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Loans and Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2017
Loans and Allowance for Loan Losses [Abstract] |
Loans and Allowance for Loan Losses | NOTE 4 – Loans and Allowance for Loan Losses The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $2.1 million as of March 31, 2017 and $2.0 million as of December 31, 2016.
| March 31, 2017 |  |  | December 31, 2016
(dollars in thousands) |  |  | Amount |  |  | % of Total |  |  |  | Amount |  |  | % of Total
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 288,300 |  |  | 23.7 | % |  | $ | 285,938 |  |  | 24.6 | %
Non-owner occupied RE |  |  | 258,449 |  |  | 21.2 | % |  |  | 239,574 |  |  | 20.6 | %
Construction |  |  | 36,889 |  |  | 3.0 | % |  |  | 33,393 |  |  | 2.9 | %
Business |  |  | 208,590 |  |  | 17.1 | % |  |  | 202,552 |  |  | 17.4 | %
Total commercial loans |  |  | 792,228 |  |  | 65.0 | % |  |  | 761,457 |  |  | 65.5 | %
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 230,695 |  |  | 18.9 | % |  |  | 215,588 |  |  | 18.5 | %
Home equity |  |  | 143,673 |  |  | 11.8 | % |  |  | 137,105 |  |  | 11.8 | %
Construction |  |  | 31,535 |  |  | 2.6 | % |  |  | 31,922 |  |  | 2.7 | %
Other |  |  | 20,549 |  |  | 1.7 | % |  |  | 17,572 |  |  | 1.5 | %
Total consumer loans |  |  | 426,452 |  |  | 35.0 | % |  |  | 402,187 |  |  | 34.5 | %
Total gross loans, net of deferred fees |  |  | 1,218,680 |  |  | 100.0 | % |  |  | 1,163,644 |  |  | 100.0 | %
Less—allowance for loan losses |  |  | (15,287 | ) |  |  |  |  |  | (14,855 | ) |  |  |
Total loans, net |  | $ | 1,203,393 |  |  |  |  |  | $ | 1,148,789 |  |  |  |
Maturities and Sensitivity of Loans to Changes in Interest Rates The information in the following tables summarizes the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.
| March 31, 2017
|  |  |  |  | After one |  |  |  |  |
|  |  | One year |  | but within |  | After five |  |  |
(dollars in thousands) |  |  | or less |  | five years |  | years |  |  | Total
Commercial |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 22,336 |  | 149,371 |  | 116,593 |  |  | 288,300
Non-owner occupied RE |  |  | 33,669 |  | 140,116 |  | 84,664 |  |  | 258,449
Construction |  |  | 9,077 |  | 11,358 |  | 16,454 |  |  | 36,889
Business |  |  | 62,790 |  | 106,729 |  | 39,071 |  |  | 208,590
Total commercial loans |  |  | 127,872 |  | 407,574 |  | 256,782 |  |  | 792,228
Consumer |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 28,754 |  | 52,367 |  | 149,574 |  |  | 230,695
Home equity |  |  | 7,391 |  | 29,494 |  | 106,788 |  |  | 143,673
Construction |  |  | 15,762 |  | 606 |  | 15,167 |  |  | 31,535
Other |  |  | 6,600 |  | 9,629 |  | 4,320 |  |  | 20,549
Total consumer loans |  |  | 58,507 |  | 92,096 |  | 275,849 |  |  | 426,452
Total gross loans, net of deferred fees |  | $ | 186,379 |  | 499,670 |  | 532,631 |  |  | 1,218,680
Loans maturing after one year with: |  |  |  |  |  |  |  |  |  |
Fixed interest rates |  |  |  |  |  |  |  |  | $ | 778,861
Floating interest rates |  |  |  |  |  |  |  |  |  | 253,440
| December 31, 2016
|  |  |  |  | After one |  |  |  |  |
|  |  | One year |  | but within |  | After five |  |  |
|  |  | or less |  | five years |  | years |  |  | Total
Commercial |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 26,062 |  | 145,419 |  | 114,457 |  |  | 285,938
Non-owner occupied RE |  |  | 34,685 |  | 142,261 |  | 62,628 |  |  | 239,574
Construction |  |  | 5,881 |  | 9,558 |  | 17,954 |  |  | 33,393
Business |  |  | 66,361 |  | 99,255 |  | 36,936 |  |  | 202,552
Total commercial loans |  |  | 132,989 |  | 396,493 |  | 231,975 |  |  | 761,457
Consumer |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 26,342 |  | 49,832 |  | 139,414 |  |  | 215,588
Home equity |  |  | 7,142 |  | 29,041 |  | 100,922 |  |  | 137,105
Construction |  |  | 14,103 |  | 627 |  | 17,192 |  |  | 31,922
Other |  |  | 5,049 |  | 9,305 |  | 3,218 |  |  | 17,572
Total consumer |  |  | 52,636 |  | 88,805 |  | 260,746 |  |  | 402,187
Total gross loan, net of deferred fees |  | $ | 185,625 |  | 485,298 |  | 492,721 |  |  | 1,163,644
Loans maturing after one year with: |  |  |  |  |  |  |  |  |  |
Fixed interest rates |  |  |  |  |  |  |  |  | $ | 733,892
Floating interest rates |  |  |  |  |  |  |  |  |  | 244,127
Portfolio Segment Methodology Commercial Commercial loans are assessed for estimated losses by grading each loan using various risk factors identified through periodic reviews. The Company applies historic grade-specific loss factors to each loan class. In the development of statistically derived loan grade loss factors, the Company observes historical losses over 20 quarters for each loan grade. These loss estimates are adjusted as appropriate based on additional analysis of external loss data or other risks identified from current economic conditions and credit quality trends. The allowance also includes an amount for the estimated impairment on nonaccrual commercial loans and commercial loans modified in a troubled debt restructuring (“TDR”), whether on accrual or nonaccrual status. Consumer For consumer loans, the Company determines the allowance on a collective basis utilizing historical losses over 20 quarters to represent its best estimate of inherent loss. The Company pools loans, generally by loan class with similar risk characteristics. The allowance also includes an amount for the estimated impairment on nonaccrual consumer loans and consumer loans modified in a TDR, whether on accrual or nonaccrual status. Credit Quality Indicators Commercial We manage a consistent process for assessing commercial loan credit quality by monitoring its loan grading trends and past due statistics. All loans are subject to individual risk assessment. Our risk categories include Pass, Special Mention, Substandard, and Doubtful, each of which is defined by banking regulatory agencies. Delinquency statistics are also an important indicator of credit quality in the establishment of our allowance for credit losses. We categorize our loans into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:
● | Pass—These loans range from minimal credit risk to average however still acceptable credit risk.
● | Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.
● | Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
● | Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.
The tables below provide a breakdown of outstanding commercial loans by risk category.
| March 31, 2017
|  | Owner |  | Non-owner |  |  |  |  |  |
(dollars in thousands) |  | occupied RE |  | occupied RE |  | Construction |  | Business |  | Total
Pass |  | $ | 282,726 |  | 253,421 |  | 36,889 |  | 198,953 |  | 771,989
Special mention |  |  | 3,164 |  | 976 |  | - |  | 3,735 |  | 7,875
Substandard |  |  | 2,410 |  | 4,052 |  | - |  | 5,902 |  | 12,364
Doubtful |  |  | - |  | - |  | - |  | - |  | -
|  | $ | 288,300 |  | 258,449 |  | 36,889 |  | 208,590 |  | 792,228
| December 31, 2016
|  |  | Owner |  | Non-owner |  |  |  |  |  |
|  |  | occupied RE |  | occupied RE |  | Construction |  | Business |  | Total
Pass |  | $ | 282,055 |  | 234,957 |  | 33,393 |  | 193,517 |  | 743,922
Special mention |  |  | 1,097 |  | 975 |  | - |  | 2,489 |  | 4,561
Substandard |  |  | 2,786 |  | 3,642 |  | - |  | 6,546 |  | 12,974
Doubtful |  |  | - |  | - |  | - |  | - |  | -
|  | $ | 285,938 |  | 239,574 |  | 33,393 |  | 202,552 |  | 761,457
The following tables provide past due information for outstanding commercial loans and include loans on nonaccrual status as well as accruing TDRs.
|  |  |  |  |  |  |  |  | March 31, 2017
|  |  | Owner |  | Non-owner |  |  |  |  |  |
(dollars in thousands) |  |  | occupied RE |  | occupied RE |  | Construction |  | Business |  | Total
Current |  | $ | 288,035 |  | 256,991 |  | 36,889 |  | 206,466 |  | 788,381
30-59 days past due |  |  | - |  | 416 |  | - |  | 651 |  | 1,067
60-89 days past due |  |  | 249 |  | - |  | - |  | 1,100 |  | 1,349
Greater than 90 Days |  |  | 16 |  | 1,042 |  | - |  | 373 |  | 1,431
|  | $ | 288,300 |  | 258,449 |  | 36,889 |  | 208,590 |  | 792,228
| December 31, 2016
|  |  | Owner |  | Non-owner |  |  |  |  |  |
|  |  | occupied RE |  | occupied RE |  | Construction |  | Business |  | Total
Current |  | $ | 284,700 |  | 238,346 |  | 33,393 |  | 200,624 |  | 757,063
30-59 days past due |  |  | 981 |  | - |  | - |  | 1,423 |  | 2,404
60-89 days past due |  |  | 257 |  | 56 |  | - |  | - |  | 313
Greater than 90 Days |  |  | - |  | 1,172 |  | - |  | 505 |  | 1,677
|  | $ | 285,938 |  | 239,574 |  | 33,393 |  | 202,552 |  | 761,457
As of March 31, 2017 and December 31, 2016, loans 30 days or more past due represented 0.45% and 0.55% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.32% and 0.38% of the Company’s total loan portfolio as of March 31, 2017 and December 31, 2016, respectively. Consumer The Company manages a consistent process for assessing consumer loan credit quality by monitoring its loan grading trends and past due statistics. All loans are subject to individual risk assessment. The Company’s categories include Pass, Special Mention, Substandard, and Doubtful, which are defined above. Delinquency statistics are also an important indicator of credit quality in the establishment of the allowance for loan losses. The tables below provide a breakdown of outstanding consumer loans by risk category.
| March 31, 2017
(dollars in thousands) |  |  | Real estate |  | Home equity |  | Construction |  | Other |  | Total
Pass |  | $ | 226,785 |  | 140,439 |  | 31,535 |  | 20,428 |  | 419,187
Special mention |  |  | 860 |  | 2,184 |  | - |  | 24 |  | 3,068
Substandard |  |  | 3,050 |  | 1,050 |  | - |  | 97 |  | 4,197
Doubtful |  |  | - |  | - |  | - |  | - |  | -
Loss |  |  | - |  | - |  | - |  | - |  | -
|  | $ | 230,695 |  | 143,673 |  | 31,535 |  | 20,549 |  | 426,452
| December 31, 2016
|  | Real estate |  | Home equity |  | Construction |  | Other |  | Total
Pass |  | $ | 211,563 |  | 134,124 |  | 31,922 |  | 17,485 |  | 395,094
Special mention |  |  | 1,064 |  | 2,109 |  | - |  | 16 |  | 3,189
Substandard |  |  | 2,961 |  | 872 |  | - |  | 71 |  | 3,904
Doubtful |  |  | - |  | - |  | - |  | - |  | -
Loss |  |  | - |  | - |  | - |  | - |  | -
|  | $ | 215,588 |  | 137,105 |  | 31,922 |  | 17,572 |  | 402,187
The following tables provide past due information for outstanding consumer loans and include loans on nonaccrual status as well as accruing TDRs.
| March 31, 2017
(dollars in thousands) |  | Real estate |  | Home equity |  | Construction |  | Other |  | Total
Current |  | $ | 229,729 |  | 143,078 |  | 31,535 |  | 20,510 |  | 424,852
30-59 days past due |  |  | 413 |  | 209 |  | - |  | 39 |  | 661
60-89 days past due |  |  | 553 |  | 129 |  | - |  | - |  | 682
Greater than 90 Days |  |  | - |  | 257 |  | - |  | - |  | 257
|  | $ | 230,695 |  | 143,673 |  | 31,535 |  | 20,549 |  | 426,452
| December 31, 2016
|  |  | Real estate |  | Home equity |  | Construction |  | Other |  | Total
Current |  | $ | 214,228 |  | 136,638 |  | 31,922 |  | 17,427 |  | 400,215
30-59 days past due |  |  | 1,041 |  | 210 |  | - |  | 126 |  | 1,377
60-89 days past due |  |  | 282 |  | - |  | - |  | 6 |  | 288
Greater than 90 Days |  |  | 37 |  | 257 |  | - |  | 13 |  | 307
|  | $ | 215,588 |  | 137,105 |  | 31,922 |  | 17,572 |  | 402,187
As of March 31, 2017 and December 31, 2016, consumer loans 30 days or more past due were 0.13% and 0.17% of total loans, respectively. Nonperforming assets The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when the Company believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Following is a summary of our nonperforming assets, including nonaccruing TDRs.
(dollars in thousands) |  | March 31, 2017 |  | December 31, 2016
Commercial |  |  |  |  |  |  |
Owner occupied RE |  | $ | 266 |  |  | 276 |
Non-owner occupied RE |  |  | 2,514 |  |  | 2,711 |
Construction |  |  | - |  |  | - |
Business |  |  | 1,616 |  |  | 686 |
Consumer |  |  |  |  |  |  |
Real estate |  |  | 541 |  |  | 550 |
Home equity |  |  | 257 |  |  | 256 |
Construction |  |  | - |  |  | - |
Other |  |  | 5 |  |  | 13 |
Nonaccruing troubled debt restructurings |  |  | 979 |  |  | 990 |
Total nonaccrual loans, including nonaccruing TDRs |  |  | 6,178 |  |  | 5,482 |
Other real estate owned |  |  | 669 |  |  | 639 |
Total nonperforming assets |  | $ | 6,847 |  |  | 6,121 |
Nonperforming assets as a percentage of: |  |  |  |  |  |  |
Total assets |  |  | 0.47 | % |  | 0.46 | %
Gross loans |  |  | 0.56 | % |  | 0.53 | %
Total loans over 90 days past due |  |  | 1,688 |  |  | 1,984 |
Loans over 90 days past due and still accruing |  |  | - |  |  | - |
Accruing troubled debt restructurings |  | $ | 5,795 |  |  | 5,675 |
Impaired Loans The table below summarizes key information for impaired loans. The Company’s impaired loans include loans on nonaccrual status and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans may have estimated impairment which is included in the allowance for loan losses. The Company’s commercial and consumer impaired loans are evaluated individually to determine the related allowance for loan losses.
|  |  |  | March 31, 2017
|  |  |  |  | Recorded investment |  |
|  |  |  |  |  |  | Impaired loans |  |
|  | Unpaid |  |  |  | with related |  | Related
|  | Principal |  | Impaired |  | allowance for |  | allowance for
(dollars in thousands) |  | Balance |  | loans |  | loan losses |  | loan losses
Commercial |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 2,271 |  | 2,220 |  | 2,220 |  | 420
Non-owner occupied RE |  |  | 7,226 |  | 3,823 |  | 1,503 |  | 410
Construction |  |  | - |  | - |  | - |  | -
Business |  |  | 4,353 |  | 3,665 |  | 2,943 |  | 1,160
Total commercial |  |  | 13,850 |  | 9,708 |  | 6,666 |  | 1,990
Consumer |  |  |  |  |  |  |  |  |
Real estate |  |  | 1,844 |  | 1,828 |  | 1,642 |  | 605
Home equity |  |  | 262 |  | 257 |  | 123 |  | 61
Construction |  |  | - |  | - |  | - |  | -
Other |  |  | 181 |  | 181 |  | 181 |  | 93
Total consumer |  |  | 2,287 |  | 2,266 |  | 1,946 |  | 759
Total |  | $ | 16,137 |  | 11,974 |  | 8,612 |  | 2,749
|  |  |  | December 31, 2016
|  |  |  | Recorded investment |  |
|  |  |  |  |  |  | Impaired loans |  |
|  | Unpaid |  |  |  | with related |  | Related
|  | Principal |  | Impaired |  | allowance for |  | allowance for
|  | Balance |  | loans |  | loan losses |  | loan losses
Commercial |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 2,284 |  | 2,243 |  | 2,224 |  | 263
Non-owner occupied RE |  |  | 7,238 |  | 4,031 |  | 1,638 |  | 457
Construction |  |  | - |  | - |  | - |  | -
Business |  |  | 3,699 |  | 2,593 |  | 1,610 |  | 1,154
Total commercial |  |  | 13,221 |  | 8,867 |  | 5,472 |  | 1,874
Consumer |  |  |  |  |  |  |  |  |
Real estate |  |  | 1,853 |  | 1,843 |  | 1,843 |  | 682
Home equity |  |  | 207 |  | 257 |  | - |  | -
Construction |  |  | - |  | - |  | - |  | -
Other |  |  | 261 |  | 190 |  | 177 |  | 88
Total consumer |  |  | 2,321 |  | 2,290 |  | 2,020 |  | 770
Total |  | $ | 15,542 |  | 11,157 |  | 7,492 |  | 2,644
The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class.
| Three months ended |  |  | Three months ended |  |  |  |  | Year ended
| March 31, 2017 |  | March 31, 2016 |  |  | December 31, 2016
|  | Average |  | Recognized |  |  | Average |  | Recognized |  |  | Average |  | Recognized
|  | recorded |  | interest |  |  | recorded |  | interest |  |  | recorded |  | interest
(dollars in thousands) |  | investment |  | income |  |  | investment |  | income |  |  | investment |  | income
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 2,232 |  | 28 |  | $ | 615 |  | 7 |  |  | 2,263 |  | 112
Non-owner occupied RE |  |  | 3,927 |  | 29 |  |  | 5,731 |  | 48 |  |  | 4,106 |  | 200
Construction |  |  | - |  | - |  |  | 1,778 |  | 30 |  |  | - |  | -
Business |  |  | 3,675 |  | 40 |  |  | 2,760 |  | 30 |  |  | 2,873 |  | 135
Total commercial |  |  | 9,834 |  | 97 |  |  | 10,884 |  | 115 |  |  | 9,242 |  | 447
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 1,836 |  | 16 |  |  | 1,119 |  | 9 |  |  | 1,854 |  | 81
Home equity |  |  | 256 |  | 1 |  |  | 195 |  | 2 |  |  | 257 |  | 2
Construction |  |  | - |  | - |  |  | - |  | - |  |  | - |  | -
Other |  |  | 182 |  | - |  |  | 257 |  | - |  |  | 203 |  | 6
Total consumer |  |  | 2,274 |  | 17 |  |  | 1,571 |  | 11 |  |  | 2,314 |  | 89
Total |  | $ | 12,108 |  | 114 |  | $ | 12,455 |  | 126 |  |  | 11,556 |  | 536
Allowance for Loan Losses The allowance for loan loss is management’s estimate of credit losses inherent in the loan portfolio. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The Company has an established process to determine the adequacy of the allowance for loan losses that assesses the losses inherent in the portfolio. While the Company attributes portions of the allowance to specific portfolio segments, the entire allowance is available to absorb credit losses inherent in the total loan portfolio. The Company’s process involves procedures to appropriately consider the unique risk characteristics of the commercial and consumer loan portfolio segments. For each portfolio segment, impairment is measured individually for each impaired loan. The Company’s allowance levels are influenced by loan volume, loan grade or delinquency status, historic loss experience and other economic conditions. The following table summarizes the activity related to the allowance for loan losses by commercial and consumer portfolio segments:
|  | Three months ended March 31, 2017
|  | Commercial |  |  | Consumer
|  | Owner |  | Non-owner |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | occupied |  | occupied |  |  |  |  |  |  | Real |  | Home |  |  |  |  |  |  |  |
(dollars in thousands) |  | RE |  | RE |  | Construction |  | Business |  | Estate |  | equity |  | Construction |  | Other |  | Total
Balance, beginning of period |  | $ | 2,843 |  |  | 2,778 |  |  | 295 |  | 4,123 |  |  | 2,780 |  |  | 1,475 |  | 252 |  | 309 |  |  | 14,855 |
Provision for loan losses |  |  | 209 |  |  | 369 |  |  | 39 |  | (321 | ) |  | (40 | ) |  | 143 |  | 37 |  | 64 |  |  | 500 |
Loan charge-offs |  |  | - |  |  | (181 | ) |  | - |  | (9 | ) |  | - |  |  | - |  | - |  | - |  |  | (190 | )
Loan recoveries |  |  | - |  |  | 1 |  |  | - |  | 30 |  |  | 90 |  |  | 1 |  | - |  | - |  |  | 122 |
Net loan charge-offs |  |  | - |  |  | (180 | ) |  | - |  | 21 |  |  | 90 |  |  | 1 |  | - |  | - |  |  | (68 | )
Balance, end of period |  | $ | 3,052 |  |  | 2,967 |  |  | 334 |  | 3,823 |  |  | 2,830 |  |  | 1,619 |  | 289 |  | 373 |  |  | 15,287 |
Net charge-offs to average loans (annualized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 0.02% |
Allowance for loan losses to gross loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1.25% |
Allowance for loan losses to nonperforming loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 247.43% |
|  | Three months ended March 31, 2016
|  | Commercial |  | Consumer
|  | Owner |  | Non-owner |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | occupied |  | occupied |  |  |  |  |  |  | Real |  | Home |  |  |  |  |  |  |  |
(dollars in thousands) |  | RE |  | RE |  | Construction |  | Business |  | Estate |  | equity |  | Construction |  | Other |  | Total
Balance, beginning of period |  | $ | 2,347 |  |  | 3,187 |  |  | 338 |  | 3,800 |  |  | 2,070 |  |  | 1,202 |  | 313 |  | 372 |  |  | 13,629 |
Provision for loan losses |  |  | 151 |  |  | 122 |  |  | 104 |  | (158 | ) |  | 248 |  |  | 61 |  | 38 |  | 59 |  |  | 625 |
Loan charge-offs |  |  | (5 | ) |  | (75 | ) |  | - |  | (36 | ) |  | (187 | ) |  | - |  | - |  | (91 | ) |  | (394 | )
Loan recoveries |  |  | - |  |  | 2 |  |  | - |  | 33 |  |  | - |  |  | - |  | - |  | 3 |  |  | 38 |
Net loan charge-offs |  |  | (5 | ) |  | (73 | ) |  | - |  | (3 | ) |  | (187 | ) |  | - |  | - |  | (88 | ) |  | (356 | )
Balance, end of period |  | $ | 2,493 |  |  | 3,236 |  |  | 442 |  | 3,639 |  |  | 2,131 |  |  | 1,263 |  | 351 |  | 343 |  |  | 13,898 |
Net charge-offs to average loans (annualized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 0.14% |
Allowance for loan losses to gross loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1.34% |
Allowance for loan losses to nonperforming loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 224.56% |
The following table disaggregates the allowance for loan losses and recorded investment in loans by impairment methodology.
|  | March 31, 2017
|  | Allowance for loan losses |  | Recorded investment in loans
(dollars in thousands) |  | Commercial |  | Consumer |  | Total |  | Commercial |  | Consumer |  | Total
Individually evaluated |  | $ | 1,990 |  | 759 |  | 2,749 |  | 9,708 |  | 2,266 |  | 11,974
Collectively evaluated |  |  | 8,230 |  | 4,308 |  | 12,538 |  | 782,520 |  | 424,186 |  | 1,206,706
Total |  | $ | 10,220 |  | 5,067 |  | 15,287 |  | 792,228 |  | 426,452 |  | 1,218,680
|  | December 31, 2016
|  | Allowance for loan losses |  | Recorded investment in loans
|  | Commercial |  | Consumer |  | Total |  | Commercial |  | Consumer |  | Total
Individually evaluated |  | $ | 1,874 |  | 770 |  | 2,644 |  | 8,867 |  | 2,290 |  | 11,157
Collectively evaluated |  |  | 8,165 |  | 4,046 |  | 12,211 |  | 752,590 |  | 399,897 |  | 1,152,487
Total |  | $ | 10,039 |  | 4,816 |  | 14,855 |  | 761,457 |  | 402,187 |  | 1,163,644

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