Note 6 – 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.


	Three Months Ended
	March 31
	2015			2014
	(Unaudited)			(Unaudited)
Balance at beginning of the period	$	16,501		$	15,992
Loans charged-off:
Commercial
Owner occupied real estate		—			—
Non owner occupied real estate		16			22
Residential development		—			—
Development & Spec Land Loans		—			7
Commercial and industrial		—			—

Total commercial		16			29
Real estate
Residential mortgage		22			22
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		22			22
Consumer
Direct Installment		59			33
Direct Installment Purchased		—			—
Indirect Installment		369			227
Home Equity		200			184

Total consumer		628			444

Total loans charged-off		666			495
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		8			4
Non owner occupied real estate		—			1
Residential development		—			—
Development & Spec Land Loans		—			—
Commercial and industrial		19			385

Total commercial		27			390
Real estate
Residential mortgage		2			4
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		2			4
Consumer
Direct Installment		29			18
Direct Installment Purchased		—			—
Indirect Installment		101			119
Home Equity		26			74

Total consumer		156			211

Total loan recoveries		185			605

Net loans charged-off (recovered)		481			(110	)

Provision charged to operating expense
Commercial		(45	)		212
Real estate		933			(604	)
Consumer		(274	)		392

Total provision charged to operating expense		614			—

Balance at the end of the period	$	16,634		$	16,102

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:


March 31, 2015	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,029	$	—	$	—	$	—	$	1,029
Collectively evaluated for impairment		6,593		3,281		1,272		4,205		15,351
Loans acquired with deteriorated credit quality		254		—		—		—		254

Total ending allowance balance	$	7,876	$	3,281	$	1,272	$	4,205	$	16,634

Loans:
Individually evaluated for impairment	$	8,547	$	—	$	—	$	—	$	8,547
Collectively evaluated for impairment		687,092		261,155		179,379		327,328		1,454,954
Loans acquired with deteriorated credit quality		1,729		—		—		—		1,729

Total ending loans balance	$	697,368	$	261,155	$	179,379	$	327,328	$	1,465,230


December 31, 2014	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
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