Loans

6 Months Ended

Jun. 30, 2014

Loans [Abstract]

Loans

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
June 30, 2014
AQR Pass		$333,734		$39,825		$49,098		$105,031		$280,143		$37,153		$32,128		$33,511		$910,623
AQR Special Mention	2,904		353		803		6,266		3,496		588		428		94		14,932
AQR Substandard	2,373		—		—		1,222		1,185		152		663		99		5,694
AQR Doubtful	—		—		—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—		—		—
Subtotal		$339,011		$40,178		$49,901		$112,519		$284,824		$37,893		$33,219		$33,704		$931,249
Less: Unearned origination fees, net of origination costs																	(4,440		)
Total loans																		$926,809
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 $3.1 million and  $1.8 million at June 30, 2014 and December 31, 2013, respectively. Nonaccrual loans at the periods indicated, by segment are presented below:

(In  Thousands)	June 30, 2014		December 31, 2013
Commercial		$934		$222
Real estate construction one-to-four family	—		—
Real estate construction other	—		—
Real estate term owner occupied	383		—
Real estate term non-owner occupied	1,194		151
Real estate term other	—		1,136
Consumer secured by 1st deeds of trust	473		187
Consumer other	96		119
Total		$3,080		$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
June 30, 2014
AQR Pass		$261		$—		$—		$—		$261		$910,362		$910,623
AQR Special Mention	488		—		—		—		488		14,444		14,932
AQR Substandard	—		—		—		3,080		3,080		2,614		5,694
AQR Doubtful	—		—		—		—		—		—		—
AQR Loss	—		—		—		—		—		—		—
Subtotal		$749		$—		$—		$3,080		$3,829		$927,420		$931,249
Less: Unearned origination fees,  net of origination costs													(4,440		)
Total														$926,809
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 June 30, 2014 and December 31, 2013, the recorded investment in loans that are considered to be impaired was $11.7 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
June 30, 2014
With no related allowance recorded
Commercial - AQR pass		$59		$59		$—
Commercial - AQR special mention	346		346		—
Commercial - AQR substandard	2,262		2,727		—
Real estate term owner occupied- AQR pass	507		507		—
Real estate term owner occupied- AQR special mention	330		330		—
Real estate term owner occupied- AQR substandard	1,183		1,183		—
Real estate term non-owner occupied- AQR pass	614		614		—
Real estate term non-owner occupied- AQR special mention	3,132		3,132		—
Real estate term non-owner occupied- AQR substandard	1,141		1,141
Real estate term other - AQR special mention	1,156		1,156		—
Real estate term other - AQR substandard	152		152		—
Consumer secured by 1st deeds of trust - AQR pass	85		85		—
Consumer secured by 1st deeds of trust - AQR substandard	293		299
Consumer other - AQR substandard	53		53		—
Subtotal		$11,313		$11,784		$—

With an allowance recorded
Consumer secured by 1st deeds of trust - AQR substandard	$349	$349	$14
Subtotal	$349	$349	$14

Commercial - AQR pass		$59		$59		$—
Commercial - AQR special mention	346		346		—
Commercial - AQR substandard	2,262		2,727		—
Real estate term owner-occupied - AQR pass	507		507		—
Real estate term owner-occupied - AQR special mention	330		330		—
Real estate term owner-occupied - AQR substandard	1,183		1,183		—
Real estate term non-owner occupied - AQR pass	614		614		—
Real estate term non-owner occupied - AQR special mention	3,132		3,132		—
Real estate term non-owner occupied - AQR substandard	1,141		1,141		—
Real estate term other - AQR special mention	1,156		1,156		—
Real estate term other - AQR substandard	152		152		—
Consumer secured by 1st deeds of trust - AQR pass	85		85		—
Consumer secured by 1st deeds of trust - AQR substandard	642		648		14
Consumer other - AQR substandard	53		53		—
Total		$11,662		$12,133		$14

(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 June 30,2014 and 2013, respectively:

Three Months Ended June 30,	2014						2013
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$63			$1			$184			$8
Commercial - AQR special mention	351			9			333			4
Commercial - AQR substandard	2,546			4			837			7
Real estate construction one-to-four family - AQR special mention	—			—			470			—
Real estate construction other - AQR pass	—			—			2,373			—
Real estate term owner occupied- AQR pass	508			15			519			29
Real estate term owner occupied- AQR special mention	363			4			942			13
Real estate term owner occupied- AQR substandard	1,414			14			286			—
Real estate term non-owner occupied- AQR pass	614			36			—			—
Real estate term non-owner occupied- AQR special mention	3,234			25			1,203			49
Real estate term non-owner occupied- AQR substandard	2,055			—			1,002			5
Real estate term other - AQR special mention	1,161			47			—			—
Real estate term other - AQR substandard	153			4			1,479			6
Consumer secured by 1st deeds of trust - AQR pass	85			—			91			1
Consumer secured by 1st deeds of trust - AQR substandard	379			—			—			—
Consumer other - AQR substandard	55			—			229			2
Subtotal		$12,981			$159			$9,948			$124

With an allowance recorded
Commercial - AQR substandard		$—		$—		$125		$—
Real estate construction one-to-four family - AQR substandard	—		—		758		—
Consumer secured by 1st deeds of trust - AQR substandard	351		—		195		—
Subtotal		$351		$—		$1,078		$—

Total
Commercial - AQR pass		$63		$1		$184		$8
Commercial - AQR special mention	351		9		333		4
Commercial - AQR substandard	2,546		4		962		7
Real estate construction one-to-four family - AQR special mention	—		—		470		—
Real estate construction one-to-four family - AQR substandard	—		—		758		—
Real estate construction other - AQR pass	—		—		2,373		—
Real estate term owner-occupied - AQR pass	508		15		519		29
Real estate term owner-occupied - AQR special mention	363		4		942		13
Real estate term owner-occupied - AQR substandard	1,414		14		286		—
Real estate term non-owner occupied - AQR pass	614		36		—		—
Real estate term non-owner occupied - AQR special mention	3,234		25		1,203		49
Real estate term non-owner occupied - AQR substandard	2,055		—		1,002		5
Real estate term other - AQR special mention	1,161		47		—		—
Real estate term other - AQR substandard	153		4		1,479		6
Consumer secured by 1st deeds of trust - AQR pass	85		—		91		1
Consumer secured by 1st deeds of trust - AQR substandard	730		—		195		—
Consumer other - AQR substandard	55		—		229		2
Total Impaired Loans		$13,332		$159		$11,026		$124

Six Months Ended June 30,	2014						2013
(In Thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment			Interest Income Recognized
With no related allowance recorded
Commercial - AQR pass		$32			$1			$184			$8
Commercial - AQR special mention	242			10			296			15
Commercial - AQR substandard	1,476			8			903			21
Real estate construction one-to-four family - AQR special mention	176			6			470			—
Real estate construction other - AQR pass	—			—			2,498			—
Real estate construction other - AQR special mention	409			29			—			—
Real estate term owner occupied- AQR pass	509			27			521			23
Real estate term owner occupied- AQR special mention	322			9			943			33
Real estate term owner occupied- AQR substandard	1,143			27			144			11
Real estate term non-owner occupied- AQR pass	616			55			—			—
Real estate term non-owner occupied- AQR special mention	2,113			40			1,216			58
Real estate term non-owner occupied- AQR substandard	1,033			—			1,193			38
Real estate term other - AQR special mention	584			47			—			—
Real estate term other - AQR substandard	154			7			1,544			13
Consumer secured by 1st deeds of trust - AQR pass	86			2			91			2
Consumer secured by 1st deeds of trust - AQR special mention	—			—			43			1
Consumer secured by 1st deeds of trust - AQR substandard	190			—			—			—
Consumer other - AQR substandard	58			—			231			3
Subtotal		$9,143			$268			$10,277			$226

With an allowance recorded
Commercial - AQR special mention		$92		$6		$—		$—
Commercial - AQR substandard	298		—		218		—
Commercial - AQR loss	—		—		93		—
Real estate construction one-to-four family - AQR substandard	—		—		770		—
Consumer secured by 1st deeds of trust - AQR substandard	268		—		197		—
Subtotal		$658		$6		$1,278		$—

Total
Commercial - AQR pass		$32		$1		$184		$8
Commercial - AQR special mention	334		16		296		15
Commercial - AQR substandard	1,774		8		1,121		21
Commercial - AQR loss	—		—		93		—
Real estate construction one-to-four family - AQR special mention	176		6		470		—
Real estate construction one-to-four family - AQR substandard	—		—		770		—
Real estate construction other - AQR pass	—		—		2,498		—
Real estate construction other - AQR special mention	409		29		—		—
Real estate term owner-occupied - AQR pass	509		27		521		23
Real estate term owner-occupied - AQR special mention	322		9		943		33
Real estate term owner-occupied - AQR substandard	1,143		27		144		11
Real estate term non-owner occupied - AQR pass	616		55		—		—
Real estate term non-owner occupied - AQR special mention	2,113		40		1,216		58
Real estate term non-owner occupied - AQR substandard	1,033		—		1,193		38
Real estate term other - AQR special mention	584		47		—		—
Real estate term other - AQR substandard	154		7		1,544		13
Consumer secured by 1st deeds of trust - AQR pass	86		2		91		2
Consumer secured by 1st deeds of trust - AQR special mention	—		—		43		1
Consumer secured by 1st deeds of trust - AQR substandard	458		—		197		—
Consumer other - AQR substandard	58		—		231		3
Total Impaired Loans		$9,801		$274		$11,555		$226

As of June 30, 2014, loans accounted for under ASC 310-30 are as follows:

(In Thousands)
Contractually required principal payments		$7,473
Nonaccretable difference	(3,654		)
Fair value of purchased credit impaired loans		$3,819

Loans classified as troubled debt restructurings (“TDR”) totaled $8.7 million and  $7.9 million at June 30, 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 following table presents newly restructured loans hat occurred during the six months ended June 30, 2014:

	Accrual Status		Nonaccrual Status		Total Modifications
(In Thousands)
New Troubled Debt Restructurings
Commercial - AQR special mention	$	112	$	—	$	112
Real estate owner occupied - AQR substandard	—		248		248
Real estate non-owner occupied - AQR special mention	2,153		—		2,153
Real estate non-owner occupied - AQR substandard	—		1,150		1,150
Real estate other - AQR substandard	255		—		255
Consumer secured by 1st deeds of trust - AQR substandard	—		128		128
Subtotal	$	2,520	$	1,526	$	4,046
Existing Troubled Debt Restructurings	4,694		—		4,694
Total	$	7,214	$	1,526	$	8,740

The following table presents newly restructured loans that occurred during the six months ended June 30, 2014 by concession (terms modified):

		June 30, 2014
	Number of Contracts	Rate Modification		Term Modification		Payment Modification		Combination Modification		Total Modifications
(In Thousands)
Pre-Modification Outstanding Recorded Investment:
Commercial - AQR special mention	1		$—		$—		$113		$—		$113
Real estate owner occupied - AQR substandard	2	—		—		—		248		248
Real estate non-owner occupied - AQR special mention	3	—		—		—		2,154		2,154
Real estate non-owner occupied - AQR substandard	3	—		—		—		1,150		1,150
Real estate other - AQR substandard	1	—		255		—		—		255
Consumer secured by 1st deeds of trust - AQR substandard	1	—		—		—		128		128
Total	11		$—		$255		$113		$3,680		$4,048
Post-Modification Outstanding Recorded Investment:
Commercial - AQR special mention	1		$—		$—		$112		$—		$112
Real estate owner occupied - AQR substandard	2	—		—		—		248		248
Real estate non-owner occupied - AQR special mention	3	—		—		—		2,153		2,153
Real estate non-owner occupied - AQR substandard	3	—		—		—		1,150		1,150
Real estate other - AQR substandard	1	—		255		—		—		255
Consumer secured by 1st deeds of trust - AQR substandard	1	—		—		—		128		128
Total	11		$—		$255		$112		$3,679		$4,046

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 six months ended June 30, 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 were no TDRs with specific impairment at June 30, 2014 and December 31, 2013, respectively. The following table presents TDRs that occurred during the last twelve months that subsequently defaulted, for the periods ending June 30, 2014 and 2013, respectively:

	June 30, 2014			June 30, 2013
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
(In  Thousands)
Troubled Debt Restructurings that Subsequently Defaulted:
Real estate construction one-to-four family - AQR special mention	1		$353	—		$—
Total	1		$353	—		$—

At June 30, 2014, the Company had one TDR that subsequently defaulted within the twelve month period ending June 30, 2014. At June 30, 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.