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 June 30					Six Months Ended June 30
	2017 (Unaudited)		2016 (Unaudited)			2017 (Unaudited)			2016 (Unaudited)
Balance at beginning of the period	$	15,054	$	14,236		$	14,837		$	14,534
Loans charged-off:
Commercial
Owner occupied real estate		—		31			—			178
Non owner occupied real estate		—		173			—			472
Residential development		—		—			—			—
Development & Spec Land Loans		1		—			1			—
Commercial and industrial		41		—			41			39

Total commercial		42		204			42			689
Real estate
Residential mortgage		1		—			52			115
Residential construction		—		—			—			—
Mortgage warehouse		—		—			—			—

Total real estate		1		—			52			115
Consumer
Direct Installment		222		46			247			104
Direct Installment Purchased		—		—			—			—
Indirect Installment		323		279			608			555
Home Equity		21		64			71			239

Total consumer		566		389			926			898

Total loans charged-off		609		593			1,020			1,702
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		1		4			1			29
Non owner occupied real estate		3		31			25			54
Residential development		2		2			4			4
Development & Spec Land Loans		—		—			—			—
Commercial and industrial		12		63			122			95

Total commercial		18		100			152			182
Real estate
Residential mortgage		9		31			22			63
Residential construction		—		—			—			—
Mortgage warehouse		—		—			—			—

Total real estate		9		31			22			63
Consumer
Direct Installment		34		28			51			44
Direct Installment Purchased		—		—			—			—
Indirect Installment		152		146			265			240
Home Equity		39		46			60			101

Total consumer		225		220			376			385

Total loan recoveries		252		351			550			630

Net loans charged-off (recovered)		357		242			470			1,072

Provision charged to operating expense
Commercial		41		(305	)		928			(639	)
Real estate		93		343			(474	)		(249	)
Consumer		196		194			206			1,652

Total provision charged to operating expense		330		232			660			764

Balance at the end of the period	$	15,027	$	14,226		$	15,027		$	14,226

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 contractually 90 days past due, and charges down to the net realizable value other secured loans when they are contractually 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, 2017	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		7,617		1,750		1,090		4,570		15,027
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	7,617	$	1,750	$	1,090	$	4,570	$	15,027

Loans:
Individually evaluated for impairment	$	3,640	$	—	$	—	$	—	$	3,640
Collectively evaluated for impairment		1,143,660		551,574		124,237		451,500		2,270,971
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,147,300	$	551,574	$	124,237	$	451,500	$	2,274,611


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