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LOANS (Tables)
 6 Months Ended
Jun. 30, 2014
LOANS [Abstract]  
Major Classifications of Loans
Major classifications of loans at June 30, 2014 and December 31, 2013 are summarized as follows:

   
2014
  
2013
 
Residential real estate
 $279,116  $216,081 
Multifamily real estate
  32,424   38,456 
Commercial real estate:
        
Owner occupied
  103,070   90,539 
Non owner occupied
  218,113   208,756 
Commercial and industrial
  79,978   85,301 
Consumer
  35,090   25,113 
All other
  85,050   76,524 
   $832,841  $740,770 
 
Activity in the Allowance for Loan Losses by Portfolio Segment
Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2014 was as follows:

Loan Class
 
Balance
Dec 31, 2013
  
Provision for loan losses
  
Loans
charged-off
  
Recoveries
  
Balance
June 30, 2014
 
                 
Residential real estate
 $2,694  $(391) $171  $8  $2,140 
Multifamily real estate
  417   (106)  -   -   311 
Commercial real estate:
                    
Owner occupied
  1,407   39   82   -   1,364 
Non owner occupied
  2,037   556   323   -   2,270 
Commercial and industrial
  2,184   (616)  84   5   1,489 
Consumer
  297   (33)  59   27   232 
All other
  1,991   162   204   122   2,071 
Total
 $11,027  $(389) $923  $162  $9,877 

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2013 was as follows:

Loan Class
 
Balance
Dec 31, 2012
  
Provision for loan losses
  
Loans
charged-off
  
Recoveries
  
Balance
June 30, 2013
 
                 
Residential real estate
 $2,163  $358  $156  $6  $2,371 
Multifamily real estate
  331   98   -   -   429 
Commercial real estate:
                    
Owner occupied
  1,117   (255)  67   299   1,094 
Non owner occupied
  1,888   80   -   -   1,968 
Commercial and industrial
  3,046   987   12   52   4,073 
Consumer
  244   27   63   25   233 
All other
  2,699   (795)  94   220   2,030 
Total
 $11,488  $500  $392  $602  $12,198 
 
Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2014 was as follows:

Loan Class
 
Balance
March 31, 2014
  
Provision for loan losses
  
Loans
charged-off
  
Recoveries
  
Balance
June 30, 2014
 
                 
Residential real estate
 $2,250  $36  $152  $6  $2,140 
Multifamily real estate
  297   14   -   -   311 
Commercial real estate:
                    
Owner occupied
  1,477   (32)  81   -   1,364 
Non owner occupied
  2,385   (92)  23   -   2,270 
Commercial and industrial
  1,527   (20)  21   3   1,489 
Consumer
  220   37   33   8   232 
All other
  2,188   (22)  167   72   2,071 
Total
 $10,344  $(79) $477  $89  $9,877 

Activity in the allowance for loan losses by portfolio segment for the three months ending June 30, 2013 was as follows:

Loan Class
 
Balance 
March 31, 2013
  
Provision for loan losses
  
Loans
charged-off
  
Recoveries
  
Balance
June 30, 2013
 
                 
Residential real estate
 $2,066  $386  $85  $4  $2,371 
Multifamily real estate
  347   82   -   -   429 
Commercial real estate:
                    
Owner occupied
  1,191   (97)  -   -   1,094 
Non owner occupied
  1,967   1   -   -   1,968 
Commercial and industrial
  4,096   (23)  2   2   4,073 
Consumer
  174   66   16   9   233 
All other
  2,501   (485)  38   52   2,030 
Total
 $12,342  $(70) $141  $67  $12,198 
 
Purchased Loans
The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2014 and December 31, 2013.

   
2014
  
2013
 
Residential real estate
 $174  $183 
Multifamily real estate
  534   1,229 
Commercial real estate
        
Owner occupied
  246   250 
Non owner occupied
  5,752   6,782 
Commercial and industrial
  486   496 
All other
  4,665   4,623 
Total carrying amount
 $11,857  $13,563 
          
Carrying amount, net of allowance
 $11,225  $12,931 
Purchase Loans Accretable Yield, or Income Expected to be Collected
The accretable yield, or income expected to be collected, on the purchased loans above is as follows at June 30, 2014 and June 30, 2013.

   
2014
  
2013
 
Balance at January 1
 $217  $635 
New loans purchased
  -   - 
Accretion of income
  (6)  (18)
Reclassifications from non-accretable difference
  -   - 
Disposals
  -   - 
Balance at June 30
 $211  $617 
 
Past Due and Non-performing Loans
The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2014 and December 31 2013.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2014
 
Principal Owed on Non-accrual Loans
  
Recorded Investment in Non-accrual Loans
  
Loans Past Due Over 90 Days, still accruing
 
           
Residential  real estate
 $2,435  $2,150  $1,774 
Multifamily real estate
  1,941   1,197   1,366 
Commercial real estate
            
Owner occupied
  2,257   2,003   1,261 
Non owner occupied
  2,028   1,892   308 
Commercial and industrial
  2,907   1,561   101 
Consumer
  235   215   33 
All other
  12,144   4,710   210 
Total
 $23,947  $13,728  $5,053 
              

December 31, 2013
 
Principal Owed on Non-accrual Loans
  
Recorded Investment in Non-accrual Loans
  
Loans Past Due Over 90 Days, still accruing
 
           
Residential  real estate
 $2,021  $1,725  $1,737 
Multifamily real estate
  3,282   1,889   1,369 
Commercial real estate
            
Owner occupied
  1,364   1,147   1,387 
Non owner occupied
  2,683   1,973   3,739 
Commercial and industrial
  6,838   4,961   84 
Consumer
  167   148   16 
All other
  12,212   4,798   146 
Total
 $28,567  $16,641  $8,478 
              
Aging of Recorded Investment in Past Due Loans by Loan Class
The following table presents the aging of the recorded investment in past due loans as of June 30, 2014 by class of loans:
Loan Class
 
Total Loans
  
30-89 Days
Past Due
  
Greater than 90 days past due
  
Total Past Due
  
Loans Not Past Due
 
                 
Residential real estate
 $279,116  $6,874  $2,781  $9,655  $269,461 
Multifamily real estate
  32,424   907   2,029   2,936   29,488 
Commercial real estate:
                    
Owner occupied
  103,070   790   2,484   3,274   99,796 
Non owner occupied
  218,113   9,097   1,993   11,090   207,023 
Commercial and industrial
  79,978   2,553   1,404   3,957   76,021 
Consumer
  35,090   691   114   805   34,285 
All other
  85,050   761   4,875   5,636   79,414 
Total
 $832,841  $21,673  $15,680  $37,353  $795,488 

The following table presents the aging of the recorded investment in past due loans as of December 31, 2013 by class of loans:
Loan Class
 
Total Loans
  
30-89 Days
Past Due
  
Greater than 90 days past due
  
Total Past Due
  
Loans Not Past Due
 
                 
Residential real estate
 $216,081  $4,770  $2,431  $7,201  $208,880 
Multifamily real estate
  38,456   367   2,688   3,055   35,401 
Commercial real estate:
                    
Owner occupied
  90,539   516   2,073   2,589   87,950 
Non owner occupied
  208,756   278   5,478   5,756   203,000 
Commercial and industrial
  85,301   1,433   1,438   2,871   82,430 
Consumer
  25,113   421   82   503   24,610 
All other
  76,524   2,510   4,881   7,391   69,133 
Total
 $740,770  $10,295  $19,071  $29,366  $711,404 
 
Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment Based on Impairment Method
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2014:
 
   
Allowance for Loan Losses
  
Loan Balances
 
Loan Class
 
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Acquired with Deteriorated Credit Quality
  
Total
  
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Acquired with Deteriorated Credit Quality
  
Total
 
                          
Residential real estate
 $32  $2,108  $-  $2,140  $2,081  $276,861  $174  $279,116 
Multifamily real estate
  28   283   -   311   1,806   30,084   534   32,424 
Commercial real estate:
                                
Owner occupied
  129   1,235   -   1,364   1,830   100,994   246   103,070 
Non-owner occupied
  -   2,270   -   2,270   207   212,154   5,752   218,113 
Commercial and industrial
  338   1,019   132   1,489   868   78,624   486   79,978 
Consumer
  -   232   -   232   -   35,090   -   35,090 
All other
  -   1,571   500   2,071   2,595   77,790   4,665   85,050 
Total
 $527  $8,718  $632  $9,877  $9,387  $811,597  $11,857  $832,841 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2013:
 
   
Allowance for Loan Losses
  
Loan Balances
 
Loan Class
 
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Acquired with Deteriorated Credit Quality
  
Total
  
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Acquired with Deteriorated Credit Quality
  
Total
 
                          
Residential real estate
 $138  $2,556  $-  $2,694  $2,787  $213,111  $183  $216,081 
Multifamily real estate
  -   417   -   417   1,822   35,405   1,229   38,456 
Commercial real estate:
                                
Owner occupied
  170   1,237   -   1,407   2,386   87,903   250   90,539 
Non-owner occupied
  362   1,675   -   2,037   1,024   200,950   6,782   208,756 
Commercial and industrial
  1,088   964   132   2,184   4,270   80,535   496   85,301 
Consumer
  -   297   -   297   -   25,113   -   25,113 
All other
  102   1,389   500   1,991   3,279   68,622   4,623   76,524 
Total
 $1,860  $8,535  $632  $11,027  $15,568  $711,639  $13,563  $740,770 
 
Loans Individually Evaluated for Impairment by Class of Loans
The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2014.  The table includes $5,869,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

   
Unpaid Principal Balance
  
Recorded Investment
  
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
         
Residential real estate
 $1,550  $1,384  $- 
Multifamily real estate
  2,725   1,980   - 
Commercial real estate
            
Owner occupied
  1,651   1,468   - 
Non owner occupied
  275   207   - 
Commercial and industrial
  792   44   - 
All other
  2,631   2,595   - 
    9,624   7,678   - 
With an allowance recorded:
            
Residential real estate
 $882  $871  $32 
Multifamily real estate
  365   360   28 
Commercial real estate
            
Owner occupied
  475   475   129 
Commercial and industrial
  1,616   1,207   470 
All other
  12,063   4,665   500 
    15,401   7,578   1,159 
Total
 $25,025  $15,256  $1,159 
              
 
The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2013.  The table includes $7,483,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

   
Unpaid Principal Balance
  
Recorded Investment
  
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
         
Residential  real estate
 $1,513  $1,314  $- 
Multifamily real estate
  4,449   3,051   - 
Commercial real estate
            
Owner occupied
  2,601   1,986   - 
Non owner occupied
  1,861   1,184   - 
Commercial and industrial
  809   49   - 
All other
  3,185   3,167   - 
    14,418   10,751   - 
With an allowance recorded:
            
Residential  real estate
 $1,668  $1,656  $138 
Commercial real estate
            
Owner occupied
  515   515   170 
Non owner occupied
  810   790   362 
Commercial and industrial
  5,543   4,604   1,220 
All other
  12,132   4,735   602 
    20,668   12,300   2,492 
Total
 $35,086  $23,051  $2,492 
 
The Average Balance of Loans Individually Evaluated for Impairment and Interest Income Recognized
The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2014 and June 30, 2013.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Six months ended June 30, 2014
  
Six months ended June 30, 2013
 
Loan Class
 
Average Recorded Investment
  
Interest Income Recognized
  
Cash Basis Interest Recognized
  
Average Recorded Investment
  
Interest Income Recognized
  
Cash Basis Interest Recognized
 
Residential real estate
 $2,536  $61  $61  $4,486  $98  $97 
Multifamily real estate
  2,586   727   727   4,006   796   796 
Commercial real estate:
                        
Owner occupied
  2,155   29   21   2,655   88   71 
Non-owner occupied
  800   627   627   2,801   17   17 
Commercial and industrial
  2,395   542   542   10,082   40   40 
All other
  7,603   81   81   9,393   161   161 
Total
 $18,075  $2,067  $2,059   33,423   1,200   1,182 

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2014 and June 30, 2013.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Three months ended June 30, 2014
  
Three months ended June 30, 2013
 
Loan Class
 
Average Recorded Investment
  
Interest Income Recognized
  
Cash Basis Interest Recognized
  
Average Recorded Investment
  
Interest Income Recognized
  
Cash Basis Interest Recognized
 
                    
Residential real estate
 $2,318  $27  $27  $4,323  $48  $47 
Multifamily real estate
  2,353   19   19   3,743   766   766 
Commercial real estate:
                        
Owner occupied
  1,983   14   10   2,592   49   42 
Non-owner occupied
  214   -   -   2,349   16   16 
Commercial and industrial
  1,265   9   9   9,468   36   36 
All other
  7,453   38   38   9,706   79   79 
Total
 $15,586  $107  $103  $32,181  $994  $986 
 
Troubled Debt Restructurings
The following table presents TDR’s as of June 30, 2014 and December 31, 2013:

June 30, 2014
 
TDR’s on Non-accrual
  
Other TDR’s
  
Total TDR’s
 
           
Residential  real estate
 $20  $199  $219 
Commercial real estate
            
Non owner occupied
  -   495   495 
Commercial and industrial
  -   796   796 
Consumer
  -   4   4 
All other
  -   1,838   1,838 
Total
 $20  $3,332  $3,352 
              

December 31, 2013
 
TDR’s on Non-accrual
  
Other TDR’s
  
Total TDR’s
 
           
Residential  real estate
 $23  $296  $319 
Commercial real estate
            
Non owner occupied
  -   506   506 
Commercial and industrial
  -   831   831 
Consumer
  -   5   5 
All other
  -   2,017   2,017 
Total
 $23  $3,655  $3,678 
              
Troubled Debt Restructuring During the Period
The following table presents TDR’s that occurred during the six months ended June 30, 2014 and June 30, 2013:

   
Six months ended June 30, 2014
  
Six months ended June 30, 2013
 
Loan Class
 
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
 
                    
All other
  -   -   -   1  $16  $16 
Total
  -  $-  $-   1  $16  $16 
Risk Category of Loans by Class of Loans
As of June 30, 2014 and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
 
Pass
  
Special Mention
  
Substandard
  
Doubtful
  
Total Loans
 
                 
Residential real estate
 $263,898  $7,661  $7,537  $20  $279,116 
Multifamily real estate
  29,177   907   2,340   -   32,424 
Commercial real estate:
                    
Owner occupied
  91,650   7,371   4,049   -   103,070 
Non-owner occupied
  207,435   8,300   2,378   -   218,113 
Commercial and industrial
  76,162   2,138   1,646   32   79,978 
Consumer
  34,645   278   167   -   35,090 
All other
  71,367   5,789   7,894   -   85,050 
Total
 $744,334  $32,444  $26,011  $52  $832,841 

The table above includes approximately $83,930,000 of loans risk rated as “pass”, $3,129,000 of loans risk rated as “special mention”, $2,771,000 of loans risk rated as “substandard” and no loans risk rated as doubtful that were acquired via the purchase of the Bank of Gassaway on April 4, 2014.  See Note 9 below for additional details on purchase of the Bank of Gassaway.

As of December 31, 2013, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
 
Pass
  
Special Mention
  
Substandard
  
Doubtful
  
Total Loans
 
                 
Residential real estate
 $202,789  $6,204  $7,065  $23  $216,081 
Multifamily real estate
  34,487   918   3,051   -   38,456 
Commercial real estate:
                    
Owner occupied
  79,694   7,431   3,348   66   90,539 
Non-owner occupied
  196,338   8,569   3,849   -   208,756 
Commercial and industrial
  78,205   2,269   4,753   74   85,301 
Consumer
  24,772   204   137   -   25,113 
All other
  62,180   5,947   8,285   112   76,524 
                      
Total
 $678,465  $31,542  $30,488  $275  $740,770