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 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
	2015		2014			2013
Balance at beginning of the period	$	16,501	$	15,992		$	18,270
Loans charged-off:
Commercial
Owner occupied real estate		2,208		40			138
Non owner occupied real estate		556		136			937
Residential development		—		—			—
Development & Spec Land Loans		—		173			182
Commercial and industrial		673		1,453			1,275

Total commercial		3,437		1,802			2,532
Real estate
Residential mortgage		288		328			1,055
Residential construction		—		—			—
Mortgage warehouse		—		—			—

Total real estate		288		328			1,055
Consumer
Direct Installment		367		250			333
Direct Installment Purchased		—		—			—
Indirect Installment		1,081		1,233			1,178
Home Equity		926		516			1,152

Total consumer		2,374		1,999			2,663

Total loans charged-off		6,099		4,129			6,250

Recoveries of loans previously charged-off:
Commercial
Owner occupied real estate		104		13			65
Non owner occupied real estate		1		210			71
Residential development		—		—			—
Development & Spec Land Loans		35		55			—
Commercial and industrial		52		495			532

Total commercial		192		773			668
Real estate
Residential mortgage		69		21			114
Residential construction		—		—			—
Mortgage warehouse		—		—			—

Total real estate		69		21			114
Consumer
Direct Installment		106		67			488
Direct Installment Purchased		—		—			—
Indirect Installment		489		560			658
Home Equity		114		159			124

Total consumer		709		786			1,270

Total loan recoveries		970		1,580			2,052

Net loans charged-off (recovered)		5,129		2,549			4,198

Provision charged to operating expense
Commercial		2,531		2,277			756
Real estate		62		(1,153	)		1,132
Consumer		569		1,934			32

Total provision charged to operating expense		3,162		3,058			1,920

Balance at the end of the period	$	14,534	$	16,501		$	15,992

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 and consumer loans, 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, 2015	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	202	$	—	$	—	$	—	$	202
Collectively evaluated for impairment		6,739		2,476		1,007		3,856		14,078
Loans acquired with deteriorated credit quality		254		—		—		—		254

Total ending allowance balance	$	7,195	$	2,476	$	1,007	$	3,856	$	14,534


Loans:
Individually evaluated for impairment	$	7,019	$	—	$	—	$	—	$	7,019
Collectively evaluated for impairment		798,454		438,454		145,172		363,419		1,745,499
Loans acquired with deteriorated credit quality		1,729		—		—		—		1,729

Total ending loans balance	$	807,202	$	438,454	$	145,172	$	363,419	$	1,754,247


December 31, 2014	Commercial		Real Estate		Mortgage Warehousing		Consumer		Total
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,589	$	—	$	—	$	—	$	1,589
Collectively evaluated for impairment		5,827		2,508		1,132		4,951		14,418
Loans acquired with deteriorated credit quality		494		—		—		—		494

Total ending allowance balance	$	7,910	$	2,508	$	1,132	$	4,951	$	16,501


Loans:
Individually evaluated for impairment	$	11,055	$	—	$	—	$	—	$	11,055
Collectively evaluated for impairment		664,251		255,383		129,636		321,470		1,370,740
Loans acquired with deteriorated credit quality		591		—		—		—		591

Total ending loans balance	$	675,897	$	255,383	$	129,636	$	321,470	$	1,382,386