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						Nine Months Ended
	September 30						September 30
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance at beginning of the period	$	16,421		$	15,660		$	16,501		$	15,992
Loans charged-off:
Commercial
Owner occupied real estate		56			—			1,478			—
Non owner occupied real estate		—			—			16			22
Residential development		—			—			—			—
Development & Spec Land Loans		—			—			—			173
Commercial and industrial		38			1,093			291			1,220

Total commercial		94			1,093			1,785			1,415
Real estate
Residential mortgage		101			31			287			225
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		101			31			287			225
Consumer
Direct Installment		51			74			206			151
Direct Installment Purchased		—			—			—			—
Indirect Installment		218			306			783			874
Home Equity		262			37			766			468

Total consumer		531			417			1,755			1,493

Total loans charged-off		726			1,541			3,827			3,133
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		8			4			94			10
Non owner occupied real estate		1			10			1			85
Residential development		—			—			—			—
Development & Spec Land Loans		—			55			—			55
Commercial and industrial		8			18			41			435

Total commercial		17			87			136			585
Real estate
Residential mortgage		5			12			10			19
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		5			12			10			19
Consumer
Direct Installment		15			10			91			49
Direct Installment Purchased		—			—			—			—
Indirect Installment		112			165			347			431
Home Equity		24			26			90			137

Total consumer		151			201			528			617

Total loan recoveries		173			300			674			1,221

Net loans charged-off (recovered)		553			1,241			3,153			1,912

Provision charged to operating expense
Commercial		532			1,563			2,580			1,682
Real estate		(955	)		697			(51	)		(290	)
Consumer		723			(519	)		291			688

Total provision charged to operating expense		300			1,741			2,820			2,080

Balance at the end of the period	$	16,168		$	16,160		$	16,168		$	16,160

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value, which is the appraised value less estimated selling costs, 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:


September 30, 2015	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,599	$	—	$	—	$	—	$	1,599
Collectively evaluated for impairment		6,989		2,297		1,015		4,014		14,315
Loans acquired with deteriorated credit quality		254		—		—		—		254

Total ending allowance balance	$	8,842	$	2,297	$	1,015	$	4,014	$	16,168

Loans:
Individually evaluated for impairment	$	10,848	$	—	$	—	$	—	$	10,848
Collectively evaluated for impairment		787,245		432,283		139,454		362,388		1,721,370
Loans acquired with deteriorated credit quality		1,729		—		—		—		1,729

Total ending loans balance	$	799,822	$	432,283	$	139,454	$	362,388	$	1,733,947


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