NOTE E — LOANS

Information relating to loans is summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2014		2013
Construction and land development	$	57,393	$	67,450
Commercial real estate		538,217		520,382
Residential real estate		606,796		592,746
Commercial and financial		87,285		78,636
Consumer		45,241		44,713
Other loans		260		280
NET LOAN BALANCES	$	1,335,192	$	1,304,207

(1)

Net loan balances as of June 30, 2014 and December 31, 2013 are net of deferred costs of $2,949,000 and $2,618,000, respectively.

The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of June 30, 2014 and December 31, 2013:

June 30, 2014
					Accruing
	Accruing		Accruing		Greater						Total
	30-59 Days		60-89 Days		Than						Financing
(Dollars in thousands)	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables
Construction & land development	$	0	$	0	$	0	$	1,023	$	56,370	$	57,393
Commercial real estate		1,634		449		0		3,752		532,382		538,217
Residential real estate		420		82		0		16,507		589,787		606,796
Commercial and financial		66		0		0		10		87,209		87,285
Consumer		45		26		0		453		44,717		45,241
Other		0		0		0		0		260		260
Total	$	2,165	$	557	$	0	$	21,745	$	1,310,725	$	1,335,192

December 31, 2013
					Accruing
	Accruing		Accruing		Greater						Total
	30-59 Days		60-89 Days		Than						Financing
(Dollars in thousands)	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables
Construction & land development	$	3	$	0	$	0	$	1,302	$	66,145	$	67,450
Commercial real estate		684		345		0		5,111		514,242		520,382
Residential real estate		974		909		160		20,705		569,998		592,746
Commercial and financial		353		0		0		13		78,270		78,636
Consumer		33		27		0		541		44,112		44,713
Other		0		0		0		0		280		280
Total	$	2,047	$	1,281	$	160	$	27,672	$	1,273,047	$	1,304,207

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention,” “Substandard,” and “Doubtful” and these loans are monitored on an ongoing basis. Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as substandard may require a specific allowance, but generally does not exceed 30% of the principal balance. Loans classified as Doubtful, have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are generally charged off. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants.

Loans not meeting the criteria above are considered to be pass-rated loans and risk grades are recalculated at least annually by the loan relationship manager. The following tables present the risk category of loans by class of loans based on the most recent analysis performed as of June 30, 2014 and December 31, 2013:

June 30, 2014
	Construction						Commercial
	& Land		Commercial		Residential		and		Consumer
(Dollars in thousands)	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	53,595	$	507,606	$	574,638	$	87,048	$	43,849	$	1,266,736
Special mention		542		2,826		309		19		304		4,000
Substandard		0		12,575		1,399		58		522		14,554
Doubtful		0		0		0		0		0		0
Nonaccrual		1,023		3,752		16,507		10		453		21,745
Pass-Troubled debt restructures		1,710		5,480		24		0		0		7,214
Troubled debt restructures		523		5,978		13,919		150		373		20,943
	$	57,393	$	538,217	$	606,796	$	87,285	$	45,501	$	1,335,192

December 31, 2013
	Construction						Commercial
	& Land		Commercial		Residential		and		Consumer
(Dollars in thousands)	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	63,186	$	485,268	$	554,681	$	77,840	$	43,267	$	1,224,242
Special mention		583		6,810		824		382		300		8,899
Substandard		0		15,886		1,670		248		453		18,257
Doubtful		0		0		0		0		0		0
Nonaccrual		1,302		5,111		20,705		13		541		27,672
Pass-Troubled debt restructures		1,838		5,584		30		0		0		7,452
Troubled debt restructures		541		1,723		14,836		153		432		17,685
	$	67,450	$	520,382	$	592,746	$	78,636	$	44,993	$	1,304,207