Bank submitted and implemented the following plans:

•a written plan to assure ongoing board oversight of the Bank's management and operations;

•a written program for the review of new products, services, or business lines; and

• an enhanced written program for conducting appropriate levels of customer due diligence by the Bank.

In addition, the Bank agreed that it will within 30 days after the end of each calendar quarter following the date of the 2015 Written Agreement, submit to FRB written progress reports detailing the form and manner of all actions taken to secure compliance with the 2015 Written Agreement and the results thereof.

The Bank continues to make progress in improving each of these areas and believes that it will be able to demonstrate full compliance with this agreement in the future.

Forward-Looking Information

Information set forth in this Quarterly Report on Form 10-Q, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements represent our judgment concerning the future and are subject to business, economic and other risks and uncertainties, both known and unknown, that could cause our actual operating results and financial position to differ materially. Such forward looking statements can be identified by the use of forward looking terminology, such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue” or the negative thereof or other variations thereof or comparable terminology.

We caution that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including, without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates on the level and composition of deposits, the effects of competition from other financial institutions, our ability to comply with the 2015 Written Agreement, the failure of assumptions underlying the establishment of the allowance for possible loan losses, our ability to maintain an effective internal control environment, the low trading volume of our common stock and the risks discussed in Part II, Item 1A. Risk Factors, and other considerations described in connection with specific forward-looking statements and other cautionary elements specified in the Company's periodic filings with the Commission, including without limitation, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Any forward-looking statements contained in this Quarterly Report on Form 10-Q are as of the date hereof and we undertake no duty to update them if our view changes later, except as required by law. These forward-looking statements should not be relied upon as representing our view as of any date subsequent to the date hereof.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 4 – CONTROLS AND PROCEDURES

As required by paragraph (b) of Rule 13a-15 under the Exchange Act, an evaluation was carried out under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report.   As defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's (the "SEC") rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report, the Company's disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits to the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods required by the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that the Company believes have materially affected or are likely to materially affect, its internal control over financial reporting.

Part II. OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In October 2013, multiple putative class action lawsuits were filed in United States district courts across the country against a number of different banks based on the banks' alleged role in "payday lending". Four of these lawsuits, filed in the Northern District of Georgia, the Middle District of North Carolina, the District of Maryland, and the Southern District of Florida, named the Bank as one of the defendants. The lawsuits allege that, by processing Automatic Clearing House transactions indirectly on behalf of "payday" lenders, the Bank is illegally participating in an enterprise to collect unlawful debts and is therefore liable to plaintiffs for damages under the federal Racketeer Influenced and Corrupt Organizations Act. The lawsuits also allege a variety of state law claims. The Bank moved to dismiss each of these lawsuits. As previously reported, the Georgia action was voluntarily dismissed by the plaintiffs and the District of Maryland granted the motion and dismissed the case, which the parties subsequently settled while on appeal to the United States Court of Appeals for the Fourth Circuit. Of the two remaining lawsuits, there are no updates to the lawsuit in the Southern District of Florida, which, as previously reported, has been stayed pending arbitration of the plaintiff's claims against the Bank's co-defendants. The Middle District of North Carolina granted the Bank’s motion to dismiss in part and denied it in part; the case against the Bank has been stayed (except for limited discovery) pending an appeal by the Bank's co-defendants.

Additionally, we are party to certain other legal actions in the ordinary course of our business. We believe these actions are routine in nature and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, management’s present judgment is that the ultimate resolution of these matters will not have a material adverse impact on our business, financial condition, results of operations, cash flows or prospects. If, however, our assessment of these actions is inaccurate, or there are any significant adverse developments in these actions, our business, financial condition, results of operations, cash flows and prospects could be adversely affected.

ITEM 1A - RISK FACTORS

There have been no material changes in the Company’s risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

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ITEM 6 - EXHIBITS

The following exhibits are filed as part of this Quarterly Report on Form 10-Q.

Exhibit No.	Description
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from Four Oaks Fincorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statement of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		FOUR OAKS FINCORP, INC.
Date:	November 14, 2016	By:	/s/ David H. Rupp
		David H. Rupp
		President and
		Chief Executive Officer
Date:	November 14, 2016	By:	/s/ Deanna W. Hart
		Deanna W. Hart
		Executive Vice President and
		Chief Financial Officer and
		Principal Accounting Officer

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Exhibit Index

Exhibit No.	Description
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from Four Oaks Fincorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statement of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Rule 13a-14(a) or Rule 15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David H. Rupp, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of Four Oaks Fincorp, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 14, 2016	/s/ David H. Rupp
		David H. Rupp
		President and
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Rule 13a-14(a) or Rule 15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Deanna W. Hart, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of Four Oaks Fincorp, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 14, 2016	/s/ Deanna W. Hart
		Deanna W. Hart
		Executive Vice President and
		Chief Financial Officer and
		Principal Accounting Officer

EX-32.1

Exhibit 32.1

Certification by the Chief Executive Officer Pursuant to 18. U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned hereby certifies that, to his or her knowledge, (i) the Form 10-Q filed by Four Oaks Fincorp, Inc. (the “Issuer”) for the period ended September 30, 2016 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

		FOUR OAKS FINCORP, INC.
Date:	November 14, 2016	By:	/s/ David H. Rupp
			David H. Rupp
			President and
			Chief Executive Officer

This Certification is being furnished solely to accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by the Issuer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Issuer under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906 has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification by the Chief Financial Officer Pursuant to 18. U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned hereby certifies that, to his or her knowledge, (i) the Form 10-Q filed by Four Oaks Fincorp, Inc. (the “Issuer”) for the period ended September 30, 2016 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

		FOUR OAKS FINCORP, INC.
Date:	November 14, 2016	By:	/s/ Deanna W. Hart
			Deanna W. Hart
			Executive Vice President and
			Chief Financial Officer and
			Principal Accounting Officer

This Certification is being furnished solely to accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by the Issuer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Issuer under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906 has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 09, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	FOUR OAKS FINCORP INC
Entity Central Index Key	0001040799
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		33,780,206

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	[1]
ASSETS
Cash and due from banks	$ 18,123	$ 17,375
Interest-earning deposits	31,327	9,380
Cash and cash equivalents	49,450	26,755
Certificates of deposits held for investment	21,805	23,520
Investment securities available-for-sale, at fair value	62,380	70,281
Investment securities held-to-maturity, at amortized cost	54,576	65,354
Total investment securities	116,956	135,635
Loans held for sale	832	1,145
Loans	489,359	458,313
Allowance for loan losses	(9,673)	(9,616)
Net loans	479,686	448,697
Accrued interest receivable	1,584	1,594
Bank premises and equipment, net	12,283	12,293
FHLB stock	3,596	3,288
Investment in life insurance	14,916	14,777
Foreclosed assets	2,144	1,760
Deferred tax assets, net	14,404	16,679
Other assets	5,200	5,244
TOTAL ASSETS	722,856	691,387
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand	145,157	132,044
Money market, NOW accounts and savings accounts	200,672	180,214
Time deposits, $250,000 and over	65,981	65,718
Other time deposits	148,433	164,358
Total deposits	560,243	542,334
Borrowings	70,000	60,000
Subordinated debentures	12,372	12,372
Subordinated promissory notes	11,500	11,500
Accrued interest payable	378	437
Other liabilities	3,436	4,338
TOTAL LIABILITIES	657,929	630,981
Commitments and Contingencies (Note F)
Shareholders’ equity:
Common stock, $1.00 par value, 80,000,000 shares authorized; 33,780,206 and 33,595,812 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	33,780	33,596
Additional paid-in capital	31,817	31,666
Accumulated deficit	(1,920)	(4,571)
Accumulated other comprehensive income (loss)	1,250	(285)
Total shareholders' equity	64,927	60,406
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 722,856	$ 691,387

[1] Derived from audited consolidated financial statements.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock, par value (in usd per share)	$ 1.00	$ 1.00
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	33,780,206	33,595,812
Common stock, shares outstanding	33,780,206	33,595,812

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest and dividend income:
Loans, including fees	$ 6,507	$ 6,365	$ 18,902	$ 19,013
Taxable investments	675	842	2,291	2,467
Other Interest and Dividend Income	82	76	263	242
Interest-earning deposits	117	106	342	414
Total interest and dividend income	7,381	7,389	21,798	22,136
Interest expense:
Deposits	575	608	1,768	1,851
Borrowings	367	787	1,111	2,334
Subordinated debentures	64	96	185	196
Subordinated promissory notes	184	257	583	763
Total interest expense	1,190	1,748	3,647	5,144
Net interest income	6,191	5,641	18,151	16,992
Provision for loan losses	0	0	0	0
Net interest income after provision for loan losses	6,191	5,641	18,151	16,992
Non-interest income:
Service charges on deposit accounts	363	401	1,081	1,198
Other service charges, commissions and fees	906	877	2,553	2,710
Gains on sale of investment securities available-for-sale, net	0	209	266	265
Gains on sale of loans held for sale	0	100	0	100
Income from investment in life insurance	54	45	139	143
Indemnification from third party payment processor clients	0	5	0	348
Other non-interest income	24	47	52	140
Total non-interest income	1,347	1,684	4,091	4,904
Non-interest expense:
Salaries	2,746	2,892	8,094	8,284
Employee benefits	580	454	1,803	1,546
Occupancy expenses	358	328	1,029	1,019
Equipment expenses	131	163	421	585
Professional and consulting fees	513	562	1,736	1,944
FDIC assessments	123	232	373	611
Foreclosed asset-related costs, net	74	80	231	341
Collection expenses	29	156	118	301
Other operating expenses	1,403	1,632	4,192	4,547
Total non-interest expense	5,957	6,499	17,997	19,178
Income before income taxes	1,581	826	4,245	2,718
Income tax expense (benefit)	633	92	1,594	(16,480)
Net income	$ 948	$ 734	$ 2,651	$ 19,198
Basic net income per common share (in usd per share)	$ 0.03	$ 0.02	$ 0.08	$ 0.60
Diluted net income per common share (in usd per share)	$ 0.03	$ 0.02	$ 0.08	$ 0.60
Weighted Average Shares Outstanding, Basic	32,442,866	32,135,465	32,383,650	32,089,950
Weighted Average Shares Outstanding, Diluted	32,965,572	32,395,315	32,775,442	32,244,253

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 948	$ 734	$ 2,651	$ 19,198
Securities available-for-sale:
Unrealized holding gains on available-for-sale securities	35	714	2,696	15
Tax effect	(1)	0	(878)	0
Reclassification of gains recognized in net income	0	(209)	(266)	(265)
Tax effect	0	0	0	0
Amortization of unrealized losses on investment securities transferred from available-for-sale to held-to-maturity	(7)	(15)	(27)	(46)
Tax effect	3	0	10	0
Total other comprehensive income (loss)	30	490	1,535	(296)
Comprehensive income	$ 978	$ 1,224	$ 4,186	$ 18,902

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands	Total		Common stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive (loss) income
BEGINNING BALANCE at Dec. 31, 2014	$ 40,729		$ 32,032	$ 32,520	$ (24,579)	$ 756
BEGINNING BALANCE (in shares) at Dec. 31, 2014			32,032,327
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	19,198				19,198
Other comprehensive income loss	(296)					(296)
Stock based compensation	426			426
Issuance of common stock	158		$ 110	48
Issuance of common stock (in shares)			109,309
Issuance of restricted stock	0		$ 1,461	(1,461)
Issuance of restricted stock (in shares)			1,461,000
Forfeiture of restricted stock	0		$ (60)	60
Forfeiture of restricted stock (in shares)			(60,000)
ENDING BALANCE at Sep. 30, 2015	60,215		$ 33,543	31,593	(5,381)	460
ENDING BALANCE (in shares) at Sep. 30, 2015			33,542,636
BEGINNING BALANCE at Dec. 31, 2015	60,406	[1]	$ 33,596	31,666	(4,571)	(285)
BEGINNING BALANCE (in shares) at Dec. 31, 2015			33,595,812
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	2,651				2,651
Other comprehensive income loss	1,535					1,535
Stock based compensation	227			227
Issuance of common stock	177		$ 105	72
Issuance of common stock (in shares)			105,382
Excess income tax benefit	2			2
Issuance of restricted stock	0		$ 210	(210)
Issuance of restricted stock (in shares)			210,000
Forfeiture of restricted stock	0		$ (94)	94
Forfeiture of restricted stock (in shares)			(93,500)
Stock withheld for payment of taxes	(71)		$ (37)	(34)
Stock withheld for payment of taxes (in shares)			(37,488)
ENDING BALANCE at Sep. 30, 2016	$ 64,927		$ 33,780	$ 31,817	$ (1,920)	$ 1,250
ENDING BALANCE (in shares) at Sep. 30, 2016			33,780,206

[1] Derived from audited consolidated financial statements.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016		Sep. 30, 2015
Cash flows from operating activities:
Net income	$ 2,651		$ 19,198
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense (benefit)	1,407		(16,480)
Provision for depreciation and amortization	509		206
Net amortization of bond premiums and discounts	695		896
Stock based compensation	227		426
Excess tax benefits from stock options	2		0
Gain on sale of investment securities	(266)		(265)
Loss on disposition of bank premises and equipment	10		24
Gain on sale of foreclosed assets, net	(19)		(34)
Valuation adjustment on foreclosed assets	67		283
Earnings on investment in bank-owned life insurance	(139)		(143)
Gain on sale of mortgage loans held for sale	(404)		(476)
Gain on sale of problem loans held for sale	0		(100)
Originations of mortgage loans held for sale	(16,733)		(22,274)
Proceeds from sale of loans held for sale	17,450		26,032
Changes in assets and liabilities:
Other assets	44		721
Accrued interest receivable	10		(85)
Other liabilities	(902)		568
Accrued interest payable	(59)		(929)
Net cash provided by operating activities	4,550		7,568
Cash flows from investing activities:
Proceeds from sales and calls of investment securities available-for-sale	5,198		8,324
Proceeds from maturities and calls of investment securities held-to-maturity	100		0
Proceeds from paydowns of investment securities available-for-sale	5,350		4,801
Proceeds from paydowns of investment securities held-to-maturity	10,255		11,965
Purchases of investment securities available-for-sale	(250)		(21,197)
Redemption of certificates of deposits held for investment	1,715		3,774
(Purchase) redemption of FHLB stock	(308)		224
Net increase in loans outstanding	(32,006)		(3,181)
Purchases of bank premises and equipment	(509)		(143)
Proceeds from sales of foreclosed assets	585		2,614
Net cash (used in) provided by investing activities	(9,870)		7,181
Cash flows from financing activities:
Net proceeds from borrowings	10,000		0
Net increase (decrease) in deposit accounts	17,909		(125,421)
Proceeds from issuance of common stock	177		158
Shares withheld for payment of taxes	(71)		0
Net cash provided by (used in) financing activities	28,015		(125,263)
Change in cash and cash equivalents	22,695		(110,514)
Cash and cash equivalents at beginning of period	26,755	[1]	158,527
Cash and cash equivalents at end of period	49,450		48,013
Supplemental disclosures of cash flow information:
Interest paid on deposits and borrowings	3,706		6,073
Supplemental disclosures of noncash investing and financing activities:
Unrealized gains (losses) on investment securities available-for-sale	2,430		(250)
Amortization of net losses on investment securities transferred to held-to-maturity	(27)		(46)
Transfer of loans to foreclosed assets	1,017		1,169
Loans transferred from held for sale to held for investment	0		109
Loans transferred from held for investment to held for sale	$ 0		$ 2,509

[1] Derived from audited consolidated financial statements.

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

The organization and business of Four Oaks Fincorp, Inc., a bank holding company incorporated under the laws of the State of North Carolina (the "Company"), accounting policies followed by the Company, and other information are contained in the notes to the consolidated financial statements filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. This Quarterly Report should be read in conjunction with such Annual Report.

The accompanying unaudited consolidated financial statements are prepared in accordance with instructions for Form 10-Q and the applicable rules and regulations of the Securities and Exchange Commission. In management’s opinion, the financial information contained in the accompanying unaudited consolidated financial statements reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the nine months endedSeptember 30, 2016 and 2015, in conformity with accounting principles generally accepted in the United States of America.  The consolidated financial statements include the accounts and transactions of the Company, and its wholly-owned subsidiary, Four Oaks Bank & Trust Company (the "Bank").  Operating results for the nine months endedSeptember 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016.

Certain amounts previously presented in the Company's Consolidated Financial Statements for the prior periods have been reclassified to conform to current classifications. All such reclassifications had no impact on the prior periods' Statements of Operations, Comprehensive Income, or Shareholders' Equity as previously reported.

Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific classification issues in an effort to reduce the diversity in practice in how these certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update replaces the incurred loss impairment methodology with one that reflects current expected credit losses (CECL) and requires consideration of a broader range of reasonable and supportable forecasted information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update amends several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of this guidance is not believed to be material to the Company's financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to be recorded as an asset on the balance sheet for the right to use the leased asset and a liability for the corresponding lease obligation for leases with terms of more than 12 months. The accounting treatment for lessors will remain relatively unchanged. The ASU also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting treatment related to classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Upon adoption, investments in equity securities, except those accounted for under the equity method or that result in the consolidation of the investee, will be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have a readily determinable fair value may be measured at cost minus impairment, plus or minus changes from observable price changes in an orderly transaction. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of certain provisions is permitted. The Company does not believe the adoption of this ASU will have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs are not affected by this update. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. We adopted ASU No. 2015-03 and there was no impact to the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. On August 12, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year. Based on ASU 2015-14, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date (i.e., interim and annual reporting periods beginning after December 15, 2016). The Company continues to evaluate the impact of adopting the new standard on its consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

From time to time the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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NET INCOME PER SHARE

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

NET INCOME PER SHARE

NET INCOME PER SHARE

Basic net income per share represents earnings credited to common shareholders divided by the weighted average number of common shares outstanding during the period.  Diluted net income per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.  Potential common shares that may be issued by the Company relate to outstanding stock options.

Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below (amounts in thousands, except share data): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net income available to common shareholders	$	948	$	734	$	2,651	$	19,198
Weighted average number of common shares - basic	32,442,866		32,135,465		32,383,650		32,089,950
Effect of dilutive stock options	39,415		17,040		37,586		15,683
Effect of dilutive restricted stock awards	483,291		242,810		354,206		138,620
Weighted average number of common shares - dilutive	32,965,572		32,395,315		32,775,442		32,244,253
Basic earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Diluted earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Anti-dilutive awards	12,305		155,455		12,305		155,455

XML

INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of securities available-for-sale and securities held-to-maturity as of September 30, 2016 and December 31, 2015 are as follows (amounts in thousands):

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	19,849	$	1,256	$	—	$	21,105
Mortgage-backed securities
GNMA	12,324		263		4		12,583
FNMA & FHLMC	27,582		360		—		27,942
Other debt securities	750		—		—		750
Total	$	60,505	$	1,879	$	4	$	62,380

	September 30, 2016
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,393	$	85	$	—	$	3,478
Mortgage-backed securities
GNMA	49,142		1,312		—		50,454
FNMA	2,041		67		—		2,108
Total	$	54,576	$	1,464	$	—	$	56,040

	December 31, 2015
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	24,789	$	225	$	447	$	24,567
Mortgage-backed securities
GNMA	13,512		68		50		13,530
FNMA & FHLMC	32,024		—		351		31,673
Other debt securities	500		—		—		500
Equity securities	11		—		—		11
Total	$	70,836	$	293	$	848	$	70,281

	December 31, 2015
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,531	$	1	$	20	$	3,512
Mortgage-backed securities
GNMA	59,185		509		230		59,464
FNMA	2,638		19		—		2,657
Total	$	65,354	$	529	$	250	$	65,633

The following tables show gross unrealized losses and fair values of investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2016 and December 31, 2015(amounts in thousands). There were no unrealized losses on held to maturity securities at September 30, 2016.

	September 30, 2016
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Mortgage-backed securities
GNMA	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4
Total temporarily impaired securities	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	20	$	16,888	$	447	—	$	—	$	—	$	16,888	$	447
Mortgage-backed securities
GNMA	3	10,010		50		—	—		—		10,010		50
FNMA & FHLMC	11	31,673		351		—	—		—		31,673		351
Total temporarily impaired securities	34	$	58,571	$	848	—	$	—	$	—	$	58,571	$	848

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Held-to-Maturity:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	9	$	3,325	$	20	—	$	—	$	—	$	3,325	$	20
Mortgage-backed securities
GNMA	14	20,784		116		3	5,130		114		25,914		230
Total temporarily impaired securities	23	$	24,109	$	136	3	$	5,130	$	114	$	29,239	$	250

Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not that the Company will be required to sell the securities.  If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors.  In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market's perception of the issuer's financial health and the security's credit quality.  If it is determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined.  If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income.

The unrealized gains and losses on securities at September 30, 2016 resulted from changing market interest rates compared to the yields available at the time the underlying securities were purchased. As of September 30, 2016, there was 1 of 54 Government National Mortgage Association ("GNMA") mortgage-backed securities ("MBS") that contained a net unrealized loss. Management identified no impairment related to credit quality. For debt securities in an unrealized loss position, the Company does not intend to sell and it is not likely that the Company will be required to sell these securities before the anticipated recovery of the amortized cost basis. As a result, no other than temporary impairment losses were recognized during the three and nine months endedSeptember 30, 2016.

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2016 by expected maturities are shown on the following table (amounts in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Fair Value
Taxable municipal securities:
Due after ten years	$	19,849	$	21,105
Total taxable municipal securities	19,849		21,105
Mortgage-backed securities - GNMA/FNMA & FHLMC:
Due after ten years	39,906		40,525
Total mortgage-backed securities - GNMA/FNMA & FHLMC	39,906		40,525
Other debt securities:
Due after five years through ten years	750		750
Total other debt securities	750		750
Total available-for-sale securities	$	60,505	$	62,380
Securities Held-to-Maturity:
Taxable municipal securities:
Due within one year	$	156	$	156
Due after one year through five years	2,183		2,221
Due after five years through ten years	1,054		1,101
Total taxable municipal securities	3,393		3,478
Mortgage-backed securities - GNMA/FNMA:
Due after five years through ten years	7,675		7,943
Due after ten years	43,508		44,619
Total mortgage-backed securities - GNMA/FNMA	51,183		52,562
Total held-to-maturity securities	$	54,576	$	56,040

Securities with a carrying value of approximately $43.8 million and $61.1 million at September 30, 2016 and December 31, 2015, respectively, were pledged to secure public deposits, borrowing lines, and for other purposes required or permitted by law. Sales and calls of securities available-for-sale for the nine months ended September 30, 2016 and 2015 of $5.2 million and $8.3 million generated net realized gains of $266,000 and $265,000, respectively, and no gross realized losses for either period. Sales and calls of securities available-for-sale for the three months ended September 30, 2015 of $4.7 million generated net realized gains of $209,000 and no gross realized losses for the period. There were no sales and calls of securities available-for-sale for the three months ended September 30, 2016.

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LOANS AND ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2016

Loans and Leases Receivable Disclosure [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

LOANS AND ALLOWANCE FOR LOAN LOSSES

The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures, which are reviewed on a regular basis. Each class of loans is subject to risks that could have an adverse impact on the credit quality of the loan portfolio. Loans are primarily made in the Company's market area in North Carolina, principally Johnston, Wake, Harnett, Duplin, and Sampson counties. There have been no significant changes to the loan class definitions outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The classification of loan segments as of September 30, 2016 and December 31, 2015 are summarized as follows (amounts in thousands):

	September 30, 2016			December 31, 2015
Commercial and industrial	$	22,108		$	23,163
Commercial construction and land development	44,364			50,510
Commercial real estate	237,195			208,737
Residential construction	41,047			36,618
Residential mortgage	134,501			128,442
Consumer	6,992			6,638
Consumer credit cards	1,951			2,240
Business credit cards	1,266			1,168
Other	762			1,257
Gross loans	490,186			458,773
Less:
Net deferred loan fees	(827		)	(460		)
Net loans before allowance	489,359			458,313
Allowance for loan losses	(9,673		)	(9,616		)
Total net loans	$	479,686		$	448,697
Loans held for sale	$	832		$	1,145

Allowance for Loan Losses and Recorded Investment in Loans

The allowance for loan losses represents management’s estimate of an amount adequate to provide for known and inherent losses in the loan portfolio in the normal course of business.  Management evaluates the adequacy of this allowance on at least a quarterly basis, which includes a review of loans both specifically and collectively evaluated for impairment.

The following tables are an analysis of the allowance for loan losses by loan segment as of and for the three and nine months endedSeptember 30, 2016 and 2015 and as of and for the twelve months ended December 31, 2015(amounts in thousands).

	Three Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate		Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	182		$	4,816		$	2,492	$	271	$	1,147		$	101		$	60		$	9,069
Provision for loan losses	(153		)	(425		)	493		29		19			58			(21		)	—
Loans charged-off	(5		)	(132		)	—		—		(25		)	(54		)	—			(216		)
Recoveries	38			714			19		—		35			14			—			820
Net recoveries (charge-offs)	33			582			19		—		10			(40		)	—			604
Balance, end of period	$	62		$	4,973		$	3,004	$	300	$	1,176		$	119		$	39		$	9,673

	Nine Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Provision for loan losses	(182		)	(1,044		)	1,280			(26		)	(46		)	29			(11		)	—
Loans charged-off	(64		)	(229		)	(565		)	—			(25		)	(124		)	—			(1,007		)
Recoveries	87			776			21			21			56			101			2			1,064
Net recoveries (charge-offs)	23			547			(544		)	21			31			(23		)	2			57
Balance, end of period	$	62		$	4,973		$	3,004		$	300		$	1,176		$	119		$	39		$	9,673
Ending balance: individually evaluated for impairment	$	1		$	345		$	393		$	—		$	35		$	—		$	—		$	774
Ending balance: collectively evaluated for impairment (1)	$	61		$	4,628		$	2,611		$	300		$	1,141		$	119		$	39		$	8,899
Loans:
Balance, end of period	$	23,374		$	44,364		$	237,195		$	41,047		$	134,501		$	8,943		$	762		$	490,186
Ending balance: individually evaluated for impairment	$	27		$	563		$	2,371		$	—		$	1,510		$	—		$	—		$	4,471
Ending balance: collectively evaluated for impairment (1)	$	23,347		$	43,801		$	234,824		$	41,047		$	132,991		$	8,943		$	762		$	485,715

⁽¹⁾At September 30, 2016, there were $239,000 in impaired loans collectively evaluated for impairment with $34,000 in reserves established.

	Three Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	153		$	5,306		$	2,669		$	318	$	1,224		$	112		$	30		$	9,812
Provision for loan losses	(102		)	(209		)	(210		)	79		409			(18		)	51			—
Loans charged-off	—			(160		)	7			—		(261		)	(38		)	(28		)	(480		)
Recoveries	73			590			198			—		44			35			—			940
Net recoveries (charge-offs)	73			430			205			—		(217		)	(3		)	(28		)	460
Balance, end of period	$	124		$	5,527		$	2,664		$	397	$	1,416		$	91		$	53		$	10,272

	Nine Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(161		)	(493		)	93			(39		)	469			50			81			—
Loans charged-off	(47		)	(179		)	(199		)	—			(426		)	(136		)	(70		)	(1,057		)
Recoveries	213			1,094			388			—			167			88			2			1,952
Net recoveries (charge-offs)	166			915			189			—			(259		)	(48		)	(68		)	895
Balance, end of period	$	124		$	5,527		$	2,664		$	397		$	1,416		$	91		$	53		$	10,272
Ending balance: individually evaluated for impairment	$	—		$	494		$	111		$	—		$	—		$	3		$	—		$	608
Ending balance: collectively evaluated for impairment (1)	$	124		$	5,033		$	2,553		$	397		$	1,416		$	88		$	53		$	9,664
Loans:
Balance, end of period	$	25,103		$	50,469		$	206,548		$	31,577		$	130,588		$	8,396		$	832		$	453,513
Ending balance: individually evaluated for impairment	$	—		$	2,357		$	3,427		$	437		$	1,778		$	3		$	12		$	8,014
Ending balance: collectively evaluated for impairment (1)	$	25,103		$	48,112		$	203,121		$	31,140		$	128,810		$	8,393		$	820		$	445,499

⁽¹⁾At September 30, 2015, there were $416,000 impaired loans collectively evaluated for impairment with $34,000 in reserves established.

	Twelve Months Ended
	December 31, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(58		)	(615		)	71			(90		)	497			121			74			—
Loans charged-off	(74		)	(196		)	(578		)	(41		)	(713		)	(210		)	(69		)	(1,881		)
Recoveries	234			1,176			393			—			201			113			3			2,120
Net recoveries (charge-offs)	160			980			(185		)	(41		)	(512		)	(97		)	(66		)	239
Balance, end of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Ending balance: individually evaluated for impairment	$	2		$	989		$	228		$	—		$	—		$	—		$	—		$	1,219
Ending balance: collectively evaluated for impairment (1)	$	219		$	4,481		$	2,040		$	305		$	1,191		$	113		$	48		$	8,397
Loans:
Balance, end of period	$	24,331		$	50,510		$	208,737		$	36,618		$	128,442		$	8,878		$	1,257		$	458,773
Ending balance: individually evaluated for impairment	$	84		$	2,564		$	3,957		$	721		$	1,305		$	—		$	—		$	8,631
Ending balance: collectively evaluated for impairment (1)	$	24,247		$	47,946		$	204,780		$	35,897		$	127,137		$	8,878		$	1,257		$	450,142

⁽¹⁾ At December 31, 2015, there were $295,000 in impaired loans collectively evaluated for impairment with $42,000 in reserves established.

Credit Risk

The Company uses an internal grading system to assign the degree of inherent risk on each individual loan and monitors trends in portfolio quality. The grade is initially assigned by the lending officer or credit administration and reviewed by the loan administration function throughout the life of the loan. There have been no significant changes in credit grade definitions as outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The following tables are an analysis of the creditworthiness by loan class and credit card portfolio exposure as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,193	$	—	$	—	$	—	$	—	$	1,364	$	—	$	2,557
2 - Strong	866		933		4,557		105		14,424		530		98		21,513
3 - Standard	10,113		11,781		106,284		11,717		56,882		1,200		622		198,599
4 - Acceptable	9,598		28,091		116,463		29,225		56,195		3,811		42		243,425
5 - Special Mention	283		2,913		7,172		—		5,040		87		—		15,495
6-8 - Substandard	56		645		2,719		—		1,960		—		—		5,380
	$	22,109	$	44,363	$	237,195	$	41,047	$	134,501	$	6,992	$	762	$	486,969

	Consumer -  Credit Card		Business- Credit Card
Performing	$	1,947	$	1,266
Nonperforming	4		—
Total	$	1,951	$	1,266
Total Loans			$	490,186

	December 31, 2015
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,942	$	—	$	—	$	—	$	—	$	1,773	$	—	$	3,715
2 - Strong	971		749		2,280		—		15,187		386		7		19,580
3 - Standard	10,530		11,262		94,357		4,296		56,493		1,250		469		178,657
4 - Acceptable	9,297		33,832		103,740		31,431		50,226		3,170		757		232,453
5 - Special Mention	304		2,486		4,444		170		5,231		59		—		12,694
6-8 - Substandard	119		2,181		3,916		721		1,305		—		24		8,266
	$	23,163	$	50,510	$	208,737	$	36,618	$	128,442	$	6,638	$	1,257	$	455,365

	Consumer- Credit Card		Business- Credit Card
Performing	$	2,211	$	1,133
Non Performing	29		35
Total	$	2,240	$	1,168
Total Loans			$	458,773

Asset Quality

The following tables are an age analysis of past due loans, including those on nonaccrual by loan class, as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	2	$	—	$	50	$	52	$	22,056	$	22,108
Commercial construction & land development	—		—		603		603		43,761		44,364
Commercial real estate	94		—		1,649		1,743		235,452		237,195
Residential construction	—		—		—		—		41,047		41,047
Residential mortgage	525		—		1,452		1,977		132,524		134,501
Consumer	21		3		—		24		6,968		6,992
Consumer credit cards	41		4		—		45		1,906		1,951
Business credit cards	22		—		—		22		1,244		1,266
Other loans	—		—		—		—		762		762
Total	$	705	$	7	$	3,754	$	4,466	$	485,720	$	490,186

	December 31, 2015
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	56	$	—	$	119	$	175	$	22,988	$	23,163
Commercial construction & land development	211		—		1,626		1,837		48,673		50,510
Commercial real estate	—		—		2,929		2,929		205,808		208,737
Residential construction	133		—		721		854		35,764		36,618
Residential mortgage	499		—		1,203		1,702		126,740		128,442
Consumer	71		—		—		71		6,567		6,638
Consumer credit cards	95		29		—		124		2,116		2,240
Business credit cards	107		36		—		143		1,025		1,168
Other loans	—		—		—		—		1,257		1,257
Total	$	1,172	$	65	$	6,598	$	7,835	$	450,938	$	458,773

Nonperforming assets

Nonperforming assets at September 30, 2016 and December 31, 2015 consist of the following (amounts in thousands):

	September 30, 2016		December 31, 2015
Loans past due ninety days or more and still accruing	$	7	$	65
Nonaccrual loans	3,754		6,598
Foreclosed assets	2,144		1,760
Total nonperforming assets	$	5,905	$	8,423

Impaired Loans

The following tables illustrate the impaired loans by loan class as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	21	$	21	$	—	$	21	$	—
Commercial construction & land development	147		265		—		248		1
Commercial real estate	1,164		1,669		—		1,206		38
Residential mortgage	1,464		1,540		—		1,522		16
Subtotal:	2,796		3,495		—		2,997		55
With an allowance recorded:
Commercial and industrial	29		29		4		26		1
Commercial construction & land development	456		573		350		468		—
Commercial real estate	1,208		1,208		394		1,205		9
Residential mortgage	221		300		60		249		11
Subtotal:	1,914		2,110		808		1,948		21
Totals:
Commercial	3,025		3,765		748		3,174		49
Residential	1,685		1,840		60		1,771		27
Grand Total	$	4,710	$	5,605	$	808	$	4,945	$	76

	December 31, 2015
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	67	$	67	$	—	$	63	$	3
Commercial construction & land development	737		1,706		—		1,031		19
Commercial real estate	2,258		2,614		—		2,020		50
Residential construction	721		722		—		408		8
Residential mortgage	1,305		1,312		—		1,191		51
Subtotal:	5,088		6,421		—		4,713		131
With an allowance recorded:
Commercial and industrial	52		63		7		58		4
Commercial construction & land development	1,948		3,020		1,006		2,086		122
Commercial real estate	1,699		1,699		228		1,713		79
Residential mortgage	139		217		20		183		8
Subtotal:	3,838		4,999		1,261		4,040		213
Totals:
Commercial	6,761		9,169		1,241		6,971		277
Residential	2,165		2,251		20		1,782		67
Grand Total:	$	8,926	$	11,420	$	1,261	$	8,753	$	344

Troubled Debt Restructurings

Loans are classified as a troubled debt restructuring ("TDR") when, for economic or legal reasons which result in a debtor experiencing financial difficulties, the Bank grants a concession through a modification of the original loan agreement that would not otherwise be considered. Generally concessions are granted as a result of a borrower's inability to meet the contractual repayment obligations of the initial loan terms and in the interest of improving the likelihood of recovery of the loan. We may grant these concessions by a number of means such as (1) forgiving principal or interest, (2) reducing the stated interest rate to a below market rate, (3) deferring principal payments, (4) changing repayment terms from amortizing to interest only, (5) extending the repayment period, or (6) accepting a change in terms based upon a bankruptcy plan. However, the Bank only restructures loans for borrowers that demonstrate the willingness and capacity to repay the loan under reasonable terms and where the Bank has sufficient protection provided by the cash flow of the underlying collateral or business.

The Bank's policy with respect to accrual of interest on loans restructured in a TDR process follows relevant supervisory guidance. If a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is considered and the loan is considered performing. If the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status. If the borrower was materially delinquent on payments prior to the restructuring but shows the capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual and nonperforming until such time as continued performance has been demonstrated, which is typically a period of at least six consecutive payments.

The following table provides a summary of loans modified as TDRs at September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial & industrial	$	—	$	27	$	27	$	1
Commercial real estate	723		683		1,406		40
Residential mortgage	215		126		341		—
Total modifications	$	938	$	836	$	1,774	$	41

	December 31, 2015
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial construction and land development	$	1,059	$	557	$	1,616	$	447
Commercial real estate	1,028		574		1,602		20
Residential mortgage	226		—		226		—
Total modifications	$	2,313	$	1,131	$	3,444	$	467

There were six new TDRs made to borrowers for the three and nine months endedSeptember 30, 2016 and there were no TDR loans modified during the previous twelve months that had a payment default for the three and nine months endedSeptember 30, 2016.

	September 30, 2016
	Three Months Ended					Nine Months Ended
	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Extended payment terms:
Commercial & industrial	3	$	26,750	$	26,750	3	$	26,750	$	26,750
Commercial real estate	2	591,487		591,487		2	591,487		591,487
Subtotal	5	$	618,237	$	618,237	5	$	618,237	$	618,237
Other:									—
Residential mortgage	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Subtotal	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Total	6	$	744,244	$	744,244	6	$	744,244	$	744,244

The table below details TDRs that the Bank has entered into during the twelve months ended September 30, 2016.

	Twelve Months Ended September 30, 2016
	Paid in full			Paying as restructured			Converted to nonaccrual			Foreclosure/Default
	Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment
	(amounts in thousands, except number of loans)
Extended payment terms	—	$	—	5	$	618,237	—	$	—	—	$	—
Other	—	—		1	126,007		—	—		—	—
Total	—	$	—	6	$	744,244	—	$	—	—	$	—

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BORROWINGS

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

At September 30, 2016 and December 31, 2015, borrowed funds included the following Federal Home Loan Bank ("FHLB") advances (amounts in thousands):

Maturity	Interest Rate		September 30, 2016
August 9, 2017	0.73%	Fixed	$	10,000
February 5, 2018	2.06%	Fixed	10,000
May 25, 2018	1.13%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
September 18, 2018	2.71%	Fixed	10,000
April 29, 2019	2.54%	Fixed	5,000
April 29, 2019	2.62%	Fixed	5,000
April 29, 2019	2.83%	Fixed	10,000
			$	70,000

Maturity	Interest Rate		December 31, 2015
February 22, 2016	0.48%	Fixed	$	10,000
August 14, 2017	3.94%	Fixed	5,000
February 5, 2018	2.06%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
June 5, 2018	3.03%	Fixed	5,000
September 10, 2018	3.14%	Fixed	10,000
September 18, 2018	2.71%	Fixed	10,000
			$	60,000

FHLB advances are secured by a floating lien covering the Company's loan portfolio of qualifying mortgage loans, as well as specific bonds in the investment portfolio. At September 30, 2016, the Company had available lines of credit totaling $107.9 million with the FHLB for borrowing dependent on adequate collateralization. The weighted average rates for the above borrowings at September 30, 2016 and December 31, 2015 were 2.06% and 2.38%, respectively.

In addition to the above advances, the Company has lines of credit of $37.0 million from various financial institutions to purchase federal funds on a short-term basis. The Company has no federal funds purchases outstanding as of September 30, 2016.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Commitments

The following table presents loan commitments at September 30, 2016(amounts in thousands).

	September 30, 2016
Commitments to extend credit	$	32,767
Undisbursed lines of credit	103,200
Financial stand-by letters of credit	439
Performance stand-by letters of credit	451
Legally binding commitments	136,857
Unused credit card lines	16,220
Total	$	153,077

Pledged Assets

Certain assets are pledged to secure municipal deposits, borrowings, and borrowing capacity, subject to certain limits, at the FHLB and the Federal Reserve Bank of Richmond (the "FRB"), as well as for other purposes as required or permitted by law. FHLB borrowings are secured by securities and a floating lien covering the Company's loan portfolio of qualifying residential (1-4 units) first mortgage and commercial real estate loans. The following table provides the total market value of pledged assets by asset type at September 30, 2016(amounts in thousands).

	September 30, 2016
Securities	$	43,753
Loans	85,333

Litigation Proceedings

In October 2013, multiple putative class action lawsuits were filed in United States district courts across the country against a number of different banks based on the banks' alleged role in "payday lending". Four of these lawsuits, filed in the Northern District of Georgia, the Middle District of North Carolina, the District of Maryland, and the Southern District of Florida, named the Bank as one of the defendants. The lawsuits allege that, by processing Automatic Clearing House transactions indirectly on behalf of "payday" lenders, the Bank is illegally participating in an enterprise to collect unlawful debts and is therefore liable to plaintiffs for damages under the federal Racketeer Influenced and Corrupt Organizations Act. The lawsuits also allege a variety of state law claims. The Bank moved to dismiss each of these lawsuits. As previously reported, the Georgia action was voluntarily dismissed by the plaintiffs and the District of Maryland granted the motion and dismissed the case, which the parties subsequently settled while on appeal to the United States Court of Appeals for the Fourth Circuit. Of the two remaining lawsuits, there are no updates to the lawsuit in the Southern District of Florida, which, as previously reported, has been stayed pending arbitration of the plaintiff's claims against the Bank's co-defendants. The Middle District of North Carolina granted the Bank’s motion to dismiss in part and denied it in part; the case against the Bank has been stayed (except for limited discovery) pending an appeal by the Bank’s co-defendants.

Additionally, the Company is party to certain legal actions in the ordinary course of its business. The Company believes these actions are routine in nature and incidental to the operation of its business. While the outcome of these actions cannot be predicted with certainty, management’s present judgment is that the ultimate resolution of these matters will not have a material adverse impact on its business, financial condition, results of operations, cash flows or prospects. If, however, the Company's assessment of these actions is inaccurate, or there are any significant adverse developments in these actions, its business, financial condition, results of operations, cash flows and prospects could be adversely affected.

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FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

FAIR VALUEMEASUREMENT

Fair Value Measured on a Recurring Basis.

The Company measures certain assets at fair value on a recurring basis, as described below.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities have historically included equity securities traded on an active exchange, such as the New York Stock Exchange. As of September 30, 2016, there were no Level 1 securities. Level 2 securities include taxable municipalities and mortgage-backed securities issued by government sponsored entities. The Company’s mortgage-backed securities were primarily issued by GNMA, the Federal National Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"). As of September 30, 2016, all of the Company’s mortgage-backed securities were agency issued and designated as Level 2 securities. Securities classified as Level 3 include other debt securities in less liquid markets and with no quoted market price.

The following table presents information about assets measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices  in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	21,105	$	21,105	$	—	$	21,105	$	—
Mortgage-backed securities:
GNMA	12,583		12,583		—		12,583		—
FNMA & FHLMC	27,942		27,942		—		27,942		—
Other debt securities	750		750		—		—		750
Total available-for-sale securities	$	62,380	$	62,380	$	—	$	61,630	$	750

					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	24,567	$	24,567	$	—	$	24,567	$	—
Mortgage-backed securities:
GNMA	13,530		13,530		—		13,530		—
FNMA & FHLMC	31,673		31,673		—		31,673		—
Other debt securities	500		500		—		—		500
Equity securities	11		11		—		11		—
Total available-for-sale securities	$	70,281	$	70,281	$	—	$	69,781	$	500

The following table presents the reconciliation for the three and nine months endedSeptember 30, 2016 and 2015 for all Level 3 assets that are measured at fair value on a recurring basis (amounts in thousands).

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Securities Available-for-Sale:	2016		2015		2016		2015
Beginning Balance	$	750	$	—	$	500	$	—
Total realized and unrealized gains or (losses):
Included in earnings	—		—		—		—
Included in other comprehensive income	—		—		—		—
Purchases, issuances and settlements	—		—		250		—
Ending Balance	$	750	$	—	$	750	$	—

Fair Value Measured on a Nonrecurring Basis.

The Company measures certain assets at fair value on a nonrecurring basis, as described below.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans held for sale as a Level 2 valuation.

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, when a loan is considered impaired, it is evaluated for impairment and written down to its estimated fair value or an allowance for loan losses is established. When the fair value of an impaired loan is based on an observable market price or a current appraised value with no adjustments, the Company records the impaired loan as nonrecurring Level 2. When there is no observable market prices, an appraised value is not available, or the Company determines the fair value of the collateral is further impaired below the appraised value, the impaired loan is classified as nonrecurring Level 3.

Foreclosed Assets

Foreclosed assets are adjusted to fair value less estimated selling costs upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Given the lack of observable market prices for identical properties, the Company records foreclosed assets as non-recurring Level 3.

Assets measured at fair value on a non-recurring basis are included in the tables below at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	832	$	832	$	—	$	832	$	—
Impaired loans	2,030		2,030		—		—		2,030
Foreclosed assets	2,144		2,144		—		—		2,144

					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical  Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	1,145	$	1,145	$	—	$	1,145	$	—
Impaired loans	3,540		3,540		—		—		3,540
Foreclosed assets	1,760		1,760		—		—		1,760

Quantitative Information about Level 3 Fair Value Measurements

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring and nonrecurring basis at September 30, 2016 (amounts in thousands, except percentages).

	Total Carrying Amount at September 30, 2016		Valuation Methodology	Range of Inputs
Recurring measurements:
Other debt securities	$	750	Probability of default	0%
			Loss given default	100%
Nonrecurring measurements:
Impaired loans	$	2,030	Collateral discounts	9 - 50%
Foreclosed assets	$	2,144	Discounted appraisals	10 - 30%

Collateral discounts to determine fair value on impaired loans varies widely and result from the consideration of the following factors: the age of the most recent appraisal, the type of asset serving as collateral, the expected marketability of the asset, its material or environmental condition, and comparisons to actual sales data of similar assets from both internal and external sources.

The following table reflects the general range of collateral discounts for impaired loans by segment.

Loan Segment:	Range of Percentages
Commercial construction and land development	10% - 40%
Commercial real estate	9% - 50%
Residential construction	9% - 30%
Residential mortgage	9% - 20%
All other segments	9% - 20%

As foreclosed assets are brought into other real estate owned through a process which requires a fair market valuation, further discounts typically reflect market conditions specific to the asset. These conditions are usually captured in subsequent appraisals which are required on an annual basis, and depending upon asset type and marketability demonstrate a more restrained variance than that noted above.

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents are equal to the fair value due to the liquid nature of the financial instruments.

Certificate of Deposits

These investments are valued at carrying amounts for fair value purposes.

Securities Available-for-Sale and Securities Held-to-Maturity

Fair values of investment securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans Held For Sale

The fair value of mortgage loans held for sale is based on commitments on hand from investors within the secondary market for loans with similar characteristics.

Loans

The fair value of loans has been estimated utilizing the net present value of future cash flows based upon contractual balances, prepayment assumptions, and applicable weighted average interest rates, adjusted for a 3% current liquidity and market discount assumption. The Company has assigned no fair value to off-balance sheet financial instruments since they are either short term in nature or subject to immediate repricing.

FHLB Stock

The carrying amount of FHLB stock approximates fair value.

Deposits

The fair value of non-maturing deposits such as noninterest-bearing demand, money market, NOW, and savings accounts, are by definition, equal to the amount payable on demand. Fair value for maturing deposits such as CDs and IRAs are estimated using a discounted cash flow approach that applies current interest rates to expected maturities.

Borrowings, Subordinated Debentures, and Subordinated Promissory Notes

The fair value of borrowings, subordinated debentures, and subordinated promissory notes, is based on discounting expected cash flows at the interest rate from debt with the same or similar remaining maturities and collection requirements. 

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximates fair value.

The following table presents information for financial assets and liabilities as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Carrying Value		Estimated  Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	49,450	$	49,450	$	49,450	$	—	$	—
Certificates of deposit	21,805		21,805		—		21,805		—
Securities available-for-sale	62,380		62,380		—		61,630		750
Securities held-to-maturity	54,576		56,040		—		56,040		—
Loans held for sale	832		832		—		832		—
Loans, net	479,686		462,669		—		—		462,669
FHLB stock	3,596		3,596		—		3,596		—
Accrued interest receivable	1,584		1,584		—		1,584		—
Financial liabilities:
Deposits	$	560,243	$	560,529	$	—	$	560,529	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	70,000		71,466		—		71,466		—
Accrued interest payable	378		378		—		378		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	26,755	$	26,755	$	26,755	$	—	$	—
Certificates of deposit	23,520		23,520		—		23,520		—
Securities available-for-sale	70,281		70,281		—		69,781		500
Securities held-to-maturity	65,354		65,633		—		65,633		—
Loans held for sale	1,145		1,145		—		1,145		—
Loans, net	448,697		423,285		—		—		423,285
FHLB stock	3,288		3,288		—		3,288		—
Accrued interest receivable	1,594		1,594		—		1,594		—
Financial liabilities:
Deposits	$	542,334	$	541,818	$	—	$	541,818	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	60,000		61,709		—		61,709		—
Accrued interest payable	437		437		—		437		—

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CAPITAL & REGULATORY INFORMATION

9 Months Ended

Sep. 30, 2016

Regulatory Capital Requirements [Abstract]

CAPITAL & REGULATORY INFORMATION

CAPITAL & REGULATORY INFORMATION

North Carolina banking law requires that the Bank may not pay a dividend that would reduce its capital below the applicable required capital. In addition, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure the financial soundness of the Bank. Although not currently limited by regulatory authorities, there were no dividends paid to the Company by the Bank during the nine months ended September 30, 2016.

Current federal regulations require that the Company and the Bank maintain a minimum ratio of total capital to risk weighted assets of 8.0%, with at least 6.0% being in the form of Tier 1 capital, as defined in the regulations. In addition, the Company and the Bank must maintain a common equity Tier 1 capital ratio of 4.5% and a leverage ratio of 4.0%. For the Bank to be categorized as well capitalized, the Bank must maintain minimum amounts and ratios as set forth in the table below. There is no such category for well capitalized at the Company level. At September 30, 2016, the Bank was classified as well capitalized for regulatory capital purposes.

Capital ratios for the Bank and the Company are presented in the table below.

	Actual Ratio				Minimum For Capital Adequacy Purposes		Minimum to be Well Capitalized under Prompt Corrective Action Provisions
	9/30/2016		12/31/2015		Ratio		Ratio
Bank
Total Capital (to Risk Weighted Assets)	15.7	%	15.6	%	8.0	%	10.0	%
Tier I Capital (to Risk Weighted Assets)	14.5	%	14.4	%	6.0	%	8.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	14.5	%	14.4	%	4.5	%	6.5	%
Tier I Capital (to Average Assets)	10.8	%	10.2	%	4.0	%	5.0	%
Company
Total Capital (to Risk Weighted Assets)	16.0	%	16.0	%	8.0	%	N/A
Tier I Capital (to Risk Weighted Assets)	12.5	%	12.4	%	6.0	%	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	10.9	%	11.3	%	4.5	%	N/A
Tier I Capital (to Average Assets)	9.3	%	8.8	%	4.0	%	N/A

In July 2015, the Bank entered into a Written Agreement (the "2015 Written Agreement") with the FRB replacing the Written Agreement the Company and the Bank entered into with the FRB and the North Carolina Office of the Commissioner of Banks in 2011. Under the terms of the 2015 Written Agreement, the Bank submitted and implemented the following plans:

•a written plan to assure ongoing board oversight of the Bank's management and operations;

•a written program for the review of new products, services, or business lines; and

• an enhanced written program for conducting appropriate levels of customer due diligence by the Bank.

In addition, the Bank agreed that it will within 30 days after the end of each calendar quarter following the date of the 2015 Written Agreement, submit to FRB written progress reports detailing the form and manner of all actions taken to secure compliance with the 2015 Written Agreement and the results thereof.

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RESTRICTED STOCK

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

RESTRICTED STOCK

RESTRICTED STOCK

A summary of the activity of the Company's restricted stock awards for the nine months endedSeptember 30, 2016 is presented below:

	Restricted Stock		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015:	1,363,175		$	1.64
Granted	210,000		1.90
Vested	(149,325	)	1.53
Forfeited	(93,500	)	1.66
Unvested at September 30, 2016:	1,330,350		$	1.69

The Company measures the fair value of restricted shares based on the price of the Company's common stock on the grant date, and compensation expense is recorded over the vesting period. The related compensation expense recognized for restricted stock awards for the nine months endedSeptember 30, 2016 and 2015 was $225,000 and $405,000, respectively. At September 30, 2016, the Company estimates there was $2.2 million of total unrecognized compensation cost related to unvested restricted stock granted under the plan. That cost is expected to be recognized over the next three years. The grant-date fair value of restricted stock grants vested during the nine months endedSeptember 30, 2016 was $1.53.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific classification issues in an effort to reduce the diversity in practice in how these certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update replaces the incurred loss impairment methodology with one that reflects current expected credit losses (CECL) and requires consideration of a broader range of reasonable and supportable forecasted information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update amends several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual and interim reporting periods beginning after December 15, 2016. The adoption of this guidance is not believed to be material to the Company's financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require lessees to be recorded as an asset on the balance sheet for the right to use the leased asset and a liability for the corresponding lease obligation for leases with terms of more than 12 months. The accounting treatment for lessors will remain relatively unchanged. The ASU also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting treatment related to classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Upon adoption, investments in equity securities, except those accounted for under the equity method or that result in the consolidation of the investee, will be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have a readily determinable fair value may be measured at cost minus impairment, plus or minus changes from observable price changes in an orderly transaction. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of certain provisions is permitted. The Company does not believe the adoption of this ASU will have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs are not affected by this update. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. We adopted ASU No. 2015-03 and there was no impact to the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. On August 12, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of the new revenue recognition standard by one year. Based on ASU 2015-14, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date (i.e., interim and annual reporting periods beginning after December 15, 2016). The Company continues to evaluate the impact of adopting the new standard on its consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations and cash flows.

From time to time the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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NET INCOME PER SHARE (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Common Share

Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below (amounts in thousands, except share data): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Net income available to common shareholders	$	948	$	734	$	2,651	$	19,198
Weighted average number of common shares - basic	32,442,866		32,135,465		32,383,650		32,089,950
Effect of dilutive stock options	39,415		17,040		37,586		15,683
Effect of dilutive restricted stock awards	483,291		242,810		354,206		138,620
Weighted average number of common shares - dilutive	32,965,572		32,395,315		32,775,442		32,244,253
Basic earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Diluted earnings per common share	$	0.03	$	0.02	$	0.08	$	0.60
Anti-dilutive awards	12,305		155,455		12,305		155,455

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses, and Fair Values of Securities Available-for-sale

	December 31, 2015
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	24,789	$	225	$	447	$	24,567
Mortgage-backed securities
GNMA	13,512		68		50		13,530
FNMA & FHLMC	32,024		—		351		31,673
Other debt securities	500		—		—		500
Equity securities	11		—		—		11
Total	$	70,836	$	293	$	848	$	70,281

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	19,849	$	1,256	$	—	$	21,105
Mortgage-backed securities
GNMA	12,324		263		4		12,583
FNMA & FHLMC	27,582		360		—		27,942
Other debt securities	750		—		—		750
Total	$	60,505	$	1,879	$	4	$	62,380

Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses, and Fair Values of Securities Held-to-maturity

	December 31, 2015
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,531	$	1	$	20	$	3,512
Mortgage-backed securities
GNMA	59,185		509		230		59,464
FNMA	2,638		19		—		2,657
Total	$	65,354	$	529	$	250	$	65,633

	September 30, 2016
Securities Held-to-Maturity:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Taxable municipal securities	$	3,393	$	85	$	—	$	3,478
Mortgage-backed securities
GNMA	49,142		1,312		—		50,454
FNMA	2,041		67		—		2,108
Total	$	54,576	$	1,464	$	—	$	56,040

Schedule of Gross Unrealized Losses and Fair Values of Investment Securities

The following tables show gross unrealized losses and fair values of investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2016 and December 31, 2015(amounts in thousands). There were no unrealized losses on held to maturity securities at September 30, 2016.

	September 30, 2016
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Mortgage-backed securities
GNMA	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4
Total temporarily impaired securities	1	$	4,361	$	4	—	$	—	$	—	$	4,361	$	4

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Available-for-Sale:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	20	$	16,888	$	447	—	$	—	$	—	$	16,888	$	447
Mortgage-backed securities
GNMA	3	10,010		50		—	—		—		10,010		50
FNMA & FHLMC	11	31,673		351		—	—		—		31,673		351
Total temporarily impaired securities	34	$	58,571	$	848	—	$	—	$	—	$	58,571	$	848

	December 31, 2015
	Less Than 12 Months					12 Months or More					Total
Securities Held-to-Maturity:	# Securities	Fair value		Unrealized losses		# Securities	Fair value		Unrealized losses		Fair value		Unrealized losses
Taxable municipal securities	9	$	3,325	$	20	—	$	—	$	—	$	3,325	$	20
Mortgage-backed securities
GNMA	14	20,784		116		3	5,130		114		25,914		230
Total temporarily impaired securities	23	$	24,109	$	136	3	$	5,130	$	114	$	29,239	$	250

Amortized Cost and Fair Value of Available-for-sale and Held-to-maturity Securities by Expected Maturities

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2016 by expected maturities are shown on the following table (amounts in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2016
Securities Available-for-Sale:	Amortized Cost		Fair Value
Taxable municipal securities:
Due after ten years	$	19,849	$	21,105
Total taxable municipal securities	19,849		21,105
Mortgage-backed securities - GNMA/FNMA & FHLMC:
Due after ten years	39,906		40,525
Total mortgage-backed securities - GNMA/FNMA & FHLMC	39,906		40,525
Other debt securities:
Due after five years through ten years	750		750
Total other debt securities	750		750
Total available-for-sale securities	$	60,505	$	62,380
Securities Held-to-Maturity:
Taxable municipal securities:
Due within one year	$	156	$	156
Due after one year through five years	2,183		2,221
Due after five years through ten years	1,054		1,101
Total taxable municipal securities	3,393		3,478
Mortgage-backed securities - GNMA/FNMA:
Due after five years through ten years	7,675		7,943
Due after ten years	43,508		44,619
Total mortgage-backed securities - GNMA/FNMA	51,183		52,562
Total held-to-maturity securities	$	54,576	$	56,040

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2016

Loans and Leases Receivable Disclosure [Abstract]

Classification of Loan Segments

The classification of loan segments as of September 30, 2016 and December 31, 2015 are summarized as follows (amounts in thousands):

	September 30, 2016			December 31, 2015
Commercial and industrial	$	22,108		$	23,163
Commercial construction and land development	44,364			50,510
Commercial real estate	237,195			208,737
Residential construction	41,047			36,618
Residential mortgage	134,501			128,442
Consumer	6,992			6,638
Consumer credit cards	1,951			2,240
Business credit cards	1,266			1,168
Other	762			1,257
Gross loans	490,186			458,773
Less:
Net deferred loan fees	(827		)	(460		)
Net loans before allowance	489,359			458,313
Allowance for loan losses	(9,673		)	(9,616		)
Total net loans	$	479,686		$	448,697
Loans held for sale	$	832		$	1,145

Analysis of the Allowance for Loan Losses by Loan Segment

The following tables are an analysis of the allowance for loan losses by loan segment as of and for the three and nine months endedSeptember 30, 2016 and 2015 and as of and for the twelve months ended December 31, 2015(amounts in thousands).

	Three Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate		Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	182		$	4,816		$	2,492	$	271	$	1,147		$	101		$	60		$	9,069
Provision for loan losses	(153		)	(425		)	493		29		19			58			(21		)	—
Loans charged-off	(5		)	(132		)	—		—		(25		)	(54		)	—			(216		)
Recoveries	38			714			19		—		35			14			—			820
Net recoveries (charge-offs)	33			582			19		—		10			(40		)	—			604
Balance, end of period	$	62		$	4,973		$	3,004	$	300	$	1,176		$	119		$	39		$	9,673

	Nine Months Ended
	September 30, 2016
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Provision for loan losses	(182		)	(1,044		)	1,280			(26		)	(46		)	29			(11		)	—
Loans charged-off	(64		)	(229		)	(565		)	—			(25		)	(124		)	—			(1,007		)
Recoveries	87			776			21			21			56			101			2			1,064
Net recoveries (charge-offs)	23			547			(544		)	21			31			(23		)	2			57
Balance, end of period	$	62		$	4,973		$	3,004		$	300		$	1,176		$	119		$	39		$	9,673
Ending balance: individually evaluated for impairment	$	1		$	345		$	393		$	—		$	35		$	—		$	—		$	774
Ending balance: collectively evaluated for impairment (1)	$	61		$	4,628		$	2,611		$	300		$	1,141		$	119		$	39		$	8,899
Loans:
Balance, end of period	$	23,374		$	44,364		$	237,195		$	41,047		$	134,501		$	8,943		$	762		$	490,186
Ending balance: individually evaluated for impairment	$	27		$	563		$	2,371		$	—		$	1,510		$	—		$	—		$	4,471
Ending balance: collectively evaluated for impairment (1)	$	23,347		$	43,801		$	234,824		$	41,047		$	132,991		$	8,943		$	762		$	485,715

⁽¹⁾At September 30, 2016, there were $239,000 in impaired loans collectively evaluated for impairment with $34,000 in reserves established.

	Three Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction		Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	153		$	5,306		$	2,669		$	318	$	1,224		$	112		$	30		$	9,812
Provision for loan losses	(102		)	(209		)	(210		)	79		409			(18		)	51			—
Loans charged-off	—			(160		)	7			—		(261		)	(38		)	(28		)	(480		)
Recoveries	73			590			198			—		44			35			—			940
Net recoveries (charge-offs)	73			430			205			—		(217		)	(3		)	(28		)	460
Balance, end of period	$	124		$	5,527		$	2,664		$	397	$	1,416		$	91		$	53		$	10,272

	Nine Months Ended
	September 30, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(161		)	(493		)	93			(39		)	469			50			81			—
Loans charged-off	(47		)	(179		)	(199		)	—			(426		)	(136		)	(70		)	(1,057		)
Recoveries	213			1,094			388			—			167			88			2			1,952
Net recoveries (charge-offs)	166			915			189			—			(259		)	(48		)	(68		)	895
Balance, end of period	$	124		$	5,527		$	2,664		$	397		$	1,416		$	91		$	53		$	10,272
Ending balance: individually evaluated for impairment	$	—		$	494		$	111		$	—		$	—		$	3		$	—		$	608
Ending balance: collectively evaluated for impairment (1)	$	124		$	5,033		$	2,553		$	397		$	1,416		$	88		$	53		$	9,664
Loans:
Balance, end of period	$	25,103		$	50,469		$	206,548		$	31,577		$	130,588		$	8,396		$	832		$	453,513
Ending balance: individually evaluated for impairment	$	—		$	2,357		$	3,427		$	437		$	1,778		$	3		$	12		$	8,014
Ending balance: collectively evaluated for impairment (1)	$	25,103		$	48,112		$	203,121		$	31,140		$	128,810		$	8,393		$	820		$	445,499

⁽¹⁾At September 30, 2015, there were $416,000 impaired loans collectively evaluated for impairment with $34,000 in reserves established.

	Twelve Months Ended
	December 31, 2015
				Real Estate
Allowances for loan losses:	Commercial and Industrial			Commercial Construction and Land Development			Commercial Real Estate			Residential Construction			Residential Mortgage			Consumer			Other			Totals
Balance, beginning of period	$	119		$	5,105		$	2,382		$	436		$	1,206		$	89		$	40		$	9,377
Provision for loan losses	(58		)	(615		)	71			(90		)	497			121			74			—
Loans charged-off	(74		)	(196		)	(578		)	(41		)	(713		)	(210		)	(69		)	(1,881		)
Recoveries	234			1,176			393			—			201			113			3			2,120
Net recoveries (charge-offs)	160			980			(185		)	(41		)	(512		)	(97		)	(66		)	239
Balance, end of period	$	221		$	5,470		$	2,268		$	305		$	1,191		$	113		$	48		$	9,616
Ending balance: individually evaluated for impairment	$	2		$	989		$	228		$	—		$	—		$	—		$	—		$	1,219
Ending balance: collectively evaluated for impairment (1)	$	219		$	4,481		$	2,040		$	305		$	1,191		$	113		$	48		$	8,397
Loans:
Balance, end of period	$	24,331		$	50,510		$	208,737		$	36,618		$	128,442		$	8,878		$	1,257		$	458,773
Ending balance: individually evaluated for impairment	$	84		$	2,564		$	3,957		$	721		$	1,305		$	—		$	—		$	8,631
Ending balance: collectively evaluated for impairment (1)	$	24,247		$	47,946		$	204,780		$	35,897		$	127,137		$	8,878		$	1,257		$	450,142

⁽¹⁾ At December 31, 2015, there were $295,000 in impaired loans collectively evaluated for impairment with $42,000 in reserves established.

Creditworthiness Analysis by Loan Class and Credit Card Portfolio Exposure

The following tables are an analysis of the creditworthiness by loan class and credit card portfolio exposure as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,193	$	—	$	—	$	—	$	—	$	1,364	$	—	$	2,557
2 - Strong	866		933		4,557		105		14,424		530		98		21,513
3 - Standard	10,113		11,781		106,284		11,717		56,882		1,200		622		198,599
4 - Acceptable	9,598		28,091		116,463		29,225		56,195		3,811		42		243,425
5 - Special Mention	283		2,913		7,172		—		5,040		87		—		15,495
6-8 - Substandard	56		645		2,719		—		1,960		—		—		5,380
	$	22,109	$	44,363	$	237,195	$	41,047	$	134,501	$	6,992	$	762	$	486,969

	Consumer -  Credit Card		Business- Credit Card
Performing	$	1,947	$	1,266
Nonperforming	4		—
Total	$	1,951	$	1,266
Total Loans			$	490,186

	December 31, 2015
			Real Estate
	Commercial and Industrial		Commercial Construction and Land Development		Commercial Real Estate		Residential Construction		Residential Mortgage		Consumer		Other		Totals
1 - Lowest Risk	$	1,942	$	—	$	—	$	—	$	—	$	1,773	$	—	$	3,715
2 - Strong	971		749		2,280		—		15,187		386		7		19,580
3 - Standard	10,530		11,262		94,357		4,296		56,493		1,250		469		178,657
4 - Acceptable	9,297		33,832		103,740		31,431		50,226		3,170		757		232,453
5 - Special Mention	304		2,486		4,444		170		5,231		59		—		12,694
6-8 - Substandard	119		2,181		3,916		721		1,305		—		24		8,266
	$	23,163	$	50,510	$	208,737	$	36,618	$	128,442	$	6,638	$	1,257	$	455,365

	Consumer- Credit Card		Business- Credit Card
Performing	$	2,211	$	1,133
Non Performing	29		35
Total	$	2,240	$	1,168
Total Loans			$	458,773

Age Analysis of Past Due Loans

The following tables are an age analysis of past due loans, including those on nonaccrual by loan class, as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	2	$	—	$	50	$	52	$	22,056	$	22,108
Commercial construction & land development	—		—		603		603		43,761		44,364
Commercial real estate	94		—		1,649		1,743		235,452		237,195
Residential construction	—		—		—		—		41,047		41,047
Residential mortgage	525		—		1,452		1,977		132,524		134,501
Consumer	21		3		—		24		6,968		6,992
Consumer credit cards	41		4		—		45		1,906		1,951
Business credit cards	22		—		—		22		1,244		1,266
Other loans	—		—		—		—		762		762
Total	$	705	$	7	$	3,754	$	4,466	$	485,720	$	490,186

	December 31, 2015
	30-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due		Current		Total Loans
Commercial & industrial	$	56	$	—	$	119	$	175	$	22,988	$	23,163
Commercial construction & land development	211		—		1,626		1,837		48,673		50,510
Commercial real estate	—		—		2,929		2,929		205,808		208,737
Residential construction	133		—		721		854		35,764		36,618
Residential mortgage	499		—		1,203		1,702		126,740		128,442
Consumer	71		—		—		71		6,567		6,638
Consumer credit cards	95		29		—		124		2,116		2,240
Business credit cards	107		36		—		143		1,025		1,168
Other loans	—		—		—		—		1,257		1,257
Total	$	1,172	$	65	$	6,598	$	7,835	$	450,938	$	458,773

Summary of Nonperforming Assets

Nonperforming assets at September 30, 2016 and December 31, 2015 consist of the following (amounts in thousands):

	September 30, 2016		December 31, 2015
Loans past due ninety days or more and still accruing	$	7	$	65
Nonaccrual loans	3,754		6,598
Foreclosed assets	2,144		1,760
Total nonperforming assets	$	5,905	$	8,423

Summary of Impaired Loans

The following tables illustrate the impaired loans by loan class as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	21	$	21	$	—	$	21	$	—
Commercial construction & land development	147		265		—		248		1
Commercial real estate	1,164		1,669		—		1,206		38
Residential mortgage	1,464		1,540		—		1,522		16
Subtotal:	2,796		3,495		—		2,997		55
With an allowance recorded:
Commercial and industrial	29		29		4		26		1
Commercial construction & land development	456		573		350		468		—
Commercial real estate	1,208		1,208		394		1,205		9
Residential mortgage	221		300		60		249		11
Subtotal:	1,914		2,110		808		1,948		21
Totals:
Commercial	3,025		3,765		748		3,174		49
Residential	1,685		1,840		60		1,771		27
Grand Total	$	4,710	$	5,605	$	808	$	4,945	$	76

	December 31, 2015
	As of Date						Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial and industrial	$	67	$	67	$	—	$	63	$	3
Commercial construction & land development	737		1,706		—		1,031		19
Commercial real estate	2,258		2,614		—		2,020		50
Residential construction	721		722		—		408		8
Residential mortgage	1,305		1,312		—		1,191		51
Subtotal:	5,088		6,421		—		4,713		131
With an allowance recorded:
Commercial and industrial	52		63		7		58		4
Commercial construction & land development	1,948		3,020		1,006		2,086		122
Commercial real estate	1,699		1,699		228		1,713		79
Residential mortgage	139		217		20		183		8
Subtotal:	3,838		4,999		1,261		4,040		213
Totals:
Commercial	6,761		9,169		1,241		6,971		277
Residential	2,165		2,251		20		1,782		67
Grand Total:	$	8,926	$	11,420	$	1,261	$	8,753	$	344

Schedule of Loans Modified as TDRs

The following table provides a summary of loans modified as TDRs at September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial & industrial	$	—	$	27	$	27	$	1
Commercial real estate	723		683		1,406		40
Residential mortgage	215		126		341		—
Total modifications	$	938	$	836	$	1,774	$	41

	December 31, 2015
	Accrual		Nonaccrual		Total TDRs		Allowance for Loan Losses Allocated
Commercial construction and land development	$	1,059	$	557	$	1,616	$	447
Commercial real estate	1,028		574		1,602		20
Residential mortgage	226		—		226		—
Total modifications	$	2,313	$	1,131	$	3,444	$	467

Troubled Debt Restructurings on Financing Receivables

There were six new TDRs made to borrowers for the three and nine months endedSeptember 30, 2016 and there were no TDR loans modified during the previous twelve months that had a payment default for the three and nine months endedSeptember 30, 2016.

	September 30, 2016
	Three Months Ended					Nine Months Ended
	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Extended payment terms:
Commercial & industrial	3	$	26,750	$	26,750	3	$	26,750	$	26,750
Commercial real estate	2	591,487		591,487		2	591,487		591,487
Subtotal	5	$	618,237	$	618,237	5	$	618,237	$	618,237
Other:									—
Residential mortgage	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Subtotal	1	$	126,007	$	126,007	1	$	126,007	$	126,007
Total	6	$	744,244	$	744,244	6	$	744,244	$	744,244

The table below details TDRs that the Bank has entered into during the twelve months ended September 30, 2016.

	Twelve Months Ended September 30, 2016
	Paid in full			Paying as restructured			Converted to nonaccrual			Foreclosure/Default
	Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment		Number of loans	Recorded Investment
	(amounts in thousands, except number of loans)
Extended payment terms	—	$	—	5	$	618,237	—	$	—	—	$	—
Other	—	—		1	126,007		—	—		—	—
Total	—	$	—	6	$	744,244	—	$	—	—	$	—

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BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Federal Home Loan Bank, Advances

At September 30, 2016 and December 31, 2015, borrowed funds included the following Federal Home Loan Bank ("FHLB") advances (amounts in thousands):

Maturity	Interest Rate		September 30, 2016
August 9, 2017	0.73%	Fixed	$	10,000
February 5, 2018	2.06%	Fixed	10,000
May 25, 2018	1.13%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
September 18, 2018	2.71%	Fixed	10,000
April 29, 2019	2.54%	Fixed	5,000
April 29, 2019	2.62%	Fixed	5,000
April 29, 2019	2.83%	Fixed	10,000
			$	70,000

Maturity	Interest Rate		December 31, 2015
February 22, 2016	0.48%	Fixed	$	10,000
August 14, 2017	3.94%	Fixed	5,000
February 5, 2018	2.06%	Fixed	10,000
June 5, 2018	2.25%	Fixed	5,000
June 5, 2018	2.55%	Fixed	5,000
June 5, 2018	3.03%	Fixed	5,000
September 10, 2018	3.14%	Fixed	10,000
September 18, 2018	2.71%	Fixed	10,000
			$	60,000

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Loan Commitments

The following table presents loan commitments at September 30, 2016(amounts in thousands).

	September 30, 2016
Commitments to extend credit	$	32,767
Undisbursed lines of credit	103,200
Financial stand-by letters of credit	439
Performance stand-by letters of credit	451
Legally binding commitments	136,857
Unused credit card lines	16,220
Total	$	153,077

Total Market Value of Pledged Assets by Asset Type

The following table provides the total market value of pledged assets by asset type at September 30, 2016(amounts in thousands).

	September 30, 2016
Securities	$	43,753
Loans	85,333

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FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value on a Recurring Basis

The following table presents information about assets measured at fair value on a recurring basis at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices  in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	21,105	$	21,105	$	—	$	21,105	$	—
Mortgage-backed securities:
GNMA	12,583		12,583		—		12,583		—
FNMA & FHLMC	27,942		27,942		—		27,942		—
Other debt securities	750		750		—		—		750
Total available-for-sale securities	$	62,380	$	62,380	$	—	$	61,630	$	750

					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Available-for-Sale Securities:	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Taxable municipal securities	$	24,567	$	24,567	$	—	$	24,567	$	—
Mortgage-backed securities:
GNMA	13,530		13,530		—		13,530		—
FNMA & FHLMC	31,673		31,673		—		31,673		—
Other debt securities	500		500		—		—		500
Equity securities	11		11		—		11		—
Total available-for-sale securities	$	70,281	$	70,281	$	—	$	69,781	$	500

Reconciliation of Level 3 Assets Measured at Fair Value on Recurring Basis

The following table presents the reconciliation for the three and nine months endedSeptember 30, 2016 and 2015 for all Level 3 assets that are measured at fair value on a recurring basis (amounts in thousands).

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Securities Available-for-Sale:	2016		2015		2016		2015
Beginning Balance	$	750	$	—	$	500	$	—
Total realized and unrealized gains or (losses):
Included in earnings	—		—		—		—
Included in other comprehensive income	—		—		—		—
Purchases, issuances and settlements	—		—		250		—
Ending Balance	$	750	$	—	$	750	$	—

Assets Measured at Fair Value on a Non-recurring Basis

Assets measured at fair value on a non-recurring basis are included in the tables below at September 30, 2016 and December 31, 2015(amounts in thousands).

					Fair Value Measurements at
					September 30, 2016, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	9/30/2016		9/30/2016		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	832	$	832	$	—	$	832	$	—
Impaired loans	2,030		2,030		—		—		2,030
Foreclosed assets	2,144		2,144		—		—		2,144

					Fair Value Measurements at
					December 31, 2015, Using
	Total Carrying Amount in the Consolidated Balance Sheet		Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical  Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	12/31/2015		12/31/2015		(Level 1)		(Level 2)		(Level 3)
Loans held for sale	$	1,145	$	1,145	$	—	$	1,145	$	—
Impaired loans	3,540		3,540		—		—		3,540
Foreclosed assets	1,760		1,760		—		—		1,760

Valuation Methodology and Unobservable Inputs for Level 3 Assets

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring and nonrecurring basis at September 30, 2016 (amounts in thousands, except percentages).

	Total Carrying Amount at September 30, 2016		Valuation Methodology	Range of Inputs
Recurring measurements:
Other debt securities	$	750	Probability of default	0%
			Loss given default	100%
Nonrecurring measurements:
Impaired loans	$	2,030	Collateral discounts	9 - 50%
Foreclosed assets	$	2,144	Discounted appraisals	10 - 30%

General Range of Collateral Discounts for Impaired Loans by Segment

The following table reflects the general range of collateral discounts for impaired loans by segment.

Loan Segment:	Range of Percentages
Commercial construction and land development	10% - 40%
Commercial real estate	9% - 50%
Residential construction	9% - 30%
Residential mortgage	9% - 20%
All other segments	9% - 20%

Information for Financial Assets and Liabilities

The following table presents information for financial assets and liabilities as of September 30, 2016 and December 31, 2015(amounts in thousands).

	September 30, 2016
	Carrying Value		Estimated  Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	49,450	$	49,450	$	49,450	$	—	$	—
Certificates of deposit	21,805		21,805		—		21,805		—
Securities available-for-sale	62,380		62,380		—		61,630		750
Securities held-to-maturity	54,576		56,040		—		56,040		—
Loans held for sale	832		832		—		832		—
Loans, net	479,686		462,669		—		—		462,669
FHLB stock	3,596		3,596		—		3,596		—
Accrued interest receivable	1,584		1,584		—		1,584		—
Financial liabilities:
Deposits	$	560,243	$	560,529	$	—	$	560,529	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	70,000		71,466		—		71,466		—
Accrued interest payable	378		378		—		378		—

	December 31, 2015
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	26,755	$	26,755	$	26,755	$	—	$	—
Certificates of deposit	23,520		23,520		—		23,520		—
Securities available-for-sale	70,281		70,281		—		69,781		500
Securities held-to-maturity	65,354		65,633		—		65,633		—
Loans held for sale	1,145		1,145		—		1,145		—
Loans, net	448,697		423,285		—		—		423,285
FHLB stock	3,288		3,288		—		3,288		—
Accrued interest receivable	1,594		1,594		—		1,594		—
Financial liabilities:
Deposits	$	542,334	$	541,818	$	—	$	541,818	$	—
Subordinated debentures and subordinated promissory notes	23,872		23,872		—		—		23,872
Borrowings	60,000		61,709		—		61,709		—
Accrued interest payable	437		437		—		437		—

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CAPITAL & REGULATORY INFORMATION (Tables)

9 Months Ended

Sep. 30, 2016

Regulatory Capital Requirements [Abstract]

Schedule of Capital Ratios

Capital ratios for the Bank and the Company are presented in the table below.

	Actual Ratio				Minimum For Capital Adequacy Purposes		Minimum to be Well Capitalized under Prompt Corrective Action Provisions
	9/30/2016		12/31/2015		Ratio		Ratio
Bank
Total Capital (to Risk Weighted Assets)	15.7	%	15.6	%	8.0	%	10.0	%
Tier I Capital (to Risk Weighted Assets)	14.5	%	14.4	%	6.0	%	8.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	14.5	%	14.4	%	4.5	%	6.5	%
Tier I Capital (to Average Assets)	10.8	%	10.2	%	4.0	%	5.0	%
Company
Total Capital (to Risk Weighted Assets)	16.0	%	16.0	%	8.0	%	N/A
Tier I Capital (to Risk Weighted Assets)	12.5	%	12.4	%	6.0	%	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	10.9	%	11.3	%	4.5	%	N/A
Tier I Capital (to Average Assets)	9.3	%	8.8	%	4.0	%	N/A

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RESTRICTED STOCK (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Non-vested Restricted Stock Awards

A summary of the activity of the Company's restricted stock awards for the nine months endedSeptember 30, 2016 is presented below:

	Restricted Stock		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2015:	1,363,175		$	1.64
Granted	210,000		1.90
Vested	(149,325	)	1.53
Forfeited	(93,500	)	1.66
Unvested at September 30, 2016:	1,330,350		$	1.69

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NET INCOME PER SHARE (Computation of Basic and Diluted Net Income (Loss) Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income available to common shareholders	$ 948	$ 734	$ 2,651	$ 19,198
Weighted average number of common shares outstanding:
Weighted average number of common shares - basic	32,442,866	32,135,465	32,383,650	32,089,950
Weighted average number of common shares - dilutive	32,965,572	32,395,315	32,775,442	32,244,253
Basic earnings per common share (in usd per share)	$ 0.03	$ 0.02	$ 0.08	$ 0.60
Diluted earnings per common share (in usd per share)	$ 0.03	$ 0.02	$ 0.08	$ 0.60
Anti-dilutive awards (in shares)	12,305	155,455	12,305	155,455
Stock options
Weighted average number of common shares outstanding:
Effect of dilutive shares	39,415	17,040	37,586	15,683
Restricted stock awards
Weighted average number of common shares outstanding:
Effect of dilutive shares	483,291	242,810	354,206	138,620

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INVESTMENT SECURITIES (Securities Available-for-sale) (Details) $ in Thousands	Sep. 30, 2016 USD ($) security	Dec. 31, 2015 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 60,505	$ 70,836
Gross Unrealized Gains	1,879	293
Gross Unrealized Losses	4	848
Fair Value	$ 62,380	$ 70,281	[1]
Number of Securities
Less Than 12 Months | security	1	34
12 Months or More | security	0	0
Fair value
Less Than 12 Months	$ 4,361	$ 58,571
12 Months or More	0	0
Total	4,361	58,571
Unrealized losses
Less Than 12 Months	4	848
12 Months or More	0	0
Total	4	848
Taxable municipal securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	19,849	24,789
Gross Unrealized Gains	1,256	225
Gross Unrealized Losses	0	447
Fair Value	21,105	$ 24,567
Number of Securities
Less Than 12 Months | security		20
12 Months or More | security		0
Fair value
Less Than 12 Months		$ 16,888
12 Months or More		0
Total		16,888
Unrealized losses
Less Than 12 Months		447
12 Months or More		0
Total		447
Mortgage-backed Securities GNMA
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,324	13,512
Gross Unrealized Gains	263	68
Gross Unrealized Losses	4	50
Fair Value	$ 12,583	$ 13,530
Number of Securities
Less Than 12 Months | security	1	3
12 Months or More | security	0	0
Fair value
Less Than 12 Months	$ 4,361	$ 10,010
12 Months or More	0	0
Total	4,361	10,010
Unrealized losses
Less Than 12 Months	4	50
12 Months or More	0	0
Total	4	50
Mortgage-backed securities FNMA & FHLMC
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	27,582	32,024
Gross Unrealized Gains	360	0
Gross Unrealized Losses	0	351
Fair Value	27,942	$ 31,673
Number of Securities
Less Than 12 Months | security		11
12 Months or More | security		0
Fair value
Less Than 12 Months		$ 31,673
12 Months or More		0
Total		31,673
Unrealized losses
Less Than 12 Months		351
12 Months or More		0
Total		351
Other debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	750	500
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	$ 750	500
Equity securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		11
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Fair Value		$ 11

[1] Derived from audited consolidated financial statements.

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INVESTMENT SECURITIES (Securities Held-to-maturity) (Details)	Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($) security
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 54,576,000	$ 65,354,000	[1]
Gross Unrealized Gains	1,464,000	529,000
Gross Unrealized Losses	0	250,000
Fair Value	56,040,000	$ 65,633,000
Number of Securities
Less Than 12 Months | security		23
12 Months or More | security		3
Fair value
Less Than 12 Months		$ 24,109,000
12 Months or More		5,130,000
Total		29,239,000
Unrealized losses
Less Than 12 Months		136,000
12 Months or More		114,000
Total	0	250,000
Taxable municipal securities
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	3,393,000	3,531,000
Gross Unrealized Gains	85,000	1,000
Gross Unrealized Losses	0	20,000
Fair Value	3,478,000	$ 3,512,000
Number of Securities
Less Than 12 Months | security		9
12 Months or More | security		0
Fair value
Less Than 12 Months		$ 3,325,000
12 Months or More		0
Total		3,325,000
Unrealized losses
Less Than 12 Months		20,000
12 Months or More		0
Total		20,000
Mortgage-backed Securities GNMA
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	49,142,000	59,185,000
Gross Unrealized Gains	1,312,000	509,000
Gross Unrealized Losses	0	230,000
Fair Value	50,454,000	$ 59,464,000
Number of Securities
Less Than 12 Months | security		14
12 Months or More | security		3
Fair value
Less Than 12 Months		$ 20,784,000
12 Months or More		5,130,000
Total		25,914,000
Unrealized losses
Less Than 12 Months		116,000
12 Months or More		114,000
Total		230,000
Mortgage-backed securities FNMA
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	2,041,000	2,638,000
Gross Unrealized Gains	67,000	19,000
Gross Unrealized Losses	0	0
Fair Value	$ 2,108,000	$ 2,657,000

[1] Derived from audited consolidated financial statements.

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INVESTMENT SECURITIES (Securities Containing Unrealized Losses) (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Unrealized losses on securities held-to-maturity	$ 0	$ 0	$ 250,000
Unrealized losses on securities available-for-sale	4,000	4,000	$ 848,000
Credit loss on other than temporarily impaired security	$ 0	$ 0

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INVESTMENT SECURITIES (Investment Securities by Contractual Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Amortized Cost
Amortized Cost	$ 60,505	$ 70,836
Fair Value
Investment securities available-for-sale, at fair value	62,380	70,281	[1]
Amortized Cost
Amortized Cost	54,576	65,354	[1]
Fair Value
Fair Value	56,040	65,633
Taxable municipal securities
Amortized Cost
Due after ten years	19,849
Amortized Cost	19,849	24,789
Fair Value
Due after ten years	21,105
Investment securities available-for-sale, at fair value	21,105	24,567
Amortized Cost
Due within one year	156
Due after one year through five years	2,183
Due after five years through ten years	1,054
Amortized Cost	3,393	3,531
Fair Value
Due within one year	156
Due after one year through five years	2,221
Due after five years through ten years	1,101
Fair Value	3,478	3,512
Mortgage-backed securities - GNMA/FNMA & FHLMC
Amortized Cost
Due after ten years	39,906
Amortized Cost	39,906
Fair Value
Due after ten years	40,525
Investment securities available-for-sale, at fair value	40,525
Other debt securities
Amortized Cost
Due after five years through ten years	750
Amortized Cost	750	500
Fair Value
Due after five years through ten years	750
Investment securities available-for-sale, at fair value	750	$ 500
Government and Federal National Mortgage Association Certificates and Obligations (FNMA and GNMA)
Amortized Cost
Due after five years through ten years	7,675
Due after ten years	43,508
Amortized Cost	51,183
Fair Value
Due after five years through ten years	7,943
Due after ten years	44,619
Fair Value	$ 52,562

[1] Derived from audited consolidated financial statements.

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INVESTMENT SECURITIES (Securities Pledged and Sold) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Carrying value of securities	$ 43,800,000		$ 43,800,000		$ 61,100,000
Proceeds from sales and calls of investment securities available-for-sale	0	$ 4,700,000	5,198,000	$ 8,324,000
Net realized gains		209,000	266,000	265,000
Gross realized losses	$ 0	$ 0	$ 0	$ 0

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Classification of Loan Segments) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015		Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 490,186		$ 458,773		$ 453,513
Net deferred loan fees	(827)		(460)
Net loans before allowance	489,359		458,313	[1]
Allowance for loan losses	(9,673)	$ (9,069)	(9,616)	[1]	(10,272)	$ (9,812)	$ (9,377)
Net loans	479,686		448,697	[1]
Loans held for sale	832		1,145
Credit Cards
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,266		1,168
Commercial and Industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	22,108		23,163
Commercial Real Estate | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	44,364		50,510		50,469
Allowance for loan losses	(4,973)	(4,816)	(5,470)		(5,527)	(5,306)	(5,105)
Commercial Real Estate | Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	237,195		208,737		206,548
Allowance for loan losses	(3,004)	(2,492)	(2,268)		(2,664)	(2,669)	(2,382)
Residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	134,501		128,442		130,588
Allowance for loan losses	(1,176)	(1,147)	(1,191)		(1,416)	(1,224)	(1,206)
Residential | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	41,047		36,618		31,577
Allowance for loan losses	(300)	(271)	(305)		(397)	(318)	(436)
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	6,992		6,638
Consumer | Credit Cards
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,951		2,240
Commercial | Credit Cards
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,266		1,168
Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	762		1,257		832
Allowance for loan losses	$ (39)	$ (60)	$ (48)		$ (53)	$ (30)	$ (40)

[1] Derived from audited consolidated financial statements.

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Allowance for Loan Losses by Loan Class) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended			12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016		Sep. 30, 2015	Dec. 31, 2015
Allowances for loan losses:
Balance, beginning of period	$ 9,069	$ 9,812	$ 9,616	[1]	$ 9,377	$ 9,377
Provision for loan losses	0	0	0		0	0
Loans charged-off	(216)	(480)	(1,007)		(1,057)	(1,881)
Recoveries	820	940	1,064		1,952	2,120
Net recoveries (charge-offs)	604	460	57		895	239
Balance, end of period	9,673	10,272	9,673		10,272	9,616	[1]
Ending balance: individually evaluated for impairment	774	608	774		608	1,219
Ending balance: collectively evaluated for impairment	8,899	9,664	8,899		9,664	8,397
Loans:
Gross loans	490,186	453,513	490,186		453,513	458,773
Ending balance: individually evaluated for impairment	4,471	8,014	4,471		8,014	8,631
Ending balance, collectively evaluated for impairment	485,715	445,499	485,715		445,499	450,142
Small Dollar Homogeneous Impaired Loans
Allowances for loan losses:
Ending balance: collectively evaluated for impairment	34	34	34		34	42
Loans:
Ending balance, collectively evaluated for impairment	239	416	239		416	295
Commercial and Industrial
Allowances for loan losses:
Balance, beginning of period	182	153	221		119	119
Provision for loan losses	(153)	(102)	(182)		(161)	(58)
Loans charged-off	(5)	0	(64)		(47)	(74)
Recoveries	38	73	87		213	234
Net recoveries (charge-offs)	33	73	23		166	160
Balance, end of period	62	124	62		124	221
Ending balance: individually evaluated for impairment	1	0	1		0	2
Ending balance: collectively evaluated for impairment	61	124	61		124	219
Loans:
Gross loans	23,374	25,103	23,374		25,103	24,331
Ending balance: individually evaluated for impairment	27	0	27		0	84
Ending balance, collectively evaluated for impairment	23,347	25,103	23,347		25,103	24,247
Commercial Real Estate | Construction
Allowances for loan losses:
Balance, beginning of period	4,816	5,306	5,470		5,105	5,105
Provision for loan losses	(425)	(209)	(1,044)		(493)	(615)
Loans charged-off	(132)	(160)	(229)		(179)	(196)
Recoveries	714	590	776		1,094	1,176
Net recoveries (charge-offs)	582	430	547		915	980
Balance, end of period	4,973	5,527	4,973		5,527	5,470
Ending balance: individually evaluated for impairment	345	494	345		494	989
Ending balance: collectively evaluated for impairment	4,628	5,033	4,628		5,033	4,481
Loans:
Gross loans	44,364	50,469	44,364		50,469	50,510
Ending balance: individually evaluated for impairment	563	2,357	563		2,357	2,564
Ending balance, collectively evaluated for impairment	43,801	48,112	43,801		48,112	47,946
Commercial Real Estate | Real Estate
Allowances for loan losses:
Balance, beginning of period	2,492	2,669	2,268		2,382	2,382
Provision for loan losses	493	(210)	1,280		93	71
Loans charged-off	0	7	(565)		(199)	(578)
Recoveries	19	198	21		388	393
Net recoveries (charge-offs)	19	205	(544)		189	(185)
Balance, end of period	3,004	2,664	3,004		2,664	2,268
Ending balance: individually evaluated for impairment	393	111	393		111	228
Ending balance: collectively evaluated for impairment	2,611	2,553	2,611		2,553	2,040
Loans:
Gross loans	237,195	206,548	237,195		206,548	208,737
Ending balance: individually evaluated for impairment	2,371	3,427	2,371		3,427	3,957
Ending balance, collectively evaluated for impairment	234,824	203,121	234,824		203,121	204,780
Residential
Allowances for loan losses:
Balance, beginning of period	1,147	1,224	1,191		1,206	1,206
Provision for loan losses	19	409	(46)		469	497
Loans charged-off	(25)	(261)	(25)		(426)	(713)
Recoveries	35	44	56		167	201
Net recoveries (charge-offs)	10	(217)	31		(259)	(512)
Balance, end of period	1,176	1,416	1,176		1,416	1,191
Ending balance: individually evaluated for impairment	35	0	35		0	0
Ending balance: collectively evaluated for impairment	1,141	1,416	1,141		1,416	1,191
Loans:
Gross loans	134,501	130,588	134,501		130,588	128,442
Ending balance: individually evaluated for impairment	1,510	1,778	1,510		1,778	1,305
Ending balance, collectively evaluated for impairment	132,991	128,810	132,991		128,810	127,137
Residential | Construction
Allowances for loan losses:
Balance, beginning of period	271	318	305		436	436
Provision for loan losses	29	79	(26)		(39)	(90)
Loans charged-off	0	0	0		0	(41)
Recoveries	0	0	21		0	0
Net recoveries (charge-offs)	0	0	21		0	(41)
Balance, end of period	300	397	300		397	305
Ending balance: individually evaluated for impairment	0	0	0		0	0
Ending balance: collectively evaluated for impairment	300	397	300		397	305
Loans:
Gross loans	41,047	31,577	41,047		31,577	36,618
Ending balance: individually evaluated for impairment	0	437	0		437	721
Ending balance, collectively evaluated for impairment	41,047	31,140	41,047		31,140	35,897
Consumer
Allowances for loan losses:
Balance, beginning of period	101	112	113		89	89
Provision for loan losses	58	(18)	29		50	121
Loans charged-off	(54)	(38)	(124)		(136)	(210)
Recoveries	14	35	101		88	113
Net recoveries (charge-offs)	(40)	(3)	(23)		(48)	(97)
Balance, end of period	119	91	119		91	113
Ending balance: individually evaluated for impairment	0	3	0		3	0
Ending balance: collectively evaluated for impairment	119	88	119		88	113
Loans:
Gross loans	8,943	8,396	8,943		8,396	8,878
Ending balance: individually evaluated for impairment	0	3	0		3	0
Ending balance, collectively evaluated for impairment	8,943	8,393	8,943		8,393	8,878
Other
Allowances for loan losses:
Balance, beginning of period	60	30	48		40	40
Provision for loan losses	(21)	51	(11)		81	74
Loans charged-off	0	(28)	0		(70)	(69)
Recoveries	0	0	2		2	3
Net recoveries (charge-offs)	0	(28)	2		(68)	(66)
Balance, end of period	39	53	39		53	48
Ending balance: individually evaluated for impairment	0	0	0		0	0
Ending balance: collectively evaluated for impairment	39	53	39		53	48
Loans:
Gross loans	762	832	762		832	1,257
Ending balance: individually evaluated for impairment	0	12	0		12	0
Ending balance, collectively evaluated for impairment	$ 762	$ 820	$ 762		$ 820	$ 1,257

[1] Derived from audited consolidated financial statements.

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Credit Quality) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	$ 22,109	$ 23,163
Commercial Construction and Land Development	44,363	50,510
Commercial Real Estate	237,195	208,737
Residential Construction	41,047	36,618
Residential Mortgage	134,501	128,442
Consumer	6,992	6,638
Other	762	1,257
Totals	486,969	455,365
Total Loans	490,186	458,773	$ 453,513
Credit Card Portfolio Exposure
Financing Receivable, Recorded Investment [Line Items]
Consumer - Credit Card	1,951	2,240
Business- Credit Card	1,266	1,168
1 - Lowest Risk
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	1,193	1,942
Commercial Construction and Land Development	0	0
Commercial Real Estate	0	0
Residential Construction	0	0
Residential Mortgage	0	0
Consumer	1,364	1,773
Other	0	0
Totals	2,557	3,715
2 - Strong
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	866	971
Commercial Construction and Land Development	933	749
Commercial Real Estate	4,557	2,280
Residential Construction	105	0
Residential Mortgage	14,424	15,187
Consumer	530	386
Other	98	7
Totals	21,513	19,580
3 - Standard
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	10,113	10,530
Commercial Construction and Land Development	11,781	11,262
Commercial Real Estate	106,284	94,357
Residential Construction	11,717	4,296
Residential Mortgage	56,882	56,493
Consumer	1,200	1,250
Other	622	469
Totals	198,599	178,657
4 - Acceptable
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	9,598	9,297
Commercial Construction and Land Development	28,091	33,832
Commercial Real Estate	116,463	103,740
Residential Construction	29,225	31,431
Residential Mortgage	56,195	50,226
Consumer	3,811	3,170
Other	42	757
Totals	243,425	232,453
5 - Special Mention
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	283	304
Commercial Construction and Land Development	2,913	2,486
Commercial Real Estate	7,172	4,444
Residential Construction	0	170
Residential Mortgage	5,040	5,231
Consumer	87	59
Other	0	0
Totals	15,495	12,694
6-8 - Substandard
Financing Receivable, Recorded Investment [Line Items]
Commercial and Industrial	56	119
Commercial Construction and Land Development	645	2,181
Commercial Real Estate	2,719	3,916
Residential Construction	0	721
Residential Mortgage	1,960	1,305
Consumer	0	0
Other	0	24
Totals	5,380	8,266
Performing | Credit Card Portfolio Exposure
Financing Receivable, Recorded Investment [Line Items]
Consumer - Credit Card	1,947	2,211
Business- Credit Card	1,266	1,133
Nonperforming | Credit Card Portfolio Exposure
Financing Receivable, Recorded Investment [Line Items]
Consumer - Credit Card	4	29
Business- Credit Card	$ 0	$ 35

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Age Analysis of Past Due Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	$ 705	$ 1,172
Nonaccrual	7	65
Nonaccrual loans	3,754	6,598
Total Past Due	4,466	7,835
Current	485,720	450,938
Gross loans	490,186	458,773	$ 453,513
Credit Cards
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	22	107
Nonaccrual	0	36
Nonaccrual loans	0	0
Total Past Due	22	143
Current	1,244	1,025
Gross loans	1,266	1,168
Commercial and Industrial
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	2	56
Nonaccrual	0	0
Nonaccrual loans	50	119
Total Past Due	52	175
Current	22,056	22,988
Gross loans	22,108	23,163
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	0	211
Nonaccrual	0	0
Nonaccrual loans	603	1,626
Total Past Due	603	1,837
Current	43,761	48,673
Gross loans	44,364	50,510	50,469
Commercial Real Estate | Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	94	0
Nonaccrual	0	0
Nonaccrual loans	1,649	2,929
Total Past Due	1,743	2,929
Current	235,452	205,808
Gross loans	237,195	208,737	206,548
Residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	525	499
Nonaccrual	0	0
Nonaccrual loans	1,452	1,203
Total Past Due	1,977	1,702
Current	132,524	126,740
Gross loans	134,501	128,442	130,588
Residential | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	0	133
Nonaccrual	0	0
Nonaccrual loans	0	721
Total Past Due	0	854
Current	41,047	35,764
Gross loans	41,047	36,618	31,577
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	21	71
Nonaccrual	3	0
Nonaccrual loans	0	0
Total Past Due	24	71
Current	6,968	6,567
Gross loans	6,992	6,638
Consumer | Credit Cards
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	41	95
Nonaccrual	4	29
Nonaccrual loans	0	0
Total Past Due	45	124
Current	1,906	2,116
Gross loans	1,951	2,240
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-89 Days Past Due	0	0
Nonaccrual	0	0
Nonaccrual loans	0	0
Total Past Due	0	0
Current	762	1,257
Gross loans	$ 762	$ 1,257	$ 832

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Nonperforming Assets) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Loans and Leases Receivable Disclosure [Abstract]
Loans past due ninety days or more and still accruing	$ 7	$ 65
Nonaccrual loans	3,754	6,598
Foreclosed assets	2,144	1,760	[1]
Total nonperforming assets	$ 5,905	$ 8,423

[1] Derived from audited consolidated financial statements.

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Impaired Loans) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Recorded Investment
With no related allowance recorded	$ 2,796	$ 5,088
With an allowance recorded	1,914	3,838
Totals	4,710	8,926
Unpaid Principal Balance
With no related allowance recorded	3,495	6,421
With an allowance recorded	2,110	4,999
Totals	5,605	11,420
Related Allowance	808	1,261
Average Recorded Investment
With no related allowance recorded	2,997	4,713
With an allowance recorded	1,948	4,040
Totals	4,945	8,753
Interest Income Recognized
With no related allowance recorded	55	131
With an allowance recorded	21	213
Totals	76	344
Commercial
Recorded Investment
Totals	3,025	6,761
Unpaid Principal Balance
Totals	3,765	9,169
Related Allowance	748	1,241
Average Recorded Investment
Totals	3,174	6,971
Interest Income Recognized
Totals	49	277
Commercial and Industrial
Recorded Investment
With no related allowance recorded	21	67
With an allowance recorded	29	52
Unpaid Principal Balance
With no related allowance recorded	21	67
With an allowance recorded	29	63
Related Allowance	4	7
Average Recorded Investment
With no related allowance recorded	21	63
With an allowance recorded	26	58
Interest Income Recognized
With no related allowance recorded	0	3
With an allowance recorded	1	4
Commercial Real Estate | Construction
Recorded Investment
With no related allowance recorded	147	737
With an allowance recorded	456	1,948
Unpaid Principal Balance
With no related allowance recorded	265	1,706
With an allowance recorded	573	3,020
Related Allowance	350	1,006
Average Recorded Investment
With no related allowance recorded	248	1,031
With an allowance recorded	468	2,086
Interest Income Recognized
With no related allowance recorded	1	19
With an allowance recorded	0	122
Commercial Real Estate | Real Estate
Recorded Investment
With no related allowance recorded	1,164	2,258
With an allowance recorded	1,208	1,699
Unpaid Principal Balance
With no related allowance recorded	1,669	2,614
With an allowance recorded	1,208	1,699
Related Allowance	394	228
Average Recorded Investment
With no related allowance recorded	1,206	2,020
With an allowance recorded	1,205	1,713
Interest Income Recognized
With no related allowance recorded	38	50
With an allowance recorded	9	79
Residential
Recorded Investment
With no related allowance recorded	1,464	1,305
With an allowance recorded	221	139
Totals	1,685	2,165
Unpaid Principal Balance
With no related allowance recorded	1,540	1,312
With an allowance recorded	300	217
Totals	1,840	2,251
Related Allowance	60	20
Average Recorded Investment
With no related allowance recorded	1,522	1,191
With an allowance recorded	249	183
Totals	1,771	1,782
Interest Income Recognized
With no related allowance recorded	16	51
With an allowance recorded	11	8
Totals	$ 27	67
Residential | Construction
Recorded Investment
With no related allowance recorded		721
Unpaid Principal Balance
With no related allowance recorded		722
Average Recorded Investment
With no related allowance recorded		408
Interest Income Recognized
With no related allowance recorded		$ 8

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Summary of Loans Modified as TDRs) (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($) loans	Sep. 30, 2016 USD ($) consecutive_payment loans	Dec. 31, 2015 USD ($)
Loans and Leases Receivable Disclosure [Abstract]
Number of consecutive payments required | consecutive_payment		6
Financing Receivable, Modifications [Line Items]
Accrual	$ 938	$ 938	$ 2,313
Nonaccrual	836	836	1,131
Total TDRs	1,774	1,774	3,444
Allowance for Loan Losses Allocated	$ 41	$ 41	467
Number of TDR loans made to borrowers | loans	6,000	6
Number of TDR loans modified | loans	0	0
Commercial & industrial
Financing Receivable, Modifications [Line Items]
Accrual	$ 0	$ 0
Nonaccrual	27	27
Total TDRs	27	27
Allowance for Loan Losses Allocated	1	1
Residential
Financing Receivable, Modifications [Line Items]
Accrual	215	215	226
Nonaccrual	126	126	0
Total TDRs	341	341	226
Allowance for Loan Losses Allocated	0	0	0
Construction | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Accrual			1,059
Nonaccrual			557
Total TDRs			1,616
Allowance for Loan Losses Allocated			447
Real Estate | Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Accrual	723	723	1,028
Nonaccrual	683	683	574
Total TDRs	1,406	1,406	1,602
Allowance for Loan Losses Allocated	$ 40	$ 40	$ 20

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LOANS AND ALLOWANCE FOR LOAN LOSSES (Loans Modified) (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016 loans	Sep. 30, 2016 USD ($) loans
Financing Receivable, Modifications [Line Items]
Number of loans | loans	6,000	6
Pre-Modification Outstanding Recorded Investment		$ 744,244
Post-Modification Outstanding Recorded Investment		$ 744,244
Commercial
Financing Receivable, Modifications [Line Items]
Number of loans | loans		5
Pre-Modification Outstanding Recorded Investment		$ 618,237
Post-Modification Outstanding Recorded Investment		$ 618,237
Commercial | Commercial and Industrial Sector [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | loans		3
Pre-Modification Outstanding Recorded Investment		$ 26,750
Post-Modification Outstanding Recorded Investment		$ 26,750
Commercial | Real Estate Sector [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | loans		2
Pre-Modification Outstanding Recorded Investment		$ 591,487
Post-Modification Outstanding Recorded Investment		$ 591,487
Consumer
Financing Receivable, Modifications [Line Items]
Number of loans | loans		1
Pre-Modification Outstanding Recorded Investment		$ 126,007
Post-Modification Outstanding Recorded Investment		$ 126,007
Consumer | Real Estate
Financing Receivable, Modifications [Line Items]
Number of loans | loans		1
Pre-Modification Outstanding Recorded Investment		$ 126,007
Post-Modification Outstanding Recorded Investment		$ 126,007

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LOANS AND ALLOWANCE FOR LOAN LOSSES (TDR that the Bank has Entered Into) (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($) loans	Sep. 30, 2016 USD ($) loans	Dec. 31, 2015 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers	6,000	6
Total TDRs | $	$ 1,774	$ 1,774	$ 3,444
Number of loans	0	0
Paid in full
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	$ 0	$ 0
Paying as Restructured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		6
Total TDRs | $	744,244	$ 744,244
Converted to Non-accrual
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	0	$ 0
Foreclosure or Default
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans		0
Recorded Investments | $		$ 0
Extended payment terms | Paid in full
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	0	$ 0
Extended payment terms | Paying as Restructured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		5
Total TDRs | $	618,237	$ 618,237
Extended payment terms | Converted to Non-accrual
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	0	$ 0
Extended payment terms | Foreclosure or Default
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans		0
Recorded Investments | $		$ 0
Troubled Debt Restructuring, Type of Concession Made to Borrower, Other [Member] | Paid in full
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	0	$ 0
Troubled Debt Restructuring, Type of Concession Made to Borrower, Other [Member] | Paying as Restructured
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		1
Total TDRs | $	126,007	$ 126,007
Troubled Debt Restructuring, Type of Concession Made to Borrower, Other [Member] | Converted to Non-accrual
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of TDR loans made to borrowers		0
Total TDRs | $	$ 0	$ 0
Troubled Debt Restructuring, Type of Concession Made to Borrower, Other [Member] | Foreclosure or Default
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans		0
Recorded Investments | $		$ 0

XML

BORROWINGS (FHLB Advances) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
FHLB Advances	$ 70,000	$ 60,000	[1]
0.48% Advance Maturing February 22, 2016
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate		0.48%
FHLB Advances		$ 10,000
0.73% Advance Maturing August 9, 2017
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	0.73%
FHLB Advances	$ 10,000
3.94% Advance Maturing August 14, 2017
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate		3.94%
FHLB Advances		$ 5,000
2.06% Advance Maturing February 5, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.06%	2.06%
FHLB Advances	$ 10,000	$ 10,000
1.13% Advance Maturing May 25, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	1.13%
FHLB Advances	$ 10,000
2.25% Advance Maturing June 5, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.25%	2.25%
FHLB Advances	$ 5,000	$ 5,000
2.55% Advance Maturing June 5, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.55%	2.55%
FHLB Advances	$ 5,000	$ 5,000
3.03% Advance Maturing June 5, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate		3.03%
FHLB Advances		$ 5,000
3.14% Advance Maturing September 10, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate		3.14%
FHLB Advances		$ 10,000
2.71% Advance Maturing September 18, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.71%	2.71%
FHLB Advances	$ 10,000	$ 10,000
2.54% Advance Maturing April 29, 2019
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.54%
FHLB Advances	$ 5,000
2.62% Advance Maturing April 29, 2019
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.62%
FHLB Advances	$ 5,000
2.83% Advance Maturing April 29, 2019
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Interest Rate	2.83%
FHLB Advances	$ 10,000

[1] Derived from audited consolidated financial statements.

XML

BORROWINGS (Narrative) (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
FHLB, available lines of credit	$ 107,900,000
FHLB borrowings, weighted average interest rate	2.06%	2.38%
Line of credit, various financial institutions	$ 37,000,000
Federal fund purchases outstanding	$ 0

XML

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Other Commitments [Line Items]
Loan commitments	$ 153,077
Securities	43,753
Loans	85,333
Commitments to extend credit
Other Commitments [Line Items]
Loan commitments	32,767
Undisbursed lines of credit
Other Commitments [Line Items]
Loan commitments	103,200
Financial stand-by letters of credit
Other Commitments [Line Items]
Loan commitments	439
Performance stand-by letters of credit
Other Commitments [Line Items]
Loan commitments	451
Legally binding commitments
Other Commitments [Line Items]
Loan commitments	136,857
Unused credit card lines
Other Commitments [Line Items]
Loan commitments	$ 16,220

XML

FAIR VALUE MEASUREMENT (Assets Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	$ 62,380	$ 70,281	[1]
Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	21,105	24,567
Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	12,583	13,530
Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	27,942	31,673
Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	750	500
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		11
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	61,630	69,781
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	750	500
Total Carrying Amount in the Consolidated Balance Sheet
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	62,380	70,281
Assets Measured at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	62,380	70,281
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		0
Recurring Basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	61,630	69,781
Recurring Basis | Significant Other Observable Inputs (Level 2) | Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	21,105	24,567
Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	12,583	13,530
Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	27,942	31,673
Recurring Basis | Significant Other Observable Inputs (Level 2) | Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Significant Other Observable Inputs (Level 2) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		11
Recurring Basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	750	500
Recurring Basis | Significant Unobservable Inputs (Level 3) | Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Significant Unobservable Inputs (Level 3) | Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Significant Unobservable Inputs (Level 3) | Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	0	0
Recurring Basis | Significant Unobservable Inputs (Level 3) | Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	750	500
Recurring Basis | Significant Unobservable Inputs (Level 3) | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		0
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	62,380	70,281
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet | Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	21,105	24,567
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet | Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	12,583	13,530
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet | Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	27,942	31,673
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet | Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	750	500
Recurring Basis | Total Carrying Amount in the Consolidated Balance Sheet | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		11
Recurring Basis | Assets Measured at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	62,380	70,281
Recurring Basis | Assets Measured at Fair Value | Taxable municipal securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	21,105	24,567
Recurring Basis | Assets Measured at Fair Value | Mortgage-backed Securities GNMA
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	12,583	13,530
Recurring Basis | Assets Measured at Fair Value | Mortgage-backed securities FNMA & FHLMC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	27,942	31,673
Recurring Basis | Assets Measured at Fair Value | Other debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value	$ 750	500
Recurring Basis | Assets Measured at Fair Value | Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale, at fair value		$ 11

[1] Derived from audited consolidated financial statements.

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FAIR VALUE MEASUREMENT (Level 3 Assets Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Level 3 assets measured at fair value on a recurring basis [Roll Forward]
Beginning Balance	$ 750	$ 0	$ 500	$ 0
Total realized and unrealized gains or (losses):
Included in earnings	0	0	0	0
Included in other comprehensive income	0	0	0	0
Purchases, issuances and settlements	0	0	250	0
Ending Balance	$ 750	$ 0	$ 750	$ 0

XML

FAIR VALUE MEASUREMENT (Assets Measured at Fair Value on Nonrecurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	$ 0	$ 0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	0	0
Total Carrying Amount in the Consolidated Balance Sheet
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Assets Measured at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Nonrecurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	0	0
Impaired loans	0	0
Foreclosed assets	0	0
Nonrecurring Basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Impaired loans	0	0
Foreclosed assets	0	0
Nonrecurring Basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	0	0
Impaired loans	2,030	3,540
Foreclosed assets	2,144	1,760
Nonrecurring Basis | Total Carrying Amount in the Consolidated Balance Sheet
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Impaired loans	2,030	3,540
Foreclosed assets	2,144	1,760
Nonrecurring Basis | Assets Measured at Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans held for sale	832	1,145
Impaired loans	2,030	3,540
Foreclosed assets	$ 2,144	$ 1,760

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FAIR VALUE MEASUREMENT (Quantitative Information, Unobservable Input) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Securities available-for-sale	$ 62,380	$ 70,281	[1]
Impaired loans	4,710	8,926
Foreclosed assets	2,144	1,760	[1]
Other debt securities
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Securities available-for-sale	750	500
Significant Unobservable Inputs (Level 3)
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Securities available-for-sale	750	500
Significant Unobservable Inputs (Level 3) | Recurring measurements
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Securities available-for-sale	750	500
Significant Unobservable Inputs (Level 3) | Recurring measurements | Other debt securities
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Securities available-for-sale	$ 750	$ 500
Probability of default (as a percent)	0.00%
Loss given default (as a percent)	100.00%
Significant Unobservable Inputs (Level 3) | Nonrecurring measurements
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans	$ 2,030
Foreclosed assets	$ 2,144
Significant Unobservable Inputs (Level 3) | Nonrecurring measurements | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	9.00%
Discounted appraisals (as a percent)	10.00%
Significant Unobservable Inputs (Level 3) | Nonrecurring measurements | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	50.00%
Discounted appraisals (as a percent)	30.00%

[1] Derived from audited consolidated financial statements.

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FAIR VALUE MEASUREMENT (Range of Collateral Discounts) (Details)	9 Months Ended
	Sep. 30, 2016
Commercial Real Estate | Construction | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	10.00%
Commercial Real Estate | Construction | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	40.00%
Commercial Real Estate | Real Estate | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	9.00%
Commercial Real Estate | Real Estate | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	50.00%
Residential | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	9.00%
Residential | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	20.00%
Residential | Construction | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	9.00%
Residential | Construction | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	30.00%
Other | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	9.00%
Other | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Collateral discounts (as a percent)	20.00%

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FAIR VALUE MEASUREMENT (Information on Financial Assets and Liabilities) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Financial assets:
Certificates of deposit	$ 21,805	$ 23,520	[1]
Securities available-for-sale	62,380	70,281	[1]
Securities held-to-maturity	56,040	65,633
Level 1
Financial assets:
Cash and cash equivalents	49,450	26,755
Certificates of deposit	0	0
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Loans held for sale	0	0
Loans, net	0	0
FHLB stock	0	0
Accrued interest receivable	0	0
Financial liabilities:
Deposits	0	0
Subordinated debentures and subordinated promissory notes	0	0
Borrowings	0	0
Accrued interest payable	0	0
Level 2
Financial assets:
Cash and cash equivalents	0	0
Certificates of deposit	21,805	23,520
Securities available-for-sale	61,630	69,781
Securities held-to-maturity	56,040	65,633
Loans held for sale	832	1,145
Loans, net	0	0
FHLB stock	3,596	3,288
Accrued interest receivable	1,584	1,594
Financial liabilities:
Deposits	560,529	541,818
Subordinated debentures and subordinated promissory notes	0	0
Borrowings	71,466	61,709
Accrued interest payable	378	437
Level 3
Financial assets:
Cash and cash equivalents	0	0
Certificates of deposit	0	0
Securities available-for-sale	750	500
Securities held-to-maturity	0	0
Loans held for sale	0	0
Loans, net	462,669	423,285
FHLB stock	0	0
Accrued interest receivable	0	0
Financial liabilities:
Deposits	0	0
Subordinated debentures and subordinated promissory notes	23,872	23,872
Borrowings	0	0
Accrued interest payable	0	0
Carrying Value
Financial assets:
Cash and cash equivalents	49,450	26,755
Certificates of deposit	21,805	23,520
Securities available-for-sale	62,380	70,281
Securities held-to-maturity	54,576	65,354
Loans held for sale	832	1,145
Loans, net	479,686	448,697
FHLB stock	3,596	3,288
Accrued interest receivable	1,584	1,594
Financial liabilities:
Deposits	560,243	542,334
Subordinated debentures and subordinated promissory notes	23,872	23,872
Borrowings	70,000	60,000
Accrued interest payable	378	437
Estimated Fair Value
Financial assets:
Cash and cash equivalents	49,450	26,755
Certificates of deposit	21,805	23,520
Securities available-for-sale	62,380	70,281
Securities held-to-maturity	56,040	65,633
Loans held for sale	832	1,145
Loans, net	462,669	423,285
FHLB stock	3,596	3,288
Accrued interest receivable	1,584	1,594
Financial liabilities:
Deposits	560,529	541,818
Subordinated debentures and subordinated promissory notes	23,872	23,872
Borrowings	71,466	61,709
Accrued interest payable	$ 378	$ 437
Loans Receivable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Adjustment for current liquidity and market discount, rate	3.00%

[1] Derived from audited consolidated financial statements.

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CAPITAL & REGULATORY INFORMATION (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Tier I Capital (to Average Assets), Ratio
Submission to FRB of written progress reports, period after the end of each calendar quarter following the 2015 Written Agreement	30 days
Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Dividends paid to the Company by the Bank	$ 0
Total Capital and Tier I Capital (to Risk Weighted Assets), Ratio
Total Capital (to Risk Weighted Assets), Ratio, Actual	15.70%	15.60%
Total Capital (to Risk Weighted Assets), Ratio, Minimum for Capital Adequacy Purposes	8.00%
Total Capital (to Risk Weighted Assets), Ratio, Minimum to be Well Capitalized under Prompt Corrective Action Provisions	10.00%
Tier I Capital (to Risk Weighted Assets), Ratio, Actual	14.50%	14.40%
Tier I Capital (to Risk Weighted Assets), Ratio, Minimum for Capital Adequacy Purposes	6.00%
Tier I Capital (to Risk Weighted Assets), Ratio, Minimum to be Well Capitalized under Prompt Corrective Action Provisions	8.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio, Actual	14.50%	14.40%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio, Minimum For Capital Adequacy Purposes	4.50%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio, Minimum to be Well Capitalized under Prompt Corrective Action Provisions	6.50%
Tier I Capital (to Average Assets), Ratio
Tier I Capital (to Average Assets), Ratio, Actual	10.80%	10.20%
Tier I Capital (to Average Assets), Ratio, Minimum for Capital Adequacy Purposes	4.00%
Tier I Capital (to Average Assets), Ratio, Minimum to be Well Capitalized under Prompt Corrective Action Provisions	5.00%
Company
Total Capital and Tier I Capital (to Risk Weighted Assets), Ratio
Total Capital (to Risk Weighted Assets), Ratio, Actual	16.00%	16.00%
Total Capital (to Risk Weighted Assets), Ratio, Minimum for Capital Adequacy Purposes	8.00%
Tier I Capital (to Risk Weighted Assets), Ratio, Actual	12.50%	12.40%
Tier I Capital (to Risk Weighted Assets), Ratio, Minimum for Capital Adequacy Purposes	6.00%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio, Actual	10.90%	11.30%
Common Equity Tier 1 Capital (to Risk Weighted Assets), Ratio, Minimum For Capital Adequacy Purposes	4.50%
Tier I Capital (to Average Assets), Ratio
Tier I Capital (to Average Assets), Ratio, Actual	9.30%	8.80%
Tier I Capital (to Average Assets), Ratio, Minimum for Capital Adequacy Purposes	4.00%

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RESTRICTED STOCK (Non-vested Restricted Stock Awards) (Details) - Restricted Stock	9 Months Ended
	Sep. 30, 2016 $ / shares shares
Restricted Stock
Balance as of beginning of period (in shares) | shares	1,363,175
Granted (in shares) | shares	210,000
Vested (in shares) | shares	(149,325)
Forfeited (in shares) | shares	(93,500)
Balance as of end of period (in shares) | shares	1,330,350
Weighted Average Grant-Date Fair Value
Balance as of beginning of period (in usd per share) | $ / shares	$ 1.64
Granted (in usd per share) | $ / shares	1.90
Vested (in usd per share) | $ / shares	1.53
Forfeited (in usd per share) | $ / shares	1.66
Balance as of end of period (in usd per share) | $ / shares	$ 1.69

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RESTRICTED STOCK (Narrative) (Details) - Restricted Stock - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 225	$ 405
Unrecognized compensation cost	$ 2,200
Unrecognized compensation cost, recognition period	3 years
Grant-date fair value vested (in usd per share)	$ 1.53