Allowance For Loan Losses | NOTE 5. Allowance for Loan Losses Changes in the allowance for loan losses for the three months ended March 31, 2016 and 2015 and the year ended December 31, 2015 were as follows: Three Months Ended Year Ended Three Months Ended March 31, December 31, March 31, 2016 2015 2015 (in thousands) Balance, beginning $ 4,959 $ 5,080 $ 5,080 Provision for (recovery of) loan losses 79 (227 ) 133 Recoveries added to the allowance 38 562 90 Loan losses charged to the allowance (73 ) (456 ) (131 ) Balance, ending $ 5,003 $ 4,959 $ 5,172 Nonaccrual and past due loans by class at March 31, 2016 and December 31, 2015 were as follows: March 31, 2016 (in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans 90 or More Days Past Due Still Accruing Nonaccrual Loans Commercial - Non Real Estate: Commercial & Industrial $ 111 $ 75 $ — $ 186 $ 32,661 $ 32,847 $ — $ 294 Commercial Real Estate: Owner Occupied 849 — — 849 114,092 114,941 — 1,065 Non-owner occupied 775 — — 775 75,271 76,046 — 931 Construction and Farmland: Residential 50 — — 50 8,622 8,672 — — Commercial 25 — — 25 31,350 31,375 — 299 Consumer: Installment 62 11 — 73 13,137 13,210 — — Residential: Equity Lines 407 19 24 450 33,661 34,111 24 291 Single family 6,588 338 791 7,717 185,550 193,267 — 1,576 Multifamily — — — — 3,928 3,928 — — All Other Loans — — — — 2,636 2,636 — — Total $ 8,867 $ 443 $ 815 $ 10,125 $ 500,908 $ 511,033 $ 24 $ 4,456 December 31, 2015 (in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans 90 or More Past Due Still Accruing Nonaccrual Loans Commercial - Non Real Estate: Commercial & Industrial $ 1 $ — $ — $ 1 $ 29,365 $ 29,366 $ — $ 475 Commercial Real Estate: Owner Occupied 623 142 — 765 108,942 109,707 — 1,614 Non-owner occupied — 55 746 801 64,664 65,465 — 948 Construction and Farmland: Residential 50 — — 50 8,509 8,559 — — Commercial 356 72 — 428 32,582 33,010 — 310 Consumer: Installment 43 3 — 46 13,484 13,530 — — Residential: Equity Lines 175 — — 175 34,246 34,421 — 276 Single family 2,123 209 1,296 3,628 191,602 195,230 307 1,662 Multifamily — — — — 3,975 3,975 — — All Other Loans — — — — 2,310 2,310 — — Total $ 3,371 $ 481 $ 2,042 $ 5,894 $ 489,679 $ 495,573 $ 307 $ 5,285 Allowance for loan losses by segment at March 31, 2016 and December 31, 2015 were as follows: As of and for the Three Months Ended March 31, 2016 (in thousands) Construction and Farmland Residential Commercial Real Estate Commercial - Non Real Estate Consumer All Other Loans Unallocated Total Allowance for credit losses: Beginning Balance $ 775 $ 2,322 $ 1,268 $ 211 $ 109 $ 53 $ 221 $ 4,959 Charge-Offs — (60 ) — — (5 ) (8 ) — (73 ) Recoveries 13 2 2 5 15 1 — 38 Provision (176 ) 5 193 18 (20 ) 21 38 79 Ending balance $ 612 $ 2,269 $ 1,463 $ 234 $ 99 $ 67 $ 259 $ 5,003 Ending balance: Individually evaluated for impairment $ 13 $ 385 $ 143 $ 5 $ — $ — $ — $ 546 Ending balance: collectively evaluated for impairment $ 599 $ 1,884 $ 1,320 $ 229 $ 99 $ 67 $ 259 $ 4,457 Loans: Ending balance $ 40,047 $ 231,306 $ 190,987 $ 32,847 $ 13,210 $ 2,636 $ — $ 511,033 Ending balance individually evaluated for impairment $ 1,374 $ 6,724 $ 3,974 $ 647 $ — $ — $ — $ 12,719 Ending balance collectively evaluated for impairment $ 38,673 $ 224,582 $ 187,013 $ 32,200 $ 13,210 $ 2,636 $ — $ 498,314 As of and for the Twelve Months Ended December 31, 2015 (in thousands) Construction and Farmland Residential Commercial Real Estate Commercial - Non Real Estate Consumer All Other Loans Unallocated Total Allowance for credit losses: Beginning Balance $ 951 $ 1,977 $ 1,347 $ 464 $ 103 $ 42 $ 196 $ 5,080 Charge-Offs (166 ) (152 ) (47 ) — (66 ) (25 ) — (456 ) Recoveries 75 142 115 181 33 16 — 562 Provision (85 ) 355 (147 ) (434 ) 39 20 25 (227 ) Ending balance $ 775 $ 2,322 $ 1,268 $ 211 $ 109 $ 53 $ 221 $ 4,959 Ending balance: Individually evaluated for impairment $ 10 $ 423 $ 141 $ 2 $ — $ — $ — $ 576 Ending balance: collectively evaluated for impairment $ 765 $ 1,899 $ 1,127 $ 209 $ 109 $ 53 $ 221 $ 4,383 Loans: Ending balance $ 41,569 $ 233,626 $ 175,172 $ 29,366 $ 13,530 $ 2,310 $ — $ 495,573 Ending balance individually evaluated for impairment $ 1,392 $ 7,209 $ 4,555 $ 847 $ — $ — $ — $ 14,003 Ending balance collectively evaluated for impairment $ 40,177 $ 226,417 $ 170,617 $ 28,519 $ 13,530 $ 2,310 $ — $ 481,570 Impaired loans by class as of and for the periods ended March 31, 2016 and December 31, 2015 were as follows: As of and for the Three Months Ended March 31, 2016 (in thousands) Unpaid Principal Balance Recorded Investment (1) Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance: Commercial - Non Real Estate: Commercial & Industrial $ 396 $ 343 $ — $ 383 $ 3 Commercial Real Estate: Owner Occupied 1,527 1,412 — 1,420 4 Non-owner occupied 1,165 1,075 — 1,079 3 Construction and Farmland: Residential — — — — — Commercial 401 369 — 373 2 Residential: Equity lines 149 143 — 143 — Single family 3,725 3,613 — 3,627 29 Multifamily — — — — — Other Loans — — — — — $ 7,363 $ 6,955 $ — $ 7,025 $ 41 With an allowance recorded: Commercial - Non Real Estate: Commercial & Industrial $ 305 $ 305 $ 5 $ 310 $ 3 Commercial Real Estate: Owner Occupied 206 207 38 207 2 Non-owner occupied 1,282 1,286 105 1,290 16 Construction and Farmland: Residential — — — — — Commercial 1,005 1,009 13 1,012 10 Residential: Equity lines 549 213 83 213 1 Single family 2,799 2,772 302 2,781 21 Multifamily — — — — — Other Loans — — — — — $ 6,146 $ 5,792 $ 546 $ 5,813 $ 53 Total: Commercial $ 701 $ 648 $ 5 $ 693 $ 6 Commercial Real Estate 4,180 3,980 143 3,996 25 Construction and Farmland 1,406 1,378 13 1,385 12 Residential 7,222 6,741 385 6,764 51 Other — — — — — Total $ 13,509 $ 12,747 $ 546 $ 12,838 $ 94 (1) Recorded investment is defined as the summation of the outstanding principal balance, accrued interest, net deferred loan fees or costs, and any partial charge-offs. As of and for the Twelve Months End December 31, 2015 (in thousands) Unpaid Principal Balance Recorded Investment (1) Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance: Commercial - Non Real Estate: Commercial & Industrial $ 747 $ 534 $ — $ 749 $ 18 Commercial Real Estate: Owner Occupied 2,146 1,964 — 1,999 19 Non-owner occupied 1,174 1,093 — 1,108 15 Construction and Farmland: Residential — — — — — Commercial 337 310 — 325 — Residential: Equity lines 149 145 — 145 5 Single family 4,407 4,288 — 4,245 126 Multifamily — — — — — Other Loans — — — — — $ 8,960 $ 8,334 $ — $ 8,571 $ 183 With an allowance recorded: Commercial - Non Real Estate: Commercial & Industrial $ 313 $ 313 $ 2 $ 328 $ 15 Commercial Real Estate: Owner Occupied 207 208 39 210 10 Non-owner occupied 1,291 1,295 102 1,311 69 Construction and Farmland: Residential — — — — — Commercial 1,081 1,085 10 1,109 48 Residential: Equity lines 551 216 86 221 3 Single family 2,596 2,575 337 2,600 76 Multifamily — — — — — Other Loans — — — — — $ 6,039 $ 5,692 $ 576 $ 5,779 $ 221 Total: Commercial $ 1,060 $ 847 $ 2 $ 1,077 $ 33 Commercial Real Estate 4,818 4,560 141 4,628 113 Construction and Farmland 1,418 1,395 10 1,434 48 Residential 7,703 7,224 423 7,211 210 Other — — — — — Total $ 14,999 $ 14,026 $ 576 $ 14,350 $ 404 (1) Recorded investment is defined as the summation of the outstanding principal balance, accrued interest, net deferred loan fees or costs, and any partial charge-offs. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is in nonaccrual status, all payments are applied to principal under the cost-recovery method. For financial statement purposes, the recorded investment in nonaccrual loans is the actual principal balance reduced by payments that would otherwise have been applied to interest. When reporting information on these loans to the applicable customers, the unpaid principal balance is reported as if payments were applied to principal and interest under the original terms of the loan agreements. Therefore, the unpaid principal balance reported to the customer would be higher than the recorded investment in the loan for financial statement purposes. When the ultimate collectability of the total principal of the impaired loan is not in doubt and the loan is in nonaccrual status, contractual interest is credited to interest income when received under the cash-basis method. The Company uses a rating system for evaluating the risks associated with non-consumer loans. Consumer loans are not evaluated for risk unless the characteristics of the loan fall within classified categories. Descriptions of these ratings are as follows: Pass Pass loans exhibit acceptable history of profits, cash flow ability and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower in an as agreed manner. Pass Monitored Pass monitored loans may be experiencing income and cash volatility, inconsistent operating trends, nominal liquidity and/or a leveraged balance sheet. A higher level of supervision is required for these loans as the potential for a negative event could impact the borrower’s ability to repay the loan. Special Mention Special mention loans exhibit negative trends and potential weakness that, if left uncorrected, may negatively affect the borrower’s ability to repay its obligations. The risk of default is not imminent and the borrower still demonstrates sufficient financial strength to service debt. Substandard Substandard loans exhibit well defined weaknesses resulting in a higher probability of default. The borrowers exhibit adverse financial trends and a diminishing ability or willingness to service debt. Doubtful Doubtful loans exhibit all of the characteristics inherent in substandard loans; however given the severity of weaknesses, the collection of 100% of the principal is unlikely under current conditions. Loss Loss loans are considered uncollectible over a reasonable period of time and of such little value that its continuance as a bankable asset is not warranted. Credit quality information by class at March 31, 2016 and December 31, 2015 was as follows: As of March 31, 2016 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special Mention Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 28,946 $ 3,524 $ 19 $ 358 $ — $ — $ 32,847 Commercial Real Estate: Owner Occupied 91,337 14,226 7,537 1,388 453 — 114,941 Non-owner occupied 51,053 22,373 1,238 1,382 — — 76,046 Construction and Farmland: Residential 8,672 — — — — — 8,672 Commercial 19,278 11,705 — 392 — — 31,375 Residential: Equity Lines 30,479 3,342 — 162 128 — 34,111 Single family 167,011 17,872 3,959 4,006 419 — 193,267 Multifamily 3,899 — 29 — — — 3,928 All other loans 2,595 41 — — — — 2,636 Total $ 403,270 $ 73,083 $ 12,782 $ 7,688 $ 1,000 $ — $ 497,823 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 13,137 $ 73 As of December 31, 2015 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special Mention Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 25,375 $ 3,175 $ 335 $ 364 $ 117 $ — $ 29,366 Commercial Real Estate: Owner Occupied 90,230 12,553 4,521 1,416 987 — 109,707 Non-owner occupied 42,988 21,072 — 1,405 — — 65,465 Construction and Farm land: Residential 8,559 — — — — — 8,559 Commercial 20,391 10,886 1,395 338 — — 33,010 Residential: Equity Lines 30,267 3,878 — 145 131 — 34,421 Single family 170,168 19,086 950 4,600 426 — 195,230 Multifamily 3,975 — — — — — 3,975 All other loans 2,265 45 — — — — 2,310 Total $ 394,218 $ 70,695 $ 7,201 $ 8,268 $ 1,661 $ — $ 482,043 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 13,484 $ 46 |