LOANS AND ALLOWANCE FOR LOAN LOSSES | LOANS AND ALLOWANCE FOR LOAN LOSSES The Company’s loan portfolio consists of the following categories of loans as of the dates presented (dollars in thousands). December 31, 2018 2017 Construction and development $ 157,946 $ 157,667 1-4 Family 287,137 276,922 Multifamily 50,501 51,283 Farmland 21,356 23,838 Commercial real estate 627,004 537,364 Total mortgage loans on real estate 1,143,944 1,047,074 Commercial and industrial 210,924 135,392 Consumer 45,957 76,313 Total loans $ 1,400,825 $ 1,258,779 Unamortized premiums and discounts on loans, included in the total loans balances above, were $1.4 million and $2.6 million at December 31, 2018 and 2017 , respectively and unearned income on loans was $0.5 million and $0.2 million at December 31, 2018 and 2017 , respectively. Nonaccrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regard to our collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payment of principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower. The tables below provide an analysis of the aging of loans as of the dates presented (dollars in thousands). December 31, 2018 Accruing Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Nonaccrual Total Past Due & Nonaccrual Acquired Impaired Loans Total Loans Construction and development $ 157,202 $ 175 $ — $ — $ 556 $ 731 $ 13 $ 157,946 1-4 Family 284,205 1,101 41 — 1,300 2,442 490 287,137 Multifamily 50,392 109 — — — 109 — 50,501 Farmland 19,092 — — — — — 2,264 21,356 Commercial real estate 624,244 66 — — 683 749 2,011 627,004 Total mortgage loans on real estate 1,135,135 1,451 41 — 2,539 4,031 4,778 1,143,944 Commercial and industrial 209,399 221 45 — 64 330 1,195 210,924 Consumer 44,493 375 51 — 994 1,420 44 45,957 Total loans $ 1,389,027 $ 2,047 $ 137 $ — $ 3,597 $ 5,781 $ 6,017 $ 1,400,825 December 31, 2017 Accruing Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Nonaccrual Total Past Due & Nonaccrual Acquired Impaired Loans Total Loans Construction and development $ 157,123 $ 225 $ — $ — $ 34 $ 259 $ 285 $ 157,667 1-4 Family 273,321 1,396 185 56 478 2,115 1,486 276,922 Multifamily 50,271 — — — — — 1,012 51,283 Farmland 19,619 — — 58 — 58 4,161 23,838 Commercial real estate 535,014 107 89 — 67 263 2,087 537,364 Total mortgage loans on real estate 1,035,348 1,728 274 114 579 2,695 9,031 1,047,074 Commercial and industrial 133,009 977 67 — 10 1,054 1,329 135,392 Consumer 74,409 610 152 20 1,118 1,900 4 76,313 Total loans $ 1,242,766 $ 3,315 $ 493 $ 134 $ 1,707 $ 5,649 $ 10,364 $ 1,258,779 Portfolio Segment Risk Factors The following describes the risk characteristics relevant to each of the Company’s loan portfolio segments. Construction and Development. Construction and development loans are generally made for the purpose of acquisition and development of land to be improved through the construction of commercial and residential buildings. The successful repayment of these types of loans is generally dependent upon a commitment for permanent financing from the Company, or from the sale of the constructed property. These loans carry more risk than commercial or residential real estate loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. One such risk is that loan funds are advanced upon the security of the property under construction, which is of uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and to calculate related loan-to-value ratios. The Company attempts to minimize the risks associated with construction lending by limiting loan-to-value ratios as described above. In addition, as to speculative development loans, the Company generally makes such loans only to borrowers that have a positive pre-existing relationship with us. The Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations in any one business or industry. 1-4 Family. The 1-4 Family portfolio mainly consists of residential mortgage loans to consumers to finance a primary residence. The majority of these loans are secured by properties located in the Company’s market areas and carry risks associated with the creditworthiness of the borrower and changes in the value of the collateral and loan-to-value-ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, employing experienced underwriting personnel, requiring standards for appraisers, and not making subprime loans. Multifamily. Multifamily loans are normally made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk, as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer. Farmland. Farmland loans are often for land improvements related to agricultural endeavors and may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loan amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Commercial Real Estate. Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Repayment is commonly derived from the successful ongoing operations of the property. General market conditions and economic activity may impact the performance of these types of loans, including fluctuations in the value of real estate, new job creation trends, and tenant vacancy rates. The Company attempts to limit risk by analyzing a borrower’s cash flow and collateral value on an ongoing basis. The Company also typically requires personal guarantees from the principal owners of the property, supported by a review of their personal financial statements, as an additional means of mitigating our risk. The Company manages risk by avoiding concentrations in any one business or industry. Commercial and Industrial. Commercial and industrial loans receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of these loans generally comes from the generation of cash flow as the result of the borrower’s business operations. Commercial lending generally involves different risks from those associated with commercial real estate lending or construction lending. Although commercial loans may be collateralized by equipment or other business assets (including real estate, if available as collateral), the repayment of these types of loans depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the general business conditions of the local economy and the borrower’s ability to sell its products and services, thereby generating sufficient operating revenue to repay us under the agreed upon terms and conditions, are the chief considerations when assessing the risk of a commercial loan. The liquidation of collateral, if any, is considered a secondary source of repayment because equipment and other business assets may, among other things, be obsolete or of limited resale value. The Company actively monitors certain financial measures of the borrower, including advance rate, cash flow, collateral value and other appropriate credit factors. Consumer. Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include auto loans, credit cards, and other consumer installment loans. Typically, the Company evaluates the borrower’s repayment ability through a review of credit scores and an evaluation of debt to income ratios. Repayment of consumer loans depends upon key consumer economic measures and upon the borrower’s financial stability, and is more likely to be adversely affected by divorce, job loss, illness and personal hardships than repayment of other loans. A shortfall in the value of any collateral also may pose a risk of loss to the Company for these types of loans. Indirect auto loans comprised the largest component of our consumer loans, representing 67% of our total consumer loans at December 31, 2018. At December 31, 2018, the weighted average remaining term of the indirect auto loan portfolio was 2.7 years. We exited the indirect auto lending business at the end of 2015. Credit Quality Indicators Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance. Pass – Loans not meeting the criteria below are considered pass. These loans have high credit characteristics and financial strength. The borrowers at least generate profits and cash flow that are in line with peer and industry standards and have debt service coverage ratios above loan covenants and our policy guidelines. For some of these loans, a guaranty from a financially capable party mitigates characteristics of the borrower that might otherwise result in a lower grade. Special Mention – Loans classified as special mention possess some credit deficiencies that need to be corrected to avoid a greater risk of default in the future. For example, financial ratios relating to the borrower may have deteriorated. Often, a special mention categorization is temporary while certain factors are analyzed or matters addressed before the loan is re-categorized as either pass or substandard. Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower or the liquidation value of any collateral. If deficiencies are not addressed, it is likely that this category of loan will result in the Bank incurring a loss. Where a borrower has been unable to adjust to industry or general economic conditions, the borrower’s loan is often categorized as substandard. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss – Loans classified as loss are considered uncollectible and of such little value that their continuance as recorded assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these assets. The tables below present a summary of the Company’s loan portfolio by category and credit quality indicator as of the dates presented (dollars in thousands). December 31, 2018 Pass Special Mention Substandard Doubtful Total Construction and development $ 157,360 $ — $ 586 $ — $ 157,946 1-4 Family 285,692 69 1,303 73 287,137 Multifamily 50,501 — — — 50,501 Farmland 19,092 — 2,264 — 21,356 Commercial real estate 625,670 — 1,334 — 627,004 Total mortgage loans on real estate 1,138,315 69 5,487 73 1,143,944 Commercial and industrial 207,941 — 2,983 — 210,924 Consumer 44,798 167 992 — 45,957 Total loans $ 1,391,054 $ 236 $ 9,462 $ 73 $ 1,400,825 December 31, 2017 Pass Special Mention Substandard Doubtful Total Construction and development $ 157,385 $ — $ 282 $ — $ 157,667 1-4 Family 275,492 74 1,356 — 276,922 Multifamily 51,283 — — — 51,283 Farmland 19,611 2,773 1,454 — 23,838 Commercial real estate 536,741 — 623 — 537,364 Total mortgage loans on real estate 1,040,512 2,847 3,715 — 1,047,074 Commercial and industrial 134,522 — 870 — 135,392 Consumer 74,934 258 1,121 — 76,313 Total loans $ 1,249,968 $ 3,105 $ 5,706 $ — $ 1,258,779 The Company had no loans that were classified as loss at December 31, 2018 or 2017 . Loan participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets. The balances of the participations and whole loans sold were $135.4 million and $204.2 million as of December 31, 2018 and 2017 , respectively. The unpaid principal balances of these loans were approximately $187.6 million and $237.3 million at December 31, 2018 and 2017 , respectively. In the ordinary course of business, the Company makes loans to related parties including its executive officers, principal shareholders, directors and their immediate family members, as well as to companies in which these individuals are principal owners. Loans outstanding to such related party borrowers amounted to approximately $93.0 million and $31.2 million as of December 31, 2018 and December 31, 2017 , respectively. The table below shows the aggregate principal balance of loans to such related parties for the years ended December 31, 2018 and 2017 (dollars in thousands). December 31, 2018 2017 Balance, beginning of period $ 31,153 $ 19,957 New loans/changes in relationship 79,639 24,428 Repayments/changes in relationship (17,771 ) (13,232 ) Balance, end of period $ 93,021 $ 31,153 During the year ended December 31, 2018 , a company of which a director is the principal owner purchased a $0.7 million substandard loan from the Bank for $0.7 million . The substandard loan was made to a related party of the director. The Company did not record a gain or loss on the sale of the loan because the proceeds approximated the Bank’s recorded investment. Loans Acquired with Deteriorated Credit Quality The Company accounts for certain loans acquired as acquired impaired loans under ASC 310-30 due to evidence of credit deterioration at acquisition and the probability that the Company will be unable to collect all contractually required payments. The table below shows the changes in the accretable yield on acquired impaired loans for the periods presented below (dollars in thousands). For the twelve months ended December 31, 2018 2017 Balance, beginning of period $ — $ 275 Loan disposals — (303 ) Accretion to interest income — 28 Balance, end of period $ — $ — The table below shows a summary of the activity in the allowance for loan losses for the years ended December 31, 2018 , 2017 and 2016 (dollars in thousands). December 31, 2018 2017 2016 Balance, beginning of period $ 7,891 $ 7,051 $ 6,128 Provision for loan losses 2,570 1,540 2,079 Loans charged-off (1,185 ) (765 ) (1,228 ) Recoveries 178 65 72 Balance, end of period $ 9,454 $ 7,891 $ 7,051 The following tables outline the activity in the allowance for loan losses by collateral type for the years ended December 31, 2018 , 2017 and 2016 , and show both the allowance and portfolio balances for loans individually and collectively evaluated for impairment as of December 31, 2018 , 2017 and 2016 (dollars in thousands). December 31, 2018 Construction & Development Farmland 1-4 Family Multifamily Commercial Real Estate Commercial & Industrial Consumer Total Allowance for loan losses: Beginning balance $ 945 $ 60 $ 1,287 $ 332 $ 3,599 $ 693 $ 975 $ 7,891 Charge-offs (24 ) — (167 ) — — (481 ) (513 ) (1,185 ) Recoveries 12 — 29 — — 55 82 178 Provision 105 21 316 (1 ) 583 1,374 172 2,570 Ending balance $ 1,038 $ 81 $ 1,465 $ 331 $ 4,182 $ 1,641 $ 716 $ 9,454 Ending allowance balance for loans individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ 236 $ 236 Ending allowance balance for loans acquired with deteriorated credit quality — — — — — — — — Ending allowance balance for loans collectively evaluated for impairment $ 1,038 $ 81 $ 1,465 $ 331 $ 4,182 $ 1,641 $ 480 $ 9,218 Loans receivable: Balance of loans individually evaluated for impairment $ 339 $ — $ 1,177 $ — $ 761 $ 76 $ 916 $ 3,269 Balance of loans acquired with deteriorated credit quality 13 2,264 490 — 2,011 1,195 44 6,017 Balance of loans collectively evaluated for impairment 157,594 19,092 285,470 50,501 624,232 209,653 44,997 1,391,539 Total period-end balance $ 157,946 $ 21,356 $ 287,137 $ 50,501 $ 627,004 $ 210,924 $ 45,957 $ 1,400,825 December 31, 2017 Construction & Development Farmland 1-4 Family Multifamily Commercial Real Estate Commercial & Industrial Consumer Total Allowance for loan losses: Beginning balance $ 579 $ 60 $ 1,377 $ 355 $ 2,499 $ 759 $ 1,422 $ 7,051 Charge-offs — — — — — (270 ) (495 ) (765 ) Recoveries 34 — 7 — — — 24 65 Provision 332 — (97 ) (23 ) 1,100 204 24 1,540 Ending balance $ 945 $ 60 $ 1,287 $ 332 $ 3,599 $ 693 $ 975 $ 7,891 Ending allowance balance for loans individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ 304 $ 304 Ending allowance balance for loans acquired with deteriorated credit quality — — — — — — — — Ending allowance balance for loans collectively evaluated for impairment $ 945 $ 60 $ 1,287 $ 332 $ 3,599 $ 693 $ 671 $ 7,587 Loans receivable: Balance of loans individually evaluated for impairment $ 182 $ — $ 1,136 $ — $ 640 $ — $ 1,086 $ 3,044 Balance of loans acquired with deteriorated credit quality 285 4,161 1,486 1,012 2,087 1,329 4 10,364 Balance of loans collectively evaluated for impairment 157,200 19,677 274,300 50,271 534,637 134,063 75,223 1,245,371 Total period-end balance $ 157,667 $ 23,838 $ 276,922 $ 51,283 $ 537,364 $ 135,392 $ 76,313 $ 1,258,779 December 31, 2016 Construction & Development Farmland 1-4 Family Multifamily Commercial Real Estate Commercial & Industrial Consumer Total Allowance for loan losses: Beginning balance $ 644 $ 22 $ 1,213 $ 246 $ 2,156 $ 513 $ 1,334 $ 6,128 Charge-offs (27 ) — (57 ) — (526 ) — (618 ) (1,228 ) Recoveries 14 — 13 — 1 20 24 72 Provision (52 ) 38 208 109 868 226 682 2,079 Ending balance $ 579 $ 60 $ 1,377 $ 355 $ 2,499 $ 759 $ 1,422 $ 7,051 Ending allowance balance for loans individually evaluated for impairment $ — $ — $ — $ — $ — $ 136 $ 287 $ 423 Ending allowance balance for loans collectively evaluated for impairment $ 579 $ 60 $ 1,377 $ 355 $ 2,499 $ 623 $ 1,135 $ 6,628 Ending allowance balance for loans acquired with deteriorated credit quality $ — $ — $ — $ — $ — $ — $ — $ — Loans receivable: Balance of loans individually evaluated for impairment $ 645 $ — $ 1,673 $ — $ 608 $ 443 $ 1,008 $ 4,377 Balance of loans collectively evaluated for impairment 90,092 8,207 175,532 42,759 380,108 84,934 107,417 889,049 Total period-end balance $ 90,737 $ 8,207 $ 177,205 $ 42,759 $ 380,716 $ 85,377 $ 108,425 $ 893,426 Balance of loans acquired with deteriorated credit quality $ 660 $ — $ 494 $ 1,022 $ — $ — $ — $ 2,176 Impaired Loans The Company considers a loan to be impaired when, based on current information and events, the Company determines that it will not be able to collect all amounts due according to the loan agreement, including scheduled interest payments. Determination of impairment is treated the same across all classes of loans. When the Company identifies a loan as impaired, it measures the impairment based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loans is the operation or liquidation of the collateral. In these cases when foreclosure is probable, the Company uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If the Company determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), the Company recognizes impairment through an allowance estimate or a charge-off to the allowance. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual, contractual interest is credited to interest income when received, under the cash basis method. The following tables contain information on the Company’s impaired loans, which include troubled debt restructurings (“TDR”), discussed in more detail below, and nonaccrual loans individually evaluated for impairment for purposes of determining the allowance for loan losses. The average balances are calculated based on the month-end balances of the loans during the period reported (dollars in thousands). As of and for the year ended December 31, 2018 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Construction and development $ 339 $ 359 $ — $ 237 $ 13 1-4 Family 1,177 1,180 — 1,455 39 Commercial real estate 761 777 — 878 20 Total mortgage loans on real estate 2,277 2,316 — 2,570 72 Commercial and industrial 76 77 — 278 — Consumer 215 237 — 410 — Total 2,568 2,630 — 3,258 72 With related allowance recorded: Consumer 701 738 236 588 — Total 701 738 236 588 — Total loans: Construction and development 339 359 — 237 13 1-4 Family 1,177 1,180 — 1,455 39 Commercial real estate 761 777 — 878 20 Total mortgage loans on real estate 2,277 2,316 — 2,570 72 Commercial and industrial 76 77 — 278 — Consumer 916 975 236 998 — Total $ 3,269 $ 3,368 $ 236 $ 3,846 $ 72 As of and for the year ended December 31, 2017 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Construction and development $ 182 $ 202 $ — $ 338 $ 13 1-4 Family 1,136 1,169 — 1,344 76 Commercial real estate 640 654 — 620 46 Total mortgage loans on real estate 1,958 2,025 — 2,302 135 Commercial and industrial — — — 122 — Consumer 168 217 — 380 1 Total 2,126 2,242 — 2,804 136 With related allowance recorded: Consumer 918 956 304 738 1 Total 918 956 304 738 1 Total loans: Construction and development 182 202 — 338 13 1-4 Family 1,136 1,169 — 1,344 76 Commercial real estate 640 654 — 620 46 Total mortgage loans on real estate 1,958 2,025 — 2,302 135 Commercial and industrial — — — 122 — Consumer 1,086 1,173 304 1,118 2 Total $ 3,044 $ 3,198 $ 304 $ 3,542 $ 137 As of and for the year ended December 31, 2016 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Construction and development $ 645 $ 661 $ — $ 1,024 $ 90 1-4 Family 1,673 1,701 — 1,910 66 Commercial real estate 608 623 — 1,742 7 Total mortgage loans on real estate 2,926 2,985 — 4,676 163 Commercial and industrial 15 16 — 1,509 — Consumer 153 166 — 399 11 Total 3,094 3,167 — 6,584 174 With related allowance recorded: Commercial and industrial 428 430 136 144 — Consumer 855 873 287 506 6 Total 1,283 1,303 423 650 6 Total loans: Construction and development 645 661 — 1,024 90 1-4 Family 1,673 1,701 — 1,910 66 Commercial real estate 608 623 — 1,742 7 Total mortgage loans on real estate 2,926 2,985 — 4,676 163 Commercial and industrial 443 446 136 1,653 — Consumer 1,008 1,039 287 905 17 Total $ 4,377 $ 4,470 $ 423 $ 7,234 $ 180 Troubled Debt Restructurings In situations where, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a TDR. The Company strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before such loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases in which the Company grants the borrower new terms that provide for a reduction of either interest or principal, or otherwise include a concession, the Company identifies the loan as a TDR and measures any impairment on the restructuring as previously noted for impaired loans. Loans classified as TDRs, consisting of 24 credits, totaled approximately $2.2 million at December 31, 2018 , compared to 18 credits totaling $1.6 million at December 31, 2017 . Sixteen of the restructured loans were considered TDRs due to modification of terms through adjustments to maturity, seven of the restructured loans were considered TDRs due to a reduction in the interest rate to a rate lower than the current market rate, and one restructured loan was considered a TDR due to forgiveness of interest due on the loan. At December 31, 2018 , three of the TDRs were in default of their modified terms and are included in nonaccrual loans. At December 31, 2017 , all restructured loans were performing under their modified terms. The Company individually evaluates each TDR for allowance purposes, primarily based on collateral value, and excludes these loans from the loan population that is collectively evaluated for impairment (ASC 450). At December 31, 2018 and 2017 , there were no available balances on loans classified as TDRs that the Company was committed to lend. The table below presents the TDR pre- and post-modification outstanding recorded investments by loan categories for loans modified during the years ended December 31, 2018 and 2017 (dollars in thousands). December 31, 2018 December 31, 2017 Troubled debt restructurings 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 Construction and development 2 $ 403 $ 403 — $ — $ — 1-4 Family 8 587 587 — — — Commercial and industrial 2 12 12 — — — Consumer — — — 1 5 5 $ 1,002 $ 1,002 $ 5 $ 5 There were three loans modified under troubled debt restructurings during the previous twelve month period that subsequently defaulted during the year ended December 31, 2018 . Of these three loans with a total recorded investment of $0.6 million , two loans, or $0.4 million , are construction and development and one loan, or $0.2 million , is 1-4 family. The following is a summary of accruing and nonaccrual TDRs and the related loan losses by portfolio type as of the dates presented (dollars in thousands). TDRs Accruing Nonaccrual Total Related Allowance December 31, 2018 Construction and development $ 239 $ 284 $ 523 $ — 1-4 Family 919 190 1,109 — Commercial real estate 78 468 546 — Commercial and industrial 12 — 12 — Total $ 1,248 $ 942 $ 2,190 $ — December 31, 2017 Construction and development $ 154 $ — $ 154 $ — 1-4 Family 889 — 889 — Commercial and industrial 573 — 573 — Consumer 5 — 5 — Total $ 1,621 $ — $ 1,621 $ — The table below includes the average recorded investment and interest income recognized for TDRs for the years ended December 31, 2018 , 2017 and 2016 (dollars in thousands). TDRs Average Recorded Investment Interest Income Recognized December 31, 2018 Construction and development $ 308 $ 13 1-4 Family 948 45 Commercial real estate 553 20 Commercial and industrial 8 — Consumer 2 — Total $ 1,819 $ 78 December 31, 2017 Construction and development $ 159 $ 13 1-4 Family 1,255 76 Commercial real estate 592 46 Consumer 2 2 Total $ 2,008 $ 137 December 31, 2016 Construction and development $ 171 $ 13 1-4 Family 1,614 66 Commercial real estate 617 7 Total $ 2,402 $ 86 |