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 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.


	Three Months Ended March 31
	2018			2017
	(Unaudited)			(Unaudited)
Balance at beginning of the period	$	16,394		$	14,837
Loans charged-off:
Commercial
Owner occupied real estate		13			—
Non-owner occupied real estate		—			—
Residential spec homes		—			—
Development & spec land		—			—
Commercial and industrial		—			5

Total commercial		13			5
Real estate
Residential mortgage		12			51
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		12			51
Consumer
Direct installment		55			20
Indirect installment		505			285
Home equity		131			50

Total consumer		691			355

Total loans charged-off		716			411
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		12			—
Non-owner occupied real estate		5			22
Residential spec homes		2			2
Development & spec land		—			—
Commercial and industrial		32			111

Total commercial		51			135
Real estate
Residential mortgage		6			13
Residential construction		—			—
Mortgage warehouse		—			—

Total real estate		6			13
Consumer
Direct installment		11			16
Indirect installment		139			113
Home equity		22			21

Total consumer		172			150

Total loan recoveries		229			298

Net loans charged-off		487			113

Provision charged to operating expense
Commercial		(1,291	)		887
Real estate		(252	)		(567	)
Consumer		2,110			10

Total provision charged to operating expense		567			330

Balance at the end of the period	$	16,474		$	15,054

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:


	March 31, 2018
	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	184	$	—	$	—	$	—	$	184
Collectively evaluated for impairment		7,656		1,930		1,030		5,674		16,290
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	7,840	$	1,930	$	1,030	$	5,674	$	16,474

Loans:
Individually evaluated for impairment	$	6,824	$	—	$	—	$	—	$	6,824
Collectively evaluated for impairment		1,654,250		619,911		101,779		482,505		2,858,445
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,661,074	$	619,911	$	101,779	$	482,505	$	2,865,269


	December 31, 2017
	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	184	$	—	$	—	$	—	$	184
Collectively evaluated for impairment		8,909		2,188		1,030		4,083		16,210
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	9,093	$	2,188	$	1,030	$	4,083	$	16,394

Loans:
Individually evaluated for impairment	$	7,187	$	—	$	—	$	—	$	7,187
Collectively evaluated for impairment		1,667,942		608,575		94,988		462,529		2,834,034
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending loans balance	$	1,675,129	$	608,575	$	94,988	$	462,529	$	2,841,221