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Note 4 - Allowance for Loan Losses | 6 Months Ended
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Jun. 30, 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 six month period ended June 30, 2016 and June 30, 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.
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 855 |  |  | $ | (225 | ) |  | $ | 25 |  |  | $ | (100 | ) |  | $ | 555 |
Agricultural |  |  | 203 |  |  |  | (18 | ) |  |  | 2 |  |  |  | 64 |  |  |  | 251 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 691 |  |  |  | (25 | ) |  |  | 804 |  |  |  | (1,032 | ) |  |  | 438 |
Residential Construction |  |  | 20 |  |  |  | - |  |  |  | - |  |  |  | (2 | ) |  |  | 18 |
Commercial |  |  | 3,851 |  |  |  | (569 | ) |  |  | 180 |  |  |  | 2,136 |  |  |  | 5,598 |
Residential |  |  | 1,990 |  |  |  | (159 | ) |  |  | 23 |  |  |  | (242 | ) |  |  | 1,612 |
Farmland |  |  | 912 |  |  |  | - |  |  |  | 125 |  |  |  | (241 | ) |  |  | 796 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 63 |  |  |  | (111 | ) |  |  | 21 |  |  |  | 123 |  |  |  | 96 |
Other |  |  | 19 |  |  |  | - |  |  |  | 5 |  |  |  | 2 |  |  |  | 26 |
|  | $ | 8,604 |  |  | $ | (1,107 | ) |  | $ | 1,185 |  |  | $ | 708 |  |  | $ | 9,390 |
June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 497 |  |  | $ | (185 | ) |  | $ | 23 |  |  | $ | 11 |  |  | $ | 346 |
Agricultural |  |  | 304 |  |  |  | - |  |  |  | 2 |  |  |  | 3 |  |  |  | 309 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 1,223 |  |  |  | (96 | ) |  |  | 272 |  |  |  | 187 |  |  |  | 1,586 |
Residential Construction |  |  | 138 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 138 |
Commercial |  |  | 3,665 |  |  |  | (166 | ) |  |  | 128 |  |  |  | 195 |  |  |  | 3,822 |
Residential |  |  | 2,425 |  |  |  | (744 | ) |  |  | 35 |  |  |  | 57 |  |  |  | 1,773 |
Farmland |  |  | 104 |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 106 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 67 |  |  |  | (90 | ) |  |  | 30 |  |  |  | 35 |  |  |  | 42 |
Other |  |  | 379 |  |  |  | (25 | ) |  |  | 3 |  |  |  | 1 |  |  |  | 358 |
|  | $ | 8,802 |  |  | $ | (1,306 | ) |  | $ | 493 |  |  | $ | 491 |  |  | $ | 8,480 |
For the year ended December 31, 2015 the Company’s historical loss ratio within the ALLL calculation was based on a rolling 8 quarter historical loss period. During the first quarter of 2016 Company management implemented a change to its allowance for loan loss methodology by expanding the historical loss period from a rolling 8 quarters to a rolling 16 quarters. Management believes the longer historical loss period better reflects the current and expected loss behavior of the loan portfolio within the current credit cycle. The transition to a rolling 16 quarter loss period will be complete in the first quarter of 2017. As of June 30, 2016, this change in the historical loss period resulted in an increase to the allowance for loan losses of $669,000. Management continually evaluates the allowance for loan losses methodology seeking to refine and enhance this process as appropriate, and it is likely that the methodology will continue to evolve over time. 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 $12.64 million and $8.6 million as of June 30, 2016 and 2015, respectively. Specific allowance allocations were made for these loans totaling $791 thousand and $569 thousand as of June 30, 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. 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. At June 30, 2016, there were 165 impaired loans totaling $3.8 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, 2015, there were 156 impaired loans totaling $4.3 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, 2016 and 2015:
June 30, 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 |  | $ | - |  |  | $ | 555 |  |  | $ | 555 |  |  | $ | 9 |  |  | $ | 47,925 |  |  | $ | 47,934 |
Agricultural |  |  | - |  |  |  | 251 |  |  |  | 251 |  |  |  | - |  |  |  | 24,307 |  |  |  | 24,307 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 22 |  |  |  | 416 |  |  |  | 438 |  |  |  | 384 |  |  |  | 31,908 |  |  |  | 32,292 |
Residential Construction |  |  | - |  |  |  | 18 |  |  |  | 18 |  |  |  | - |  |  |  | 9,141 |  |  |  | 9,141 |
Commercial |  |  | 2,886 |  |  |  | 2,712 |  |  |  | 5,598 |  |  |  | 17,463 |  |  |  | 327,718 |  |  |  | 345,181 |
Residential |  |  | 440 |  |  |  | 1,172 |  |  |  | 1,612 |  |  |  | 3,609 |  |  |  | 192,531 |  |  |  | 196,140 |
Farmland |  |  | 33 |  |  |  | 763 |  |  |  | 796 |  |  |  | 1,048 |  |  |  | 69,089 |  |  |  | 70,137 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 96 |  |  |  | 96 |  |  |  | - |  |  |  | 19,936 |  |  |  | 19,936 |
Other |  |  | - |  |  |  | 26 |  |  |  | 26 |  |  |  | - |  |  |  | 19,141 |  |  |  | 19,141 |
Total End of Period Balance |  | $ | 3,381 |  |  | $ | 6,009 |  |  | $ | 9,390 |  |  | $ | 22,513 |  |  | $ | 741,696 |  |  | $ | 764,209 |
June 30, 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 |  | $ | 92 |  |  | $ | 254 |  |  | $ | 346 |  |  | $ | 91 |  |  | $ | 52,415 |  |  | $ | 52,506 |
Agricultural |  |  | - |  |  |  | 309 |  |  |  | 309 |  |  |  | 8 |  |  |  | 24,011 |  |  |  | 24,019 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 18 |  |  |  | 1,568 |  |  |  | 1,586 |  |  |  | 3,313 |  |  |  | 43,386 |  |  |  | 46,699 |
Residential Construction |  |  | - |  |  |  | 138 |  |  |  | 138 |  |  |  | - |  |  |  | 11,327 |  |  |  | 11,327 |
Commercial |  |  | 278 |  |  |  | 3,544 |  |  |  | 3,822 |  |  |  | 20,537 |  |  |  | 320,630 |  |  |  | 341,167 |
Residential |  |  | 320 |  |  |  | 1,453 |  |  |  | 1,773 |  |  |  | 3,432 |  |  |  | 199,373 |  |  |  | 202,805 |
Farmland |  |  | 59 |  |  |  | 47 |  |  |  | 106 |  |  |  | 1,697 |  |  |  | 52,438 |  |  |  | 54,135 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 42 |  |  |  | 42 |  |  |  | - |  |  |  | 21,371 |  |  |  | 21,371 |
Other |  |  | - |  |  |  | 358 |  |  |  | 358 |  |  |  | - |  |  |  | 6,049 |  |  |  | 6,049 |
Total End of Period Balance |  | $ | 767 |  |  | $ | 7,713 |  |  | $ | 8,480 |  |  | $ | 29,078 |  |  | $ | 731,000 |  |  | $ | 760,078 |

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