Note 4.

Allowance for Loan Losses

Transactions in the allowance for loan losses for the six months ended June 30, 2014 and 2013 and for the year ended December 31, 2013 were as follows (in thousands):


	June 30, 2014			December 31, 2013			June 30, 2013
Balance at beginning of year	$	10,644		$	13,075		$	13,075
Provision charged to (recovery from) operating expense		(600	)		(425	)		2,250
Loan recoveries		507			2,486			498
Loan charge-offs		(545	)		(4,492	)		(3,345	)

Balance at end of period	$	10,006		$	10,644		$	12,478

The following tables present, as of June 30, 2014, December 31, 2013 and June 30, 2013, the total allowance for loan losses, the allowance by impairment methodology and loans by impairment methodology (in thousands).


	June 30, 2014
	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		—			(104	)		(203	)		(36	)		(202	)		(545	)
Recoveries		40			7			339			3			118			507
Provision for (recovery of) loan losses		(636	)		18			(167	)		65			120			(600	)

Ending Balance, June 30, 2014	$	2,114		$	2,896		$	4,387		$	474		$	135		$	10,006


Ending Balance:
Individually evaluated for impairment		779			126			911			57			—			1,873
Collectively evaluated for impairment		1,335			2,770			3,476			417			135			8,133

Loans:
Ending Balance		32,795			151,043			146,483			24,797			12,372			367,490

Individually evaluated for impairment		6,427			3,297			9,994			164			—			19,882
Collectively evaluated for impairment		26,368			147,746			136,489			24,633			12,372			347,608


	December 31, 2013
	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


	June 30, 2013
	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		(2,308	)		(172	)		(798	)		—			(67	)		(3,345	)
Recoveries		—			6			206			176			110			498
Provision for (recovery of) loan losses		3,097			179			(561	)		(399	)		(66	)		2,250

Ending Balance, June 30, 2013	$	3,270		$	3,725		$	5,010		$	385		$	88		$	12,478


Ending Balance:
Individually evaluated for impairment		747			195			161			19			—			1,122
Collectively evaluated for impairment		2,523			3,530			4,849			366			88			11,356

Loans:
Ending Balance		44,305			145,628			159,834			19,701			8,045			377,513

Individually evaluated for impairment		3,595			1,940			5,219			90			—			10,844
Collectively evaluated for impairment		40,710			143,688			154,615			19,611			8,045			366,669

Impaired loans and the related allowance at June 30, 2014, December 31, 2013 and June 30, 2013, were as follows (in thousands):


	June 30, 2014
	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	$	8,746	$	4,022	$	2,405	$	6,427	$	779	$	6,607	$	21
Secured by 1-4 family		4,230		2,766		531		3,297		126		3,248		62
Other real estate loans		10,501		7,347		2,647		9,994		911		10,998		125
Commercial and industrial		170		11		153		164		57		185		1
Consumer and other loans		—		—		—		—		—		—		—

Total	$	23,647	$	14,146	$	5,736	$	19,882	$	1,873	$	21,038	$	209


	December 31, 2013
	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


	June 30, 2013
	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	$	6,245	$	2,678	$	917	$	3,595	$	747	$	5,059	$	20
Secured by 1-4 family		2,864		856		1,084		1,940		195		3,047		14
Other real estate loans		6,242		3,877		1,342		5,219		161		8,682		90
Commercial and industrial		91		—		90		90		19		87		2
Consumer and other loans		—		—		—		—		—		—		—

Total	$	15,442	$	7,411	$	3,433	$	10,844	$	1,122	$	16,875	$	126

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 June 30, 2014, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $2.0 million. At June 30, 2014, $978 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 six month period ended June 30, 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 June 30, 2014 and the three and six month periods ended June 30, 2013.

For the three and six months ended June 30, 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 or charged-off during the twelve month period subsequent to the modification.