Note 4. Allowance for Loan Losses

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


	September 30, 2014			December 31, 2013			September 30, 2013
Balance at beginning of year	$	10,644		$	13,075		$	13,075
Provision charged to (recovery from) operating expense		(700	)		(425	)		2,525
Loan recoveries		619			2,486			575
Loan charge-offs		(847	)		(4,492	)		(4,300	)

Balance at end of period	$	9,716		$	10,644		$	11,875

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


	September 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		(91	)		(259	)		(203	)		(43	)		(251	)		(847	)
Recoveries		79			10			340			16			174			619
Provision for (recovery of) loan losses		(832	)		185			(131	)		(58	)		136			(700	)

Ending Balance, September 30, 2014	$	1,866		$	2,911		$	4,424		$	357		$	158		$	9,716


Ending Balance:
Individually evaluated for impairment		626			133			914			36			—			1,709
Collectively evaluated for impairment		1,240			2,778			3,510			321			158			8,007

Loans:
Ending Balance		29,862			155,298			154,769			22,943			11,818			374,690

Individually evaluated for impairment		3,382			3,436			9,899			126			—			16,843
Collectively evaluated for impairment		26,480			151,862			144,870			22,817			11,818			357,847


	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


	September 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		(2,923	)		(260	)		(976	)		(31	)		(110	)		(4,300	)
Recoveries		—			47			214			177			137			575
Provision for (recovery of) loan losses		3,385			(332	)		(89	)		(359	)		(80	)		2,525

Ending Balance, September 30, 2013	$	2,943		$	3,167		$	5,312		$	395		$	58		$	11,875


Ending Balance:
Individually evaluated for impairment		743			81			201			56			—			1,081
Collectively evaluated for impairment		2,200			3,086			5,111			339			58			10,794

Loans:
Ending Balance		34,404			142,446			156,691			21,316			11,970			366,827

Individually evaluated for impairment		7,217			3,439			6,690			244			—			17,590
Collectively evaluated for impairment		27,187			139,007			150,001			21,072			11,970			349,237

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


	September 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	$	3,588	$	2,129	$	1,253	$	3,382	$	626	$	6,289	$	34
Secured by 1-4 family		4,384		2,686		750		3,436		133		3,200		108
Other real estate loans		10,453		7,499		2,400		9,899		914		10,635		188
Commercial and industrial		131		8		118		126		36		171		1
Consumer and other loans		—		—		—		—		—		—		—

Total	$	18,556	$	12,322	$	4,521	$	16,843	$	1,709	$	20,295	$	331


	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


	September 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	$	9,441	$	5,406	$	1,811	$	7,217	$	743	$	4,469	$	217
Secured by 1-4 family		4,339		2,533		906		3,439		81		2,673		105
Other real estate loans		7,855		4,883		1,807		6,690		201		6,817		197
Commercial and industrial		245		16		228		244		56		795		9
Consumer and other loans		—		—		—		—		—		—		—

Total	$	21,880	$	12,838	$	4,752	$	17,590	$	1,081	$	14,754	$	528

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 September 30, 2014, loans classified as troubled debt restructurings (TDRs) and included in impaired loans in the disclosure above totaled $1.9 million. At September 30, 2014, $796 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 nine month period ended September 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 September 30, 2014 and the three and nine month periods ended September 30, 2013.

For the three and nine months ended September 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.