Allowance For Loan Losses | NOTE 5. Allowance for Loan Losses Changes in the allowance for loan losses for the three months ended March 31, 2017 and 2016 and the year ended December 31, 2016 were as follows: Three Months Ended Year Ended Three Months Ended March 31, December 31, March 31, 2017 2016 2016 (in thousands) Balance, beginning $ 4,505 $ 4,959 $ 4,959 (Recovery of) provision for loan losses (527 ) (188 ) 79 Recoveries added to the allowance 502 341 38 Loan losses charged to the allowance (62 ) (607 ) (73 ) Balance, ending $ 4,418 $ 4,505 $ 5,003 Nonaccrual and past due loans by class at March 31, 2017 and December 31, 2016 were as follows: March 31, 2017 (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 $ 55 $ — $ — $ 55 $ 33,227 $ 33,282 $ — $ 258 Commercial Real Estate: Owner Occupied 202 — — 202 115,493 115,695 — 423 Non-owner occupied 198 — 183 381 94,337 94,718 — 370 Construction and Farmland: Residential — — — — 2,711 2,711 — — Commercial — — — — 31,183 31,183 — — Consumer: Installment 44 7 — 51 11,785 11,836 — 9 Residential: Equity Lines 33 — — 33 31,577 31,610 — 111 Single family 1,271 155 4,295 5,721 187,110 192,831 — 5,163 Multifamily — — — — 3,498 3,498 — — All Other Loans — — — — 1,994 1,994 — — Total $ 1,803 $ 162 $ 4,478 $ 6,443 $ 512,915 $ 519,358 $ — $ 6,334 December 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 Past Due Still Accruing Nonaccrual Loans Commercial - Non Real Estate: Commercial & Industrial $ 69 $ 49 $ — $ 118 $ 30,223 $ 30,341 $ — $ 278 Commercial Real Estate: Owner Occupied 150 384 — 534 114,820 115,354 — 431 Non-owner occupied — 54 135 189 92,982 93,171 — 1,066 Construction and Farmland: Residential 50 — — 50 4,627 4,677 — — Commercial 499 — — 499 26,615 27,114 — — Consumer: Installment 23 2 11 36 12,641 12,677 8 8 Residential: Equity Lines 66 — — 66 31,240 31,306 — 132 Single family 444 51 166 661 195,999 196,660 — 5,076 Multifamily — — — — 3,566 3,566 — — All Other Loans — — — — 2,076 2,076 — — Total $ 1,301 $ 540 $ 312 $ 2,153 $ 514,789 $ 516,942 $ 8 $ 6,991 Allowance for loan losses by segment at March 31, 2017 and December 31, 2016 were as follows: As of and for the Three Months Ended March 31, 2017 (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 $ 450 $ 1,992 $ 1,522 $ 235 $ 69 $ 22 $ 215 $ 4,505 Charge-Offs — — — (41 ) (17 ) (4 ) — (62 ) Recoveries 482 6 1 1 11 1 — 502 (Recovery of) provision for loan losses (519 ) (80 ) 2 72 1 1 (4 ) (527 ) Ending balance $ 413 $ 1,918 $ 1,525 $ 267 $ 64 $ 20 $ 211 $ 4,418 Ending balance: Individually evaluated for impairment $ — $ 252 $ 100 $ 14 $ — $ — $ — $ 366 Ending balance: collectively evaluated for impairment $ 413 $ 1,666 $ 1,425 $ 253 $ 64 $ 20 $ 211 $ 4,052 Loans: Ending balance $ 33,894 $ 227,939 $ 210,413 $ 33,282 $ 11,836 $ 1,994 $ — $ 519,358 Ending balance individually evaluated for impairment $ 338 $ 8,993 $ 2,152 $ 536 $ 9 $ — $ — $ 12,028 Ending balance collectively evaluated for impairment $ 33,556 $ 218,946 $ 208,261 $ 32,746 $ 11,827 $ 1,994 $ — $ 507,330 As of and for the Twelve Months Ended December 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 — (535 ) — — (30 ) (42 ) — (607 ) Recoveries 144 124 8 11 49 5 — 341 (Recovery of) provision for loan losses (469 ) 81 246 13 (59 ) 6 (6 ) (188 ) Ending balance $ 450 $ 1,992 $ 1,522 $ 235 $ 69 $ 22 $ 215 $ 4,505 Ending balance: Individually evaluated for impairment $ — $ 268 $ 102 $ 15 $ — $ — $ — $ 385 Ending balance: collectively evaluated for impairment $ 450 $ 1,724 $ 1,420 $ 220 $ 69 $ 22 $ 215 $ 4,120 Loans: Ending balance $ 31,791 $ 231,532 $ 208,525 $ 30,341 $ 12,677 $ 2,076 $ — $ 516,942 Ending balance individually evaluated for impairment $ 1,320 $ 8,608 $ 2,864 $ 581 $ 7 $ — $ — $ 13,380 Ending balance collectively evaluated for impairment $ 30,471 $ 222,924 $ 205,661 $ 29,760 $ 12,670 $ 2,076 $ — $ 503,562 Impaired loans by class as of and for the periods ended March 31, 2017 and December 31, 2016 were as follows: As of and for the Three Months Ended March 31, 2017 (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 $ 278 $ 261 $ — $ 279 $ 4 Commercial Real Estate: Owner Occupied 867 761 — 762 4 Non-owner occupied 511 371 — 371 — Construction and Farmland: Residential — — — — — Commercial 338 339 — 343 7 Consumer: Installment 10 9 — 10 — Residential: Equity lines — — — — — Single family 7,720 7,491 — 7,510 29 Multifamily — — — — — Other Loans — — — — — $ 9,724 $ 9,232 $ — $ 9,275 $ 44 With an allowance recorded: Commercial - Non Real Estate: Commercial & Industrial $ 275 $ 275 $ 14 $ 280 $ 3 Commercial Real Estate: Owner Occupied 202 203 37 203 1 Non-owner occupied 819 822 63 824 9 Construction and Farmland: Residential — — — — — Commercial — — — — — Residential: Equity lines 456 111 52 113 Single family 1,446 1,401 200 1,406 15 Multifamily — — — — — Other Loans — — — — — $ 3,198 $ 2,812 $ 366 $ 2,826 $ 28 Total: Commercial $ 553 $ 536 $ 14 $ 559 $ 7 Commercial Real Estate 2,399 2,157 100 2,160 14 Construction and Farmland 338 339 — 343 7 Consumer 10 9 — 10 — Residential 9,622 9,003 252 9,029 44 Other — — — — — Total $ 12,922 $ 12,044 $ 366 $ 12,101 $ 72 (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, 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 $ 311 $ 299 $ — $ 356 $ 21 Commercial Real Estate: Owner Occupied 869 772 — 778 15 Non-owner occupied 1,298 1,066 — 1,137 13 Construction and Farmland: Residential — — — — — Commercial 1,320 1,324 — 1,358 75 Consumer: Installment 8 8 — 9 — Residential: Equity lines 17 17 — 18 — Single family 7,072 6,849 — 6,930 170 Multifamily — — — — — Other Loans — — — — — $ 10,895 $ 10,335 $ — $ 10,586 $ 294 With an allowance recorded: Commercial - Non Real Estate: Commercial & Industrial $ 283 $ 283 $ 15 $ 298 $ 14 Commercial Real Estate: Owner Occupied 203 203 37 205 10 Non-owner occupied 824 826 65 834 37 Construction and Farmland: Residential — — — — — Commercial — — — — — Residential: Equity lines 458 115 56 120 — Single family 1,678 1,638 212 1,676 60 Multifamily — — — — — Other Loans — — — — — $ 3,446 $ 3,065 $ 385 $ 3,133 $ 121 Total: Commercial $ 594 $ 582 $ 15 $ 654 $ 35 Commercial Real Estate 3,194 2,867 102 2,954 75 Construction and Farmland 1,320 1,324 — 1,358 75 Consumer 8 8 — 9 — Residential 9,225 8,619 268 8,744 230 Other — — — — — Total $ 14,341 $ 13,400 $ 385 $ 13,719 $ 415 (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. Consumer loans are evaluated for collection based on payment performance. 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, 2017 and December 31, 2016 was as follows: As of March 31, 2017 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special Mention Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 28,711 $ 4,257 $ — $ 314 $ — $ — $ 33,282 Commercial Real Estate: Owner Occupied 99,193 15,741 — 338 423 — 115,695 Non-owner occupied 60,216 33,699 — 803 — — 94,718 Construction and Farmland: Residential 2,661 50 — — — — 2,711 Commercial 21,397 9,448 — 338 — — 31,183 Residential: Equity Lines 31,115 384 — — 111 — 31,610 Single family 177,646 7,547 538 6,953 147 — 192,831 Multifamily 3,498 — — — — — 3,498 All other loans 1,994 — — — — — 1,994 Total $ 426,431 $ 71,126 $ 538 $ 8,746 $ 681 $ — $ 507,522 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 11,785 $ 51 As of December 31, 2016 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special Mention Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 25,951 $ 3,858 $ 170 $ 362 $ — $ — $ 30,341 Commercial Real Estate: Owner Occupied 99,365 13,050 1,766 742 431 — 115,354 Non-owner occupied 60,259 30,515 891 1,506 — — 93,171 Construction and Farm land: Residential 4,627 50 — — — — 4,677 Commercial 21,105 5,349 314 346 — — 27,114 Residential: Equity Lines 30,791 382 — 17 116 — 31,306 Single family 182,404 6,850 724 6,533 149 — 196,660 Multifamily 3,032 534 — — — — 3,566 All other loans 2,076 — — — — — 2,076 Total $ 429,610 $ 60,588 $ 3,865 $ 9,506 $ 696 $ — $ 504,265 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 12,641 $ 36 |