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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2013
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:

 
 
2013
  
2012
  
2011
 
 
 
  
  
 
Balance, Beginning of Year
 
$
12,736,921
  
$
15,649,594
  
$
28,280,077
 
 
            
Provision for Loan Losses
  
4,485,000
   
6,784,767
   
8,250,000
 
Loans Charged Off
  
(6,227,716
)
  
(10,454,175
)
  
(22,850,673
)
Recoveries of Loans Previously Charged Off
  
811,781
   
756,735
   
1,970,190
 
 
            
Balance, End of Year
 
$
11,805,986
  
$
12,736,921
  
$
15,649,594
 

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.
 
 
2013
 
Beginning Balance
  
Charge-Offs
  
Recoveries
  
Provision
  
Ending Balance
 
 
 
  
  
  
  
 
Commercial and Agricultural
 
  
  
  
  
 
Commercial
 
$
981,021
  
$
(120,690
)
 
$
55,829
  
$
100,913
  
$
1,017,073
 
Agricultural
  
296,175
   
(34,502
)
  
6,200
   
26,013
   
293,886
 
 
                    
Real Estate
                    
Commercial Construction
  
1,890,200
   
(2,071,162
)
  
253,459
   
1,709,682
   
1,782,179
 
Residential Construction
  
138,092
   
-
   
-
   
-
   
138,092
 
Commercial
  
5,162,839
   
(2,872,408
)
  
297,984
   
1,790,861
   
4,379,276
 
Residential
  
3,405,947
   
(706,242
)
  
64,583
   
513,981
   
3,278,269
 
Farmland
  
290,526
   
(20,977
)
  
21,762
   
20,183
   
311,494
 
 
                    
Consumer and Other
                    
Consumer
  
227,774
   
(397,822
)
  
93,520
   
319,781
   
243,253
 
Other
  
344,347
   
(3,913
)
  
18,444
   
3,586
   
362,464
 
 
                    
 
 
$
12,736,921
  
$
(6,227,716
)
 
$
811,781
  
$
4,485,000
  
$
11,805,986
 
 
                    
2012
                    
 
                    
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
 
Beginning Balance
  
Charge-Offs
  
Recoveries
  
Provision
  
Ending Balance
 
 
 
  
  
  
  
 
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
 

During 2012, the Company changed its loss history period used in calculating the ALLL from a one-year average to a rolling eight-quarter average.  Although at December 31, 2012 the loss history period used was based on the annual loss rate from calendar year 2011 and the first three quarters of 2012, whereas the loss history period used at December 31, 2013 was based on the loss rate from the eight quarters ended September 30, 2013.

During the third quarter, management implemented a change to its methodology for calculating the allowance for loan losses.  This change was intended to better reflect the current position of the loan portfolio.  Prior to the third quarter, the allowance for loan loss calculation incorporated a qualitative factor related to improvements in credit administration.  These improvements, which began in 2008, included organizational changes to credit administration, specifically related to managing past due loans, grading of loans, recognition of losses and underwriting of new loans.  Primary among the organizational changes was the appointment of experienced lending officers to oversee the lending function, as well as the appointment of a chief credit officer.  Management feels these organizational changes are now fully implemented, as evidenced by a lower charge-off rate, and therefore, the qualitative factor is no longer relevant.  The removal of this qualitative factor did not result in a significant adjustment 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.  Effective March 31, 2013, management increased the dollar threshold of this review process from $50,000 to $250,000.  The threshold change resulted in loans totaling $4.1 million at December 31, 2013 being removed from the individual impairment review process and being placed in the collective review process.  These loans are now subject to general reserves.

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 $6.7 million and $10.8 million as of December 31, 2013 and 2012, respectively.  Specific allowance allocations were made for these loans totaling $261 thousand and $899 thousand as of December 31, 2013 and 2012, 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, 2013, impaired loans totaling $2.82 million were below the $250 thousand 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.  Likewise, at December 31, 2012 and 2011, impaired loans totaling $1.03 million and $995 thousand, respectively, were below the $50 thousand 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 Balance
  
Ending Loan Balance
 
2013
 
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Total
  
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Total
 
 
 
  
  
  
  
  
 
Commercial and Agricultural
 
  
  
  
  
  
 
Commercial
 
$
433,714
  
$
583,359
  
$
1,017,073
  
$
1,542,058
  
$
46,565,390
  
$
48,107,448
 
Agricultural
  
-
   
293,886
   
293,886
   
-
   
10,665,938
   
10,665,938
 
 
                        
Real Estate
                        
Commercial Construction
  
830,546
   
951,633
   
1,782,179
   
7,971,298
   
44,767,485
   
52,738,783
 
Residential Construction
  
-
   
138,092
   
138,092
   
-
   
6,549,260
   
6,549,260
 
Commercial
  
423,685
   
3,955,591
   
4,379,276
   
24,757,942
   
317,025,596
   
341,783,538
 
Residential
  
526,005
   
2,752,264
   
3,278,269
   
6,545,490
   
199,712,437
   
206,257,927
 
Farmland
  
85,500
   
225,994
   
311,494
   
1,617,206
   
45,417,220
   
47,034,426
 
 
                        
Consumer and Other
                        
Consumer
  
-
   
243,253
   
243,253
   
-
   
25,675,560
   
25,675,560
 
Other
  
-
   
362,464
   
362,464
   
9,146
   
12,396,436
   
12,405,582
 
 
                        
Total End of Year Balance
 
$
2,299,450
  
$
9,506,536
  
$
11,805,986
  
$
42,443,140
  
$
708,775,322
  
$
751,218,462
 
 
 
 
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