10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 0-33203

LANDMARK BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-1930755
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

701 Poyntz Avenue, Manhattan, Kansas       66502

(Address of principal executive offices)       (Zip code)

(785) 565-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ] Accelerated filer [X] Non-accelerated filer [  ] (Do not check if a smaller reporting company)

Smaller reporting company [  ] Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: as of August 7, 2018, the issuer had outstanding 4,162,779 shares of its common stock, $0.01 par value per share.

LANDMARK BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents

		Page Number
PART I
Item 1.	Financial Statements	3 - 28
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	39
PART II
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
	Signature Page	41

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)	June 30, 2018			December 31, 2017
		(Unaudited)
Assets
Cash and cash equivalents	$	19,883		$	16,584
Investment securities available-for-sale, at fair value		398,137			387,983
Bank stocks, at cost		6,034			5,423
Loans, net of allowance for loans losses of $5,835 at June 30, 2018 and $5,459 at December 31, 2017		461,396			433,743
Loans held for sale, at fair value		11,764			6,535
Premises and equipment, net		21,381			20,824
Bank owned life insurance		24,019			23,698
Goodwill		17,532			17,532
Other intangible assets, net		3,358			3,659
Real estate owned, net		452			436
Accrued interest and other assets		14,224			13,037
Total assets	$	978,180		$	929,454
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing demand	$	172,103		$	160,496
Money market and checking		373,843			388,311
Savings		96,160			93,474
Time		123,185			123,277
Total deposits		765,291			765,558
Federal Home Loan Bank borrowings		85,600			31,600
Subordinated debentures		21,584			21,484
Other borrowings		8,417			13,509
Accrued interest, taxes, and other liabilities		10,873			9,681
Total liabilities		891,765			841,832
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued		-			-
Common stock, $0.01 par value per share, 7,500,000 shares authorized; 4,147,946 and 4,081,659 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively		41			41
Additional paid-in capital		58,356			57,772
Retained earnings		33,514			30,214
Accumulated other comprehensive loss		(5,496	)		(405	)
Total stockholders’ equity		86,415			87,622
Total liabilities and stockholders’ equity	$	978,180		$	929,454

See accompanying notes to consolidated financial statements.

3

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three months ended				Six months ended
(Dollars in thousands, except per share amounts)	June 30,				June 30,
	2018		2017		2018		2017
Interest income:
Loans:
Taxable	$	5,709	$	5,246	$	11,059	$	10,265
Tax-exempt		35		34		64		69
Investment securities:
Taxable		1,305		1,202		2,502		2,394
Tax-exempt		1,034		974		2,059		1,916
Total interest income		8,083		7,456		15,684		14,644
Interest expense:
Deposits		631		394		1,172		732
Borrowings		616		486		1,082		968
Total interest expense		1,247		880		2,254		1,700
Net interest income		6,836		6,576		13,430		12,944
Provision for loan losses		250		100		450		150
Net interest income after provision for loan losses		6,586		6,476		12,980		12,794
Non-interest income:
Fees and service charges		1,808		1,917		3,564		3,632
Gains on sales of loans, net		1,468		1,692		2,629		3,081
Bank owned life insurance		162		119		321		236
Gains on sales of investment securities, net		-		177		35		324
Other		815		296		1,105		569
Total non-interest income		4,253		4,201		7,654		7,842
Non-interest expense:
Compensation and benefits		3,966		3,918		7,755		7,675
Occupancy and equipment		1,072		1,097		2,150		2,121
Amortization of intangibles		283		328		560		626
Data processing		376		337		741		667
Professional fees		430		476		818		766
Advertising		165		166		332		332
Federal deposit insurance premiums		72		73		144		145
Foreclosure and real estate owned expense		12		49		25		101
Other		1,190		1,108		2,481		2,180
Total non-interest expense		7,566		7,552		15,006		14,613
Earnings before income taxes		3,273		3,125		5,628		6,023
Income tax expense		428		742		684		1,435
Net earnings	$	2,845	$	2,383	$	4,944	$	4,588
Earnings per share:
Basic (1)	$	0.69	$	0.59	$	1.20	$	1.13
Diluted (1)	$	0.68	$	0.58	$	1.19	$	1.11
Dividends per share (1)	$	0.20	$	0.19	$	0.40	$	0.38

(1) Per share amounts for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

See accompanying notes to consolidated financial statements.

4

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

	Three months ended						Six months ended
(Dollars in thousands)	June 30,						June 30,
	2018			2017			2018			2017
Net earnings	$	2,845		$	2,383		$	4,944		$	4,588
Net unrealized holding (losses) gains on available-for-sale securities		(323	)		4,497			(6,699	)		5,019
Reclassification adjustment for net gains included in earnings		-			(177	)		(35	)		(324	)
Net unrealized (losses) gains		(323	)		4,320			(6,734	)		4,695
Income tax effect on net gains included in earnings		-			65			9			120
Income tax effect on net unrealized holding losses (gains)		79			(1,670	)		1,641			(1,871	)
Other comprehensive (loss) income		(244	)		2,715			(5,084	)		2,944
Total comprehensive income (loss)	$	2,601		$	5,098		$	(140	)	$	7,532

See accompanying notes to consolidated financial statements.

5

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share amounts)	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			Total
Balance at January 1, 2017	$	38	$	51,968	$	34,293		$	(1,348	)	$	84,951
Net earnings		-		-		4,588			-			4,588
Other comprehensive income		-		-		-			2,944			2,944
Dividends paid ($0.38 per share)		-		-		(1,548	)		-			(1,548	)
Stock-based compensation		-		77		-			-			77
Exercise of stock options, 2,968 shares		1		22		-			-			23
Balance at June 30, 2017	$	39	$	52,067	$	37,333		$	1,596		$	91,035
Balance at January 1, 2018	$	41	$	57,772	$	30,214		$	(405	)	$	87,622
Net earnings		-		-		4,944			-			4,944
Other comprehensive loss		-		-		-			(5,084	)		(5,084	)
Dividends paid ($0.40 per share)		-		-		(1,651	)		-			(1,651	)
Stock-based compensation		-		100		-			-			100
Adjustment of common stock investments		-		-		7			(7	)		-
Exercise of stock options, 66,287 shares,		-		484		-			-			484
Balance at June 30, 2018	$	41	$	58,356	$	33,514		$	(5,496	)	$	86,415

See accompanying notes to consolidated financial statements.

6

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)	Six months ended June 30,
	2018			2017
Cash flows from operating activities:
Net earnings		4,944		$	4,588
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		450			150
Valuation allowance on real estate owned		-			67
Amortization of investment security premiums, net		977			944
Amortization of purchase accounting adjustment on loans		(80	)		(91	)
Amortization of purchase accounting adjustment on subordinated debentures		100			100
Amortization of intangibles		560			626
Depreciation		498			520
Increase in cash surrender value of bank owned life insurance		(321	)		(236	)
Stock-based compensation		100			77
Deferred income taxes		392			542
Net gains on sales of investment securities		(35	)		(324	)
Net gain on sales of premises, equipment and real estate owned		(1	)		(10	)
Net gains on sales of loans		(2,629	)		(3,081	)
Proceeds from sales of loans		75,613			86,747
Origination of loans held for sale		(78,213	)		(87,907	)
Changes in assets and liabilities:
Accrued interest and other assets		(152	)		(1,183	)
Accrued expenses, taxes, and other liabilities		1,192			(1,201	)
Net cash provided by operating activities		3,395			328
Cash flows from investing activities:
Net increase in loans		(28,096	)		(2,662	)
Maturities and prepayments of investment securities		25,745			28,501
Purchases of investment securities		(45,117	)		(42,164	)
Proceeds from sales of investment securities		1,535			13,459
Proceeds from sales of common stock investments		7			-
Redemption of bank stocks		4,516			6,319
Purchase of bank stocks		(5,127	)		(6,370	)
Proceeds from sales of premises and equipment and foreclosed assets		22			398
Purchases of premises and equipment, net		(1,055	)		(51	)
Net cash used in investing activities		(47,570	)		(2,570	)
Cash flows from financing activities:
Net (decrease) increase in deposits		(267	)		3,501
Federal Home Loan Bank advance borrowings		413,190			313,277
Federal Home Loan Bank advance repayments		(359,190	)		(321,377	)
Proceeds from other borrowings		-			100
Repayments on other borrowings		(5,092	)		(1,136	)
Proceeds from exercise of stock options		484			23
Payment of dividends		(1,651	)		(1,548	)
Net cash provided by (used in) financing activities		47,474			(7,160	)
Net increase (decrease) in cash and cash equivalents		3,299			(9,402	)
Cash and cash equivalents at beginning of period		16,584			19,996
Cash and cash equivalents at end of period	$	19,883		$	10,594

(Continued)

7

LANDMARK BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(Unaudited)

	Six months ended
(Dollars in thousands)	June 30,
	2018			2017
	(Unaudited)
Supplemental disclosure of cash flow information:
Cash (refund) payments for income taxes	$	(1,000	)	$	800
Cash paid for interest		2,079			1,616
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to real estate owned		38			180

See accompanying notes to consolidated financial statements.

8

LANDMARK BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Interim Financial Statements

The unaudited consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, Landmark National Bank (the “Bank”) and Landmark Risk Management Inc., have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein. The results of the six month interim period ended June 30, 2018 are not necessarily indicative of the results expected for the year ending December 31, 2018 or any other future time period. The Company has evaluated subsequent events for recognition and disclosure up to the date the financial statements were issued.

On January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of non-financial assets, such as real estate owned. The majority of the Company’s revenues come from interest income and other sources, including loans, leases, securities and derivatives that are outside the scope of ASC 606. Services within the scope of ASC 606 include deposit service charges on deposits, interchange income, and the sale of real estate owned. Refer to footnote 7 to the financial statements, Revenue from Contracts with Customers, for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.

The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams. As such, no cumulative effect adjustment was recorded.

In January 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities. The main provisions of the update are to eliminate the available for sale classification of accounting for equity securities and to adjust the fair value disclosures for financial instruments carried at amortized costs such that the disclosed fair values represent an exit price as opposed to an entry price. The provisions of this update will require that equity securities be carried at fair market value on the balance sheet and any periodic changes in value will be adjustments to the income statement. A practical expedient is provided for equity securities without a readily determinable fair value, such that these securities can be carried at cost less any impairment. The provisions of this update became effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU 2016-01 effective January 1, 2018. Effective January 1, 2018, changes in the value of the Company’s common stock investments are adjustments to the income statement. Additionally, the disclosure of fair value of the loan portfolio is presented using an exit price method instead of the discounted cash method previously utilized. Management has concluded that the requirements of this update did not have a material impact to the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Payments (a consensus of Emerging Issues Task Force). This ASU attempts to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The purpose of this update is to reduce existing diversity in practice in eight areas addressed by the update. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of ASU 2016-15 did not result in any material changes to the Company’s consolidated financial statements and related disclosures.

9

2. Investments

A summary of investment securities available-for-sale is as follows:

(Dollars in thousands)	As of June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(47	)	$	1,952
U. S. federal agency obligations		13,774		3		(100	)		13,677
Municipal obligations, tax exempt		182,163		482		(3,106	)		179,539
Municipal obligations, taxable		55,284		64		(708	)		54,640
Agency mortgage-backed securities		144,416		9		(3,876	)		140,549
Certificates of deposit		7,780		-		-			7,780
Total	$	405,416	$	558	$	(7,837	)	$	398,137

(Dollars in thousands)	As of December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(9	)	$	1,990
U. S. federal agency obligations		16,572		5		(85	)		16,492
Municipal obligations, tax exempt		183,846		1,972		(1,080	)		184,738
Municipal obligations, taxable		57,783		409		(216	)		57,976
Agency mortgage-backed securities		119,096		92		(1,633	)		117,555
Certificates of deposit		9,224		-		-			9,224
Common stocks		-		8		-			8
Total	$	388,520	$	2,486	$	(3,023	)	$	387,983

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of June 30, 2018 and December 31, 2017. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

(Dollars in thousands)			As of June 30, 2018
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,952	$	(47	)	$	-	$	-		$	1,952	$	(47	)
U.S. federal agency obligations		11		3,723		(31	)		9,729		(69	)		13,452		(100	)
Municipal obligations, tax exempt		301		89,803		(1,508	)		33,670		(1,598	)		123,473		(3,106	)
Municipal obligations, taxable		110		36,430		(531	)		10,984		(177	)		47,414		(708	)
Agency mortgage-backed securities		103		102,870		(2,155	)		37,065		(1,721	)		139,935		(3,876	)
Total		526	$	234,778	$	(4,272	)	$	91,448	$	(3,565	)	$	326,226	$	(7,837	)

(Dollars in thousands)			As of December 31, 2017
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,990	$	(9	)	$	-	$	-		$	1,990	$	(9	)
U. S. federal agency obligations		14		7,989		(24	)		8,272		(61	)		16,261		(85	)
Municipal obligations, tax exempt		178		37,299		(273	)		31,930		(807	)		69,229		(1,080	)
Municipal obligations, taxable		73		18,792		(96	)		9,744		(120	)		28,536		(216	)
Agency mortgage-backed securities		79		68,630		(620	)		39,844		(1,013	)		108,474		(1,633	)
Total		345	$	134,700	$	(1,022	)	$	89,790	$	(2,001	)	$	224,490	$	(3,023	)

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the security and its belief that it was more likely than not that the Company will not be required to sell the security before recovery of their cost basis, the Company believed that the U.S. treasury security identified in the table above was temporarily impaired as of June 30, 2018 and December 31, 2017.

10

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. The Company did not intend to sell and it was more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of their costs. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association (“GNMA”). The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The table below sets forth amortized cost and fair value of investment securities at June 30, 2018. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	30,042	$	29,939
Due after one year but within five years		196,229		192,202
Due after five years but within ten years		94,540		92,727
Due after ten years		84,605		83,269
Total	$	405,416	$	398,137

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

(Dollars in thousands)	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Sales proceeds	$	-	$	1,917	$	1,535	$	13,459
Realized gains	$	-	$	177	$	35	$	348
Realized losses		-		-		-		(24	)
Net realized losses	$	-	$	177	$	35	$	324

Securities with carrying values of $248.6 million and $232.5 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at June 30, 2018 and December 31, 2017, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

11

Effective January 1, 2018, the Company changed the classification of its common stock investments from available-for-sale with changes in fair value excluded from earnings and reported as a separate component of stockholders’ equity, net of taxes to be carried at fair value with changes in fair value included in net earnings. The Company received $7,000 of proceeds from the sale of its remaining common stock investments during the six months ended June 30, 2018.

3. Loans and Allowance for Loan Losses

Loans consisted of the following as of the dates indicated below:

	June 30,			December 31,
(Dollars in thousands)	2018			2017
One-to-four family residential real estate	$	138,267		$	136,215
Construction and land		26,453			19,356
Commercial real estate		121,946			120,624
Commercial		66,531			54,591
Agriculture		87,901			83,008
Municipal		3,172			3,396
Consumer		22,867			22,046
Total gross loans		467,137			439,236
Net deferred loan costs and loans in process		94			(34	)
Allowance for loan losses		(5,835	)		(5,459	)
Loans, net	$	461,396		$	433,743

12

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class:

(Dollars in thousands)	Three and six months ended June 30, 2018
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2018	$	477		$	121		$	1,562		$	1,484		$	1,867	$	7		$	126		$	5,644
Charge-offs		-			-			-			(29	)		-		-			(44	)		(73	)
Recoveries		1			-			-			1			-		-			12			14
Provision for loan losses		(39	)		(12	)		(96	)		237			138		-			22			250
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835
Balance at January 1, 2018	$	542		$	181		$	1,540		$	1,226		$	1,812	$	8		$	150		$	5,459
Charge-offs		-			-			-			(29	)		-		-			(77	)		(106	)
Recoveries		2			-			1			2			-		2			25			32
Provision for loan losses		(105	)		(72	)		(75	)		494			193		(3	)		18			450
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835

(Dollars in thousands)	Three and six months ended June 30, 2017
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2017	$	493		$	71		$	1,740		$	1,101		$	1,731	$	11		$	180		$	5,327
Charge-offs		-			-			(61	)		-			-		-			(58	)		(119	)
Recoveries		7			-			-			1			-		-			10			18
Provision for loan losses		(1	)		(1	)		30			(21	)		41		(1	)		53			100
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326
Balance at January 1, 2017	$	504		$	53		$	1,777		$	1,119		$	1,684	$	12		$	195		$	5,344
Charge-offs		(19	)		-			(61	)		-			-		-			(165	)		(245	)
Recoveries		8			-			-			9			1		-			59			77
Provision for loan losses		6			17			(7	)		(47	)		87		(2	)		96			150
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326

13

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class and allowance methodology:

(Dollars in thousands)	As of June 30, 2018
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		85		-		14		728		25		-		1		853
Collectively evaluated for loss		354		109		1,452		965		1,980		7		115		4,982
Total		439		109		1,466		1,693		2,005		7		116		5,835
Loan balances:
Individually evaluated for loss		651		1,641		3,920		2,032		602		126		46		9,018
Collectively evaluated for loss		137,616		24,812		118,026		64,499		87,299		3,046		22,821		458,119
Total	$	138,267	$	26,453	$	121,946	$	66,531	$	87,901	$	3,172	$	22,867	$	467,137

(Dollars in thousands)	As of December 31, 2017
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		73		102		52		391		24		-		-		642
Collectively evaluated for loss		469		79		1,488		835		1,788		8		150		4,817
Total		542		181		1,540		1,226		1,812		8		150		5,459
Loan balances:
Individually evaluated for loss		747		2,031		3,973		2,002		833		140		34		9,760
Collectively evaluated for loss		135,468		17,325		116,651		52,589		82,175		3,256		22,012		429,476
Total	$	136,215	$	19,356	$	120,624	$	54,591	$	83,008	$	3,396	$	22,046	$	439,236

The Company’s impaired loans decreased from $9.8 million at December 31, 2017 to $9.0 million at June 30, 2018. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2018 and December 31, 2017, was related to troubled debt restructurings (“TDR”) that are current and accruing interest, but still classified as impaired. Interest income recognized on a cash basis on impaired loans was immaterial during the three and six month periods ended June 30, 2018 and 2017.

14

The following tables present information on impaired loans:

(Dollars in thousands)	As of June 30, 2018
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	651	$	651	$	395	$	256	$	85	$	661	$	5
Construction and land		3,376		1,641		1,641		-		-		1,736		29
Commercial real estate		3,920		3,920		2,127		1,793		14		3,926		243
Commercial		2,032		2,032		3		2,029		728		2,055		8
Agriculture		817		602		344		258		25		652		27
Municipal		126		126		126		-		-		132		1
Consumer		46		46		40		6		1		46		-
Total impaired loans	$	10,968	$	9,018	$	4,676	$	4,342	$	853	$	9,208	$	313

(Dollars in thousands)	As of December 31, 2017
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	747	$	747	$	503	$	244	$	73	$	774	$	8
Construction and land		3,766		2,031		430		1,601		102		2,033		65
Commercial real estate		3,973		3,973		3,888		85		52		3,989		490
Commercial		2,002		2,002		11		1,991		391		2,082		-
Agriculture		1,048		833		545		288		24		912		1
Municipal		140		140		140		-		-		192		5
Consumer		34		34		34		-		-		35		-
Total impaired loans	$	11,710	$	9,760	$	5,551	$	4,209	$	642	$	10,017	$	569

The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. The accrual of interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless the credit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. There were no loans ninety days or more delinquent and accruing interest at June 30, 2018 or December 31, 2017.

15

The following tables present information on the Company’s past due and non-accrual loans by loan class:

(Dollars in thousands)	As of June 30, 2018
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	100		$	289		$	-		$	389		$	463		$	852		$	137,415
Construction and land		-			-			-			-			567			567			25,886
Commercial real estate		-			-			-			-			1,793			1,793			120,153
Commercial		48			711			-			759			2,032			2,791			63,740
Agriculture		127			176			-			303			384			687			87,214
Municipal		-			-			-			-			-			-			3,172
Consumer		36			43			-			79			46			125			22,742
Total	$	311		$	1,219		$	-		$	1,530		$	5,285		$	6,815		$	460,322
Percent of gross loans		0.07	%		0.26	%		0.00	%		0.33	%		1.13	%		1.46	%		98.54	%

(Dollars in thousands)	As of December 31, 2017
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	101		$	313		$	-		$	414		$	552		$	966		$	135,249
Construction and land		-			4			-			4			779			783			18,573
Commercial real estate		22			209			-			231			1,841			2,072			118,552
Commercial		-			397			-			397			2,002			2,399			52,192
Agriculture		-			-			-			-			833			833			82,175
Municipal		-			-			-			-			-			-			3,396
Consumer		105			204			-			309			34			343			21,703
Total	$	228		$	1,127		$	-		$	1,355		$	6,041		$	7,396		$	431,840
Percent of gross loans		0.05	%		0.26	%		0.00	%		0.31	%		1.37	%		1.68	%		98.32	%

16

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the six months ended June 30, 2018 and 2017 would have increased interest income by $132,000 and $63,000, respectively. No interest income related to non-accrual loans was included in interest income for the six months ended June 30, 2018 and 2017.

The Company also categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Non-classified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtful risk rating using the following definitions:

Special Mention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledged but such protection is potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.

Substandard: Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following table provides information on the Company’s risk categories by loan class:

(Dollars in thousands)	As of June 30, 2018				As of December 31, 2017
	Non-classified		Classified		Non-classified		Classified
One-to-four family residential real estate	$	137,325	$	942	$	135,475	$	740
Construction and land		25,886		567		18,577		779
Commercial real estate		111,697		10,249		114,736		5,888
Commercial		58,424		8,107		52,313		2,278
Agriculture		83,390		4,511		76,455		6,553
Municipal		3,172		-		3,396		-
Consumer		22,821		46		22,006		40
Total	$	442,715	$	24,422	$	422,958	$	16,278

At June 30, 2018, the Company had 12 loan relationships consisting of 17 outstanding loans that were classified as TDRs. During the second quarter of 2018, the Company classified an agriculture loan totaling $64,000 as a TDR after originating a loan to an existing loan relationship that was classified as a TDR in 2016. As part of the restructuring the borrower paid off three loans previously classified as TDRs. The Company also classified a $41,000 commercial loan as a TDR after extending the maturity of the loan during the second quarter of 2018. There were no loans classified as TDRs during the first three months of 2018. Since the agriculture loan relationship was adequately secured, no impairments were recorded against the principal as of June 30, 2018. The commercial loan had a $11,000 impairment recorded against the principal balance as of June 30, 2018.

During the second quarter of 2017, the Company classified two agriculture loans totaling $87,000 as TDRs after renewing loans to an existing loan relationship that was classified as a TDR in 2016. These two loans were paid off in the second quarter of 2018. During the first quarter of 2017, the Company classified an $11,000 commercial real estate loan as a TDR after extending the maturity of the loan and classified as a TDR a $15,000 agriculture loan extended to an existing loan relationship that was classified as a TDR in 2016. Since the commercial real estate loan was adequately secured, no charge-offs or impairments were recorded against the principal as of June 30, 2017. The agriculture loan relationship had a $49,000 impairment recorded against the principal balance as of June 30, 2017 and a charge-off of $215,000 was recorded in the third quarter of 2016.

17

The Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans that were classified as TDRs that defaulted within 12 months of modification during the first six months of 2018. There was one commercial real estate loan totaling $11,000 that was classified as a TDR during the second quarter of 2017 which defaulted within 12 months of modification. The loan was charged off in the fourth quarter of 2017. The Company did not record any charge-offs against loans classified as TDRs in the first six months of either 2018 or 2017. A credit provision for loan losses of $58,000 related to TDRs was recorded in the three months ended June 30, 2018. No provision for loan losses was recorded against TDRs during the three months ended June 30, 2017. A credit provision for loan losses of $91,000 and $13,000 related to TDRs was recorded in the six months ended June 30, 2018 and 2017, respectively. The Company allocated $36,000 and $127,000 of the allowance for loan losses against loans classified as TDRs at June 30, 2018 and December 31, 2017, respectively.

The following table presents information on loans that are classified as TDRs:

(Dollars in thousands)	As of June 30, 2018						As of December 31, 2017
	Number of loans		Non-accrual balance		Accruing balance		Number of loans		Non-accrual balance		Accruing balance
One-to-four family residential real estate		2	$	-	$	188		2	$	-	$	194
Construction and land		4		567		1,074		4		575		1,252
Commercial real estate		2		-		2,127		3		45		2,133
Commercial		1		41		-		-		-		-
Agriculture		6		136		218		9		471		-
Municipal		2		-		126		2		-		140
Total troubled debt restructurings		17	$	744	$	3,733		20	$	1,091	$	3,719

4. Goodwill and Other Intangible Assets

The Company tests goodwill for impairment annually or more frequently if circumstances warrant. The Company’s annual step one impairment test as of December 31, 2017 concluded that its goodwill was not impaired. The Company concluded there were no triggering events during the first six months of 2018 that required an interim goodwill impairment test.

Lease intangible assets are amortized over the life of the lease. Core deposit intangible assets are amortized over the estimated useful life of ten years on an accelerated basis. Mortgage servicing rights are amortized over the estimated life of the mortgage loan serviced for others. A summary of the other intangible assets that continue to be subject to amortization is as follows:

(Dollars in thousands)	As of June 30, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,487	)	$	580
Lease intangible asset		350		(211	)		139
Mortgage servicing rights		6,410		(3,771	)		2,639
Total other intangible assets	$	8,827	$	(5,469	)	$	3,358

(Dollars in thousands)	As of December 31, 2017
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,381	)	$	686
Lease intangible asset		350		(188	)		162
Mortgage servicing rights		6,285		(3,474	)		2,811
Total other intangible assets	$	8,702	$	(5,043	)	$	3,659

18

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2018 and in successive years ending December 31:

(Dollars in thousands)	Amortization
	expense
Remainder of 2018	$	123
2019		214
2020		177
2021		121
2022		58
Thereafter		26
Total	$	719

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

(Dollars in thousands)	June 30,		December 31,
	2018		2017
FHLMC	$	520,587	$	517,863
FHLB		9,324		9,782
Total	$	529,911	$	527,645

Custodial escrow balances maintained in connection with serviced loans were $5.0 million and $4.4 million at June 30, 2018 and December 31, 2017, respectively. Gross service fee income related to such loans was $337,000 and $320,000 for the three months ended June 30, 2018 and 2017, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $673,000 and $639,000 for the six months ended June 30, 2018 and 2017, respectively.

Activity for mortgage servicing rights and the related valuation allowance was as follows:

(Dollars in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Mortgage servicing rights:
Balance at beginning of period	$	2,722		$	2,787		$	2,811		$	2,849
Additions		137			281			259			442
Amortization		(220	)		(255	)		(431	)		(478	)
Balance at end of period	$	2,639		$	2,813		$	2,639		$	2,813

The fair value of mortgage servicing rights was $6.1 million and $5.6 million at June 30, 2018 and December 31, 2017, respectively. Fair value at June 30, 2018 was determined using discount rates ranging from 9.00% to 11.00%; prepayment speeds ranging from 6.00% to 23.83%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.35%. Fair value at December 31, 2017 was determined using discount rates ranging from 9.50% to 9.59%, prepayment speeds ranging from 5.23% to 33.39%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 2.26%.

The Company had a mortgage repurchase reserve of $235,000 at both June 30, 2018 and December 31, 2017, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the first six months of 2018 and 2017. As of June 30, 2018, the Company did not have any outstanding mortgage repurchase requests.

19

5. Earnings per Share

Basic earnings per share have been computed based upon the weighted average number of common shares outstanding during each period. Diluted earnings per share include the effect of all potential common shares outstanding during each period. The shares used in the calculation of basic and diluted earnings per share are shown below:

	Three months ended				Six months ended
(Dollars in thousands, except per share amounts)	June 30,				June 30,
	2018		2017		2018		2017
Net earnings(1)	$	2,845	$	2,383	$	4,944	$	4,588
Weighted average common shares outstanding - basic (1)		4,141,894		4,064,092		4,124,947		4,063,692
Assumed exercise of stock options (1)		18,693		84,092		18,544		83,040
Weighted average common shares outstanding - diluted (1)		4,160,587		4,148,184		4,143,491		4,146,732
Net earnings per share (1):
Basic	$	0.69	$	0.59	$	1.20	$	1.13
Diluted	$	0.68	$	0.58	$	1.19	$	1.11

(1) Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

The diluted earnings per share computations for the three and six months ended June 30, 2018 and 2017 include all unexercised stock options because no stock options were anti-dilutive during such periods.

6. Repurchase Agreements

The Company has overnight repurchase agreements with certain deposit customers whereby the Company uses investment securities as collateral for non-insured funds. These balances are accounted for as collateralized financing and included in other borrowings on the balance sheet. The following is a summary of the balances of and collateral for the Company’s repurchase agreements:

	As of June 30, 2018
	Overnight and						Greater
	Continuous		Up to 30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal treasury obligations	$	307	$	-	$	-	$	-	$	307
U.S. federal agency obligations		2,948		-		-		-		2,948
Agency mortgage-backed securities		5,162		-		-		-		5,162
Total	$	8,417	$	-	$	-	$	-	$	8,417

	As of December 31, 2017
	Overnight and		Up to				Greater
	Continuous		30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal agency obligations	$	5,147	$	-	$	-	$	-	$	5,147
Agency mortgage-backed securities		8,362		-		-		-		8,362
Total	$	13,509	$	-	$	-	$	-	$	13,509

Repurchase agreements are comprised of non-insured customer funds, totaling $8.4 million at June 30, 2018, and $13.5 million at December 31, 2017, which were secured by $16.2 million and $16.8 million of the Company’s investment portfolio at the same dates, respectively.

The investment securities are held by a third-party financial institution in the customer’s custodial account. The Company is required to maintain adequate collateral for each repurchase agreement. Changes in the fair value of the investment securities impact the amount of collateral required. If the Company were to default, the investment securities would be used to settle the repurchase agreement with the deposit customer.

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7. Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. Items outside the scope of ASC 606 are noted as such.

	Three months ended				Six months ended
(Dollars in thousands)	June 30,				June 30,
	2018		2017		2018		2017
Non-interest income:
Service charges on deposits
Overdraft fees	$	783	$	915	$	1,580	$	1,769
Other		135		137		273		282
Interchange income		516		425		958		786
Loan servicing fees (1)		337		320		673		639
Office lease income (1)		156		150		308		300
Gains on sales of loans (1)		1,468		1,692		2,629		3,081
Bank owned life insurance income (1)		162		119		321		236
Gains on sales of investment securities (1)		-		177		35		324
Gains on sales of real estate owned		-		25		1		10
Other		696		241		876		415
Total non-interest income	$	4,253	$	4,201	$	7,654	$	7,842

(1) Not within the scope of ASC 606.

The increase in other non-interest income during the three and six months ended June 30, 2018 was primarily the result of a $525,000 recovery on a deposit-related loss that occurred in the third quarter of 2017.

A description of the Company’s revenue streams within the scope of ASC 606 follows:

Service Charges on Deposit Accounts

The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period during which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Interchange Income

The Company earns interchange fees from debit cardholder transactions conducted through the interchange payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Gains (Losses) on Sales of Real Estate Owned

The Company records a gain or loss from the sale of real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the real estate owned asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. There were no sales of real estate owned that were financed by the Company during the first six months of 2018 or 2017.

8. Fair Value of Financial Instruments and Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

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Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value estimates of the Company’s financial instruments as of June 30, 2018 and December 31, 2017, including methods and assumptions utilized, are set forth below:

(Dollars in thousands)	As of June 30, 2018
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	19,883		$	19,883		$	-		$	-	$	19,883
Investment securities available-for-sale		398,137			1,952			396,185			-		398,137
Bank stocks, at cost		6,034			n/a			n/a			n/a		n/a
Loans, net		461,396			-			-			480,331		480,331
Loans held for sale, net		11,764			-			11,764			-		11,764
Derivative financial instruments		695			-			695			-		695
Accrued interest receivable		4,459			20			2,279			2,160		4,459
Financial liabilities:
Non-maturity deposits	$	(642,106	)	$	(642,106	)	$	-		$	-	$	(642,106	)
Time deposits		(123,185	)		-			(120,775	)		-		(120,775	)
FHLB borrowings		(85,600	)		-			(85,613	)		-		(85,613	)
Subordinated debentures		(21,584	)		-			(19,522	)		-		(19,522	)
Other borrowings		(8,417	)		-			(8,417	)		-		(8,417	)
Derivative financial instruments		(97	)		-			(97	)		-		(97	)
Accrued interest payable		(349	)		-			(349	)		-		(349	)

	As of December 31, 2017
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	16,584		$	16,584		$	-		$	-	$	16,584
Investment securities available-for-sale		387,983			1,998			385,985			-		387,983
Bank stocks, at cost		5,423			n/a			n/a			n/a		n/a
Loans, net		433,743			-			-			436,910		436,910
Loans held for sale		6,535			-			6,535			-		6,535
Derivative financial instruments		395			-			395			-		395
Accrued interest receivable		4,409			20			2,234			2,155		4,409
Financial liabilities:
Non-maturity deposits		(642,281	)		(642,281	)		-			-		(642,281	)
Time deposits		(123,277	)		-			(121,298	)		-		(121,298	)
FHLB borrowings		(31,600	)		-			(31,706	)		-		(31,706	)
Subordinated debentures		(21,484	)		-			(19,134	)		-		(19,134	)
Other borrowings		(13,509	)		-			(13,509	)		-		(13,509	)
Accrued interest payable		(274	)		-			(274	)		-		(274	)

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Methods and Assumptions Utilized

The carrying amount of cash and cash equivalents is considered to approximate fair value.

The Company’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal agency securities, municipal obligations, agency mortgage-backed securities, certificates of deposits and common stocks. Quoted exchange prices are available for the Company’s U.S treasury securities and common stock investments, which are classified as Level 1. U.S. federal agency securities and agency mortgage-backed obligations are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. These measurements are classified as Level 2. Municipal securities are valued using a type of matrix, or grid, pricing in which securities are benchmarked against U.S. treasury rates based on credit rating. These model and matrix measurements are classified as Level 2 in the fair value hierarchy.

The Company’s common stock investments are valued based on quoted exchange prices and classified as Level 1. As of January 1, 2018, the common stocks were transferred out of the available-for-sale classification. The common stock investments were sold during the second quarter of 2018.

It is not practical to determine the fair value of bank stocks due to restrictions placed on the transferability of FHLB and FRB stock.

Effective January 1, 2018, the estimated fair value of the Company’s loan portfolio is based on the segregation of loans by collateral type, interest terms, and maturities. The fair value is estimated based on discounting scheduled and estimated cash flows through maturity using appropriate market inputs to arrive at a discount rate that reflects exit pricing as prescribed in ASC Topic 820. The market inputs utilize market trading information in the calculation of loan fair values and is classified as Level 3. Prior to January 1, 2018, the fair value was estimated based on discounting scheduled and estimated cash flows through maturity using an appropriate risk-adjusted yield curve to approximate current interest rates for each category and was classified as Level 3. No adjustment was made to the interest rates for changes in credit risk of performing loans where there are no known credit concerns. The fair values of impaired loans were generally based on market prices for similar assets determined through independent appraisals or discounted values of independent appraisals and brokers’ opinions of value. The difference in methodologies may make the fair value of loans not comparable between current year and prior year periods.

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. The mortgage loan valuations are based on quoted secondary market prices for similar loans and are classified as Level 2.

The carrying amounts of accrued interest receivable and payable are considered to approximate fair value.

The estimated fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, money market accounts, and checking accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits. The discount rate is tied to the FHLB yield curve plus an appropriate servicing spread. Fair value measurements based on discounted cash flows are classified as Level 2. These fair values do not incorporate the value of core deposit intangibles which may be associated with the deposit base.

The fair value of advances from the FHLB, subordinated debentures, and other borrowings is estimated using current yield curves for similar borrowings adjusted for the Company’s current credit spread and classified as Level 2.

The Company’s derivative financial instruments consist of interest rate lock commitments and corresponding forward sales contracts on mortgage loans held for sale. The fair values of these derivatives are based on quoted prices for similar loans in the secondary market. The market prices are adjusted by a factor, based on the Company’s historical data and its judgment about future economic trends, which considers the likelihood that a commitment will ultimately result in a closed loan. These instruments are classified as Level 2. The amounts are included in other assets or other liabilities on the consolidated balance sheets and gains on sales of loans, net in the consolidated statements of earnings.

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Off-Balance-Sheet Financial Instruments

The fair value of letters of credit and commitments to extend credit is based on the fees currently charged to enter into similar agreements. The aggregate amount of these fees is not material.

Transfers

The Company did not transfer any assets or liabilities among levels during the six months ended June 30, 2018 or during the year ended December 31, 2017.

Valuation Methods for Instruments Measured at Fair Value on a Recurring Basis

The following tables represent the Company’s financial instruments that are measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)				As of June 30, 2018
				Fair value hierarchy
	Total			Level 1		Level 2			Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,952		$	1,952	$	-		$	-
U. S. federal agency obligations		13,677			-		13,677			-
Municipal obligations, tax exempt		179,539			-		179,539			-
Municipal obligations, taxable		54,640			-		54,640			-
Agency mortgage-backed securities		140,549			-		140,549			-
Certificates of deposit		7,780			-		7,780			-
Loans held for sale		11,764			-		11,764			-
Derivative financial instruments		695			-		695			-
Liability:
Derivative financial instruments		(97	)		-		(97	)		-

			As of December 31, 2017
			Fair value hierarchy
	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,990	$	1,990	$	-	$	-
U. S. federal agency obligations		16,492		-		16,492		-
Municipal obligations, tax exempt		184,738		-		184,738		-
Municipal obligations, taxable		57,976		-		57,976		-
Agency mortgage-backed securities		117,555		-		117,555		-
Certificates of deposit		9,224		-		9,224		-
Common stocks		8		8		-		-
Loans held for sale		6,535		-		6,535		-
Derivative financial instruments		395		-		395		-

Changes in the fair value of available-for-sale securities are included in other comprehensive income to the extent the changes are not considered other-than-temporary impairments. Other-than-temporary impairment tests are performed on a quarterly basis and any decline in the fair value of an individual security below its cost that is deemed to be other-than-temporary results in a write-down of that security’s cost basis.

The aggregate fair value, contractual balance (including accrued interest), and gain on loans held for sale were as follows:

	As of		As of
(Dollars in thousands)	June 30, 2018		December 31, 2017
Aggregate fair value	$	11,764	$	6,535
Contractual balance		11,484		6,420
Gain	$	280	$	115

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The total amount of gains from changes in fair value of loans held for sale included in earnings were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2018		2017		2018		2017
Interest income	$	98	$	79	$	146	$	124
Change in fair value		264		60		165		169
Total change in fair value	$	362	$	139	$	311	$	293

Valuation Methods for Instruments Measured at Fair Value on a Non-recurring Basis

The Company does not value its loan portfolio at fair value. Collateral-dependent impaired loans are generally carried at the lower of cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated at least quarterly for additional impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s impaired loans was $9.0 million and $9.8 million, with an allocated allowance of $853,000 and $642,000, at June 30, 2018 and December 31, 2017, respectively.

Real estate owned includes assets acquired through, or in lieu of, foreclosure and land previously acquired for expansion. Real estate owned is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updated periodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Real estate owned is reviewed and evaluated at least annually for additional impairment and adjusted accordingly, based on the same factors identified above.

The following tables represent the Company’s financial instruments that are measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)
			As of June 30, 2018						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(15	)
Commercial real estate		1,779		-		-		1,779		2
Commercial		1,301		-		-		1,301		(338	)
Agriculture		233		-		-		233		(1	)

			As of December 31, 2017						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(73	)
Construction and land		1,499		-		-		1,499		(102	)
Commercial real estate		33		-		-		33		12
Commercial		1,600		-		-		1,600		(304	)
Agriculture		264		-		-		264		65
Real estate owned:
One-to-four family residential real estate		325		-		-		325		(68	)
Commercial real estate		85		-		-		85		(50	)

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The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

(Dollars in thousands)
	Fair value		Valuation technique	Unobservable inputs	Range
As of June 30, 2018
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		7%-50	%
Commercial real estate		1,799	Sales comparison	Adjustment to appraised value		7%-25	%
Commercial		1,301	Sales comparison	Adjustment to comparable sales		10%-25	%
Agriculture		233	Sales comparison	Adjustment to appraised value		0%-50	%
As of December 31, 2017
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		16%-50	%
Construction and land		1,499	Sales comparison	Adjustment to appraised value		0%-25	%
Commercial real estate		33	Sales comparison	Adjustment to appraised value		0%-91	%
Commercial		1,600	Sales comparison	Adjustment to comparable sales		15%-50	%
Agriculture		264	Sales comparison	Adjustment to appraised value		0%-50	%
Real estate owned:
One-to-four family residential real estate		325	Sales comparison	Adjustment to appraised value		10	%
Commercial real estate		85	Sales comparison	Adjustment to appraised value		10	%

9. Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believed that as of June 30, 2018, the Company and the Bank met all capital adequacy requirements to which they were subject at that time.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The Company and the Bank are subject to the capital rules (the “Basel III Rules”) that implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $1.0 billion).

The Basel III Rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a Tier 1 capital to risk-weighted assets minimum ratio of 6.0%, a Total Capital to risk-weighted assets minimum ratio of 8.0%, and a Tier 1 leverage minimum ratio of 4.0%. A capital conservation buffer, comprised of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets, was 1.25% effective on January 1, 2017, was 1.875% effective on January 1, 2018, and will increase to 2.5% on January 1, 2019.

As of June 30, 2018 and December 31, 2017, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.

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The following is a comparison of the Company’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

(Dollars in thousands)						For capital
	Actual					adequacy purposes
	Amount		Ratio			Amount		Ratio (1)
As of June 30, 2018
Leverage	$	94,793		10.10	%	$	37,556		4.0	%
Common Equity Tier 1 Capital		73,860		12.93	%		36,426		6.4	%
Tier 1 Capital		94,793		16.59	%		44,996		7.9	%
Total Risk Based Capital		100,768		17.64	%		56,424		9.9	%
As of December 31, 2017
Leverage	$	88,605		9.80	%	$	36,180		4.0	%
Common Equity Tier 1 Capital		68,269		12.83	%		30,590		5.8	%
Tier 1 Capital		88,605		16.65	%		38,571		7.3	%
Total Risk Based Capital		94,208		17.71	%		49,211		9.3	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

											To be well-capitalized under prompt
(Dollars in thousands)						For capital					corrective
	Actual					adequacy purposes					action provisions
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
As of June 30, 2018
Leverage	$	92,978		9.93	%	$	37,451		4.0	%	$	46,814		5.0	%
Common Equity Tier 1 Capital		92,978		16.30	%		36,355		6.4	%		37,068		6.5	%
Tier 1 Capital		92,978		16.30	%		44,909		7.9	%		45,622		8.0	%
Total Risk Based Capital		98,953		17.35	%		56,314		9.9	%		57,027		10.0	%
As of December 31, 2017
Leverage	$	86,808		9.62	%	$	36,097		4.0	%	$	44,105		5.0	%
Common Equity Tier 1 Capital		86,808		16.35	%		30,529		5.8	%		33,222		6.5	%
Tier 1 Capital		86,808		16.35	%		38,493		7.3	%		40,888		8.0	%
Total Risk Based Capital		92,407		17.40	%		49,112		9.3	%		51,110		10.0	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017.

10. Impact of Recent Accounting Pronouncements

In February 2016, the FASB issued an update (ASU No. 2016-02, Leases) creating FASB Topic 842, Leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Management has concluded that based on the Company’s current operating leases, the adoption of ASU 2016-02 will not have a material impact on the Company’s consolidated financial statement and related disclosures.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly referred to as “CECL.” The provisions of the update eliminate the probable initial recognition threshold under current GAAP which requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assets measured at amortized cost will reflect an organization’s estimate of all expected credit losses over the expected term of the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity debt securities. Under the provisions of the update, credit losses recognized on available for sale debt securities will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans, with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Under current GAAP a purchased loan’s contractual balance is adjusted to fair value through a credit discount and no reserve is recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at the time of acquisition, the accounting for purchased loans is made more comparable to the accounting for originated loans. Finally, increased disclosure requirements under CECL oblige organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. For public entities, the amendments of the update are effective beginning January 1, 2020. Management has initiated an implementation committee to assist in assessing data and system needs for the new standard. Management anticipates the effect will be an increase to the allowance for loan losses upon adoption. However, the size of the overall increase is uncertain at this time.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The provisions of this update become effective for interim and annual periods beginning after December 15, 2018. Management has concluded that based on the Company’s current portfolio of investment securities that the adoption of these amendments will result in a shorter amortization period for investment security premiums; however, the impact will not be material to interest income on investment securities.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview. Landmark Bancorp, Inc. is a financial holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly-owned subsidiary, Landmark National Bank, and in the insurance business through its wholly-owned subsidiary, Landmark Risk Management, Inc. References to the “Company,” “we,” “us,” and “our” refer collectively to Landmark Bancorp, Inc., Landmark National Bank and Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing a tradition of holding and acquiring quality assets while growing our commercial, commercial real estate and agriculture loan portfolios. We are committed to developing relationships with our borrowers and providing a total banking service.

The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans. Although not our primary business function, we do invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.

Landmark Risk Management, Inc., which was formed and began operations on May 31, 2017, is a Nevada-based captive insurance company which provides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently available or economically feasible in today’s insurance marketplace. Landmark Risk Management, Inc. pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. Landmark Risk Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other non-interest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, federal deposit insurance costs, data processing expenses, provision for loan losses, and certain other non-interest expenses.

We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions.

Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and twenty- eight additional branch offices in central, eastern, southeast and southwest Kansas, and our ownership of Landmark Risk Management, Inc.

Critical Accounting Policies. Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for loan losses, the valuation of investment securities, accounting for income taxes and the accounting for goodwill and other intangible assets, all of which involve significant judgment by our management. Information about our critical accounting policies is included under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2017.

Summary of Results. During the second quarter of 2018, we recorded net earnings of $2.8 million, which was an increase of $462,000, or 19.4%, from the $2.4 million of net earnings in the second quarter of 2017. During the first six months of 2018, we recorded net earnings of $4.9 million, which was an increase of $356,000, or 7.8%, from the $4.6 million of net earnings in the first six months of 2017.

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The following table summarizes earnings and key performance measures for the periods presented.

(Dollars in thousands, except per share amounts)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Net earnings:
Net earnings	$	2,845		$	2,383		$	4,944		$	4,588
Basic earnings per share (1)	$	0.69		$	0.59		$	1.20		$	1.13
Diluted earnings per share (1)	$	0.68		$	0.58		$	1.19		$	1.11
Earnings ratios:
Return on average assets (1)		1.20	%		1.04	%		1.06	%		1.01	%
Return on average equity (1)		13.49	%		10.78	%		11.69	%		10.62	%
Equity to total assets		8.83	%		10.00	%		8.83	%		10.00	%
Net interest margin (2) (3)		3.33	%		3.41	%		3.33	%		3.40	%
Dividend payout ratio		29.41	%		33.33	%		33.61	%		34.48	%

(1) Per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

(2) Ratios have been annualized and are not necessarily indicative of the results for the entire year.

(3) Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate for the three and six months ended June 30, 2018 and a 34% rate for the three and six months ended June 30, 2017

Interest Income. Interest income of $8.1 million for the quarter ended June 30, 2018 increased $627,000, or 8.4%, as compared to the same period of 2017. Interest income on loans increased $464,000, or 8.8%, to $5.7 million for the quarter ended June 30, 2018, compared to the same period of 2017 due primarily to an increase in our average loan balances, which increased from $428.4 million in the second quarter of 2017 to $452.5 million in the second quarter of 2018. Also contributing to the increase in interest income were higher yields on loans, which increased from 4.96% in the second quarter of 2017 to 5.10% in the second quarter of 2018. Interest income on investment securities increased $163,000, or 7.5%, to $2.3 million for the second quarter of 2018, as compared to $2.2 million in the same period of 2017. The increase in interest income on investment securities was primarily the result of an increase in our average balance of investment securities from $398.3 million during the second quarter of 2017 to $402.3 million during the second quarter of 2018.

Interest income of $15.7 million for the six months ended June 30, 2018 increased $1.0 million, or 7.1%, as compared to the same period of 2017. Interest income on loans increased $789,000, or 7.6%, to $11.1 million for the six months ended June 30, 2018, compared to the same period of 2017 due primarily to an increase in our average loan balances, which increased from $424.5 million during the first six months of 2017 to $445.3 million during the first six months of 2018. Also contributing to the increase in interest income were higher yields on loans, which increased from 4.93% in the first six months of 2017 to 5.04% in the first six months of 2018. Interest income on investment securities increased $251,000, or 5.8%, to $4.6 million for the first six months of 2018, as compared to $4.3 million in the same period of 2017. The increase in interest income on investment securities was primarily the result of an increase in our average balance of investment securities from $395.9 million during the first six months of 2017 to $398.5 million during the first six months of 2018.

Interest Expense. Interest expense during the quarter ended June 30, 2018 increased $367,000, or 41.7%, to $1.2 million as compared to the same period of 2017. Interest expense on interest-bearing deposits increased $237,000, or 60.2%, to $631,000 for the quarter ended June 30, 2018 as compared to the same period of 2017. The increase in interest expense on interest-bearing deposits was the result of deposits repricing higher and an increase in average interest-bearing deposit balances, which increased from $590.1 million in the second quarter of 2017 to $597.5 million in the second quarter of 2018. The average rate of interest-bearing deposits increased 0.15% for the second quarter of 2018 to 0.42% as compared to 0.27% in the same period of 2017. For the second quarter of 2018, interest expense on borrowings increased $130,000, or 26.7%, to $616,000 as compared to the same period of 2017, due to an increase in our average outstanding borrowings, which increased from $68.5 million in the second quarter of 2017 to $91.6 million in the same period of 2018. Partially offsetting the higher average outstanding borrowings were lower average rates on our borrowings which decreased to 2.70% for the second quarter of 2018 compared to 2.84% for the same period of 2017, due to maturity of higher interest borrowings.

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Interest expense during the six months ended June 30, 2018 increased $554,000, or 32.6%, to $2.3 million as compared to the same period of 2017. Interest expense on interest-bearing deposits increased $440,000, or 60.1%, to $1.2 million for the six months ended June 30, 2018 as compared to the same period of 2017. The increase in interest expense on interest-bearing deposits was the result of deposits repricing higher and an increase in average interest-bearing deposit balances, which increased from $588.8 million in the first six months of 2017 to $599.9 million in the same period of 2018. The average rate of interest-bearing deposits increased 0.14% for the first six months of 2018 to 0.39% as compared to 0.25% in the same period of 2017. For the first six months of 2018, interest expense on borrowings increased $114,000, or 11.8%, to $1.1 million as compared to the same period of 2017, due to an increase in our average outstanding borrowings, which increased from $70.1 million in the first six months of 2017 to $79.5 million in the first six months of 2018. Partially offsetting the higher average outstanding borrowings were lower average rates on our borrowings which decreased to 2.74% for the first six months of 2018 compared to 2.78% for the same period of 2017.

Net Interest Income. Net interest income increased $260,000, or 4.0%, to $6.8 million for the second quarter of 2018 compared to the same period of 2017. The increase in net interest income was primarily a result of an increase of 2.9% in average interest-earning assets, from $831.3 million in the second quarter of 2017 to $855.4 million for the same period of 2018. Our net interest margin, on a tax-equivalent basis, decreased from 3.41% during the second quarter of 2017 to 3.33% in the same period of 2018. The decrease in net interest margin was primarily a result of the reduction of federal corporate income tax rates from 34% in 2017 to 21% in 2018 following enactment of the federal tax reform legislation in December 2017. The lower income tax rate reduced the tax equivalent yield on our tax exempt municipal investments and loans.

Net interest income increased $486,000, or 3.8%, to $13.4 million for the first six months of 2018 compared to the same period of 2017. The increase was primarily a result of a 2.1% increase in average interest-earning assets, from $827.1 million in the first six months of 2017 to $844.9 million in the first six months of 2018. Net interest margin, on a tax-equivalent basis, decreased from 3.40% in the first six months of 2017 to 3.33% in the same period of 2018. The decrease in net interest margin was primarily a result of the reduction in 2018 federal corporate income tax rates and the related effect on our tax equivalent adjustment.

Our net interest income and net interest margin may continue to decline if short-term interest rates continue to increase and we are unable to continue to reprice our loans higher or grow our average balances while our cost of interest-bearing deposits and borrowings increase. See the Average Assets/Liabilities and Rate/Volume tables at the end of Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details on asset yields, liability rates and net interest margin.

Provision for Loan Losses. We maintain, and our Board of Directors monitors, an allowance for losses on loans. The allowance is established based upon management’s periodic evaluation of known and inherent risks in the loan portfolio, review of significant individual loans and collateral, review of delinquent loans, past loss experience, adverse situations that may affect the borrowers’ ability to repay, current and expected market conditions, and other factors management deems important. Determining the appropriate level of reserves involves a high degree of management judgment and is based upon historical and projected losses in the loan portfolio and the collateral value or discounted cash flows of specifically identified impaired loans. Additionally, allowance policies are subject to periodic review and revision in response to a number of factors, including current market conditions, actual loss experience and management’s expectations.

During the second quarter of 2018, we recorded a provision for loan losses of $250,000 compared to $100,000 in the second quarter of 2017. We recorded net loan charge-offs of $59,000 during the second quarter of 2018 compared to net loan charge-offs of $101,000 during the second quarter of 2017.

During the first six months of 2018, we recorded a provision for loan losses of $450,000 compared to $150,000 during the same period of 2017. We recorded net loan charge-offs of $74,000 during the six months ended June 30, 2018 compared to $168,000 during the same period of 2017.

For further discussion of the allowance for loan losses, refer to the “Asset Quality and Distribution” section below.

Non-interest Income. Total non-interest income was $4.3 million in the second quarter of 2018, an increase of $52,000, or 1.2%, compared to the second quarter of 2017. This was primarily the result of an increase of $519,000 in other non-interest income, which reflects $525,000 of recoveries on a deposit-related loss that occurred in the third quarter of 2017. Partially offsetting those recoveries were decreases of $224,000 in gains on sale of loans, $177,000 of gains on sales of investment securities and $109,000 in fees and service charges. Our gains on sales of loans were impacted by lower volumes of one-to-four family residential real estate loans originated for sale while a decline in overdraft fees impacted our fees and service charges.

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Total non-interest income was $7.7 million in the first six months of 2018, a decrease of $188,000, or 2.4%, compared to the same period of 2017. This change was primarily the result of a decline of $452,000 in gains on sales of loans, as the volume of one-to-four family residential real estate loans originated for sale in the first six months of 2018 was lower than in the same period of 2017. Also contributing to the decline in non-interest income were lower gains on sales of investment securities during the first six months of 2018 of $35,000 compared to $324,000 in the same period of 2017. Partially offsetting the declines was an increase of $536,000 in other non-interest income which reflects $525,000 of recoveries on the deposit-related loss.

Non-interest Expense. Non-interest expense totaled $7.6 million for the second quarter of 2018, an increase of $14,000, or 0.2%, from $7.6 million for the second quarter of 2017. The increase was primarily due to increases of $82,000 in other non-interest expense and $48,000 in compensation and benefits in the second quarter of 2018 as compared to the second quarter of 2017. Those increases were partially offset by decreases of $46,000 in professional fees and $45,000 in amortization expense.

Non-interest expense totaled $15.0 million for the first six months of 2018, an increase of $393,000, or 2.7%, from $14.6 million for the first six months of 2017. The increase was primarily related to an increase of $301,000 in other non-interest expense which was impacted by the accrual of loss reserves at our captive insurance subsidiary and increases in various other expense categories. Also contributing to higher non-interest expense were increases of $80,000 in compensation and benefits, $74,000 in data processing and $52,000 in professional fees. Those increases were partially offset by decreases of $76,000 in foreclosure and other real estate expense and $66,000 in amortization expense.

Income Tax Expense. During the second quarter of 2018, we recorded income tax expense of $428,000, compared to $742,000 during the same period of 2017. Our effective tax rate decreased from 23.7% in the second quarter of 2017 to 13.0% in the second quarter of 2018 primarily as a result of the reduction of federal corporate income tax rates from 34% in 2017 to 21% in 2018 following the enactment of the federal tax reform legislation in December 2017.

We recorded income tax expense of $684,000 for the first six months of 2018 compared to $1.4 million in the same period of 2017. Our effective tax rate decreased from 23.8% in the first half of 2017 to 12.2% in the first half of 2018 primarily as a result of the reduction in 2018 federal corporate income tax rates.

Financial Condition. Despite measured improvement in certain metrics, general uncertainty with respect to economic conditions in the United States continues to affect our asset quality and performance. The geographic markets in which the Company operates have also been impacted by an economic downturn in the agriculture sector. However, our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has generally improved over the past few years. Aside from these identified problem assets, management believes that the Company continues to have a high quality asset base and solid core earnings, and anticipates that its efforts to maintain these quality features will continue to provide a strong foundation for continued growth and profitability in the future.

Asset Quality and Distribution. Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, commercial real estate, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets increased $48.7 million, or 5.2%, to $978.2 million at June 30, 2018, compared to $929.5 million at December 31, 2017. Net loans increased $27.7 million, or 6.4%, to $461.4 million at June 30, 2018, compared to $433.7 million at year-end 2017. Investment securities increased $10.8 million, or 2.7%, to $404.2 million at June 30, 2018, from $393.4 million at December 31, 2017.

The allowance for loan losses is established through a provision for loan losses based on our evaluation of the risk inherent in the loan portfolio and changes in the nature and volume of our loan activity. This evaluation, which includes a review of all loans with respect to which full collectability may not be reasonably assured, considers the fair value of the underlying collateral, economic conditions, historical loan loss experience, level of classified loans and other factors that warrant recognition in providing for an appropriate allowance for loan losses. At June 30, 2018 our allowance for loan losses totaled $5.8 million, or 1.25% of gross loans outstanding, compared to $5.5 million, or 1.24% of gross loans outstanding, at December 31, 2017.

As of June 30, 2018 and December 31, 2017, approximately $24.4 million and $16.3 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful. These ratings indicate that these loans were identified as potential problem loans having more than normal risk which raised doubts as to the ability of the borrower to comply with present loan repayment terms. Even though borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the allowance for loan losses was sufficient to cover the risks and probable incurred losses related to such loans at June 30, 2018 and December 31, 2017, respectively.

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Loans past due 30-89 days and still accruing interest totaled $1.5 million, or 0.33% of gross loans, at June 30, 2018, compared to $1.4 million, or 0.31% of gross loans, at December 31, 2017. At June 30, 2018, $5.3 million in loans were on non-accrual status, or 1.13% of gross loans, compared to $6.0 million, or 1.38% of gross loans, at December 31, 2017. Non-accrual loans consist of loans 90 or more days past due and certain impaired loans. There were no loans 90 days delinquent and accruing interest at June 30, 2018 or December 31, 2017. Our impaired loans totaled $9.0 million at June 30, 2018 compared to $9.8 million at December 31, 2017. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2018 and December 31, 2017 was related to TDRs that were accruing interest but still classified as impaired.

As part of our credit risk management, we continue to manage the loan portfolio to identify problem loans and have placed additional emphasis on commercial real estate and construction and land relationships. We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At June 30, 2018, we had $452,000 of real estate owned compared to $436,000 at December 31, 2017. As of June 30, 2018, real estate owned primarily consisted of residential real estate and commercial properties. The Company is currently marketing all of the remaining properties in real estate owned.

Liability Distribution. Our primary ongoing sources of funds are deposits, FHLB borrowings, proceeds from principal and interest payments on loans and investment securities and proceeds from the sale of mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions. We experienced a decrease of $267,000 in total deposits during the first six months of 2018, to $765.3 million at June 30, 2018, from $765.6 million at December 31, 2017. The decrease in deposits was primarily due to decreased balances of money market and checking and time deposit accounts. This decrease was partially offset by higher balances of non-interest bearing and savings accounts.

Non-interest-bearing deposits at June 30, 2018, were $172.1 million, or 22.5% of deposits, compared to $160.5 million, or 21.0% of deposits, at December 31, 2017. Money market and checking deposit accounts were 48.8% of our deposit portfolio and totaled $373.8 million at June 30, 2018, compared to $388.3 million, or 50.7% of deposits, at December 31, 2017. Savings accounts increased to $96.2 million, or 12.6% of deposits, at June 30, 2018, from $93.5 million, or 12.2% of deposits, at December 31, 2017. Certificates of deposit totaled $123.2 million, or 16.1% of deposits, at June 30, 2018, compared to $123.3 million, or 16.1% of deposits, at December 31, 2017.

Certificates of deposit at June 30, 2018, scheduled to mature in one year or less, totaled $86.7 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.

Total borrowings increased $49.0 million to $115.6 million at June 30, 2018, from $66.6 million at December 31, 2017. The increase in total borrowings was primarily due to an increase in our FHLB borrowings from $31.6 million at December 31, 2017 to $85.6 million at June 30, 2018, which was primarily the result of funding our growth in loans and investment securities during the first six months of 2018.

Cash Flows. During the six months ended June 30, 2018, our cash and cash equivalents increased by $3.3 million. Our operating activities provided cash of $3.4 million during the first six months of 2018. Our investing activities used net cash of $47.6 million during the first six months of 2018, primarily as a result of the purchase of investment securities and an increase in our loan balances. Financing activities provided net cash of $47.5 million during the first six months of 2018, primarily as a result of increased FHLB borrowings.

Liquidity. Our most liquid assets are cash and cash equivalents and investment securities available for sale. The levels of these assets are dependent on the operating, financing, lending and investing activities during any given period. These liquid assets totaled $418.0 million at June 30, 2018 and $404.6 million at December 31, 2017. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments.

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Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through sales of investment securities. At June 30, 2018, we had an outstanding FHLB advance of $5.0 million and $80.6 million of borrowings against our line of credit with the FHLB. At June 30, 2018, we had collateral pledged to the FHLB that would allow us to borrow an additional $8.9 million, subject to FHLB credit requirements and policies. At June 30, 2018, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $14.0 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks totaling approximately $30.0 million in available credit under which we had no outstanding borrowings at June 30, 2018. At June 30, 2018, we had subordinated debentures totaling $21.6 million and other borrowings of $8.4 million, which consisted of $8.4 million in repurchase agreements. The Company has a $7.5 million line of credit from an unrelated financial institution maturing on November 1, 2018, with an interest rate that adjusts daily based on the prime rate less 0.25%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at June 30, 2018.

Off Balance Sheet Arrangements. As a provider of financial services, we routinely issue financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by us generally to guarantee the payment or performance obligation of a customer to a third party. While these standby letters of credit represent a potential outlay by us, a significant amount of the commitments may expire without being drawn upon. We have recourse against the customer for any amount the customer is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by us. Most of the standby letters of credit are secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $859,000 at June 30, 2018.

At June 30, 2018, we had outstanding loan commitments, excluding standby letters of credit, of $79.8 million. We anticipate that sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments to finance real estate loans.

Capital. Current regulatory capital regulations require financial institutions (including banks and bank holding companies) to meet certain regulatory capital requirements. The Company and the Bank are subject to the Basel III Rules that implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $1.0 billion).

The Basel III Rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a Tier 1 capital to risk-weighted assets minimum ratio of 6.0%, a Total Capital to risk-weighted assets minimum ratio of 8.0%, and a Tier 1 leverage minimum ratio of 4.0%. A capital conservation buffer, comprised of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets, was 1.25% effective on January 1, 2017, was 1.875% effective on January 1, 2018, and will increase to 2.5% on January 1, 2019. As of June 30, 2018 and December 31, 2017, the Bank was rated “well capitalized,” which is the highest rating available under the regulatory capital regulations framework for prompt corrective action. Management believed that as of June 30, 2018, the Company and the Bank met all capital adequacy requirements to which we are subject.

Dividends. During the quarter ended June 30, 2018, we paid a quarterly cash dividend of $0.20 per share to our stockholders.

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. In addition, under the Basel III Rules, financial institutions have to maintain 2.5% in common equity Tier 1 capital attributable to the capital conservation buffer in order to pay dividends and do other capital distributions. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of June 30, 2018. The National Bank Act imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank’s current year’s net earnings plus the adjusted retained earnings for the two preceding years. As of June 30, 2018, approximately $12.7 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval.

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Additionally, our ability to pay dividends is limited by the subordinated debentures that are held by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock.

Average Assets/Liabilities. The following tables reflect the tax-equivalent yields earned on average interest-earning assets and costs of average interest-bearing liabilities for the periods indicated (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively) as well as “net interest margin” (which reflects the effect of the net earnings balance) for the periods shown:

	Three months ended							Three months ended
(Dollars in thousands)	June 30, 2018							June 30, 2017
	Average balance		Interest		Average yield/rate			Average balance		Interest		Average yield/rate
Assets
Interest-earning assets:
Interest-bearing deposits at banks	$	645	$	3		1.87	%	$	4,566	$	9		0.79	%
Investment securities (1)		402,266		2,599		2.59	%		398,328		2,651		2.67	%
Loans receivable, net (2)		452,462		5,752		5.10	%		428,424		5,297		4.96	%
Total interest-earning assets		855,373		8,354		3.92	%		831,318		7,957		3.84	%
Non-interest-earning assets		95,646							91,856
Total	$	951,019						$	923,174
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market and checking	$	378,682	$	436		0.46	%	$	360,528	$	236		0.26	%
Savings accounts		96,454		7		0.03	%		94,047		7		0.03	%
Time deposit		122,381		188		0.62	%		135,512		151		0.45	%
Total deposits		597,517		631		0.42	%		590,087		394		0.27	%
FHLB advances and other borrowings		91,612		616		2.70	%		68,549		486		2.84	%
Total interest-bearing liabilities		689,129		1,247		0.73	%		658,636		880		0.54	%
Non-interest-bearing liabilities		177,271							175,859
Stockholders’ equity		84,619							88,679
Total	$	951,019						$	923,174
Interest rate spread (3)						3.19	%						3.30	%
Net interest margin (4)			$	7,107		3.33	%			$	7,077		3.41	%
Tax-equivalent interest - imputed				271							501
Net interest income			$	6,836						$	6,576
Ratio of average interest-earning assets to average interest-bearing liabilities						124.1	%						126.2	%

(1)	Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate for 2018 and a 34% federal tax rate for 2017.
(2)	Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate for 2018 and a 34% federal tax rate for 2017.
(3)	Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4)	Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

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	Six months ended							Six months ended
(Dollars in thousands)	June 30, 2018							June 30, 2017
	Average balance		Interest		Average yield/rate			Average balance		Interest		Average yield/rate
Assets
Interest-earning assets:
Interest-bearing deposits at banks	$	1,024	$	9		1.77	%	$	6,676	$	27		0.82	%
Investment securities (1)		398,536		5,076		2.57	%		395,947		5,237		2.67	%
Loans receivable, net (2)		445,301		11,140		5.04	%		424,495		10,369		4.93	%
Total interest-earning assets		844,861		16,225		3.87	%		827,118		15,633		3.81	%
Non-interest-earning assets		94,417							91,448
Total	$	939,278						$	918,566
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Money market and checking	$	379,335	$	804		0.43	%	$	357,950	$	417		0.23	%
Savings accounts		95,708		14		0.03	%		92,670		14		0.03	%
Time deposit		124,900		354		0.57	%		138,228		301		0.44	%
Total deposits		599,943		1,172		0.39	%		588,848		732		0.25	%
FHLB advances and other borrowings		79,532		1,082		2.74	%		70,135		968		2.78	%
Total interest-bearing liabilities		679,475		2,254		0.67	%		658,983		1,700		0.52	%
Non-interest-bearing liabilities		174,544							172,486
Stockholders’ equity		85,259							87,097
Total	$	939,278						$	918,566
Interest rate spread (3)						3.20	%						3.29	%
Net interest margin (4)			$	13,971		3.33	%			$	13,933		3.40	%
Tax-equivalent interest - imputed				541							989
Net interest income			$	13,430						$	12,944
Ratio of average interest-earning assets to average interest-bearing liabilities						124.3	%						125.5	%

(1)	Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate for 2018 and a 34% federal tax rate for 2017.
(2)	Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate for 2018 and a 34% federal tax rate for 2017.
(3)	Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
(4)	Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

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Rate/Volume Table. The following table describes the extent to which changes in tax-equivalent interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities affected the Company’s interest income and expense for the periods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume), (ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of the previous columns). The net changes attributable to the combined effect of volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

(Dollars in thousands)	Three months ended June 30,								Six months ended June 30,
	2018 vs 2017								2018 vs 2017
	Increase/(decrease) attributable to								Increase/(decrease) attributable to
	Volume		Rate			Net			Volume		Rate			Net
Interest income:
Interest-bearing deposits at banks	$	10	$	(16	)	$	(6	)	$	49	$	(67	)	$	(18	)
Investment securities		26		(78	)	$	(52	)		34		(195	)	$	(161	)
Loans		303		152		$	455			530		241		$	771
Total		339		58			397			613		(21	)		592
Interest expense:
Deposits		5		232			237			14		426			440
Borrowings		152		(22	)		130			128		(14	)		114
Total		157		210			367			142		412			554
Net interest income	$	182	$	(152	)	$	30		$	471	$	(433	)	$	38

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our assets and liabilities are principally financial in nature, and the resulting net interest income thereon is subject to changes in market interest rates and the mix of various assets and liabilities. Interest rates in the financial markets affect our decisions relating to pricing our assets and liabilities, which impact net interest income, a significant cash flow source for us. As a result, a substantial portion of our risk management activities relates to managing interest rate risk.

Our Asset/Liability Management Committee monitors the interest rate sensitivity of our balance sheet using earnings simulation models. We have set policy limits of interest rate risk to be assumed in the normal course of business and monitor such limits through our simulation process.

We have been successful in meeting the interest rate sensitivity objectives set forth in our policy. Simulation models are prepared to determine the impact on net interest income for the coming twelve months, including one using rates at June 30, 2018, and forecasting volumes for the twelve-month projection. This position is then subjected to a shift in interest rates of 100 and 200 basis points with an impact to our net interest income on a one-year horizon as follows:

	Dollar change in net			Percent change in
Scenario	interest income ($000’s)			net interest income
200 basis point rising	$	(2,393	)		(8.1	)%
100 basis point rising	$	(1,198	)		(4.0	)%
100 basis point falling	$	450			1.5	%
200 basis point falling	$	81			(0.3	)%

37

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Forward-Looking Statements

This document (including information incorporated by reference) contains, and future oral and written statements by us and our management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on operations and future prospects by us and our subsidiaries include, but are not limited to, the following:

● The strength of the United States economy in general and the strength of the local economies in which we conduct our operations, which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of our assets.

● The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance, tax, trade and monetary and financial matters.

● The effects of changes in interest rates (including the effects of changes in the rate of prepayments of our assets) and the policies of the Board of Governors of the Federal Reserve System.

● Our ability to compete with other financial institutions due to increases in competitive pressures in the financial services sector.

● Our inability to obtain new customers and to retain existing customers.

● The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet.

● Technological changes implemented by us and by other parties, including third-party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to us and our customers.

● Our ability to develop and maintain secure and reliable electronic systems.

● Our ability to retain key executives and employees and the difficulty that we may experience in replacing key executives and employees in an effective manner.

● Consumer spending and saving habits which may change in a manner that affects our business adversely.

● Our ability to successfully integrate acquired businesses and future growth.

● The costs, effects and outcomes of existing or future litigation.

● Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the FASB.

● The economic impact of past and any future terrorist attacks, acts of war or threats thereof, and the response of the United States to any such threats and attacks.

● Our ability to effectively manage our credit risk.

● Our ability to forecast probable loan losses and maintain an adequate allowance for loan losses.

● The effects of declines in the value of our investment portfolio.

● Our ability to raise additional capital if needed.

● The effects of cyber-attacks.

● The effects of declines in real estate markets.

● The effects of fraudulent activity on the part of our employees, customers, vendors, or counterparties.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including other factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2017.

38

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of June 30, 2018. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2018.

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2018 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

39

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company or its subsidiaries is a party or which any of their property is subject, other than ordinary routine litigation incidental to their respective businesses.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors applicable to the Company from those disclosed in Part I, Item 1A. “Risk Factors,” in the Company’s 2017 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit 31.1	Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 31.2	Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017; (ii) Consolidated Statements of Earnings for the three and six months ended June 30, 2018 and June 30, 2017; (iii) Consolidated Statements of Comprehensive Income/(Loss) for the three and six months ended June 30, 2018 and June 30, 2017; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and June 30, 2017; (v) Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2018 and June 30, 2017; and (vi) Notes to Consolidated Financial Statements

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LANDMARK BANCORP, INC.
Date: August 8, 2018	/s/ Michael E. Scheopner
	Michael E. Scheopner
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 8, 2018	/s/ Mark A. Herpich
	Mark A. Herpich
	Vice President, Secretary, Treasurer
	and Chief Financial Officer
	(Principal Financial and Accounting Officer)

41

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

I, Michael E. Scheopner, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2018	/s/ Michael E. Scheopner
	Michael E. Scheopner
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

I, Mark A. Herpich, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Landmark Bancorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2018	/s/ Mark A. Herpich
	Mark A. Herpich
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Scheopner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael E. Scheopner

Michael E. Scheopner

Chief Executive Officer

August 8, 2018

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landmark Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Herpich, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark A. Herpich

Mark A. Herpich

Chief Financial Officer

August 8, 2018

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 07, 2018
Document And Entity Information
Entity Registrant Name	LANDMARK BANCORP INC
Entity Central Index Key	0001141688
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		4,162,779
Trading Symbol	LARK
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 19,883	$ 16,584
Investment securities available-for-sale, at fair value	398,137	387,983
Bank stocks, at cost	6,034	5,423
Loans, net of allowance for loans losses of $5,835 at June 30, 2018 and $5,459 at December 31, 2017	461,396	433,743
Loans held for sale, at fair value	11,764	6,535
Premises and equipment, net	21,381	20,824
Bank owned life insurance	24,019	23,698
Goodwill	17,532	17,532
Other intangible assets, net	3,358	3,659
Real estate owned, net	452	436
Accrued interest and other assets	14,224	13,037
Total assets	978,180	929,454
Deposits:
Non-interest-bearing demand	172,103	160,496
Money market and checking	373,843	388,311
Savings	96,160	93,474
Time	123,185	123,277
Total deposits	765,291	765,558
Federal Home Loan Bank borrowings	85,600	31,600
Subordinated debentures	21,584	21,484
Other borrowings	8,417	13,509
Accrued interest, taxes, and other liabilities	10,873	9,681
Total liabilities	891,765	841,832
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued
Common stock, $0.01 par value per share, 7,500,000 shares authorized; 4,147,946 and 4,081,659 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	41	41
Additional paid-in capital	58,356	57,772
Retained earnings	33,514	30,214
Accumulated other comprehensive loss	(5,496)	(405)
Total stockholders' equity	86,415	87,622
Total liabilities and stockholders' equity	$ 978,180	$ 929,454

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for loans losses	$ 5,835	$ 5,459
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	200,000	200,000
Preferred stock, shares issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	7,500,000	7,500,000
Common stock, shares issued	4,147,946	4,081,659
Common stock, shares outstanding	4,147,946	4,081,659

XML

Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Loans:
Taxable		$ 5,709	$ 5,246	$ 11,059	$ 10,265
Tax-exempt		35	34	64	69
Investment securities:
Taxable		1,305	1,202	2,502	2,394
Tax-exempt		1,034	974	2,059	1,916
Total interest income		8,083	7,456	15,684	14,644
Interest expense:
Deposits		631	394	1,172	732
Borrowings		616	486	1,082	968
Total interest expense		1,247	880	2,254	1,700
Net interest income		6,836	6,576	13,430	12,944
Provision for loan losses		250	100	450	150
Net interest income after provision for loan losses		6,586	6,476	12,980	12,794
Non-interest income:
Fees and service charges		1,808	1,917	3,564	3,632
Gains on sales of loans, net	[1]	1,468	1,692	2,629	3,081
Bank owned life insurance	[1]	162	119	321	236
Gains on sales of investment securities, net			177	35	324
Other		815	296	1,105	569
Total non-interest income		4,253	4,201	7,654	7,842
Non-interest expense:
Compensation and benefits		3,966	3,918	7,755	7,675
Occupancy and equipment		1,072	1,097	2,150	2,121
Amortization of intangibles		283	328	560	626
Data processing		376	337	741	667
Professional fees		430	476	818	766
Advertising		165	166	332	332
Federal deposit insurance premiums		72	73	144	145
Foreclosure and real estate owned expense		12	49	25	101
Other		1,190	1,108	2,481	2,180
Total non-interest expense		7,566	7,552	15,006	14,613
Earnings before income taxes		3,273	3,125	5,628	6,023
Income tax expense		428	742	684	1,435
Net earnings	[2]	$ 2,845	$ 2,383	$ 4,944	$ 4,588
Earnings per share:
Basic	[3]	$ 0.69	$ 0.59	$ 1.20	$ 1.13
Diluted	[3]	0.68	0.58	1.19	1.11
Dividends per share	[3]	$ 0.20	$ 0.19	$ 0.40	$ 0.38

[1] Not within the scope of ASC 606.

[2] Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

[3] Per share amounts for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

XML

Consolidated Statements of Earnings (Unaudited) (Parenthetical)	6 Months Ended
	Jun. 30, 2017
Income Statement [Abstract]
Stock dividend, percentage	5.00%

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net earnings	[1]	$ 2,845	$ 2,383	$ 4,944	$ 4,588
Net unrealized holding (losses) gains on available-for-sale securities		(323)	4,497	(6,699)	5,019
Reclassification adjustment for net gains included in earnings			(177)	(35)	(324)
Net unrealized (losses) gains		(323)	4,320	(6,734)	4,695
Income tax effect on net gains included in earnings			65	9	120
Income tax effect on net unrealized holding losses (gains)		79	(1,670)	1,641	(1,871)
Other comprehensive (loss) income		(244)	2,715	(5,084)	2,944
Total comprehensive income (loss)		$ 2,601	$ 5,098	$ (140)	$ 7,532

[1] Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2016	$ 38	$ 51,968	$ 34,293	$ (1,348)	$ 84,951
Net earnings			4,588		4,588	[1]
Other comprehensive income (loss)				2,944	2,944
Dividends paid			(1,548)		(1,548)	[2]
Stock-based compensation		77			77
Exercise of stock options	1	22			23
Balance at Jun. 30, 2017	39	52,067	37,333	1,596	91,035
Balance at Dec. 31, 2017	41	57,772	30,214	(405)	87,622
Net earnings			4,944		4,944	[1]
Other comprehensive income (loss)				(5,084)	(5,084)
Dividends paid			(1,651)		(1,651)
Stock-based compensation		100			100
Exercise of stock options		484			484
Adjustment of common stock			7	(7)
Balance at Jun. 30, 2018	$ 41	$ 58,356	$ 33,514	$ (5,496)	$ 86,415

[1] Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

[2] Dividends per share have been adjusted to give effect to the 5% stock dividends paid during December 2017, 2016 and 2015.

XML

Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Statement of Stockholders' Equity [Abstract]
Dividend, per share	$ 0.40	$ 0.38
Excise of stock option, shares	66,287	2,968

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net earnings	[1]	$ 4,944	$ 4,588
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		450	150
Valuation allowance on real estate owned			67
Amortization of investment security premiums, net		977	944
Amortization of purchase accounting adjustment on loans		(80)	(91)
Amortization of purchase accounting adjustment on subordinated debentures		100	100
Amortization of intangibles		560	626
Depreciation		498	520
Increase in cash surrender value of bank owned life insurance	[2]	(321)	(236)
Stock-based compensation		100	77
Deferred income taxes		392	542
Net gains on sales of investment securities		(35)	(324)
Net gain on sales of premises, equipment and real estate owned		(1)	(10)
Net gains on sales of loans	[2]	(2,629)	(3,081)
Proceeds from sales of loans		75,613	86,747
Origination of loans held for sale		(78,213)	(87,907)
Changes in assets and liabilities:
Accrued interest and other assets		(152)	(1,183)
Accrued expenses, taxes, and other liabilities		1,192	(1,201)
Net cash provided by operating activities		3,395	328
Cash flows from investing activities:
Net increase in loans		(28,096)	(2,662)
Maturities and prepayments of investment securities		25,745	28,501
Purchases of investment securities		(45,117)	(42,164)
Proceeds from sales of investment securities		1,535	13,459
Proceeds from sales of common stock		7
Redemption of bank stocks		4,516	6,319
Purchase of bank stocks		(5,127)	(6,370)
Proceeds from sales of premises and equipment and foreclosed assets		22	398
Purchases of premises and equipment, net		(1,055)	(51)
Net cash used in investing activities		(47,570)	(2,570)
Cash flows from financing activities:
Net (decrease) increase in deposits		(267)	3,501
Federal Home Loan Bank advance borrowings		413,190	313,277
Federal Home Loan Bank advance repayments		(359,190)	(321,377)
Proceeds from other borrowings			100
Repayments on other borrowings		(5,092)	(1,136)
Proceeds from exercise of stock options		484	23
Payment of dividends		(1,651)	(1,548)
Net cash provided by (used in) financing activities		47,474	(7,160)
Net increase (decrease) in cash and cash equivalents		3,299	(9,402)
Cash and cash equivalents at beginning of period		16,584	19,996
Cash and cash equivalents at end of period		19,883	10,594
Supplemental disclosure of cash flow information:
Cash (refund) payments for income taxes		(1,000)	800
Cash paid for interest		2,079	1,616
Supplemental schedule of noncash investing and financing activities:
Transfer of loans to real estate owned		$ 38	$ 180

[1] Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

[2] Not within the scope of ASC 606.

XML

Interim Financial Statements

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Interim Financial Statements

1. Interim Financial Statements

The unaudited consolidated financial statements of Landmark Bancorp, Inc. (the “Company”) and its wholly owned subsidiaries, Landmark National Bank (the “Bank”) and Landmark Risk Management Inc., have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto. The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of financial statements have been reflected herein. The results of the six month interim period ended June 30, 2018 are not necessarily indicative of the results expected for the year ending December 31, 2018 or any other future time period. The Company has evaluated subsequent events for recognition and disclosure up to the date the financial statements were issued.

On January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of non-financial assets, such as real estate owned. The majority of the Company’s revenues come from interest income and other sources, including loans, leases, securities and derivatives that are outside the scope of ASC 606. Services within the scope of ASC 606 include deposit service charges on deposits, interchange income, and the sale of real estate owned. Refer to footnote 7 to the financial statements, Revenue from Contracts with Customers, for further discussion on the Company’s accounting policies for revenue sources within the scope of ASC 606.

The Company adopted ASC 606 using the modified retrospective method applied to all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. The adoption of ASC 606 did not result in a change to the accounting for any of the in-scope revenue streams. As such, no cumulative effect adjustment was recorded.

In January 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities. The main provisions of the update are to eliminate the available for sale classification of accounting for equity securities and to adjust the fair value disclosures for financial instruments carried at amortized costs such that the disclosed fair values represent an exit price as opposed to an entry price. The provisions of this update will require that equity securities be carried at fair market value on the balance sheet and any periodic changes in value will be adjustments to the income statement. A practical expedient is provided for equity securities without a readily determinable fair value, such that these securities can be carried at cost less any impairment. The provisions of this update became effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU 2016-01 effective January 1, 2018. Effective January 1, 2018, changes in the value of the Company’s common stock investments are adjustments to the income statement. Additionally, the disclosure of fair value of the loan portfolio is presented using an exit price method instead of the discounted cash method previously utilized. Management has concluded that the requirements of this update do not have a material impact to the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Payments (a consensus of Emerging Issues Task Force). This ASU attempts to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The purpose of this update is to reduce existing diversity in practice in eight areas addressed by the update. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 effective January 1, 2018. The adoption of ASU 2016-15 did not result in any material changes to the Company’s consolidated financial statements and related disclosures.

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Investments

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investments

2. Investments

A summary of investment securities available-for-sale is as follows:

(Dollars in thousands)	As of June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(47	)	$	1,952
U. S. federal agency obligations		13,774		3		(100	)		13,677
Municipal obligations, tax exempt		182,163		482		(3,106	)		179,539
Municipal obligations, taxable		55,284		64		(708	)		54,640
Agency mortgage-backed securities		144,416		9		(3,876	)		140,549
Certificates of deposit		7,780		-		-			7,780
Total	$	405,416	$	558	$	(7,837	)	$	398,137

(Dollars in thousands)	As of December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(9	)	$	1,990
U. S. federal agency obligations		16,572		5		(85	)		16,492
Municipal obligations, tax exempt		183,846		1,972		(1,080	)		184,738
Municipal obligations, taxable		57,783		409		(216	)		57,976
Agency mortgage-backed securities		119,096		92		(1,633	)		117,555
Certificates of deposit		9,224		-		-			9,224
Common stocks		-		8		-			8
Total	$	388,520	$	2,486	$	(3,023	)	$	387,983

The tables above show that some of the securities in the available-for-sale investment portfolio had unrealized losses, or were temporarily impaired, as of June 30, 2018 and December 31, 2017. This temporary impairment represents the estimated amount of loss that would be realized if the securities were sold on the valuation date. Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

(Dollars in thousands)			As of June 30, 2018
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,952	$	(47	)	$	-	$	-		$	1,952	$	(47	)
U.S. federal agency obligations		11		3,723		(31	)		9,729		(69	)		13,452		(100	)
Municipal obligations, tax exempt		301		89,803		(1,508	)		33,670		(1,598	)		123,473		(3,106	)
Municipal obligations, taxable		110		36,430		(531	)		10,984		(177	)		47,414		(708	)
Agency mortgage-backed securities		103		102,870		(2,155	)		37,065		(1,721	)		139,935		(3,876	)
Total		526	$	234,778	$	(4,272	)	$	91,448	$	(3,565	)	$	326,226	$	(7,837	)

(Dollars in thousands)			As of December 31, 2017
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,990	$	(9	)	$	-	$	-		$	1,990	$	(9	)
U. S. federal agency obligations		14		7,989		(24	)		8,272		(61	)		16,261		(85	)
Municipal obligations, tax exempt		178		37,299		(273	)		31,930		(807	)		69,229		(1,080	)
Municipal obligations, taxable		73		18,792		(96	)		9,744		(120	)		28,536		(216	)
Agency mortgage-backed securities		79		68,630		(620	)		39,844		(1,013	)		108,474		(1,633	)
Total		345	$	134,700	$	(1,022	)	$	89,790	$	(2,001	)	$	224,490	$	(3,023	)

The Company’s U.S. treasury portfolio consists of securities issued by the United States Department of the Treasury. The receipt of principal and interest on U.S. treasury securities is guaranteed by the full faith and credit of the U.S. government. Based on these factors, along with the Company’s intent to not sell the security and its belief that it was more likely than not that the Company will not be required to sell the security before recovery of their cost basis, the Company believed that the U.S. treasury security identified in the table above was temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s U.S. federal agency portfolio consists of securities issued by the government-sponsored agencies of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Federal Home Loan Bank (“FHLB”). The receipt of principal and interest on U.S. federal agency obligations is guaranteed by the respective government-sponsored agency guarantor, such that the Company believes that its U.S. federal agency obligations do not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and its belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the U.S. federal agency obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s portfolio of municipal obligations consists of both tax-exempt and taxable general obligations securities issued by various municipalities. The Company did not intend to sell and it was more likely than not that the Company will not be required to sell its municipal obligations in an unrealized loss position until the recovery of their costs. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believed that the municipal obligations identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The Company’s agency mortgage-backed securities portfolio consists of securities underwritten to the standards of and guaranteed by the government-sponsored agencies of FHLMC, FNMA and the Government National Mortgage Association (“GNMA”). The receipt of principal, at par, and interest on agency mortgage-backed securities is guaranteed by the respective government-sponsored agency guarantor, such that the Company believed that its agency mortgage-backed securities did not expose the Company to credit-related losses. Based on these factors, along with the Company’s intent to not sell the securities and the Company’s belief that it was more likely than not that the Company will not be required to sell the securities before recovery of their cost basis, the Company believed that the agency mortgage-backed securities identified in the tables above were temporarily impaired as of June 30, 2018 and December 31, 2017.

The table below sets forth amortized cost and fair value of investment securities at June 30, 2018. The table includes scheduled principal payments and estimated prepayments, based on observable market inputs, for agency mortgage-backed securities. Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	30,042	$	29,939
Due after one year but within five years		196,229		192,202
Due after five years but within ten years		94,540		92,727
Due after ten years		84,605		83,269
Total	$	405,416	$	398,137

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

(Dollars in thousands)	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Sales proceeds	$	-	$	1,917	$	1,535	$	13,459
Realized gains	$	-	$	177	$	35	$	348
Realized losses		-		-		-		(24	)
Net realized losses	$	-	$	177	$	35	$	324

Securities with carrying values of $248.6 million and $232.5 million were pledged to secure public funds on deposit, repurchase agreements and as collateral for borrowings at June 30, 2018 and December 31, 2017, respectively. Except for U.S. federal agency obligations, no investment in a single issuer exceeded 10% of consolidated stockholders’ equity.

Effective January 1, 2018, the Company changed the classification of its common stock investments from available-for-sale with changes in fair value excluded from earnings and reported as a separate component of stockholders’ equity, net of taxes to be carried at fair value with changes in fair value included in net earnings. The Company received $7,000 of proceeds from the sale of its remaining common stock investments during the six months ended June 30, 2018.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Loans and Allowance for Loan Losses

3. Loans and Allowance for Loan Losses

Loans consisted of the following as of the dates indicated below:

	June 30,			December 31,
(Dollars in thousands)	2018			2017
One-to-four family residential real estate	$	138,267		$	136,215
Construction and land		26,453			19,356
Commercial real estate		121,946			120,624
Commercial		66,531			54,591
Agriculture		87,901			83,008
Municipal		3,172			3,396
Consumer		22,867			22,046
Total gross loans		467,137			439,236
Net deferred loan costs and loans in process		94			(34	)
Allowance for loan losses		(5,835	)		(5,459	)
Loans, net	$	461,396		$	433,743

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class:

(Dollars in thousands)	Three and six months ended June 30, 2018
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2018	$	477		$	121		$	1,562		$	1,484		$	1,867	$	7		$	126		$	5,644
Charge-offs		-			-			-			(29	)		-		-			(44	)		(73	)
Recoveries		1			-			-			1			-		-			12			14
Provision for loan losses		(39	)		(12	)		(96	)		237			138		-			22			250
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835
Balance at January 1, 2018	$	542		$	181		$	1,540		$	1,226		$	1,812	$	8		$	150		$	5,459
Charge-offs		-			-			-			(29	)		-		-			(77	)		(106	)
Recoveries		2			-			1			2			-		2			25			32
Provision for loan losses		(105	)		(72	)		(75	)		494			193		(3	)		18			450
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835

(Dollars in thousands)	Three and six months ended June 30, 2017
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2017	$	493		$	71		$	1,740		$	1,101		$	1,731	$	11		$	180		$	5,327
Charge-offs		-			-			(61	)		-			-		-			(58	)		(119	)
Recoveries		7			-			-			1			-		-			10			18
Provision for loan losses		(1	)		(1	)		30			(21	)		41		(1	)		53			100
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326
Balance at January 1, 2017	$	504		$	53		$	1,777		$	1,119		$	1,684	$	12		$	195		$	5,344
Charge-offs		(19	)		-			(61	)		-			-		-			(165	)		(245	)
Recoveries		8			-			-			9			1		-			59			77
Provision for loan losses		6			17			(7	)		(47	)		87		(2	)		96			150
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class and allowance methodology:

(Dollars in thousands)	As of June 30, 2018
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		85		-		14		728		25		-		1		853
Collectively evaluated for loss		354		109		1,452		965		1,980		7		115		4,982
Total		439		109		1,466		1,693		2,005		7		116		5,835
Loan balances:
Individually evaluated for loss		651		1,641		3,920		2,032		602		126		46		9,018
Collectively evaluated for loss		137,616		24,812		118,026		64,499		87,299		3,046		22,821		458,119
Total	$	138,267	$	26,453	$	121,946	$	66,531	$	87,901	$	3,172	$	22,867	$	467,137

(Dollars in thousands)	As of December 31, 2017
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		73		102		52		391		24		-		-		642
Collectively evaluated for loss		469		79		1,488		835		1,788		8		150		4,817
Total		542		181		1,540		1,226		1,812		8		150		5,459
Loan balances:
Individually evaluated for loss		747		2,031		3,973		2,002		833		140		34		9,760
Collectively evaluated for loss		135,468		17,325		116,651		52,589		82,175		3,256		22,012		429,476
Total	$	136,215	$	19,356	$	120,624	$	54,591	$	83,008	$	3,396	$	22,046	$	439,236

The Company’s impaired loans decreased from $9.8 million at December 31, 2017 to $9.0 million at June 30, 2018. The difference between the unpaid contractual principal and the impaired loan balance is a result of charge-offs recorded against impaired loans. The difference in the Company’s non-accrual loan balances and impaired loan balances at June 30, 2018 and December 31, 2017, was related to troubled debt restructurings (“TDR”) that are current and accruing interest, but still classified as impaired. Interest income recognized on a cash basis on impaired loans was immaterial during the three and six month periods ended June 30, 2018 and 2017.

The following tables present information on impaired loans:

(Dollars in thousands)	As of June 30, 2018
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	651	$	651	$	395	$	256	$	85	$	661	$	5
Construction and land		3,376		1,641		1,641		-		-		1,736		29
Commercial real estate		3,920		3,920		2,127		1,793		14		3,926		243
Commercial		2,032		2,032		3		2,029		728		2,055		8
Agriculture		817		602		344		258		25		652		27
Municipal		126		126		126		-		-		132		1
Consumer		46		46		40		6		1		46		-
Total impaired loans	$	10,968	$	9,018	$	4,676	$	4,342	$	853	$	9,208	$	313

(Dollars in thousands)	As of December 31, 2017
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	747	$	747	$	503	$	244	$	73	$	774	$	8
Construction and land		3,766		2,031		430		1,601		102		2,033		65
Commercial real estate		3,973		3,973		3,888		85		52		3,989		490
Commercial		2,002		2,002		11		1,991		391		2,082		-
Agriculture		1,048		833		545		288		24		912		1
Municipal		140		140		140		-		-		192		5
Consumer		34		34		34		-		-		35		-
Total impaired loans	$	11,710	$	9,760	$	5,551	$	4,209	$	642	$	10,017	$	569

The Company’s key credit quality indicator is a loan’s performance status, defined as accruing or non-accruing. Performing loans are considered to have a lower risk of loss. Non-accrual loans are those which the Company believes have a higher risk of loss. The accrual of interest on non-performing loans is discontinued at the time the loan is ninety days delinquent, unless the credit is well secured and in process of collection. Loans are placed on non-accrual or are charged off at an earlier date if collection of principal or interest is considered doubtful. There were no loans ninety days or more delinquent and accruing interest at June 30, 2018 or December 31, 2017.

The following tables present information on the Company’s past due and non-accrual loans by loan class:

(Dollars in thousands)	As of June 30, 2018
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	100		$	289		$	-		$	389		$	463		$	852		$	137,415
Construction and land		-			-			-			-			567			567			25,886
Commercial real estate		-			-			-			-			1,793			1,793			120,153
Commercial		48			711			-			759			2,032			2,791			63,740
Agriculture		127			176			-			303			384			687			87,214
Municipal		-			-			-			-			-			-			3,172
Consumer		36			43			-			79			46			125			22,742
Total	$	311		$	1,219		$	-		$	1,530		$	5,285		$	6,815		$	460,322
Percent of gross loans		0.07	%		0.26	%		0.00	%		0.33	%		1.13	%		1.46	%		98.54	%

(Dollars in thousands)	As of December 31, 2017
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	101		$	313		$	-		$	414		$	552		$	966		$	135,249
Construction and land		-			4			-			4			779			783			18,573
Commercial real estate		22			209			-			231			1,841			2,072			118,552
Commercial		-			397			-			397			2,002			2,399			52,192
Agriculture		-			-			-			-			833			833			82,175
Municipal		-			-			-			-			-			-			3,396
Consumer		105			204			-			309			34			343			21,703
Total	$	228		$	1,127		$	-		$	1,355		$	6,041		$	7,396		$	431,840
Percent of gross loans		0.05	%		0.26	%		0.00	%		0.31	%		1.37	%		1.68	%		98.32	%

Under the original terms of the Company’s non-accrual loans, interest earned on such loans for the six months ended June 30, 2018 and 2017 would have increased interest income by $132,000 and $63,000, respectively. No interest income related to non-accrual loans was included in interest income for the six months ended June 30, 2018 and 2017.

The Company also categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Non-classified loans generally include those loans that are expected to be repaid in accordance with contractual loan terms. Classified loans are those that are assigned a special mention, substandard or doubtful risk rating using the following definitions:

Special Mention: Loans are currently protected by the current net worth and paying capacity of the obligor or of the collateral pledged but such protection is potentially weak. These loans constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset.

Substandard: Loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

The following table provides information on the Company’s risk categories by loan class:

(Dollars in thousands)	As of June 30, 2018				As of December 31, 2017
	Non-classified		Classified		Non-classified		Classified
One-to-four family residential real estate	$	137,325	$	942	$	135,475	$	740
Construction and land		25,886		567		18,577		779
Commercial real estate		111,697		10,249		114,736		5,888
Commercial		58,424		8,107		52,313		2,278
Agriculture		83,390		4,511		76,455		6,553
Municipal		3,172		-		3,396		-
Consumer		22,821		46		22,006		40
Total	$	442,715	$	24,422	$	422,958	$	16,278

At June 30, 2018, the Company had 12 loan relationships consisting of 17 outstanding loans that were classified as TDRs. During the second quarter of 2018, the Company classified an agriculture loan totaling $64,000 as a TDR after originating a loan to an existing loan relationship that was classified as a TDR in 2016. As part of the restructuring the borrower paid off three loans previously classified as TDRs. The Company also classified a $41,000 commercial loan as a TDR after extending the maturity of the loan during the second quarter of 2018. There were no loans classified as TDRs during the first three months of 2018. Since the agriculture loan relationship was adequately secured, no impairments were recorded against the principal as of June 30, 2018. The commercial loan had a $11,000 impairment recorded against the principal balance as of June 30, 2018.

During the second quarter of 2017, the Company classified two agriculture loans totaling $87,000 as TDRs after renewing loans to an existing loan relationship that was classified as a TDR in 2016. These two loans were paid off in the second quarter of 2018. During the first quarter of 2017, the Company classified an $11,000 commercial real estate loan as a TDR after extending the maturity of the loan and classified as a TDR a $15,000 agriculture loan extended to an existing loan relationship that was classified as a TDR in 2016. Since the commercial real estate loan was adequately secured, no charge-offs or impairments were recorded against the principal as of June 30, 2017. The agriculture loan relationship had a $49,000 impairment recorded against the principal balance as of June 30, 2017 and a charge-off of $215,000 was recorded in the third quarter of 2016.

The Company evaluates each TDR individually and returns the loan to accrual status when a payment history is established after the restructuring and future payments are reasonably assured. There were no loans that were classified as TDRs that defaulted within 12 months of modification during the first six months of 2018. There was one commercial real estate loan totaling $11,000 that was classified as a TDR during the second quarter of 2017 which defaulted within 12 months of modification. The loan was charged off in the fourth quarter of 2017. The Company did not record any charge-offs against loans classified as TDRs in the first six months of either 2018 or 2017. A credit provision for loan losses of $58,000 related to TDRs was recorded in the three months ended June 30, 2018. No provision for loan losses was recorded against TDRs during the three months ended June 30, 2017. A credit provision for loan losses of $91,000 and $13,000 related to TDRs was recorded in the six months ended June 30, 2018 and 2017, respectively. The Company allocated $36,000 and $127,000 of the allowance for loan losses against loans classified as TDRs at June 30, 2018 and December 31, 2017, respectively.

The following table presents information on loans that are classified as TDRs:

(Dollars in thousands)	As of June 30, 2018						As of December 31, 2017
	Number of loans		Non-accrual balance		Accruing balance		Number of loans		Non-accrual balance		Accruing balance
One-to-four family residential real estate		2	$	-	$	188		2	$	-	$	194
Construction and land		4		567		1,074		4		575		1,252
Commercial real estate		2		-		2,127		3		45		2,133
Commercial		1		41		-		-		-		-
Agriculture		6		136		218		9		471		-
Municipal		2		-		126		2		-		140
Total troubled debt restructurings		17	$	744	$	3,733		20	$	1,091	$	3,719

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

The Company tests goodwill for impairment annually or more frequently if circumstances warrant. The Company’s annual step one impairment test as of December 31, 2017 concluded that its goodwill was not impaired. The Company concluded there were no triggering events during the first six months of 2018 that required an interim goodwill impairment test.

Lease intangible assets are amortized over the life of the lease. Core deposit intangible assets are amortized over the estimated useful life of ten years on an accelerated basis. Mortgage servicing rights are amortized over the estimated life of the mortgage loan serviced for others. A summary of the other intangible assets that continue to be subject to amortization is as follows:

(Dollars in thousands)	As of June 30, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,487	)	$	580
Lease intangible asset		350		(211	)		139
Mortgage servicing rights		6,410		(3,771	)		2,639
Total other intangible assets	$	8,827	$	(5,469	)	$	3,358

(Dollars in thousands)	As of December 31, 2017
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,381	)	$	686
Lease intangible asset		350		(188	)		162
Mortgage servicing rights		6,285		(3,474	)		2,811
Total other intangible assets	$	8,702	$	(5,043	)	$	3,659

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2018 and in successive years ending December 31:

(Dollars in thousands)	Amortization
	expense
Remainder of 2018	$	123
2019		214
2020		177
2021		121
2022		58
Thereafter		26
Total	$	719

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

(Dollars in thousands)	June 30,		December 31,
	2018		2017
FHLMC	$	520,587	$	517,863
FHLB		9,324		9,782
Total	$	529,911	$	527,645

Custodial escrow balances maintained in connection with serviced loans were $5.0 million and $4.4 million at June 30, 2018 and December 31, 2017, respectively. Gross service fee income related to such loans was $337,000 and $320,000 for the three months ended June 30, 2018 and 2017, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $673,000 and $639,000 for the six months ended June 30, 2018 and 2017, respectively.

Activity for mortgage servicing rights and the related valuation allowance was as follows:

(Dollars in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Mortgage servicing rights:
Balance at beginning of period	$	2,722		$	2,787		$	2,811		$	2,849
Additions		137			281			259			442
Amortization		(220	)		(255	)		(431	)		(478	)
Balance at end of period	$	2,639		$	2,813		$	2,639		$	2,813

The fair value of mortgage servicing rights was $6.1 million and $5.6 million at June 30, 2018 and December 31, 2017, respectively. Fair value at June 30, 2018 was determined using discount rates ranging from 9.00% to 11.00%; prepayment speeds ranging from 6.00% to 23.83%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.35%. Fair value at December 31, 2017 was determined using discount rates ranging from 9.50% to 9.59%, prepayment speeds ranging from 5.23% to 33.39%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 2.26%.

The Company had a mortgage repurchase reserve of $235,000 at both June 30, 2018 and December 31, 2017, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company did not incur any losses charged against the reserve or make any provisions to the reserve during the first six months of 2018 and 2017. As of June 30, 2018, the Company did not have any outstanding mortgage repurchase requests.

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Earnings Per Share

6 Months Ended

Jun. 30, 2018

Earnings per share:

Earnings Per Share

5. Earnings per Share

Basic earnings per share have been computed based upon the weighted average number of common shares outstanding during each period. Diluted earnings per share include the effect of all potential common shares outstanding during each period. The shares used in the calculation of basic and diluted earnings per share are shown below:

	Three months ended				Six months ended
(Dollars in thousands, except per share amounts)	June 30,				June 30,
	2018		2017		2018		2017
Net earnings(1)	$	2,845	$	2,383	$	4,944	$	4,588
Weighted average common shares outstanding - basic (1)		4,141,894		4,064,092		4,124,947		4,063,692
Assumed exercise of stock options (1)		18,693		84,092		18,544		83,040
Weighted average common shares outstanding - diluted (1)		4,160,587		4,148,184		4,143,491		4,146,732
Net earnings per share (1):
Basic	$	0.69	$	0.59	$	1.20	$	1.13
Diluted	$	0.68	$	0.58	$	1.19	$	1.11

(1) Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

The diluted earnings per share computations for the three and six months ended June 30, 2018 and 2017 include all unexercised stock options because no stock options were anti-dilutive during such periods.

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Repurchase Agreements

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Repurchase Agreements

6. Repurchase Agreements

The Company has overnight repurchase agreements with certain deposit customers whereby the Company uses investment securities as collateral for non-insured funds. These balances are accounted for as collateralized financing and included in other borrowings on the balance sheet. The following is a summary of the balances of and collateral for the Company’s repurchase agreements:

	As of June 30, 2018
	Overnight and						Greater
	Continuous		Up to 30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal treasury obligations	$	307	$	-	$	-	$	-	$	307
U.S. federal agency obligations		2,948		-		-		-		2,948
Agency mortgage-backed securities		5,162		-		-		-		5,162
Total	$	8,417	$	-	$	-	$	-	$	8,417

	As of December 31, 2017
	Overnight and		Up to				Greater
	Continuous		30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal agency obligations	$	5,147	$	-	$	-	$	-	$	5,147
Agency mortgage-backed securities		8,362		-		-		-		8,362
Total	$	13,509	$	-	$	-	$	-	$	13,509

Repurchase agreements are comprised of non-insured customer funds, totaling $8.4 million at June 30, 2018, and $13.5 million at December 31, 2017, which were secured by $16.2 million and $16.8 million of the Company’s investment portfolio at the same dates, respectively.

The investment securities are held by a third-party financial institution in the customer’s custodial account. The Company is required to maintain adequate collateral for each repurchase agreement. Changes in the fair value of the investment securities impact the amount of collateral required. If the Company were to default, the investment securities would be used to settle the repurchase agreement with the deposit customer.

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Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

7. Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. Items outside the scope of ASC 606 are noted as such.

	Three months ended				Six months ended
(Dollars in thousands)	June 30,				June 30,
	2018		2017		2018		2017
Non-interest income:
Service charges on deposits
Overdraft fees	$	783	$	915	$	1,580	$	1,769
Other		135		137		273		282
Interchange income		516		425		958		786
Loan servicing fees (1)		337		320		673		639
Office lease income (1)		156		150		308		300
Gains on sales of loans (1)		1,468		1,692		2,629		3,081
Bank owned life insurance income (1)		162		119		321		236
Gains on sales of investment securities (1)		-		177		35		324
Gains on sales of real estate owned		-		25		1		10
Other		696		241		876		415
Total non-interest income	$	4,253	$	4,201	$	7,654	$	7,842

(1) Not within the scope of ASC 606.

The increase in other non-interest income during the three and six months ended June 30, 2018 was primarily the result of a $525,000 recovery on a deposit-related loss that occurred in the third quarter of 2017.

A description of the Company’s revenue streams within the scope of ASC 606 follows:

Service Charges on Deposit Accounts

The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period during which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Interchange Income

The Company earns interchange fees from debit cardholder transactions conducted through the interchange payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Gains (Losses) on Sales of Real Estate Owned

The Company records a gain or loss from the sale of real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the real estate owned asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. There were no sales of real estate owned that were financed by the Company during the first six months of 2018 or 2017.

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Fair Value of Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments and Fair Value Measurements

8. Fair Value of Financial Instruments and Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value estimates of the Company’s financial instruments as of June 30, 2018 and December 31, 2017, including methods and assumptions utilized, are set forth below:

(Dollars in thousands)	As of June 30, 2018
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	19,883		$	19,883		$	-		$	-	$	19,883
Investment securities available-for-sale		398,137			1,952			396,185			-		398,137
Bank stocks, at cost		6,034			n/a			n/a			n/a		n/a
Loans, net		461,396			-			-			480,331		480,331
Loans held for sale, net		11,764			-			11,764			-		11,764
Derivative financial instruments		695			-			695			-		695
Accrued interest receivable		4,459			20			2,279			2,160		4,459
Financial liabilities:
Non-maturity deposits	$	(642,106	)	$	(642,106	)	$	-		$	-	$	(642,106	)
Time deposits		(123,185	)		-			(120,775	)		-		(120,775	)
FHLB borrowings		(85,600	)		-			(85,613	)		-		(85,613	)
Subordinated debentures		(21,584	)		-			(19,522	)		-		(19,522	)
Other borrowings		(8,417	)		-			(8,417	)		-		(8,417	)
Derivative financial instruments		(97	)		-			(97	)		-		(97	)
Accrued interest payable		(349	)		-			(349	)		-		(349	)

	As of December 31, 2017
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	16,584		$	16,584		$	-		$	-	$	16,584
Investment securities available-for-sale		387,983			1,998			385,985			-		387,983
Bank stocks, at cost		5,423			n/a			n/a			n/a		n/a
Loans, net		433,743			-			-			436,910		436,910
Loans held for sale		6,535			-			6,535			-		6,535
Derivative financial instruments		395			-			395			-		395
Accrued interest receivable		4,409			20			2,234			2,155		4,409
Financial liabilities:
Non-maturity deposits		(642,281	)		(642,281	)		-			-		(642,281	)
Time deposits		(123,277	)		-			(121,298	)		-		(121,298	)
FHLB borrowings		(31,600	)		-			(31,706	)		-		(31,706	)
Subordinated debentures		(21,484	)		-			(19,134	)		-		(19,134	)
Other borrowings		(13,509	)		-			(13,509	)		-		(13,509	)
Accrued interest payable		(274	)		-			(274	)		-		(274	)

Methods and Assumptions Utilized

The carrying amount of cash and cash equivalents is considered to approximate fair value.

The Company’s investment securities classified as available-for-sale include U.S. treasury securities, U.S. federal agency securities, municipal obligations, agency mortgage-backed securities, certificates of deposits and common stocks. Quoted exchange prices are available for the Company’s U.S treasury securities and common stock investments, which are classified as Level 1. U.S. federal agency securities and agency mortgage-backed obligations are priced utilizing industry-standard models that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. These measurements are classified as Level 2. Municipal securities are valued using a type of matrix, or grid, pricing in which securities are benchmarked against U.S. treasury rates based on credit rating. These model and matrix measurements are classified as Level 2 in the fair value hierarchy.

The Company’s common stock investments are valued based on quoted exchange prices and classified as Level 1. As of January 1, 2018, the common stocks were transferred out of the available-for-sale classification. The common stock investments were sold during the second quarter of 2018.

It is not practical to determine the fair value of bank stocks due to restrictions placed on the transferability of FHLB and FRB stock.

Effective January 1, 2018, the estimated fair value of the Company’s loan portfolio is based on the segregation of loans by collateral type, interest terms, and maturities. The fair value is estimated based on discounting scheduled and estimated cash flows through maturity using appropriate market inputs to arrive at a discount rate that reflects exit pricing as prescribed in ASC Topic 820. The market inputs utilize market trading information in the calculation of loan fair values and is classified as Level 3. Prior to January 1, 2018, the fair value was estimated based on discounting scheduled and estimated cash flows through maturity using an appropriate risk-adjusted yield curve to approximate current interest rates for each category and was classified as Level 3. No adjustment was made to the interest rates for changes in credit risk of performing loans where there are no known credit concerns. The fair values of impaired loans were generally based on market prices for similar assets determined through independent appraisals or discounted values of independent appraisals and brokers’ opinions of value. The difference in methodologies may make the fair value of loans not comparable between current year and prior year periods.

Mortgage loans originated and intended for sale in the secondary market are carried at fair value. The mortgage loan valuations are based on quoted secondary market prices for similar loans and are classified as Level 2.

The carrying amounts of accrued interest receivable and payable are considered to approximate fair value.

The estimated fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, money market accounts, and checking accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits. The discount rate is tied to the FHLB yield curve plus an appropriate servicing spread. Fair value measurements based on discounted cash flows are classified as Level 2. These fair values do not incorporate the value of core deposit intangibles which may be associated with the deposit base.

The fair value of advances from the FHLB, subordinated debentures, and other borrowings is estimated using current yield curves for similar borrowings adjusted for the Company’s current credit spread and classified as Level 2.

The Company’s derivative financial instruments consist of interest rate lock commitments and corresponding forward sales contracts on mortgage loans held for sale. The fair values of these derivatives are based on quoted prices for similar loans in the secondary market. The market prices are adjusted by a factor, based on the Company’s historical data and its judgment about future economic trends, which considers the likelihood that a commitment will ultimately result in a closed loan. These instruments are classified as Level 2. The amounts are included in other assets or other liabilities on the consolidated balance sheets and gains on sales of loans, net in the consolidated statements of earnings.

Off-Balance-Sheet Financial Instruments

The fair value of letters of credit and commitments to extend credit is based on the fees currently charged to enter into similar agreements. The aggregate amount of these fees is not material.

Transfers

The Company did not transfer any assets or liabilities among levels during the six months ended June 30, 2018 or during the year ended December 31, 2017.

Valuation Methods for Instruments Measured at Fair Value on a Recurring Basis

The following tables represent the Company’s financial instruments that are measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)				As of June 30, 2018
				Fair value hierarchy
	Total			Level 1		Level 2			Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,952		$	1,952	$	-		$	-
U. S. federal agency obligations		13,677			-		13,677			-
Municipal obligations, tax exempt		179,539			-		179,539			-
Municipal obligations, taxable		54,640			-		54,640			-
Agency mortgage-backed securities		140,549			-		140,549			-
Certificates of deposit		7,780			-		7,780			-
Loans held for sale		11,764			-		11,764			-
Derivative financial instruments		695			-		695			-
Liability:
Derivative financial instruments		(97	)		-		(97	)		-

			As of December 31, 2017
			Fair value hierarchy
	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,990	$	1,990	$	-	$	-
U. S. federal agency obligations		16,492		-		16,492		-
Municipal obligations, tax exempt		184,738		-		184,738		-
Municipal obligations, taxable		57,976		-		57,976		-
Agency mortgage-backed securities		117,555		-		117,555		-
Certificates of deposit		9,224		-		9,224		-
Common stocks		8		8		-		-
Loans held for sale		6,535		-		6,535		-
Derivative financial instruments		395		-		395		-

Changes in the fair value of available-for-sale securities are included in other comprehensive income to the extent the changes are not considered other-than-temporary impairments. Other-than-temporary impairment tests are performed on a quarterly basis and any decline in the fair value of an individual security below its cost that is deemed to be other-than-temporary results in a write-down of that security’s cost basis.

The aggregate fair value, contractual balance (including accrued interest), and gain on loans held for sale were as follows:

	As of		As of
(Dollars in thousands)	June 30, 2018		December 31, 2017
Aggregate fair value	$	11,764	$	6,535
Contractual balance		11,484		6,420
Gain	$	280	$	115

The total amount of gains from changes in fair value of loans held for sale included in earnings were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2018		2017		2018		2017
Interest income	$	98	$	79	$	146	$	124
Change in fair value		264		60		165		169
Total change in fair value	$	362	$	139	$	311	$	293

Valuation Methods for Instruments Measured at Fair Value on a Non-recurring Basis

The Company does not value its loan portfolio at fair value. Collateral-dependent impaired loans are generally carried at the lower of cost or fair value of the collateral, less estimated selling costs. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company and then further adjusted if warranted based on relevant facts and circumstances. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Impaired loans are reviewed and evaluated at least quarterly for additional impairment and adjusted accordingly, based on the same factors identified above. The carrying value of the Company’s impaired loans was $9.0 million and $9.8 million, with an allocated allowance of $853,000 and $642,000, at June 30, 2018 and December 31, 2017, respectively.

Real estate owned includes assets acquired through, or in lieu of, foreclosure and land previously acquired for expansion. Real estate owned is initially recorded at the fair value of the collateral less estimated selling costs. Subsequent valuations are updated periodically and are based upon independent appraisals, third party price opinions or internal pricing models. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Real estate owned is reviewed and evaluated at least annually for additional impairment and adjusted accordingly, based on the same factors identified above.

The following tables represent the Company’s financial instruments that are measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)
			As of June 30, 2018						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(15	)
Commercial real estate		1,779		-		-		1,779		2
Commercial		1,301		-		-		1,301		(338	)
Agriculture		233		-		-		233		(1	)

			As of December 31, 2017						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(73	)
Construction and land		1,499		-		-		1,499		(102	)
Commercial real estate		33		-		-		33		12
Commercial		1,600		-		-		1,600		(304	)
Agriculture		264		-		-		264		65
Real estate owned:
One-to-four family residential real estate		325		-		-		325		(68	)
Commercial real estate		85		-		-		85		(50	)

The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

(Dollars in thousands)
	Fair value		Valuation technique	Unobservable inputs	Range
As of June 30, 2018
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		7%-50	%
Commercial real estate		1,799	Sales comparison	Adjustment to appraised value		7%-25	%
Commercial		1,301	Sales comparison	Adjustment to comparable sales		10%-25	%
Agriculture		233	Sales comparison	Adjustment to appraised value		0%-50	%
As of December 31, 2017
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		16%-50	%
Construction and land		1,499	Sales comparison	Adjustment to appraised value		0%-25	%
Commercial real estate		33	Sales comparison	Adjustment to appraised value		0%-91	%
Commercial		1,600	Sales comparison	Adjustment to comparable sales		15%-50	%
Agriculture		264	Sales comparison	Adjustment to appraised value		0%-50	%
Real estate owned:
One-to-four family residential real estate		325	Sales comparison	Adjustment to appraised value		10	%
Commercial real estate		85	Sales comparison	Adjustment to appraised value		10	%

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Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Regulatory Capital Requirements

9. Regulatory Capital Requirements

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believed that as of June 30, 2018, the Company and the Bank met all capital adequacy requirements to which they were subject at that time.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The Company and the Bank are subject to the capital rules (the “Basel III Rules”) that implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than “small bank holding companies” (generally, non-public bank holding companies with consolidated assets of less than $1.0 billion).

The Basel III Rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a Tier 1 capital to risk-weighted assets minimum ratio of 6.0%, a Total Capital to risk-weighted assets minimum ratio of 8.0%, and a Tier 1 leverage minimum ratio of 4.0%. A capital conservation buffer, comprised of common equity Tier 1 capital, is also established above the regulatory minimum capital requirements. This capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets, was 1.25% effective on January 1, 2017, was 1.875% effective on January 1, 2018, and will increase to 2.5% on January 1, 2019.

As of June 30, 2018 and December 31, 2017, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action then in effect. There are no conditions or events since that notification that management believes have changed the institution’s category.

The following is a comparison of the Company’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

(Dollars in thousands)						For capital
	Actual					adequacy purposes
	Amount		Ratio			Amount		Ratio (1)
As of June 30, 2018
Leverage	$	94,793		10.10	%	$	37,556		4.0	%
Common Equity Tier 1 Capital		73,860		12.93	%		36,426		6.4	%
Tier 1 Capital		94,793		16.59	%		44,996		7.9	%
Total Risk Based Capital		100,768		17.64	%		56,424		9.9	%
As of December 31, 2017
Leverage	$	88,605		9.80	%	$	36,180		4.0	%
Common Equity Tier 1 Capital		68,269		12.83	%		30,590		5.8	%
Tier 1 Capital		88,605		16.65	%		38,571		7.3	%
Total Risk Based Capital		94,208		17.71	%		49,211		9.3	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

											To be well-capitalized under prompt
(Dollars in thousands)						For capital					corrective
	Actual					adequacy purposes					action provisions
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
As of June 30, 2018
Leverage	$	92,978		9.93	%	$	37,451		4.0	%	$	46,814		5.0	%
Common Equity Tier 1 Capital		92,978		16.30	%		36,355		6.4	%		37,068		6.5	%
Tier 1 Capital		92,978		16.30	%		44,909		7.9	%		45,622		8.0	%
Total Risk Based Capital		98,953		17.35	%		56,314		9.9	%		57,027		10.0	%
As of December 31, 2017
Leverage	$	86,808		9.62	%	$	36,097		4.0	%	$	44,105		5.0	%
Common Equity Tier 1 Capital		86,808		16.35	%		30,529		5.8	%		33,222		6.5	%
Tier 1 Capital		86,808		16.35	%		38,493		7.3	%		40,888		8.0	%
Total Risk Based Capital		92,407		17.40	%		49,112		9.3	%		51,110		10.0	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017.

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Impact of Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Accounting Changes and Error Corrections [Abstract]

Impact of Recent Accounting Pronouncements

10. Impact of Recent Accounting Pronouncements

In February 2016, the FASB issued an update (ASU No. 2016-02, Leases) creating FASB Topic 842, Leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Management has concluded that based on the Company’s current operating leases, the adoption of ASU 2016-02 will not have a material impact on the Company’s consolidated financial statement and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly referred to as “CECL.” The provisions of the update eliminate the probable initial recognition threshold under current GAAP which requires reserves to be based on an incurred loss methodology. Under CECL, reserves required for financial assets measured at amortized cost will reflect an organization’s estimate of all expected credit losses over the expected term of the financial asset and thereby require the use of reasonable and supportable forecasts to estimate future credit losses. Because CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity debt securities. Under the provisions of the update, credit losses recognized on available for sale debt securities will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans, with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Under current GAAP a purchased loan’s contractual balance is adjusted to fair value through a credit discount and no reserve is recorded on the purchased loan upon acquisition. Since under CECL reserves will be established for purchased loans at the time of acquisition, the accounting for purchased loans is made more comparable to the accounting for originated loans. Finally, increased disclosure requirements under CECL oblige organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. FASB expects that the evaluation of underwriting standards and credit quality trends by financial statement users will be enhanced with the additional vintage disclosures. For public entities, the amendments of the update are effective beginning January 1, 2020. Management has initiated an implementation committee to assist in assessing data and system needs for the new standard. Management anticipates the effect will be an increase to the allowance for loan losses upon adoption. However, the size of the overall increase is uncertain at this time.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The provisions of this update become effective for interim and annual periods beginning after December 15, 2018. Management has concluded that based on the Company’s current portfolio of investment securities that the adoption of these amendments will result in a shorter amortization period for investment security premiums; however, the impact will not be material to interest income on investment securities.

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Investments (Tables)

6 Months Ended

Jun. 30, 2018

Investments Schedule [Abstract]

Schedule of Available-for-sale Securities

A summary of investment securities available-for-sale is as follows:

(Dollars in thousands)	As of June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(47	)	$	1,952
U. S. federal agency obligations		13,774		3		(100	)		13,677
Municipal obligations, tax exempt		182,163		482		(3,106	)		179,539
Municipal obligations, taxable		55,284		64		(708	)		54,640
Agency mortgage-backed securities		144,416		9		(3,876	)		140,549
Certificates of deposit		7,780		-		-			7,780
Total	$	405,416	$	558	$	(7,837	)	$	398,137

(Dollars in thousands)	As of December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
U. S. treasury securities	$	1,999	$	-	$	(9	)	$	1,990
U. S. federal agency obligations		16,572		5		(85	)		16,492
Municipal obligations, tax exempt		183,846		1,972		(1,080	)		184,738
Municipal obligations, taxable		57,783		409		(216	)		57,976
Agency mortgage-backed securities		119,096		92		(1,633	)		117,555
Certificates of deposit		9,224		-		-			9,224
Common stocks		-		8		-			8
Total	$	388,520	$	2,486	$	(3,023	)	$	387,983

Schedule of Available for Sale Securities Continuous Unrealized Loss Position Fair Value

Securities which were temporarily impaired are shown below, along with the length of time in a continuous unrealized loss position.

(Dollars in thousands)			As of June 30, 2018
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,952	$	(47	)	$	-	$	-		$	1,952	$	(47	)
U.S. federal agency obligations		11		3,723		(31	)		9,729		(69	)		13,452		(100	)
Municipal obligations, tax exempt		301		89,803		(1,508	)		33,670		(1,598	)		123,473		(3,106	)
Municipal obligations, taxable		110		36,430		(531	)		10,984		(177	)		47,414		(708	)
Agency mortgage-backed securities		103		102,870		(2,155	)		37,065		(1,721	)		139,935		(3,876	)
Total		526	$	234,778	$	(4,272	)	$	91,448	$	(3,565	)	$	326,226	$	(7,837	)

(Dollars in thousands)			As of December 31, 2017
			Less than 12 months					12 months or longer					Total
	No. of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	securities		value		losses			value		losses			value		losses
U.S. treasury securities		1	$	1,990	$	(9	)	$	-	$	-		$	1,990	$	(9	)
U. S. federal agency obligations		14		7,989		(24	)		8,272		(61	)		16,261		(85	)
Municipal obligations, tax exempt		178		37,299		(273	)		31,930		(807	)		69,229		(1,080	)
Municipal obligations, taxable		73		18,792		(96	)		9,744		(120	)		28,536		(216	)
Agency mortgage-backed securities		79		68,630		(620	)		39,844		(1,013	)		108,474		(1,633	)
Total		345	$	134,700	$	(1,022	)	$	89,790	$	(2,001	)	$	224,490	$	(3,023	)

Schedule of Investments Classified by Contractual Maturity Date

Actual maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

(Dollars in thousands)	Amortized		Estimated
	cost		fair value
Due in less than one year	$	30,042	$	29,939
Due after one year but within five years		196,229		192,202
Due after five years but within ten years		94,540		92,727
Due after ten years		84,605		83,269
Total	$	405,416	$	398,137

Schedule of Realized Gain (loss)

Sales proceeds and gross realized gains and losses on sales of available-for-sale securities are as follows:

(Dollars in thousands)	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Sales proceeds	$	-	$	1,917	$	1,535	$	13,459
Realized gains	$	-	$	177	$	35	$	348
Realized losses		-		-		-		(24	)
Net realized losses	$	-	$	177	$	35	$	324

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Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Schedule of Loans

Loans consisted of the following as of the dates indicated below:

	June 30,			December 31,
(Dollars in thousands)	2018			2017
One-to-four family residential real estate	$	138,267		$	136,215
Construction and land		26,453			19,356
Commercial real estate		121,946			120,624
Commercial		66,531			54,591
Agriculture		87,901			83,008
Municipal		3,172			3,396
Consumer		22,867			22,046
Total gross loans		467,137			439,236
Net deferred loan costs and loans in process		94			(34	)
Allowance for loan losses		(5,835	)		(5,459	)
Loans, net	$	461,396		$	433,743

Schedule of Allowance for Credit Losses on Financing Receivables

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class:

(Dollars in thousands)	Three and six months ended June 30, 2018
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2018	$	477		$	121		$	1,562		$	1,484		$	1,867	$	7		$	126		$	5,644
Charge-offs		-			-			-			(29	)		-		-			(44	)		(73	)
Recoveries		1			-			-			1			-		-			12			14
Provision for loan losses		(39	)		(12	)		(96	)		237			138		-			22			250
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835
Balance at January 1, 2018	$	542		$	181		$	1,540		$	1,226		$	1,812	$	8		$	150		$	5,459
Charge-offs		-			-			-			(29	)		-		-			(77	)		(106	)
Recoveries		2			-			1			2			-		2			25			32
Provision for loan losses		(105	)		(72	)		(75	)		494			193		(3	)		18			450
Balance at June 30, 2018		439			109			1,466			1,693			2,005		7			116			5,835

(Dollars in thousands)	Three and six months ended June 30, 2017
	One-to-four family residential real estate			Construction and land			Commercial real estate			Commercial			Agriculture		Municipal			Consumer			Total
Allowance for loan losses:
Balance at April 1, 2017	$	493		$	71		$	1,740		$	1,101		$	1,731	$	11		$	180		$	5,327
Charge-offs		-			-			(61	)		-			-		-			(58	)		(119	)
Recoveries		7			-			-			1			-		-			10			18
Provision for loan losses		(1	)		(1	)		30			(21	)		41		(1	)		53			100
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326
Balance at January 1, 2017	$	504		$	53		$	1,777		$	1,119		$	1,684	$	12		$	195		$	5,344
Charge-offs		(19	)		-			(61	)		-			-		-			(165	)		(245	)
Recoveries		8			-			-			9			1		-			59			77
Provision for loan losses		6			17			(7	)		(47	)		87		(2	)		96			150
Balance at June 30, 2017		499			70			1,709			1,081			1,772		10			185			5,326

The following tables provide information on the Company’s activity in the allowance for loan losses by loan class and allowance methodology:

(Dollars in thousands)	As of June 30, 2018
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		85		-		14		728		25		-		1		853
Collectively evaluated for loss		354		109		1,452		965		1,980		7		115		4,982
Total		439		109		1,466		1,693		2,005		7		116		5,835
Loan balances:
Individually evaluated for loss		651		1,641		3,920		2,032		602		126		46		9,018
Collectively evaluated for loss		137,616		24,812		118,026		64,499		87,299		3,046		22,821		458,119
Total	$	138,267	$	26,453	$	121,946	$	66,531	$	87,901	$	3,172	$	22,867	$	467,137

(Dollars in thousands)	As of December 31, 2017
	One-to-four family residential real estate		Construction and land		Commercial real estate		Commercial		Agriculture		Municipal		Consumer		Total
Allowance for loan losses:
Individually evaluated for loss		73		102		52		391		24		-		-		642
Collectively evaluated for loss		469		79		1,488		835		1,788		8		150		4,817
Total		542		181		1,540		1,226		1,812		8		150		5,459
Loan balances:
Individually evaluated for loss		747		2,031		3,973		2,002		833		140		34		9,760
Collectively evaluated for loss		135,468		17,325		116,651		52,589		82,175		3,256		22,012		429,476
Total	$	136,215	$	19,356	$	120,624	$	54,591	$	83,008	$	3,396	$	22,046	$	439,236

Schedule of Impaired Financing Receivables

The following tables present information on impaired loans:

(Dollars in thousands)	As of June 30, 2018
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	651	$	651	$	395	$	256	$	85	$	661	$	5
Construction and land		3,376		1,641		1,641		-		-		1,736		29
Commercial real estate		3,920		3,920		2,127		1,793		14		3,926		243
Commercial		2,032		2,032		3		2,029		728		2,055		8
Agriculture		817		602		344		258		25		652		27
Municipal		126		126		126		-		-		132		1
Consumer		46		46		40		6		1		46		-
Total impaired loans	$	10,968	$	9,018	$	4,676	$	4,342	$	853	$	9,208	$	313

(Dollars in thousands)	As of December 31, 2017
	Unpaid contractual principal		Impaired loan balance		Impaired loans without an allowance		Impaired loans with an allowance		Related allowance recorded		Year-to-date average loan balance		Year-to-date interest income recognized
One-to-four family residential real estate	$	747	$	747	$	503	$	244	$	73	$	774	$	8
Construction and land		3,766		2,031		430		1,601		102		2,033		65
Commercial real estate		3,973		3,973		3,888		85		52		3,989		490
Commercial		2,002		2,002		11		1,991		391		2,082		-
Agriculture		1,048		833		545		288		24		912		1
Municipal		140		140		140		-		-		192		5
Consumer		34		34		34		-		-		35		-
Total impaired loans	$	11,710	$	9,760	$	5,551	$	4,209	$	642	$	10,017	$	569

Schedule of Past Due Financing Receivables

The following tables present information on the Company’s past due and non-accrual loans by loan class:

(Dollars in thousands)	As of June 30, 2018
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	100		$	289		$	-		$	389		$	463		$	852		$	137,415
Construction and land		-			-			-			-			567			567			25,886
Commercial real estate		-			-			-			-			1,793			1,793			120,153
Commercial		48			711			-			759			2,032			2,791			63,740
Agriculture		127			176			-			303			384			687			87,214
Municipal		-			-			-			-			-			-			3,172
Consumer		36			43			-			79			46			125			22,742
Total	$	311		$	1,219		$	-		$	1,530		$	5,285		$	6,815		$	460,322
Percent of gross loans		0.07	%		0.26	%		0.00	%		0.33	%		1.13	%		1.46	%		98.54	%

(Dollars in thousands)	As of December 31, 2017
	30-59 days delinquent and accruing			60-89 days delinquent and accruing			90 days or more delinquent and accruing			Total past due loans accruing			Non-accrual loans			Total past due and non-accrual loans			Total loans not past due
One-to-four family residential real estate	$	101		$	313		$	-		$	414		$	552		$	966		$	135,249
Construction and land		-			4			-			4			779			783			18,573
Commercial real estate		22			209			-			231			1,841			2,072			118,552
Commercial		-			397			-			397			2,002			2,399			52,192
Agriculture		-			-			-			-			833			833			82,175
Municipal		-			-			-			-			-			-			3,396
Consumer		105			204			-			309			34			343			21,703
Total	$	228		$	1,127		$	-		$	1,355		$	6,041		$	7,396		$	431,840
Percent of gross loans		0.05	%		0.26	%		0.00	%		0.31	%		1.37	%		1.68	%		98.32	%

Schedule of Risk Categories by Loan Class

The following table provides information on the Company’s risk categories by loan class:

(Dollars in thousands)	As of June 30, 2018				As of December 31, 2017
	Non-classified		Classified		Non-classified		Classified
One-to-four family residential real estate	$	137,325	$	942	$	135,475	$	740
Construction and land		25,886		567		18,577		779
Commercial real estate		111,697		10,249		114,736		5,888
Commercial		58,424		8,107		52,313		2,278
Agriculture		83,390		4,511		76,455		6,553
Municipal		3,172		-		3,396		-
Consumer		22,821		46		22,006		40
Total	$	442,715	$	24,422	$	422,958	$	16,278

Schedule of Troubled Debt Restructurings on Financing Receivables

The following table presents information on loans that are classified as TDRs:

(Dollars in thousands)	As of June 30, 2018						As of December 31, 2017
	Number of loans		Non-accrual balance		Accruing balance		Number of loans		Non-accrual balance		Accruing balance
One-to-four family residential real estate		2	$	-	$	188		2	$	-	$	194
Construction and land		4		567		1,074		4		575		1,252
Commercial real estate		2		-		2,127		3		45		2,133
Commercial		1		41		-		-		-		-
Agriculture		6		136		218		9		471		-
Municipal		2		-		126		2		-		140
Total troubled debt restructurings		17	$	744	$	3,733		20	$	1,091	$	3,719

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

A summary of the other intangible assets that continue to be subject to amortization is as follows:

(Dollars in thousands)	As of June 30, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,487	)	$	580
Lease intangible asset		350		(211	)		139
Mortgage servicing rights		6,410		(3,771	)		2,639
Total other intangible assets	$	8,827	$	(5,469	)	$	3,358

(Dollars in thousands)	As of December 31, 2017
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,381	)	$	686
Lease intangible asset		350		(188	)		162
Mortgage servicing rights		6,285		(3,474	)		2,811
Total other intangible assets	$	8,702	$	(5,043	)	$	3,659

Schedule of Finite-lived Intangible Assets, Future Amortization Expense

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2018 and in successive years ending December 31:

(Dollars in thousands)	Amortization
	expense
Remainder of 2018	$	123
2019		214
2020		177
2021		121
2022		58
Thereafter		26
Total	$	719

Schedule of Participating Mortgage Loans

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

(Dollars in thousands)	June 30,		December 31,
	2018		2017
FHLMC	$	520,587	$	517,863
FHLB		9,324		9,782
Total	$	529,911	$	527,645

Schedule of Servicing Asset at Amortized Cost

Activity for mortgage servicing rights and the related valuation allowance was as follows:

(Dollars in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Mortgage servicing rights:
Balance at beginning of period	$	2,722		$	2,787		$	2,811		$	2,849
Additions		137			281			259			442
Amortization		(220	)		(255	)		(431	)		(478	)
Balance at end of period	$	2,639		$	2,813		$	2,639		$	2,813

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings per share:

Schedule of Earnings Per Share, Basic and Diluted

The shares used in the calculation of basic and diluted earnings per share are shown below:

	Three months ended				Six months ended
(Dollars in thousands, except per share amounts)	June 30,				June 30,
	2018		2017		2018		2017
Net earnings(1)	$	2,845	$	2,383	$	4,944	$	4,588
Weighted average common shares outstanding - basic (1)		4,141,894		4,064,092		4,124,947		4,063,692
Assumed exercise of stock options (1)		18,693		84,092		18,544		83,040
Weighted average common shares outstanding - diluted (1)		4,160,587		4,148,184		4,143,491		4,146,732
Net earnings per share (1):
Basic	$	0.69	$	0.59	$	1.20	$	1.13
Diluted	$	0.68	$	0.58	$	1.19	$	1.11

(1) Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

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Repurchase Agreements (Tables)

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Schedule of Repurchase Agreements

The following is a summary of the balances of and collateral for the Company’s repurchase agreements:

	As of June 30, 2018
	Overnight and						Greater
	Continuous		Up to 30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal treasury obligations	$	307	$	-	$	-	$	-	$	307
U.S. federal agency obligations		2,948		-		-		-		2,948
Agency mortgage-backed securities		5,162		-		-		-		5,162
Total	$	8,417	$	-	$	-	$	-	$	8,417

	As of December 31, 2017
	Overnight and		Up to				Greater
	Continuous		30 days		30-90 days		than 90 days		Total
Repurchase agreements:
U.S. federal agency obligations	$	5,147	$	-	$	-	$	-	$	5,147
Agency mortgage-backed securities		8,362		-		-		-		8,362
Total	$	13,509	$	-	$	-	$	-	$	13,509

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of Revenue from Contracts with Customers Within Non-interest Income

Items outside the scope of ASC 606 are noted as such.

	Three months ended				Six months ended
(Dollars in thousands)	June 30,				June 30,
	2018		2017		2018		2017
Non-interest income:
Service charges on deposits
Overdraft fees	$	783	$	915	$	1,580	$	1,769
Other		135		137		273		282
Interchange income		516		425		958		786
Loan servicing fees (1)		337		320		673		639
Office lease income (1)		156		150		308		300
Gains on sales of loans (1)		1,468		1,692		2,629		3,081
Bank owned life insurance income (1)		162		119		321		236
Gains on sales of investment securities (1)		-		177		35		324
Gains on sales of real estate owned		-		25		1		10
Other		696		241		876		415
Total non-interest income	$	4,253	$	4,201	$	7,654	$	7,842

(1) Not within the scope of ASC 606.

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Fair Value of Financial Instruments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Fair Value, by Balance Sheet Grouping

Fair value estimates of the Company’s financial instruments as of June 30, 2018 and December 31, 2017, including methods and assumptions utilized, are set forth below:

(Dollars in thousands)	As of June 30, 2018
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	19,883		$	19,883		$	-		$	-	$	19,883
Investment securities available-for-sale		398,137			1,952			396,185			-		398,137
Bank stocks, at cost		6,034			n/a			n/a			n/a		n/a
Loans, net		461,396			-			-			480,331		480,331
Loans held for sale, net		11,764			-			11,764			-		11,764
Derivative financial instruments		695			-			695			-		695
Accrued interest receivable		4,459			20			2,279			2,160		4,459
Financial liabilities:
Non-maturity deposits	$	(642,106	)	$	(642,106	)	$	-		$	-	$	(642,106	)
Time deposits		(123,185	)		-			(120,775	)		-		(120,775	)
FHLB borrowings		(85,600	)		-			(85,613	)		-		(85,613	)
Subordinated debentures		(21,584	)		-			(19,522	)		-		(19,522	)
Other borrowings		(8,417	)		-			(8,417	)		-		(8,417	)
Derivative financial instruments		(97	)		-			(97	)		-		(97	)
Accrued interest payable		(349	)		-			(349	)		-		(349	)

	As of December 31, 2017
	Carrying
	amount			Level 1			Level 2			Level 3		Total
Financial assets:
Cash and cash equivalents	$	16,584		$	16,584		$	-		$	-	$	16,584
Investment securities available-for-sale		387,983			1,998			385,985			-		387,983
Bank stocks, at cost		5,423			n/a			n/a			n/a		n/a
Loans, net		433,743			-			-			436,910		436,910
Loans held for sale		6,535			-			6,535			-		6,535
Derivative financial instruments		395			-			395			-		395
Accrued interest receivable		4,409			20			2,234			2,155		4,409
Financial liabilities:
Non-maturity deposits		(642,281	)		(642,281	)		-			-		(642,281	)
Time deposits		(123,277	)		-			(121,298	)		-		(121,298	)
FHLB borrowings		(31,600	)		-			(31,706	)		-		(31,706	)
Subordinated debentures		(21,484	)		-			(19,134	)		-		(19,134	)
Other borrowings		(13,509	)		-			(13,509	)		-		(13,509	)
Accrued interest payable		(274	)		-			(274	)		-		(274	)

Schedule of Fair Value, Assets Measured on Recurring Basis

The following tables represent the Company’s financial instruments that are measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)				As of June 30, 2018
				Fair value hierarchy
	Total			Level 1		Level 2			Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,952		$	1,952	$	-		$	-
U. S. federal agency obligations		13,677			-		13,677			-
Municipal obligations, tax exempt		179,539			-		179,539			-
Municipal obligations, taxable		54,640			-		54,640			-
Agency mortgage-backed securities		140,549			-		140,549			-
Certificates of deposit		7,780			-		7,780			-
Loans held for sale		11,764			-		11,764			-
Derivative financial instruments		695			-		695			-
Liability:
Derivative financial instruments		(97	)		-		(97	)		-

			As of December 31, 2017
			Fair value hierarchy
	Total		Level 1		Level 2		Level 3
Assets:
Available-for-sale investment securities:
U. S. treasury securities	$	1,990	$	1,990	$	-	$	-
U. S. federal agency obligations		16,492		-		16,492		-
Municipal obligations, tax exempt		184,738		-		184,738		-
Municipal obligations, taxable		57,976		-		57,976		-
Agency mortgage-backed securities		117,555		-		117,555		-
Certificates of deposit		9,224		-		9,224		-
Common stocks		8		8		-		-
Loans held for sale		6,535		-		6,535		-
Derivative financial instruments		395		-		395		-

Schedule of Fair Value Contractual Balance and Gain Loss on Loans Held for Sale

The aggregate fair value, contractual balance (including accrued interest), and gain on loans held for sale were as follows:

	As of		As of
(Dollars in thousands)	June 30, 2018		December 31, 2017
Aggregate fair value	$	11,764	$	6,535
Contractual balance		11,484		6,420
Gain	$	280	$	115

Schedule of Gains and Losses from Changes in Fair Value of Loans Held for Sale

The total amount of gains from changes in fair value of loans held for sale included in earnings were as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2018		2017		2018		2017
Interest income	$	98	$	79	$	146	$	124
Change in fair value		264		60		165		169
Total change in fair value	$	362	$	139	$	311	$	293

Schedule of Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques

The following tables represent the Company’s financial instruments that are measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017 allocated to the appropriate fair value hierarchy:

(Dollars in thousands)
			As of June 30, 2018						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(15	)
Commercial real estate		1,779		-		-		1,779		2
Commercial		1,301		-		-		1,301		(338	)
Agriculture		233		-		-		233		(1	)

			As of December 31, 2017						Total
			Fair value hierarchy						(losses)/
	Total		Level 1		Level 2		Level 3		gains
Assets:
Impaired loans:
One-to-four family residential real estate	$	171	$	-	$	-	$	171	$	(73	)
Construction and land		1,499		-		-		1,499		(102	)
Commercial real estate		33		-		-		33		12
Commercial		1,600		-		-		1,600		(304	)
Agriculture		264		-		-		264		65
Real estate owned:
One-to-four family residential real estate		325		-		-		325		(68	)
Commercial real estate		85		-		-		85		(50	)

Schedule of Fair Value Measurements on Nonrecurring, Valuation Techniques

The following table presents quantitative information about Level 3 fair value measurements for impaired loans measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

(Dollars in thousands)
	Fair value		Valuation technique	Unobservable inputs	Range
As of June 30, 2018
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		7%-50	%
Commercial real estate		1,799	Sales comparison	Adjustment to appraised value		7%-25	%
Commercial		1,301	Sales comparison	Adjustment to comparable sales		10%-25	%
Agriculture		233	Sales comparison	Adjustment to appraised value		0%-50	%
As of December 31, 2017
Impaired loans:
One-to-four family residential real estate	$	171	Sales comparison	Adjustment to appraised value		16%-50	%
Construction and land		1,499	Sales comparison	Adjustment to appraised value		0%-25	%
Commercial real estate		33	Sales comparison	Adjustment to appraised value		0%-91	%
Commercial		1,600	Sales comparison	Adjustment to comparable sales		15%-50	%
Agriculture		264	Sales comparison	Adjustment to appraised value		0%-50	%
Real estate owned:
One-to-four family residential real estate		325	Sales comparison	Adjustment to appraised value		10	%
Commercial real estate		85	Sales comparison	Adjustment to appraised value		10	%

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Regulatory Capital Requirements (Tables)

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies

The following is a comparison of the Company’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

(Dollars in thousands)						For capital
	Actual					adequacy purposes
	Amount		Ratio			Amount		Ratio (1)
As of June 30, 2018
Leverage	$	94,793		10.10	%	$	37,556		4.0	%
Common Equity Tier 1 Capital		73,860		12.93	%		36,426		6.4	%
Tier 1 Capital		94,793		16.59	%		44,996		7.9	%
Total Risk Based Capital		100,768		17.64	%		56,424		9.9	%
As of December 31, 2017
Leverage	$	88,605		9.80	%	$	36,180		4.0	%
Common Equity Tier 1 Capital		68,269		12.83	%		30,590		5.8	%
Tier 1 Capital		88,605		16.65	%		38,571		7.3	%
Total Risk Based Capital		94,208		17.71	%		49,211		9.3	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations

The following is a comparison of the Bank’s regulatory capital to minimum capital requirements at June 30, 2018 and December 31, 2017:

											To be well-capitalized under prompt
(Dollars in thousands)						For capital					corrective
	Actual					adequacy purposes					action provisions
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
As of June 30, 2018
Leverage	$	92,978		9.93	%	$	37,451		4.0	%	$	46,814		5.0	%
Common Equity Tier 1 Capital		92,978		16.30	%		36,355		6.4	%		37,068		6.5	%
Tier 1 Capital		92,978		16.30	%		44,909		7.9	%		45,622		8.0	%
Total Risk Based Capital		98,953		17.35	%		56,314		9.9	%		57,027		10.0	%
As of December 31, 2017
Leverage	$	86,808		9.62	%	$	36,097		4.0	%	$	44,105		5.0	%
Common Equity Tier 1 Capital		86,808		16.35	%		30,529		5.8	%		33,222		6.5	%
Tier 1 Capital		86,808		16.35	%		38,493		7.3	%		40,888		8.0	%
Total Risk Based Capital		92,407		17.40	%		49,112		9.3	%		51,110		10.0	%

(1) The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017.

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Investments (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Security owned and pledged as collateral, fair value, total	$ 248,600		$ 232,500
Equity method investment, ownership percentage	10.00%
Proceeds from sales of remaining common stock	$ 7

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Investments - Schedule of Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale [Line Items]
Amortized cost	$ 405,416	$ 388,520
Gross unrealized gains	558	2,486
Gross unrealized losses	(7,837)	(3,023)
Estimated fair value	398,137	387,983
US Treasury Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	1,999	1,999
Gross unrealized gains
Gross unrealized losses	(47)	(9)
Estimated fair value	1,952	1,990
US Federal Agency Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	13,774	16,572
Gross unrealized gains	3	5
Gross unrealized losses	(100)	(85)
Estimated fair value	13,677	16,492
Municipal Obligations, Tax Exempt [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	182,163	183,846
Gross unrealized gains	482	1,972
Gross unrealized losses	(3,106)	(1,080)
Estimated fair value	179,539	184,738
Municipal Obligations, Taxable [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	55,284	57,783
Gross unrealized gains	64	409
Gross unrealized losses	(708)	(216)
Estimated fair value	54,640	57,976
Agency Mortgage-backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	144,416	119,096
Gross unrealized gains	9	92
Gross unrealized losses	(3,876)	(1,633)
Estimated fair value	140,549	117,555
Certificates of Deposit [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost	7,780	9,224
Gross unrealized gains
Gross unrealized losses
Estimated fair value	$ 7,780	9,224
Common Stocks [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized cost
Gross unrealized gains		8
Gross unrealized losses
Estimated fair value		$ 8

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Investments - Schedule of Available for Sale Securities Continuous Unrealized Loss Position Fair Value (Details) $ in Thousands	Jun. 30, 2018 USD ($) Number	Dec. 31, 2017 USD ($) Number
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	526	345
Fair value, Less than 12 months	$ 234,778	$ 134,700
Unrealized losses, Less than 12 months	(4,272)	(1,022)
Fair value, 12 months or longer	91,448	89,790
Unrealized losses, 12 months or longer	(3,565)	(2,001)
Total, Fair value	326,226	224,490
Total, Unrealized losses	$ (7,837)	$ (3,023)
US Treasury Securities [Member]
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	1	1
Fair value, Less than 12 months	$ 1,952	$ 1,990
Unrealized losses, Less than 12 months	(47)	(9)
Fair value, 12 months or longer
Unrealized losses, 12 months or longer
Total, Fair value	1,952	1,990
Total, Unrealized losses	$ (47)	$ (9)
US Federal Agency Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	11	14
Fair value, Less than 12 months	$ 3,723	$ 7,989
Unrealized losses, Less than 12 months	(31)	(24)
Fair value, 12 months or longer	9,729	8,272
Unrealized losses, 12 months or longer	(69)	(61)
Total, Fair value	13,452	16,261
Total, Unrealized losses	$ (100)	$ (85)
Municipal Obligations, Tax Exempt [Member]
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	301	178
Fair value, Less than 12 months	$ 89,803	$ 37,299
Unrealized losses, Less than 12 months	(1,508)	(273)
Fair value, 12 months or longer	33,670	31,930
Unrealized losses, 12 months or longer	(1,598)	(807)
Total, Fair value	123,473	69,229
Total, Unrealized losses	$ (3,106)	$ (1,080)
Municipal Obligations, Taxable [Member]
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	110	73
Fair value, Less than 12 months	$ 36,430	$ 18,792
Unrealized losses, Less than 12 months	(531)	(96)
Fair value, 12 months or longer	10,984	9,744
Unrealized losses, 12 months or longer	(177)	(120)
Total, Fair value	47,414	28,536
Total, Unrealized losses	$ (708)	$ (216)
Agency Mortgage-backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
No. of securities | Number	103	79
Fair value, Less than 12 months	$ 102,870	$ 68,630
Unrealized losses, Less than 12 months	(2,155)	(620)
Fair value, 12 months or longer	37,065	39,844
Unrealized losses, 12 months or longer	(1,721)	(1,013)
Total, Fair value	139,935	108,474
Total, Unrealized losses	$ (3,876)	$ (1,633)

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Investments - Schedule of Investments Classified by Contractual Maturity Date (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Amortized cost, Due in less than one year	$ 30,042
Amortized cost, Due after one year but within five years	196,229
Amortized cost, Due after five years but within ten years	94,540
Amortized cost, Due after ten years	84,605
Amortized cost, Total	405,416	$ 388,520
Estimated fair value, Due in less than one year	29,939
Estimated fair value, Due after one year but within five years	192,202
Estimated fair value, Due after five years but within ten years	92,727
Estimated fair value, Due after ten years	83,269
Estimated fair value, Total	$ 398,137	$ 387,983

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Investments - Schedule of Realized Gain (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Investments, Debt and Equity Securities [Abstract]
Sales proceeds		$ 1,917	$ 1,535	$ 13,459
Realized gains		177	35	348
Realized losses				(24)
Net realized losses		$ 177	$ 35	$ 324

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Loans and Allowance for Loan Losses (Details Narrative) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2018	Sep. 30, 2017	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2016
Impaired financing receivable loan balance charged off				$ 9,000		$ 9,800
Nonaccrual loans, interest earned				132	$ 63
Loans receivable, gross, total	$ 467,137			467,137		439,236
Impaired financing receivable, recorded investment, total	9,018			9,018		9,760
Loans and leases receivable, allowance	5,835		$ 5,326	5,835	5,326	5,459	$ 5,644	$ 5,327	$ 5,344
Commercial Loan [Member]
Commercial real estate loans receivable, gross	41			41
Loans receivable, gross, total	11			11
Trouble Debt Restructurings [Member]
Provision for loan losses reversal	58			91	13
Loans and leases receivable, allowance	36			36		$ 127
Trouble Debt Restructurings [Member] | Agriculture Loan [Member]
Agriculture loans receivable	$ 64			$ 64
Loans receivable, gross, total								15
Trouble Debt Restructurings [Member] | Two Agriculture Loans [Member]
Agriculture loans receivable			87		87
Impaired financing receivable, recorded investment, total			49		49
Trouble Debt Restructurings [Member] | Agriculture Loan [Member]
Impaired financing receivable loan balance charged off		$ 215
Trouble Debt Restructurings [Member] | Commercial Real Estate Loan [Member]
Loans receivable, gross, total								$ 11
Trouble Debt Restructurings [Member] | One Commercial Real Estate Loan [Member]
Commercial real estate loans receivable, gross			$ 11		$ 11

XML

Loans and Allowance for Loan Losses - Schedule of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans and Leases Receivable, Gross, Total	$ 467,137		$ 439,236
Net deferred loan costs and loans in process	94		(34)
Allowance for loan losses	(5,835)	$ (5,644)	(5,459)	$ (5,326)	$ (5,327)	$ (5,344)
Loans, net	461,396		433,743
One-To-Four Family Residential Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	138,267		136,215
Allowance for loan losses	(439)	(477)	(542)	(499)	(493)	(504)
Loans, net	138,267		136,215
Construction and Land Loan [Member]
Loans and Leases Receivable, Gross, Total	26,453		19,356
Allowance for loan losses	(109)	(121)	(181)	(70)	(71)	(53)
Loans, net	26,453		19,356
Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	121,946		120,624
Allowance for loan losses	(1,466)	(1,562)	(1,540)	(1,709)	(1,740)	(1,777)
Loans, net	121,946		120,624
Commercial Loan [Member]
Loans and Leases Receivable, Gross, Total	66,531		54,591
Allowance for loan losses	(1,693)	(1,484)	(1,226)	(1,081)	(1,101)	(1,119)
Loans, net	66,531		54,591
Agriculture Loan [Member]
Loans and Leases Receivable, Gross, Total	87,901		83,008
Allowance for loan losses	(2,005)	(1,867)	(1,812)	(1,772)	(1,731)	(1,684)
Loans, net	87,901		83,008
Municipal Loan [Member]
Loans and Leases Receivable, Gross, Total	3,172		3,396
Allowance for loan losses	(7)	$ (7)	(8)	$ (10)	$ (11)	$ (12)
Loans, net	3,172		3,396
Consumer Loan [Member]
Loans and Leases Receivable, Gross, Total	22,867		22,046
Allowance for loan losses	(116)		(150)
Loans, net	$ 22,867		$ 22,046

XML

Loans and Allowance for Loan Losses - Schedule of Allowance for Credit Losses on Financing Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Balance	$ 5,644	$ 5,327	$ 5,459	$ 5,344
Charge-offs	(73)	(119)	(106)	(245)
Recoveries	14	18	32	77
Provision for loan losses	250	100	450	150
Balance	5,835	5,326	5,835	5,326
Individually evaluated for loss					$ 853	$ 642
Collectively evaluated for loss					4,982	4,817
Total	5,835	5,327	5,459	5,344	5,835	5,459
Individually evaluated for loss					9,018	9,760
Collectively evaluated for loss					458,119	429,476
Total					467,137	439,236
One-To-Four Family Residential Real Estate Loan [Member]
Balance	477	493	542	504
Charge-offs				(19)
Recoveries	1	7	2	8
Provision for loan losses	(39)	(1)	(105)	6
Balance	439	499	439	499
Individually evaluated for loss					85	73
Collectively evaluated for loss					354	469
Total	439	499	542	504	439	542
Individually evaluated for loss					651	747
Collectively evaluated for loss					137,616	135,468
Total					138,267	136,215
Construction and Land Loan [Member]
Balance	121	71	181	53
Charge-offs
Recoveries
Provision for loan losses	(12)	(1)	(72)	17
Balance	109	70	109	70
Individually evaluated for loss						102
Collectively evaluated for loss					109	79
Total	109	70	181	70	109	181
Individually evaluated for loss					1,641	2,031
Collectively evaluated for loss					24,812	17,325
Total					26,453	19,356
Commercial Real Estate Loan [Member]
Balance	1,562	1,740	1,540	1,777
Charge-offs		(61)		(61)
Recoveries			1
Provision for loan losses	(96)	30	(75)	(7)
Balance	1,466	1,709	1,466	1,709
Individually evaluated for loss					14	52
Collectively evaluated for loss					1,452	1,488
Total	1,466	1,709	1,540	1,777	1,466	1,540
Individually evaluated for loss					3,920	3,973
Collectively evaluated for loss					118,026	116,651
Total					121,946	120,624
Commercial Loan [Member]
Balance			1,226
Charge-offs	(29)		(29)
Recoveries	1	1	2	9
Provision for loan losses	237	(21)	494	(47)
Balance	1,693		1,693
Individually evaluated for loss					728	391
Collectively evaluated for loss					965	835
Total	1,693		1,693		1,693	1,226
Individually evaluated for loss					2,032	2,002
Collectively evaluated for loss					64,499	52,589
Total					66,531	54,591
Agriculture Loan [Member]
Balance	1,867	1,731	1,812	1,684
Charge-offs
Recoveries				1
Provision for loan losses	138	41	193	87
Balance	2,005	1,772	2,005	1,772
Individually evaluated for loss					25	24
Collectively evaluated for loss					1,980	1,788
Total	2,005	1,772	1,812	1,684	2,005	1,812
Individually evaluated for loss					602	833
Collectively evaluated for loss					87,299	82,175
Total					87,901	83,008
Municipal Loan [Member]
Balance	7	11	8	12
Charge-offs
Recoveries			2
Provision for loan losses		(1)	(3)	(2)
Balance	7	10	7	10
Individually evaluated for loss
Collectively evaluated for loss					7	8
Total	7	10	8	12	7	8
Individually evaluated for loss					126	140
Collectively evaluated for loss					3,046	3,256
Total					3,172	3,396
Consumer Loan [Member]
Balance	126	180	150	195
Charge-offs	(44)	(58)	(77)	(165)
Recoveries	12	10	25	59
Provision for loan losses	22	53	18	96
Balance	116	185	116	185
Individually evaluated for loss					1
Collectively evaluated for loss					115	150
Total	$ 116	$ 185	$ 116	$ 195	116	150
Individually evaluated for loss					46	34
Collectively evaluated for loss					22,821	22,012
Total					$ 22,867	$ 22,046

XML

Loans and Allowance for Loan Losses - Schedule of Impaired Financing Receivables (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Unpaid contractual principal	$ 10,968	$ 11,710
Impaired loan balance	9,018	9,760
Impaired loans without an allowance	4,676	5,551
Impaired loans with an allowance	4,342	4,209
Related allowance recorded	853	642
Year-to-date average loan balance	9,208	10,017
Year-to-date interest income recognized	313	569
One-To-Four Family Residential Real Estate Loan [Member]
Unpaid contractual principal	651	747
Impaired loan balance	651	747
Impaired loans without an allowance	395	503
Impaired loans with an allowance	256	244
Related allowance recorded	85	73
Year-to-date average loan balance	661	774
Year-to-date interest income recognized	5	8
Construction and Land Loan [Member]
Unpaid contractual principal	3,376	3,766
Impaired loan balance	1,641	2,031
Impaired loans without an allowance	1,641	430
Impaired loans with an allowance		1,601
Related allowance recorded		102
Year-to-date average loan balance	1,736	2,033
Year-to-date interest income recognized	29	65
Commercial Real Estate Loan [Member]
Unpaid contractual principal	3,920	3,973
Impaired loan balance	3,920	3,973
Impaired loans without an allowance	2,127	3,888
Impaired loans with an allowance	1,793	85
Related allowance recorded	14	52
Year-to-date average loan balance	3,926	3,989
Year-to-date interest income recognized	243	490
Commercial Loan [Member]
Unpaid contractual principal	2,032	2,002
Impaired loan balance	2,032	2,002
Impaired loans without an allowance	3	11
Impaired loans with an allowance	2,029	1,991
Related allowance recorded	728	391
Year-to-date average loan balance	2,055	2,082
Year-to-date interest income recognized	8
Agriculture Loan [Member]
Unpaid contractual principal	817	1,048
Impaired loan balance	602	833
Impaired loans without an allowance	344	545
Impaired loans with an allowance	258	288
Related allowance recorded	25	24
Year-to-date average loan balance	652	912
Year-to-date interest income recognized	27	1
Municipal Loan [Member]
Unpaid contractual principal	126	140
Impaired loan balance	126	140
Impaired loans without an allowance	126	140
Impaired loans with an allowance
Related allowance recorded
Year-to-date average loan balance	132	192
Year-to-date interest income recognized	1	5
Consumer Loan [Member]
Unpaid contractual principal	46	34
Impaired loan balance	46	34
Impaired loans without an allowance	40	34
Impaired loans with an allowance	6
Related allowance recorded	1
Year-to-date average loan balance	46	35
Year-to-date interest income recognized

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Loans and Allowance for Loan Losses - Schedule of Past Due Financing Receivables (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing	1,530	1,355
Loans, Non-accrual loans	5,285	6,041
Loan, Total past due and non-accrual loans	6,815	7,396
Loan, Total loans not past due	$ 460,322	$ 431,840
Percent of gross loans, 30-59 days delinquent and accruing	0.07%	0.05%
Percent of gross loans, 60-89 days delinquent and accruing	0.26%	0.26%
Percent of gross loans, 90 days or more delinquent and accruing	0.00%	0.00%
Percentage of gross loans, Total past due loans accruing	0.33%	0.31%
Percent of gross loans, Non-accrual loans	1.13%	1.37%
Percentage of Total past due and non-accrual loans	1.46%	1.68%
Percentage of Total loans not past due	98.54%	98.32%
Commercial Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing	759	397
Loans, Non-accrual loans	2,032	2,002
Loan, Total past due and non-accrual loans	2,791	2,399
Loan, Total loans not past due	63,740	52,192
Agriculture Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing	303
Loans, Non-accrual loans	384	833
Loan, Total past due and non-accrual loans	687	833
Loan, Total loans not past due	87,214	82,175
Municipal Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing
Loans, Non-accrual loans
Loan, Total past due and non-accrual loans
Loan, Total loans not past due	3,172	3,396
Consumer Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing	79	309
Loans, Non-accrual loans	46	34
Loan, Total past due and non-accrual loans	125	343
Loan, Total loans not past due	22,742	21,703
30-59 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due	311	228
30-59 Days Delinquent and Accruing [Member] | Commercial Loan [Member]
Financing Receivable, Recorded Investment, Past Due	48
30-59 Days Delinquent and Accruing [Member] | Agriculture Loan [Member]
Financing Receivable, Recorded Investment, Past Due	127
30-59 Days Delinquent and Accruing [Member] | Municipal Loan [Member]
Financing Receivable, Recorded Investment, Past Due
30-59 Days Delinquent and Accruing [Member] | Consumer Loan [Member]
Financing Receivable, Recorded Investment, Past Due	36	105
60-89 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due	1,219	1,127
60-89 Days Delinquent and Accruing [Member] | Commercial Loan [Member]
Financing Receivable, Recorded Investment, Past Due	711	397
60-89 Days Delinquent and Accruing [Member] | Agriculture Loan [Member]
Financing Receivable, Recorded Investment, Past Due	176
60-89 Days Delinquent and Accruing [Member] | Municipal Loan [Member]
Financing Receivable, Recorded Investment, Past Due
60-89 Days Delinquent and Accruing [Member] | Consumer Loan [Member]
Financing Receivable, Recorded Investment, Past Due	43	204
One-To-Four Family Residential Real Estate Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing	389	414
Loans, Non-accrual loans	463	552
Loan, Total past due and non-accrual loans	852	966
Loan, Total loans not past due	137,415	135,249
One-To-Four Family Residential Real Estate Loan [Member] | 30-59 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due	100	101
One-To-Four Family Residential Real Estate Loan [Member] | 60-89 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due	289	313
Construction and Land Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing		4
Loans, Non-accrual loans	567	779
Loan, Total past due and non-accrual loans	567	783
Loan, Total loans not past due	25,886	18,573
Construction and Land Loan [Member] | 30-59 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due
Construction and Land Loan [Member] | 60-89 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due		4
Commercial Real Estate Loan [Member]
Loans, 90 days or more delinquent and accruing
Loans, Total past due loans accruing		231
Loans, Non-accrual loans	1,793	1,841
Loan, Total past due and non-accrual loans	1,793	2,072
Loan, Total loans not past due	120,153	118,552
Commercial Real Estate Loan [Member] | 30-59 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due		22
Commercial Real Estate Loan [Member] | 60-89 Days Delinquent and Accruing [Member]
Financing Receivable, Recorded Investment, Past Due		$ 209

XML

Loans and Allowance for Loan Losses - Schedule of Risk Categories by Loan Class (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loans and Leases Receivable, Gross, Total	$ 467,137	$ 439,236
One-To-Four Family Residential Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	138,267	136,215
Construction and Land Loan [Member]
Loans and Leases Receivable, Gross, Total	26,453	19,356
Commercial Loan [Member]
Loans and Leases Receivable, Gross, Total	66,531	54,591
Agriculture Loan [Member]
Loans and Leases Receivable, Gross, Total	87,901	83,008
Municipal Loan [Member]
Loans and Leases Receivable, Gross, Total	3,172	3,396
Consumer Loan [Member]
Loans and Leases Receivable, Gross, Total	22,867	22,046
Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	121,946	120,624
Loans Receivables Non Classified [Member]
Loans and Leases Receivable, Gross, Total	442,715	422,958
Loans Receivables Non Classified [Member] | One-To-Four Family Residential Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	137,325	135,475
Loans Receivables Non Classified [Member] | Construction and Land Loan [Member]
Loans and Leases Receivable, Gross, Total	25,886	18,577
Loans Receivables Non Classified [Member] | Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	111,697
Loans Receivables Non Classified [Member] | Commercial Loan [Member]
Loans and Leases Receivable, Gross, Total	58,424	52,313
Loans Receivables Non Classified [Member] | Agriculture Loan [Member]
Loans and Leases Receivable, Gross, Total	83,390	76,455
Loans Receivables Non Classified [Member] | Municipal Loan [Member]
Loans and Leases Receivable, Gross, Total	3,172	3,396
Loans Receivables Non Classified [Member] | Consumer Loan [Member]
Loans and Leases Receivable, Gross, Total	22,821	22,006
Loans Receivables Non Classified [Member] | Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total		114,736
Loans Receivables Classified [Member]
Loans and Leases Receivable, Gross, Total	24,422	16,278
Loans Receivables Classified [Member] | One-To-Four Family Residential Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	942	740
Loans Receivables Classified [Member] | Construction and Land Loan [Member]
Loans and Leases Receivable, Gross, Total	567	779
Loans Receivables Classified [Member] | Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	10,249
Loans Receivables Classified [Member] | Commercial Loan [Member]
Loans and Leases Receivable, Gross, Total	8,107	2,278
Loans Receivables Classified [Member] | Agriculture Loan [Member]
Loans and Leases Receivable, Gross, Total	4,511	6,553
Loans Receivables Classified [Member] | Municipal Loan [Member]
Loans and Leases Receivable, Gross, Total
Loans Receivables Classified [Member] | Consumer Loan [Member]
Loans and Leases Receivable, Gross, Total	$ 46	40
Loans Receivables Classified [Member] | Commercial Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total		$ 5,888

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Loans and Allowance for Loan Losses - Schedule of Troubled Debt Restructurings on Financing Receivables (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($) Number	Dec. 31, 2017 USD ($) Number
Financing receivable, modifications, recorded investment, non accrual balance	$ 5,285	$ 6,041
One-To-Four Family Residential Real Estate Loan [Member]
Troubled debt restructurings, Number of loans | Number	2	2
Financing receivable, modifications, recorded investment, non accrual balance
Financing receivable, modifications, recorded investment, accruing balance	$ 188	$ 194
Construction and Land Loan [Member]
Troubled debt restructurings, Number of loans | Number	4	4
Financing receivable, modifications, recorded investment, non accrual balance	$ 567	$ 575
Financing receivable, modifications, recorded investment, accruing balance	$ 1,074	$ 1,252
Commercial Real Estate Loan [Member]
Troubled debt restructurings, Number of loans | Number	2	3
Financing receivable, modifications, recorded investment, non accrual balance		$ 45
Financing receivable, modifications, recorded investment, accruing balance	$ 2,127	$ 2,133
Commercial Loan [Member]
Troubled debt restructurings, Number of loans | Number	1
Financing receivable, modifications, recorded investment, non accrual balance	$ 41
Financing receivable, modifications, recorded investment, accruing balance
Agriculture Loan [Member]
Troubled debt restructurings, Number of loans | Number	6
Financing receivable, modifications, recorded investment, non accrual balance	$ 384	$ 833
Municipal Loan [Member]
Troubled debt restructurings, Number of loans | Number	2	2
Financing receivable, modifications, recorded investment, non accrual balance
Financing receivable, modifications, recorded investment, accruing balance	$ 126	$ 140
TDR [Member]
Troubled debt restructurings, Number of loans | Number	17	20
Financing receivable, modifications, recorded investment, non accrual balance	$ 744	$ 1,091
Financing receivable, modifications, recorded investment, accruing balance	3,733	$ 3,719
Agriculture Loan [Member]
Troubled debt restructurings, Number of loans | Number		9
Financing receivable, modifications, recorded investment, non accrual balance	136	$ 471
Financing receivable, modifications, recorded investment, accruing balance	$ 218

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Goodwill and Other Intangible Assets (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Weighted Average [Member]
Finite-Lived Intangible Assets [Line Items]
Assumption for fair value of interests continued to be held by transferor servicing assets or liabilities weighted average default rate			1.35%		2.26%
Mortgage Loans Serviced [Member]
Finite-Lived Intangible Assets [Line Items]
Escrow deposit	$ 5,000		$ 5,000		$ 4,400
Interest and fee income, other loans	337	$ 320	673	$ 639
Servicing asset at fair value, amount	6,100		$ 6,100		$ 5,600
Mortgage Loans Serviced [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Assumption for fair value of assets or liabilities that relate to transferor's continuing involvement, discount rate			9.00%		9.50%
Assumption for fair value of assets or liabilities that relate to transferor's continuing involvement, prepayment speed			6.00%		5.23%
Mortgage Loans Serviced [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Assumption for fair value of assets or liabilities that relate to transferor's continuing involvement, discount rate			11.00%		9.59%
Assumption for fair value of assets or liabilities that relate to transferor's continuing involvement, prepayment speed			23.83%		33.39%
Mortgage Repurchase Reserve [Member]
Finite-Lived Intangible Assets [Line Items]
Mortgage loans on real estate, write-down or reserve, amount	$ 235		$ 235		$ 235

XML

Goodwill and Other Intangible Assets - Schedule of Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross carrying amount	$ 8,827	$ 8,702
Intangible assets, Accumulated amortization	(5,469)	(5,043)
Intangible assets, Net carrying amount	3,358	3,659
Core Deposit Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross carrying amount	2,067	2,067
Intangible assets, Accumulated amortization	(1,487)	(1,381)
Intangible assets, Net carrying amount	580	686
Lease Intangible Asset [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross carrying amount	350	350
Intangible assets, Accumulated amortization	(211)	(188)
Intangible assets, Net carrying amount	139	162
Mortgage Servicing Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Gross carrying amount	6,410	6,285
Intangible assets, Accumulated amortization	(3,771)	(3,474)
Intangible assets, Net carrying amount	$ 2,639	$ 2,811

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Goodwill and Other Intangible Assets - Schedule of Finite-lived Intangible Assets, Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2018	$ 123
2019	214
2020	177
2021	121
2022	58
Thereafter	26
Total	$ 719

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Goodwill and Other Intangible Assets - Schedule of Participating Mortgage Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loans on real estate, face amount of mortgages	$ 529,911	$ 527,645
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loans on real estate, face amount of mortgages	520,587	517,863
Federal Home Loan Bank Certificates and Obligations (FHLB) [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loans on real estate, face amount of mortgages	$ 9,324	$ 9,782

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Goodwill and Other Intangible Assets - Schedule of Servicing Asset at Amortized Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Balance at beginning of period	$ 2,722	$ 2,787	$ 2,811	$ 2,849
Additions	137	281	259	442
Amortization	(220)	(255)	(431)	(478)
Balance at end of period	$ 2,639	$ 2,813	$ 2,639	$ 2,813

XML

Earnings Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Earnings per share:
Net earnings	[1]	$ 2,845	$ 2,383	$ 4,944	$ 4,588
Weighted average common shares outstanding - basic	[1]	4,141,894	4,064,092	4,124,947	4,063,692
Assumed exercise of stock options	[1]	18,693	84,092	18,544	83,040
Weighted average common shares outstanding - diluted	[1]	4,160,587	4,148,184	4,143,491	4,146,732
Net earnings per share: Basic	[2]	$ 0.69	$ 0.59	$ 1.20	$ 1.13
Net earnings per share: Diluted	[2]	$ 0.68	$ 0.58	$ 1.19	$ 1.11

[1] Share and per share values for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

[2] Per share amounts for the periods ended June 30, 2017 have been adjusted to give effect to the 5% stock dividend paid during December 2017.

XML

Repurchase Agreements (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets Sold under Agreements to Repurchase [Line Items]
Customer funds	$ 8,400	$ 13,500
Repurchase Agreements [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Debt instrument, collateral amount	$ 16,200	$ 16,800

XML

Repurchase Agreements - Schedule of Repurchase Agreements (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	$ 8,417	$ 13,509
Overnight and Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	8,417	13,509
Up to 30 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
30 - 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
U.S. Federal Treasury Obligations [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	307
U.S. Federal Treasury Obligations [Member] | Overnight and Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	307
U.S. Federal Treasury Obligations [Member] | Up to 30 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
U.S. Federal Treasury Obligations [Member] | 30 - 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
U.S. Federal Treasury Obligations [Member] | Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
US Federal Agency Obligations [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	2,948	5,147
US Federal Agency Obligations [Member] | Overnight and Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	2,948	5,147
US Federal Agency Obligations [Member] | Up to 30 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
US Federal Agency Obligations [Member] | 30 - 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
US Federal Agency Obligations [Member] | Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
Agency Mortgage-backed Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	5,162	8,362
Agency Mortgage-backed Securities [Member] | Overnight and Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount	5,162	8,362
Agency Mortgage-backed Securities [Member] | Up to 30 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
Agency Mortgage-backed Securities [Member] | 30 - 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount
Agency Mortgage-backed Securities [Member] | Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Assets Sold under Agreements to Repurchase, Carrying Amount

XML

Revenue from Contracts with Customers (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Revenue from Contract with Customer [Abstract]
Increase in other non-interest income	$ 525	$ 525

XML

Revenue from Contracts with Customers - Schedule of Revenue from Contracts with Customers Within Non-interest Income (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue from Contract with Customer [Abstract]
Service charges on deposits overdraft fees		$ 783	$ 915	$ 1,580	$ 1,769
Service charges on deposits other		135	137	273	282
Interchange income		516	425	958	786
Loan servicing fees	[1]	337	320	673	639
Office lease income	[1]	156	150	308	300
Gains on sales of loans	[1]	1,468	1,692	2,629	3,081
Bank owned life insurance income	[1]	162	119	321	236
Gains on sales of investment securities	[1]		177	35	324
Gains on sales of real estate owned			25	1	10
Other		696	241	876	415
Total non-interest income		$ 4,253	$ 4,201	$ 7,654	$ 7,842

[1] Not within the scope of ASC 606.

XML

Fair Value of Financial Instruments and Fair Value Measurements (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Impaired financing receivable, recorded investment, total	$ 9,018	$ 9,760
Impaired financing receivable, related allowance	$ 853	$ 642

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Fair Value, by Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 19,883	$ 16,584	$ 10,594	$ 19,996
Investment securities available for sale	398,137	387,983
Bank stocks, at cost	6,034	5,423
Loans, net	461,396	433,743
Loans held for sale net	11,764	6,535
Derivative financial instruments	695	395
Accrued interest receivable	4,459	4,409
Non-maturity deposits	(642,106)	(642,281)
Time deposits	(123,185)	(123,277)
FHLB borrowings	(85,600)	(31,600)
Subordinated debentures	(21,584)	(21,484)
Other borrowings	(8,417)	(13,509)
Derivative financial instruments	(97)	(274)
Accrued interest payable	(349)	(274)
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	19,883	16,584
Investment securities available for sale	1,952	1,998
Bank stocks, at cost
Loans, net
Loans held for sale net
Derivative financial instruments
Accrued interest receivable	20	20
Non-maturity deposits	(642,106)	(642,281)
Time deposits
FHLB borrowings
Subordinated debentures
Other borrowings
Derivative financial instruments
Accrued interest payable
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents
Investment securities available for sale	396,185	385,985
Bank stocks, at cost
Loans, net
Loans held for sale net	11,764	6,535
Derivative financial instruments	695	395
Accrued interest receivable	2,279	2,234
Non-maturity deposits
Time deposits	(120,775)	(121,298)
FHLB borrowings	(85,613)	(31,706)
Subordinated debentures	(19,522)	(19,134)
Other borrowings	(8,417)	(13,509)
Derivative financial instruments	(97)	(274)
Accrued interest payable	(349)	(274)
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents
Investment securities available for sale
Bank stocks, at cost
Loans, net	480,331	436,910
Loans held for sale net
Derivative financial instruments
Accrued interest receivable	2,160	2,155
Non-maturity deposits
Time deposits
FHLB borrowings
Subordinated debentures
Other borrowings
Derivative financial instruments
Accrued interest payable
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	19,883	16,584
Investment securities available for sale	398,137	387,983
Bank stocks, at cost
Loans, net	480,331	436,910
Loans held for sale net	11,764	6,535
Derivative financial instruments	695	395
Accrued interest receivable	4,459	4,409
Non-maturity deposits	(642,106)	(642,281)
Time deposits	(120,775)	(121,298)
FHLB borrowings	(85,613)	(31,706)
Subordinated debentures	(19,522)	(19,134)
Other borrowings	(8,417)	(13,509)
Derivative financial instruments	(97)	(274)
Accrued interest payable	$ (349)	$ (274)

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Fair Value, Assets Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	$ 398,137	$ 387,983
Loans held for Sale	11,764	6,535
Assets: Derivative financial instruments	695	395
Municipal Obligations, Tax Exempt [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	179,539	184,738
Municipal Obligations, Taxable [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	54,640	57,976
Agency Mortgage-backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	140,549	117,555
Certificates of Deposit [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	7,780	9,224
Common Stocks [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale		8
Level 1 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	1,952	1,998
Assets: Derivative financial instruments
Level 2 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	396,185	385,985
Assets: Derivative financial instruments	695	395
Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Assets: Derivative financial instruments
Fair Value, Measurements, Recurring [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for Sale	11,764	6,535
Assets: Derivative financial instruments	695	395
Liability: Derivative financial instruments	(97)
Fair Value, Measurements, Recurring [Member] | Municipal Obligations, Tax Exempt [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	179,539	184,738
Fair Value, Measurements, Recurring [Member] | Municipal Obligations, Taxable [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	54,640	57,976
Fair Value, Measurements, Recurring [Member] | Agency Mortgage-backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	140,549	117,555
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	7,780	9,224
Fair Value, Measurements, Recurring [Member] | Common Stocks [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale		8
Fair Value, Measurements, Recurring [Member] | US Federal Agency Obligations [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	13,677	16,492
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for Sale
Assets: Derivative financial instruments
Liability: Derivative financial instruments
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Municipal Obligations, Tax Exempt [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Municipal Obligations, Taxable [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Agency Mortgage-backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Certificates of Deposit [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Common Stocks [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale		8
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | US Federal Agency Obligations [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for Sale	11,764	6,535
Assets: Derivative financial instruments	695	395
Liability: Derivative financial instruments	(97)
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Municipal Obligations, Tax Exempt [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	179,539	184,738
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Municipal Obligations, Taxable [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	54,640	57,976
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Agency Mortgage-backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	140,549	117,555
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Certificates of Deposit [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	7,780	9,224
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Common Stocks [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | US Federal Agency Obligations [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	13,677	16,492
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Loans held for Sale
Assets: Derivative financial instruments
Liability: Derivative financial instruments
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Municipal Obligations, Tax Exempt [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Municipal Obligations, Taxable [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Agency Mortgage-backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Certificates of Deposit [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Common Stocks [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | US Federal Agency Obligations [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	1,952	1,990
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Level 1 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale	1,952	1,990
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Level 2 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale
Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investment securities available for sale

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Fair Value Contractual Balance and Gain Loss on Loans Held for Sale (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Aggregate fair value	$ 11,764	$ 6,535
Contractual balance	11,484	6,420
Gain	$ 280	$ 115

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Gains and Losses from Changes in Fair Value of Loans Held for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair Value Disclosures [Abstract]
Interest income	$ 98	$ 79	$ 146	$ 124
Change in fair value	264	60	165	169
Total change in fair value	$ 362	$ 139	$ 311	$ 293

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Fair Value, Assets and Liabilities Measured On Nonrecurring Basis, Valuation Techniques (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
One-To-Four Family Residential Real Estate Loan [Member]
Impaired loans	$ 171	$ 171
Total (losses)/gains on impaired loans fair value disclosure	(15)	(73)
One-To-Four Family Residential Real Estate Loan [Member] | Level 1 [Member]
Impaired loans
One-To-Four Family Residential Real Estate Loan [Member] | Level 2 [Member]
Impaired loans
One-To-Four Family Residential Real Estate Loan [Member] | Level 3 [Member]
Impaired loans	171	171
Commercial Real Estate Loan [Member]
Impaired loans	1,779
Commercial Real Estate Loan [Member]
Impaired loans		33
Total (losses)/gains on impaired loans fair value disclosure	2	12
Commercial Real Estate Loan [Member] | Level 1 [Member]
Impaired loans
Commercial Real Estate Loan [Member] | Level 2 [Member]
Impaired loans
Commercial Real Estate Loan [Member] | Level 3 [Member]
Impaired loans	1,779	33
Commercial Loan [Member]
Impaired loans	1,301	1,600
Total (losses)/gains on impaired loans fair value disclosure	(338)	(304)
Commercial Loan [Member] | Level 1 [Member]
Impaired loans
Commercial Loan [Member] | Level 2 [Member]
Impaired loans
Commercial Loan [Member] | Level 3 [Member]
Impaired loans	1,301	1,600
Agriculture Loan [Member]
Impaired loans	233	264
Total (losses)/gains on impaired loans fair value disclosure	(1)	65
Agriculture Loan [Member] | Level 1 [Member]
Impaired loans
Agriculture Loan [Member] | Level 2 [Member]
Impaired loans
Agriculture Loan [Member] | Level 3 [Member]
Impaired loans	$ 233	264
Construction and Land Loan [Member]
Impaired loans		1,499
Total (losses)/gains on impaired loans fair value disclosure		(102)
Construction and Land Loan [Member] | Level 1 [Member]
Impaired loans
Construction and Land Loan [Member] | Level 2 [Member]
Impaired loans
Construction and Land Loan [Member] | Level 3 [Member]
Impaired loans		1,499
Real Estate Owned One-To-Four Family Residential Real Estate Loan [Member]
Impaired loans		325
Total (losses)/gains on impaired loans fair value disclosure		(68)
Real Estate Owned One-To-Four Family Residential Real Estate Loan [Member] | Level 1 [Member]
Impaired loans
Real Estate Owned One-To-Four Family Residential Real Estate Loan [Member] | Level 2 [Member]
Impaired loans
Real Estate Owned One-To-Four Family Residential Real Estate Loan [Member] | Level 3 [Member]
Impaired loans		325
Real Estate Owned Commercial Real Estate Loan [Member]
Impaired loans		85
Total (losses)/gains on impaired loans fair value disclosure		(50)
Real Estate Owned Commercial Real Estate Loan [Member] | Level 1 [Member]
Impaired loans
Real Estate Owned Commercial Real Estate Loan [Member] | Level 2 [Member]
Impaired loans
Real Estate Owned Commercial Real Estate Loan [Member] | Level 3 [Member]
Impaired loans		$ 85

XML

Fair Value of Financial Instruments and Fair Value Measurements - Schedule of Fair Value Measurements on Nonrecurring, Valuation Techniques (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
One-To-Four Family Residential Real Estate Loan [Member]
Impaired Loans Fair Value Disclosure	$ 171	$ 171
Real Estate Owned Fair Value Disclosure		$ 325
Fair Value Measurements, Valuation Techniques	Sales comparison	Sales comparison
Fair Value Measurements, Unobservable inputs	Adjustment to appraised value	Adjustment to appraised value
Fair Value Measurements Range		10.00%
One-To-Four Family Residential Real Estate Loan [Member] | Minimum [Member]
Fair Value Measurements Range	7.00%	16.00%
One-To-Four Family Residential Real Estate Loan [Member] | Maximum [Member]
Fair Value Measurements Range	50.00%	50.00%
Commercial Real Estate Loan [Member]
Impaired Loans Fair Value Disclosure	$ 1,779
Commercial Real Estate Loan [Member]
Impaired Loans Fair Value Disclosure		$ 33
Real Estate Owned Fair Value Disclosure		$ 85
Fair Value Measurements, Valuation Techniques	Sales comparison	Sales comparison
Fair Value Measurements, Unobservable inputs	Adjustment to appraised value	Adjustment to appraised value
Fair Value Measurements Range		10.00%
Commercial Real Estate Loan [Member] | Minimum [Member]
Fair Value Measurements Range	7.00%	0.00%
Commercial Real Estate Loan [Member] | Maximum [Member]
Fair Value Measurements Range	25.00%	91.00%
Commercial Loan [Member]
Impaired Loans Fair Value Disclosure	$ 1,301	$ 1,600
Fair Value Measurements, Valuation Techniques	Sales comparison	Sales comparison
Fair Value Measurements, Unobservable inputs	Adjustment to comparable sales	Adjustment to comparable sales
Commercial Loan [Member] | Minimum [Member]
Fair Value Measurements Range	10.00%	15.00%
Commercial Loan [Member] | Maximum [Member]
Fair Value Measurements Range	25.00%	50.00%
Agriculture Loan [Member]
Impaired Loans Fair Value Disclosure	$ 233	$ 264
Fair Value Measurements, Valuation Techniques	Sales comparison	Sales comparison
Fair Value Measurements, Unobservable inputs	Adjustment to appraised value	Adjustment to appraised value
Agriculture Loan [Member] | Minimum [Member]
Fair Value Measurements Range	0.00%	0.00%
Agriculture Loan [Member] | Maximum [Member]
Fair Value Measurements Range	50.00%	50.00%
Construction and Land Loan [Member]
Impaired Loans Fair Value Disclosure		$ 1,499
Fair Value Measurements, Valuation Techniques		Sales comparison
Fair Value Measurements, Unobservable inputs		Adjustment to appraised value
Construction and Land Loan [Member] | Minimum [Member]
Fair Value Measurements Range		0.00%
Construction and Land Loan [Member] | Maximum [Member]
Fair Value Measurements Range		25.00%

XML

Regulatory Capital Requirements (Details Narrative) - USD ($) $ in Thousands				6 Months Ended
	Jan. 02, 2018	Jan. 02, 2017	Jan. 02, 2016	Jun. 30, 2018	Dec. 31, 2017
Regulatory Capital Requirements [Line Items]
Assets, total				$ 978,180	$ 929,454
Common equity tier one risk based capital required for capital adequacy to risk weighted assets				4.50%
Tier one risk based capital required for capital adequacy to risk weighted assets				6.00%
Capital required for capital adequacy to risk weighted assets				8.00%
Tier one leverage capital required for capital adequacy to average assets				4.00%
Small Bank Holding Companies [Member]
Regulatory Capital Requirements [Line Items]
Assets, total				$ 1,000,000,000
Capital Conservation Buffer [Member]
Regulatory Capital Requirements [Line Items]
Tier one capital conversation buffer	1.875%	1.25%	0.625%
Capital Conservation Buffer [Member] | January 1, 2019 [Member]
Regulatory Capital Requirements [Line Items]
Tier one capital conversation buffer				2.50%

XML

Regulatory Capital Requirements - Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies (Details) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Regulatory Capital Requirements [Line Items]
Leverage - For capital adequacy purposes Ratio		4.00%
Common Equity Tier 1 Capital - For capital adequacy purposes Ratio		4.50%
Tier 1 Capital - For capital adequacy purposes Ratio		6.00%
Total Risk Based Capital - For capital adequacy purposes Ratio		8.00%
Company's Regulatory Capital Requirements [Member]
Regulatory Capital Requirements [Line Items]
Leverage - Actual Amount		$ 94,793	$ 88,605
Common Equity Tier 1 Capital - Actual Amount		73,860	68,269
Tier 1 Capital - Actual Amount		94,793	88,605
Total Risk Based Capital - Actual Amount		$ 100,768	$ 94,208
Leverage - Actual Ratio		10.10%	9.80%
Common Equity Tier 1 Capital - Actual Ratio		12.93%	12.83%
Tier 1 Capital - Actual Ratio		16.59%	16.65%
Total Risk Based Capital - Actual Ratio		17.64%	17.71%
Leverage - For capital adequacy purposes Amount		$ 37,556	$ 36,180
Common Equity Tier 1 Capital - For capital adequacy purposes Amount		36,426	30,590
Tier 1 Capital - For capital adequacy purposes Amount		44,996	38,571
Total Risk Based Capital - For capital adequacy purposes Amount		$ 56,424	$ 49,211
Leverage - For capital adequacy purposes Ratio	[1]	4.00%	4.00%
Common Equity Tier 1 Capital - For capital adequacy purposes Ratio	[1]	6.40%	5.80%
Tier 1 Capital - For capital adequacy purposes Ratio	[1]	7.90%	7.30%
Total Risk Based Capital - For capital adequacy purposes Ratio	[1]	9.90%	9.30%

[1] The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017.

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Regulatory Capital Requirements - Schedule of Compliance with Regulatory Capital Requirements for Mortgage Companies (Details) (Parenthetical)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Company's Regulatory Capital Requirements [Member]
Tier one capital conversation buffer	1.875%	1.25%

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Regulatory Capital Requirements - Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations (Details) - USD ($) $ in Thousands		Jun. 30, 2018	Dec. 31, 2017
Regulatory Capital Requirements [Line Items]
Leverage - For capital adequacy purposes Ratio		4.00%
Common Equity Tier 1 Capital - For capital adequacy purposes Ratio		4.50%
Tier 1 Capital - For capital adequacy purposes Ratio		6.00%
Total Risk Based Capital - For capital adequacy purposes Ratio		8.00%
Banks Regulatory Capital Requirements [Member]
Regulatory Capital Requirements [Line Items]
Leverage - Actual Amount		$ 92,978	$ 86,808
Common Equity Tier 1 Capital - Actual Amount		92,978	86,808
Tier 1 Capital - Actual Amount		92,978	86,808
Total Risk Based Capital - Actual Amount		$ 98,953	$ 92,407
Leverage - Actual Ratio		9.93%	9.62%
Common Equity Tier 1 Capital - Actual Ratio		16.30%	16.35%
Tier 1 Capital - Actual Ratio		16.30%	16.35%
Total Risk Based Capital - Actual Ratio		17.35%	17.40%
Leverage - For capital adequacy purposes Amount		$ 37,451	$ 36,097
Common Equity Tier 1 Capital - For capital adequacy purposes Amount		36,355	30,529
Tier 1 Capital - For capital adequacy purposes Amount		44,909	38,493
Total Risk Based Capital - For capital adequacy purposes Amount		$ 56,314	$ 49,112
Leverage - For capital adequacy purposes Ratio	[1]	4.00%	4.00%
Common Equity Tier 1 Capital - For capital adequacy purposes Ratio	[1]	6.40%	5.80%
Tier 1 Capital - For capital adequacy purposes Ratio	[1]	7.90%	7.30%
Total Risk Based Capital - For capital adequacy purposes Ratio	[1]	9.90%	9.30%
Leverage - To be well-capitalized under prompt corrective action provisions Amount		$ 46,814	$ 44,105
Common Equity Tier 1 Capital - To be well-capitalized under prompt corrective action provisions Amount		37,068	33,222
Tier 1 Capital - To be well-capitalized under prompt corrective action provisions Amount		45,622	40,888
Total Risk Based Capital - To be well-capitalized under prompt corrective action provisions Amount		$ 57,027	$ 51,110
Leverage - To be well-capitalized under prompt corrective action provisions Ratio		5.00%	5.00%
Common Equity Tier 1 Capital - To be well-capitalized under prompt corrective action provisions Ratio		6.50%	6.50%
Tier 1 Capital - To be well-capitalized under prompt corrective action provisions Ratio		8.00%	8.00%
Total Risk Based Capital - To be well-capitalized under prompt corrective action provisions Ratio		10.00%	10.00%

[1] The required ratios for capital adequacy purposes include a capital conservation buffer of 1.875% for June 30, 2018 and 1.25% for December 31, 2017.

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Regulatory Capital Requirements - Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations (Details) (Parenthetical)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Banks Regulatory Capital Requirements [Member]
Tier one capital conversation buffer	1.875%	1.25%