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
	2016			2015
	(Unaudited)			(Unaudited)
Balance at beginning of the period	$	14,534		$	16,501
Loans charged-off:
Commercial
Owner occupied real estate		147			—
Non owner occupied real estate		299			16
Residential development		—			—
Development & Spec Land Loans		—			—
Commercial and industrial		39			—

Total commercial		485			16
Real estate
Residential mortgage		115			22
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		115			22
Consumer
Direct Installment		58			59
Direct Installment Purchased		—			—
Indirect Installment		276			369
Home Equity		175			200

Total consumer		509			628

Total loans charged-off		1,109			666
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		25			8
Non owner occupied real estate		23			—
Residential development		2			—
Development & Spec Land Loans		—			—
Commercial and industrial		32			19

Total commercial		82			27
Real estate
Residential mortgage		32			2
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		32			2
Consumer
Direct Installment		16			29
Direct Installment Purchased		—			—
Indirect Installment		94			101
Home Equity		55			26

Total consumer		165			156

Total loan recoveries		279			185

Net loans charged-off (recovered)		830			481

Provision charged to operating expense
Commercial		(332	)		(45	)
Real estate		(592	)		933
Consumer		1,456			(274	)

Total provision charged to operating expense		532			614

Balance at the end of the period	$	14,236		$	16,634

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:


March 31, 2016	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	900	$	—	$	—	$	—	$	900
Collectively evaluated for impairment		5,560		1,794		1,014		4,968		13,336
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	6,460	$	1,794	$	1,014	$	4,968	$	14,236

Loans:
Individually evaluated for impairment	$	5,788	$	—	$	—	$	—	$	5,788
Collectively evaluated for impairment		794,072		444,123		120,356		360,721		1,719,272
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	799,860	$	444,123	$	120,356	$	360,721	$	1,725,060


December 31, 2015	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	202	$	—	$	—	$	—	$	202
Collectively evaluated for impairment		6,739		2,476		1,007		3,856		14,078
Loans acquired with deteriorated credit quality		254		—		—		—		254

Total ending allowance balance	$	7,195	$	2,476	$	1,007	$	3,856	$	14,534

Loans:
Individually evaluated for impairment	$	7,019	$	—	$	—	$	—	$	7,019
Collectively evaluated for impairment		798,454		438,454		145,172		363,419		1,745,499
Loans acquired with deteriorated credit quality		1,729		—		—		—		1,729

Total ending loans balance	$	807,202	$	438,454	$	145,172	$	363,419	$	1,754,247