LOANS (Tables)

9 Months Ended

Sep. 30, 2015

The following table shows the composition of the loan portfolio by category:

Composition of Loan Portfolio

	September 30, 2015 December 31, 2014
	Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)
Mortgage loans held for sale	$	1,058		0.1	%	$	2,103		0.3	%
Commercial, financial and agricultural		123,872		16.6			106,109		15.0
Real Estate:
Mortgage-commercial		251,631		33.7			238,602		33.8
Mortgage-residential		265,762		35.5			256,406		36.3
Construction		85,769		11.5			84,935		12.0
Lease financing receivable		2,303		.3			-		-
Consumer and other		17,251		2.3			18,479		2.6
Total loans		747,646		100	%		706,634		100	%
Allowance for loan losses		(6,734)					(6,095)
Net loans	$	740,912				$	700,539

Activity in Allowance for Loan Losses

Activity in the allowance for loan losses for the period was as follows:

(In thousands)

	Three Months		Nine Months
	Ended		Ended
	Sept. 30, 2015		Sept. 30, 2015

Balance at beginning of period	$	6,419	$	6,095
Loans charged-off:
Real Estate		(58)		(407)
Installment and Other		(24)		(87)
Commercial, Financial and Agriculture		(183)		(183)
Total		(265)		(677)
Recoveries on loans previously charged-off:
Real Estate		296		849
Installment and Other		32		56
Commercial, Financial and Agriculture		2		11
Total		330		916
Net recoveries		65		239
Provision for Loan Losses		250		400
Balance at end of period	$	6,734	$	6,734

Allocation of Allowance for Loan Losses

The following tables represent how the allowance for loan losses is allocated to a particular loan type, as well as the percentage of the category to total loans at September 30, 2015 and December 31, 2014.

Allocation of the Allowance for Loan Losses

	September 30, 2015
	(Dollars in thousands)
	Amount		% of loans in each category to total loans

Commercial Non Real Estate	$	765		17.1	%
Commercial Real Estate		2,607		57.7
Consumer Real Estate		1,414		22.8
Consumer		137		2.4
Unallocated		1,811		-
Total	$	6,734		100	%

	December 31, 2014
	(Dollars in thousands)
	Amount		% of loans in each category to total loans

Commercial Non Real Estate	$	713		15.3	%
Commercial Real Estate		3,355		57.9
Consumer Real Estate		1,852		24.2
Consumer		175		2.6
Unallocated		-		-
Total	$	6,095		100	%

Impaired Loans

The following table represents the Company’s impaired loans at September 30, 2015, and December 31, 2014.

	Sept. 30,		December 31,
	2015		2014
	(In thousands)
Impaired Loans:
Impaired loans without a valuation allowance	$	6,322	$	4,702
Impaired loans with a valuation allowance		4,510		4,858
Total impaired loans	$	10,832	$	9,560
Allowance for loan losses on impaired loans at period end		1,028		968

Total nonaccrual loans		7,949		6,056

Past due 90 days or more and still accruing		6		669
Average investment in impaired loans		9,534		7,077

Summary of Interest Recognized and Cash-Basis Interest Earned on Impaired Loans

The following table is a summary of interest recognized and cash-basis interest earned on impaired loans:

	Three Months Ended Sept. 30, 2015		Nine Months Ended Sept. 30, 2015

Interest income recognized during impairment		-		-
Cash-basis interest income recognized		43		166

Loans and Allowance for Loan Losses Evaluated Individually and Collectively

The following tables provide the ending balances in the Company's loans (excluding mortgage loans held for sale) and allowance for loan losses, broken down by portfolio segment as of September 30, 2015 and December 31, 2014. The tables also provide additional detail as to the amount of our loans and allowance that correspond to individual versus collective impairment evaluation. The impairment evaluation corresponds to the Company's systematic methodology for estimating its Allowance for Loan Losses.

September 30, 2015

					Commercial,
			Installment		Financial
	Real Estate		and Other		and Agriculture		Total
	(In thousands)
Loans
Individually evaluated	$	10,522	$	42	$	268	$	10,832
Collectively evaluated		590,844		18,100		126,812		735,756
Total	$	601,366	$	18,142	$	127,080	$	746,588

Allowance for Loan Losses
Individually evaluated	$	980	$	26	$	22	$	1,028
Collectively evaluated		3,292		1,672		742		5,706
Total	$	4,272	$	1,698	$	764	$	6,734

December 31, 2014

					Commercial,
			Installment		Financial
	Real Estate		and Other		and Agriculture		Total
	(In thousands)
Loans
Individually evaluated	$	9,282	$	38	$	240	$	9,560
Collectively evaluated		568,952		18,610		107,409		694,971
Total	$	578,234	$	18,648	$	107,649	$	704,531

Allowance for Loan Losses
Individually evaluated	$	922	$	29	$	17	$	968
Collectively evaluated		4,285		146		696		5,127
Total	$	5,207	$	175	$	713	$	6,095

Troubled Debt Restructurings

The following tables provide additional detail of impaired loans broken out according to class as of September 30, 2015 and December 31, 2014. The recorded investment included in the following tables represent customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. As nearly all of our impaired loans at September 30, 2015, are on nonaccrual status, recorded investment excludes any insignificant amount of accrued interest receivable on loans 90-days or more past due and still accruing. The unpaid balance represents the recorded balance prior to any partial charge-offs.

September 30, 2015

							Average		Interest
							Recorded		Income
	Recorded		Unpaid		Related		Investment		Recognized
	Investment		Balance		Allowance		YTD		YTD
	(In thousands)
Impaired loans with no related allowance:
Commercial installment	$	-	$	-	$	-	$	3	$	-
Commercial real estate		6,077		6,116		-		4,927		43
Consumer real estate		238		238		-		200		-
Consumer installment		7		7		-		8		-
Total	$	6,322	$	6,361	$	-	$	5,138	$	43

Impaired loans with a related allowance:
Commercial installment	$	268	$	268	$	22	$	254	$	10
Commercial real estate		3,232		3,232		479		2,882		102
Consumer real estate		975		975		501		1,230		11
Consumer installment		35		35		26		30		-
Total	$	4,510	$	4,510	$	1,028	$	4,396	$	123

Total Impaired Loans:
Commercial installment	$	268	$	268	$	22	$	257	$	10
Commercial real estate		9,309		9,348		479		7,809		145
Consumer real estate		1,213		1,213		501		1,430		11
Consumer installment		42		42		26		38		-
Total Impaired Loans	$	10,832	$	10,871	$	1,028	$	9,534	$	166

On January 1, 2015, the Company adopted Accounting Standards Update (ASU) 2014-4, Receivables – Troubled Debt Restructuring by Creditors. As of September 30, 2015, the Company had $1.5 million of foreclosed residential real estate property obtained by physical possession and $0.1 million of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions.

December 31, 2014

							Average		Interest
							Recorded		Income
	Recorded		Unpaid		Related		Investment		Recognized
	Investment		Balance		Allowance		YTD		YTD
	(In thousands)
Impaired loans with no related allowance:
Commercial installment	$	-	$	-	$	-	$	50	$	-
Commercial real estate		4,665		4,665		-		2,654		142
Consumer real estate		27		27		-		179		-
Consumer installment		10		10		-		11		-
Total	$	4,702	$	4,702	$	-	$	2,894	$	142

Impaired loans with a related allowance:
Commercial installment	$	240	$	240	$	18	$	189	$	20
Commercial real estate		2,558		2,558		315		2,415		59
Consumer real estate		2,032		2,032		607		1,546		33
Consumer installment		28		28		28		33		2
Total	$	4,858	$	4,858	$	968	$	4,183	$	114

Total Impaired Loans:
Commercial installment	$	240	$	240	$	18	$	239	$	20
Commercial real estate		7,223		7,223		315		5,069		201
Consumer real estate		2,059		2,059		607		1,725		33
Consumer installment		38		38		28		44		2
Total Impaired Loans	$	9,560	$	9,560	$	968	$	7,077	$	256

Certain loans acquired in transfer not accounted for as debt securities acquired

The following table presents information regarding the contractually required payments receivable, cash flows expected to be collected and the estimated fair value of loans acquired in the BCB acquisition as of July 1, 2014, the closing date of the transaction:

	December 31, 2014
	(In thousands)
	Commercial, financial and agricultural		Mortgage- Commercial		Mortgage- Residential		Commercial and other		Total
Contractually required payments	$	1,519	$	29,648	$	7,933	$	976	$	40,076
Cash flows expected to be collected		1,570		37,869		9,697		1,032		50,168
Fair value of loans acquired		1,513		28,875		7,048		957		38,393

Schedule of certain loans acquired in transfer carrying amount and accretable yield for acquired impaired loans

Changes in the carrying amount and accretable yield for acquired impaired loans were as follows at September 30, 2015 and December 31, 2014: (in thousands)

	September 30, 2015				December 31, 2014
	Accretable Yield		Carrying Amount of Loans		Accretable Yield		Carrying Amount of Loans
Balance at beginning of period	$	1,417	$	2,063	$	-	$	-
Additions due to BCB acquisition on July 1, 2014		-		-		1,603		2,325
Accretion		(141)		141		(186)		186
Payments received, net		-		(346)		-		(448)
Balance at end of period	$	1,276	$	1,858	$	1,417	$	2,063

Additional Detail of Troubled Debt Restructurings

The following tables provide detail of troubled debt restructurings (TDRs) at September 30, 2015.

For the Three Months Ending September 30, 2015

			Outstanding
	Outstanding		Recorded
	Recorded		Investment				Interest
	Investment		Post-		Number of		Income
	Pre-Modification		Modification		Loans		Recognized

Commercial installment	$	-	$	-		-	$	-
Commercial real estate		269		268		1		3
Consumer real estate		-		-		-		-
Consumer installment		-		-		-		-
Total	$	269	$	268		1	$	3

For the Nine Months Ending September 30, 2015

			Outstanding
	Outstanding		Recorded
	Recorded		Investment				Interest
	Investment		Post-		Number of		Income
	Pre-Modification		Modification		Loans		Recognized
Commercial installment	$	-	$	-		-	$	-
Commercial real estate		269		267		1		3
Consumer real estate		-		-		-		-
Consumer installment		-		-		-		-
Total	$	269	$	267		1	$	3

Summary of Loans Classified as Past Due in Excess of Thirty Days or More and Loans Classified as Non-Accrual

The following tables set forth the amounts and past due status for the Bank TDRs at September 30, 2015 and December 31, 2014:

(in thousands)

	September 30, 2015
	Current Loans		Past Due 30-89		Past Due 90 days and still accruing		Non- accrual		Total

Commercial installment	$	214	$	-	$	-	$	52	$	266
Commercial real estate		1,931		-		-		2,641		4,572
Consumer real estate		728		-		-		1,241		1,969
Consumer installment		9		-		-		31		40
Total	$	2,882	$	-	$	-	$	3,965	$	6,847
Allowance for loan losses	$	112	$	-	$	-	$	177	$	289

(in thousands)

	December 31, 2014
	Current Loans		Past Due 30-89		Past Due 90 days and still accruing		Non- accrual		Total

Commercial installment	$	233	$	-	$	-	$	-	$	233
Commercial real estate		1,685		-		-		2,729		4,414
Consumer real estate		952		622		-		449		2,023
Consumer installment		10		-		-		103		113
Total	$	2,880	$	622	$	-	$	3,281	$	6,783
Allowance for loan losses	$	120	$	11	$	103	$	-	$	234

The following tables summarize by class our loans classified as past due in excess of 30 days or more in addition to those loans classified as non-accrual:

	September 30, 2015
	(In thousands)
	Past Due 30 to 89 Days		Past Due 90 Days or More and Still Accruing		Non- Accrual		Total Past Due and Non- Accrual		Total Loans

Real Estate-construction	$	424	$	-	$	3,244	$	3,668	$	85,769
Real Estate-mortgage		1,009		6		2,141		3,156		265,762
Real Estate-non farm non residential		674		-		2,425		3,099		251,631
Commercial		305		-		106		411		123,872
Lease Financing Rec.		-		-		-		-		2,303
Consumer		93		-		33		126		17,251
Total	$	2,505	$	6	$	7,949	$	10,460	$	746,588

	December 31, 2014
	(In thousands)
	Past Due 30 to 89 Days		Past Due 90 Days or More and Still Accruing		Non- Accrual		Total Past Due and Non- Accrual		Total Loans

Real Estate-construction	$	428	$	-	$	2,747	$	3,175	$	84,935
Real Estate-mortgage		3,208		208		2,164		5,580		256,406
Real Estate-non farm non residential		3,408		461		1,102		4,971		238,601
Commercial		29		-		5		34		106,109
Consumer		90		-		38		128		18,480
Total	$	7,163	$	669	$	6,056	$	13,888	$	704,531

Risk Category of Loans by Class of Loans

As of September 30, 2015 and December 31, 2014, and based on the most recent analysis performed, the risk categories of loans by class of loans (excluding mortgage loans held for sale) were as follows:

($ in thousands)

September 30, 2015

							Commercial,
	Real Estate Commercial		Real Estate Mortgage		Installment and Other		Financial and Agriculture		Total

Pass	$	409,569	$	168,836	$	18,060	$	126,741	$	723,206
Special Mention		4,313		156		-		171		4,640
Substandard		17,260		1,395		82		193		18,930
Doubtful		-		330		-		-		330
Subtotal		431,142		170,717		18,142		127,105		747,106
Less:
Unearned discount		419		74		-		25		518
Loans, net of unearned discount	$	430,723	$	170,643	$	18,142	$	127,080	$	746,588

December 31, 2014

							Commercial,
	Real Estate Commercial		Real Estate Mortgage		Installment and Other		Financial and Agriculture		Total

Pass	$	388,568	$	167,827	$	18,558	$	107,126	$	682,079
Special Mention		4,756		191		-		498		5,445
Substandard		14,727		2,567		90		63		17,447
Doubtful		-		-		-		-		-
Subtotal		408,051		170,585		18,648		107,687		704,971
Less:
Unearned discount		320		82		-		38		440
Loans, net of unearned discount	$	407,731	$	170,503	$	18,648	$	107,649	$	704,531