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Allowance for Loan Losses | 6 Months Ended
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Jun. 30, 2014
Allowance for Loan Losses [Abstract] |
Allowance for Loan Losses | (4) Allowance for Loan Losses The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the six month period ended June 30, 2014 and June 30, 2013. 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.
June 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 1,017 |  |  | $ | (373 | ) |  | $ | 58 |  |  | $ | 18 |  |  | $ | 720 |
Agricultural |  |  | 294 |  |  |  | - |  |  |  | 1 |  |  |  | 5 |  |  |  | 300 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,782 |  |  |  | (470 | ) |  |  | 254 |  |  |  | 308 |  |  |  | 1,874 |
Residential Construction |  |  | 138 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138 |
Commercial |  |  | 4,379 |  |  |  | (753 | ) |  |  | 43 |  |  |  | 323 |  |  |  | 3,992 |
Residential |  |  | 3,278 |  |  |  | (585 | ) |  |  | 25 |  |  |  | 92 |  |  |  | 2,810 |
Farmland |  |  | 312 |  |  |  | (234 | ) |  |  | - |  |  |  | 4 |  |  |  | 82 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 243 |  |  |  | (173 | ) |  |  | 51 |  |  |  | 57 |  |  |  | 178 |
Other |  |  | 363 |  |  |  | - |  |  |  | 12 |  |  |  | 1 |  |  |  | 376 |
|  | $ | 11,806 |  |  | $ | (2,588 | ) |  | $ | 444 |  |  | $ | 808 |  |  | $ | 10,470 |
June 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 981 |  |  | $ | (45 | ) |  | $ | 38 |  |  | $ | 43 |  |  | $ | 1,017 |
Agricultural |  |  | 296 |  |  |  | (27 | ) |  |  | 4 |  |  |  | 26 |  |  |  | 299 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,890 |  |  |  | (791 | ) |  |  | 120 |  |  |  | 756 |  |  |  | 1,975 |
Residential Construction |  |  | 138 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138 |
Commercial |  |  | 5,163 |  |  |  | (1,425 | ) |  |  | 85 |  |  |  | 1,361 |  |  |  | 5,184 |
Residential |  |  | 3,406 |  |  |  | (279 | ) |  |  | 18 |  |  |  | 267 |  |  |  | 3,412 |
Farmland |  |  | 291 |  |  |  | (21 | ) |  |  | 16 |  |  |  | 20 |  |  |  | 306 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 228 |  |  |  | (233 | ) |  |  | 55 |  |  |  | 223 |  |  |  | 273 |
Other |  |  | 344 |  |  |  | (4 | ) |  |  | 9 |  |  |  | 4 |  |  |  | 353 |
|  | $ | 12,737 |  |  | $ | (2,825 | ) |  | $ | 345 |  |  | $ | 2,700 |  |  | $ | 12,957 |
The loss history period used at June 30, 2014 was based on the loss rate from the eight quarters ended March 31, 2014. During the third quarter 2013, 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. 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 $9.0 million and $8.2 million as of June 30, 2014 and 2013, respectively. Specific allowance allocations were made for these loans totaling $630 thousand and $615 thousand as of June 30, 2014 and 2013, 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 June 30, 2014, there were impaired loans totaling $3.93 million below the $250,000 review threshold which 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 June 30, 2013, impaired loans totaling $2.17 million were below the $250,000 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. The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for June 30, 2014 and 2013:
June 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
|  | Individually |  |  | Collectively |  |  |  |  |  | Individually |  |  | Collectively |  |  |  |
|  | Evaluated for |  |  | Evaluated for |  |  |  |  |  | Evaluated for |  |  | Evaluated for |  |  |  |
|  | Impairment |  |  | Impairment |  |  | Total |  |  | Impairment |  |  | Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 102 |  |  | $ | 618 |  |  | $ | 720 |  |  | $ | 1,068 |  |  | $ | 40,772 |  |  | $ | 41,840 |
Agricultural |  |  | - |  |  |  | 300 |  |  |  | 300 |  |  |  | - |  |  |  | 18,568 |  |  |  | 18,568 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,082 |  |  |  | 792 |  |  |  | 1,874 |  |  |  | 4,812 |  |  |  | 45,368 |  |  |  | 50,180 |
Residential Construction |  |  | - |  |  |  | 138 |  |  |  | 138 |  |  |  | - |  |  |  | 10,875 |  |  |  | 10,875 |
Commercial |  |  | 772 |  |  |  | 3,220 |  |  |  | 3,992 |  |  |  | 26,204 |  |  |  | 306,691 |  |  |  | 332,895 |
Residential |  |  | 310 |  |  |  | 2,500 |  |  |  | 2,810 |  |  |  | 4,815 |  |  |  | 196,698 |  |  |  | 201,513 |
Farmland |  |  | - |  |  |  | 82 |  |  |  | 82 |  |  |  | 963 |  |  |  | 48,212 |  |  |  | 49,175 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 178 |  |  |  | 178 |  |  |  | - |  |  |  | 23,548 |  |  |  | 23,548 |
Other |  |  | - |  |  |  | 376 |  |  |  | 376 |  |  |  | - |  |  |  | 7,169 |  |  |  | 7,169 |
Total End of Period Balance |  | $ | 2,266 |  |  | $ | 8,204 |  |  | $ | 10,470 |  |  | $ | 37,862 |  |  | $ | 697,901 |  |  | $ | 735,763 |
June 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
|  | Individually |  |  | Collectively |  |  |  |  |  | Individually |  |  | Collectively |  |  |  |
|  | Evaluated for |  |  | Evaluated for |  |  |  |  |  | Evaluated for |  |  | Evaluated for |  |  |  |
|  | Impairment |  |  | Impairment |  |  | Total |  |  | Impairment |  |  | Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 551 |  |  | $ | 466 |  |  | $ | 1,017 |  |  | $ | 2,388 |  |  | $ | 48,770 |  |  | $ | 51,158 |
Agricultural |  |  | - |  |  |  | 299 |  |  |  | 299 |  |  |  | - |  |  |  | 14,177 |  |  |  | 14,177 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,580 |  |  |  | 395 |  |  |  | 1,975 |  |  |  | 10,007 |  |  |  | 42,692 |  |  |  | 52,699 |
Residential Construction |  |  | - |  |  |  | 138 |  |  |  | 138 |  |  |  | - |  |  |  | 8,189 |  |  |  | 8,189 |
Commercial |  |  | 1,080 |  |  |  | 4,104 |  |  |  | 5,184 |  |  |  | 23,144 |  |  |  | 302,173 |  |  |  | 325,317 |
Residential |  |  | 982 |  |  |  | 2,430 |  |  |  | 3,412 |  |  |  | 6,591 |  |  |  | 201,971 |  |  |  | 208,562 |
Farmland |  |  | - |  |  |  | 306 |  |  |  | 306 |  |  |  | 2,277 |  |  |  | 47,521 |  |  |  | 49,798 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 273 |  |  |  | 273 |  |  |  | - |  |  |  | 27,439 |  |  |  | 27,439 |
Other |  |  | - |  |  |  | 353 |  |  |  | 353 |  |  |  | - |  |  |  | 6,804 |  |  |  | 6,804 |
Total End of Period Balance |  | $ | 4,193 |  |  | $ | 8,764 |  |  | $ | 12,957 |  |  | $ | 44,407 |  |  | $ | 699,736 |  |  | $ | 744,143 |

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