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Note 5 - Allowance for Loan Losses
 12 Months Ended
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