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Note 5 - Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
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 7 |  |  | 201 6 |  |  | 20 15 |
Balance, Beginning of Year |  | $ | 8,923,293 |  |  | $ | 8,603,905 |  |  | $ | 8,802,316 |
Provision for Loan Losses |  |  | 390,000 |  |  |  | 1,062,000 |  |  |  | 865,500 |
Loans Charged Off |  |  | (2,915,753 | ) |  |  | (2,087,850 | ) |  |  | (2,083,347 | )
Recoveries of Loans Previously Charged Off |  |  | 1,109,968 |  |  |  | 1,345,238 |  |  |  | 1,019,436 |
Balance, End of Year |  | $ | 7,507,508 |  |  | $ | 8,923,293 |  |  | $ | 8,603,905 |
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.
201 7 |  | Beginning Balance |  |  | Charge- O ffs |  |  | Recoveries |  |  | Provision |  |  | Ending Balance |
Commercial and Agricultur al |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 456,197 |  |  | $ | (299,079 | ) |  | $ | 136,499 |  |  | $ | 153,058 |  |  | $ | 446,675 |
Agricultural |  |  | 167,692 |  |  |  | (159,500 | ) |  |  | 3,963 |  |  |  | 173,749 |  |  |  | 185,904 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 322,725 |  |  |  | (51,977 | ) |  |  | 266,459 |  |  |  | 678,808 |  |  |  | 1,216,015 |
Residential Construction |  |  | 13,491 |  |  |  | - |  |  |  | - |  |  |  | (13,491 | ) |  |  | - |
Commercial |  |  | 5,750,998 |  |  |  | (966,014 | ) |  |  | 527,150 |  |  |  | (1,438,175 | ) |  |  | 3,873,959 |
Residential |  |  | 1,396,099 |  |  |  | (1,048,337 | ) |  |  | 82,079 |  |  |  | 538,260 |  |  |  | 968,101 |
Farmland |  |  | 722,331 |  |  |  | (60,902 | ) |  |  | 16,750 |  |  |  | 101,352 |  |  |  | 779,531 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 80,265 |  |  |  | (329,944 | ) |  |  | 74,933 |  |  |  | 208,739 |  |  |  | 33,993 |
Other |  |  | 13,495 |  |  |  | - |  |  |  | 2,135 |  |  |  | (12,300 | ) |  |  | 3,330 |
|  | $ | 8,923,293 |  |  | $ | (2,915,753 | ) |  | $ | 1,109,968 |  |  | $ | 390,000 |  |  | $ | 7,507,508 |
201 6 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Agricultur al |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 855,364 |  |  | $ | (304,918 | ) |  | $ | 66,738 |  |  | $ | (160,987 | ) |  | $ | 456,197 |
Agricultural |  |  | 203,091 |  |  |  | (19,258 | ) |  |  | 4,150 |  |  |  | (20,291 | ) |  |  | 167,692 |
Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Construction |  |  | 690,766 |  |  |  | (25,318 | ) |  |  | 814,586 |  |  |  | (1,157,309 | ) |  |  | 322,725 |
Residential Construction |  |  | 19,890 |  |  |  | - |  |  |  | - |  |  |  | (6,399 | ) |  |  | 13,491 |
Commercial |  |  | 3,850,527 |  |  |  | (992,067 | ) |  |  | 206,154 |  |  |  | 2,686,384 |  |  |  | 5,750,998 |
Residential |  |  | 1,990,355 |  |  |  | (361,630 | ) |  |  | 49,660 |  |  |  | (282,286 | ) |  |  | 1,396,099 |
Farmland |  |  | 911,692 |  |  |  | (119,576 | ) |  |  | 145,000 |  |  |  | (214,785 | ) |  |  | 722,331 |
Consumer and Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer |  |  | 63,377 |  |  |  | (265,083 | ) |  |  | 52,629 |  |  |  | 229,342 |  |  |  | 80,265 |
Other |  |  | 18,843 |  |  |  | - |  |  |  | 6,321 |  |  |  | (11,669 | ) |  |  | 13,495 |
|  | $ | 8,603,905 |  |  | $ | (2,087,850 | ) |  | $ | 1,345,238 |  |  | $ | 1,062,000 |  |  | $ | 8,923,293 |
201 5 |  | 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 |
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. 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 December 31, 2017, this change in the historical loss period resulted in a decrease to the allowance for loan losses of $114,144. The loss history period used at December 31, 2016 and 2015 was based on the loss rate from the eight quarters ended September 30, 2016 and 2015, respectively. 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. 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. 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 $9,470,621 and $10,786,699 as of December 31, 2017 and 2016, respectively. Specific allowance allocations were made for these loans totaling $1,510,868 and $632,706 as of December 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. At December 31, 2017, there were 149 impaired loans totaling $4,335,524 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 December 31, 2016 and 2015, impaired loans totaling $4,204,156 and $3,744,733, 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 Balanc e |  |  | Ending Loan Balanc e |
201 7 |  | Individually Evaluated for Impairmen t |  |  | Collectively Evaluated for Impairmen t |  |  | Tota l |  |  | Individually Evaluated for Impairmen t |  |  | Collectively Evaluated for Impairmen t |  |  | Tota l |
Commercial and Agricultura l |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercia l |  | $ | - |  |  | $ | 446,675 |  |  | $ | 446,675 |  |  | $ | 77,599 |  |  | $ | 48,044,664 |  |  | $ | 48,122,263 |
Agricultura l |  |  | - |  |  |  | 185,904 |  |  |  | 185,904 |  |  |  | 5,121 |  |  |  | 16,437,460 |  |  |  | 16,442,581 |
Real Estat e |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Constructio n |  |  | 65,635 |  |  |  | 1,150,380 |  |  |  | 1,216,015 |  |  |  | 493,067 |  |  |  | 44,720,893 |  |  |  | 45,213,960 |
Residential Constructio n |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 8,583,446 |  |  |  | 8,583,446 |
Commercia l |  |  | 1,712,557 |  |  |  | 2,161,402 |  |  |  | 3,873,959 |  |  |  | 18,010,035 |  |  |  | 333,161,633 |  |  |  | 351,171,668 |
Residential |  |  | 27,123 |  |  |  | 940,978 |  |  |  | 968,101 |  |  |  | 2,040,125 |  |  |  | 192,008,820 |  |  |  | 194,048,945 |
Farmlan d |  |  | 21,369 |  |  |  | 758,162 |  |  |  | 779,531 |  |  |  | 1,035,572 |  |  |  | 66,732,083 |  |  |  | 67,767,655 |
Consumer and Othe r |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consume r |  |  | - |  |  |  | 33,993 |  |  |  | 33,993 |  |  |  | - |  |  |  | 18,956,028 |  |  |  | 18,956,028 |
Othe r |  |  | - |  |  |  | 3,330 |  |  |  | 3,330 |  |  |  | - |  |  |  | 14,977,309 |  |  |  | 14,977,309 |
Total End of Year Balanc e |  | $ | 1,826,684 |  |  | $ | 5,680,824 |  |  | $ | 7,507,508 |  |  | $ | 21,661,519 |  |  | $ | 743,622,336 |  |  | $ | 765,283,855 |
|  | Ending Allowance Balanc e |  |  | Ending Loan Balanc e |
201 6 |  | Individually Evaluated for Impairmen t |  |  | Collectively Evaluated for Impairmen t |  |  | Tota l |  |  | Individually Evaluated for Impairmen t |  |  | Collectively Evaluated for Impairmen t |  |  | Tota l |
Commercial and Agricultura l |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercia l |  | $ | - |  |  | $ | 456,197 |  |  | $ | 456,197 |  |  | $ | 6,671 |  |  | $ | 47,018,207 |  |  | $ | 47,024,878 |
Agricultura l |  |  | - |  |  |  | 167,692 |  |  |  | 167,692 |  |  |  | - |  |  |  | 17,079,579 |  |  |  | 17,079,579 |
Real Estat e |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Constructio n |  |  | 21,135 |  |  |  | 301,590 |  |  |  | 322,725 |  |  |  | 72,296 |  |  |  | 30,286,066 |  |  |  | 30,358,362 |
Residential Construction |  |  | - |  |  |  | 13,491 |  |  |  | 13,491 |  |  |  | - |  |  |  | 11,830,447 |  |  |  | 11,830,447 |
Commercia l |  |  | 3,021,943 |  |  |  | 2,729,055 |  |  |  | 5,750,998 |  |  |  | 22,422,451 |  |  |  | 326,667,580 |  |  |  | 349,090,031 |
Residentia l |  |  | 362,522 |  |  |  | 1,033,577 |  |  |  | 1,396,099 |  |  |  | 2,911,874 |  |  |  | 192,668,093 |  |  |  | 195,579,967 |
Farmlan d |  |  | 29,172 |  |  |  | 693,159 |  |  |  | 722,331 |  |  |  | 1,044,047 |  |  |  | 65,833,150 |  |  |  | 66,877,197 |
Consumer and Othe r |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consume r |  |  | - |  |  |  | 80,265 |  |  |  | 80,265 |  |  |  | - |  |  |  | 19,695,241 |  |  |  | 19,695,241 |
Othe r |  |  | - |  |  |  | 13,495 |  |  |  | 13,495 |  |  |  | - |  |  |  | 16,747,861 |  |  |  | 16,747,861 |
Total End of Year Balanc e |  | $ | 3,434,772 |  |  | $ | 5,488,521 |  |  | $ | 8,923,293 |  |  | $ | 26,457,339 |  |  | $ | 727,826,224 |  |  | $ | 754,283,563 |
201 5 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Agricultura l |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercia l |  | $ | 94,538 |  |  | $ | 760,826 |  |  | $ | 855,364 |  |  | $ | 122,928 |  |  | $ | 47,658,761 |  |  | $ | 47,781,689 |
Agricultura l |  |  | - |  |  |  | 203,091 |  |  |  | 203,091 |  |  |  | 8,445 |  |  |  | 19,185,052 |  |  |  | 19,193,497 |
Real Estat e |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Constructio n |  |  | 25,344 |  |  |  | 665,422 |  |  |  | 690,766 |  |  |  | 1,622,560 |  |  |  | 38,484,073 |  |  |  | 40,106,633 |
Residential Constructio n |  |  | - |  |  |  | 19,890 |  |  |  | 19,890 |  |  |  | - |  |  |  | 9,413,263 |  |  |  | 9,413,263 |
Commercia l |  |  | 1,607,962 |  |  |  | 2,242,565 |  |  |  | 3,850,527 |  |  |  | 23,628,213 |  |  |  | 322,633,820 |  |  |  | 346,262,033 |
Residentia l |  |  | 308,188 |  |  |  | 1,682,167 |  |  |  | 1,990,355 |  |  |  | 3,597,386 |  |  |  | 193,405,033 |  |  |  | 197,002,419 |
Farmlan d |  |  | 37,386 |  |  |  | 874,306 |  |  |  | 911,692 |  |  |  | 1,402,939 |  |  |  | 60,376,920 |  |  |  | 61,779,859 |
Consumer and Othe r |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consume r |  |  | - |  |  |  | 63,377 |  |  |  | 63,377 |  |  |  | - |  |  |  | 20,605,465 |  |  |  | 20,605,465 |
Othe r |  |  | - |  |  |  | 18,843 |  |  |  | 18,843 |  |  |  | - |  |  |  | 16,490,737 |  |  |  | 16,490,737 |
Total End of Year Balanc e |  | $ | 2,073,418 |  |  | $ | 6,530,487 |  |  | $ | 8,603,905 |  |  | $ | 30,382,471 |  |  | $ | 728,253,124 |  |  | $ | 758,635,595 |

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