Note 4 - Allowance for Loan Losses

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Allowance for Credit Losses [Text Block]

(

4

) Allowance for Loan Losses

The following table

s detail activity in the allowance for loan losses, segregated by class of loan, for the

nine

month period ended

September

30,

2017

and

September 30, 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.

September 30, 2017
	Beginning										Ending
	Balance		Charge-Offs			Recoveries		Provision			Balance
Commercial and Agricultural
Commercial	$	456	$	(215	)	$	124	$	71		$	436
Agricultural		168		(160	)		3		238			249
Real Estate
Commercial Construction		323		(49	)		241		473			988
Residential Construction		13		-			-		(7	)		6
Commercial		5,751		(966	)		523		(1,085	)		4,223
Residential		1,396		(648	)		47		334			1,129
Farmland		722		(61	)		2		209			872
Consumer and Other
Consumer		80		(184	)		60		100			56
Other		14		-			2		2			18
	$	8,923	$	(2,283	)	$	1,002	$	335		$	7,977

September 30, 2016
	Beginning										Ending
	Balance		Charge-Offs			Recoveries		Provision			Balance
Commercial and Agricultural
Commercial	$	855	$	(291	)	$	54	$	(127	)	$	491
Agricultural		203		(18	)		3		93			281
Real Estate
Commercial Construction		691		(25	)		813		(1,021	)		458
Residential Construction		20		-			-		2			22
Commercial		3,851		(992	)		197		2,231			5,287
Residential		1,990		(243	)		32		(114	)		1,665
Farmland		912		-			137		(187	)		862
Consumer and Other
Consumer		63		(180	)		44		176			103
Other		19		-			6		9			34
	$	8,604	$	(1,749	)	$	1,286	$	1,062		$	9,203

During the

first

quarter of

201

7

Company management completed the transition to 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.  As of

September 30, 2017,

this change in the historical loss period resulted in an increase to the allowance for loan losses of

$191.

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

September 30, 2017,

there were

155

impaired loans totaling

$4.5

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

September 30, 2016,

there were

160

impaired loans totaling

$4.6

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

$1

2.68

million and

$12.45

million as of

September 30, 2017

and

2016,

respectively. Specific allowance allocations were made for these loans totaling

$1.49

million and

$742

thousand as of

September 30, 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

September 30, 2017

and

2016:

September 30, 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	$	-	$	436	$	436	$	77	$	45,286	$	45,363
Agricultural		-		249		249		5		25,241		25,246
Real Estate
Commercial Construction		69		919		988		497		36,036		36,533
Residential Construction		-		6		6		-		8,905		8,905
Commercial		1,471		2,752		4,223		17,605		328,646		346,251
Residential		21		1,108		1,129		2,204		194,128		196,332
Farmland		24		848		872		1,038		70,865		71,903
Consumer and Other
Consumer		-		56		56		-		18,677		18,677
Other		-		18		18		-		20,836		20,836
Total End of Period Balance	$	1,585	$	6,392	$	7,977	$	21,426	$	748,620	$	770,046

September 30, 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	$	-	$	491	$	491	$	8	$	45,765	$	45,773
Agricultural		-		281		281		-		26,547		26,547
Real Estate
Commercial Construction		22		436		458		380		33,344		33,724
Residential Construction		-		22		22		-		10,325		10,325
Commercial		2,470		2,817		5,287		24,363		325,029		349,392
Residential		435		1,230		1,665		3,200		191,845		195,045
Farmland		33		829		862		1,047		72,754		73,801
Consumer and Other
Consumer		-		103		103		-		20,378		20,378
Other		-		34		34		-		21,132		21,132
Total End of Period Balance	$	2,960	$	6,243	$	9,203	$	28,998	$	747,119	$	776,117