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.


	December 31		December 31		December 31
	2013		2012		2011
Balance at beginning of the period	$	18,270	$	18,882	$	19,064
Loans charged-off:
Commercial
Owner occupied real estate		138		418		190
Non owner occupied real estate		937		1,196		401
Residential development		—		—		—
Development & Spec Land Loans		182		—		—
Commercial and industrial		1,275		774		376

Total commercial		2,532		2,388		967
Real estate
Residential mortgage		1,055		597		956
Residential construction		—		—		—
Mortgage warehouse		—		—		—

Total real estate		1,055		597		956
Consumer
Direct Installment		333		327		661
Direct Installment Purchased		—		—		—
Indirect Installment		1,178		1,294		1,676
Home Equity		1,152		1,337		2,420

Total consumer		2,663		2,958		4,757

Total loans charged-off		6,250		5,943		6,680
Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		65		547		26
Non owner occupied real estate		71		98		113
Residential development		—		—		—
Development & Spec Land Loans		—		—		—
Commercial and industrial		532		137		24

Total commercial		668		782		163
Real estate
Residential mortgage		114		77		10
Residential construction		—		—		—
Mortgage warehouse		—		—		—

Total real estate		114		77		10
Consumer
Direct Installment		488		84		96
Direct Installment Purchased		—		—		—
Indirect Installment		658		737		803
Home Equity		124		127		144

Total consumer		1,270		948		1,043

Total loan recoveries		2,052		1,807		1,216

Net loans charged-off		4,198		4,136		5,464

Provision charged to operating expense
Commercial		756		1,360		1,267
Real estate		1,132		1,262		1,299
Consumer		32		902		2,716

Total provision charged to operating expense		1,920		3,524		5,282

Balance at the end of the period	$	15,992	$	18,270	$	18,882

Certain loans are individually evaluated for impairment, and the Company’s general practice is to proactively charge down impaired loans to the fair value 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 90 days past due, and charges down to the net realizable value other secured loans when they are 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:


December 31, 2013	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,312	$	—	$	—	$	—	$	1,312
Collectively evaluated for impairment		4,963		3,462		1,638		4,228		14,291
Loans acquired with deteriorated credit quality		389		—		—		—		389

Total ending allowance balance	$	6,664	$	3,462	$	1,638	$	4,228	$	15,992

Loans:
Individually evaluated for impairment	$	7,448	$	—	$	—	$	—	$	7,448
Collectively evaluated for impairment		489,547		186,526		98,636		279,448		1,054,157
Loans acquired with deteriorated credit quality		9,355		24		—		1,030		10,409

Total ending loans balance	$	506,350	$	186,550	$	98,636	$	280,478	$	1,072,014


December 31, 2012	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,945	$	—	$	—	$	—	$	1,945
Collectively evaluated for impairment		5,826		3,204		1,705		5,590		16,325
Loans acquired with deteriorated credit quality		—		—		—		—		—

Total ending allowance balance	$	7,771	$	3,204	$	1,705	$	5,590	$	18,270

Loans:
Individually evaluated for impairment	$	10,597	$	—	$	—	$	—	$	10,597
Collectively evaluated for impairment		435,544		190,224		251,928		288,398		1,166,094
Loans acquired with deteriorated credit quality		15,699		68		—		1,776		17,543

Total ending loans balance	$	461,840	$	190,292	$	251,928	$	290,174	$	1,194,234