Note 7 – 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 using the highest of the one, two or five-year historical loss experience is an appropriate methodology 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.


	December 31			December 31		December 31
	2016			2015		2014


Balance at beginning of the period	$	14,534		$	16,501	$	15,992
Loans charged-off:
Commercial
Owner occupied real estate		181			2,208		40
Non owner occupied real estate		471			556		136
Residential development		—			—		—
Development & Spec Land Loans		—			—		173
Commercial and industrial		106			673		1,453

Total commercial		758			3,437		1,802
Real estate
Residential mortgage		213			288		328
Residential construction		—			—		—
Mortgage warehouse		—			—		—

Total real estate		213			288		328
Consumer
Direct Installment		329			367		250
Direct Installment Purchased		—			—		—
Indirect Installment		1,051			1,081		1,233
Home Equity		309			926		516

Total consumer		1,689			2,374		1,999

Total loans charged-off		2,660			6,099		4,129

Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		31			104		13
Non owner occupied real estate		55			1		210
Residential development		8			—		—
Development & Spec Land Loans		—			35		55
Commercial and industrial		116			52		495

Total commercial		210			192		773
Real estate
Residential mortgage		97			69		21
Residential construction		—			—		—
Mortgage warehouse		—			—		—

Total real estate		97			69		21
Consumer
Direct Installment		81			106		67
Direct Installment Purchased		—			—		—
Indirect Installment		529			489		560
Home Equity		204			114		159

Total consumer		814			709		786

Total loan recoveries		1,121			970		1,580

Net loans charged-off (recovered)		1,539			5,129		2,549

Provision charged to operating expense
Commercial		(68	)		2,531		2,277
Real estate		(23	)		62		(1,153	)
Consumer		1,933			569		1,934

Total provision charged to operating expense		1,842			3,162		3,058

Balance at the end of the period	$	14,837		$	14,534	$	16,501

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 and consumer loans, 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:


December 31, 2016	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4	$	—	$	—	$	—	$	4
Collectively evaluated for impairment		6,575		2,090		1,254		4,914		14,833
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	6,579	$	2,090	$	1,254	$	4,914	$	14,837


Loans:
Individually evaluated for impairment	$	2,250	$	—	$	—	$	—	$	2,250
Collectively evaluated for impairment		1,071,199		533,399		136,207		399,676		2,140,481
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,073,449	$	533,399	$	136,207	$	399,676	$	2,142,731


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