NOTE E — LOANS

Information relating to loans is summarized as follows:

	September 30,		December 31,
(Dollars in thousands)	2014		2013
Construction and land development	$	57,851	$	67,450
Commercial real estate		570,659		520,382
Residential real estate		623,265		592,746
Commercial and financial		91,300		78,636
Consumer		47,645		44,713
Other loans		362		280
NET LOAN BALANCES	$	1,391,082	$	1,304,207

(1)

Net loan balances as of September 30, 2014 and December 31, 2013 are net of deferred costs of $3,418,000 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 September 30, 2014 and December 31, 2013:

September 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	$	967	$	56,884	$	57,851
Commercial real estate		348		0		0		3,565		566,746		570,659
Residential real estate		316		1,042		22		14,006		607,879		623,265
Commercial and financial		5		0		0		8		91,287		91,300
Consumer		2		26		0		396		47,221		47,645
Other		0		0		0		0		362		362
Total	$	671	$	1,068	$	22	$	18,942	$	1,370,379	$	1,391,082

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 September 30, 2014 and December 31, 2013:

September 30, 2014
	Construction						Commercial
	& Land		Commercial		Residential		and		Consumer
(Dollars in thousands)	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	54,241	$	542,784	$	591,372	$	90,970	$	46,380	$	1,325,747
Special mention		526		2,456		718		140		334		4,174
Substandard		0		11,234		1,505		34		477		13,250
Doubtful		0		0		0		0		0		0
Nonaccrual		967		3,565		14,006		8		396		18,942
Pass-Troubled debt restructures		1,605		4,665		21		0		0		6,291
Troubled debt restructures		512		5,955		15,643		148		420		22,678
	$	57,851	$	570,659	$	623,265	$	91,300	$	48,007	$	1,391,082

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