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Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2013
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:
|  | 2013 |  |  | 2012 |  |  | 2011 |
Balance, Beginning of Year |  | $ | 12,736,921 |  |  | $ | 15,649,594 |  |  | $ | 28,280,077 |
Provision for Loan Losses |  |  | 4,485,000 |  |  |  | 6,784,767 |  |  |  | 8,250,000 |
Loans Charged Off |  |  | (6,227,716 | ) |  |  | (10,454,175 | ) |  |  | (22,850,673 | )
Recoveries of Loans Previously Charged Off |  |  | 811,781 |  |  |  | 756,735 |  |  |  | 1,970,190 |
Balance, End of Year |  | $ | 11,805,986 |  |  | $ | 12,736,921 |  |  | $ | 15,649,594 |
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.
2013 |  | Beginning Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 981,021 |  |  | $ | (120,690 | ) |  | $ | 55,829 |  |  | $ | 100,913 |  |  | $ | 1,017,073 |
Agricultural |  |  | 296,175 |  |  |  | (34,502 | ) |  |  | 6,200 |  |  |  | 26,013 |  |  |  | 293,886 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,890,200 |  |  |  | (2,071,162 | ) |  |  | 253,459 |  |  |  | 1,709,682 |  |  |  | 1,782,179 |
Residential Construction |  |  | 138,092 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138,092 |
Commercial |  |  | 5,162,839 |  |  |  | (2,872,408 | ) |  |  | 297,984 |  |  |  | 1,790,861 |  |  |  | 4,379,276 |
Residential |  |  | 3,405,947 |  |  |  | (706,242 | ) |  |  | 64,583 |  |  |  | 513,981 |  |  |  | 3,278,269 |
Farmland |  |  | 290,526 |  |  |  | (20,977 | ) |  |  | 21,762 |  |  |  | 20,183 |  |  |  | 311,494 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 227,774 |  |  |  | (397,822 | ) |  |  | 93,520 |  |  |  | 319,781 |  |  |  | 243,253 |
Other |  |  | 344,347 |  |  |  | (3,913 | ) |  |  | 18,444 |  |  |  | 3,586 |  |  |  | 362,464 |
|  | $ | 12,736,921 |  |  | $ | (6,227,716 | ) |  | $ | 811,781 |  |  | $ | 4,485,000 |  |  | $ | 11,805,986 |
2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
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 |  | Beginning Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
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 |
During 2012, the Company changed its loss history period used in calculating the ALLL from a one-year average to a rolling eight-quarter average. Although at December 31, 2012 the loss history period used was based on the annual loss rate from calendar year 2011 and the first three quarters of 2012, whereas the loss history period used at December 31, 2013 was based on the loss rate from the eight quarters ended September 30, 2013. During the third quarter, management implemented a change to its methodology for calculating the allowance for loan losses. This change was intended to better reflect the current position of the loan portfolio. Prior to the third quarter, the allowance for loan loss calculation incorporated a qualitative factor related to improvements in credit administration. These improvements, which began in 2008, included organizational changes to credit administration, specifically related to managing past due loans, grading of loans, recognition of losses and underwriting of new loans. Primary among the organizational changes was the appointment of experienced lending officers to oversee the lending function, as well as the appointment of a chief credit officer. Management feels these organizational changes are now fully implemented, as evidenced by a lower charge-off rate, and therefore, the qualitative factor is no longer relevant. The removal of this qualitative factor did not result in a significant adjustment to the recorded allowance for loan loss balance. The Company determines its individual 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 balance of $250,000 or more, regardless of the loans impairment classification. Effective March 31, 2013, management increased the dollar threshold of this review process from $50,000 to $250,000. The threshold change resulted in loans totaling $4.1 million at December 31, 2013 being removed from the individual impairment review process and being placed in the collective review process. These loans are now subject to general reserves. 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, therefore, makes specific allocations to the allowance for those loans if warranted. The total of such loans is $6.7 million and $10.8 million as of December 31, 2013 and 2012, respectively. Specific allowance allocations were made for these loans totaling $261 thousand and $899 thousand as of December 31, 2013 and 2012, respectively. Since these loans are not considered impaired, both the loan balance and related specific allocation are included in the “Collectively Evaluated for Impairment” column of the following tables. At December 31, 2013, impaired loans totaling $2.82 million were below the $250 thousand 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. Likewise, at December 31, 2012 and 2011, impaired loans totaling $1.03 million and $995 thousand, respectively, were below the $50 thousand review threshold and 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.
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
2013 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 433,714 |  |  | $ | 583,359 |  |  | $ | 1,017,073 |  |  | $ | 1,542,058 |  |  | $ | 46,565,390 |  |  | $ | 48,107,448 |
Agricultural |  |  | - |  |  |  | 293,886 |  |  |  | 293,886 |  |  |  | - |  |  |  | 10,665,938 |  |  |  | 10,665,938 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 830,546 |  |  |  | 951,633 |  |  |  | 1,782,179 |  |  |  | 7,971,298 |  |  |  | 44,767,485 |  |  |  | 52,738,783 |
Residential Construction |  |  | - |  |  |  | 138,092 |  |  |  | 138,092 |  |  |  | - |  |  |  | 6,549,260 |  |  |  | 6,549,260 |
Commercial |  |  | 423,685 |  |  |  | 3,955,591 |  |  |  | 4,379,276 |  |  |  | 24,757,942 |  |  |  | 317,025,596 |  |  |  | 341,783,538 |
Residential |  |  | 526,005 |  |  |  | 2,752,264 |  |  |  | 3,278,269 |  |  |  | 6,545,490 |  |  |  | 199,712,437 |  |  |  | 206,257,927 |
Farmland |  |  | 85,500 |  |  |  | 225,994 |  |  |  | 311,494 |  |  |  | 1,617,206 |  |  |  | 45,417,220 |  |  |  | 47,034,426 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 243,253 |  |  |  | 243,253 |  |  |  | - |  |  |  | 25,675,560 |  |  |  | 25,675,560 |
Other |  |  | - |  |  |  | 362,464 |  |  |  | 362,464 |  |  |  | 9,146 |  |  |  | 12,396,436 |  |  |  | 12,405,582 |
Total End of Year Balance |  | $ | 2,299,450 |  |  | $ | 9,506,536 |  |  | $ | 11,805,986 |  |  | $ | 42,443,140 |  |  | $ | 708,775,322 |  |  | $ | 751,218,462 |
|  | 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 |

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