Note 7 – Allowance for Loan Losses

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years. Management believes the five-year historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed. The actual allowance for loan loss activity is provided below.


	December 31			December 31		December 31
	2014			2013		2012
Balance at beginning of the period	$	15,992		$	18,270	$	18,882
Loans charged-off:
Commercial
Owner occupied real estate		40			138		418
Non owner occupied real estate		136			937		1,196
Residential development		—			—		—
Development & Spec Land Loans		173			182		—
Commercial and industrial		1,453			1,275		774

Total commercial		1,802			2,532		2,388
Real estate
Residential mortgage		328			1,055		597
Residential construction		—			—		—
Mortgage warehouse		—			—		—

Total real estate		328			1,055		597
Consumer
Direct Installment		250			333		327
Direct Installment Purchased		—			—		—
Indirect Installment		1,233			1,178		1,294
Home Equity		516			1,152		1,337

Total consumer		1,999			2,663		2,958

Total loans charged-off		4,129			6,250		5,943
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		13			65		547
Non owner occupied real estate		210			71		98
Residential development		—			—		—
Development & Spec Land Loans		55			—		—
Commercial and industrial		495			532		137

Total commercial		773			668		782
Real estate
Residential mortgage		21			114		77
Residential construction		—			—		—
Mortgage warehouse		—			—		—

Total real estate		21			114		77
Consumer
Direct Installment		67			488		84
Direct Installment Purchased		—			—		—
Indirect Installment		560			658		737
Home Equity		159			124		127

Total consumer		786			1,270		948

Total loan recoveries		1,580			2,052		1,807

Net loans charged-off (recovered)		2,549			4,198		4,136

Provision charged to operating expense
Commercial		2,277			756		1,360
Real estate		(1,153	)		1,132		1,262
Consumer		1,934			32		902

Total provision charged to operating expense		3,058			1,920		3,524

Balance at the end of the period	$	16,501		$	15,992	$	18,270

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value of the underlying collateral.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down or specific allocation of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the value is known but no later than when a loan is 180 days past due. Pursuant to such guidelines, the Company also charges-off unsecured open-end loans when the loan is 90 days past due, and charges down to the net realizable value other secured loans when they are 90 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection in full will occur regardless of delinquency status, are not charged off.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment analysis:


	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
December 31, 2014
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,589	$	—	$	—	$	—	$	1,589
Collectively evaluated for impairment		5,827		2,508		1,132		4,951		14,418
Loans acquired with deteriorated credit quality		494		—		—		—		494

Total ending allowance balance	$	7,910	$	2,508	$	1,132	$	4,951	$	16,501

Loans:
Individually evaluated for impairment	$	11,055	$	—	$	—	$	—	$	11,055
Collectively evaluated for impairment		664,251		255,383		129,636		321,470		1,370,740
Loans acquired with deteriorated credit quality		591		—		—		—		591

Total ending loans balance	$	675,897	$	255,383	$	129,636	$	321,470	$	1,382,386


	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
December 31, 2013
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,312	$	—	$	—	$	—	$	1,312
Collectively evaluated for impairment		4,963		3,462		1,638		4,228		14,291
Loans acquired with deteriorated credit quality		389		—		—		—		389

Total ending allowance balance	$	6,664	$	3,462	$	1,638	$	4,228	$	15,992

Loans:
Individually evaluated for impairment	$	7,448	$	—	$	—	$	—	$	7,448
Collectively evaluated for impairment		489,547		186,526		98,636		279,448		1,054,157
Loans acquired with deteriorated credit quality		9,355		24		—		1,030		10,409

Total ending loans balance	$	506,350	$	186,550	$	98,636	$	280,478	$	1,072,014