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
	2016			2015			2016			2015
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance at beginning of the period	$	14,226		$	16,421		$	14,534		$	16,501
Loans charged-off:
Commercial
Owner occupied real estate		4			56			182			1,478
Non owner occupied real estate		(1	)		—			471			16
Residential development		—			—			—			—
Development & Spec Land Loans		—			—			—			—
Commercial and industrial		8			38			47			291

Total commercial		11			94			700			1,785
Real estate
Residential mortgage		12			101			127			287
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		12			101			127			287
Consumer
Direct Installment		55			51			159			206
Direct Installment Purchased		—			—			—			—
Indirect Installment		296			218			851			783
Home Equity		32			262			271			766

Total consumer		383			531			1,281			1,755

Total loans charged-off		406			726			2,108			3,827

Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		2			8			31			94
Non owner occupied real estate		1			1			55			1
Residential development		2			—			6			—
Development & Spec Land Loans		—			—			—			—
Commercial and industrial		12			8			107			41

Total commercial		17			17			199			136
Real estate
Residential mortgage		12			5			75			10
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		12			5			75			10
Consumer
Direct Installment		26			15			70			91
Direct Installment Purchased		—			—			—			—
Indirect Installment		160			112			400			347
Home Equity		34			24			135			90

Total consumer		220			151			605			528

Total loan recoveries		249			173			879			674

Net loans charged-off (recovered)		157			553			1,229			3,153

Provision charged to operating expense
Commercial		165			532			(471	)		2,580
Real estate		102			(955	)		(147	)		(51	)
Consumer		188			723			1,837			291

Total provision charged to operating expense		455			300			1,219			2,820

Balance at the end of the period	$	14,524		$	16,168		$	14,524		$	16,168

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, 2016	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		6,222		1,947		1,337		5,018		14,524
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	6,222	$	1,947	$	1,337	$	5,018	$	14,524


Loans:
Individually evaluated for impairment	$	5,855	$	—	$	—	$	—	$	5,855
Collectively evaluated for impairment		1,045,464		531,799		227,374		387,170		2,191,807
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,051,319	$	531,799	$	227,374	$	387,170	$	2,197,662


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