Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes o No.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. xYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero Accelerated filero Non-accelerated filero Smaller reporting companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) oYes x No

SEC 1296 (08-03) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

Indicate the number of shares outstanding for each of the issuer’s classes of common stock as of the latest practicable date: 2,056,790 shares of Common Stock, $1.00 par value and 90,000 shares of Non-Voting Common Stock, $1.00 par value were outstanding on ~~August~~November 11, 2014.

ASSETS	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Cash and due from banks	$	2,902		$	6,340		$	2,860		$	6,340
Interest-bearing deposits with banks		49,495			22,827			52,636			22,827
Certificates of deposit		350			350			350			350
Investment securities available for sale, at fair value		135,836			141,045			130,132			141,045
Investment securities held to maturity, at cost		240			240			240			240
Other investments		748			874			792			874
Loans receivable, net		184,469			182,119			184,044			182,119
Premises and equipment, net		6,358			6,589			6,238			6,589
Cash surrender value of life insurance		10,135			9,948			10,196			9,948
Other Real Estate Owned		6,808			7,404			4,601			7,404
Other assets		9,432			9,997			9,057			9,997

Total assets	$	406,773		$	387,733		$	401,146		$	387,733

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:
Noninterest-bearing deposits	$	83,883		$	71,142		$	81,624		$	71,142
Interest-bearing deposits		269,641			265,820			266,317			265,820

Total deposits		353,524			336,962			347,941			336,962

Accrued expenses and other liabilities		4,431			4,190			4,370			4,190
Advances from Federal Home Loan Bank		264			273			259			273

Total liabilities		358,219			341,425			352,570			341,425

STOCKHOLDERS’ EQUITY:
Preferred stock - No par value; 10,000,000 shares authorized;
Series B, 7,462 shares issued and outstanding		7,462			7,462			7,462			7,462
Series C, 4,379 shares issued and outstanding		4,379			4,379			4,379			4,379

Common stock - $1 par value; 20,000,000 shares authorized; 2,292,728 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively		2,293			2,293
Common stock - $1 par value; 20,000,000 shares authorized;
2,292,728 shares issued and outstanding at September 30, 2014
and December 31, 2013, respectively								2,293			2,293
Nonvoting common stock - $1 par value; 5,000,000 shares authorized; 90,000 issued and outstanding		90			90			90			90
Nonvested restricted common stock		(175	)		(16	)		(140	)		(16	)
Additional paid-in capital		8,130			7,933			8,130			7,933
Retained earnings		27,729			27,131			28,046			27,131
Treasury stock at cost, 235,938 shares at June 30, 2014 and December 31, 2013, respectively		(1,882	)		(1,882	)
Treasury stock at cost, 235,938 shares at September 30, 2014 and December 31, 2013, respectively								(1,882	)		(1,882	)
Accumulated other comprehensive income (loss), net of income taxes		528			(1,082	)		198			(1,082	)

Total stockholders’ equity		48,554			46,308			48,576			46,308

	$	406,773		$	387,733		$	401,146		$	387,733

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013			2014			2013		2014		2013
Interest income:
Loans, including fees	$	2,503	$	2,636		$	4,980	$	5,174		$	2,432		$	2,620	$	7,412	$	7,794
Investment securities:
Taxable		564		444			1,148		819			537			530		1,685		1,349
Tax-exempt		284		321			579		661			332			307		917		968
Interest-bearing deposits		36		28			56		48			32			25		88		73
Total interest income		3,387		3,429			6,763		6,702			3,333			3,482		10,102		10,184

Interest expense:
Deposits		211		232			423		467			211			223		634		690
Other borrowings												—			1		—		1
Total interest expense		211		232			423		467			211			224		634		691

Net interest income		3,176		3,197			6,340		6,235			3,122			3,258		9,468		9,493

Provision for loan losses		—		50			—		275			—			175		—		450

Net interest income after provision for loan losses		3,176		3,147			6,340		5,960			3,122			3,083		9,468		9,043

Noninterest income:
Service charges on deposits		710		801			1,413		1,569			720			816		2,133		2,385
Gain on sales of securities		6		103			6		244			—			—		—		244
Other operating income		301		295			577		623			270			243		847		866

Total noninterest income		1,017		1,199			1,996		2,436			990			1,059		2,980		3,495

Noninterest expense:
Salaries and employee benefits		1,656		1,637			3,192		3,252			1,612			1,624		4,804		4,876
Net occupancy and equipment		501		534			1,044		1,044			524			543		1,568		1,587
Amortization of core deposit intangible		118		118			236		236			118			118		354		354
FDIC insurance		79		133			156		263			80			135		236		398
Other real estate owned, net		45		408			276		656			306			139		582		795
Other operating expenses		1,224		1,271			2,363		2,463			1,118			1,242		3,481		3,705

Total noninterest expense		3,623		4,101			7,267		7,914			3,758			3,801		11,025		11,715

Income before income taxes		570		245			1,069		482			354			341		1,423		823

Income tax expense (benefit)		97		(26	)		180		(61	)		(22	)		11		158		(50	)

Net income	$	473	$	271		$	889	$	543		$	376		$	330	$	1,265	$	873
Preferred dividends		59		59			118		118			59			59		178		178

Net income available to common shareholders	$	414	$	212		$	771	$	425		$	317		$	271	$	1,087	$	695

Net income per common share - basic	$	0.19	$	0.10		$	0.36	$	0.20		$	0.15		$	0.13	$	0.50	$	0.32

Net income per common share - diluted	$	0.19	$	0.10		$	0.35	$	0.20		$	0.14		$	0.13	$	0.50	$	0.32

Weighted average common outstanding shares - basic		2,161		2,153			2,161		2,149			2,169			2,155		2,165		2,151

Weighted average common outstanding shares - diluted		2,190		2,170			2,189		2,166			2,193			2,170		2,189		2,166

Dividends per common share	$	0.08	$	0.08		$	0.08	$	0.08		$	0.00		$	0.00	$	0.08	$	0.08

	Three Months Ended						Three Months Ended
	June 30,						September 30,
	2014			2013			2014			2013

Net Income	$	473		$	271		$	376		$	330

Other Comprehensive Income (Loss)

Unrealized holding gain (loss) on investment securities available for sale, net of tax of ($410) for 2014 and $1,296 for 2013		795			(2,516	)

Reclassification adjustment for holding gains included in net income, net of tax of $2 for 2014 and $35 for 2013		(4	)		(68	)
Unrealized holding gain (loss) on investment securities available for sale, net of tax of $170 for 2014 and ($34) for 2013								(330	)		66
Reclassification adjustment for holding gains included in net income, net of tax								—			—

Other Comprehensive Income (Loss)		791			(2,584	)		(330	)		66

Total Comprehensive Income (Loss)	$	1,264		$	(2,313	)	$	46		$	396

																												Accumulated
									Nonvoting				Nonvested			Additional												Other																																	Accumulated
	Preferred Stock				Common Stock				Common Stock				Restricted			Paid-in			Retained			Treasury Stock						Comprehensive						Preferred								Nonvoting				Nonvested			Additional												Other
	Shares		Amount		Shares		Amount		Shares		Amount		Stock			Capital			Earnings			Shares			Amount			Income (Loss)			Total			Stock				Common Stock				Common Stock				Restricted			Paid-in			Retained			Treasury Stock						Comprehensive
																																		Shares		Amount		Shares		Amount		Shares		Amount		Stock			Capital			Earnings			Shares			Amount			Income (Loss)			Total

Balance—December 31, 2012		12	$	11,841		2,250	$	2,250		90	$	90	$	(57	)	$	7,942		$	26,190			(221	)	$	(1,820	)	$	2,718		$	49,154			12	$	11,841		2,250	$	2,250		90	$	90	$	(57	)	$	7,942		$	26,190			(221	)	$	(1,820	)	$	2,718		$	49,154

Net income		—		—		—		—		—		—		—			—			543			—			—			—			543			—		—		—		—		—		—		—			—			873			—			—			—			873
Other Comprehensive Loss		—		—		—		—		—		—		—			—			—			—			—			(2,764	)		(2,764	)		—		—		—		—		—		—		—			—			—			—			—			(2,698	)		(2,698	)
Issuance of common stock		—		—		43		43		—		—		—			137			—			—			—			—			180			—		—		43		43		—		—		—			137			—			—			—			—			180
Nonvested restricted stock		—		—		—		—		—		—		17			(146	)		—			—			—			—			(129	)		—		—		—		—		—		—		29			(147	)		—			—			—			—			(118	)
Purchase of treasury stock		—		—		—		—		—		—		—			—			—			(15	)		(62	)		—			(62	)		—		—		—		—		—		—		—			—			—			(15	)		(62	)		—			(62	)
Dividends declared - preferred		—		—		—		—		—		—		—			—			(118	)		—			—			—			(118	)		—		—		—		—		—		—		—			—			(178	)		—			—			—			(178	)
Dividends declared - common		—		—		—		—		—		—		—			—			(172	)		—			—			—			(172	)		—		—		—		—		—		—		—			—			(171	)		—			—			—			(171	)
Balance—June 30, 2013		12	$	11,841		2,293	$	2,293		90	$	90	$	(40	)	$	7,933		$	26,443			(236	)	$	(1,882	)	$	(46	)	$	46,632
Balance—September 30, 2013																																			12	$	11,841		2,293	$	2,293		90	$	90	$	(28	)	$	7,932		$	26,714			(236	)	$	(1,882	)	$	20		$	46,980

Balance—December 31, 2013		12	$	11,841		2,293	$	2,293		90	$	90	$	(16	)	$	7,933		$	27,131			(236	)	$	(1,882	)	$	(1,082	)	$	46,308			12	$	11,841		2,293	$	2,293		90	$	90	$	(16	)	$	7,933		$	27,131			(236	)	$	(1,882	)	$	(1,082	)	$	46,308

Net income		—		—		—		—		—		—		—			—			889			—			—			—			889			—		—		—		—		—		—		—			—			1,265			—			—			—			1,265
Other Comprehensive Income		—		—		—		—		—		—		—			—			—			—			—			1,610			1,610			—		—		—		—		—		—		—			—			—			—			—			1,280			1,280
Issuance of common stock		—		—		—		—		—		—		—			—			—			—			—			—
Nonvested restricted stock		—		—		—		—		—		—		(159	)		197			—			—			—			—			38			—		—		—		—		—		—		(124	)		197			—			—			—			—			73
Purchase of treasury stock		—		—		—		—		—		—		—			—			—			—			—			—			—
Dividends declared - preferred		—		—		—		—		—		—		—			—			(118	)		—			—			—			(118	)		—		—		—		—		—		—		—			—			(178	)		—			—			—			(178	)
Dividends declared - common		—		—		—		—		—		—		—			—			(173	)		—			—			—			(173	)		—		—		—		—		—		—		—			—			(172	)		—			—			—			(172	)
Balance—June 30, 2014		12	$	11,841		2,293	$	2,293		90	$	90	$	(175	)	$	8,130		$	27,729			(236	)	$	(1,882	)	$	528		$	48,554
Balance—September 30, 2014																																			12	$	11,841		2,293	$	2,293		90	$	90	$	(140	)	$	8,130		$	28,046			(236	)	$	(1,882	)	$	198		$	48,576

	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
OPERATING ACTIVITIES:
Net income	$	889		$	543		$	1,265		$	873
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		—			275			—			450
Depreciation		272			301			408			462
Amortization and accretion, net		526			723			717			1,006
Provision for deferred income tax benefit		(73	)		1,382			109			1,386
Gains on sale of assets and investments, net		(6	)		(244	)		—			(244	)
Restricted stock based compensation plan		38			(129	)		73			(118	)
Decrease in carrying value of other real estate owned		206			350			309			473
Net (gain) loss on sale of other real estate owned		(54	)		158			87			74
Change in other assets		(917	)		206			(431	)		802
Change in accrued expenses and other liabilities		241			(884	)		180			(600	)

Net cash provided by operating activities		1,122			2,681			2,717			4,564

INVESTING ACTIVITIES:
Net change in certificates of deposit		—			(250	)		—			(250	)
Proceeds from calls and maturities of investment securities held to maturity		—			1,806			—			1,806
Proceeds from sales and maturities of investment securities available for sale		9,821			18,608			17,501			26,483
Purchases of investment securities available for sale		(2,276	)		(41,568	)		(4,900	)		(44,074	)
Net change in loans receivable		(2,612	)		8,356			(2,725	)		1,745
Proceeds from the sale of other real estate owned		954			2,702			3,178			2,981
Purchases of premises and equipment, net		(41	)		(163	)		(57	)		(214	)

Net cash provided by (used) in investing activities		5,846			(10,509	)		12,997			(11,523	)

FINANCING ACTIVITIES:
Net change in deposits		16,562			4,053			10,979			(868	)
Net change in Federal Funds Purchased		—			5,000
Net change in advances from Federal Home Loan Bank		(9	)		9,990			(14	)		(14	)
Proceeds from issuance of common stock		—			180			—			180
Purchase of treasury stock		—			(62	)		—			(62	)
Dividends paid - preferred		(118	)		(118	)		(178	)		(178	)
Dividends paid - common		(173	)		(172	)		(172	)		(171	)
Net cash provided by financing activities		16,262			18,871
Net cash provided by (used in) financing activities								10,615			(1,113	)

Net change in cash and cash equivalents		23,230			11,043			26,329			(8,072	)

Cash and cash equivalents, beginning of period		29,167			40,187			29,167			40,187

Cash and cash equivalents at end of period	$	52,397		$	51,230		$	55,496		$	32,115

Supplemental disclosures of cash paid during the period for:
Interest	$	456		$	484		$	668		$	713

Income taxes	$	—		$	26		$	—		$	26

Supplemental disclosures of noncash transactions:
Real estate acquired through foreclosure	$	510		$	1,377		$	771			3,782
Change in unrealized gain (loss) on investment securities available for sale, net of taxes	$	1,610		$	(2,764	)	$	1,280		$	(2,698	)

Citizens Bancshares Corporation (the “Company”) is a holding company that provides a full range of commercial and personal banking services to individual and corporate customers in metropolitan Atlanta and Columbus, Georgia, and in Birmingham and Eutaw, Alabama, through its wholly owned subsidiary, Citizens Trust Bank (the “Bank”). The Bank operates under a state charter and serves its customers through seven full-service financial centers in metropolitan Atlanta, Georgia, one full-service financial center in Columbus, Georgia, one full-service financial center in Birmingham, Alabama, and one full-service financial center in Eutaw, Alabama.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by generally accepted accounting principles are not included herein. These interim statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2013. The results of operations for the interim periods reported herein are not necessarily representative of the results expected for the full 2014 fiscal year.

The consolidated financial statements of the Company for the three and ~~six~~nine month periods ended ~~June~~September 30, 2014 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for the three and ~~six~~nine month periods have been included. All adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which often require the judgment of management in the selection and application of certain accounting principles and methods. Reference is made to the accounting policies of the Company described in the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The Company has followed those policies in preparing this report. Management believes that the quality and reasonableness of its most critical policies enable the fair presentation of its financial position and of its results of operations.

On August 13, 2010, as part of the U.S. Department of the Treasury (the “Treasury”) Troubled Asset Relief Program (“TARP”) Community Development Capital Initiative, the Company entered into a Letter Agreement, and an Exchange Agreement–Standard Terms (“Exchange Agreement”), with the Treasury, pursuant to which the Company agreed to exchange 7,462 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Shares”), issued on March 6, 2009, pursuant to the Company’s participation in the TARP Capital Purchase Program, for 7,462 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred Shares”), both of which have a liquidation preference of $1,000 (the “Exchange Transaction”). No new monetary consideration was exchanged in connection with the Exchange Transaction. The Exchange Transaction closed on August 13, 2010 (the “Closing Date”).

On September 17, 2010, the Company issued 4,379 shares of its Series C Preferred Shares to the Treasury as part of its TARP Community Development Capital Initiative for a total of 11,841 sharesof Series B and C Preferred Shares issued to Treasury. The issuance of the Series B and Series C Preferred Shares was a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

The Series B and Series C Preferred Shares qualify as Tier 1 capital and will pay cumulative dividends at a rate of 2% per annum for the first eight years after the Closing Date and 9% per annum thereafter. The Company may, subject to consultation with the Federal Reserve Bank of Atlanta, redeem the Series B and Series C Preferred Shares at any time for its aggregate liquidation amount plus any accrued and unpaid dividends.

In January 2014, the FASB amended Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (OREO). In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company will apply the amendment prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Investment securities available for sale are summarized as follows (in thousands):

At June 30, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

At September 30, 2014									Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

State, county, and municipal securities	$	31,766	$	1,631	$	—	$	33,397	$	28,294	$	1,522	$	—	$	29,816
Mortgage-backed securities		93,433		562		1,565		92,430		91,686		400		1,787		90,299
Corporate securities		9,837		178		6		10,009		9,852		165		—		10,017
Totals	$	135,036	$	2,371	$	1,571	$	135,836	$	129,832	$	2,087	$	1,787	$	130,132

Investment securities held to maturity are summarized as follows (in thousands):

At June 30, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
At September 30, 2014									Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

State, county, and municipal securities	$	240	$	1	$	—	$	241	$	240	$	1	$	—	$	241

The amortized costs and fair values of investment securities at ~~June~~September 30, 2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with and without call or prepayment penalties (in thousands).

	Available for Sale				Held to Maturity
									Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value		Cost		Value

Due in one year or less	$	—	$	—	$	—	$	—	$	2,000	$	2,012	$	—	$	—
Due after one year through five years		13,312		13,643		240		241		12,122		12,479		240		241
Due after five years through ten years		31,832		33,219		—		—		30,992		32,325		—		—
Due after ten years		89,892		88,974		—		—		84,718		83,316		—		—

	$	135,036	$	135,836	$	240	$	241	$	129,832	$	130,132	$	240	$	241

Securities with carrying values of ~~$93,945,000~~$100,477,000 and $102,728,000 as of ~~June~~September 30, 2014 and December 31, 2013, respectively, were pledged to secure public deposits, FHLB advances and a ~~$21.0~~$17.5 million line of credit at the Federal Reserve Bank discount window and for other purposes as required by law.

Proceeds from the sale of securities were ~~$611,000 and~~ $2,268,000 for the ~~six~~nine months ended ~~June~~September 30, 2013. There were no sale of securities in 2014 ~~and 2013, respectively.~~or for the three months ended September 30, 2013. Gross realized gains on sales of securities were ~~$6,000 and~~ $244,000 for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively. Proceeds from the sale of securities were $611,000 and $1,186,000 for the three months ended June 30, 2014 and 2013, respectively. For the three month period ended June 30, 2014 and 2013, gross realized gains on securities were $6,000 and $103,000, respectively.2013. There were no gross realized losses on sales of securities for the ~~three month and six~~nine month periods ended ~~June~~September 30, ~~2014 and 2013, respectively.~~2013.

The Company’s investment portfolio consists principally of obligations of the United States, its agencies, or its corporations, general obligation and revenue municipals and corporate securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio. The company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions. Management believes credit risk associated with correspondent accounts is not significant.

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at ~~June~~September 30, 2014 and December 31, 2013. Except as explicitly identified below, all unrealized losses on investment securities are considered by management to be temporarily impaired given the credit ratings on these investment securities and the short duration of the unrealized loss (in thousands).

There were no securities classified as held to maturity in an unrealized loss position at ~~June~~September 30, 2014.

There were no securities classified as held to maturity in an unrealized loss position at December 31, 2013.

The Company’s available for sale portfolio had ~~twenty-four~~twenty-three investment securities at ~~June~~September 30, 2014 that were in an unrealized loss position for longer than twelve months. At December 31, 2013, the Company had two investment securities that were in an unrealized loss position for longer than twelve months. The Company reviews these securities for other-than-temporary impairment on a quarterly basis by monitoring their credit support and coverage, constant payment of the contractual principal and interest, loan to value and delinquencies ratios.

We use prices from third party pricing services and, to a lesser extent, indicative (non-binding) quotes from third party brokers, to measure fair value of our investment securities. Fair values of the investment securities portfolio could decline in the future if the underlying performance of the collateral for collateralized mortgage obligations or other securities deteriorates and the levels do not provide sufficient protection for contractual principal and interest. As a result, there is risk that an other-than-temporary impairment may occur in the future particularly in light of the current economic environment.

As of the date of its evaluation, the Company did not intend to sell and has the ability to hold these securities and it is more likely than not that the Company will not be required to sell those securities before recovery of its amortized cost or the security matures. The Company believes, based on industry analyst reports and credit ratings, that it will continue to receive scheduled interest payments as well as the entire principal balance, and the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary.

	June 30,		December 31,		September 30,		December 31,
	2014		2013		2014		2013

Commercial, financial, and agricultural	$	23,854	$	20,292	$	23,275	$	20,292
Commercial Real Estate		118,280		120,180		121,226		120,180
Single-Family Residential		33,739		34,864		33,098		34,864
Construction and Development		5,078		3,626		2,271		3,626
Consumer		6,476		6,314		6,728		6,314
		187,427		185,276		186,598		185,276
Allowance for loan losses		2,958		3,157		2,554		3,157

	$	184,469	$	182,119	$	184,044	$	182,119

Activity in the allowance for loan losses for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 and the year ended December 31, 2013 is summarized as follows (in thousands):

										September 30,			December 31,			September 30,
	June 30, 2014			December 31, 2013			June 30, 2013			2014			2013			2013

Balance at beginning of period	$	3,157		$	3,509		$	3,509		$	3,157		$	3,509		$	3,509
Provision for loan losses		—			425			275			—			425			450
Loans charged-off		(358	)		(1,485	)		(808	)		(818	)		(1,485	)		(1,423	)
Recoveries on loans previously charged-off		159			708			438			215			708			580
Balance at end of period	$	2,958		$	3,157		$	3,414		$	2,554		$	3,157		$	3,116

Activity in the allowance for loan losses by portfolio segment is summarized as follows (in thousands):

	For the Three Month Period Ended June 30, 2014
	Commercial			Commercial Real Estate			Single-family Residential			Construction & Development		Consumer			Total			For the Three Month Period Ended September 30, 2014
																		Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total
Beginning balance	$	394		$	1,619		$	765		$	126	$	165		$	3,069		$	251		$	1,913		$	508		$	139		$	147		$	2,958
Provision for loan losses		(157	)		307			(190	)		13		27			—			206			(140	)		(162	)		52			44			—
Loans charged-off		—			(31	)		(72	)		—		(55	)		(158	)		(7	)		(108	)		(162	)		(137	)		(46	)		(460	)
Recoveries on loans charged-off		14			18			5			—		10			47			6			9			23			—			18			56
Ending Balance	$	251		$	1,913		$	508		$	139	$	147		$	2,958			$ 4 56		$	1,674		$	207		$	54		$	163		$	2,554

	For the Six Month Period Ended June 30, 2014
	Commercial			Commercial Real Estate			Single-family Residential			Construction & Development		Consumer			Total			For the Nine Month Period Ended September 30, 2014
																		Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total
Beginning balance	$	384		$	1,721		$	731		$	126	$	195		$	3,157		$	384		$	1,721		$	731		$	126		$	195		$	3,157
Provision for loan losses		(157	)		307			(190	)		13		27			—			49			167			(352	)		65			71			—
Loans charged-off		—			(136	)		(124	)		—		(98	)		(358	)		(7	)		(244	)		(286	)		(137	)		(144	)		(818	)
Recoveries on loans charged-off		24			21			91			—		23			159			30			30			114			—			41			215
Ending Balance	$	251		$	1,913		$	508		$	139	$	147		$	2,958		$	456		$	1,674		$	207		$	54		$	163		$	2,554

	For the Three Month Period Ended June 30, 2013
	Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total			For the Three Month Period Ended September 30, 2013
																			Commercial			Commercial Real Estate			Single-family Residential			Construction & Development		Consumer			Total
Beginning balance	$	408		$	1,828		$	734		$	186		$	259		$	3,415		$	168		$	2,180		$	606		$	156	$	304		$	3,414
Provision for loan losses		(246	)		332			(77	)		(30	)		71			50			(65	)		(64	)		243			139		(78	)		175
Loans charged-off		(1	)		(307	)		(68	)		—			(44	)		(420	)		(16	)		(338	)		(234	)		—		(27	)		(615	)
Recoveries on loans charged-off		7			327			17			—			18			369			8			2			83			35		14			142
Ending Balance	$	168		$	2,180		$	606		$	156		$	304		$	3,414		$	95		$	1,780		$	698		$	330	$	213		$	3,116

	For the Six Month Period Ended June 30, 2013
	Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total			For the Nine Month Period Ended September 30, 2013
																			Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total
Beginning balance	$	433		$	1,853		$	803		$	177		$	243		$	3,509		$	433		$	1,853		$	803			$ 1 77		$	243		$	3,509
Provision for loan losses		(277	)		346			59			9			138			275			(342	)		281			302			148			61			450
Loans charged-off		(6	)		(373	)		(284	)		(30	)		(115	)		(808	)		(22	)		(711	)		(518	)		(30	)		(142	)		(1,423	)
Recoveries on loans charged-off		18			354			28			—			38			438			26			357			111			35			51			580
Ending Balance	$	168		$	2,180		$	606		$	156		$	304		$	3,414		$	95		$	1,780		$	698		$	330		$	213		$	3,116

	For the Year Ended December 31, 2013
	Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total			For the Year Ended December, 2013
																			Commercial			Commercial Real Estate			Single-family Residential			Construction & Development			Consumer			Total
Beginning balance	$	433		$	1,853		$	803		$	177		$	243		$	3,509		$	433		$	1,853		$	803		$	177		$	243		$	3,509
Provision for loan losses		(68	)		127			361			(56	)		61			425			(68	)		127			361			(56	)		61			425
Loans charged-off		(22	)		(710	)		(554	)		(30	)		(169	)		(1,485	)		(22	)		(710	)		(554	)		(30	)		(169	)		(1,485	)
Recoveries on loans charged-off		41			451			121			35			60			708			41			451			121			35			60			708
Ending Balance	$	384		$	1,721		$	731		$	126		$	195		$	3,157		$	384		$	1,721		$	731		$	126		$	195		$	3,157

In determining our allowance for loan losses, we regularly review loans for specific reserves based on the appropriate impairment assessment methodology. Consumer residential loans are evaluated as a homogeneous population and therefore loans are not evaluated individually for impairment. General reserves are determined using historical loss trends measured over a rolling four quarter average for consumer loans, and a three year average loss factor for commercial loans which is applied to risk rated loans grouped by Federal Financial Examination Council (“FFIEC”) call code. For commercial loans, the general reserves are calculated by applying the appropriate historical loss factor to the loan pool. Impaired loans greater than a minimum threshold established by management are excluded from this analysis. The sum of all such amounts determines our total allowance for loan losses.

The allocation of the allowance for loan losses by portfolio segment was as follows (in thousands):

	At June 30, 2014												At September 30, 2014
	Commercial		Commercial Real Estate		Single-family Residential		Construction & Development		Consumer		Total		Commercial		Commercial Real Estate		Single-family Residential		Construction & Development		Consumer		Total
Specific Reserves:
Impaired loans	$	—	$	237	$	9	$	139	$	—	$	385
Total specific reserves		—		237		9		139		—		385
Specific reserves impaired loans													$	—	$	325	$	51	$	—	$	—	$	376
General reserves		251		1,676		499		—		147		2,573		456		1,349		156		54		163		2,178
Total	$	251	$	1,913	$	508	$	139	$	147	$	2,958	$	456	$	1,674	$	207	$	54	$	163	$	2,554

Loans individually evaluated for impairment	$	—	$	10,530	$	782	$	359	$	—	$	11,671	$	—	$	7,771	$	578	$	220	$	—	$	8,569
Loans collectively evaluated for impairment		23,854		107,750		32,957		4,719		6,476		175,756		23,275		113,455		32,520		2,051		6,728		178,029
Total	$	23,854	$	118,280	$	33,739	$	5,078	$	6,476	$	187,427	$	23,275	$	121,226	$	33,098	$	2,271	$	6,728	$	186,598

	At December 31, 2013												At December 31, 2013
	Commercial		Commercial Real Estate		Single-family Residential		Construction & Development		Consumer		Total		Commercial		Commercial Real Estate		Single-family Residential		Construction & Development		Consumer		Total
Specific Reserves:
Impaired loans	$	—	$	3	$	—	$	—	$	—	$	3
Total specific reserves		—		3		—		—		—		3
Specific reserves impaired loans													$	—	$	3	$	—	$	—	$	—	$	3
General reserves		384		1,718		731		126		195		3,154		384		1,718		731		126		195		3,154
Total	$	384	$	1,721	$	731	$	126	$	195	$	3,157	$	384	$	1,721	$	731	$	126	$	195	$	3,157

Loans individually evaluated for impairment	$	—	$	10,705	$	360	$	—	$	—	$	11,065	$	—	$	10,705	$	360	$	—	$	—	$	11,065
Loans collectively evaluated for impairment		20,292		109,475		34,504		3,626		6,314		174,211		20,292		109,475		34,504		3,626		6,314		174,211
Total	$	20,292	$	120,180	$	34,864	$	3,626	$	6,314	$	185,276	$	20,292	$	120,180	$	34,864	$	3,626	$	6,314	$	185,276

	At June 30, 2014										At September 30, 2014
							Impaired Loans - With										Impaired Loans - With
	Impaired Loans - With Allowance						no Allowance				Impaired Loans - With Allowance						no Allowance
	Unpaid Principal		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal		Recorded Investment		Unpaid Principal		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal		Recorded Investment
Residential:
First mortgages	$	—	$	—	$	—	$	231	$	231	$	—	$	—	$	—	$	231	$	231
HELOC’s and equity		86		70		9		493		481		102		102		51		256		245
Commercial
Secured		—		—		—		—		—		—		—		—		—		—
Unsecured		—		—		—		—		—		—		—		—		—		—
Commercial Real Estate:
Owner occupied		—		—		—		10,417		8,131		832		832		253		5,530		4,711
Non-owner occupied		1,906		1,606		227		822		696		853		799		62		1,582		1,333
Multi-family		97		97		10		—		—		96		96		10		—		—
Construction and Development:
Construction		359		359		139		—		—		—		—		—		357		220
Improved Land		—		—		—		—		—		—		—		—		—		—
Unimproved Land		—		—		—		—		—		—		—		—		—		—
Consumer and Other		—		—		—		—		—		—		—		—		—		—
Total	$	2,448	$	2,132	$	385	$	11,963	$	9,539	$	1,883	$	1,829	$	376	$	7,956	$	6,740

The following table presents the average recorded investment and interest income recognized on impaired loans by class of loan (in thousands):

	June 30, 2014				June 30, 2013				September 30, 2014				September 30, 2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Residential:
First mortgages	$	231	$	—	$	231	$	—	$	231	$	—	$	231	$	—
HELOC’s and equity		581		13		128		17		274		24		128		2
Commercial
Secured		—		—		—		—		—		—		30		—
Unsecured		—		—		—		—		—		—		—		—
Commercial Real Estate:
Owner occupied		8,247		443		8,031		394		5,637		603		6,049		337
Non-owner occupied		2,347		43		5,282		171		2,216		79		2,367		83
Multi-family		98		27		364		46		97		51		363		16
Construction and Development:				.				.				.				.
Construction		362		19		—		—		292		27		—		—
Improved Land		—		—		—		—		—		—		—		—
Unimproved Land		—		—		—		—		—		—		—		—
Consumer and Other		—		—		—		—		—		—		—		—
Total	$	11,866	$	545	$	14,036	$	628	$	8,747	$	784	$	9,168	$	438

	At December 31, 2013														At December 31, 2013
							Impaired Loans - With														Impaired Loans - With
	Impaired Loans - With Allowance						no Allowance								Impaired Loans - With Allowance						no Allowance
	Unpaid Principal		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal		Recorded Investment		Average Recorded Investment		Interest Income Recognized		Unpaid Principal		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal		Recorded Investment		Average Recorded Investment		Interest Income Recognized
Residential:
First mortgages	$	—	$	—	$	—	$	231	$	231	$	231	$	—	$	—	$	—	$	—	$	231	$	231	$	231	$	—
HELOC’s and equity		—		—		—		129		129		128		2		—		—		—		129		129		128		2
Commercial
Secured		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Unsecured		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Commercial Real Estate:
Owner occupied		—		—		—		10,300		7,968		8,049		534		—		—		—		10,300		7,968		8,049		534
Non-owner occupied		—		—		—		2,924		2,407		2,516		108		—		—		—		2,924		2,407		2,516		108
Multi-family		386		330		3		—		—		359		28		386		330		3		—		—		359		28
Construction and Development:
Construction and Development																												.
Construction		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Improved Land		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Unimproved Land		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Consumer and Other		—		—				—		—		—		—		—		—				—		—		—		—
Total	$	386	$	330	$	3	$	13,584	$	10,735	$	11,283	$	672	$	386	$	330	$	3	$	13,584	$	10,735	$	11,283	$	672

	At June 30, 2014																At September 30, 2014
	30- 59 Days Past Due		60- 89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		Nonaccrual		30- 59 Days Past Due		60- 89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		Nonaccrual
Residential:
First mortgages	$	40	$	98	$	1,707	$	1,845	$	23,710	$	25,555	$	35	$	2,473	$	—	$	326	$	1,144	$	1,470	$	23,950	$	25,420	$	35	$	1,905
HELOC’s and equity		586		85		729		1,400		6,784		8,184		—		831		164		400		423		987		6,691		7,678		—		525
Commercial:
Secured		—		—		2		2		18,903		18,905		—		2		—		28		2		30		18,262		18,292		—		2
Unsecured		—		—		—		—		4,949		4,949		—		—		—		—		—		—		4,983		4,983		—		—
Commercial Real Estate:
Owner occupied		137		248		339		724		61,357		62,081		—		1,372		14		107		528		649		61,750		62,399		—		1,546
Non-owner occupied		4,468		326		81		4,875		37,096		41,971		—		1,034		733		325		914		1,972		42,515		44,487		—		1,863
Multi-family		430		399		—		829		13,399		14,228		—		—		—		493		—		493		13,847		14,340		—		—
Construction and Development:
Construction		566		—		—		566		4,311		4,877		—		—		—		—		—		—		2,077		2,077		—		—
Improved Land		156		—		—		156		45		201		—		—		—		—		—		—		194		194		—		—
Unimproved Land		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Consumer and Other		4		27		30		61		6,415		6,476		—		30		45		28		26		99		6,629		6,728		—		26
Total	$	6,387	$	1,183	$	2,888	$	10,458	$	176,969	$	187,427	$	35	$	5,742	$	956	$	1,707	$	3,037	$	5,700	$	180,898	$	186,598	$	35	$	5,867

	At December 31, 2013																At December 31, 2013
	30- 59 Days Past Due		60- 89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		Nonaccrual		30- 59 Days Past Due		60- 89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		Nonaccrual
Residential:
First mortgages	$	1,778	$	360	$	1,840	$	3,978	$	22,348	$	26,326	$	—	$	3,334	$	1,778	$	360	$	1,840	$	3,978	$	22,348	$	26,326	$	—	$	3,334
HELOC’s and equity		444		19		466		929		7,609		8,538		—		821		444		19		466		929		7,609		8,538		—		821
Commercial:
Secured		125		—		2		127		14,906		15,033		—		2		125		—		2		127		14,906		15,033		—		2
Unsecured		—		—		—		—		5,259		5,259		—		—		—		—		—		—		5,259		5,259		—		—
Commercial Real Estate:
Owner occupied		715		753		81		1,549		60,090		61,639		—		1,038		715		753		81		1,549		60,090		61,639		—		1,038
Non-owner occupied		38		199		286		523		43,287		43,810		—		1,550		38		199		286		523		43,287		43,810		—		1,550
Multi-family		747		—		—		747		13,984		14,731		—		330		747		—		—		747		13,984		14,731		—		330
Construction and Development:
Construction		477		—		—		477		2,542		3,019		—		—		477		—		—		477		2,542		3,019		—		—
Improved Land		—		—		—		—		242		242		—		—		—		—		—		—		242		242		—		—
Unimproved Land		—		—		—		—		365		365		—		—		—		—		—		—		365		365		—		—
Consumer and Other		6		30		45		81		6,233		6,314		—		45		6		30		45		81		6,233		6,314		—		45
Total	$	4,330	$	1,361	$	2,720	$	8,411	$	176,865	$	185,276	$	—	$	7,120	$	4,330	$	1,361	$	2,720	$	8,411	$	176,865	$	185,276	$	—	$	7,120

Each of our portfolio segments and the classes within those segments are subject to risks that could have an adverse impact on the credit quality of our loan and lease portfolio. Management has identified the most significant risks as described below which are generally similar among our segments and classes. While the list in not exhaustive, it provides a description of the risks that management has determined are the most significant.

Commercial, financial and agricultural loans—We centrally underwrite each of our commercial loans based primarily upon the customer’s ability to generate the required cash flow to service the debt in accordance with the contractual terms and conditions of the loan agreement. We endeavor to gain a complete understanding of our borrower’s businesses including the experience and background of the principals. To the extent that the loan is secured by collateral, which is a predominant feature of the majority of our commercial loans, we gain an understanding of the likely value of the collateral and what level of strength the collateral brings to the loan transaction. To the extent that the principals or other parties provide personal guarantees, we analyze the relative financial strength and liquidity of each guarantor. Common risks to each class of commercial loans include risks that are not specific to individual transactions such as general economic conditions within our markets, as well as risks that are specific to each transaction including demand for products and services, personal events such as disability or change in marital status, and reductions in the value of our collateral. Due to the concentration of loans in the metro Atlanta and Birmingham areas, we are susceptible to changes in market and economic conditions of these areas.

Consumer—The installment loan portfolio includes loans secured by personal property such as automobiles, marketable securities, other titled recreational vehicles and motorcycles, as well as unsecured consumer debt. The value of underlying collateral within this class is especially volatile due to potential rapid depreciation in values since date of loan origination in excess of principal repayment.

Commercial Real Estate—Real estate commercial loans consist of loans secured by multifamily housing, commercial non-owner and owner occupied and other commercial real estate loans. The primary risk associated with multifamily loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. High unemployment or generally weak economic conditions may result in our customer having to provide rental rate concessions to achieve adequate occupancy rates. Commercial owner-occupied and other commercial real estate loans are primarily dependent on the ability of our customers to achieve business results consistent with those projected at loan origination resulting in cash flow sufficient to service the debt. To the extent that a customer’s business results are significantly unfavorable versus the original projections, the ability for our loan to be serviced on a basis consistent with the contractual terms may be at risk. These loans are primarily secured by real property and can include other collateral such as personal guarantees, personal property, or business assets such as inventory or accounts receivable, it is possible that the liquidation of the collateral will not fully satisfy the obligation. Also, due to the concentration of loans in the metro Atlanta and Birmingham areas, we are susceptible to changes in market and economic conditions of these areas.

Single-family Residential—Real estate residential loans are to individuals and are secured by 1-4 family residential property. Significant and rapid declines in real estate values can result in residential mortgage loan borrowers having debt levels in excess of the current market value of the collateral. Such a decline in values led to unprecedented levels of foreclosures and losses during 2008-2012 within the banking industry.

Construction and Development—Real estate construction loans are highly dependent on the supply and demand for residential and commercial real estate in the markets we serve as well as the demand for newly constructed commercial space and residential homes and lots that our customers are developing. Continuing deterioration in demand could result in significant decreases in the underlying collateral values and make repayment of the outstanding loans more difficult for our customers. Real estate construction loans can experience delays in completion and cost overruns that exceed the borrower’s financial ability to complete the project. Such cost overruns can routinely result in foreclosure of partially completed and unmarketable collateral.

Risk categories—The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if appropriately classified and impairment, if any. All other loan relationships greater than $750,000 are reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as if a loan becomes past due, the Company will evaluate the loan grade.

Loans excluded from the scope of the annual review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged off. The Company uses the following definitions for risk ratings:

Special Mention Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

	At June 30, 2014										At September 30, 2014
	Total		Pass Credits		Special Mention		Substandard		Doubtful		Total		Pass Credits		Special Mention		Substandard		Doubtful
Residential:
First mortgages	$	25,555	$	23,709	$	40	$	1,739	$	67	$	25,420	$	23,949	$	—	$	1,471	$	—
HELOC’s and equity		8,184		7,030		19		994		141		7,678		6,266		558		679		175
Commercial:
Secured		18,905		18,885		—		20		—		18,292		18,292		—		—		—
Unsecured		4,949		4,949		—		—		—		4,983		4,983		—		—		—
Commercial Real Estate:
Owner occupied		62,081		49,065		8,303		4,713		—		62,399		52,046		7,437		2,916		—
Non-owner occupied		41,971		39,701		—		2,180		90		44,487		37,947		4,482		1,997		61
Multi-family		14,228		13,443		646		139		—		14,340		12,835		1,371		134		—
Construction and Development:
Construction		4,877		4,518		—		359		—		2,077		1,857		—		220		—
Improved Land		201		159		—		42		—		194		153		—		41		—
Unimproved Land		—		—		—		—		—		—		—		—		—		—
Consumer and Other		6,476		6,396		—		69		11		6,728		6,681		—		37		10
Total	$	187,427	$	167,855	$	9,008	$	10,255	$	309	$	186,598	$	165,009	$	13,848	$	7,495	$	246

During the three and ~~six~~nine months ended ~~June~~September 30, 2014 the bank modified no1 loans that ~~were~~was considered to be troubled debt restructurings. We extended the term and decreased the interest rate on the loan (dollars in thousands).

During the three and ~~six~~nine months ended ~~June~~September 30, 2013, the Bank modified 5 and 813 loans, respectively that were considered to be troubled debt restructurings. We extended the terms and decreased the interest rate on 3 and 69 loans during the three and ~~six~~nine months ended ~~June~~September 30, 2013. We decreased the interest rate on 2 ~~and 2~~ loans during the nine months ended September 30, 2013. We extended the terms on two loans during each of the three and ~~six~~nine months ended ~~June~~September 30, ~~2013.~~2013, respectively. (dollars in thousands)

	Three months ended June 30, 2013						Three months ended September 30, 2013
	Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Troubled Debt Restructurings
Residential mortgages		2	$	335	$	346		1	$	82	$	82
Commercial Real Estate:
Non-owner occupied		1		190		196		2		390		390
Total		3	$	525	$	542		3	$	472	$	472

	Six months ended June 30, 2013						Nine months ended September 30, 2013
	Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Troubled Debt Restructurings
Residential mortgages		2	$	335	$	346		3	$	417	$	423
Commercial Real Estate:
Owner occupied		2		252		258		2		252		258
Non-owner occupied		2		1,196		1,197		4		1,586		1,571
Total		6	$	1,783	$	1,801		9	$	2,255	$	2,252

There were no loans with a decreased interest rate only for the three months ended September 30, 2013.

	Six months ended June 30, 2013						Nine months ended September 30, 2013
	Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Troubled Debt Restructurings
Residential mortgages		2	$	140	$	140		2	$	140	$	140
Total		2	$	140	$	140		2	$	140	$	140

There were no loans restructured during the last twelve months that have experienced payment default subsequent to restructuring during the three and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively.

The Company considers a default as failure to comply with the restructured loan agreement. This would include the restructured loan being past due greater than 90 days, failure to comply with financial covenants, or failure to maintain current insurance coverage or real estate taxes after the loan restructure date.

The Company measures or monitors certain of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities that are elected to be accounted for under ASC guidance as well as certain assets and liabilities in which fair value is the primary basis of accounting. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value, which are in accordance with the guidance for determining the fair value of a financial asset when the market for that asset is not active.

In accordance with ASC guidance, the Company applied the following fair value hierarchy:

Level 1—Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasury and other highly liquid investments that are actively traded in over-the-counter markets.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government and agency mortgage-backed debt securities, certain derivative contracts and impaired loans.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Investment Securities Available for Sale—Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the counter markets and money market funds. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Other Real Estate Owned— Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. The fair value of other real estate owned is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. In addition, the Company may further adjust an appraised amount given its knowledge of a specific property or market.

Loans—The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered impaired. Once a loan is identified as individually impaired, management measures impairment. The fair value of impaired loans is estimated using one of several methods, including the collateral value, market value of similar debt, and discounted cash flows. Those impaired loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At ~~June~~September 30, 2014 and December 31, 2013, substantially all of the impaired loans were evaluated based upon the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. In addition, the Company may further adjust an appraised amount given its knowledge of a specific property or market. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

The following tables present financial assets measured at fair value on a recurring and nonrecurring basis and the change in fair value for those specific financial instruments in which fair value has been elected. (there were no financial liabilities measured at fair value for the periods being reported) (in thousands):

	Fair Value Measurements at June 30, 2014								Fair Value Measurements at September 30, 2014
			Quoted Prices								Quoted Prices				��
			In Active		Significant						In Active		Significant
			Markets for		Other		Significant				Markets for		Other		Significant
	Assets		Identical		Observable		Unobservable		Assets		Identical		Observable		Unobservable
	Measured at		Assets		Inputs		Inputs		Measured at		Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)		Fair Value		(Level 1)		(Level 2)		(Level 3)
Recurring Basis:
Assets
Securities available for sale:
State, county, and municipal securities	$	33,397	$	—	$	33,397	$	—	$	29,816	$	—	$	29,816	$	—
Mortgage-backed securities		92,430		—		92,430		—		90,299		—		90,299		—
Corporate securities		10,009		—		10,009		—		10,017		—		10,017		—
		135,836				135,836				130,132				130,132

Nonrecurring Basis:
Assets
Collateral Dependent Impaired loans:
Commercial Real Estate	$	10,293	$	—	$	—	$	10,293	$	7,446	$	—	$	—	$	7,446
Single-family Residential		773		—		—		773		527		—		—		527
Construction and Development		220		—		—		220		220		—		—		220
Other real estate owned		6,808		—		—		6,808		4,601		—		—		4,601
		18,094						18,094		12,794						12,794

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of ~~June~~September 30, 2014, the significant unobservable inputs used in the fair value measurements were as follows (dollars in thousands):

Fair Value at

Valuation

Unobservable

Fair Value at

Valuation

Unobservable

(Dollars in thousands)

June 30, 2014

Technique

Inputs

Range

September 30, 2014

Technique

Inputs

Range

Collateral Dependent Impaired Loans:

Commercial Real Estate

10,293

Appraised Value