Loans

The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on our risk classification criteria:



(In Thousands)	Commercial		Real estate construction one-to-four family		Real estate construction other		Real estate term owner occupied		Real estate term non-owner occupied		Real estate term other		Consumer secured by 1st deeds of trust		Consumer other		Total
March 31, 2014
AQR Pass		$287,224		$27,775		$35,083		$73,602		$255,703		$34,663		$15,215		$18,065		$747,330
AQR Special Mention	5,803		353		812		5,993		3,129		286		635		165		17,176
AQR Substandard	973		—		—		865		47		154		239		92		2,370
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$294,000		$28,128		$35,895		$80,460		$258,879		$35,103		$16,089		$18,322		$766,876
Less: Unearned origination fees, net of origination costs																	(3,811		)
Total loans																		$763,065
December 31, 2013
AQR Pass		$293,803		$28,227		$31,633		$84,191		$251,384		$28,684		$15,877		$17,694		$751,493
AQR Special Mention	6,022		1,934		966		6,235		2,620		—		397		196		18,370
AQR Substandard	513		—		—		672		1,320		1,292		209		168		4,174
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$300,338		$30,161		$32,599		$91,098		$255,324		$29,976		$16,483		$18,058		$774,037
Less: Unearned origination fees, net of origination costs																	(4,021		)
Total loans																		$770,016

Loans are carried at their principal amount outstanding, net of charge-offs, unamortized fees and direct loan origination costs. Loan balances are charged-off to the allowance for loan losses ("Allowance") when management believes that collection of principal is unlikely. Interest income on loans is accrued and recognized on the principal amount outstanding except for loans in a nonaccrual status. All classes of loans are placed on nonaccrual and considered impaired when management believes doubt exists as to the collectability of the interest or principal. Cash payments received on nonaccrual loans are directly applied to the principal balance. Generally, a loan may be returned to accrual status when the delinquent principal and interest is brought current in accordance with the terms of the loan agreement. Additionally, certain ongoing performance criteria, which generally includes a performance period of six months, must be met in order for a loan to be returned to accrual status. Loans are reported as past due when installment payments, interest payments, or maturity payments are past due based on contractual terms.

Nonaccrual loans totaled $999,000 and $1.8 million at March 31, 2014 and December 31, 2013, respectively. Nonaccrual loans at the periods indicated, by segment are presented below:



(In Thousands)	March 31, 2014		December 31, 2013
Commercial		$653		$222
Real estate construction one-to-four family	—		—
Real estate construction other	—		—
Real estate term owner occupied	—		—
Real estate term non-owner occupied	47		151
Real estate term other	—		1,136
Consumer secured by 1st deeds of trust	217		187
Consumer other	82		119
Total		$999		$1,815

Past due loans and nonaccrual loans at the periods indicated are presented below by loan class:



(In Thousands)	30-59 Days Past Due Still Accruing		60-89 Days Past Due Still Accruing		Greater Than 90 Days Still Accruing		Nonaccrual		Total Past Due		Current		Total
March 31, 2014
AQR Pass		$725		$—		$—		$—		$725		$746,605		$747,330
AQR Special Mention	577		—		—		—		577		16,599		17,176
AQR Substandard	—		—		—		999		999		1,371		2,370
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$1,302		$—		$—		$999		$2,301		$764,575		$766,876
Less: Unearned origination fees, net of origination costs													(3,811		)
Total														$763,065
December 31, 2013
AQR Pass		$672		$—		$—		$127		$799		$750,694		$751,493
AQR Special Mention	385		—		—		—		385		17,985		18,370
AQR Substandard	—		—		—		1,688		1,688		2,486		4,174
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$1,057		$—		$—		$1,815		$2,872		$771,165		$774,037
Less: Unearned origination fees, net of origination costs													(4,021		)
Total														$770,016

The Company considers a loan to be impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, except that if the loan is collateral dependent, the impairment is measured by using the fair value of the loan’s collateral. Nonperforming loans greater than $50,000 are individually evaluated for impairment based upon the borrower’s overall financial condition, resources, and payment record, and the prospects for support from any financially responsible guarantors.

At March 31, 2014 and December 31, 2013, the recorded investment in loans that are considered to be impaired was $6.0 million and $8.8 million, respectively. The following table presents information about impaired loans by class as of the periods indicated:



(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
March 31, 2014
With no related allowance recorded
Commercial - AQR special mention		$125		$125		$—
Commercial - AQR substandard	390		535		—
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR special mention	812		812		—
Real estate term owner occupied- AQR pass	509		509		—
Real estate term owner occupied- AQR special mention	280		280		—
Real estate term owner occupied- AQR substandard	865		865		—
Real estate term non-owner occupied- AQR pass	615		615		—
Real estate term non-owner occupied- AQR special mention	979		979		—
Real estate term other - AQR substandard	154		154		—
Consumer secured by 1st deeds of trust - AQR pass	86		86		—
Consumer other - AQR substandard	56		56		—
Subtotal		$5,224		$5,369		$—



With an allowance recorded
Commercial - AQR special mention		$184		$184		$2
Commercial - AQR substandard	440		760		275
Consumer secured by 1st deeds of trust - AQR substandard	183		183		5
Subtotal		$807		$1,127		$282



Commercial - AQR special mention		$309		$309		$2
Commercial - AQR substandard	830		1,295		275
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR special mention	812		812		—
Real estate term owner-occupied - AQR pass	509		509		—
Real estate term owner-occupied - AQR special mention	280		280		—
Real estate term owner-occupied - AQR substandard	865		865		—
Real estate term non-owner occupied - AQR pass	615		615		—
Real estate term non-owner occupied - AQR special mention	979		979		—
Real estate term other - AQR substandard	154		154		—
Consumer secured by 1st deeds of trust - AQR pass	86		86		—
Consumer secured by 1st deeds of trust - AQR substandard	183		183		5
Consumer other - AQR substandard	56		56		—
Total		$6,031		$6,496		$282



(In Thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2013
With no related allowance recorded
Commercial - AQR pass		$181		$181		$—
Commercial - AQR special mention	314		314		—
Commercial - AQR substandard	343		488		—
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR pass	1,686		1,686		—
Real estate construction other - AQR special mention	834		834		—
Real estate term owner occupied - AQR pass	512		512		—
Real estate term owner occupied - AQR special mention	484		484		—
Real estate term owner occupied - AQR substandard	672		672		—
Real estate term non-owner occupied - AQR special mention	786		786		—
Real estate term non-owner occupied - AQR substandard	955		955		—
Real estate term other - AQR substandard	1,292		1,571		—
Consumer secured by 1st deeds of trust - AQR pass	88		88		—
Consumer other - AQR substandard	65		65		—
Subtotal		$8,565		$8,989		$—



With an allowance recorded
Consumer secured by 1st deeds of trust - AQR substandard	$186	$186	$11
Subtotal	$186	$186	$11



Commercial - AQR pass		$181		$181		$—
Commercial - AQR special mention	314		314		—
Commercial - AQR substandard	343		488		—
Real estate construction one-to-four family - AQR special mention	353		353		—
Real estate construction other - AQR pass	1,686		1,686		—
Real estate construction other - AQR special mention	834		834		—
Real estate term owner occupied - AQR pass	512		512		—
Real estate term owner occupied - AQR special mention	484		484		—
Real estate term owner occupied - AQR substandard	672		672		—
Real estate term non-owner occupied - AQR special mention	786		786		—
Real estate term non-owner occupied - AQR substandard	955		955		—
Real estate term other - AQR substandard	1,292		1,571		—
Consumer secured by 1st deeds of trust - AQR pass	88		88		—
Consumer secured by 1st deeds of trust - AQR substandard	186		186		11
Consumer other - AQR substandard	65		65		—
Total		$8,751		$9,175		$11

The unpaid principal balance included in the table above represents the recorded investment at the dates indicated, plus amounts charged off for book purposes.

The following table summarizes our average recorded investment and interest income recognized on impaired loans for the three month periods ended March 31, 2014 and 2013, respectively:



Three Months Ended March 31,	2014						2013
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR special mention		$132			$1			$486			$11
Commercial - AQR substandard	393			4			962			14
Real estate construction one-to-four family - AQR special mention	353			6			470			—
Real estate construction other - AQR pass	—			—			2,623			—
Real estate construction other - AQR special mention	823			30			—			—
Real estate term owner occupied- AQR pass	511			11			—			—
Real estate term owner occupied- AQR special mention	281			6			1,082			20
Real estate term owner occupied- AQR substandard	869			13			—			—
Real estate term owner occupied- AQR loss	—			—			406			5
Real estate term non-owner occupied- AQR pass	618			19			—			—
Real estate term non-owner occupied- AQR special mention	979			15			550			9
Real estate term non-owner occupied- AQR substandard	—			—			1,691			33
Real estate term other - AQR substandard	154			3			1,607			7
Consumer secured by 1st deeds of trust - AQR pass	87			1			92			1
Consumer secured by 1st deeds of trust - AQR special mention	—			—			86			1
Consumer other - AQR substandard	61			—			232			1
Subtotal		$5,261			$109			$10,287			$102



With an allowance recorded
Commercial - AQR special mention		$185		$6		$—		$—
Commercial - AQR substandard	600		—		315		—
Commercial - AQR loss	—		—		187		—
Real estate construction one-to-four family - AQR substandard	—		—		782		—
Consumer secured by 1st deeds of trust - AQR substandard	185		—		199		—
Subtotal		$970		$6		$1,483		$—



Total
Commercial - AQR special mention		$317		$7		$486		$11
Commercial - AQR substandard	993		4		1,277		14
Commercial - AQR loss	—		—		187		—
Real estate construction one-to-four family - AQR special mention	353		6		470		—
Real estate construction one-to-four family - AQR substandard	—		—		782		—
Real estate construction other - AQR pass	—		—		2,623		—
Real estate construction other - AQR special mention	823		30		—		—
Real estate term owner-occupied - AQR pass	511		11		—		—
Real estate term owner-occupied - AQR special mention	281		6		1,082		20
Real estate term owner-occupied - AQR substandard	869		13		—		—
Real estate term owner-occupied - AQR loss	—		—		406		5
Real estate term non-owner occupied - AQR pass	618		19		—		—
Real estate term non-owner occupied - AQR special mention	979		15		550		9
Real estate term non-owner occupied - AQR substandard	—		—		1,691		33
Real estate term other - AQR substandard	154		3		1,607		7
Consumer secured by 1st deeds of trust - AQR pass	87		1		92		1
Consumer secured by 1st deeds of trust - AQR special mention	—		—		86		1
Consumer secured by 1st deeds of trust - AQR substandard	185		—		199		—
Consumer other - AQR substandard	61		—		232		1
Total Impaired Loans		$6,231		$115		$11,770		$102

Loans classified as troubled debt restructurings (“TDR”) totaled $4.8 million and $7.9 million at March 31, 2014 and December 31, 2013, respectively. A TDR is a loan to a borrower that is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that the Company is granting the borrower a concession that it would not grant otherwise. The Company has granted a variety of concessions to borrowers in the form of loan modifications. The modifications granted can generally be described in the following categories:

Rate Modification: A modification in which the interest rate is changed.

Term Modification: A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Payment Modification: A modification in which the dollar amount of the payment is changed, or in which a loan is converted to interest only payments for a period of time is included in this category.

Combination Modification: Any other type of modification, including the use of multiple categories above.

AQR pass graded loans included above in the impaired loan data are loans classified as TDRs. By definition, TDRs are considered impaired loans. All of the Company's TDRs are included in impaired loans.

The Company did not have any newly restructured loans during the three months ended March 31, 2014.

The Company had no commitments to extend additional credit to borrowers whose terms have been modified in TDRs. There were no charge offs in the three months ended March 31, 2014 on loans that were later classified as TDRs.

All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the Allowance. There was one TDR with a recorded investment of $184,000 and a specific impairment amount totaling $2,000 at March 31, 2014 and no TDRs with specific impairment at December 31, 2013.

The loans in the following table are past due, and they are nonaccrual loans. The following table presents TDRs that occurred during the last twelve months that subsequently defaulted, for the periods ending March 31, 2014 and 2013, respectively:



	March 31, 2014			March 31, 2013
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
(In Thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Troubled Debt Restructurings that Subsequently Defaulted:
Real estate construction one-to-four family - AQR special mention	1		$353	—		$—
Total	1		$353	—		$—

At March 31, 2014, the Company had one TDR that subsequently defaulted within the twelve month period ending March 31, 2014. At March 31, 2014 this restructured loan that defaulted is not past due and is accruing interest. At December 31, 2013, the Company had no TDRs that subsequently defaulted within the twelve month period ending December 31, 2013.