Allowance for Loan Losses | Allowance for Loan Losses Changes in the allowance for loan losses for the years December 31, 2017 , 2016 and 2015 were as follows: December 31, 2017 2016 2015 (in thousands) Balance, beginning $ 4,505 $ 4,959 $ 5,080 (Recovery of) loan losses (625 ) (188 ) (227 ) Recoveries added to the allowance 901 341 562 Loan losses charged to the allowance (370 ) (607 ) (456 ) Balance, ending $ 4,411 $ 4,505 $ 4,959 Nonaccrual and past due loans by class at December 31, 2017 and December 31, 2016 were as follows: December 31, 2017 (in thousands) 30 - 59 60 - 89 90 or More Total Past Current Total Loans 90 or More Nonaccrual Commercial - Non Real Estate: Commercial & Industrial $ 75 $ 10 $ 142 $ 227 $ 37,200 $ 37,427 $ — $ 594 Commercial Real Estate: Owner Occupied — — — — 127,018 127,018 — — Non-owner occupied — 368 — 368 112,529 112,897 — 767 Construction and Farmland: Residential — — — — 3,214 3,214 — — Commercial 187 — — 187 48,953 49,140 — — Consumer: Installment 17 — 2 19 10,168 10,187 — 13 Residential: Equity Lines 18 — — 18 32,820 32,838 — 44 Single family 829 572 4,060 5,461 184,911 190,372 — 4,921 Multifamily — — — — 4,095 4,095 — — All Other Loans — — — — 2,050 2,050 — — Total $ 1,126 $ 950 $ 4,204 $ 6,280 $ 562,958 $ 569,238 $ — $ 6,339 December 31, 2016 (in thousands) 30 - 59 60 - 89 90 or More Total Past Current Total Loans 90 or More Nonaccrual 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 — — — — 2,259 2,259 — — Total $ 1,301 $ 540 $ 312 $ 2,153 $ 514,972 $ 517,125 $ 8 $ 6,991 Allowance for loan losses by segment at December 31, 2017 , December 31, 2016 and December 31, 2015 were as follows: As of and for the Twelve Months Ended December 31, 2017 (in thousands) Construction Residential Commercial Commercial Consumer All Other Unallocated Total Allowance for credit losses: Beginning Balance $ 450 $ 1,992 $ 1,522 $ 235 $ 69 $ 22 $ 215 $ 4,505 Charge-Offs (19 ) (55 ) (1 ) (187 ) (59 ) (49 ) — (370 ) Recoveries 535 212 65 44 40 5 — 901 Provision (recovery) (634 ) (395 ) 41 478 19 51 (185 ) (625 ) Ending balance $ 332 $ 1,754 $ 1,627 $ 570 $ 69 $ 29 $ 30 $ 4,411 Ending balance: Individually evaluated for impairment $ — $ 195 $ 59 $ 195 $ 9 $ — $ — $ 458 Ending balance: collectively evaluated for impairment $ 332 $ 1,559 $ 1,568 $ 375 $ 60 $ 29 $ 30 $ 3,953 Loans: Ending balance $ 52,354 $ 227,305 $ 239,915 $ 37,427 $ 10,187 $ 2,050 $ — $ 569,238 Ending balance individually evaluated for impairment $ 315 $ 8,315 $ 1,904 $ 858 $ 34 $ — $ — $ 11,426 Ending balance collectively evaluated for impairment $ 52,039 $ 218,990 $ 238,011 $ 36,569 $ 10,153 $ 2,050 $ — $ 557,812 As of and for the Twelve Months Ended December 31, 2016 (in thousands) Construction Residential Commercial Commercial Consumer All Other 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 Provision (recovery) (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 $ 2,259 $ — $ 517,125 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 $ 2,259 $ — $ 503,745 As of and for the Twelve Months Ended December 31, 2015 (in thousands) Construction Residential Commercial Commercial Consumer All Other 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 (recovery) (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 $ 2,413 $ — $ 495,676 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 $ 2,413 $ — $ 481,673 Impaired loans by class at December 31, 2017 and December 31, 2016 were as follows: As of and for the Year Ended December 31, 2017 (in thousands) Unpaid Recorded Related Average Interest With no related allowance: Commercial - Non Real Estate: Commercial & Industrial $ 626 $ 304 $ — $ 342 $ 23 Commercial Real Estate: Owner Occupied 330 331 — 336 15 Non-owner occupied 805 767 — 785 20 Construction and Farmland: Residential — — — — — Commercial 362 316 — 330 28 Consumer: Installment 25 25 — 27 1 Residential: Equity lines — — — — — Single family 7,371 6,985 — 7,069 124 Multifamily — — — — — Other Loans — — — — — $ 9,519 $ 8,728 $ — $ 8,889 $ 211 With an allowance recorded: Commercial - Non Real Estate: Commercial & Industrial $ 595 $ 556 $ 195 $ 567 $ 17 Commercial Real Estate: Owner Occupied — — — — — Non-owner occupied 806 809 59 817 37 Construction and Farmland: Residential — — — — — Commercial — — — — — Consumer: Installment 9 9 9 9 — Residential: Equity lines 217 44 44 45 — Single family 1,349 1,299 151 1,315 57 Multifamily — — — — — Other Loans — — — — — $ 2,976 $ 2,717 $ 458 $ 2,753 $ 111 Total: Commercial $ 1,221 $ 860 $ 195 $ 909 $ 40 Commercial Real Estate 1,941 1,907 59 1,938 72 Construction and Farmland 362 316 — 330 28 Consumer 34 34 9 36 1 Residential 8,937 8,328 195 8,429 181 Other — — — — — Total $ 12,495 $ 11,445 $ 458 $ 11,642 $ 322 (1) Recorded investment is defined as the summation of the outstanding principal balance, accrued interest, and any partial charge-offs. As of and for the Year Ended December 31, 2016 (in thousands) Unpaid Recorded Related Average Interest 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 — — — — — Consumer: Installment — — — — — 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, and any partial charge-offs. For the year ended December 31, 2015 , the average recorded investment of impaired loans was $14.4 million . The interest income recognized on impaired loans was $404 thousand in 2015 . 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 December 31, 2017 and December 31, 2016 was as follows: As of December 31, 2017 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 33,279 $ 1,788 $ 1,748 $ 612 $ — $ — $ 37,427 Commercial Real Estate: Owner Occupied 112,649 10,893 3,146 330 — — 127,018 Non-owner occupied 82,050 17,992 12,088 767 — — 112,897 Construction and Farmland: Residential 2,614 600 — — — — 3,214 Commercial 30,093 17,069 1,663 315 — — 49,140 Residential: Equity Lines 32,495 299 — — 44 — 32,838 Single family 177,829 5,869 155 6,327 192 — 190,372 Multifamily 3,588 — 507 — — — 4,095 All other loans 2,050 — — — — — 2,050 Total $ 476,647 $ 54,510 $ 19,307 $ 8,351 $ 236 $ — $ 559,051 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 10,168 $ 19 As of December 31, 2016 (in thousands) INTERNAL RISK RATING GRADES Pass Pass Monitored Special 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 Farmland: 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 2,259 — — — — — 2,259 Total $ 429,793 $ 60,588 $ 3,865 $ 9,506 $ 696 $ — $ 504,448 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 12,641 $ 36 Three consumer loans totaling $13 thousand were rated below Pass at December 31, 2017 . One consumer loan totaling $5 thousand was rated below Pass at December 31, 2016 . |