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Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2012
Allowance for Loan Losses [Abstract] |
Allowance for Loan Losses | (5) Allowance for Loan Losses Changes in the allowance for loan losses for the years ended December 31 are as follows:
|  | December 31 |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Balance, Beginning of Year |  | $ | 15,649,594 |  |  | $ | 28,280,077 |  |  | $ | 31,400,641 |
Provision for Loan Losses |  |  | 6,784,767 |  |  |  | 8,250,000 |  |  |  | 13,350,000 |
Loans Charged Off |  |  | (10,454,175 | ) |  |  | (22,850,673 | ) |  |  | (17,622,454 | )
Recoveries of Loans Previously Charged Off |  |  | 756,735 |  |  |  | 1,970,190 |  |  |  | 1,151,890 |
Balance, End of Year |  | $ | 12,736,921 |  |  | $ | 15,649,594 |  |  | $ | 28,280,077 |
The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the years ended December 31. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other loan categories and periodically may result in reallocation within the provision categories.
2012 |  | Beginning Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 1,070,560 |  |  | $ | (653,389 | ) |  | $ | 139,802 |  |  | $ | 424,048 |  |  | $ | 981,021 |
Agricultural |  |  | 297,168 |  |  |  | (3,028 | ) |  |  | - |  |  |  | 2,035 |  |  |  | 296,175 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 3,122,594 |  |  |  | (4,106,124 | ) |  |  | 209,352 |  |  |  | 2,664,378 |  |  |  | 1,890,200 |
Residential Construction |  |  | 138,092 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138,092 |
Commercial |  |  | 6,448,064 |  |  |  | (4,325,642 | ) |  |  | 232,880 |  |  |  | 2,807,537 |  |  |  | 5,162,839 |
Residential |  |  | 3,695,357 |  |  |  | (960,620 | ) |  |  | 47,690 |  |  |  | 623,520 |  |  |  | 3,405,947 |
Farmland |  |  | 364,663 |  |  |  | (224,725 | ) |  |  | 4,716 |  |  |  | 145,872 |  |  |  | 290,526 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 205,154 |  |  |  | (169,249 | ) |  |  | 81,956 |  |  |  | 109,913 |  |  |  | 227,774 |
Other |  |  | 307,942 |  |  |  | (11,398 | ) |  |  | 40,339 |  |  |  | 7,464 |  |  |  | 344,347 |
|  | $ | 15,649,594 |  |  | $ | (10,454,175 | ) |  | $ | 756,735 |  |  | $ | 6,784,767 |  |  | $ | 12,736,921 |
2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 4,414,817 |  |  | $ | (841,887 | ) |  | $ | 127,490 |  |  | $ | (2,629,860 | ) |  | $ | 1,070,560 |
Agricultural |  |  | 698,637 |  |  |  | (455,165 | ) |  |  | 454,453 |  |  |  | (400,757 | ) |  |  | 297,168 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 4,126,043 |  |  |  | (6,957,181 | ) |  |  | 557,168 |  |  |  | 5,396,564 |  |  |  | 3,122,594 |
Residential Construction |  |  | 519,766 |  |  |  | (481 | ) |  |  | - |  |  |  | (381,193 | ) |  |  | 138,092 |
Commercial |  |  | 8,029,525 |  |  |  | (12,492,097 | ) |  |  | 527,996 |  |  |  | 10,382,640 |  |  |  | 6,448,064 |
Residential |  |  | 5,941,696 |  |  |  | (1,704,887 | ) |  |  | 149,173 |  |  |  | (690,625 | ) |  |  | 3,695,357 |
Farmland |  |  | 944,323 |  |  |  | (60,447 | ) |  |  | 411 |  |  |  | (519,624 | ) |  |  | 364,663 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 3,074,220 |  |  |  | (222,878 | ) |  |  | 145,279 |  |  |  | (2,791,467 | ) |  |  | 205,154 |
Other |  |  | 531,050 |  |  |  | (115,650 | ) |  |  | 8,220 |  |  |  | (115,678 | ) |  |  | 307,942 |
|  | $ | 28,280,077 |  |  | $ | (22,850,673 | ) |  | $ | 1,970,190 |  |  | $ | 8,250,000 |  |  | $ | 15,649,594 |
2010 |  | Beginning Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 3,930,760 |  |  | $ | (469,214 | ) |  | $ | 80,181 |  |  | $ | 873,090 |  |  | $ | 4,414,817 |
Agricultural |  |  | 779,337 |  |  |  | (255,627 | ) |  |  | 1,377 |  |  |  | 173,550 |  |  |  | 698,637 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 7,402,484 |  |  |  | (4,648,124 | ) |  |  | 184,868 |  |  |  | 1,186,815 |  |  |  | 4,126,043 |
Residential Construction |  |  | 447,676 |  |  |  | - |  |  |  | - |  |  |  | 72,090 |  |  |  | 519,766 |
Commercial |  |  | 8,790,443 |  |  |  | (7,459,619 | ) |  |  | 141,931 |  |  |  | 6,556,770 |  |  |  | 8,029,525 |
Residential |  |  | 5,025,839 |  |  |  | (2,929,668 | ) |  |  | 439,940 |  |  |  | 3,405,585 |  |  |  | 5,941,696 |
Farmland |  |  | 942,019 |  |  |  | (271,750 | ) |  |  | 7,639 |  |  |  | 266,415 |  |  |  | 944,323 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 2,826,058 |  |  |  | (548,834 | ) |  |  | 245,641 |  |  |  | 551,355 |  |  |  | 3,074,220 |
Other |  |  | 1,256,025 |  |  |  | (1,039,618 | ) |  |  | 50,313 |  |  |  | 264,330 |  |  |  | 531,050 |
|  | $ | 31,400,641 |  |  | $ | (17,622,454 | ) |  | $ | 1,151,890 |  |  | $ | 13,350,000 |  |  | $ | 28,280,077 |
In 2012, the Company refined its methodology used in estimating the amount of the Allowance for Loan and Lease Losses (ALLL). Management has been proactive in identifying problem loans, assessing exposure and providing sufficient reserves to cover the exposures. The ALLL was increased in anticipation of identified exposures resulting in confirmed losses. When losses were confirmed, they were promptly charged off. As a result, losses for the years 2009, 2010 and 2011 were very high. During this period and in 2012, newer loans granted were made subject to higher underwriting standards and more conservative appraisals. Because of the prompt recognition of losses that drove the excessive charge-off history, management now believes the remaining losses incurred in the current portfolio, including newer loans made, will be less than unadjusted loss history factors will suggest. Considering the major losses taken, along with organizational and staffing changes, the validity of qualitative factors in determining adjustments of loss history needed to be reviewed. Recognizing the importance of credit administration and the role of personnel involved in granting, approving, administering, monitoring and collecting loans, management concluded that greater weight should be placed on factors associated with those activities. Additionally, during the year ended December 31, 2012, management reviewed the appropriateness of continuing to use a one-year annual loss rate to determine losses incurred in the loan portfolio segments of loans collectively reviewed for impairment. Consideration was given to the trends in losses incurred over prior quarters and economic indicators impacting the Company. Management concluded that the one-year charge-off history should be expanded to include quarters from the current year. Thus, the annualized loss rates used for the December 31, 2012 allowance for loan loss calculation were based on an expanded period that includes all four quarters of 2011 and the first three quarters of 2012. The effect of these changes on the ALLL resulted in a reduction in the ALLL estimate of $2,154,639. Management believes the adjustments made will result in a better estimation of losses incurred in the portfolio. The Company determines its individual loan reserves during its quarterly review of substandard loans. This process involves reviewing all loans with a risk grade of 6 or greater and an outstanding relationship balance of $50,000 or more, regardless of the loan's impairment classification. Since not all loans in the substandard category are considered impaired, this quarterly review process may result in the identification of specific reserves on nonimpaired loans. Management considers those loans graded substandard, but not classified as impaired, to be higher risk loans and will make specific allocations of the allowance to those loans if warranted. Since these loans are not considered impaired, they are included in the "Collectively Evaluated for Impairment" column of the following tables. At December 31, 2012 and 2011, substandard loans, not classified as impaired, for which a specific allocation was made totaled $10,795,911 and $16,746,384, respectively. The specific allocation associated with these loans for December 31, 2012 and 2011 was $898,773 and $1,926,438. At December 31, 2012, 2011 and 2010, impaired loans totaling $1,026,624, $995,168 and $976,971, respectively, were below the $50,000 review threshold and were not individually reviewed for impairment. Those loans were subject to the bank's general loan loss reserve methodology and are included in the "Collectively Evaluated for Impairment" column of the following tables. The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for December 31, 2012 and 2011:
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
2012 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 462,555 |  |  | $ | 518,466 |  |  | $ | 981,021 |  |  | $ | 2,512,133 |  |  | $ | 53,172,359 |  |  | $ | 55,684,492 |
Agricultural |  |  | - |  |  |  | 296,175 |  |  |  | 296,175 |  |  |  | - |  |  |  | 6,210,953 |  |  |  | 6,210,953 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,732,534 |  |  |  | 157,666 |  |  |  | 1,890,200 |  |  |  | 13,892,135 |  |  |  | 39,915,921 |  |  |  | 53,808,056 |
Residential Construction |  |  | - |  |  |  | 138,092 |  |  |  | 138,092 |  |  |  | - |  |  |  | 5,852,238 |  |  |  | 5,852,238 |
Commercial |  |  | 1,236,526 |  |  |  | 3,926,313 |  |  |  | 5,162,839 |  |  |  | 28,205,405 |  |  |  | 306,180,772 |  |  |  | 334,386,177 |
Residential |  |  | 840,492 |  |  |  | 2,565,455 |  |  |  | 3,405,947 |  |  |  | 8,022,249 |  |  |  | 195,822,273 |  |  |  | 203,844,522 |
Farmland |  |  | - |  |  |  | 290,526 |  |  |  | 290,526 |  |  |  | 2,393,775 |  |  |  | 46,663,086 |  |  |  | 49,056,861 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 227,774 |  |  |  | 227,774 |  |  |  | 28,007 |  |  |  | 29,749,769 |  |  |  | 29,777,776 |
Other |  |  | - |  |  |  | 344,347 |  |  |  | 344,347 |  |  |  | 17,491 |  |  |  | 8,411,445 |  |  |  | 8,428,936 |
Total End of Year Balance |  | $ | 4,272,107 |  |  | $ | 8,464,814 |  |  | $ | 12,736,921 |  |  | $ | 55,071,195 |  |  | $ | 691,978,816 |  |  | $ | 747,050,011 |
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
2011 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 308,211 |  |  | $ | 762,349 |  |  | $ | 1,070,560 |  |  | $ | 2,237,878 |  |  | $ | 46,748,224 |  |  | $ | 48,986,102 |
Agricultural |  |  | - |  |  |  | 297,168 |  |  |  | 297,168 |  |  |  | - |  |  |  | 8,421,884 |  |  |  | 8,421,884 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 2,693,571 |  |  |  | 429,023 |  |  |  | 3,122,594 |  |  |  | 24,212,519 |  |  |  | 34,333,301 |  |  |  | 58,545,820 |
Residential Construction |  |  | - |  |  |  | 138,092 |  |  |  | 138,092 |  |  |  | - |  |  |  | 3,530,502 |  |  |  | 3,530,502 |
Commercial |  |  | 2,060,815 |  |  |  | 4,387,249 |  |  |  | 6,448,064 |  |  |  | 35,715,026 |  |  |  | 279,565,722 |  |  |  | 315,280,748 |
Residential |  |  | 674,998 |  |  |  | 3,020,359 |  |  |  | 3,695,357 |  |  |  | 5,614,744 |  |  |  | 188,023,073 |  |  |  | 193,637,817 |
Farmland |  |  | 11,878 |  |  |  | 352,785 |  |  |  | 364,663 |  |  |  | 486,683 |  |  |  | 47,738,723 |  |  |  | 48,225,406 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 1,632 |  |  |  | 203,522 |  |  |  | 205,154 |  |  |  | 9,596 |  |  |  | 30,439,707 |  |  |  | 30,449,303 |
Other |  |  | - |  |  |  | 307,942 |  |  |  | 307,942 |  |  |  | - |  |  |  | 9,243,739 |  |  |  | 9,243,739 |
Total End of Year Balance |  | $ | 5,751,105 |  |  | $ | 9,898,489 |  |  | $ | 15,649,594 |  |  | $ | 68,276,446 |  |  | $ | 648,044,875 |  |  | $ | 716,321,321 |
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
2010 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 336,011 |  |  | $ | 4,078,806 |  |  | $ | 4,414,817 |  |  | $ | 2,131,375 |  |  | $ | 51,088,966 |  |  | $ | 53,220,341 |
Agricultural |  |  | - |  |  |  | 698,637 |  |  |  | 698,637 |  |  |  | 274,679 |  |  |  | 10,277,112 |  |  |  | 10,551,791 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 3,501,117 |  |  |  | 624,926 |  |  |  | 4,126,043 |  |  |  | 28,392,107 |  |  |  | 43,917,124 |  |  |  | 72,309,231 |
Residential Construction |  |  | - |  |  |  | 519,766 |  |  |  | 519,766 |  |  |  | 194,881 |  |  |  | 4,178,130 |  |  |  | 4,373,011 |
Commercial |  |  | 7,539,533 |  |  |  | 489,992 |  |  |  | 8,029,525 |  |  |  | 58,562,946 |  |  |  | 304,315,619 |  |  |  | 362,878,565 |
Residential |  |  | 1,561,952 |  |  |  | 4,379,744 |  |  |  | 5,941,696 |  |  |  | 13,645,907 |  |  |  | 193,825,906 |  |  |  | 207,471,813 |
Farmland |  |  | - |  |  |  | 944,323 |  |  |  | 944,323 |  |  |  | 1,416,538 |  |  |  | 51,361,851 |  |  |  | 52,778,389 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 3,033 |  |  |  | 3,071,187 |  |  |  | 3,074,220 |  |  |  | 76,420 |  |  |  | 33,487,443 |  |  |  | 33,563,863 |
Other |  |  | - |  |  |  | 531,050 |  |  |  | 531,050 |  |  |  | 113,002 |  |  |  | 15,990,667 |  |  |  | 16,103,669 |
Total End of Year Balance |  | $ | 12,941,646 |  |  | $ | 15,338,431 |  |  | $ | 28,280,077 |  |  | $ | 104,807,855 |  |  | $ | 708,442,818 |  |  | $ | 813,250,673 |

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