Note 4.

Allowance for Loan Losses

Transactions in the allowance for loan losses for the years ended December 31, 2013, 2012 and 2011 were as follows:


	(in thousands)
	2013			2012			2011
Balance at beginning of year	$	13,075		$	12,937		$	16,036
Provision for (recovery of) loan losses		(425	)		3,555			12,380
Loan recoveries		2,486			376			310
Loan charge-offs		(4,492	)		(3,793	)		(15,789	)

Balance at end of year	$	10,644		$	13,075		$	12,937

The following tables present, as of December 31, 2013, 2012 and 2011, the total allowance for loan losses, the allowance by impairment methodology and loans by impairment methodology.


	December 31, 2013 (in thousands)
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2012	$	2,481		$	3,712		$	6,163		$	608		$	111		$	13,075
Charge-offs		(2,962	)		(260	)		(1,070	)		(37	)		(163	)		(4,492	)
Recoveries		—			823			1,304			179			180			2,486
Provision for (recovery of) loan losses		3,191			(1,300	)		(1,979	)		(308	)		(29	)		(425	)

Ending Balance, December 31, 2013	$	2,710		$	2,975		$	4,418		$	442		$	99		$	10,644


Ending Balance:
Individually evaluated for impairment		882			190			263			44			—			1,379
Collectively evaluated for impairment		1,828			2,785			4,155			398			99			9,265

Loans:
Ending Balance		34,060			141,961			145,968			22,803			12,301			357,093

Individually evaluated for impairment		6,862			3,431			11,143			258			—			21,694
Collectively evaluated for impairment		27,198			138,530			134,825			22,545			12,301			335,399


	December 31, 2012 (in thousands)
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2011	$	2,843		$	3,766		$	5,192		$	963		$	173		$	12,937
Charge-offs		(431	)		(761	)		(2,154	)		(261	)		(186	)		(3,793	)
Recoveries		1			68			64			35			208			376
Provision for loan losses		68			639			3,061			(129	)		(84	)		3,555

Ending Balance, December 31, 2012	$	2,481		$	3,712		$	6,163		$	608		$	111		$	13,075


Ending Balance:
Individually evaluated for impairment		567			306			930			35			—			1,838
Collectively evaluated for impairment		1,914			3,406			5,233			573			111			11,237

Loans:
Ending Balance		43,524			134,964			176,573			20,718			7,815			383,594

Ending Balance:
Individually evaluated for impairment		2,516			3,776			10,528			160			—			16,980
Collectively evaluated for impairment		41,008			131,188			163,692			20,558			7,815			366,614


	December 31, 2011 (in thousands)
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for loan losses:
Beginning Balance, December 31, 2010	$	4,050		$	1,681		$	9,187		$	858		$	260		$	16,036
Charge-offs		(2,983	)		(4,369	)		(7,551	)		(348	)		(268	)		(15,789	)
Recoveries		50			6			—			3			251			310
Provision for loan losses		1,726			6,718			3,556			450			(70	)		12,380

Ending Balance, December 31, 2011	$	2,843		$	3,766		$	5,192		$	963		$	173		$	12,937


Ending Balance:
Individually evaluated for impairment		930			848			351			309			—			2,438
Collectively evaluated for impairment		1,913			2,918			4,841			654			173			10,499

Loans:
Ending Balance		48,363			122,339			181,141			29,446			11,151			392,440

Ending Balance:
Individually evaluated for impairment		7,640			6,860			10,940			480			—			25,920
Collectively evaluated for impairment		40,723			115,479			170,201			28,966			11,151			366,520

Impaired loans and the related allowance at December 31, 2013, 2012 and 2011, were as follows:


	December 31, 2013 (in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	9,086	$	4,259	$	2,603	$	6,862	$	882	$	5,397	$	204
Secured by 1-4 family		4,341		2,515		916		3,431		190		2,864		146
Other real estate loans		12,385		9,455		1,688		11,143		263		7,079		441
Commercial and industrial		260		114		144		258		44		669		14
Consumer and other loans		—		—		—		—		—		—		—

Total	$	26,072	$	16,343	$	5,351	$	21,694	$	1,379	$	16,009	$	805


	December 31, 2012 (in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	2,947	$	622	$	1,894	$	2,516	$	567	$	5,691	$	99
Secured by 1-4 family		4,706		1,690		2,086		3,776		306		4,821		163
Other real estate loans		14,861		4,886		5,642		10,528		930		10,148		276
Commercial and industrial		161		—		160		160		35		330		10
Consumer and other loans		—		—		—		—		—		—		—

Total	$	22,675	$	7,198	$	9,782	$	16,980	$	1,838	$	20,990	$	548


	December 31, 2011 (in thousands)
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
Real estate loans:
Construction and land development	$	8,106	$	3,531	$	4,109	$	7,640	$	930	$	7,077	$	367
Secured by 1-4 family		8,566		3,495		3,365		6,860		848		6,519		301
Other real estate loans		15,165		8,135		2,805		10,940		351		23,918		396
Commercial and industrial		480		—		480		480		309		660		27
Consumer and other loans		—		—		—		—		—		—		—

Total	$	32,317	$	15,161	$	10,758	$	25,920	$	2,438	$	38,174	$	1,091

The “Recorded Investment” amounts in the table above represent the outstanding principal balance on each loan represented in the table. The “Unpaid Principal Balance” represents the outstanding principal balance on each loan represented in the table plus any amounts that have been charged off on each loan and/or payments that have been applied towards principal on non-accrual loans.

As of December 31, 2013, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $1.9 million. At December 31, 2013, $829 thousand of the loans classified as TDRs were performing under the restructured terms and were not considered non-performing assets. There were $6.3 million in TDRs at December 31, 2012, $1.6 million of which were performing under the restructured terms. Modified terms under TDRs may include rate reductions, extension of terms that are considered to be below market, conversion to interest only, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. There were no loans modified under TDRs during the year ended December 31, 2013. The following table provides further information regarding loans modified under TDRs during the year ended December 31, 2012 and 2011:


	For the year ended December 31, 2012 (dollars in thousands)						For the year ended December 31, 2011 (dollars in thousands)
	Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Number of Contracts		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Real estate loans:
Construction		—	$	—	$	—		1	$	701	$	357
Secured by 1-4 family		1		183		183		4		2,667		2,667
Other real estate loans		1		2,426		2,426		14		12,829		12,855
Commercial and industrial		—		—		—		—		—		—
Consumer and other loans		—		—		—		—		—		—

Total		2	$	2,609	$	2,609		19	$	16,197	$	15,879

For the years ended December 31, 2013 and 2012, there were no troubled debt restructurings that subsequently defaulted within twelve months of the loan modification. The table below shows troubled debt restructurings that subsequently defaulted as of December 31, 2011:


	December 31, 2011 (dollars in thousands)
	Number of Contracts		Recorded investment
Real estate loans:
Construction and land development		1	$	235
Secured by 1-4 family		—		—
Other real estate loans		3		361
Commercial and industrial		—		—
Consumer and other loans		—		—

Total		4	$	596

Management defines default as over ninety days past due during the twelve month period subsequent to the modification.

Non-accrual loans excluded from impaired loan disclosure amounted to $14 thousand, $13 thousand and $103 thousand at December 31, 2013, 2012 and 2011, respectively. Had non-accrual loans performed in accordance with their original contract terms, the Company would have recognized additional interest income in the amount of $483 thousand, $510 thousand and $402 thousand during the years ended December 31, 2013, 2012 and 2011, respectively.