Page 31 - Annual Report 2017

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 2016 and 2015

NOTE E ALLOWANCE FOR POSSIBLE CREDIT LOSSES

For purposes of determining the allowance for possible credit losses, the Company considers
the loans in its portfolio by segment and risk grade. Each segment requires significant
judgment to determine the estimation method that fits the credit risk characteristics of that
portfolio segment. To facilitate the assessment of risk, management reviews reports related
to loan production, loan quality, concentrations of credit, loan delinquencies, and
nonperforming and potential problem loans. The Company utilizes an external loan review
group to review the credit risk assigned to loans on a periodic basis and the results are
presented to management for review.
An analysis of activity in the allowance for possible credit losses by portfolio segment at
December 31, 2016 and 2015 follows:

Balance, Balance,
beginning end
of year Provisions Charge-offs Recoveries of year
2016
Real estate $ 2,741,559 $ 477,149 $ (42,536) $ 62,100 $ 3,238,272
Commercial and industrial 573,772 78,334 (20,500) - 631,606
Agricultural 18,526 4,614 - - 23,140
Consumer 66,167 31,723 (30,208) 4,000 71,682
Other 51,870 8,798 - - 60,668
Totals $ 3,451,894 $ 600,618 $ (93,244) $ 66,100 $ 4,025,368

Balance, Balance,
beginning end
of year Provisions Charge-offs Recoveries of year
2015
Real estate $ 2,819,666 $ 114,631 $ (192,738) $ - $ 2,741,559
Commercial and industrial 618,246 19,110 (63,584) - 573,772
Agricultural 17,907 619 - - 18,526
Consumer 75,727 39,153 (55,015) 6,302 66,167
Other 50,140 1,730 - - 51,870
Totals $ 3,581,686 $ 175,243 $ (311,337) $ 6,302 $ 3,451,894

The allocation in the table above is based on dollar amount of loans in each segment rather
than an analysis of specific loans or groups of loans. The allocation is not necessarily
indicative of the segments in which future losses may occur. The total allowance is available
to absorb losses from any segment of loans.

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