	December 31, 2013			December 31, 2012

Construction/Land	$	24,307		$	26,506
One-to-four family residential		137,298			137,402
Multi-family residential		16,408			19,988
Nonresidential and agricultural land		118,946			106,433
Commercial		24,741			19,549
Consumer and other		4,326			4,906
		326,026			314,784
Unamortized deferred loan costs		487			484
Undisbursed loans in process		(5,775	)		(6,186	)
Allowance for loan losses		(4,510	)		(3,564	)
Total loans	$	316,228		$	305,518

The Construction, Land and Land Development segments include loans for raw land, loans to develop raw land preparatory to building construction, and construction loans of all types. Construction and development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction and development loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest-rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Land loans are secured by raw land held as an investment, for future development, or as collateral for other use. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. These loans are underwritten based on the underlying purpose of the loan with repayment primarily from the sale or use of the underlying collateral.

With respect to residential loans that are secured by one-to-four family residences and are usually owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. This segment also includes residential loans secured by non-owner-occupied one-to-four family residences. Management tracks the level of owner-occupied residential loans versus non-owner-occupied residential loans as a portion of our recent loss history relates to these loans. Home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Nonresidential and multi-family residential real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Nonresidential and multi-family residential real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s nonresidential and multi-family residential real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Company avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied residential real estate loans versus non-owner-occupied residential loans.

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

The following tables present the activity in the allowance for loan losses for the years ended December 31, 2013 and December 31, 2012, and information regarding the breakdown of the balance in the allowance for loan losses and the recorded investment in loans, both presented by portfolio class and impairment method, as of December 31, 2013 and December 31, 2012.

	Construction/Land			1-4 Family			Multi-Family		Nonresidential			Commercial			Consumer			Total
Year Ended December 31, 2013
Balances at beginning of period:	$	648		$	1,423		$	281	$	1,078		$	133		$	1		$	3,564
Provision for losses		109			565			123		(180	)		181			134			932
Loans charged off		(99	)		(245	)		-		(182	)		(140	)		(177	)		(843	)
Recoveries on loans		18			6					754			15			64			857
Balances at end of period	$	676		$	1,749		$	404	$	1,470		$	189		$	22		$	4,510

Year Ended December 31, 2012
Balances at beginning of period:	$	1,016		$	1,986		$	65	$	822			70		$	44		$	4,003
Provision for losses		(31	)		493			216		619			63			22			1,382
Loans charged off		(341	)		(1,136	)		-		(366	)		-			(89	)		(1,932	)
Recoveries on loans		4			80			-		3			-			24			111
Balances at end of period	$	648		$	1,423		$	281	$	1,078		$	133		$	1		$	3,564

	Construction/ Land		1-4 Family		Multi-Family		Nonresidential		Commercial		Consumer		Total
As of December 31, 2013 Allowance for losses:
Individually evaluated for impairment	$	195	$	552	$	196	$	97	$	68	$	-	$	1,108
Collectively evaluated for impairment		481		1,101		110		1,305		120		21		3,138
Loans acquired with a deteriorated credit quality		-		96		98		68		1		1		264
Balances at end of period	$	676	$	1,749	$	404	$	1,470	$	189	$	22	$	4,510
Loans:
Individually evaluated for impairment	$	4,104	$	5,917	$	1,074	$	4,096	$	372	$	-	$	15,563
Collectively evaluated for impairment		19,866		130,100		14,834		114,145		24,354		4,307		307,606
Loans acquired with a deteriorated credit quality		337		1,281		500		705		15		19		2,857
Balances at end of period	$	24,307	$	137,298	$	16,408	$	118,946	$	24,741	$	4,326	$	326,026

As of December 31, 2012 Allowance for losses:
Individually evaluated for impairment	$	195	$	310	$	196	$	-	$	93	$	-	$	794
Collectively evaluated for impairment		453		1,113		85		1,078		40		1		2,770
Loans acquired with a deteriorated credit quality		-		-		-		-		-		-		-
Balances at end of period	$	648	$	1,423	$	281	$	1,078	$	133	$	1	$	3,564
Loans:
Individually evaluated for impairment	$	4,752	$	4,517	$	1,104	$	3,278	$	565	$	12	$	14,228
Collectively evaluated for impairment		21,453		131,465		18,433		102,292		18,946		4,864		297,453
Loans acquired with a deteriorated credit quality		301		1,420		451		863		38		30		3,103
Balances at end of period	$	26,506	$	137,402	$	19,988	$	106,433	$	19,549	$	4,906	$	314,784

December 31, 2013	Total Portfolio		Pass		Special Mention		Substandard		Doubtful

Construction/Land	$	24,307	$	20,023	$	33	$	4,251	$	-
1-4 family residential		137,298		124,765		4,144		7,691		698
Multi-family residential		16,408		14,798		44		1,566		-
Nonresidential		118,946		110,622		2,686		5,066		572
Commercial		24,741		24,341		8		316		76
Consumer		4,326		4,301		-		25		-
Total loans	$	326,026	$	298,850	$	6,915	$	18,915	$	1,346

December 31, 2012	Total Portfolio		Pass		Special Mention		Substandard		Doubtful

Construction/Land	$	26,506	$	20,952	$	314	$	4,909	$	331
1-4 family residential		137,402		123,705		6,597		5,885		1,215
Multi-family residential		19,988		17,546		186		2,256		-
Nonresidential		106,433		97,307		4,931		2,793		1,402
Commercial		19,549		18,869		15		414		251
Consumer		4,906		4,863		14		29		-
Total loans	$	314,784	$	283,242	$	12,057	$	16,286	$	3,199

The Company categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually on an ongoing basis by classifying the loans as to credit risk, assigning grade classifications. Loan grade classifications of special mention, substandard, doubtful, or loss are reported to the Company’s board of directors monthly. The Company uses the following definitions for credit risk grade classifications:

Special Mention: These assets are currently protected, but potentially weak. They have credit deficiencies deserving a higher degree of attention by management. These assets do not presently exhibit a sufficient degree of risk to warrant adverse classification. Concerns may lie with cash flow, liquidity, leverage, collateral, or industry conditions. These are graded special mention so that the appropriate level of attention is administered to prevent a move to a “substandard” rating.

Substandard: By regulatory definition, “substandard” loans are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. These types of loans have well defined weaknesses that jeopardize the liquidation of the debt. A distinct possibility exists that the institution will sustain some loss if the deficiencies are not corrected. These loans are considered workout credits. They exhibit at least one of the following characteristics.

Doubtful: These loans exhibit the same characteristics as those rated “substandard,” plus weaknesses that make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. This would include inadequately secured loans that are being liquidated, and inadequately protected loans for which the likelihood of liquidation is high. This classification is temporary. Pending events are expected to materially reduce the amount of the loss. This means that the “doubtful” classification will result in either a partial or complete loss on the loan (write-down or specific reserve), with reclassification of the asset as “substandard,” or removal of the asset from the classified list, as in foreclosure or full loss.

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
Construction/Land	$	207	$	-	$	71	$	278	$	23,692	$	337	$	24,307
1-4 family residential		458		671		2,322		3,451		132,566		1,281		137,298
Multi-family residential		-		-		-		-		15,908		500		16,408
Nonresidential		267		398		940		1,605		116,636		705		118,946
Commercial		66		-		96		162		24,564		15		24,741
Consumer		104		7		7		118		4,189		19		4,326
	$	1,102	$	1,076	$	3,436	$	5,614	$	317,555	$	2,857	$	326,026

December 31, 2012	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
Construction/Land	$	63	$	-	$	556	$	619	$	25,586	$	301	$	26,506
1-4 family residential		1,347		768		1,408		3,523		132,459		1,420		137,402
Multi-family residential		-		-		-		-		19,537		451		19,988
Nonresidential		276		-		753		1,029		104,541		863		106,433
Commercial		100		-		251		351		19,160		38		19,549
Consumer		36		-		2		38		4,838		30		4,906
	$	1,822	$	768	$	2,970	$	5,560	$	306,121	$	3,103	$	314,784

	2013			2012

Construction/Land	$	3,864		$	4,798
One-to-four family residential		3,833			2,687
Multi-family residential		1,073			1,104
Nonresidential and agricultural land		2,377			1,678
Commercial		362			567
Consumer and other		5			16
Total nonaccrual loans	$	11,514		$	10,850

Nonaccrual loans as a percent of total loans receivable		3.53	%		3.45	%

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Impaired loans without a specific allowance:
Construction/Land	$	2,286	$	2,516	$	-	$	2,559	$	120
1-4 family residential		4,154		4,184		-		3,633		172
Multi-family residential		52		53		-		52		3
Nonresidential		3,194		3,672		-		3,148		179
Commercial		237		395		-		310		15
Consumer		-		-		-		11		1
	$	9,923	$	10,820	$	-	$	9,713	$	490

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Impaired loans with a specific allowance:
Construction/Land	$	1,818	$	1,831	$	195	$	1,863	$	18
1-4 family residential		1,763		1,784		552		1,490		31
Multi-family residential		1,022		1,038		196		1,031		21
Nonresidential		902		902		97		769		24
Commercial		135		143		68		135		14
Consumer		-		-		-		-		-
	$	5,640	$	5,698	$	1,108	$	5,288	$	108

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Total Impaired Loans:
Construction/Land	$	4,104	$	4,347	$	195	$	4,422	$	138
1-4 family residential		5,917		5,968		552		5,123		203
Multi-family residential		1,074		1,091		196		1,083		24
Nonresidential		4,096		4,574		97		3,917		203
Commercial		372		538		68		445		29
Consumer		-		-		-		11		1
	$	15,563	$	16,518	$	1,108	$	15,001	$	598

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Impaired loans without a specific allowance:
Construction/Land	$	2,870	$	3,379	$	-	$	2,756	$	2
1-4 family residential		3,562		3,612		-		5,003		157
Multi-family residential		53		54		-		41		2
Nonresidential		3,278		4,439		-		3,692		70
Commercial		386		418		-		423		17
Consumer		12		12		-		14		1
	$	10,161	$	11,914	$	-	$	11,929	$	249

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Impaired loans with a specific allowance:
Construction/Land	$	1,882	$	1,882	$	195		1,903	$	-
1-4 family residential		955		957		310		950		10
Multi-family residential		1,051		1,061		196		804		4
Nonresidential		-		-		-		-		-
Commercial		179		186		93		92		-
Consumer		-		-		-		-		-
	$	4,067	$	4,086	$	794	$	3,749	$	14

	Recorded Investment		Unpaid Principal Balance		Specific Allowance		Average Investment		Interest Income Recognized
Total Impaired Loans:
Construction/Land	$	4,752	$	5,261	$	195	$	4,659	$	2
1-4 family residential		4,517		4,569		310		5,953		167
Multi-family residential		1,104		1,115		196		845		6
Nonresidential		3,278		4,439		-		3,692		70
Commercial		565		604		93		515		17
Consumer		12		12		-		14		1
	$	14,228	$	16,000	$	794	$	15,678	$	263

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work out an alternative payment schedule with the borrower in order to optimize collectibility of the loan. Any loans that are modified, whether through a new agreement, replacing the old, or via changes to an existing loan agreement, are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Company do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Company may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. On at least a quarterly basis, the Company reviews all TDR loans to determine if the loan meets this criterion. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due.

Loans reported as TDR as of December 31, 2013 totaled $10.4 million. TDR loans reported as nonaccrual (non-performing) loans, and included in total nonaccrual (non-performing) loans, were $6.5 million at December 31, 2013. The remaining TDR loans, totaling $3.9 million, were accruing at December 31, 2013 and reported as performing loans.

All TDRs are considered impaired by the Company for the life of the loan and reflected so in the Company’s analysis of the allowance for credit losses. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above.

At December 31, 2013, the Company had a number of loans that were modified in troubled debt restructurings and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

	At December 31, 2013				For the Year Ended December 31, 2013
	# of Loans		Total Troubled Debt Restructured		# of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance

Construction/Land		11	$	4,032		8	$	2,031	$	2,403
One-to-four family residential		12		3,628		7		758		777
Multi-family residential		1		1,022		-		-		-
Nonresidential and agricultural land		4		1,487		-		-		-
Commercial		8		266		4		55		69
Consumer		-		-		-		-		-
		36	$	10,435		19	$	2,844	$	3,249

	At December 31, 2012				For the Year Ended December 31, 2012
	# of Loans		Total Troubled Debt Restructured		# of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance

Construction/Land		5	$	4,366		4	$	2,623	$	2,647
One-to-four family residential		9		3,629		3		574		593
Multi-family residential		1		1,050		1		1,068		1,082
Nonresidential and agricultural land		5		2,210		-		-		-
Commercial		9		297		8		262		342
Consumer		-		-		-		-		-
		29	$	11,552		16	$	4,527	$	4,664

December 31, 2013	Interest Only		Term		Combination		Total Modifications

Construction/Land	$	-	$	138	$	2,265	$	2,403
One-to-four family residential		-		204		573		777
Multi-family residential		-		-		-		-
Nonresidential and agricultural land		-		-		-		-
Commercial		-		-		69		69
Consumer		-		-		-		-
	$	-	$	342	$	2,907	$	3,249

December 31, 2012	Interest Only		Term		Combination		Total Modifications

Construction/Land	$	-	$	2,647	$	-	$	2,647
One-to-four family residential		-		90		503		593
Multi-family residential		-		-		1,082		1,082
Nonresidential and agricultural land		-		-		-		-
Commercial		-		-		342		342
Consumer		-		-		-		-
	$	-	$	2,737	$	1,927	$	4,664