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 September 30						Nine Months Ended September 30
	2017			2016			2017			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance at beginning of the period	$	15,027		$	14,226		$	14,837		$	14,534
Loans charged-off:
Commercial
Owner occupied real estate		12			4			12			182
Non owner occupied real estate		20			(1	)		20			471
Residential development		—			—			—			—
Development & Spec Land Loans		—			—			1			—
Commercial and industrial		232			8			273			47

Total commercial		264			11			306			700
Real estate
Residential mortgage		37			12			89			127
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		37			12			89			127
Consumer
Direct Installment		84			55			331			159
Direct Installment Purchased		—			—			—			—
Indirect Installment		254			296			862			851
Home Equity		24			32			95			271

Total consumer		362			383			1,288			1,281

Total loans charged-off		663			406			1,683			2,108
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		7			2			8			31
Non owner occupied real estate		4			1			29			55
Residential development		2			2			6			6
Development & Spec Land Loans		—			—			—			—
Commercial and industrial		82			12			204			107

Total commercial		95			17			247			199
Real estate
Residential mortgage		13			12			35			75
Residential construction		—			—			—			—
Mortgage warehouse		—			—			—			—

Total real estate		13			12			35			75
Consumer
Direct Installment		260			26			311			70
Direct Installment Purchased		—			—			—			—
Indirect Installment		119			160			384			400
Home Equity		25			34			85			135

Total consumer		404			220			780			605

Total loan recoveries		512			249			1,062			879

Net loans charged-off (recovered)		151			157			621			1,229

Provision charged to operating expense
Commercial		429			165			1,357			(471	)
Real estate		361			102			(113	)		(147	)
Consumer		(80	)		188			126			1,837

Total provision charged to operating expense		710			455			1,370			1,219

Balance at the end of the period	$	15,586		$	14,524		$	15,586		$	14,524

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:


					Mortgage
September 30, 2017	Commercial		Real Estate		Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		7,877		2,129		1,048		4,532		15,586
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	7,877	$	2,129	$	1,048	$	4,532	$	15,586

Loans:
Individually evaluated for impairment	$	3,451	$	—	$	—	$	—	$	3,451
Collectively evaluated for impairment		1,274,952		572,905		95,963		486,971		2,430,791
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,278,403	$	572,905	$	95,963	$	486,971	$	2,434,242


					Mortgage
December 31, 2016	Commercial		Real Estate		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