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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2014
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:

  
2014
  
2013
  
2012
 
       
Balance, Beginning of Year
 
$
11,805,986
  
$
12,736,921
  
$
15,649,594
 
             
Provision for Loan Losses
  
1,308,000
   
4,485,000
   
6,784,767
 
Loans Charged Off
  
(5,104,491
)
  
(6,227,716
)
  
(10,454,175
)
Recoveries of Loans Previously Charged Off
  
792,821
   
811,781
   
756,735
 
             
Balance, End of Year
 
$
8,802,316
  
$
11,805,986
  
$
12,736,921
 
 
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.
 
 
2014
 
Beginning Balance
  
Charge-Offs
  
Recoveries
  
Provision
  
Ending Balance
 
           
Commercial and Agricultural
          
Commercial
 
$
1,017,073
  
$
(624,944
)
 
$
76,002
  
$
29,430
  
$
497,561
 
Agricultural
  
293,886
   
-
   
2,700
   
7,586
   
304,172
 
                     
Real Estate
                    
Commercial Construction
  
1,782,179
   
(1,543,099
)
  
485,005
   
498,610
   
1,222,695
 
Residential Construction
  
138,092
   
-
   
-
   
-
   
138,092
 
Commercial
  
4,379,276
   
(1,326,825
)
  
90,042
   
522,284
   
3,664,777
 
Residential
  
3,278,269
   
(1,033,966
)
  
31,127
   
149,897
   
2,425,327
 
Farmland
  
311,494
   
(233,580
)
  
20,000
   
5,886
   
103,800
 
                     
Consumer and Other
                    
Consumer
  
243,253
   
(342,077
)
  
72,477
   
93,261
   
66,914
 
Other
  
362,464
   
-
   
15,468
   
1,046
   
378,978
 
                     
  
$
11,805,986
  
$
(5,104,491
)
 
$
792,821
  
$
1,308,000
  
$
8,802,316
 
                     
2013
                    
                     
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
 
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
 
 
The loss history period used at December 31, 2014 and 2013 was based on the loss rate from the eight quarters ended September 30, 2014 and 2013, respectively.  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.   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.

During 2014 management changed its methodology for calculating the allowance for loan losses to better reflect the estimated losses inherent in the portfolio.  Specific changes included:

·Reducing the historical loss ratios by including loan loss recoveries in the calculation.  Previously, management only included the loan charge-off amount and did not consider the effect of subsequent recoveries.
 
·Reducing the balance of those loans which are guaranteed by government agencies, such as SBA loans.  Previously, the entire balance of such loans was considered in the calculation of the general reserves; however, beginning in 2014, only the non-guaranteed portion of these loans is subject to the loss calculation.

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.

During the third quarter of 2013, 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.

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 $9,356,253 and $6,664,935 as of December 31, 2014 and 2013, respectively.  Specific allowance allocations were made for these loans totaling $747,982 and $260,742 as of December 31, 2014 and 2013, 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, 2014, impaired loans totaling $3,885,411 were below the $250,000 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.  Likewise, at December 31, 2013 and 2012, impaired loans totaling $2,821,199 and $1,026,624, respectively, were below the $250,000 and $50,000 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 Balance
  
Ending Loan Balance
 
2014
 
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Total
  
Individually Evaluated for Impairment
  
Collectively Evaluated for Impairment
  
Total
 
             
Commercial and Agricultural
            
Commercial
 
$
96,580
  
$
400,981
  
$
497,561
  
$
96,580
  
$
50,863,685
  
$
50,960,265
 
Agricultural
  
-
   
304,172
   
304,172
   
-
   
16,689,444
   
16,689,444
 
                         
Real Estate
                        
Commercial Construction
  
53,947
   
1,168,748
   
1,222,695
   
3,384,377
   
47,874,593
   
51,258,970
 
Residential Construction
  
-
   
138,092
   
138,092
   
-
   
11,220,683
   
11,220,683
 
Commercial
  
456,941
   
3,207,836
   
3,664,777
   
21,693,061
   
310,537,786
   
332,230,847
 
Residential
  
414,684
   
2,010,643
   
2,425,327
   
7,559,965
   
196,192,655
   
203,752,620
 
Farmland
  
28,962
   
74,838
   
103,800
   
1,700,793
   
48,250,191
   
49,950,984
 
                         
Consumer and Other
                        
Consumer
  
-
   
66,914
   
66,914
   
-
   
22,820,314
   
22,820,314
 
Other
  
-
   
378,978
   
378,978
   
-
   
7,209,682
   
7,209,682
 
                         
Total End of Year Balance
 
$
1,051,114
  
$
7,751,202
  
$
8,802,316
  
$
34,434,776
  
$
711,659,033
  
$
746,093,809
 
 
  
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
 
     
2012
                        
                         
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