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Note 4 - Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2017
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, 2017 and March 31, 2016. 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, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ending |
|  | Balance |  |  | Charge-Offs |  |  | Recoveries |  |  | Provision |  |  | Balance |
Commercial and Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 456 |  |  | $ | (4 | ) |  | $ | 79 |  |  | $ | (128 | ) |  | $ | 403 |
Agricultural |  |  | 168 |  |  |  | - |  |  |  | 1 |  |  |  | 20 |  |  |  | 189 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 323 |  |  |  | - |  |  |  | 162 |  |  |  | (183 | ) |  |  | 302 |
Residential Construction |  |  | 13 |  |  |  | - |  |  |  | - |  |  |  | (3 | ) |  |  | 10 |
Commercial |  |  | 5,751 |  |  |  | (852 | ) |  |  | 247 |  |  |  | 773 |  |  |  | 5,919 |
Residential |  |  | 1,396 |  |  |  | (15 | ) |  |  | 15 |  |  |  | (160 | ) |  |  | 1,236 |
Farmland |  |  | 722 |  |  |  | - |  |  |  | - |  |  |  | (13 | ) |  |  | 709 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 80 |  |  |  | (46 | ) |  |  | 19 |  |  |  | 28 |  |  |  | 81 |
Other |  |  | 14 |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 15 |
|  | $ | 8,923 |  |  | $ | (917 | ) |  | $ | 523 |  |  | $ | 335 |  |  | $ | 8,864 |
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 |
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 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 was completed in the first quarter of 2017. As of March 31, 2017, this change in the historical loss period resulted in an increase to the allowance for loan losses of $575,000. 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. 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 March 31, 2017, there were 161 impaired loans totaling $4.3 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, 2016, there were 156 impaired loans totaling $3.6 million which 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. Since not all loans in the substandard category are considered impaired, this quarterly review process may result in the identification of specific reserves on unimpaired 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 $10.16 million and $17.84 million as of March 31, 2017 and 2016, respectively. Specific allowance allocations were made for these loans totaling $802 thousand and $1.17 million as of March 31, 2017 and 2016, 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 following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for March 31, 2017 and 2016:
March 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 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 |  | $ | - |  |  | $ | 403 |  |  | $ | 403 |  |  | $ | - |  |  | $ | 44,925 |  |  | $ | 44,925 |
Agricultural |  |  | - |  |  |  | 189 |  |  |  | 189 |  |  |  | 5 |  |  |  | 19,301 |  |  |  | 19,306 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 21 |  |  |  | 281 |  |  |  | 302 |  |  |  | 72 |  |  |  | 30,468 |  |  |  | 30,540 |
Residential Construction |  |  | - |  |  |  | 10 |  |  |  | 10 |  |  |  | - |  |  |  | 9,367 |  |  |  | 9,367 |
Commercial |  |  | 3,051 |  |  |  | 2,868 |  |  |  | 5,919 |  |  |  | 19,865 |  |  |  | 339,278 |  |  |  | 359,143 |
Residential |  |  | 340 |  |  |  | 896 |  |  |  | 1,236 |  |  |  | 3,102 |  |  |  | 192,180 |  |  |  | 195,282 |
Farmland |  |  | 27 |  |  |  | 682 |  |  |  | 709 |  |  |  | 1,042 |  |  |  | 63,828 |  |  |  | 64,870 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | - |  |  |  | 81 |  |  |  | 81 |  |  |  | - |  |  |  | 19,188 |  |  |  | 19,188 |
Other |  |  | - |  |  |  | 15 |  |  |  | 15 |  |  |  | - |  |  |  | 17,720 |  |  |  | 17,720 |
Total End of Period Balance |  | $ | 3,439 |  |  | $ | 5,425 |  |  | $ | 8,864 |  |  | $ | 24,086 |  |  | $ | 736,255 |  |  | $ | 760,341 |
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 |

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