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
	2017			2016			2015
Balance at beginning of the period	$	14,837		$	14,534		$	16,501
Loans charged-off:
Commercial
Owner occupied real estate		68			181			2,208
Non owner occupied real estate		20			471			556
Residential development		—			—			—
Development & Spec Land Loans		1			—			—
Commercial and industrial		288			106			673

Total commercial		377			758			3,437
Real estate
Residential mortgage		89			213			288
Residential construction		—			—			—
Mortgage warehouse		—			—			—

Total real estate		89			213			288
Consumer
Direct Installment		389			329			367
Direct Installment Purchased		—			—			—
Indirect Installment		1,193			1,051			1,081
Home Equity		205			309			926

Total consumer		1,787			1,689			2,374

Total loans charged-off		2,253			2,660			6,099

Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		9			31			104
Non owner occupied real estate		32			55			1
Residential development		8			8			—
Development & Spec Land Loans		—			—			35
Commercial and industrial		219			116			52

Total commercial		268			210			192
Real estate
Residential mortgage		44			97			69
Residential construction		—			—			—
Mortgage warehouse		—			—			—

Total real estate		44			97			69
Consumer
Direct Installment		531			81			106
Direct Installment Purchased		—			—			—
Indirect Installment		497			529			489
Home Equity		—			204			114

Total consumer		1,028			814			709

Total loan recoveries		1,340			1,121			970

Net loans charged-off		913			1,539			5,129

Provision charged to operating expense
Commercial		2,164			(68	)		2,531
Real estate		(81	)		(23	)		62
Consumer		387			1,933			569

Total provision charged to operating expense		2,470			1,842			3,162

Balance at the end of the period	$	16,394		$	14,837		$	14,534

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
December 31, 2017	Commercial		Real Estate		Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	184	$	—	$	—	$	—	$	184
Collectively evaluated for impairment		8,450		2,188		1,030		4,542		16,210
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	8,634	$	2,188	$	1,030	$	4,542	$	16,394

Loans:
Individually evaluated for impairment	$	7,187	$	—	$	—	$	—	$	7,187
Collectively evaluated for impairment		1,615,927		608,575		94,988		514,544		2,834,034
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,623,114	$	608,575	$	94,988	$	514,544	$	2,841,221


					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