Note 4.

Allowance for Loan Losses

Transactions in the allowance for loan losses for the three months ended March 31, 2014 and 2013 and for the year ended December 31, 2013 were as follows:


	March 31, 2014			December 31, 2013			March 31, 2013
	(in thousands)
Balance at beginning of year	$	10,644		$	13,075		$	13,075
Recovery of loan losses		(200	)		(425	)		(250	)
Loan recoveries		78			2,486			209
Loan charge-offs		(239	)		(4,492	)		(278	)

Balance at end of period	$	10,283		$	10,644		$	12,756

The following tables present, as of March 31, 2014, December 31, 2013 and March 31, 2013, the total allowance for loan losses, the allowance by impairment methodology and loans by impairment methodology.


	March 31, 2014
	(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, 2013	$	2,710		$	2,975		$	4,418	$	442		$	99		$	10,644
Charge-offs		—			(71	)		—		(36	)		(132	)		(239	)
Recoveries		—			4			1		1			72			78
Provision for (recovery of) loan losses		(458	)		42			89		36			91			(200	)

Ending Balance, March 31, 2014	$	2,252		$	2,950		$	4,508	$	443		$	130		$	10,283


Ending Balance:
Individually evaluated for impairment		862			126			505		45			—			1,538
Collectively evaluated for impairment		1,390			2,824			4,003		398			130			8,745

Loans:
Ending Balance		33,876			147,541			142,719		23,381			12,016			359,533

Individually evaluated for impairment		6,568			3,468			11,030		172			—			21,238
Collectively evaluated for impairment		27,308			144,073			131,689		23,209			12,016			338,295


	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


	March 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		—			(149	)		(82	)		—			(47	)		(278	)
Recoveries		—			2			7			139			61			209
Provision for (recovery of) loan losses		(84	)		134			(263	)		(4	)		(33	)		(250	)

Ending Balance, March 31, 2013	$	2,397		$	3,699		$	5,825		$	743		$	92		$	12,756


Ending Balance:
Individually evaluated for impairment		604			156			903			261			—			1,924
Collectively evaluated for impairment		1,793			3,543			4,922			482			92			10,832

Loans:
Ending Balance		45,783			143,765			162,742			22,743			7,306			382,339

Individually evaluated for impairment		6,098			2,959			7,654			2,509			—			19,220
Collectively evaluated for impairment		39,685			140,806			155,088			20,234			7,306			363,119

Impaired loans and the related allowance at March 31, 2014, December 31, 2013 and March 31, 2013, were as follows:


	March 31, 2014
	(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	$	8,864	$	4,018	$	2,550	$	6,568	$	862	$	6,684	$	11
Secured by 1-4 family		4,391		2,932		536		3,468		126		3,313		31
Other real estate loans		12,346		9,139		1,891		11,030		505		11,082		79
Commercial and industrial		176		13		159		172		45		200		—
Consumer and other loans		—		—		—		—		—		—		—

Total	$	25,777	$	16,102	$	5,136	$	21,238	$	1,538	$	21,279	$	121


	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


	March 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	$	6,441	$	4,988	$	1,110	$	6,098	$	604	$	4,244	$	16
Secured by 1-4 family		3,898		1,024		1,935		2,959		156		4,116		23
Other real estate loans		9,443		1,645		6,009		7,654		903		9,151		70
Commercial and industrial		2,510		—		2,509		2,509		261		185		27
Consumer and other loans		—		—		—		—		—		—		—

Total	$	22,292	$	7,657	$	11,563	$	19,220	$	1,924	$	17,696	$	136

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 March 31, 2014, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $2.2 million. At March 31, 2014, $986 thousand of the loans classified as TDRs were performing under the restructured terms and were not considered non-performing assets. There were $1.9 million in TDRs at December 31, 2013, $829 thousand 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 was one new other real estate loan modified under a TDR during the three month period ended March 31, 2014. The recorded investment for this loan prior to the modification totaled $283 thousand and the recorded investment after the modification totaled $344 thousand. There were no loans modified under TDRs during the three month period ended March 31, 2013.

For the three months ended March 31, 2014 and 2013, there were no troubled debt restructurings that subsequently defaulted within twelve months of the loan modification. Management defines default as over ninety days past due during the twelve month period subsequent to the modification.