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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2012
Allowance for Loan Losses [Abstract]  
Allowance for Loan Losses
(5)  Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31 are as follows:

 
December 31
 
 
2012
 
 
2011
 
 
2010
 
 
 
 
 
 
 
 
 
 
Balance, Beginning of Year
 
$
15,649,594
 
 
$
28,280,077
 
 
$
31,400,641
 
 
 
 
 
 
 
 
 
 
 
 
 
  Provision for Loan Losses
 
 
6,784,767
 
 
 
8,250,000
 
 
 
13,350,000
 
  Loans Charged Off
 
 
(10,454,175
)
 
 
(22,850,673
)
 
 
(17,622,454
)
  Recoveries of Loans Previously Charged Off
 
 
756,735
 
 
 
1,970,190
 
 
 
1,151,890
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, End of Year
 
$
12,736,921
 
 
$
15,649,594
 
 
$
28,280,077
 
 
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.
 
 
2012
 
Beginning Balance
 
 
Charge-Offs
 
 
Recoveries
 
 
Provision
 
 
Ending Balance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
1,070,560
 
 
$
(653,389
)
 
$
139,802
 
 
$
424,048
 
 
$
981,021
 
  Agricultural
 
 
297,168
 
 
 
(3,028
)
 
 
-
 
 
 
2,035
 
 
 
296,175
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
3,122,594
 
 
 
(4,106,124
)
 
 
209,352
 
 
 
2,664,378
 
 
 
1,890,200
 
  Residential Construction
 
 
138,092
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
138,092
 
  Commercial
 
 
6,448,064
 
 
 
(4,325,642
)
 
 
232,880
 
 
 
2,807,537
 
 
 
5,162,839
 
  Residential
 
 
3,695,357
 
 
 
(960,620
)
 
 
47,690
 
 
 
623,520
 
 
 
3,405,947
 
  Farmland
 
 
364,663
 
 
 
(224,725
)
 
 
4,716
 
 
 
145,872
 
 
 
290,526
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
205,154
 
 
 
(169,249
)
 
 
81,956
 
 
 
109,913
 
 
 
227,774
 
  Other
 
 
307,942
 
 
 
(11,398
)
 
 
40,339
 
 
 
7,464
 
 
 
344,347
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15,649,594
 
 
$
(10,454,175
)
 
$
756,735
 
 
$
6,784,767
 
 
$
12,736,921
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
4,414,817
 
 
$
(841,887
)
 
$
127,490
 
 
$
(2,629,860
)
 
$
1,070,560
 
  Agricultural
 
 
698,637
 
 
 
(455,165
)
 
 
454,453
 
 
 
(400,757
)
 
 
297,168
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
4,126,043
 
 
 
(6,957,181
)
 
 
557,168
 
 
 
5,396,564
 
 
 
3,122,594
 
  Residential Construction
 
 
519,766
 
 
 
(481
)
 
 
-
 
 
 
(381,193
)
 
 
138,092
 
  Commercial
 
 
8,029,525
 
 
 
(12,492,097
)
 
 
527,996
 
 
 
10,382,640
 
 
 
6,448,064
 
  Residential
 
 
5,941,696
 
 
 
(1,704,887
)
 
 
149,173
 
 
 
(690,625
)
 
 
3,695,357
 
  Farmland
 
 
944,323
 
 
 
(60,447
)
 
 
411
 
 
 
(519,624
)
 
 
364,663
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
3,074,220
 
 
 
(222,878
)
 
 
145,279
 
 
 
(2,791,467
)
 
 
205,154
 
  Other
 
 
531,050
 
 
 
(115,650
)
 
 
8,220
 
 
 
(115,678
)
 
 
307,942
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
28,280,077
 
 
$
(22,850,673
)
 
$
1,970,190
 
 
$
8,250,000
 
 
$
15,649,594
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2010
 
Beginning Balance
 
 
Charge-Offs
 
 
Recoveries
 
 
Provision
 
 
Ending Balance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
3,930,760
 
 
$
(469,214
)
 
$
80,181
 
 
$
873,090
 
 
$
4,414,817
 
   Agricultural
 
 
779,337
 
 
 
(255,627
)
 
 
1,377
 
 
 
173,550
 
 
 
698,637
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
7,402,484
 
 
 
(4,648,124
)
 
 
184,868
 
 
 
1,186,815
 
 
 
4,126,043
 
  Residential Construction
 
 
447,676
 
 
 
-
 
 
 
-
 
 
 
72,090
 
 
 
519,766
 
  Commercial
 
 
8,790,443
 
 
 
(7,459,619
)
 
 
141,931
 
 
 
6,556,770
 
 
 
8,029,525
 
  Residential
 
 
5,025,839
 
 
 
(2,929,668
)
 
 
439,940
 
 
 
3,405,585
 
 
 
5,941,696
 
  Farmland
 
 
942,019
 
 
 
(271,750
)
 
 
7,639
 
 
 
266,415
 
 
 
944,323
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
2,826,058
 
 
 
(548,834
)
 
 
245,641
 
 
 
551,355
 
 
 
3,074,220
 
  Other
 
 
1,256,025
 
 
 
(1,039,618
)
 
 
50,313
 
 
 
264,330
 
 
 
531,050
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
31,400,641
 
 
$
(17,622,454
)
 
$
1,151,890
 
 
$
13,350,000
 
 
$
28,280,077
 
 
In 2012, the Company refined its methodology used in estimating the amount of the Allowance for Loan and Lease Losses (ALLL).  Management has been proactive in identifying problem loans, assessing exposure and providing sufficient reserves to cover the exposures.  The ALLL was increased in anticipation of identified exposures resulting in confirmed losses.  When losses were confirmed, they were promptly charged off.  As a result, losses for the years 2009, 2010 and 2011 were very high.  During this period and in 2012, newer loans granted were made subject to higher underwriting standards and more conservative appraisals.  Because of the prompt recognition of losses that drove the excessive charge-off history, management now believes the remaining losses incurred in the current portfolio, including newer loans made, will be less than unadjusted loss history factors will suggest.  Considering the major losses taken, along with organizational and staffing changes, the validity of qualitative factors in determining adjustments of loss history needed to be reviewed.  Recognizing the importance of credit administration and the role of personnel involved in granting, approving, administering, monitoring and collecting loans, management concluded that greater weight should be placed on factors associated with those activities.  Additionally, during the year ended December 31, 2012, management reviewed the appropriateness of continuing to use a one-year annual loss rate to determine losses incurred in the loan portfolio segments of loans collectively reviewed for impairment.  Consideration was given to the trends in losses incurred over prior quarters and economic indicators impacting the Company.  Management concluded that the one-year charge-off history should be expanded to include quarters from the current year.  Thus, the annualized loss rates used for the December 31, 2012 allowance for loan loss calculation were based on an expanded period that includes all four quarters of 2011 and the first three quarters of 2012. The effect of these changes on the ALLL resulted in a reduction in the ALLL estimate of $2,154,639.  Management believes the adjustments made will result in a better estimation of losses incurred in the portfolio.
 
The Company determines its individual loan 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 relationship balance of $50,000 or more, regardless of the loan's 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 will make specific allocations of the allowance to those loans if warranted.  Since these loans are not considered impaired, they are included in the "Collectively Evaluated for Impairment" column of the following tables.  At December 31, 2012 and 2011, substandard loans, not classified as impaired, for which a specific allocation was made totaled $10,795,911 and $16,746,384, respectively.  The specific allocation associated with these loans for December 31, 2012 and 2011 was $898,773 and $1,926,438.  At December 31, 2012, 2011 and 2010, impaired loans totaling $1,026,624, $995,168 and $976,971, respectively, were below the $50,000 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.  The following tables present breakdowns of the allowance for loan losses, segregated by impairment methodology for December 31, 2012 and 2011:

 
Ending Allowance Balance
 
 
Ending Loan Balance
 
2012
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
462,555
 
 
$
518,466
 
 
$
981,021
 
 
$
2,512,133
 
 
$
53,172,359
 
 
$
55,684,492
 
  Agricultural
 
 
-
 
 
 
296,175
 
 
 
296,175
 
 
 
-
 
 
 
6,210,953
 
 
 
6,210,953
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
1,732,534
 
 
 
157,666
 
 
 
1,890,200
 
 
 
13,892,135
 
 
 
39,915,921
 
 
 
53,808,056
 
  Residential Construction
 
 
-
 
 
 
138,092
 
 
 
138,092
 
 
 
-
 
 
 
5,852,238
 
 
 
5,852,238
 
  Commercial
 
 
1,236,526
 
 
 
3,926,313
 
 
 
5,162,839
 
 
 
28,205,405
 
 
 
306,180,772
 
 
 
334,386,177
 
  Residential
 
 
840,492
 
 
 
2,565,455
 
 
 
3,405,947
 
 
 
8,022,249
 
 
 
195,822,273
 
 
 
203,844,522
 
  Farmland
 
 
-
 
 
 
290,526
 
 
 
290,526
 
 
 
2,393,775
 
 
 
46,663,086
 
 
 
49,056,861
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
-
 
 
 
227,774
 
 
 
227,774
 
 
 
28,007
 
 
 
29,749,769
 
 
 
29,777,776
 
  Other
 
 
-
 
 
 
344,347
 
 
 
344,347
 
 
 
17,491
 
 
 
8,411,445
 
 
 
8,428,936
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total End of Year Balance
 
$
4,272,107
 
 
$
8,464,814
 
 
$
12,736,921
 
 
$
55,071,195
 
 
$
691,978,816
 
 
$
747,050,011
 
 
 
Ending Allowance Balance
 
 
Ending Loan Balance
 
2011
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
308,211
 
 
$
762,349
 
 
$
1,070,560
 
 
$
2,237,878
 
 
$
46,748,224
 
 
$
48,986,102
 
  Agricultural
 
 
-
 
 
 
297,168
 
 
 
297,168
 
 
 
-
 
 
 
8,421,884
 
 
 
8,421,884
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
2,693,571
 
 
 
429,023
 
 
 
3,122,594
 
 
 
24,212,519
 
 
 
34,333,301
 
 
 
58,545,820
 
  Residential Construction
 
 
-
 
 
 
138,092
 
 
 
138,092
 
 
 
-
 
 
 
3,530,502
 
 
 
3,530,502
 
  Commercial
 
 
2,060,815
 
 
 
4,387,249
 
 
 
6,448,064
 
 
 
35,715,026
 
 
 
279,565,722
 
 
 
315,280,748
 
  Residential
 
 
674,998
 
 
 
3,020,359
 
 
 
3,695,357
 
 
 
5,614,744
 
 
 
188,023,073
 
 
 
193,637,817
 
  Farmland
 
 
11,878
 
 
 
352,785
 
 
 
364,663
 
 
 
486,683
 
 
 
47,738,723
 
 
 
48,225,406
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
1,632
 
 
 
203,522
 
 
 
205,154
 
 
 
9,596
 
 
 
30,439,707
 
 
 
30,449,303
 
  Other
 
 
-
 
 
 
307,942
 
 
 
307,942
 
 
 
-
 
 
 
9,243,739
 
 
 
9,243,739
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total End of Year Balance
 
$
5,751,105
 
 
$
9,898,489
 
 
$
15,649,594
 
 
$
68,276,446
 
 
$
648,044,875
 
 
$
716,321,321
 
 
 
Ending Allowance Balance
 
 
Ending Loan Balance
 
2010
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
Individually Evaluated for Impairment
 
 
Collectively Evaluated for Impairment
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Agricultural
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial
 
$
336,011
 
 
$
4,078,806
 
 
$
4,414,817
 
 
$
2,131,375
 
 
$
51,088,966
 
 
$
53,220,341
 
  Agricultural
 
 
-
 
 
 
698,637
 
 
 
698,637
 
 
 
274,679
 
 
 
10,277,112
 
 
 
10,551,791
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Commercial Construction
 
 
3,501,117
 
 
 
624,926
 
 
 
4,126,043
 
 
 
28,392,107
 
 
 
43,917,124
 
 
 
72,309,231
 
  Residential Construction
 
 
-
 
 
 
519,766
 
 
 
519,766
 
 
 
194,881
 
 
 
4,178,130
 
 
 
4,373,011
 
  Commercial
 
 
7,539,533
 
 
 
489,992
 
 
 
8,029,525
 
 
 
58,562,946
 
 
 
304,315,619
 
 
 
362,878,565
 
  Residential
 
 
1,561,952
 
 
 
4,379,744
 
 
 
5,941,696
 
 
 
13,645,907
 
 
 
193,825,906
 
 
 
207,471,813
 
  Farmland
 
 
-
 
 
 
944,323
 
 
 
944,323
 
 
 
1,416,538
 
 
 
51,361,851
 
 
 
52,778,389
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Consumer
 
 
3,033
 
 
 
3,071,187
 
 
 
3,074,220
 
 
 
76,420
 
 
 
33,487,443
 
 
 
33,563,863
 
  Other
 
 
-
 
 
 
531,050
 
 
 
531,050
 
 
 
113,002
 
 
 
15,990,667
 
 
 
16,103,669
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total End of Year Balance
 
$
12,941,646
 
 
$
15,338,431
 
 
$
28,280,077
 
 
$
104,807,855
 
 
$
708,442,818
 
 
$
813,250,673