Note 5 Allowance for Loan Losses

The tables below detail the Company’s allowance for loan losses (“ALL”) and recorded investment in loans as of and for the three and six months ended June 30, 2017 and 2016:


	Three months ended June 30, 2017
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	20,539	$	5,815	$	4,216	$	280	$	30,850
Non 310-30 beginning balance		20,539		5,599		4,216		276		30,630
Charge-offs		—		—		(2)		(119)		(121)
Recoveries		30		10		110		55		205
Provision		4,087		191		(257)		82		4,103
Non 310-30 ending balance		24,656		5,800		4,067		294		34,817
ASC 310-30 beginning balance		—		216		—		4		220
Charge-offs		—		—		—		—		—
Recoveries		—		—		—		—		—
(Recoupment) provision		—		(82)		—		4		(78)
ASC 310-30 ending balance		—		134		—		8		142
Ending balance	$	24,656	$	5,934	$	4,067	$	302	$	34,959


	Three months ended June 30, 2016
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	28,684	$	3,861	$	4,325	$	296	$	37,166
Non 310-30 beginning balance		28,610		3,803		4,289		249		36,951
Charge-offs		(3,375)		—		(140)		(171)		(3,686)
Recoveries		12		56		16		126		210
Provision		4,733		1,298		339		30		6,400
Non 310-30 ending balance		29,980		5,157		4,504		234		39,875
ASC 310-30 beginning balance		74		58		36		47		215
Charge-offs		—		(41)		—		—		(41)
Recoveries		—		—		—		—		—
(Recoupment) provision		(72)		194		(36)		(29)		57
ASC 310-30 ending balance		2		211		—		18		231
Ending balance	$	29,982	$	5,368	$	4,504	$	252	$	40,106


	Six months ended June 30, 2017
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	18,821	$	5,642	$	4,387	$	324	$	29,174
Non 310-30 beginning balance		18,821		5,422		4,387		319		28,949
Charge-offs		(20)		—		(10)		(301)		(331)
Recoveries		41		20		113		122		296
Provision		5,814		358		(423)		154		5,903
Non 310-30 ending balance		24,656		5,800		4,067		294		34,817
ASC 310-30 beginning balance		—		220		—		5		225
Charge-offs		—		—		—		—		—
Recoveries		—		—		—		—		—
(Recoupment) provision		—		(86)		—		3		(83)
ASC 310-30 ending balance		—		134		—		8		142
Ending balance	$	24,656	$	5,934	$	4,067	$	302	$	34,959
Ending allowance balance attributable to:
Non 310-30 loans individually evaluated for impairment	$	6,197	$	1	$	45	$	1	$	6,244
Non 310-30 loans collectively evaluated for impairment		18,459		5,799		4,022		293		28,573
ASC 310-30 loans		—		134		—		8		142
Total ending allowance balance	$	24,656	$	5,934	$	4,067	$	302	$	34,959
Loans:
Non 310-30 individually evaluated for impairment	$	30,458	$	551	$	8,205	$	165	$	39,379
Non 310-30 collectively evaluated for impairment		1,709,018		472,684		706,294		26,143		2,914,139
ASC 310-30 loans		35,978		83,785		14,012		652		134,427
Total loans	$	1,775,454	$	557,020	$	728,511	$	26,960	$	3,087,945


	Six months ended June 30, 2016
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	17,261	$	4,166	$	5,281	$	411	$	27,119
Non 310-30 beginning balance		16,473		3,939		5,245		385		26,042
Charge-offs		(3,484)		(276)		(197)		(388)		(4,345)
Recoveries		24		65		23		185		297
Provision		16,967		1,429		(567)		52		17,881
Non 310-30 ending balance		29,980		5,157		4,504		234		39,875
ASC 310-30 beginning balance		788		227		36		26		1,077
Charge-offs		—		(41)		—		—		(41)
Recoveries		—		—		—		—		—
(Recoupment) provision		(786)		25		(36)		(8)		(805)
ASC 310-30 ending balance		2		211		—		18		231
Ending balance	$	29,982	$	5,368	$	4,504	$	252	$	40,106
Ending allowance balance attributable to:
Non 310-30 loans individually evaluated for impairment	$	14,933	$	3	$	39	$	2	$	14,977
Non 310-30 loans collectively evaluated for impairment		15,047		5,154		4,465		232		24,898
ASC 310-30 loans		2		211		—		18		231
Total ending allowance balance	$	29,982	$	5,368	$	4,504	$	252	$	40,106
Loans:
Non 310-30 individually evaluated for impairment	$	37,265	$	842	$	7,369	$	240	$	45,716
Non 310-30 collectively evaluated for impairment		1,406,609		423,178		667,461		26,258		2,523,506
ASC 310-30 loans		46,875		101,719		19,341		1,347		169,282
Total loans	$	1,490,749	$	525,739	$	694,171	$	27,845	$	2,738,504

In evaluating the loan portfolio for an appropriate ALL level, non-impaired loans that were not accounted for under ASC 310-30 were grouped into segments based on broad characteristics such as primary use and underlying collateral. Within the segments, the portfolio was further disaggregated into classes of loans with similar attributes and risk characteristics for purposes of applying loss ratios and determining applicable subjective adjustments to the ALL. The application of subjective adjustments was based upon qualitative risk factors, including economic trends and conditions, industry conditions, asset quality, loss trends, lending management, portfolio growth and loan review/internal audit results.

Net charge-offs on non 310-30 loans during the three and six months ended June 30, 2017 were $0.1 million and $0.0 million, respectively. Management's evaluation of credit quality resulted in a provision for loan losses on the non 310-30 loans of $4.1 million and $5.9 million during the three and six months ended June 30, 2017, respectively. Provision for the three months ended June 30, 2017 included specific reserves of $2.1 million on one commercial loan and general reserves on net loan growth. Provision for the six months ended June 30, 2017 included specific reserves totaling $3.4 million on one energy sector and one commercial sector loan.

During the six months ended June 30, 2017, the Company re-estimated the expected cash flows of the loan pools accounted for under ASC 310-30. The re-measurement resulted in a net recoupment of $78 thousand and $83 thousand for the three and six months ended June 30, 2017, respectively. The net recoupment was primarily due to a recoupment of $82 thousand in the non-owner occupied commercial real estate segment during the three months ended June 30, 2017, and primarily due to a recoupment of $86 thousand in the non-owner occupied commercial real estate segment for the six months ended June 30, 2017.

Net charge-offs on non 310-30 loans during the three and six months ended June 30, 2016 were $3.5 million and $4.0 million, respectively. Management’s evaluation resulted in a provision for loan losses on the non 310-30 loans of $6.4 million and $17.9 million during the three and six months ended June 30, 2016, respectively. The increase in provision was driven by a $4.3 million increase in reserves against the energy sector portfolio for the three months ended June 30, 2016 and a net $15.1 million increase for the six months ended June 30, 2016.

During the six months ended June 30, 2016, the Company re-estimated the expected cash flows of the loan pools accounted for under ASC 310-30. The re-measurement resulted in a net provision of $57 thousand and a net recoupment of $805 thousand for the three and six months ended June 30, 2016, respectively, which was comprised primarily of a provision of $195 thousand in the non-owner occupied commercial real estate segment, partially offset by recoupments of $73 thousand and $3 thousand in the commercial real estate and residential real estate segments, respectively, for the three months ended June 30, 2016, and primarily a recoupment of $786 thousand in the commercial segment for the six months ended June 30, 2016.