LOANS

The loan portfolio consisted of the following (in thousands):

	December 31,
	2014			2013
Commercial, financial and agricultural	$	467,147		$	403,976
Real estate – construction		68,577			82,691
Real estate – commercial		467,172			397,135
Real estate – residential		154,602			146,841
Installment loans to individuals		119,328			97,459
Lease financing receivable		4,857			5,542
Other		2,748			3,910
		1,284,431			1,137,554
Less allowance for loan losses		(11,226	)		(8,779	)
	$	1,273,205		$	1,128,775

The amounts reported in other loans at December 31, 2014 and 2013 includes the overdrawn demand deposit accounts and loans primarily made to non-profit entities reported for each period.

An analysis of the activity in the allowance for loan losses is as follows (in thousands):

	December 31,
	2014			2013			2012
Balance, beginning of year	$	8,779		$	7,370		$	7,276
Provision for loan losses		5,625			3,050			2,050
Recoveries		738			265			300
Loans charged-off		(3,916	)		(1,906	)		(2,256	)
Balance, end of year	$	11,226		$	8,779		$	7,370

The Company monitors loan concentrations and evaluates individual customer and aggregate industry leverage, profitability, risk rating distributions, and liquidity for each major standard industry classification segment. At December 31, 2014, one industry segment concentration, the oil and gas industry, aggregate more than 10% of the loan portfolio. The Company’s exposure in the oil and gas industry, including related service and manufacturing industries, totaled approximately $265.0 million, or 20.6% of total loans. Additionally, the Company’s exposure to loans secured by commercial real estate is monitored. At December 31, 2014, loans secured by commercial real estate (including commercial construction and multifamily loans) totaled approximately $510.7 million. Of the $510.7 million, $467.2 million represent CRE loans, 56% of which are secured by owner-occupied commercial properties. Of the $510.7 million in loans secured by commercial real estate, $6.5 million or 1.3% were on nonaccrual status at December 31, 2014.

A rollforward of the activity within the allowance for loan losses by loan type and recorded investment in loans for the years ended December 31, 2014 and 2013 is as follows (in thousands):

				December 31, 2014
				Real Estate
	Coml, fin, and agric			Construction			Commercial			Residential			Installment loans to individuals			Lease financing receivable			Other		Total
Allowance for loan losses:
Beginning balance	$	3,906		$	1,046		$	1,389		$	1,141		$	1,273		$	21		$	3	$	8,779
Charge-offs		(2,843	)		(1	)		(93	)		(273	)		(706	)		-			-		(3,916	)
Recoveries		164			-			407			47			120			-			-		738
Provision		4,502			(91	)		699			(105	)		624			(5	)		1		5,625
Ending balance	$	5,729		$	954		$	2,402		$	810		$	1,311		$	16		$	4	$	11,226
Ending balance: individually evaluated for impairment	$	1,010		$	-		$	907		$	68		$	179		$	-		$	-	$	2,164
Ending balance: collectively evaluated for impairment	$	4,719		$	954		$	1,495		$	742		$	1,132		$	16		$	4	$	9,062

Loans:
Ending balance	$	467,147		$	68,577		$	467,172		$	154,602		$	119,328		$	4,857		$	2,748	$	1,284,431
Ending balance: individually evaluated for impairment	$	2,656		$	54		$	6,388		$	1,072		$	377		$	-		$	-	$	10,547
Ending balance: collectively evaluated for impairment	$	464,491		$	68,523		$	460,118		$	153,436		$	118,951		$	4,857		$	2,748	$	1,273,124
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-		$	666		$	94		$	-		$	-		$	-	$	760

	December 31, 2013
				Real Estate
	Coml, fin, and agric			Construction			Commercial			Residential			Installment loans to individuals			Lease financing receivable			Other		Total
Allowance for loan losses:
Beginning balance	$	1,535		$	2,147		$	2,166		$	936		$	543		$	41		$	2	$	7,370
Charge-offs		(935	)		-			(18	)		(129	)		(824	)		-			-		(1,906	)
Recoveries		80			8			29			39			109			-			-		265
Provision		3,226			(1,109	)		(788	)		295			1,445			(20	)		1		3,050
Ending balance	$	3,906		$	1,046		$	1,389		$	1,141		$	1,273		$	21		$	3	$	8,779
Ending balance: individually evaluated for impairment	$	168		$	3		$	54		$	60		$	120		$	-		$	-	$	405
Ending balance: collectively evaluated for impairment	$	3,738		$	1,043		$	1,335		$	1,081		$	1,153		$	21		$	3	$	8,374

Loans:
Ending balance	$	403,976		$	82,691		$	397,135		$	146,841		$	97,459		$	5,542		$	3,910	$	1,137,554
Ending balance: individually evaluated for impairment	$	1,241		$	100		$	2,213		$	900		$	271		$	-		$	-	$	4,725
Ending balance: collectively evaluated for impairment	$	402,735		$	82,591		$	394,218		$	145,773		$	97,188		$	5,542		$	3,910	$	1,131,957
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-		$	704		$	168		$	-		$	-		$	-	$	872

An age analysis of past due loans (including both accruing and non-accruing loans) is as follows (in thousands):

	December 31, 2014

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Commercial, financial, and agricultural	$	2,179	$	654	$	2,556	$	5,389	$	461,758	$	467,147	$	26
Commercial real estate - construction		15		-		105		120		43,390		43,510		97
Commercial real estate - other		4,989		270		2,464		7,723		459,449		467,172		-
Residential - construction		431		-		-		431		24,636		25,067		-
Residential - prime		1,843		523		704		3,070		151,532		154,602		-
Consumer - credit card		5		19		18		42		5,970		6,012		18
Consumer - other		671		392		107		1,170		112,146		113,316		46
Lease financing receivable		-		-		-		-		4,857		4,857		-
Other loans		134		-		-		134		2,614		2,748		-
	$	10,267	$	1,858	$	5,954	$	18,079	$	1,266,352	$	1,284,431	$	187

	December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Commercial, financial, and agricultural	$	4,350	$	208	$	1,256	$	5,814	$	398,162	$	403,976	$	26
Commercial real estate - construction		36		-		63		99		64,794		64,893		-
Commercial real estate - other		1,230		1,447		2,395		5,072		392,063		397,135		141
Residential - construction		149		-		-		149		17,649		17,798		-
Residential - prime		2,984		870		307		4,161		142,680		146,841		-
Consumer - credit card		36		-		7		43		6,163		6,206		7
Consumer - other		767		102		269		1,138		90,115		91,253		4
Lease financing receivable		-		-		-		-		5,542		5,542		-
Other loans		125		-		-		125		3,785		3,910		-
	$	9,677	$	2,627	$	4,297	$	16,601	$	1,120,953	$	1,137,554	$	178

Non-accrual loans are as follows (in thousands):

	December 31,
	2014		2013
Commercial, financial and agricultural	$	2,642	$	1,272
Commercial real estate – construction		54		100
Commercial real estate – other		6,429		2,290
Residential - construction		-		-
Residential - prime		1,194		1,153
Consumer – credit card		-		-
Consumer - other		382		284
Lease financing receivable		-		-
Other		-		-
	$	10,701	$	5,099

The amount of interest that would have been recorded on nonaccrual loans, had the loans not been classified as nonaccrual, totaled approximately $594,000, $518,000, and $582,000 for the years ended December 31, 2014, 2013, and 2012. Interest actually received on nonaccrual loans at December 31, 2014, 2013, and 2012 was $105,000, $312,000, and $70,000 respectively.

Loans that are individually evaluated for impairment are as follows (in thousands):

	December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	438	$	521	$	-	$	554	$	-
Commercial real estate – construction		54		54		-		58		-
Commercial real estate – other		1,921		1,921		-		1,885		17
Residential – prime		543		543		-		534		15
Consumer – other		78		78		-		72		-
Subtotal:		3,034		3,117		-		3,103		32
With an allowance recorded:
Commercial, financial, and agricultural		2,218		2,333		1,010		1,394		35
Commercial real estate – construction		-		-		-		19		-
Commercial real estate – other		4,467		4,467		907		2,416		220
Residential – prime		529		548		68		452		3
Consumer – other		299		313		179		252		4
Subtotal:		7,513		7,661		2,164		4,533		262
Totals:
Commercial		9,098		9,296		1,917		6,326		272
Residential		1,072		1,091		68		986		18
Consumer		377		391		179		324		4
Grand total:	$	10,547	$	10,778	$	2,164	$	7,636	$	294

	December 31, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial, financial, and agricultural	$	671	$	1,107	$	-	$	617	$	3
Commercial real estate – construction		61		61		-		416		-
Commercial real estate – other		1,850		2,324		-		2,190		8
Residential – prime		525		525		-		1,050		14
Consumer – other		66		66		-		90		1
Subtotal:		3,173		4,083		-		4,363		26
With an allowance recorded:
Commercial, financial, and agricultural		570		570		168		821		3
Commercial real estate – construction		39		39		3		102		1
Commercial real estate – other		363		363		54		372		11
Residential – prime		375		395		60		214		4
Consumer – other		205		205		120		211		2
Subtotal:		1,552		1,572		405		1,720		21
Totals:
Commercial		3,554		4,464		225		4,518		26
Residential		900		920		60		1,264		18
Consumer		271		271		120		301		3
Grand total:	$	4,725	$	5,655	$	405	$	6,083	$	47

The following tables present the classes of loans by risk rating (in thousands):

	December 31, 2014
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial, financial, and agricultural		Commercial real estate –construction		Commercial real estate – other		Percentage of Total
Pass	$	456,221	$	43,320	$	440,281		96.11	%
Special mention		4,861		132		7,120		1.24	%
Substandard		5,541		58		19,771		2.60	%
Doubtful		524		-		-		0.05	%
	$	467,147	$	43,510	$	467,172		100.00	%

Consumer Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential – construction		Residential – prime		Residential – subprime		Percentage of Total
Pass	$	25,067	$	150,664	$	-		97.81	%
Special mention		-		1,184		-		0.66	%
Substandard		-		2,754		-		1.53	%
	$	25,067	$	154,602	$	-		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer - credit card		Consumer –other		Lease financing receivable		Other		Percentage of Total
Performing	$	5,995	$	112,893	$	4,857	$	2,748		99.65	%
Nonperforming		17		423		-		-		0.35	%
	$	6,012	$	113,316	$	4,857	$	2,748		100.00	%

	December 31, 2013
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Commercial, financial, and agricultural		Commercial real estate –construction		Commercial real estate – other		Percentage of Total
Pass	$	397,513	$	63,577	$	371,618		96.15	%
Special mention		2,962		49		8,781		1.36	%
Substandard		3,272		1,267		16,736		2.46	%
Doubtful		229		-		-		0.03	%
	$	403,976	$	64,893	$	397,135		100.00	%

Consumer Credit Exposure
Credit Risk Profile by Creditworthiness Category
	Residential – construction		Residential – prime		Residential – subprime		Percentage of Total
Pass	$	17,798	$	143,790	$	-		98.15	%
Special mention		-		548		-		0.33	%
Substandard		-		2,503		-		1.52	%
	$	17,798	$	146,841	$	-		100.00	%

Consumer and Commercial Credit Exposure
Credit Risk Profile Based on Payment Activity
	Consumer - credit card		Consumer –other		Lease financing receivable		Other		Percentage of Total
Performing	$	6,196	$	90,978	$	5,542	$	3,910		99.73	%
Nonperforming		10		275		-		-		0.27	%
	$	6,206	$	91,253	$	5,542	$	3,910		100.00	%

Troubled Debt Restructurings

A troubled debt restructuring (“TDR”) is a restructuring of a debt made by the Company to a debtor for economic or legal reasons related to the debtor’s financial difficulties that it would not otherwise consider. The Company grants the concession in an attempt to protect as much of its investment as possible.

Information about the Company’s TDRs is as follows (in thousands):

	December 31, 2014
	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial and agricultural	$	21	$	-	$	234	$	255
Real estate - commercial		155		-		-		155
	$	176	$	-	$	234	$	410

	December 31, 2013
	Current		Past Due Greater Than 30 Days		Nonaccrual TDRs		Total TDRs
Commercial, financial and agricultural	$	-	$	23	$	233	$	256
Real estate - commercial		156		-		-		156
	$	156	$	23	$	233	$	412

During the year ended December 31, 2014, there was one loan relationship with a pre-modification balance of $1.2 million identified as a TDR through a modification of the original loan terms. The loan was paid off during the second quarter of 2014 and, therefore, is not reflected in the balance of TDRs at December 31, 2014. During the year ended December 31, 2014, there were no defaults on any loans that were modified as TDRs during the preceding twelve months. During the year ended December 31, 2013, one loan with a pre-modification balance of $27,000 was identified as a TDR through modification of the original loan terms, and there were no defaults on any loans that were modified as TDRs during the preceding twelve months. For purposes of the determination of an allowance for loan losses on these TDRs, as an identified TDR, the Company considers a loss probable on the loan and, as a result is reviewed for specific impairment in accordance with the Company’s allowance for loan loss methodology. If it is determined losses are probable on such TDRs, either because of delinquency or other credit quality indicator, the Company establishes specific reserves for these loans. As of December 31, 2014, there were no commitments to lend additional funds to debtors owing sums to the Company whose terms have been modified in TDRs.

In the opinion of management, all transactions entered into between the Company and such related parties have been and are made in the ordinary course of business, on substantially the same terms and conditions, including interest rates and collateral, as similar transactions with unaffiliated persons and do not involve more than the normal risk of collection.

An analysis of the 2014 activity with respect to these related party loans and commitments to extend credit is as follows (in thousands):

Balance, beginning of year	$	3,114
New loans		407
Repayments and adjustments		(544	)
Balance, end of year	$	2,977