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Note 5 - Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2015
Disclosure Text Block Supplement [Abstract] |
Allowance for Credit Losses [Text Block] | (5) Allowance for Loan Losses Changes in the allowance for loan losses for the years ended December 31 are as follows:
|  | 201 5 |  |  | 2014 |  |  | 2013 |
Balance, Beginning of Year |  | $ | 8,802,316 |  |  | $ | 11,805,986 |  |  | $ | 12,736,921 |
Provision for Loan Losses |  |  | 865,500 |  |  |  | 1,308,000 |  |  |  | 4,485,000 |
Loans Charged Off |  |  | (2,083,347 | ) |  |  | (5,104,491 | ) |  |  | (6,227,716 | )
Recoveries of Loans Previously Charged Off |  |  | 1,019,436 |  |  |  | 792,821 |  |  |  | 811,781 |
Balance, End of Year |  | $ | 8,603,905 |  |  | $ | 8,802,316 |  |  | $ | 11,805,986 |
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.
2015 |  | Beginning Balance |  |  | Charge-O ffs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultur al |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 497,561 |  |  | $ | (454,971 | ) |  | $ | 52,111 |  |  | $ | 760,663 |  |  | $ | 855,364 |
Agricultural |  |  | 304,172 |  |  |  | (5,000 | ) |  |  | 3,600 |  |  |  | (99,681 | ) |  |  | 203,091 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,222,695 |  |  |  | (97,698 | ) |  |  | 485,834 |  |  |  | (920,065 | ) |  |  | 690,766 |
Residential Construction |  |  | 138,092 |  |  |  | - |  |  |  | - |  |  |  | (118,202 | ) |  |  | 19,890 |
Commercial |  |  | 3,664,777 |  |  |  | (275,297 | ) |  |  | 270,003 |  |  |  | 191,044 |  |  |  | 3,850,527 |
Residential |  |  | 2,425,327 |  |  |  | (929,668 | ) |  |  | 109,626 |  |  |  | 385,070 |  |  |  | 1,990,355 |
Farmland |  |  | 103,800 |  |  |  | (40,000 | ) |  |  | 20,000 |  |  |  | 827,892 |  |  |  | 911,692 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 66,914 |  |  |  | (255,062 | ) |  |  | 61,976 |  |  |  | 189,549 |  |  |  | 63,377 |
Other |  |  | 378,978 |  |  |  | (25,651 | ) |  |  | 16,286 |  |  |  | (350,770 | ) |  |  | 18,843 |
|  | $ | 8,802,316 |  |  | $ | (2,083,347 | ) |  | $ | 1,019,436 |  |  | $ | 865,500 |  |  | $ | 8,603,905 |
2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Agricultur al |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 1,017,073 |  |  | $ | (624,944 | ) |  | $ | 76,002 |  |  | $ | 29,430 |  |  | $ | 497,561 |
Agricultural |  |  | 293,886 |  |  |  | - |  |  |  | 2,700 |  |  |  | 7,586 |  |  |  | 304,172 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,782,179 |  |  |  | (1,543,099 | ) |  |  | 485,005 |  |  |  | 498,610 |  |  |  | 1,222,695 |
Residential Construction |  |  | 138,092 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138,092 |
Commercial |  |  | 4,379,276 |  |  |  | (1,326,825 | ) |  |  | 90,042 |  |  |  | 522,284 |  |  |  | 3,664,777 |
Residential |  |  | 3,278,269 |  |  |  | (1,033,966 | ) |  |  | 31,127 |  |  |  | 149,897 |  |  |  | 2,425,327 |
Farmland |  |  | 311,494 |  |  |  | (233,580 | ) |  |  | 20,000 |  |  |  | 5,886 |  |  |  | 103,800 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 243,253 |  |  |  | (342,077 | ) |  |  | 72,477 |  |  |  | 93,261 |  |  |  | 66,914 |
Other |  |  | 362,464 |  |  |  | - |  |  |  | 15,468 |  |  |  | 1,046 |  |  |  | 378,978 |
|  | $ | 11,805,986 |  |  | $ | (5,104,491 | ) |  | $ | 792,821 |  |  | $ | 1,308,000 |  |  | $ | 8,802,316 |
2013 |  | Beginning Balance |  |  | Charge-O ffs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultur al |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
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 |
The loss history period used at December 31, 2015, 2014 and 2013 was based on the loss rate from the eight quarters ended September 30, 2015, 2014 and 2013, respectively. The Company’s allowance for loan losses consists of specific valuation allowances established for probable losses on specific loans and historical valuation allowances for other loans with similar risk characteristics. Effective with the quarter ended June 30, 2015, the calculation of the amount needed in the Allowance for Loan Losses changed. Management determined that the segmentation method for the ASC 450-20 portion of the loan portfolio should be changed to bank call report categories. Prior to this change, the ASC 450-20 segmentation categorized loans by various non-owner occupied commercial real estate loan types and risk grades for the remainder of the ASC 450-20 portion of the portfolio. On the date of change, June 30, 2015, the change in methodology resulted in an increase to the calculated allowance for loan loss reserve of $1,621,424; however, no additional provisions were required to be recorded as a result of the change. During 2014, management changed its methodology for calculating the allowance for loan losses to better reflect the estimated losses inherent in the portfolio. Specific changes included:
| ● | Reducing the historical loss ratios by including loan loss recoveries in the calculation. Previously, management included only the loan charge-off amount and did not consider the effect of subsequent recoveries.
| ● | Reducing the balance of those loans which are guaranteed by government agencies, such as SBA loans. Previously, the entire balance of such loans was considered in the calculation of the general reserves; however, beginning in 2014, only the nonguaranteed portion of these loans is subject to the loss calculation.
Management feels these changes better align the calculation of the allowance for loan losses with the direction of the loan portfolio. These changes did not result in a significant change to the recorded allowance for loan loss balance. During the third quarter of 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. 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. 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 $11,155,813 and $9,356,253 as of December 31, 2015 and 2014, respectively. Specific allowance allocations were made for these loans totaling $276,731 and $747,982 as of December 31, 2015 and 2014, 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, 2015, impaired loans totaling $3,744,733 were below the $250,000 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. Likewise, at December 31, 2014 and 2013, impaired loans totaling $3,885,411 and $2,821,199, respectively, 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.
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
201 5 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 94,538 |  |  | $ | 760,826 |  |  | $ | 855,364 |  |  | $ | 122,928 |  |  | $ | 47,658,761 |  |  | $ | 47,781,689 |
Agricultural |  |  | - |  |  |  | 203,091 |  |  |  | 203,091 |  |  |  | 8,445 |  |  |  | 19,185,052 |  |  |  | 19,193,497 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 25,344 |  |  |  | 665,422 |  |  |  | 690,766 |  |  |  | 1,622,560 |  |  |  | 38,484,073 |  |  |  | 40,106,633 |
Residential Construction |  |  | - |  |  |  | 19,890 |  |  |  | 19,890 |  |  |  | - |  |  |  | 9,413,263 |  |  |  | 9,413,263 |
Commercial |  |  | 1,607,962 |  |  |  | 2,242,565 |  |  |  | 3,850,527 |  |  |  | 23,628,213 |  |  |  | 322,633,820 |  |  |  | 346,262,033 |
Residential |  |  | 308,188 |  |  |  | 1,682,167 |  |  |  | 1,990,355 |  |  |  | 3,597,386 |  |  |  | 193,405,033 |  |  |  | 197,002,419 |
Farmland |  |  | 37,386 |  |  |  | 874,306 |  |  |  | 911,692 |  |  |  | 1,402,939 |  |  |  | 60,376,920 |  |  |  | 61,779,859 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 63,377 |  |  |  | 63,377 |  |  |  | - |  |  |  | 20,605,465 |  |  |  | 20,605,465 |
Other |  |  | - |  |  |  | 18,843 |  |  |  | 18,843 |  |  |  | - |  |  |  | 16,490,737 |  |  |  | 16,490,737 |
Total End of Year Balance |  | $ | 2,073,418 |  |  | $ | 6,530,487 |  |  | $ | 8,603,905 |  |  | $ | 30,382,471 |  |  | $ | 728,253,124 |  |  | $ | 758,635,595 |
|  | Ending Allowance Balance |  |  | Ending Loan Balance |
2014 |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 96,580 |  |  | $ | 400,981 |  |  | $ | 497,561 |  |  | $ | 96,580 |  |  | $ | 50,863,685 |  |  | $ | 50,960,265 |
Agricultural |  |  | - |  |  |  | 304,172 |  |  |  | 304,172 |  |  |  | - |  |  |  | 16,689,444 |  |  |  | 16,689,444 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 53,947 |  |  |  | 1,168,748 |  |  |  | 1,222,695 |  |  |  | 3,384,377 |  |  |  | 47,874,593 |  |  |  | 51,258,970 |
Residential Construction |  |  | - |  |  |  | 138,092 |  |  |  | 138,092 |  |  |  | - |  |  |  | 11,220,683 |  |  |  | 11,220,683 |
Commercial |  |  | 456,941 |  |  |  | 3,207,836 |  |  |  | 3,664,777 |  |  |  | 21,693,061 |  |  |  | 310,537,786 |  |  |  | 332,230,847 |
Residential |  |  | 414,684 |  |  |  | 2,010,643 |  |  |  | 2,425,327 |  |  |  | 7,559,965 |  |  |  | 196,192,655 |  |  |  | 203,752,620 |
Farmland |  |  | 28,962 |  |  |  | 74,838 |  |  |  | 103,800 |  |  |  | 1,700,793 |  |  |  | 48,250,191 |  |  |  | 49,950,984 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 66,914 |  |  |  | 66,914 |  |  |  | - |  |  |  | 22,820,314 |  |  |  | 22,820,314 |
Other |  |  | - |  |  |  | 378,978 |  |  |  | 378,978 |  |  |  | - |  |  |  | 7,209,682 |  |  |  | 7,209,682 |
Total End of Year Balance |  | $ | 1,051,114 |  |  | $ | 7,751,202 |  |  | $ | 8,802,316 |  |  | $ | 34,434,776 |  |  | $ | 711,659,033 |  |  | $ | 746,093,809 |
2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
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 |

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