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						Six Months Ended
	June 30						June 30
	2016			2015			2016			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance at beginning of the period	$	14,236		$	16,634		$	14,534		$	16,501
Loans charged-off:
Commercial
Owner occupied real estate		31			1,422			178			1,422
Non owner occupied real estate		173			—			472			16
Residential development		—			—			—			—
Development & Spec Land Loans		—			—			—			—
Commercial and industrial		—			253			39			253

Total commercial		204			1,675			689			1,691
Real estate
Residential mortgage		—			164			115			186
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		—			164			115			186
Consumer
Direct Installment		46			96			104			155
Direct Installment Purchased		—			—			—			—
Indirect Installment		279			196			555			565
Home Equity		64			304			239			504

Total consumer		389			596			898			1,224

Total loans charged-off		593			2,435			1,702			3,101
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		4			78			29			86
Non owner occupied real estate		31			—			54			—
Residential development		2			—			4			—
Development & Spec Land Loans		—			—			—			—
Commercial and industrial		63			14			95			33

Total commercial		100			92			182			119
Real estate
Residential mortgage		31			3			63			5
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		31			3			63			5
Consumer
Direct Installment		28			47			44			76
Direct Installment Purchased		—			—			—			—
Indirect Installment		146			134			240			235
Home Equity		46			40			101			66

Total consumer		220			221			385			377

Total loan recoveries		351			316			630			501

Net loans charged-off (recovered)		242			2,119			1,072			2,600

Provision charged to operating expense
Commercial		(305	)		2,093			(639	)		2,048
Real estate		343			(29	)		(249	)		904
Consumer		194			(158	)		1,652			(432	)

Total provision charged to operating expense		232			1,906			764			2,520

Balance at the end of the period	$	14,226		$	16,421		$	14,226		$	16,421

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:


June 30, 2016	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	500	$	—	$	—	$	—	$	500
Collectively evaluated for impairment		5,551		2,102		1,080		4,993		13,726
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	6,051	$	2,102	$	1,080	$	4,993	$	14,226

Loans:
Individually evaluated for impairment	$	4,344	$	—	$	—	$	—	$	4,344
Collectively evaluated for impairment		873,140		495,096		206,179		365,005		1,939,420
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	877,484	$	495,096	$	206,179	$	365,005	$	1,943,764


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