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Note 4 - Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2016
Notes to Financial Statements |
Allowance for Credit Losses [Text Block] | ( 4 ) Allowance for Loan Losses The following tables detail activity in the allowance for loan losses, segregated by class of loan, for the three month period ended March 31, 2016 and March 31, 2015. 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.
March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 855 |  |  | $ | (169 | ) |  | $ | 12 |  |  | $ | (144 | ) |  | $ | 554 |
Agricultural |  |  | 203 |  |  |  | (22 | ) |  |  | 1 |  |  |  | 10 |  |  |  | 192 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 691 |  |  |  | - |  |  |  | 804 |  |  |  | (685 | ) |  |  | 810 |
Residential Construction |  |  | 20 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20 |
Commercial |  |  | 3,851 |  |  |  | (248 | ) |  |  | 168 |  |  |  | 1,475 |  |  |  | 5,246 |
Residential |  |  | 1,990 |  |  |  | (63 | ) |  |  | 14 |  |  |  | (136 | ) |  |  | 1,805 |
Farmland |  |  | 912 |  |  |  | - |  |  |  | 125 |  |  |  | (234 | ) |  |  | 803 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 63 |  |  |  | (49 | ) |  |  | 15 |  |  |  | 72 |  |  |  | 101 |
Other |  |  | 19 |  |  |  | - |  |  |  | 3 |  |  |  | (4 | ) |  |  | 18 |
|  | $ | 8,604 |  |  | $ | (551 | ) |  | $ | 1,142 |  |  | $ | 354 |  |  | $ | 9,549 |
March 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 497 |  |  | $ | (184 | ) |  | $ | 13 |  |  | $ | 8 |  |  | $ | 334 |
Agricultural |  |  | 304 |  |  |  | - |  |  |  | 1 |  |  |  | 2 |  |  |  | 307 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,223 |  |  |  | (6 | ) |  |  | 14 |  |  |  | 138 |  |  |  | 1,369 |
Residential Construction |  |  | 138 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138 |
Commercial |  |  | 3,665 |  |  |  | (125 | ) |  |  | 88 |  |  |  | 144 |  |  |  | 3,772 |
Residential |  |  | 2,425 |  |  |  | (589 | ) |  |  | 22 |  |  |  | 42 |  |  |  | 1,900 |
Farmland |  |  | 104 |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 106 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 67 |  |  |  | (36 | ) |  |  | 13 |  |  |  | 26 |  |  |  | 70 |
Other |  |  | 379 |  |  |  | - |  |  |  | 2 |  |  |  | - |  |  |  | 381 |
|  | $ | 8,802 |  |  | $ | (940 | ) |  | $ | 153 |  |  | $ | 362 |  |  | $ | 8,377 |
The loss history period used at March 31, 2016 was based on the loss rate from the twelve quarters ended December 31, 2015. 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. A change in the method of calculation since March 31, 2015 and since year end 2015 was made. The historical losses period was increased from 8 quarters to 12 quarters. Management believes the 12 quarter period includes loss history that will be more indicative of incurred losses than 8 quarters. In more recent quarters, recoveries have exceeded ongoing expectations, and losses have moderated significantly as problem loans made several years ago have been worked out. The result is that net charge-offs have become lower than ongoing expectations. This change in the historical losses period from 8 quarters to 12 quarters increased the ALLL calculation for call code segments by $718. 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; however, no additional provisions were required to be recorded as a result of the change. 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 $17.84 million and $7.2 million as of March 31, 2016 and 2015, respectively. Specific allowance allocations were made for these loans totaling $1.17 million and $596 thousand as of March 31, 2016 and 2015, 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 March 31, 2016, there were 156 impaired loans totaling $3.6 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 March 31, 2015, impaired loans totaling $4.4 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 March 31, 2016 and 2015:
March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 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 |  | $ | 4 |  |  | $ | 550 |  |  | $ | 554 |  |  | $ | 37 |  |  | $ | 45,078 |  |  | $ | 45,115 |
Agricultural |  |  | - |  |  |  | 192 |  |  |  | 192 |  |  |  | - |  |  |  | 18,562 |  |  |  | 18,562 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 24 |  |  |  | 786 |  |  |  | 810 |  |  |  | 389 |  |  |  | 35,581 |  |  |  | 35,970 |
Residential Construction |  |  | - |  |  |  | 20 |  |  |  | 20 |  |  |  | - |  |  |  | 9,849 |  |  |  | 9,849 |
Commercial |  |  | 1,940 |  |  |  | 3,306 |  |  |  | 5,246 |  |  |  | 16,918 |  |  |  | 330,454 |  |  |  | 347,372 |
Residential |  |  | 528 |  |  |  | 1,277 |  |  |  | 1,805 |  |  |  | 3,370 |  |  |  | 192,309 |  |  |  | 195,679 |
Farmland |  |  | 35 |  |  |  | 768 |  |  |  | 803 |  |  |  | 1,401 |  |  |  | 64,884 |  |  |  | 66,285 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 101 |  |  |  | 101 |  |  |  | - |  |  |  | 19,661 |  |  |  | 19,661 |
Other |  |  | - |  |  |  | 18 |  |  |  | 18 |  |  |  | - |  |  |  | 15,768 |  |  |  | 15,768 |
Total End of Period Balance |  | $ | 2,531 |  |  | $ | 7,018 |  |  | $ | 9,549 |  |  | $ | 22,115 |  |  | $ | 732,146 |  |  | $ | 754,261 |
March 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 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 |  | $ | 94 |  |  | $ | 240 |  |  | $ | 334 |  |  | $ | 94 |  |  | $ | 51,680 |  |  | $ | 51,774 |
Agricultural |  |  | - |  |  |  | 307 |  |  |  | 307 |  |  |  | 8 |  |  |  | 19,180 |  |  |  | 19,188 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 49 |  |  |  | 1,320 |  |  |  | 1,369 |  |  |  | 3,428 |  |  |  | 45,183 |  |  |  | 48,611 |
Residential Construction |  |  | - |  |  |  | 138 |  |  |  | 138 |  |  |  | - |  |  |  | 10,030 |  |  |  | 10,030 |
Commercial |  |  | 209 |  |  |  | 3,563 |  |  |  | 3,772 |  |  |  | 21,953 |  |  |  | 319,892 |  |  |  | 341,845 |
Residential |  |  | 330 |  |  |  | 1,570 |  |  |  | 1,900 |  |  |  | 3,680 |  |  |  | 199,198 |  |  |  | 202,878 |
Farmland |  |  | 53 |  |  |  | 53 |  |  |  | 106 |  |  |  | 1,699 |  |  |  | 49,873 |  |  |  | 51,572 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 70 |  |  |  | 70 |  |  |  | - |  |  |  | 21,705 |  |  |  | 21,705 |
Other |  |  | - |  |  |  | 381 |  |  |  | 381 |  |  |  | - |  |  |  | 6,031 |  |  |  | 6,031 |
Total End of Period Balance |  | $ | 735 |  |  | $ | 7,642 |  |  | $ | 8,377 |  |  | $ | 30,862 |  |  | $ | 722,772 |  |  | $ | 753,634 |

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