Allowance for Loan Losses

9 Months Ended

Sep. 30, 2019

Provision for Loan and Lease Losses [Abstract]

Allowance for Loan Losses

Allowance for Loan Losses

The Company’s ALLL covers estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated probable incurred losses inherent in the remainder of the loan portfolio. The ALLL is prepared using the information provided by the Company’s credit review process together with data from peer institutions and economic information gathered from published sources.

The loan portfolio is segmented into groups of loans with similar risk characteristics. Each segment possesses varying degrees of risk based on, among other things, the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. An estimated loss rate calculated using the Company’s actual historical loss rates adjusted for current portfolio trends, economic conditions and other relevant internal and external factors, is applied to each group’s aggregate loan balances.

The Company’s base ALLL factors are determined by management using the Bank’s annualized actual trailing charge-off data over a full credit cycle with the loss emergence period extending from 1 year to 1.6 years. Adjustments to those base factors are made for relevant internal and external factors. Those factors may include:

• Changes in national, regional and local economic conditions, including trends in real estate values and the interest rate environment,

• Changes in the nature and volume of the loan portfolio, including new types of lending,

• Changes in volume and severity of past due loans, the volume of nonaccrual loans and the volume and severity of adversely classified or graded loans and

• The existence and effect of concentrations of credit, and changes in the level of such concentrations.

For loans risk graded as watch or worse, progressively higher potential loss factors are applied based on a migration analysis of risk grading and net charge-offs.

The following tables summarize the allocation of the ALLL as well as the activity in the ALLL attributed to various segments in the loan portfolio as of and for the periods indicated:

	Three Months Ended September 30, 2019
	Commercial and industrial			Franchise			Commercial owner occupied			SBA			Agribusiness			Commercial non-owner occupied			Multi-family			One-to-four family			Construction			Farmland			Land			Consumer loans			Total
	(dollars in thousands)
Balance, March 31, 2019	$	11,031		$	6,765		$	1,490		$	3,363		$	2,765		$	1,765		$	705		$	704		$	4,750		$	809		$	658		$	221		$	35,026
Charge-offs	(290		)	(995		)	—			(143		)	—			(86		)	—			—			—			—			—			(11		)	(1,525		)
Recoveries	54			—			8			62			—			—			—			1			—			—			—			9			134
Provisions for (reduction in) loan losses	(265		)	963			228			1,099			(399		)	199			10			(14		)	(592		)	29			(25		)	132			1,365
Balance, June 30, 2019	$	10,530		$	6,733		$	1,726		$	4,381		$	2,366		$	1,878		$	715		$	691		$	4,158		$	838		$	633		$	351		$	35,000
	Nine Months Ended September 30, 2019
	Commercial and industrial			Franchise			Commercial owner occupied			SBA			Agribusiness			Commercial non-owner occupied			Multi-family			One-to-four family			Construction			Farmland			Land			Consumer loans			Total
	(dollars in thousands)
Balance, December 31, 2018	$	10,821		$	6,500		$	1,386		$	4,288		$	3,283		$	1,604		$	725		$	805		$	5,166		$	503		$	772		$	219		$	36,072
Charge-offs	(985		)	(2,531		)	—			(1,362		)	—			(574		)	—			—			—			—			—			(16		)	(5,468		)
Recoveries	168			—			31			66			—			—			—			2			—			—			—			10			277
Provisions for (reduction in) loan losses	526			2,764			309			1,389			(917		)	848			(10		)	(116		)	(1,008		)	335			(139		)	138			4,119
Balance, September 30, 2019	$	10,530		$	6,733		$	1,726		$	4,381		$	2,366		$	1,878		$	715		$	691		$	4,158		$	838		$	633		$	351		$	35,000
Amount of allowance attributed to:
Specifically evaluated impaired loans	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
General portfolio allocation	10,530			6,733			1,726			4,381			2,366			1,878			715			691			4,158			838			633			351			35,000
Loans individually evaluated for impairment	2,950			16			1,406			2,586			6,903			777			—			371			—			—			—			—			15,009
Specific reserves to total loans individually evaluated for impairment	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%
Loans collectively evaluated for impairment	$	1,230,988		$	894,007		$	1,677,482		$	177,379		$	112,730		$	2,052,813		$	1,611,904		$	272,811		$	478,961		$	171,667		$	30,717		$	40,548		$	8,752,007
General reserves to total loans collectively evaluated for impairment	0.86		%	0.75		%	0.10		%	2.47		%	2.10		%	0.09		%	0.04		%	0.25		%	0.87		%	0.49		%	2.06		%	0.87		%	0.40		%
Total gross loans held for investment	$	1,233,938		$	894,023		$	1,678,888		$	179,965		$	119,633		$	2,053,590		$	1,611,904		$	273,182		$	478,961		$	171,667		$	30,717		$	40,548		$	8,767,016
Total allowance to gross loans held for investment	0.85		%	0.75		%	0.10		%	2.43		%	1.98		%	0.09		%	0.04		%	0.25		%	0.87		%	0.49		%	2.06		%	0.87		%	0.40		%

	Three Months Ended September 30, 2018
	Commercial and industrial			Franchise			Commercial owner occupied			SBA			Agribusiness			Commercial non-owner occupied			Multi-family			One-to-four family			Construction			Farmland			Land			Consumer loans			Total
	(dollars in thousands)
Balance, March 31, 2018	$	10,164		$	6,181		$	1,137		$	2,575		$	2,694		$	1,450		$	563		$	698		$	4,809		$	405		$	972		$	99		$	31,747
Charge-offs	(100		)	—			—			(44		)	—			—			—			—			—			—			—			(85		)	(229		)
Recoveries	120			—			8			8			—			—			—			—			—			—			—			6			142
Provisions for (reduction in) loan losses	200			151			68			288			871			33			60			21			11			(30		)	(104		)	77			1,646
Balance, June 30, 2018	$	10,384		$	6,332		$	1,213		$	2,827		$	3,565		$	1,483		$	623		$	719		$	4,820		$	375		$	868		$	97		$	33,306
	Nine Months Ended September 30, 2018
	Commercial and industrial			Franchise			Commercial owner occupied			SBA			Agribusiness			Commercial non-owner occupied			Multi-family			One-to-four family			Construction			Farmland			Land			Consumer loans			Total
	(dollars in thousands)
Balance, December 31, 2017	$	9,721		$	5,797		$	767		$	2,890		$	1,291		$	1,266		$	607		$	803		$	4,569		$	137		$	993		$	95		$	28,936
Charge-offs	(1,011		)	—			—			(100		)	—			—			—			—			—			—			—			(137		)	(1,248		)
Recoveries	283			—			32			43			—			—			—			1			—			—			—			7			366
Provisions for (reduction in) loan losses	1,391			535			414			(6		)	2,274			217			16			(85		)	251			238			(125		)	132			5,252
Balance, September 30, 2018	$	10,384		$	6,332		$	1,213		$	2,827		$	3,565		$	1,483		$	623		$	719		$	4,820		$	375		$	868		$	97		$	33,306
Amount of allowance attributed to:
Specifically evaluated impaired loans	$	—		$	—		$	—		$	250		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	250
General portfolio allocation	10,384			6,332			1,213			2,577			3,565			1,483			623			719			4,820			375			868			97			33,056
Loans individually evaluated for impairment	1,027			209			—			2,748			—			1,290			589			1,388			—			—			4			13			7,268
Specific reserves to total loans individually evaluated for impairment	—		%	—		%	—		%	9.10		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	3.44		%
Loans collectively evaluated for impairment	$	1,358,814		$	735,157		$	1,675,528		$	190,739		$	133,241		$	1,929,875		$	1,554,103		$	375,229		$	504,708		138,479			$	49,988		$	114,723		$	8,760,584
General reserves to total loans collectively evaluated for impairment	0.76		%	0.86		%	0.07		%	1.35		%	2.68		%	0.08		%	0.04		%	0.19		%	0.96		%	0.27		%	1.74		%	0.08		%	0.38		%
Total gross loans held for investment	$	1,359,841		$	735,366		$	1,675,528		$	193,487		$	133,241		$	1,931,165		$	1,554,692		$	376,617		$	504,708		138,479			$	49,992		$	114,736		$	8,767,852
Total allowance to gross loans held for investment	0.76		%	0.86		%	0.07		%	1.46		%	2.68		%	0.08		%	0.04		%	0.19		%	0.96		%	0.27		%	1.74		%	0.08		%	0.38		%