10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

for the quarterly period ended June 30, 2016

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 000-50820

FIRST CLOVER LEAF FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Maryland	20-4797391
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

6814 Goshen Road, Edwardsville, IL	62025
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (618) 656-6122

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (do not check if smaller reporting company)	Smaller reporting company x

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.

Class	Outstanding August 4, 2016
Common Stock, par value $.10 per share	7,005,883

FIRST CLOVER LEAF FINANCIAL CORP. 

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2016

INDEX

		PAGE NO.
PART I - Financial Information
Item 1.	Financial Statements  (Unaudited)
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Comprehensive Income		5
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	51
PART II - Other Information
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		54

FIRST CLOVER LEAF FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2016		2015
	(Unaudited)
ASSETS
Cash and due from banks	$	19,327,625	$	14,865,466
Interest-earning deposits		23,207,090		17,041,862
Federal funds sold		24,093,634		47,325,238
Total cash and cash equivalents		66,628,349		79,232,566
Interest-earning time deposits		1,930,000		1,685,000
Securities available for sale		108,328,285		103,756,614
Federal Home Loan Bank stock		997,763		1,747,763
Federal Reserve Bank stock		1,676,700		1,676,700
Loans, net of allowance for loan losses of $6,225,250 and $5,886,225 at June 30, 2016 and December 31, 2015, respectively		440,400,476		420,463,583
Loans held for sale		592,450		1,078,785
Property and equipment, net		9,669,512		9,871,440
Goodwill		11,385,323		11,385,323
Bank-owned life insurance		15,562,625		15,336,442
Core deposit intangible		109,010		138,000
Foreclosed assets		2,851,367		3,059,101
Mortgage servicing rights		1,081,828		1,109,720
Accrued interest receivable		1,589,201		1,620,309
Other assets		2,516,067		2,712,911
Total assets	$	665,318,956	$	654,874,257
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	78,715,230	$	69,296,354
Interest-bearing		460,874,608		463,861,939
Total deposits		539,589,838		533,158,293
Federal Home Loan Bank advances		15,999,355		15,995,485
Securities sold under agreements to repurchase		21,817,155		19,732,766
Subordinated debentures		4,000,000		4,000,000
Accrued interest payable		254,015		227,947
Other liabilities		1,461,381		1,485,891
Total liabilities		583,121,744		574,600,382
Stockholders' Equity
Preferred stock, $.10 par value, 10,000,000 shares authorized, no shares issued		-		-
Common stock, $.10 par value, 20,000,000 shares authorized, 7,005,883 shares issued and outstanding at June 30, 2016 and December 31, 2015		700,588		700,588
Additional paid-in capital		55,806,256		55,806,256
Retained earnings		24,193,306		23,369,037
Accumulated other comprehensive income		1,497,062		397,994
Total stockholders' equity		82,197,212		80,273,875
Total liabilities and stockholders' equity	$	665,318,956	$	654,874,257

See notes to consolidated financial statements.

3. 

FIRST CLOVER LEAF FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Interest and dividend income:
Interest and fees on loans	$	4,567,461	$	4,429,579	$	9,030,121	$	8,723,018
Securities:
Taxable interest income		279,279		249,252		578,151		538,435
Nontaxable interest income		265,269		288,752		532,956		572,775
Federal Reserve Bank dividends		24,864		25,250		50,301		50,301
Interest-earning deposits, federal funds sold, and other		95,430		29,471		171,491		55,696
Total interest and dividend income		5,232,303		5,022,304		10,363,020		9,940,225
Interest expense:
Deposits		608,875		522,875		1,190,870		1,047,503
Federal Home Loan Bank advances		65,837		40,522		131,674		66,337
Securities sold under agreements to repurchase		11,145		757		24,409		1,585
Subordinated debentures		25,958		22,159		51,013		43,816
Total interest expense		711,815		586,313		1,397,966		1,159,241
Net interest income		4,520,488		4,435,991		8,965,054		8,780,984
Provision (credit) for loan losses		70,000		-		320,000		(500,000	)
Net interest income after provision (credit) for loan losses		4,450,488		4,435,991		8,645,054		9,280,984
Non-interest income:
Service fees on deposit accounts		150,568		123,403		278,198		230,311
Other service charges and fees		137,125		117,241		259,279		231,094
Loan servicing fees		77,470		74,833		156,094		147,601
Gain on sale of securities, net		-		-		29,181		-
Gain on sale of loans		224,740		294,971		350,891		476,092
Other		115,937		130,178		245,408		253,954
		705,840		740,626		1,319,051		1,339,052
Non-interest expense:
Compensation and employee benefits		2,423,002		1,925,756		4,384,301		3,777,393
Occupancy expense		382,518		365,392		748,243		756,151
Data processing services		205,624		184,644		414,906		376,434
Director fees		56,200		49,933		105,750		97,683
Professional fees		515,036		134,102		661,128		261,446
FDIC insurance premiums		108,000		94,000		198,000		204,000
Foreclosed asset related expenses		67,670		35,039		76,855		37,238
Amortization of core deposit intangible		14,505		14,505		28,990		28,990
Amortization of mortgage servicing rights		62,471		35,054		101,051		57,939
Other		613,255		668,542		1,227,254		1,264,004
		4,448,281		3,506,967		7,946,478		6,861,278
Income before income taxes		708,047		1,669,650		2,017,627		3,758,758
Income tax expense		56,646		457,170		352,878		1,075,024
Net income	$	651,401	$	1,212,480	$	1,664,749	$	2,683,734
Basic and diluted earnings per share	$	0.09	$	0.17	$	0.24	$	0.38
Dividends per share	$	0.06	$	0.06	$	0.12	$	0.12

See notes to consolidated financial statements.

4. 

FIRST CLOVER LEAF FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net income	$	651,401		$	1,212,480		$	1,664,749		$	2,683,734
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale arising during the period		766,298			(1,142,570	)		1,830,931			(278,293	)
Reclassification adjustment for realized gains included in income		-			-			(29,181	)		-
Tax effect		(298,856	)		445,602			(702,682	)		102,268
Total other comprehensive income (loss)		467,442			(696,968	)		1,099,068			(176,025	)
Comprehensive income	$	1,118,843		$	515,512		$	2,763,817		$	2,507,709

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,
	2016			2015
Cash flows from operating activities
Net income	$	1,664,749		$	2,683,734
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization (accretion) of:
Deferred loan origination costs, net		38,454			(27,026	)
Premiums and discounts on securities		380,153			412,574
Core deposit intangible		28,990			28,990
Mortgage servicing rights		101,051			57,939
Fair value adjustments		(6,584	)		(31,454	)
Provision (credit) for loan losses		320,000			(500,000	)
Depreciation		273,154			303,028
Gain on sale of securities, net		(29,181	)		-
Gain on sale of loans		(350,891	)		(476,092	)
Gain on sale of foreclosed assets		(223	)		(2,241	)
Write-down on foreclosed assets		45,195			12,000
Earnings on bank-owned life insurance		(226,183	)		(232,033	)
Increase in mortgage servicing rights		(73,159	)		(115,568	)
Proceeds from sales of loans held for sale		14,539,809			17,767,967
Originations of loans held for sale		(13,702,583	)		(17,941,188	)
Change in assets and liabilities:
Accrued interest receivable and other assets		(474,780	)		185,149
Accrued interest payable		26,068			27,952
Other liabilities		(24,510	)		(307,819	)
Net cash provided by operating activities		2,529,529			1,845,912

(Continued)

See notes to consolidated financial statements.

5. 

FIRST CLOVER LEAF FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

	Six Months Ended
	June 30,
	2016			2015
Cash flows from investing activities
Purchase of interest-earning time deposits	$	(245,000	)	$	(8,774	)
Available for sale securities:
Purchases		(21,884,883	)		(9,572,644	)
Proceeds from calls, maturities, and principal repayments		15,096,240			8,972,615
Proceeds from sales		3,686,240			-
Redemption of FHLB stock		750,000			1,140,000
Decrease (increase) in loans		(20,258,458	)		8,385,058
Purchase of property and equipment		(79,212	)		(59,001	)
Proceeds from the sale of foreclosed assets		125,873			80,630
Net cash (used in) provided by investing activities		(22,809,200	)		8,937,884
Cash flows from financing activities
Net increase (decrease) in deposit accounts		6,431,545			(30,906,508	)
Net increase (decrease) in securities sold under agreements to repurchase		2,084,389			(108,239	)
Proceeds from Federal Home Loan Bank advances		-			15,000,000
Repurchase of common stock		-			(3,420	)
Cash dividends paid		(840,480	)		(840,849	)
Net cash provided by (used in) financing activities		7,675,454			(16,859,016	)
Net decrease in cash and cash equivalents		(12,604,217	)		(6,075,220	)
Cash and cash equivalents:
Beginning		79,232,566			49,066,462
Ending	$	66,628,349		$	42,991,242
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	1,317,015		$	1,127,419
Income taxes, net of refunds		895,000			1,052,500
Supplemental schedule of noncash investing and financing activities
Loans made to finance sales of foreclosed assets	$	36,889		$	-

See notes to consolidated financial statements.

6. 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the interim periods. All such adjustments are of a normal recurring nature. Any differences appearing between the numbers presented in the financial statements and management’s discussion and analysis are due to rounding. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire year or for any other period. These consolidated financial statements should be read in conjunction with the consolidated financial statements of First Clover Leaf Financial Corp. (the “Company” or “First Clover Leaf”) for the year ended December 31, 2015 contained in the 2015 Annual Report to Stockholders that is filed as Exhibit 13 to the Company’s Annual Report on Form 10-K. Accordingly, footnote disclosures which would substantially duplicate the disclosures in the audited consolidated financial statements have been omitted.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ from those estimates.

The Company is a single-bank holding company, whose wholly-owned bank subsidiary, First Clover Leaf Bank (the “Bank”), which is a community bank operating with six branch locations in Madison and St. Clair Counties in Illinois along with one branch location in Clayton, Missouri. The Bank is subject to competition from other financial institutions and nonfinancial institutions providing financial products and services. Additionally, the Company and the Bank are subject to the regulations of certain regulatory agencies and both undergo periodic examinations by those regulatory agencies. In August 2014, the Bank converted from a federal savings and loan association to a nationally chartered bank. First Clover Leaf’s common stock is traded on the NASDAQ Capital Market under the symbol “FCLF”.

On April 26, 2016, the Company and First-Mid Illinois Bancshares, Inc., a Delaware corporation with its principal office in Mattoon, Illinois (“First Mid”), entered into an Agreement and Plan of Merger (as amended by the First Amendment to Agreement and Plan of Merger entered into as of June 6, 2016, and as may be further amended, the “Merger Agreement”), pursuant to which, among other things, First Mid will acquire the Company and the Bank through the merger of the Company with and into First Mid, with First Mid as the surviving entity (the “Merger”). Consummation of the transaction remains subject to customary closing conditions, including receipt of requisite stockholder approvals. The Merger is anticipated to be completed in the second half of 2016.

Recent Accounting Pronouncements: The following accounting standards were recently issued relating to the financial services industry:

In May 2014, the Financial Accounting Standard Board (the “FASB”) issued an update creating FASB Topic 606, Revenue from Contracts with Customers.  The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.  We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

7. 

In January 2016, the FASB issued an update (ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities). The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As 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 (“HTM”) debt securities. The update amends the accounting for credit losses on available-for-sale securities (“AFS”), whereby credit losses 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. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on our consolidated financial statements.

Reclassifications: Certain reclassifications have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s net income or total stockholders’ equity.

8. 

NOTE 2 – SECURITIES AVAILABLE FOR SALE

The amortized cost and fair values of securities with gross unrealized gains and losses as of the dates indicated are summarized as follows:

	June 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	31,502,726	$	510,843	$	-		$	32,013,569
State and municipal securities		43,672,468		1,723,981		(22,569	)		45,373,880
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		30,695,390		268,618		(26,673	)		30,937,335
	$	105,874,085	$	2,503,442	$	(49,242	)	$	108,328,285

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	29,183,789	$	26,006	$	(161,693	)	$	29,048,102
State and municipal securities		44,746,083		1,156,547		(168,391	)		45,734,239
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		29,170,791		60,300		(260,319	)		28,970,772
	$	103,104,164	$	1,242,853	$	(590,403	)	$	103,756,614

9. 

NOTE 2 – SECURITIES AVAILABLE FOR SALE (Continued)

Unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2016 and December 31, 2015, are summarized as follows:

	June 30, 2016
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
State and municipal securities	$	299,277	$	(935	)	$	1,704,091	$	(21,634	)	$	2,003,368	$	(22,569	)
Mortgage-backed: residential		-		-			5,393,861		(26,673	)		5,393,861		(26,673	)
	$	299,277	$	(935	)	$	7,097,952	$	(48,307	)	$	7,397,229	$	(49,242	)

	December 31, 2015
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. government agency obligations	$	15,928,702	$	(82,008	)	$	5,934,944	$	(79,685	)	$	21,863,646	$	(161,693	)
State and municipal securities		7,666,691		(66,224	)		4,927,928		(102,167	)		12,594,619		(168,391	)
Mortgage-backed: residential		18,251,546		(183,188	)		4,227,473		(77,131	)		22,479,019		(260,319	)
	$	41,846,939	$	(331,420	)	$	15,090,345	$	(258,983	)	$	56,937,284	$	(590,403	)

Management evaluates the investment portfolio on at least a quarterly basis to determine if investments have suffered an other-than-temporary decline in value. In addition, management monitors market trends, investment grades, bond defaults and other circumstances to identify trends and circumstances that might impact the carrying value of equity securities.

At June 30, 2016, the Company had 10 securities in an unrealized loss position which included: six mortgage-backed securities and four state and municipal securities. This was a decrease from 67 securities at December 31, 2015. The unrealized losses resulted from changes in market interest rates and liquidity, as opposed to changes in the probability of contractual cash flows. The Company does not intend to sell the securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of the amortized cost. Full collection of the amounts due according to the contractual terms of the securities was expected as of June 30, 2016; therefore, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2016.

10. 

NOTE 2 – SECURITIES AVAILABLE FOR SALE (Continued)

The amortized cost and fair value of the Company’s securities at June 30, 2016 by contractual maturity, are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Additionally, an item in our “other securities” category has no stated maturity. Therefore, stated maturities are not disclosed for these items.

	Amortized		Fair
	Cost		Value
Due in one year or less	$	8,206,342	$	8,249,908
Due after one year through five years		29,114,362		29,699,080
Due after five years through ten years		27,735,538		28,865,845
Due after ten years		10,118,952		10,572,616
Other securities - non-maturing		3,501		3,501
Mortgage-backed: residential		30,695,390		30,937,335
	$	105,874,085	$	108,328,285

Securities with a carrying amount of approximately $90,223,000 and $66,882,000 were pledged to secure deposits, as required or permitted by law, at June 30, 2016 and December 31, 2015, respectively.

At June 30, 2016 there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity. The Company received proceeds of $3,686,240 from the sale of securities during the six months ended June 30, 2016, resulting in gross realized gains of $29,489 and gross realized losses of $308. For the same time period last year, there were no sales of securities.

11. 

NOTE 3 - LOANS

The components of the Company’s loans are as follows:

	At June 30,						At December 31,
	2016						2015
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family	$	113,870,419			25.5	%	$	110,792,710			26.0	%
Multi-family		36,797,825			8.2			41,182,067			9.7
Commercial		162,403,332			36.5			153,634,426			36.0
Construction and land		13,950,427			3.1			13,588,626			3.2
		327,022,003			73.3			319,197,829			74.9
Commercial business		102,869,196			23.0			89,743,511			21.1
Consumer:
Home equity		12,505,761			2.8			13,656,008			3.2
Automobile and other		3,989,525			0.9			3,523,696			0.8
		16,495,286			3.7			17,179,704			4.0
Total gross loans		446,386,485			100.0	%		426,121,044			100.0	%
Deferred loan origination costs, net		239,241						228,764
Allowance for loan losses		(6,225,250	)					(5,886,225	)
Loans, net	$	440,400,476					$	420,463,583

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and presents these policies to the Company’s board of directors at least annually. A reporting system supplements the review process by providing management with reports related to loan production, loan quality, loan delinquencies and non-performing and potential problem loans.

Additional information regarding our accounting policies for the individual loan categories is contained in our 2015 Annual Report to Stockholders that is filed as Exhibit 13 to the Company’s Annual Report on Form 10-K.

On occasion, the Company originates loans secured by single-family dwellings with initial loan-to-value ratios exceeding 90%. As of June 30, 2016 and December 31, 2015, these loans represented 1.83% and 2.07%, respectively, of our combined one-to-four family and home equity portfolios. The Company did not consider the level of such loans to be a significant concentration of credit as of June 30, 2016 or December 31, 2015.

The recorded investment in loans does not include accrued interest on loans nor loan origination fees due to immateriality. The allowance for loan losses does not include a component for undisbursed loan commitments; rather this amount is included in other liabilities.

12. 

NOTE 3 - LOANS (Continued)

The following tables present our past-due loans, segregated by class, as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	-	$	192,863	$	365,269	$	558,132	$	113,312,287	$	113,870,419	$	-
Multi-family		-		-		-		-		36,797,825		36,797,825		-
Commercial		113,082		709,773		165,956		988,811		161,414,521		162,403,332		-
Construction and land		-		-		-		-		13,950,427		13,950,427		-
		113,082		902,636		531,225		1,546,943		325,475,060		327,022,003		-
Commercial business		80,282		-		179,522		259,804		102,609,392		102,869,196		-
Consumer:
Home equity		-		-		42,318		42,318		12,463,443		12,505,761		-
Automobile and other		-		-		-		-		3,989,525		3,989,525		-
		-		-		42,318		42,318		16,452,968		16,495,286		-
Total	$	193,364	$	902,636	$	753,065	$	1,849,065	$	444,537,420	$	446,386,485	$	-

December 31, 2015
	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	331,479	$	259,240	$	33,839	$	624,558	$	110,168,152	$	110,792,710	$	-
Multi-family		-		-		-		-		41,182,067		41,182,067		-
Commercial		-		-		111,706		111,706		153,522,720		153,634,426		-
Construction and land		-		-		-		-		13,588,626		13,588,626		-
		331,479		259,240		145,545		736,264		318,461,565		319,197,829		-
Commercial business		-		-		87,254		87,254		89,656,257		89,743,511		-
Consumer:
Home equity		57,625		-		89,407		147,032		13,508,976		13,656,008		-
Automobile and other		500		-		-		500		3,523,196		3,523,696		-
		58,125		-		89,407		147,532		17,032,172		17,179,704		-
Total	$	389,604	$	259,240	$	322,206	$	971,050	$	425,149,994	$	426,121,044	$	-

13. 

NOTE 3 - LOANS (Continued)

All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed. Subsequent payments are applied to the outstanding principal balance.

Non-accrual loans, segregated by class, are as follows:

	June 30,		December 31,
	2016		2015
Real estate loans:
One-to-four family	$	1,388,481	$	601,833
Multi-family		614,784		995,659
Commercial		3,147,074		1,245,023
Construction and land		-		-
		5,150,339		2,842,515
Commercial business		323,584		263,233
Consumer:
Home equity		165,875		124,627
Automobile and other		66,120		8,558
		231,995		133,185
Total non-accrual loans	$	5,705,918	$	3,238,933

14. 

NOTE 3 - LOANS (Continued)

The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2016 and 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,158,110	$	-		$	-	$	37,680		$	1,195,790
Multi-family		411,519		-			3,000		(33,409	)		381,110
Commercial		2,449,438		-			2,060		(9,782	)		2,441,716
Construction and land		437,211		-			-		48,570			485,781
		4,456,278		-			5,060		43,059			4,504,397
Commercial business		1,328,516		-			1,103		64,252			1,393,871
Consumer
Home equity		280,466		-			12,442		(46,033	)		246,875
Automobile and other		71,460		(75	)		-		8,722			80,107
		351,926		(75	)		12,442		(37,311	)		326,982
Total	$	6,136,720	$	(75	)	$	18,605	$	70,000		$	6,225,250

Three months ended June 30, 2015
	Beginning Balance		Charge-offs		Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,315,813	$	-	$	-	$	(201,071	)	$	1,114,742
Multi-family		439,661		-		4,752		29,155			473,568
Commercial		2,110,850		-		3,971		76,378			2,191,199
Construction and land		729,089		-		-		(61,623	)		667,466
		4,595,413		-		8,723		(157,161	)		4,446,975
Commercial business		1,051,713		-		11,663		123,272			1,186,648
Consumer
Home equity		220,365		-		-		30,522			250,887
Automobile and other		10,816		-		331		3,367			14,514
		231,181		-		331		33,889			265,401
Total	$	5,878,307	$	-	$	20,717	$	-		$	5,899,024

15. 

NOTE 3 - LOANS (Continued)

Six months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,139,730	$	-		$	984	$	55,076		$	1,195,790
Multi-family		474,368		-			6,000		(99,258	)		381,110
Commercial		1,984,088		-			4,838		452,790			2,441,716
Construction and land		497,992		-			-		(12,211	)		485,781
		4,096,178		-			11,822		396,397			4,504,397
Commercial business		1,434,687		-			8,233		(49,049	)		1,393,871
Consumer:
Home equity		279,670		-			12,442		(45,237	)		246,875
Automobile and other		75,690		(13,546	)		74		17,889			80,107
		355,360		(13,546	)		12,516		(27,348	)		326,982
Total	$	5,886,225	$	(13,546	)	$	32,571	$	320,000		$	6,225,250

Six months ended June 30, 2015
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,119,762	$	(25,258	)	$	-	$	20,238		$	1,114,742
Multi-family		436,833		-			5,752		30,983			473,568
Commercial		1,650,290		(25,742	)		4,701		561,950			2,191,199
Construction and land		1,194,917		-			811,350		(1,338,801	)		667,466
		4,401,802		(51,000	)		821,803		(725,630	)		4,446,975
Commercial business		951,215		-			65,953		169,480			1,186,648
Consumer:
Home equity		198,150		-			-		52,737			250,887
Automobile and other		10,275		-			826		3,413			14,514
		208,425		-			826		56,150			265,401
Total	$	5,561,442	$	(51,000	)	$	888,582	$	(500,000	)	$	5,899,024

16. 

NOTE 3 - LOANS (Continued)

The following tables separate the allocation of the allowance for loan losses and the loan balances between loans evaluated both individually and collectively as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	309,439	$	886,351	$	1,195,790	$	1,434,910	$	112,435,509	$	113,870,419
Multi-family		-		381,110		381,110		4,184,634		32,613,191		36,797,825
Commercial		728,773		1,712,943		2,441,716		3,778,261		158,625,071		162,403,332
Construction and land		-		485,781		485,781		176,353		13,774,074		13,950,427
		1,038,212		3,466,185		4,504,397		9,574,158		317,447,845		327,022,003
Commercial business		230,210		1,163,661		1,393,871		480,459		102,388,737		102,869,196
Consumer:
Home equity		71,483		175,392		246,875		182,753		12,323,008		12,505,761
Automobile and other		9,345		70,762		80,107		66,120		3,923,405		3,989,525
		80,828		246,154		326,982		248,873		16,246,413		16,495,286
Total	$	1,349,250	$	4,876,000	$	6,225,250	$	10,303,490	$	436,082,995	$	446,386,485

December 31, 2015
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	116,724	$	1,023,006	$	1,139,730	$	905,974	$	109,886,736	$	110,792,710
Multi-family		-		474,368		474,368		995,659		40,186,408		41,182,067
Commercial		183,966		1,800,122		1,984,088		2,735,652		150,898,774		153,634,426
Construction and land		-		497,992		497,992		186,888		13,401,738		13,588,626
		300,690		3,795,488		4,096,178		4,824,173		314,373,656		319,197,829
Commercial business		259,787		1,174,900		1,434,687		586,103		89,157,408		89,743,511
Consumer:
Home equity		49,782		229,888		279,670		141,649		13,514,359		13,656,008
Automobile and other		-		75,690		75,690		8,558		3,515,138		3,523,696
		49,782		305,578		355,360		150,207		17,029,497		17,179,704
Total	$	610,259	$	5,275,966	$	5,886,225	$	5,560,483	$	420,560,561	$	426,121,044

17. 

NOTE 3 - LOANS (Continued)

Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements. The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends. Generally, all sizeable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credit’s risk profile. Credits classified as watch generally receive a review more frequently than annually. A watch classification is generally used for new businesses, for a business expanding in a new direction, or for borrowers experiencing temporary difficulties. The risk category of homogeneous loans, including consumer loans and smaller balance loans, is evaluated when the loan becomes delinquent. For special mention, substandard, and doubtful credit classifications, the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates.

The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:

Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.

Special Mention - A special mention asset has potential weaknesses that deserve management’s close attention. The asset may also be subject to a weak or in the future speculative market or to economic conditions, which may adversely affect the obligor. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard - A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the institution will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.

Doubtful - An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.

Loss - An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Company’s books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off. Therefore, there is no balance to report for credits categorized as loss.

18. 

NOTE 3 - LOANS (Continued)

The following tables present our credit quality indicators, segregated by class, as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	111,732,989	$	748,949	$	1,388,481	$	-	$	113,870,419
Multi-family		32,613,191		-		4,184,634		-		36,797,825
Commercial		151,696,933		5,171,386		5,535,013		-		162,403,332
Construction and land		13,463,977		-		486,450		-		13,950,427
		309,507,090		5,920,335		11,594,578		-		327,022,003
Commercial business		99,726,671		2,449,651		692,874		-		102,869,196
Consumer:
Home equity		12,339,886		-		165,875		-		12,505,761
Automobile and other		3,923,405		-		66,120		-		3,989,525
		16,263,291		-		231,995		-		16,495,286
Total	$	425,497,052	$	8,369,986	$	12,519,447	$	-	$	446,386,485

December 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	109,161,526	$	772,127	$	859,057	$	-	$	110,792,710
Multi-family		37,571,827		2,614,581		995,659		-		41,182,067
Commercial		143,837,755		5,295,878		4,500,793		-		153,634,426
Construction and land		13,143,977		-		444,649		-		13,588,626
		303,715,085		8,682,586		6,800,158		-		319,197,829
Commercial business		85,604,981		3,323,003		815,527		-		89,743,511
Consumer:
Home equity		13,504,552		-		68,241		83,215		13,656,008
Automobile and other		3,510,289		-		4,849		8,558		3,523,696
		17,014,841		-		73,090		91,773		17,179,704
Total	$	406,334,907	$	12,005,589	$	7,688,775	$	91,773	$	426,121,044

19. 

NOTE 3 - LOANS (Continued)

The following tables provide details of impaired loans, segregated by class, as of and for the periods indicated. The unpaid contractual balance represents the recorded balance prior to any partial charge-offs. The recorded investment represents customer balances net of any partial charge-offs recognized on the loans.

	As of June 30, 2016						As of December 31, 2015
	Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Real estate loans:
One-to-four family	$	431,065	$	431,065	$	-	$	648,750	$	648,750	$	-
Multi-family		4,667,112		4,184,634		-		1,478,137		995,659		-
Commercial		2,149,411		1,959,509		-		2,246,797		2,193,291		-
Construction and land		176,353		176,353		-		186,888		186,888		-
		7,423,941		6,751,561		-		4,560,572		4,024,588		-
Commercial business		230,116		230,116		-		87,254		87,254		-
Consumer:
Home equity		50,957		50,957		-		52,242		52,242
Automobile and other		-		-		-		8,558		8,558		-
		50,957		50,957				60,800		60,800		-
Subtotal	$	7,705,014	$	7,032,634	$	-	$	4,708,626	$	4,172,642	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	1,003,845	$	1,003,845	$	309,439	$	257,224	$	257,224	$	116,724
Commercial		1,818,752		1,818,752		728,773		685,759		542,361		183,966
		2,822,597		2,822,597		1,038,212		942,983		799,585		300,690
Commercial business		250,343		250,343		230,210		498,849		498,849		259,787
Consumer:
Home equity		131,796		131,796		71,483		89,407		89,407		49,782
Automobile and other		66,120		66,120		9,345		-		-		-
		197,916		197,916		80,828		89,407		89,407		49,782
Subtotal		3,270,856		3,270,856		1,349,250		1,531,239		1,387,841		610,259
Total	$	10,975,870	$	10,303,490	$	1,349,250	$	6,239,865	$	5,560,483	$	610,259

20. 

NOTE 3 - LOANS (Continued)

	For the three months ended June 30, 2016						For the three months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	555,453	$	464	$	-	$	660,569	$	1,713	$	-
Multi-family		2,578,784		43,758		-		1,130,198		-		-
Commercial		1,973,177		9,191		-		1,271,873		14,142		-
Construction and land		178,997		2,003		-		854,331		2,236		-
		5,286,411		55,416		-		3,916,971		18,091		-
Commercial business		158,685		-		-		-		-		-
Consumer:
Home equity		62,649		253		-		54,226		257		-
Automobile and other		5,847		-		-		-		-		-
		68,496		253		-		54,226		257		-
Subtotal	$	5,513,592	$	55,669	$	-	$	3,971,197	$	18,348	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	881,912	$	-	$	-	$	545,364	$	6,415	$	-
Commercial		1,819,051		-		-		815,183		4,262		-
		2,700,963		-		-		1,360,547		10,677		-
Commercial business		328,005		1,809		-		189,200		3,650		-
Consumer:
Home equity		155,691		-		-		51,220		115		-
Automobile and other		33,060		169		-		-		-		-
		188,751		169		-		51,220		115		-
Subtotal		3,217,719		1,978		-		1,600,967		14,442		-
Total	$	8,731,311	$	57,647	$	-	$	5,572,164	$	32,790	$	-

21. 

NOTE 3 - LOANS (Continued)

	For the six months ended June 30, 2016						For the six months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	586,552	$	930	$	-	$	655,561	$	3,419	$	-
Multi-family		2,051,076		43,758		-		1,200,392		-		-
Commercial		2,046,548		27,186		-		1,104,093		14,142		-
Construction and land		181,627		4,065		-		1,115,897		4,503		-
		4,865,803		75,939		-		4,075,943		22,064		-
Commercial business		134,874		-		-		8,365		-		-
Consumer:
Home equity		59,180		507		-		54,668		513		-
Automobile and other		6,751		-		-		-		-		-
		65,931		507		-		54,668		513		-
Subtotal	$	5,066,608	$	76,446	$	-	$	4,138,976	$	22,577	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	673,683	$	4,506	$	-	$	630,085	$	12,126	$	-
Multi-family		-		-		-		-		-		-
Commercial		1,393,488		501		-		1,043,065		8,532		-
Construction and land		-		-		-		-		-		-
		2,067,171		5,007		-		1,673,150		20,658		-
Commercial business		384,953		5,263		-		164,615		5,543		-
Consumer:
Home equity		133,596		227		-		37,447		115		-
Automobile and other		22,040		169		-		-		-		-
		155,636		396		-		37,447		115		-
Subtotal		2,607,760		10,666		-		1,875,212		26,316		-
Total	$	7,674,368	$	87,112	$	-	$	6,014,188	$	48,893	$	-

22. 

NOTE 3 - LOANS (Continued)

Troubled Debt Restructurings:

The Company had allocations of $1,241,024 of specific reserves on $8,993,694 of loans to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2016. The Company had $380,593 of allocations of specific reserves on $3,925,262 of loans to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2015. The amount the Company had committed to lend to loan customers that are classified as troubled debt restructurings was not material as of June 30, 2016 or December 31, 2015.

During the three and six months ended June 30, 2016, 11 loans totaling $6,317,451 were modified as troubled debt restructurings. The modifications included one or a combination of the following: payment and maturity changes not available in the market; and a reduction of the stated interest rate of the loan.

During the three and six months ended June 30, 2015, three loans totaling $1,163,970 were modified as troubled debt restructurings. The modifications included payment and maturity changes not available in the market.

The following tables present loans, by class, modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2016 and 2015:

Three and six months ended June 30, 2016
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		1	$	748,641	$	748,641
Multi-family		3		3,569,850		3,569,850
Commercial		2		1,699,300		1,699,300
		6		6,017,791		6,017,791
Commercial business		2		144,062		144,062
Consumer:
Home equity		1		89,478		89,478
Automobile and other		2		66,120		66,120
		3		155,598		155,598
Total		11	$	6,317,451	$	6,317,451

The troubled debt restructurings described above resulted in a net decrease in the allowance for loan losses of $94,638 during the three months ended June 30, 2016. During the three months ended March 31, 2016 a relationship totaling $2.5 million was classified as impaired and a reserve of $1.0 million was established. This relationship was restructured during the three months ended June 30, 2016, but no additional reserves were required. We experienced a net increase in the allowance for loan losses of $876,747 during the six months ended June 30, 2016. There were no charge offs during the three and six months ended June 30, 2016.

23. 

NOTE 3 - LOANS (Continued)

Three and six months ended June 30, 2015
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Commercial		2		1,001,803		1,001,803
Commercial business		1		162,167		162,167
Total		3	$	1,163,970	$	1,163,970

There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2016 and 2015.

A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.

The recorded investment in consumer loans collateralized by residential real estate property that was in the process of foreclosure was not material as of June 30, 2016 and December 31, 2015.

NOTE 4 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase are shown below.

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90 days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	21,817,155	$	-	$	-	$	-	$	21,817,155
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	21,817,155

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90 days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	19,732,766	$	-	$	-	$	-	$	19,732,766
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	19,732,766

Securities sold under agreements to repurchase were secured by securities with an approximate carrying amount of $41,259,000 and $26,458,000 at June 30, 2016 and December 31, 2015, respectively. The carrying amount at June 30, 2016 was comprised of $15,867,000 in securities issued by U.S. government agencies, $13,331,000 in mortgage-backed securities, and $12,061,000 in state and municipal securities. The carrying amount at December 31, 2015 was comprised of $13,962,000 in securities issued by U.S. government agencies, $8,419,000 in state and municipal securities, and $4,077,000 in mortgage-backed securities. Also included in total borrowings at June 30, 2016 and December 31, 2015 were Federal Home Loan Bank of Chicago (“FHLB”) advances of $15,999,000 and $15,996,000, respectively.

24. 

NOTE 4 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Continued)

Given that the value of the securities that are pledged fluctuate due to market conditions, the Company has no control over the market value. If the market value of the securities pledged falls below the repurchase price, the Company is obligated to promptly transfer additional securities, per the terms of the agreements to repurchase.

NOTE 5 – EARNINGS PER SHARE

Basic and diluted earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income	$	651,401	$	1,212,480	$	1,664,749	$	2,683,734
Basic potential common shares:
Basic weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Dilutive potential common shares		-		-		-		-
Diluted weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Basic and diluted earnings per share	$	0.09	$	0.17	$	0.24	$	0.38

NOTE 6 - FAIR VALUE MEASUREMENTS

The Company determines the fair market values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value.

· Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2 - Inputs other than quoted prices included with Level 1 that are observable for the asset or liability either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived from or corroborated by market data by correlation or other means.

· Level 3 - Unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Securities: The fair value of available-for-sale securities are determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar

25. 

NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)

characteristics. For these investments, the pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. They also use model processes, such as the Option Adjusted Spread model to assess interest rate impact and develop prepayment scenarios. In the case of municipal securities, information on the Bloomberg terminal such as credit ratings, credit support, and call features are used to set the matrix values for the issues, which will be used to determine the yields from which the market values are calculated each month. Because they are not price quote valuations, the pricing methods are considered Level 2 inputs. At this time all of the Company’s securities fall within the Level 2 hierarchy for pricing. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company currently has no securities classified within Level 3. During the six months ended June 30, 2016, there were no transfers between Level 1 and Level 2. The valuation methodology was consistent for the six months ended June 30, 2016 and the year ended December 31, 2015.

Foreclosed Assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Foreclosed assets are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Impaired Loans:  The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for both foreclosed assets and collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the loan department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.

Mortgage Servicing Rights: Annually, loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. If the carrying amount exceeds fair value, impairment is recorded so that the servicing asset is carried at fair value. Fair value is determined based on market prices for comparable mortgage servicing contracts, when available, resulting in a Level 2 classification, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data which also results in a Level 2 classification.

26. 

NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)

Assets measured at fair value on a recurring basis segregated by fair value hierarchy level during the periods ended June 30, 2016 and December 31, 2015 are summarized below:

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	32,013,569	$	-	$	32,013,569
State and municipal securities		-		45,373,880		-		45,373,880
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		30,937,335		-		30,937,335
Total securities available for sale	$	-	$	108,328,285	$	-	$	108,328,285

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	29,048,102	$	-	$	29,048,102
State and municipal securities		-		45,734,239		-		45,734,239
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		28,970,772		-		28,970,772
Total securities available for sale	$	-	$	103,756,614	$	-	$	103,756,614

27. 

NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)

Assets measured at fair value on a nonrecurring basis by fair value hierarchy level during the periods ended June 30, 2016 and December 31, 2015 are summarized below:

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Construction and land	$	-	$	-	$	1,566,126	$	1,566,126
Total foreclosed assets	$	-	$	-	$	1,566,126	$	1,566,126
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	694,406	$	694,406
Commercial		-		-		1,089,979		1,089,979
		-		-		1,784,385		1,784,385
Commercial business		-		-		20,132		20,132
Consumer:
Home equity		-		-		60,314		60,314
Automobile and other		-		-		56,775		56,775
		-		-		117,089		117,089
Total impaired loans	$	-	$	-	$	1,921,606	$	1,921,606

28. 

NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Commercial	$	-	$	-	$	19,000	$	19,000
Construction and land		-		-		604,500	$	604,500
Total foreclosed assets	$	-	$	-	$	623,500	$	623,500
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	140,500	$	140,500
Commercial		-		-		358,395		358,395
		-		-		498,895		498,895
Commercial business		-		-		239,062		239,062
Consumer:
Home equity		-		-		39,625		39,625
Total impaired loans	$	-	$	-	$	777,582	$	777,582
Mortgage Servicing Rights	$	-	$	1,109,720	$	-	$	1,109,720

Foreclosed assets are collateral dependent and are recorded at the fair value less costs to sell and may be revalued on a nonrecurring basis. Foreclosed assets measured at fair value less costs to sell on a nonrecurring basis at June 30, 2016, had a net carrying amount of $1,566,126, which was made up of the outstanding balance of $1,917,044, net of cumulative write-downs of $350,918, which included $45,195 of write-downs that occurred during the six months ended June 30, 2016. At December 31, 2015, foreclosed assets had a net carrying amount of $623,500, which was made up of the outstanding balance of $1,337,678, net of cumulative write-downs of $714,178 which includes $355,500 that occurred during the year ended December 31, 2015.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,270,856, with a valuation allowance of $1,349,250 at June 30, 2016, resulting in a net increase in provision for loan losses of $738,991 for the six months ended June 30, 2016. At December 31, 2015, impaired loans had a principal balance of $1,387,841, with a valuation allowance of $610,259.

29. 

NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)

The following table presents quantitative information about Level 3 fair value measurements for significant categories of financial instruments measured at fair value on a non-recurring basis at June 30, 2016:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	1,566,126	Sales Comparison	Adjustment for difference  between comparable sales	-11% to 31%		11.5	%
Impaired loans:
Real estate loans:
One-to-four family	$	504,626	Cost Approach	Adjustment for depreciation  and other factors	6.6%		6.6	%
One-to-four family	$	189,780	Fair Value of Collateral	Adjustment based on lease  purchase agreement	0% to 6%		6.2	%
Commercial		118,968	Sales Comparison	Adjustment for difference  between comparable sales	-53% to -34%		-42.2	%
Commercial		971,011	Income Approach	Investment Capitalization Rates	8.7%		8.7	%
Commercial business		20,132	Sales Comparison	Adjustment for difference  between comparable sales	-48% to 27%		5.2	%
Consumer loans:
Automobile and other		56,775	Fair Value of Collateral	Adjustment for depreciation  and other factors	-20% to -14%		-16.9	%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	604,500	Sales Comparison	Adjustment for difference  between comparable sales	-29% to 5%		-8.9	%
Impaired loans:
Real estate loans:
One-to-four family	$	140,500	Sales Comparison	Adjustment for difference  between comparable sales	-19% to -7%		-13.0	%
Commercial		88,000	Sales Comparison	Adjustment for difference  between comparable sales	9% to 16%		12.8	%
Commercial		270,395	Income Approach	Investment Capitalization Rates	9.0%		9.0	%
Commercial business		121,094	Fair Value of Collateral	Discount for type of business  assets	0% to 10%		7.0	%

30. 

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework established by ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents approximate fair values given the short-term nature and active market for U.S. currency and are classified as Level 1.

Interest-Earning Time Deposits: Due to the short-term nature of these deposits, the carrying amounts of these deposits approximate fair values. However, since it is unusual to observe a quoted price in an active market during the outstanding term, these deposits are classified as Level 2.

Federal Home Loan Bank Stock: The Company is required to maintain these equity securities as a member of the FHLB and in amounts as required by the FHLB. These equity securities are "restricted" in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily attainable.

Federal Reserve Bank Stock: The Company is required to maintain these equity securities as a member of the Federal Reserve Bank and in amounts as required by this institution. These equity securities are "restricted" in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily attainable.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segmented by type such as real estate, commercial business, and consumer loans. Each loan segment is further segregated by fixed and adjustable rate interest terms and by performing and non-performing classifications. The fair value of fixed rate loans is estimated by either observable market prices or by discounting future cash flows using discount rates that reflect the Company’s current pricing for loans with similar characteristics, such as loan type, pricing and remaining maturity, resulting in a Level 3 classification. Impaired loans that have no specific reserve are classified as Level 3. Impaired loans that have been written down to the fair value of the corresponding collateral, less estimated costs to sell, are not included in this table as those amounts were presented previously. The fair value computed is not necessarily an exit price.

Loans Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third-party investors resulting in a Level 2 classification.

Accrued Interest Receivable: The carrying amount of accrued interest receivable approximates its fair value. Accrued interest receivable related to interest-earning time deposits and securities is classified as Level 2. Accrued interest receivable related to loans is classified as Level 3.

Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified as Level 1. The carrying amounts for interest-bearing money market and savings accounts approximate their fair values at the reporting date and are classified as Level 1. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

31. 

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Federal Home Loan Bank Advances: The fair value of FHLB advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances resulting in a Level 2 classification.

Securities Sold Under Agreements to Repurchase: The carrying amounts of securities sold under agreements to repurchase approximate fair value resulting in a Level 2 classification.

Subordinated Debentures: This debenture is a floating rate instrument which re-prices quarterly. The fair value of variable rate trust preferred debentures approximate carrying value resulting in a Level 2 classification.

Accrued Interest Payable: The carrying amount of accrued interest payable approximates its fair value. Accrued interest payable related to interest-bearing money market and savings accounts is classified as Level 1. All other accrued interest payable is classified as Level 2.

The following information presents estimated fair values of the Company’s financial instruments as of June 30, 2016 and December 31, 2015 that have not been previously presented and the methods and assumptions used to estimate those fair values.

			Fair Value Measurements at June 30, 2016 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	66,628,349	$	66,628,349	$	-	$	-	$	66,628,349
Interest-earning time deposits		1,930,000		-		1,930,000		-		1,930,000
Federal Home Loan Bank stock		997,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		438,478,870		-		-		445,409,350		445,409,350
Loans held for sale		592,450		-		592,450		-		592,450
Accrued interest receivable		1,589,201		-		520,040		1,069,161		1,589,201
Financial liabilities:
Non-interest bearing deposits		78,715,230		78,715,230		-		-		78,715,230
Interest-bearing deposits		460,874,608		325,646,790		136,103,659		-		461,750,449
Federal Home Loan Bank advances		15,999,355		-		16,481,205		-		16,481,205
Securities sold under agreements to repurchase		21,817,155		-		21,817,155		-		21,817,155
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		254,015		15,928		238,087		-		254,015

32. 

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

			Fair Value Measurements at December 31, 2015 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	79,232,566	$	79,232,566	$	-	$	-	$	79,232,566
Interest-earning time deposits		1,685,000		-		1,685,000		-		1,685,000
Federal Home Loan Bank stock		1,747,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		419,686,001		-		-		421,795,305		421,795,305
Loans held for sale		1,078,785		-		1,078,785		-		1,078,785
Accrued interest receivable		1,620,309		-		510,231		1,110,078		1,620,309
Financial liabilities:
Non-interest bearing deposits		69,296,354		69,296,354		-		-		69,296,354
Interest-bearing deposits		463,861,939		330,689,715		133,976,643		-		464,666,358
Federal Home Loan Bank advances		15,995,485		-		16,315,262		-		16,315,262
Securities sold under agreement to repurchase		19,732,766		-		19,732,766		-		19,732,766
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		227,947		14,621		213,326		-		227,947

In addition, other assets and liabilities of the Company that are not defined as financial instruments, such as property and equipment, are not included in the above disclosures.

33. 

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables summarize the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2016, and summarize the significant amounts reclassified out of each component of accumulated other comprehensive income for the six months ended June 30, 2016. There was no reclassification out of accumulated other comprehensive income for the three months ended June 30, 2016.

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities		Total
Accumulated Other Comprehensive Income at April 1, 2016	$	1,029,620	$	1,029,620
Other comprehensive income before reclassifications		467,442		467,442
Amount reclassified from accumulated other comprehensive income		-		-
Net current-period other comprehensive income		467,442		467,442
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062	$	1,497,062

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2016	$	397,994		$	397,994
Other comprehensive income before reclassifications		1,116,868			1,116,868
Amount reclassified from accumulated other comprehensive income(2)		(17,800	)		(17,800	)
Net current-period other comprehensive income		1,099,068			1,099,068
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062		$	1,497,062

⁽¹⁾ All amounts are net of tax.

⁽²⁾ See table below for details about reclassifications.

Reclassifications out of Accumulated Other Comprehensive Income
For the Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	29,181		Gain on sale of securities
		(11,381	)	Tax expense
Total reclassifications for the period	$	17,800		Net of tax

34. 

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME (Continued)

The following tables summarize the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2015. There was no reclassification out of accumulated other comprehensive income for these periods.

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at April 1, 2015	$	718,274		$	718,274
Other comprehensive loss before reclassifications		(696,968	)		(696,968	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(696,968	)		(696,968	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2015	$	197,331		$	197,331
Other comprehensive loss before reclassifications		(176,025	)		(176,025	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(176,025	)		(176,025	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

NOTE 9 – SUBSEQUENT EVENTS

On July 15, 2016, First Mid received approval of the Merger from the Board of Governors of the Federal Reserve System. Subject to the satisfaction of customary closing conditions in the Merger Agreement and the approval of the stockholders of both First Mid and First Clover Leaf, the Merger is anticipated to be completed in the second half of 2016.

On July 26, 2016, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.06 per share for the quarter ended June 30, 2016. The dividend will be payable to stockholders of record as of August 19, 2016 and is expected to be paid on August 26, 2016.

35. 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

When used in this Quarterly Report, the words or phrases “will,” “are expected to,” “we believe,” “should,” “is anticipated,” “estimate,” “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including, but not limited to, (i) changes in general economic conditions, either nationally, internationally or in our market areas, that are worse than expected; (ii) competition among depository and other financial institutions; (iii) inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; (iv) adverse changes in the securities markets; changes in laws or government regulations or policies affecting financial institutions, including Basel III, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations issued thereunder; (v) our ability to enter new markets successfully and capitalize on growth opportunities; (vi) the inability to complete the proposed transactions with First Mid due to the failure to obtain the required stockholder approvals; (vii) the failure to satisfy other conditions to completion of the proposed transaction with First Mid, including receipt of required regulatory and other approvals; (viii) the effect of the announcement of the transaction with First Mid on customer relationships and operating results; (ix) our ability to successfully integrate acquired entities, if any; (x) changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight Board; (xi) changes resulting from shutdowns of the federal government; (xii) changes in our organization, compensation and benefit plans; (xii) changes in our financial condition or results of operations that reduce capital available to pay dividends; and (xiv) changes in the financial condition or future prospects of issuers of securities that we own, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements, which only speak as of the date made.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

First Clover Leaf considers the allowance for loan losses to be a critical accounting estimate due to the higher degree of judgment and complexity than other significant accounting estimates.

Allowance for loan losses. The allowance for loan losses is a valuation account that reflects our evaluation of the probable incurred credit losses in our loan portfolio. We maintain the allowance through provisions for loan losses that we charge against income. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

Our evaluation of risk in maintaining the allowance for loan losses includes the review of all loans on which the collectibility of principal may not be reasonably assured. We consider the following factors as part of this evaluation: our historical loan loss experience, adverse situations that may affect the borrower’s ability to repay, and estimated value of any underlying collateral. Management also evaluates the total balance of the allowance for loan losses based on several factors that are not loan specific but are reflective of the probable incurred losses in the loan portfolio, including prevailing economic conditions such as housing trends, inflation rates and unemployment rates, and geographic concentrations of loans within the Bank’s immediate market area.

36. 

There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable incurred losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.

In addition, the Office of the Comptroller of the Currency (“OCC”), as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses. The OCC may require us to increase the allowance for loan losses based on its judgments of information available to it at the time of its examination, thereby adversely affecting our results of operations.

Overview

First Clover Leaf is a bank holding company incorporated under the laws of Maryland. Located in Edwardsville Illinois, First Clover Leaf has a wholly-owned subsidiary, First Clover Leaf Bank, National Association (“First Clover Leaf Bank”), which is a community bank operating with six branch locations in Madison and St. Clair Counties in Illinois along with one branch location in Clayton, Missouri. First Clover Leaf Bank is the source of all of the Company’s revenue. First Clover Leaf common stock is listed on the NASDAQ Capital Market and is traded under the symbol “FCLF”.

First Clover Leaf’s results of operations depend primarily on net interest income. Net interest income is the difference between the interest earned on interest-earning assets, and the interest paid on interest-bearing liabilities. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Moreover, the results of operations may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and the actions of regulatory authorities.

On April 26, 2016, the Company and First Mid, entered into an Agreement and Plan of Merger (as amended by the First Amendment to Agreement and Plan of Merger entered into as of June 6, 2016, and as may be further amended, the “Merger Agreement”), pursuant to which First Mid will acquire the Company and First Clover Leaf Bank (the “Merger”). Until the consummation of the Merger, we anticipate continuing to focus on our loan and deposit growth strategies. We expect to also incur higher non-interest expenses in the upcoming quarters as we work toward closing the transaction. Specifically, we have incurred increased professional fees as well as other costs necessary in connection with the transaction. For the six months ended June 30, 2016, we continued our emphasis on growth, specifically on earning assets. As of June 30, 2016, our loan balance grew $19.9 million to $440.4 million compared to $420.5 million at December 31, 2015. Our growth in deposits continued as our core deposits, excluding broker deposits, grew $23.2 million to $496.7 million at June 30, 2016 compared to $473.5 million at December 31, 2015.

Our net income decreased to $1.7 million for the six months ended June 30, 2016 from $2.7 million for the same period in 2015. The decrease in net income resulted primarily from merger related expenses in compensation and employee benefits and in professional fees. Additionally, we experienced an increase in provision for loan losses compared to a $500,000 credit for loan losses in the previous year. These increased expenses were partially offset by higher net interest income and by lower income taxes. Basic and diluted earnings per share were $0.24 for the six months ended June 30, 2016 compared to $0.38 for the comparable period in 2015.

The following discussion and analysis of our financial condition and asset quality provides a comparison of our results as of June 30, 2016 to December 31, 2015, while our operating results compare the three and six months ended June 30, 2016 to the three and six months ended June 30, 2015. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes.

37. 

Financial Condition

Total Assets.  Total assets increased $10.4 million to $665.3 million at June 30, 2016 from $654.9 million at December 31, 2015. The increase was primarily due to an increase in loans and an increase in securities available for sale partially offset by lower balances of cash and cash equivalents.

Cash and cash equivalents decreased $12.6 million to $66.6 million at June 30, 2016 from $79.2 million at December 31, 2015 primarily due to an increase in loans, partially offset by an increase in deposits.

Loans, net, increased $19.9 million to $440.4 million at June 30, 2016 from $420.5 million at December 31, 2015. The loan categories with significant increases were commercial business and commercial real estate. Commercial business increased $13.1 million to $102.9 million at June 30, 2016 from $89.7 million at December 31, 2015. Commercial real estate increased $8.8 million to $162.4 million at June 30, 2016 from $153.6 million at December 31, 2015. One-to-four family loans increased $3.1 million to $113.9 million at June 30, 2016 from $110.8 million at December 31, 2015. These increases were partially offset by decreases in multi-family and home equity loan categories. Multi-family loans decreased $4.4 million to $36.8 million at June 30, 2016 from $41.2 million at December 31, 2015. Home equity loans decreased $1.2 million to $12.5 million at June 30, 2016 from $13.7 million at December 31, 2015.

Securities available for sale increased $4.6 million to $108.3 million at June 30, 2016 from $103.8 million at December 31, 2015. The increase was due primarily to purchases of $21.9 million partially offset by calls, maturities and principal repayments of $15.1 million and sales of $3.7 million. Overall, our U.S. government agency securities increased $3.0 million, mortgage backed securities increased $2.0 million, and state and municipal securities decreased $360,359.

Total Liabilities.  Total liabilities increased $8.5 million to $583.1 million at June 30, 2016 from $574.6 million at December 31, 2015. The increase was primarily due to increases in deposits and in securities sold under agreements to repurchase.

Deposits increased $6.4 million to $539.6 million at June 30, 2016 from $533.2 million at December 31, 2015. The increase in deposits was primarily due to an increase in core deposits partially offset by reduction of $16.8 million in brokered deposits.

Securities sold under agreements to repurchase increased $2.1 million to $21.8 million at June 30, 2016 from $19.7 million at December 31, 2015. This increase was due primarily to normal fluctuations in these business accounts.

Stockholders’ Equity.  Stockholders’ equity increased to $82.2 million at June 30, 2016 from $80.3 million at December 31, 2015 primarily due to net income of $1.7 million and an increase of $1.1 million in accumulated other comprehensive income, partially offset by the payment of cash dividends to the holders of our common stock in the amount of $840,480.

38. 

Asset Quality

The Company experienced an increase in non-performing assets as of June 30, 2016 compared to December 31, 2015. The following tables set forth information with respect to the Company’s non-performing and impaired loans and other non-performing assets at the dates indicated:

	June 30,		December 31,
	2016		2015
Non-accrual loans(1)		5,705,918		3,238,933
Other impaired loans		4,597,572		2,321,550
Total non-performing and impaired loans		10,303,490		5,560,483
Foreclosed assets		2,851,367		3,059,101
Total non-performing assets	$	13,154,857	$	8,619,584

⁽¹⁾ The entire balance was also classified as impaired as of June 30, 2016 and December 31, 2015.

	June 30,			December 31,
	2016			2015
Non-performing assets to total assets		1.98	%		1.32	%
Non-performing and impaired loans to total loans		2.31			1.30
Allowance for loan losses to non-performing and impaired loans		60.42			105.86
Allowance for loan losses to total loans		1.39			1.38

Non-Performing and Impaired Loans and Other Non-Performing Assets. At June 30, 2016, our total non-performing assets increased $4.6 million to $13.2 million compared to $8.6 million at December 31, 2015. At June 30, 2016, the Company’s non-accrual loans increased to $5.7 million from $3.2 million at December 31, 2015. This increase was primarily due to a $2.6 million loan that was newly classified as non-accrual during the first quarter of 2016.

At June 30, 2016, the Bank had one relationship classified as non-accrual with a balance over $1.0 million. The relationship was a $2.5 million credit secured by a special purpose facility. This credit was placed on non-accrual status during March 2016. Prior to being placed on non-accrual, the loan was current in principal and interest payments, but it was experiencing cash flow difficulties due to low utilization rates. The borrower has signed a forbearance agreement with the Bank which includes several provisions that will improve the viability of the business and therefore the value to be received in a sale of the property. The Bank has recorded a $1.0 million allowance on the credit for what we estimate the shortfall in collateral may be to cover the outstanding balance. The loan is performing in compliance with the restructured terms.

At June 30, 2016, the Bank also had two relationships classified as non-accrual with outstanding balances over $500,000. The first relationship is a $710,000 credit secured by a special purpose facility. The loan was placed on non-accrual status during May 2016. The borrower has been experiencing insufficient cash flow and the credit has been restructured to allow the borrower time to improve cash flow. The second relationship was a $615,000 credit to a real estate investor. This credit was placed on non-accrual status in 2012. The investor has experienced cash flow difficulties due to higher vacancy rates and the need for property repairs. Since being placed on non-accrual, $1.7 million in pay-downs from the sale of collateral has been received on this relationship, and a charge-off of $483,000 was recorded in June 2013. A property manager is overseeing the daily operations, and all non-rented properties have been listed for sale. The borrower has signed a forbearance agreement with the Bank to aid in selling some of the properties to further reduce the debt.

39. 

In addition to the non-accrual loans discussed above, we have loans that were accruing interest that we categorize as impaired due to observed credit deterioration or restructured status. At June 30, 2016, there were five credits in this classification, with a total balance of $4.6 million. Of this balance, one relationship, comprised of two credits, totaled $3.6 million. The largest loan in this relationship at June 30, 2016 was a $2.6 million credit secured by a multi-family property that was experiencing cash flow difficulties due to high vacancy rates. The second loan in this relationship is a $955,000 credit secured by a separate multi-family property that required an additional loan advance to finance the payment of real estate taxes. The property was experiencing cash flow issues since proceeds from the operation of this collateral were being used to assist the larger credit. In comparison, there were six loans that met this classification at December 31, 2015 with a total balance of $2.3 million.

The following table presents a summary of our past due loans as of June 30, 2016 and December 31, 2015:

	June 30,		December 31,
	2016		2015
Loans 30-59 Days Past Due	$	193,364	$	389,604
Loans 60-89 Days Past Due		902,636		259,240
Loans 90 or more Days Past Due		753,065		322,206
Total Past Due Loans	$	1,849,065	$	971,050

Past due balances increased $878,000 to $1.8 million at June 30, 2016 from $971,000 at December 31, 2015. The category with the largest increase was the 60-89 day category which increased $643,000. This increase is due to a $790,000 credit that became past due early in the second quarter. The 90 or more days past due category increased $431,000 from December 31, 2015. This was primarily due to two loans in the 60-89 day category that exceeded 90 days past due during the first quarter and remain past due at this reporting, and two additional loans in the 60-89 day category that exceeded 90 days past due during the second quarter.

The following table presents a summary of our credit quality indicators as of June 30, 2016 and December 31, 2015:

	June 30,		December 31,
	2016		2015
Pass	$	425,497,052	$	406,334,907
Special Mention		8,369,986		12,005,589
Substandard		12,519,447		7,688,775
Doubtful		-		91,773
Total Loans	$	446,386,485	$	426,121,044

At June 30, 2016, loans classified as special mention decreased $3.6 million from $12.0 million at December 31, 2015. The decrease was primarily a result of two commercial business loans totaling $1.0 million that were upgraded to the pass category, and two credits totaling $3.6 million reclassified from the special mention to substandard category during the second quarter of 2016. Loans classified as substandard increased $4.8 million to $12.5 million at June 30, 2016 compared to $7.7 million at December 31, 2015. The increase was due to one credit that was reclassified from pass to substandard during the first quarter of 2016, and the two credits previously mentioned totaling $3.6 million reclassified from special mention to substandard during the second quarter of 2016. These two credits are both classified as impaired, but they are performing in accordance with their modified terms.

At June 30, 2016, the Bank had six properties classified as foreclosed assets valued at $2.9 million. The foreclosed asset balance declined $200,000 from December 31, 2015 due to five lot sales that occurred during the first half of 2016, and a write down on a residential lot development during the

40. 

second quarter of 2016. The collateral on the remaining properties consists of farmland, two residential lot developments, a commercial development, and two single-family residences. All of these properties were transferred into foreclosed assets at the property’s fair value, less estimated costs of disposal, at the date of foreclosure. Initial valuation adjustments, if any, are charged against the allowance for loan losses. The properties are evaluated on a non-recurring basis to verify that the recorded amount is supported by its current fair value.

Results of Operations

General.  We recorded net income of $651,401 and $1.2 million for the three months ended June 30, 2016 and 2015, respectively. The decrease in net income for the three months ended June 30, 2016 resulted primarily from merger related expenses in compensation and employee benefits and in professional fees, along with a provision for loan losses, partially offset by higher net interest income and by lower income taxes. We recorded net income of $1.7 million and $2.7 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in net income for the six months ended June 30, 2016 resulted primarily from increases in compensation and employee benefits and in professional fees due to merger related expenses, and an increase in provision for loan losses compared to a $500,000 credit for loan losses in the previous year, partially offset by higher net interest income and by lower income taxes.

During the three months ended June 30, 2016, yields on loans decreased 0.30% to 4.12% compared to 4.42% for the three months ended June 30, 2015. The higher yield during the 2015 period included an interest recovery of $189,000 from non-accrual loan payoffs. Without this interest recovery, our yield on loans would have been 4.23% for the three months ended June 30, 2015.

During the six months ended June 30, 2016, yields on loans decreased 0.23% to 4.13% compared to 4.36% for the six months ended June 30, 2015. The higher yield during the 2015 period included an interest recovery of $250,000 from non-accrual loan payoffs. Without this interest recovery, our yield on loans would have been 4.24% for the six months ended June 30, 2015. The decline in yield was primarily due to longer-term assets re-pricing at lower current rates as well as competitive market forces driving down rates. Our commercial loans are the most sensitive to changes in market interest rates because they often have shorter terms to maturity, and, therefore, the interest rates adjust more frequently.

We have experienced a slight increase in the rate of time deposits as they mature from shorter term time deposits into longer term time deposits. Our ability to lower rates paid on deposits is limited due to the already low deposit rates and the competitive environment in which we operate. The Company’s yield on earning assets and cost of funds are largely dependent on the interest rate environment. The competitive and market forces continue to pressure the yield on our earning assets.

Net interest income.   Net interest income increased to $4.5 million for the three months ended June 30, 2016, from $4.4 million for the comparable period in 2015, primarily due to an increase of $43.6 million in average outstanding loans and from an increased yield on interest-earning deposits, partially offset by higher interest expense from an increased rate on time deposits and a higher average balance of FHLB advances. Net interest income increased to $9.0 million for the six months ended June 30, 2016, from $8.8 million for the comparable period in 2015, primarily due to an increase of $36.8 million in average outstanding loans and from an increased yield on interest-earning deposits, partially offset by higher interest expense from an increased rate on time deposits and a higher average balance of FHLB advances. Net average interest-earning assets were $101.8 million for the six months ended June 30, 2016, compared to $87.6 million for the same period in 2015. The ratio of average interest-earning assets to average interest-bearing liabilities increased to 120.28% for the six months ended June 30, 2016 from 118.96% for the same period in 2015. Our interest rate spread decreased to 2.89% for the six months ended June 30, 2016, compared to 3.14% for the comparable period in 2015. Our net interest margin decreased to 2.99% for the six months ended June 30, 2016 compared to 3.22% for the same period in 2015. The average rate earned on interest-earning assets decreased by 20 basis points for the six months ended June 30, 2016 to 3.45% from 3.65% for the same period in 2015, while the average rate paid on interest-bearing liabilities increased five basis points for the six months ended June 30, 2016 to 0.56% from 0.51% for the same period in 2015.

41. 

The following tables set forth the average balance sheets, average yields and cost of funds, and certain other information for the periods indicated. No tax-equivalent yield adjustments on loans or securities were made. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred loan fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields and rates have been annualized.

	Three Months Ended June 30,							Three Months Ended June 30,
	2016							2015
	Average Outstanding Balance		Interest		Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans, gross (1) (2) (3)	$	445,883	$	4,567		4.12	%	$	402,333	$	4,430		4.42	%
Securities (1)		107,243		544		2.04	%		107,170		538		2.01	%
Federal Reserve Bank stock		1,677		25		6.00	%		1,677		25		6.00	%
Interest-earning balances from depository institutions		64,632		96		0.60	%		39,570		29		0.29	%
Total interest-earning assets		619,435		5,232		3.40	%		550,750		5,022		3.66	%
Non-interest-earning assets		56,147							52,499
Total assets	$	675,582						$	603,249
Interest-bearing liabilities:
Interest-bearing transaction	$	302,726	$	176		0.23	%	$	272,232	$	159		0.23	%
Savings deposits		30,594		14		0.18	%		30,571		13		0.17	%
Time deposits		134,243		419		1.26	%		127,831		350		1.10	%
Federal Home Loan Bank advances		15,998		66		1.66	%		11,721		41		1.40	%
Securities sold under agreements to repurchase		26,662		11		0.17	%		16,066		1		0.02	%
Subordinated debentures		4,000		26		2.61	%		4,000		22		2.21	%
Total interest-bearing liabilities		514,223		712		0.56	%		462,421		586		0.51	%
Non-interest-bearing liabilities		79,592							61,711
Total liabilities		593,815							524,132
Stockholders’ equity		81,767							79,117
Total liabilities and stockholders’ equity	$	675,582						$	603,249
Net interest income			$	4,520						$	4,436
Net interest rate spread (4)						2.84	%						3.15	%
Net interest-earning assets (5)	$	105,212						$	88,329
Net interest margin (6)						2.93	%						3.23	%
Ratio of interest-earning assets to interest-bearing liabilities						120.46	%						119.10	%

⁽¹⁾ Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 3.13% and 3.42% for the three months ended June 30, 2016 and 2015, respectively. The tax equivalent basis was computed by calculating the deemed interest on tax-exempt loans and municipal bonds that would have been earned on a fully taxable basis to yield the same after-tax income using a combined federal and state marginal tax rate of 36%.

⁽²⁾ Interest on loans includes loan fees collected in the amount of $57,976 and $37,405 for the three months ended June 30, 2016 and 2015, respectively.

⁽³⁾ Interest on loans includes $189,000 of interest recaptured from non-accrual loan payoffs for the three months ended June 30, 2015.

⁽⁴⁾ Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

⁽⁵⁾ Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

⁽⁶⁾ Net interest margin represents net interest income divided by average total interest-earning assets.

42. 

	Six Months Ended June 30,							Six Months Ended June 30,
	2016							2015
	Average Outstanding Balance		Interest		Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans, gross (1) (2) (3)	$	439,998	$	9,030		4.13	%	$	403,195	$	8,723		4.36	%
Securities (1)		107,253		1,111		2.08	%		106,049		1,111		2.11	%
Federal Reserve Bank stock		1,677		50		6.00	%		1,677		50		6.00	%
Interest-earning balances from depository institutions		54,949		172		0.63	%		38,920		56		0.29	%
Total interest-earning assets		603,877		10,363		3.45	%		549,841		9,940		3.65	%
Non-interest-earning assets		55,073							51,225
Total assets	$	658,950						$	601,066
Interest-bearing liabilities:
Interest-bearing transaction	$	290,859	$	344		0.24	%	$	277,625	$	334		0.24	%
Savings deposits		30,561		29		0.19	%		30,326		25		0.17	%
Time deposits		134,184		818		1.23	%		127,351		688		1.09	%
Federal Home Loan Bank advances		15,997		132		1.66	%		7,130		66		1.87	%
Securities sold under agreements to repurchase		26,443		24		0.18	%		15,764		2		0.03	%
Subordinated debentures		4,000		51		2.56	%		4,000		44		2.22	%
Total interest-bearing liabilities		502,044		1,398		0.56	%		462,196		1,159		0.51	%
Non-interest-bearing liabilities		75,446							60,320
Total liabilities		577,490							522,516
Stockholders’ equity		81,460							78,550
Total liabilities and stockholders’ equity	$	658,950						$	601,066
Net interest income			$	8,965						$	8,781
Net interest rate spread (4)						2.89	%						3.14	%
Net interest-earning assets (5)	$	101,833						$	87,645
Net interest margin (6)						2.99	%						3.22	%
Ratio of interest-earning assets to interest-bearing liabilities						120.28	%						118.96	%

⁽¹⁾ Yields on loans and securities have not been adjusted to a tax-equivalent basis. Net interest margin on a fully tax-equivalent basis would have been 3.18% and 3.41% for the six months ended June 30, 2016 and 2015, respectively. The tax equivalent basis was computed by calculating the deemed interest on tax-exempt loans and municipal bonds that would have been earned on a fully taxable basis to yield the same after-tax income using a combined federal and state marginal tax rate of 36%.

⁽²⁾ Interest on loans includes loan fees collected in the amount of $67,575 and $56,822 for the six months ended June 30, 2016 and 2015, respectively.

⁽³⁾ Interest on loans includes $250,000 of interest recaptured from non-accrual loan payoffs for the six months ended June 30, 2015.

⁽⁴⁾ Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

⁽⁵⁾ Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

⁽⁶⁾ Net interest margin represents net interest income divided by average total interest-earning assets.

Interest and dividend income.  The relative components of interest income vary from time to time based on the availability and interest rates of loans, securities and other interest-earning assets. Interest and fee income on loans increased to $4.6 million for the three months ended June 30, 2016 from $4.4 million for the same period in 2015. This increase was primarily due to a $43.6 million increase in average outstanding loans partially offset by a decline in yield. The three months ended June 30, 2015 also included interest recaptured from non-accrual loan payoffs of $189,000. Interest and fee income on loans increased to $9.0 million for the six months ended June 30, 2016 from $8.7 million for the same period in

43. 

2015. This increase was primarily due to a $36.8 million increase in average outstanding loans partially offset by a decline in yield on loans. The six months ended June 30, 2015 also included interest recaptured from non-accrual loan payoffs of $250,000. The average balance of loans was $440.0 million and $403.2 million for the six months ended June 30, 2016 and 2015, respectively. The average yield on loans decreased to 4.13% for the six months ended June 30, 2016 from 4.36% for the comparable period in 2015. Without the interest recapture, the yield on loans would have been 4.24% instead of 4.36% for the six months ended June 30, 2015.

Interest income on securities increased slightly to $544,000 for the three months ended June 30, 2016 from $538,000 for the same period in 2015. Interest income on securities remained at $1.1 million for the six months ended June 30, 2016 and 2015. Interest income on securities remained flat primarily due to a slight decline in yield partially offset by a higher average balance of securities. The average yield on securities decreased to 2.08% for the six months ended June 30, 2016 from 2.11% for the comparable period in 2015. The average balance of securities was $107.3 million and $106.0 million for the six months ended June 30, 2016 and 2015, respectively.

Interest on interest-earning deposits increased to $96,000 for the three months ended June 30, 2016 from $29,000 for the same period in 2015. Interest on interest-earning deposits increased to $172,000 for the six months ended June 30, 2016 from $56,000 for the same period in 2015. The increase in interest on interest-earning deposits was primarily due to an increase in yield along with a higher average balance. The average yield on interest-earning deposits was 0.63% and 0.29% for the six months ended June 30, 2016 and 2015, respectively. The average balance of interest-earning deposits was $54.9 million and $38.9 million for the six months ended June 30, 2016 and 2015, respectively.

Interest expense.  Interest expense on deposits increased to $609,000 for the three months ended June 30, 2016, from $523,000 for the comparable period in 2015. Interest expense on deposits increased to $1.2 million for the six months ended June 30, 2016, from $1.0 million for the comparable period in 2015. The increase in interest expense was primarily due to an increase in rate along with a higher average balance of time deposits. The average rate on time deposits was 1.23% and 1.09% for the six months ended June 30, 2016 and 2015, respectively. The average balance of time deposits increased to $134.2 million for the six months ended June 30, 2016 from $127.4 million for the same period in 2015.

Interest expense on FHLB advances increased to $66,000 for the three months ended June 30, 2016 compared to $41,000 for the same period in 2015. Interest expense on FHLB advances increased to $132,000 for the six months ended June 30, 2016 compared to $66,000 for the same period in 2015. The increase in interest expense was due to an increase in the average balance partially offset by a decline in the average rate paid. The average balance of FHLB advances was $16.0 million and $7.1 million for the six months ended June 30, 2016 and 2015, respectively. The average rate on FHLB advances decreased to 1.66% for the six months ended June 30, 2016 compared to 1.87% for the same period in 2015.

Interest on securities sold under agreements to repurchase increased to $11,000 for the three months ended June 30, 2016 compared to $1,000 for the comparable period in 2015. Interest on securities sold under agreements to repurchase increased to $24,000 for the six months ended June 30, 2016 compared to $2,000 for the comparable period in 2015. The increase in interest expense was primarily due to a higher average balance along with an increase in rate. The average balance of securities sold under agreements to repurchase was $26.4 million and $15.8 million for the six months ended June 30, 2016 and 2015, respectively. The average rate increased to 0.18% for the six months ended June 30, 2016 from 0.03% for the comparable period in 2015.

Provision for loan losses.  For the three months ended June 30, 2016, the Bank recorded provision expense of $70,000 compared to no provision expense for the three months ended June 30, 2015. For the six months ended June 30, 2016, the Bank recorded provision expense of $320,000 compared to a $500,000 credit provision for the six months ended June 30, 2015. The credit provision was recorded in June 2015 as management determined it was appropriate due to improvements in credit quality trends and recoveries received on previously charged off loans. The provision expense recorded for the six months ended June 30, 2016 was due primarily to a downgrade on a $2.5 million commercial real estate loan that was tested for impairment as well as an overall increase in non-performing loans. Non-performing and

44. 

impaired loans totaled $10.3 million and $5.6 million at June 30, 2016 and December 31, 2015, respectively. We received recoveries of $33,000 and $889,000 and recorded charge-offs of $14,000 and $51,000 for the six months ended June 30, 2016 and 2015, respectively.

The provision for loan losses is based upon management’s consideration of current economic conditions; First Clover Leaf’s loan portfolio composition and historical loss experience coupled with current market valuations on collateral; and management’s estimate of probable losses in the portfolio as well as the level of non-performing and impaired loans. We continue to review and make adjustments to certain qualitative factors as appropriate due to our continued expansion into newer markets and continued segment concentration in real estate loans that are collateral dependent. Management also reviews individual loans for which full collectability may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. This evaluation is ongoing and results in variations in First Clover Leaf’s provision for loan losses. There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable incurred losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.

Non-interest income. Non-interest income decreased to $706,000 for the three months ended June 30, 2016 compared to $741,000 for the same period in 2015. Non-interest income remained at $1.3 million for the six months ended June 30, 2016 compared to 2015. During the six months ended June 30, 2016, we experienced a reduction in gain on sale of loans partially offset by increases in service fees on deposit accounts and gain on the sale of securities compared to the same period in 2015.

Service fees on deposit accounts increased to $151,000 for the three months ended June 30, 2016 from $123,000 for the same period in 2015. Service fees on deposit accounts increased to $278,000 for the six months ended June 30, 2016 from $230,000 for the same period in 2015. This increase was due to higher non-sufficient fund income and treasury management fees during the three and six months ended June 30, 2016.

Gain on sale of securities was $29,000 for the six months ended June 30, 2016. During the six months ended June 30, 2016, we sold $3.7 million of securities. There were no sales of securities during the three months ended June 30, 2016 or for the three and six months ended June 30, 2015.

Gain on sale of loans totaled $225,000 and $295,000 for the three months ended June 30, 2016 and 2015, respectively. Gain on sale of loans totaled $351,000 and $476,000 for the six months ended June 30, 2016 and 2015, respectively. These decreases were due to a lower volume of loan sales for the three and six months ended June 30, 2016 compared to the same periods in 2015. We sold loans totaling $9.3 million and $10.3 million during the three months ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2016 and 2015, we sold loans totaling $14.2 million and $17.3 million, respectively.

Non-interest expense. Non-interest expense increased to $4.4 million for the three months ended June 30, 2016 from $3.5 million for the same period in 2015. Non-interest expense increased to $7.9 million for the six months ended June 30, 2016 from $6.9 million for the same period in 2015. The increase in non-interest expense was primarily due to merger related expenses in compensation and employee benefits and in professional fees for the three and six months ended June 30, 2016.

Compensation and employee benefits increased to $2.4 million for the three months ended June 30, 2016 from $1.9 million for the same period in 2015. Compensation and employee benefits increased to $4.4 million for the six months ended June 30, 2016 from $3.8 million for the same period in 2015. These increases were primarily due to payments of $533,000 in accordance with a separation and release agreement.

Professional fees increased to $515,000 for the three months ended June 30, 2016 compared to $134,000 for the same period in 2015. Professional fees increased to $661,000 for the six months ended June 30, 2016 compared to $261,000 for the same period in 2015. These increases were primarily due to merger expenses of $387,000 related to consulting, legal, and auditing fees.

45. 

Income taxes.  Income tax expense decreased to $57,000 for the three months ended June 30, 2016 compared to $457,000 for the same period in 2015. Income tax expense decreased to $353,000 for the six months ended June 30, 2016 compared to $1.1 million for the same period in 2015. These decreases were primarily due to a reduction in the effective tax rates resulting from tax exempt income comprising a higher portion of total income, tax credits resulting from a loss at the holding company generated by increased merger expenses, along with lower pre-tax income for the three and six months ended June 30, 2016. The effective tax rate was 8.0% and 17.5% for the three and six months ended June 30, 2016, respectively compared to 27.4% and 28.6% for the comparable periods in 2015, respectively.

Liquidity and Capital Resources

We maintain liquid assets at levels considered adequate to meet liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, amortization and prepayment of loans, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2016 and December 31, 2015, $66.6 million and $79.2 million, respectively, were invested in cash and cash equivalents. The primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit and securities sold under agreements to repurchase accounts, and advances from the FHLB.

Cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statements of Cash Flows included with the Consolidated Financial Statements under Item 1 of Part I of this 10-Q.

Our primary investing activities are the origination of loans and the purchase of investment securities. Loan originations exceeded principal collections on loans by $20.3 million for the six months ended June 30, 2016 compared to principal collections on loans exceeding loan originations by $8.4 million for the for the same period in 2015. Cash received from calls, maturities, and principal repayments of available-for-sale investment securities totaled $15.1 million and $9.0 million for the six month periods ended June 30, 2016 and 2015, respectively. We purchased $21.9 million and $9.6 million of available-for-sale investment securities during the six months ended June 30, 2016 and 2015, respectively.

Deposit flows are generally affected by market interest rates, products offered by local competitors, and other factors. Net deposits increased by $6.4 million during the six months ended June 30, 2016 compared to a decrease of $30.9 million for the same period in 2015. The increase in deposits during the six months ended June 30, 2016 was primarily due to an increase in core deposits partially offset by a reduction of $16.8 million in brokered deposits.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, we exercise borrowing agreements with the FHLB, which provide for an additional source of funds. We had $16.0 million of advances from the FHLB at June 30, 2016 and December 31, 2015. At June 30, 2016, we had additional available credit of approximately $79.4 million. Additionally, we have the ability to purchase funds through our affiliation with Promontory Interfinancial Network if we require additional liquidity. At June 30, 2016, the funds authorized for purchase through this program totaled $61.0 million.

The Bank is required to maintain certain minimum capital requirements under OCC regulations. Failure by a national bank to meet minimum capital requirements can result in certain mandatory and possible discretionary actions by regulators, which, if undertaken, could have a direct material effect on the

46. 

Bank’s financial statements. Under the capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. As of June 30, 2016, under regulatory standards, the Bank had capital levels in excess of the minimums necessary to be considered “well capitalized,” which is the highest regulatory designation.

The Bank’s actual capital amounts and ratios under Basel III as of June 30, 2016 and December 31, 2015 are presented in the following tables:

As of June 30, 2016
											To be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets	$	72,346,000		14.05	%	$	23,170,000		4.50	%	$	33,468,000		6.50	%
Tier I Capital to Adjusted Total Assets		72,346,000		10.89	%		26,566,000		4.00	%		33,208,000		5.00	%
Tier I Capital to Risk Weighted Assets		72,346,000		14.05	%		30,893,000		6.00	%		41,191,000		8.00	%
Total Capital to Risk Weighted Assets		76,885,000		14.93	%		41,191,000		8.00	%		51,489,000		10.00	%

As of December 31, 2015
											To be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets	$	71,273,000		14.89	%	$	21,546,000		4.50	%	$	31,122,000		6.50	%
Tier I Capital to Adjusted Total Assets		71,273,000		11.47	%		24,855,000		4.00	%		31,069,000		5.00	%
Tier I Capital to Risk Weighted Assets		71,273,000		14.89	%		28,728,000		6.00	%		38,303,000		8.00	%
Total Capital to Risk Weighted Assets		76,195,000		15.91	%		38,303,000		8.00	%		47,879,000		10.00	%

47. 

The Company’s actual consolidated capital amounts and ratios under Basel III as of June 30, 2016 and December 31, 2015 are presented in the following tables:

As of June 30, 2016
											To be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets	$	69,282,000		13.45	%	$	23,185,000		4.50	%		N/A		N/A
Tier I Capital to Adjusted Total Assets		69,282,000		10.24	%		27,069,000		4.00	%		N/A		N/A
Tier I Capital to Risk Weighted Assets		69,282,000		13.45	%		30,914,000		6.00	%		N/A		N/A
Total Capital to Risk Weighted Assets		77,821,000		15.10	%		41,218,000		8.00	%		N/A		N/A

As of December 31, 2015
											To be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets	$	68,467,000		14.29	%	$	21,555,000		4.50	%		N/A		N/A
Tier I Capital to Adjusted Total Assets		68,467,000		10.28	%		26,651,000		4.00	%		N/A		N/A
Tier I Capital to Risk Weighted Assets		68,467,000		14.29	%		28,740,000		6.00	%		N/A		N/A
Total Capital to Risk Weighted Assets		77,389,000		16.16	%		38,321,000		8.00	%		N/A		N/A

In July 2013, the U.S. federal banking authorities approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act (the “Basel III Rules”). 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 billion). The Bank, along with other community banking organizations, became subject to the Basel III Rules effective January 1, 2015.

The Basel III Rules not only increased most of the required minimum regulatory capital ratios, but they introduced a new common equity Tier 1 capital ratio and the concept of a Capital Conservation Buffer ("CCB"). The Basel III Rules also expanded the definition of capital as in effect currently by establishing criteria that instruments must meet to be considered additional Tier 1 capital (Tier 1 capital in addition to common equity) and Tier 2 capital. A number of instruments that qualified previously as Tier 1 capital no longer qualify, or their qualifications may change as the Basel III rules are fully implemented. The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the previous treatment for accumulated other comprehensive income. The Bank elected this one-time opt-out to exclude accumulated other comprehensive income from regulatory capital with the filing of its regulatory reports for first quarter of 2015.

The Basel III Rules have maintained the general structure of the current prompt corrective action framework, while incorporating the increased requirements. The prompt corrective action guidelines were also revised to add the common equity Tier 1 capital ratio.  In order to be a “well-capitalized” depository institution under the new regime, a bank and holding company must maintain a common equity Tier 1 capital ratio of 6.5% or more; a Tier 1 capital ratio of 8% or more; a total capital ratio of 10% or more; and a leverage ratio of 5% or more. 

The Bank and the Company have each adopted Regulatory Capital Plans that require the Bank to maintain a Tier 1 leverage ratio of at least 8% and a total risk-based capital ratio of at least 12% (excluding the CCB). The minimum capital ratios set forth in the Regulatory Capital Plans will be increased and other minimum capital requirements will be established if and as necessary. In accordance

48. 

with the Regulatory Capital Plans, neither the Company nor the Bank will pursue any growth opportunity, declare any dividend or conduct any stock repurchase that would cause the Bank's total risk-based capital ratio and/or its Tier 1 leverage ratio to fall below the established minimum capital levels, or capital levels required for capital adequacy plus the CCB. The minimum CCB in 2016 is 0.625% and will increase by 0.625% annually through 2019 to 2.5%. As of March 31, 2016, the Bank and the Company adopted all of the Basel III 2016 phase-in rules and were well-capitalized, with all capital ratios exceeding the well-capitalized requirement. At present, management concludes that its current capital structure and the execution of its capital plan will be sufficient to meet and exceed the revised regulatory capital ratios as required by the new Basel III Rules.

Off-Balance Sheet Arrangements

In the ordinary course of business, the Company is a party to credit-related financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, as described further below. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in such customer’s contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Unfunded commitments under construction lines of credit for residential and multi-family properties are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

A summary of the notional or contractual amounts of financial instruments with off-balance-sheet risk at June 30, 2016 follows:

							Range of Rates
	Variable Rate		Fixed Rate		Total		on Fixed Rate
	Commitments		Commitments		Commitments		Commitments
Commitments to extend credit	$	41,919,882	$	40,493,461	$	82,413,343		2.875% - 18.00	%
Standby letters of credit		1,035,125		94,000		1,129,125		4.00% - 6.00	%

Loans sold to the FHLB under the Mortgage Partnership Finance (“MPF”) program are sold with recourse. The Bank has an agreement to sell residential loans of up to $81.0 million to the FHLB, of which approximately $72.2 million had been sold as of June 30, 2016. As a part of the agreement, the Bank had a maximum credit enhancement of $388,000 at June 30, 2016. The Company intends to continue originating and selling mortgage loans while retaining the servicing rights of the loans. In addition to the MPF program, the Company currently has a relationship to sell loans to Fannie Mae. These loans are also sold with recourse. The Company has a recourse liability reserve established. Since the Company has no loss experience at this time, we utilized the current Fannie Mae loss history rates in the calculation of our reserve.

49. 

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

The majority of First Clover Leaf’s assets and liabilities are monetary in nature. Consequently, the most significant form of market risk is interest rate risk. First Clover Leaf’s assets, consisting primarily of loans, have longer maturities than its liabilities, which consist primarily of deposits. As a result, the principal part of First Clover Leaf’s business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, the Bank’s board of directors has established an Asset/Liability Management Committee which is responsible for evaluating the interest rate risk inherent in assets and liabilities, for determining the level of risk that is appropriate given First Clover Leaf’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk on a regular basis, and the Asset/Liability Management Committee meets at least quarterly to review the asset/liability policies and interest rate risk position.

During the relatively low interest rate environment that has existed in recent years, we have implemented the following strategies to manage interest rate risk: (i) maintaining a high equity-to-assets ratio; and (ii) offering a variety of adjustable rate loan products, including adjustable rate one-to-four family, multi-family and non-residential mortgage loans, short-term consumer loans, and a variety of adjustable-rate commercial loans. By maintaining a high equity-to-assets ratio and by investing in adjustable-rate and short-term assets, we are better positioned to react to increases in market interest rates. However, maintaining high equity balances reduces the return-on-equity ratio, and investments in shorter-term assets generally bear lower yields than longer-term investments.

First Clover Leaf utilized an independent third-party to analyze interest rate risk sensitivity as of March 31, 2016. The model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value (“NPV”). The model estimates the economic value of each type of asset, liability and off-balance-sheet contract under the assumption of instantaneous rate increases of up to 400 basis points or decreases of 100 points in 100 basis point increments. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest” column.

The tables below set forth, as of March 31, 2016 and December 31, 2015, the estimated changes in the NPV that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

March 31, 2016
		NPV								Net Portfolio Value as a Percentage of Present Value of Assets
		Estimated		Estimated Increase (Decrease) in NPV
Change in Interest Rates		NPV		Amount			Percent			NPV Ratio			Change
	+400  bp	$	83,587	$	(20,347	)		(20	)%		14.71	%		(148	)  bp
	+300  bp		91,327		(12,607	)		(12	)		15.60			(59	)  bp
	+200  bp		97,408		(6,526	)		(6	)		16.12			(7	)  bp
	+100  bp		102,053		(1,881	)		(2	)		16.39			20	bp
	0  bp		103,934		-			-			16.19			0	bp
	-100  bp		95,842		(8,092	)		(8	)		14.69			(150	)  bp

50. 

Item 3.   Quantitative and Qualitative Disclosures about Market Risk (Continued)

December 31, 2015
		NPV								Net Portfolio Value as a Percentage of Present Value of Assets
		Estimated		Estimated Increase (Decrease) in NPV
Change in Interest Rates		NPV		Amount			Percent			NPV Ratio			Change
	+400  bp	$	84,743	$	(19,577	)		(19	)%		14.40	%		(142	)  bp
	+300  bp		91,987		(12,333	)		(12	)		15.21			(61	)  bp
	+200  bp		97,818		(6,502	)		(6	)		15.70			(12	)  bp
	+100  bp		102,388		(1,932	)		(2	)		15.98			16	bp
	—  bp		104,320		—			—			15.82			—	bp
	-100  bp		95,264		(9,056	)		(9	)		14.22			(160	)  bp

The 2016 table above indicates that at March 31, 2016 in the event of a 100 basis point decrease in interest rates, we would experience an 8% decrease in the net portfolio value. In the event of a 400 basis point increase in interest rates, we would experience a 20% decrease in the net portfolio value. Management does not believe that the Company’s primary market risk exposures at June 30, 2016, and how those exposures were managed during the three months ended June 30, 2016, have changed materially when compared to the immediately preceding quarter ended March 31, 2016. However, the Company’s primary market risk exposure has not yet been quantified at June 30, 2016 as it is not yet available, and the complexity of the model makes it difficult to accurately predict results.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions such as the duration of our assets and liabilities as it relates to prepayments on loans and the average life of non-maturing deposits. In addition, we make rate assumptions for loans and deposits that are re-pricing. These assumptions may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value table presented assumes that the composition of the interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or re-pricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of the interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on its net interest income and will differ from actual results.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

In addition, there have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

51. 

FIRST CLOVER LEAF FINANCIAL CORP.

PART II - Other Information

Item 1 - Legal Proceedings.

We and our subsidiaries are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of our business. As of June 30, 2016, except as noted below, we and our subsidiaries were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

First Clover Leaf, certain executive officers of First Clover Leaf, certain members of First Clover Leaf’s board of directors, and First Mid are named as defendants in one purported class action lawsuit brought by an alleged individual First Clover Leaf stockholder challenging the Merger (the “Lawsuit”). The Lawsuit is captioned Raul v. Highlander, et al, Case No. 16-L-703, and was filed on May 20, 2016, in the Circuit Court of Madison County, Illinois, Third Judicial District. The Lawsuit alleges breaches of fiduciary duty by the individual officers and directors of First Clover Leaf relating to the process leading to the proposed Merger of First Clover Leaf and First Mid. The Lawsuit alleges that the Merger consideration is inadequate and that the joint proxy statement/prospectus does not contain sufficient disclosures and detail. The Lawsuit also alleges that First Clover Leaf and First Mid aided and abetted the alleged breaches of fiduciary duty by the individual defendants. The relief sought includes class certification, declaratory relief, an injunction enjoining consummation of the Merger, rescission of the Merger should it be consummated, interest on any monetary judgment, costs, and attorneys’ fees.

First Clover Leaf, First Mid and the individual defendants believe that the factual allegations in the Lawsuit are without merit and legally unfounded and they intend to vigorously defend against these allegations.

Item 1A – Risk Factors.

Not required.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds.

(a)  None.

(b)  Not applicable.

(c)  None.

Item 3 - Defaults upon Senior Securities.

Not applicable.

Item 4 – Mine Safety Disclosures.

Not applicable.

Item 5 - Other Information.

None.

52. 

FIRST CLOVER LEAF FINANCIAL CORP.

Item 6 – Exhibits.

(a) Exhibits.

2.1:	Agreement and Plan of Merger by and between First Mid-Illinois Bancshares, Inc. and First Clover Leaf Financial Corp., dated April 26, 2016.* (1)
2.2:	First Amendment to Agreement and Plan of Merger by and between First Mid-Illinois Bancshares, Inc. and First Clover Leaf Financial Corp., dated June 6, 2016.
10.1:	Form of Separation and Release Agreement by and among First Clover Leaf Financial Corp, First Clover Leaf Bank, National Association, and William D. Barlow. (2)
31.1:	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2:	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32:	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101:	The following financial statements as of and for the quarter ended June 30, 2016, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements.

(1)	Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of First Clover Leaf Financial Corp., filed with the Commission on April 26, 2016.
(2)	Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of First Clover Leaf Financial Corp., filed with the Commission on April 26, 2016.
* Certain schedules have been omitted pursuant to Section 601(b)(2) of Regulation S-K.

53. 

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.

FIRST CLOVER LEAF FINANCIAL CORP.

(Registrant)

DATE:    August 10, 2016	BY:	/s/ P. David Kuhl
		P. David Kuhl,
		President and Chief Executive Officer
	BY:	/s/ Darlene F. McDonald
		Darlene F. McDonald,
		Executive Vice-President and Chief Financial Officer

54. 

EX-2.2

Exhibit 2.2

FIRST AMENDMENT

TO

AGREEMENT AND PLAN OF MERGER

This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “First Amendment”) is entered into as of the 6th day of June, 2016, by and between First Mid-Illinois Bancshares, Inc., a Delaware corporation (“Parent”), and First Clover Leaf Financial Corp., a Maryland corporation (the “Company”).

WHEREAS, Parent and the Company are parties to that certain Agreement and Plan of Merger, dated as of April 26, 2016 (the “Agreement”), pursuant to the terms of which the Company will merge with and into Parent;

WHEREAS, Section 9.6 of the Agreement prohibits any modifications or amendments to the Agreement other than by written agreement of Parent and the Company; and

WHEREAS, the Parent and the Company desire to amend the Agreement as herein provided.

NOW, THEREFORE, in consideration of the premises, the mutual covenants hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, subject to the terms and conditions set forth herein, Parent and the Company hereby agree as follows:

1.          General.  The Agreement is amended, as of the date on which Parent and the Company execute this First Amendment, by adding, deleting or otherwise modifying the provisions of the Agreement as noted herein. This First Amendment is part of the Agreement. All other provisions of the Agreement remain intact and by signing below, each of Parent and the Company reaffirms its agreement to be bound by the terms and conditions of the Agreement (as hereby amended by this First Amendment). Capitalized terms used but not defined in this First Amendment shall have the same meanings ascribed to such terms in the Agreement.

2.          Amendment.  The first sentence of Section 5.1(c) of the Agreement is hereby amended and restated in its entirety to read as follows:

“Following the Effective Time, Parent or the applicable Parent Subsidiary shall cause the Employees to be covered by a severance policy under which any Employees who incur a qualifying involuntary termination of employment within twelve months after the Closing Date will be eligible to receive severance pay in accordance with the severance pay schedule set forth on Schedule 5.1(c), the receipt of such severance to be conditioned on the Employee’s execution of a release of claims.”

3.          Ratification.  As amended by this First Amendment, the Agreement is in all respects ratified and confirmed, and as so amended by this First Amendment, the Agreement shall be read, taken and construed as one and the same instrument. Upon the execution of this First Amendment, each reference in the First Agreement or the Agreement to “this Agreement,” “hereby,” “hereunder,” “herein,” “hereof” or words of like import referring to the Agreement shall mean and refer to the Agreement as amended by this First Amendment. Any and all notices, requests, certificates and other instruments executed and delivered prior to, on or after the date of this First Amendment may refer to the Agreement without making specific reference to this First Amendment, but nevertheless all references to the Agreement shall be a reference to such document as amended hereby.

4.          Counterparts.  This First Amendment may be executed in more than one counterpart, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument and shall become effective when counterparts havebeen signed by each of Parent and the Company and delivered to the other parties, it being understood that Parent and the Company need not sign the same counterpart.

** Signature Page Follows **

IN WITNESS WHEREOF, Parent and the Company have each executed this First Amendment to Agreement and Plan of Merger as of the day and year first written above.

FIRST MID-ILLINOIS BANCSHARES, INC.
By:	/s/ Joseph R. Dively

Name:	Joseph R. Dively
Title:	Chairman & CEO

FIRST CLOVER LEAF FINANCIAL CORP.
By:	/s/ P. David Kuhl

Name:	P. David Kuhl
Title:	President & CEO

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, P. David Kuhl, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Clover Leaf Financial Corp.;

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 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 10, 2016

/s/ P. David Kuhl

P. David Kuhl

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Darlene F. McDonald, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Clover Leaf Financial Corp.;

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 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 10, 2016

/s/ Darlene F. McDonald

Darlene F. McDonald

Executive Vice-President and Chief Financial Officer

EX-32

Exhibit 32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

P. David Kuhl, President and Chief Executive Officer, and Darlene F. McDonald, Executive Vice-President and Chief Financial Officer, of First Clover Leaf Financial Corp. (Company) each certify in their capacity as an officer of the Company that they have reviewed the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2016 (Report) and that to the best of their knowledge:

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

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

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.

By:	/s/ P. David Kuhl
	P. David Kuhl
	President and Chief Executive Officer
By:	/s/ Darlene F. McDonald
	Darlene F. McDonald
	Executive Vice-President and Chief Financial Officer

Date: August 10, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 04, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	First Clover Leaf Financial Corp.
Entity Central Index Key	0001283582
Trading Symbol	fclf
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,005,883
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED BALANCE SHEETS - USD ($)		Jun. 30, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks		$ 19,327,625	$ 14,865,466
Interest-earning deposits		23,207,090	17,041,862
Federal funds sold		24,093,634	47,325,238
Total cash and cash equivalents		66,628,349	79,232,566
Interest-earning time deposits		1,930,000	1,685,000
Securities available for sale		108,328,285	103,756,614
Federal Home Loan Bank stock		997,763	1,747,763
Federal Reserve Bank stock		1,676,700	1,676,700
Loans, net of allowance for loan losses of $6,225,250 and $5,886,225 at June 30, 2016 and December 31, 2015, respectively		440,400,476	420,463,583
Loans held for sale		592,450	1,078,785
Property and equipment, net		9,669,512	9,871,440
Goodwill		11,385,323	11,385,323
Bank-owned life insurance		15,562,625	15,336,442
Core deposit intangible		109,010	138,000
Foreclosed assets		2,851,367	3,059,101
Mortgage servicing rights		1,081,828	1,109,720
Accrued interest receivable		1,589,201	1,620,309
Other assets		2,516,067	2,712,911
Total assets		665,318,956	654,874,257
Deposits:
Noninterest-bearing		78,715,230	69,296,354
Interest-bearing		460,874,608	463,861,939
Total deposits		539,589,838	533,158,293
Federal Home Loan Bank advances		15,999,355	15,995,485
Securities sold under agreements to repurchase		21,817,155	19,732,766
Subordinated debentures		4,000,000	4,000,000
Accrued interest payable		254,015	227,947
Other liabilities		1,461,381	1,485,891
Total liabilities		583,121,744	574,600,382
Stockholders' Equity
Preferred stock, $.10 par value, 10,000,000 shares authorized, no shares issued
Common stock, $.10 par value, 20,000,000 shares authorized, 7,005,883 shares issued and outstanding at June 30, 2016 and December 31, 2015		700,588	700,588
Additional paid-in capital		55,806,256	55,806,256
Retained earnings		24,193,306	23,369,037
Accumulated other comprehensive income	[1]	1,497,062	397,994
Total stockholders' equity		82,197,212	80,273,875
Total liabilities and stockholders' equity		$ 665,318,956	$ 654,874,257

[1] All amounts are net of tax.

XML

CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Loans, allowance for loan losses (in dollars)	$ 6,225,250	$ 5,886,225
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	7,005,883	7,005,883
Common stock, shares outstanding	7,005,883	7,005,883

XML

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Interest and dividend income:
Interest and fees on loans	$ 4,567,461	$ 4,429,579	$ 9,030,121	$ 8,723,018
Securities:
Taxable interest income	279,279	249,252	578,151	538,435
Nontaxable interest income	265,269	288,752	532,956	572,775
Federal Reserve Bank dividends	24,864	25,250	50,301	50,301
Interest-earning deposits, federal funds sold, and other	95,430	29,471	171,491	55,696
Total interest and dividend income	5,232,303	5,022,304	10,363,020	9,940,225
Interest expense:
Deposits	608,875	522,875	1,190,870	1,047,503
Federal Home Loan Bank advances	65,837	40,522	131,674	66,337
Securities sold under agreements to repurchase	11,145	757	24,409	1,585
Subordinated debentures	25,958	22,159	51,013	43,816
Total interest expense	711,815	586,313	1,397,966	1,159,241
Net interest income	4,520,488	4,435,991	8,965,054	8,780,984
Provision (credit) for loan losses	70,000		320,000	(500,000)
Net interest income after provision (credit) for loan losses	4,450,488	4,435,991	8,645,054	9,280,984
Non-interest income:
Service fees on deposit accounts	150,568	123,403	278,198	230,311
Other service charges and fees	137,125	117,241	259,279	231,094
Loan servicing fees	77,470	74,833	156,094	147,601
Gain on sale of securities, net			29,181
Gain on sale of loans	224,740	294,971	350,891	476,092
Other	115,937	130,178	245,408	253,954
Total Non-interest income	705,840	740,626	1,319,051	1,339,052
Non-interest expense:
Compensation and employee benefits	2,423,002	1,925,756	4,384,301	3,777,393
Occupancy expense	382,518	365,392	748,243	756,151
Data processing services	205,624	184,644	414,906	376,434
Director fees	56,200	49,933	105,750	97,683
Professional fees	515,036	134,102	661,128	261,446
FDIC insurance premiums	108,000	94,000	198,000	204,000
Foreclosed asset related expenses	67,670	35,039	76,855	37,238
Amortization of core deposit intangible	14,505	14,505	28,990	28,990
Amortization of mortgage servicing rights	62,471	35,054	101,051	57,939
Other	613,255	668,542	1,227,254	1,264,004
Total Non-interest expense	4,448,281	3,506,967	7,946,478	6,861,278
Income before income taxes	708,047	1,669,650	2,017,627	3,758,758
Income tax expense	56,646	457,170	352,878	1,075,024
Net income	$ 651,401	$ 1,212,480	$ 1,664,749	$ 2,683,734
Basic and diluted earnings per share (in dollars per share)	$ 0.09	$ 0.17	$ 0.24	$ 0.38
Dividends per share (in dollars per share)	$ 0.06	$ 0.06	$ 0.12	$ 0.12

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income		$ 651,401	$ 1,212,480	$ 1,664,749	$ 2,683,734
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale arising during the period		766,298	(1,142,570)	1,830,931	(278,293)
Reclassification adjustment for realized gains included in income				(29,181)
Tax effect		(298,856)	445,602	(702,682)	102,268
Total other comprehensive income (loss)	[1]	467,442	(696,968)	1,099,068	(176,025)
Comprehensive income		$ 1,118,843	$ 515,512	$ 2,763,817	$ 2,507,709

[1] All amounts are net of tax.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities
Net income	$ 1,664,749	$ 2,683,734
Amortization (accretion) of:
Deferred loan origination costs, net	38,454	(27,026)
Premiums and discounts on securities	380,153	412,574
Core deposit intangible	28,990	28,990
Mortgage servicing rights	101,051	57,939
Fair value adjustments	(6,584)	(31,454)
Provision (credit) for loan losses	320,000	(500,000)
Depreciation	273,154	303,028
Gain on sale of securities, net	(29,181)
Gain on sale of loans	(350,891)	(476,092)
Gain on sale of foreclosed assets	(223)	(2,241)
Write-down on foreclosed assets	45,195	12,000
Earnings on bank-owned life insurance	(226,183)	(232,033)
Increase in mortgage servicing rights	(73,159)	(115,568)
Proceeds from sales of loans held for sale	14,539,809	17,767,967
Originations of loans held for sale	(13,702,583)	(17,941,188)
Change in assets and liabilities:
Accrued interest receivable and other assets	(474,780)	185,149
Accrued interest payable	26,068	27,952
Other liabilities	(24,510)	(307,819)
Net cash provided by operating activities	2,529,529	1,845,912
Cash flows from investing activities
Purchase of interest-earning time deposits	(245,000)	(8,774)
Available for sale securities:
Purchases	(21,884,883)	(9,572,644)
Proceeds from calls, maturities, and principal repayments	15,096,240	8,972,615
Proceeds from sales	3,686,240
Redemption of FHLB stock	750,000	1,140,000
Decrease (increase) in loans	(20,258,458)	8,385,058
Purchase of property and equipment	(79,212)	(59,001)
Proceeds from the sale of foreclosed assets	125,873	80,630
Net cash (used in) provided by investing activities	(22,809,200)	8,937,884
Cash flows from financing activities
Net increase (decrease) in deposit accounts	6,431,545	(30,906,508)
Net increase (decrease) in securities sold under agreements to repurchase	2,084,389	(108,239)
Proceeds from Federal Home Loan Bank advances		15,000,000
Repurchase of common stock		(3,420)
Cash dividends paid	(840,480)	(840,849)
Net cash provided by (used in) financing activities	7,675,454	(16,859,016)
Net decrease in cash and cash equivalents	(12,604,217)	(6,075,220)
Cash and cash equivalents:
Beginning	79,232,566	49,066,462
Ending	66,628,349	42,991,242
Cash paid during the period for:
Interest	1,317,015	1,127,419
Income taxes, net of refunds	895,000	$ 1,052,500
Supplemental schedule of noncash investing and financing activities
Loans made to finance sales of foreclosed assets	$ 36,889

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the interim periods. All such adjustments are of a normal recurring nature. Any differences appearing between the numbers presented in the financial statements and management’s discussion and analysis are due to rounding. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire year or for any other period. These consolidated financial statements should be read in conjunction with the consolidated financial statements of First Clover Leaf Financial Corp. (the “Company” or “First Clover Leaf”) for the year ended December 31, 2015 contained in the 2015 Annual Report to Stockholders that is filed as Exhibit 13 to the Company’s Annual Report on Form 10-K. Accordingly, footnote disclosures which would substantially duplicate the disclosures in the audited consolidated financial statements have been omitted.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ from those estimates.

The Company is a single-bank holding company, whose wholly-owned bank subsidiary, First Clover Leaf Bank (the “Bank”), which is a community bank operating with six branch locations in Madison and St. Clair Counties in Illinois along with one branch location in Clayton, Missouri. The Bank is subject to competition from other financial institutions and nonfinancial institutions providing financial products and services. Additionally, the Company and the Bank are subject to the regulations of certain regulatory agencies and both undergo periodic examinations by those regulatory agencies. In August 2014, the Bank converted from a federal savings and loan association to a nationally chartered bank. First Clover Leaf’s common stock is traded on the NASDAQ Capital Market under the symbol “FCLF”.

On April 26, 2016, the Company and First-Mid Illinois Bancshares, Inc., a Delaware corporation with its principal office in Mattoon, Illinois (“First Mid”), entered into an Agreement and Plan of Merger (as amended by the First Amendment to Agreement and Plan of Merger entered into as of June 6, 2016, and as may be further amended, the “Merger Agreement”), pursuant to which, among other things, First Mid will acquire the Company and the Bank through the merger of the Company with and into First Mid, with First Mid as the surviving entity (the “Merger”). Consummation of the transaction remains subject to customary closing conditions, including receipt of requisite stockholder approvals. The Merger is anticipated to be completed in the second half of 2016.

Recent Accounting Pronouncements: The following accounting standards were recently issued relating to the financial services industry:

In May 2014, the Financial Accounting Standard Board (the “FASB”) issued an update creating FASB Topic 606, Revenue from Contracts with Customers.  The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.  We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

In January 2016, the FASB issued an update (ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities). The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As 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 (“HTM”) debt securities. The update amends the accounting for credit losses on available-for-sale securities (“AFS”), whereby credit losses 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. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on our consolidated financial statements.

Reclassifications: Certain reclassifications have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s net income or total stockholders’ equity.

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SECURITIES AVAILABLE FOR SALE

6 Months Ended

Jun. 30, 2016

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

NOTE 2 – SECURITIES AVAILABLE FOR SALE

The amortized cost and fair values of securities with gross unrealized gains and losses as of the dates indicated are summarized as follows:

	June 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	31,502,726	$	510,843	$	-		$	32,013,569
State and municipal securities		43,672,468		1,723,981		(22,569	)		45,373,880
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		30,695,390		268,618		(26,673	)		30,937,335
	$	105,874,085	$	2,503,442	$	(49,242	)	$	108,328,285

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	29,183,789	$	26,006	$	(161,693	)	$	29,048,102
State and municipal securities		44,746,083		1,156,547		(168,391	)		45,734,239
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		29,170,791		60,300		(260,319	)		28,970,772
	$	103,104,164	$	1,242,853	$	(590,403	)	$	103,756,614

Unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2016 and December 31, 2015, are summarized as follows:

	June 30, 2016
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
State and municipal securities	$	299,277	$	(935	)	$	1,704,091	$	(21,634	)	$	2,003,368	$	(22,569	)
Mortgage-backed: residential		-		-			5,393,861		(26,673	)		5,393,861		(26,673	)
	$	299,277	$	(935	)	$	7,097,952	$	(48,307	)	$	7,397,229	$	(49,242	)

	December 31, 2015
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. government agency obligations	$	15,928,702	$	(82,008	)	$	5,934,944	$	(79,685	)	$	21,863,646	$	(161,693	)
State and municipal securities		7,666,691		(66,224	)		4,927,928		(102,167	)		12,594,619		(168,391	)
Mortgage-backed: residential		18,251,546		(183,188	)		4,227,473		(77,131	)		22,479,019		(260,319	)
	$	41,846,939	$	(331,420	)	$	15,090,345	$	(258,983	)	$	56,937,284	$	(590,403	)

Management evaluates the investment portfolio on at least a quarterly basis to determine if investments have suffered an other-than-temporary decline in value. In addition, management monitors market trends, investment grades, bond defaults and other circumstances to identify trends and circumstances that might impact the carrying value of equity securities.

At June 30, 2016, the Company had 10 securities in an unrealized loss position which included: six mortgage-backed securities and four state and municipal securities. This was a decrease from 67 securities at December 31, 2015. The unrealized losses resulted from changes in market interest rates and liquidity, as opposed to changes in the probability of contractual cash flows. The Company does not intend to sell the securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of the amortized cost. Full collection of the amounts due according to the contractual terms of the securities was expected as of June 30, 2016; therefore, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2016.

The amortized cost and fair value of the Company’s securities at June 30, 2016 by contractual maturity, are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Additionally, an item in our “other securities” category has no stated maturity. Therefore, stated maturities are not disclosed for these items.

	Amortized		Fair
	Cost		Value
Due in one year or less	$	8,206,342	$	8,249,908
Due after one year through five years		29,114,362		29,699,080
Due after five years through ten years		27,735,538		28,865,845
Due after ten years		10,118,952		10,572,616
Other securities - non-maturing		3,501		3,501
Mortgage-backed: residential		30,695,390		30,937,335
	$	105,874,085	$	108,328,285

Securities with a carrying amount of approximately $90,223,000 and $66,882,000 were pledged to secure deposits, as required or permitted by law, at June 30, 2016 and December 31, 2015, respectively.

At June 30, 2016 there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity. The Company received proceeds of $3,686,240 from the sale of securities during the six months ended June 30, 2016, resulting in gross realized gains of $29,489 and gross realized losses of $308. For the same time period last year, there were no sales of securities.

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LOANS

6 Months Ended

Jun. 30, 2016

LOANS

LOANS

NOTE 3 - LOANS

The components of the Company’s loans are as follows:

	At June 30,						At December 31,
	2016						2015
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family	$	113,870,419			25.5	%	$	110,792,710			26.0	%
Multi-family		36,797,825			8.2			41,182,067			9.7
Commercial		162,403,332			36.5			153,634,426			36.0
Construction and land		13,950,427			3.1			13,588,626			3.2
		327,022,003			73.3			319,197,829			74.9
Commercial business		102,869,196			23.0			89,743,511			21.1
Consumer:
Home equity		12,505,761			2.8			13,656,008			3.2
Automobile and other		3,989,525			0.9			3,523,696			0.8
		16,495,286			3.7			17,179,704			4.0
Total gross loans		446,386,485			100.0	%		426,121,044			100.0	%
Deferred loan origination costs, net		239,241						228,764
Allowance for loan losses		(6,225,250	)					(5,886,225	)
Loans, net	$	440,400,476					$	420,463,583

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and presents these policies to the Company’s board of directors at least annually. A reporting system supplements the review process by providing management with reports related to loan production, loan quality, loan delinquencies and non-performing and potential problem loans.

Additional information regarding our accounting policies for the individual loan categories is contained in our 2015 Annual Report to Stockholders that is filed as Exhibit 13 to the Company’s Annual Report on Form 10-K.

On occasion, the Company originates loans secured by single-family dwellings with initial loan-to-value ratios exceeding 90%. As of June 30, 2016 and December 31, 2015, these loans represented 1.83% and 2.07%, respectively, of our combined one-to-four family and home equity portfolios. The Company did not consider the level of such loans to be a significant concentration of credit as of June 30, 2016 or December 31, 2015.

The recorded investment in loans does not include accrued interest on loans nor loan origination fees due to immateriality. The allowance for loan losses does not include a component for undisbursed loan commitments; rather this amount is included in other liabilities.

The following tables present our past-due loans, segregated by class, as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	-	$	192,863	$	365,269	$	558,132	$	113,312,287	$	113,870,419	$	-
Multi-family		-		-		-		-		36,797,825		36,797,825		-
Commercial		113,082		709,773		165,956		988,811		161,414,521		162,403,332		-
Construction and land		-		-		-		-		13,950,427		13,950,427		-
		113,082		902,636		531,225		1,546,943		325,475,060		327,022,003		-
Commercial business		80,282		-		179,522		259,804		102,609,392		102,869,196		-
Consumer:
Home equity		-		-		42,318		42,318		12,463,443		12,505,761		-
Automobile and other		-		-		-		-		3,989,525		3,989,525		-
		-		-		42,318		42,318		16,452,968		16,495,286		-
Total	$	193,364	$	902,636	$	753,065	$	1,849,065	$	444,537,420	$	446,386,485	$	-

December 31, 2015
	Loans 30-59 Days Past  Due		Loans 60-89 Days Past  Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	331,479	$	259,240	$	33,839	$	624,558	$	110,168,152	$	110,792,710	$	-
Multi-family		-		-		-		-		41,182,067		41,182,067		-
Commercial		-		-		111,706		111,706		153,522,720		153,634,426		-
Construction and land		-		-		-		-		13,588,626		13,588,626		-
		331,479		259,240		145,545		736,264		318,461,565		319,197,829		-
Commercial business		-		-		87,254		87,254		89,656,257		89,743,511		-
Consumer:
Home equity		57,625		-		89,407		147,032		13,508,976		13,656,008		-
Automobile and other		500		-		-		500		3,523,196		3,523,696		-
		58,125		-		89,407		147,532		17,032,172		17,179,704		-
Total	$	389,604	$	259,240	$	322,206	$	971,050	$	425,149,994	$	426,121,044	$	-

All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed. Subsequent payments are applied to the outstanding principal balance.

Non-accrual loans, segregated by class, are as follows:

	June 30,		December 31,
	2016		2015
Real estate loans:
One-to-four family	$	1,388,481	$	601,833
Multi-family		614,784		995,659
Commercial		3,147,074		1,245,023
Construction and land		-		-
		5,150,339		2,842,515
Commercial business		323,584		263,233
Consumer:
Home equity		165,875		124,627
Automobile and other		66,120		8,558
		231,995		133,185
Total non-accrual loans	$	5,705,918	$	3,238,933

The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2016 and 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,158,110	$	-		$	-	$	37,680		$	1,195,790
Multi-family		411,519		-			3,000		(33,409	)		381,110
Commercial		2,449,438		-			2,060		(9,782	)		2,441,716
Construction and land		437,211		-			-		48,570			485,781
		4,456,278		-			5,060		43,059			4,504,397
Commercial business		1,328,516		-			1,103		64,252			1,393,871
Consumer
Home equity		280,466		-			12,442		(46,033	)		246,875
Automobile and other		71,460		(75	)		-		8,722			80,107
		351,926		(75	)		12,442		(37,311	)		326,982
Total	$	6,136,720	$	(75	)	$	18,605	$	70,000		$	6,225,250

Three months ended June 30, 2015
	Beginning Balance		Charge-offs		Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,315,813	$	-	$	-	$	(201,071	)	$	1,114,742
Multi-family		439,661		-		4,752		29,155			473,568
Commercial		2,110,850		-		3,971		76,378			2,191,199
Construction and land		729,089		-		-		(61,623	)		667,466
		4,595,413		-		8,723		(157,161	)		4,446,975
Commercial business		1,051,713		-		11,663		123,272			1,186,648
Consumer
Home equity		220,365		-		-		30,522			250,887
Automobile and other		10,816		-		331		3,367			14,514
		231,181		-		331		33,889			265,401
Total	$	5,878,307	$	-	$	20,717	$	-		$	5,899,024

Six months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,139,730	$	-		$	984	$	55,076		$	1,195,790
Multi-family		474,368		-			6,000		(99,258	)		381,110
Commercial		1,984,088		-			4,838		452,790			2,441,716
Construction and land		497,992		-			-		(12,211	)		485,781
		4,096,178		-			11,822		396,397			4,504,397
Commercial business		1,434,687		-			8,233		(49,049	)		1,393,871
Consumer:
Home equity		279,670		-			12,442		(45,237	)		246,875
Automobile and other		75,690		(13,546	)		74		17,889			80,107
		355,360		(13,546	)		12,516		(27,348	)		326,982
Total	$	5,886,225	$	(13,546	)	$	32,571	$	320,000		$	6,225,250

Six months ended June 30, 2015
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,119,762	$	(25,258	)	$	-	$	20,238		$	1,114,742
Multi-family		436,833		-			5,752		30,983			473,568
Commercial		1,650,290		(25,742	)		4,701		561,950			2,191,199
Construction and land		1,194,917		-			811,350		(1,338,801	)		667,466
		4,401,802		(51,000	)		821,803		(725,630	)		4,446,975
Commercial business		951,215		-			65,953		169,480			1,186,648
Consumer:
Home equity		198,150		-			-		52,737			250,887
Automobile and other		10,275		-			826		3,413			14,514
		208,425		-			826		56,150			265,401
Total	$	5,561,442	$	(51,000	)	$	888,582	$	(500,000	)	$	5,899,024

The following tables separate the allocation of the allowance for loan losses and the loan balances between loans evaluated both individually and collectively as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	309,439	$	886,351	$	1,195,790	$	1,434,910	$	112,435,509	$	113,870,419
Multi-family		-		381,110		381,110		4,184,634		32,613,191		36,797,825
Commercial		728,773		1,712,943		2,441,716		3,778,261		158,625,071		162,403,332
Construction and land		-		485,781		485,781		176,353		13,774,074		13,950,427
		1,038,212		3,466,185		4,504,397		9,574,158		317,447,845		327,022,003
Commercial business		230,210		1,163,661		1,393,871		480,459		102,388,737		102,869,196
Consumer:
Home equity		71,483		175,392		246,875		182,753		12,323,008		12,505,761
Automobile and other		9,345		70,762		80,107		66,120		3,923,405		3,989,525
		80,828		246,154		326,982		248,873		16,246,413		16,495,286
Total	$	1,349,250	$	4,876,000	$	6,225,250	$	10,303,490	$	436,082,995	$	446,386,485

December 31, 2015
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	116,724	$	1,023,006	$	1,139,730	$	905,974	$	109,886,736	$	110,792,710
Multi-family		-		474,368		474,368		995,659		40,186,408		41,182,067
Commercial		183,966		1,800,122		1,984,088		2,735,652		150,898,774		153,634,426
Construction and land		-		497,992		497,992		186,888		13,401,738		13,588,626
		300,690		3,795,488		4,096,178		4,824,173		314,373,656		319,197,829
Commercial business		259,787		1,174,900		1,434,687		586,103		89,157,408		89,743,511
Consumer:
Home equity		49,782		229,888		279,670		141,649		13,514,359		13,656,008
Automobile and other		-		75,690		75,690		8,558		3,515,138		3,523,696
		49,782		305,578		355,360		150,207		17,029,497		17,179,704
Total	$	610,259	$	5,275,966	$	5,886,225	$	5,560,483	$	420,560,561	$	426,121,044

Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements. The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends. Generally, all sizeable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credit’s risk profile. Credits classified as watch generally receive a review more frequently than annually. A watch classification is generally used for new businesses, for a business expanding in a new direction, or for borrowers experiencing temporary difficulties. The risk category of homogeneous loans, including consumer loans and smaller balance loans, is evaluated when the loan becomes delinquent. For special mention, substandard, and doubtful credit classifications, the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates.

The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:

Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.

Special Mention - A special mention asset has potential weaknesses that deserve management’s close attention. The asset may also be subject to a weak or in the future speculative market or to economic conditions, which may adversely affect the obligor. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard - A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the institution will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.

Doubtful - An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.

Loss - An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Company’s books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off. Therefore, there is no balance to report for credits categorized as loss.

The following tables present our credit quality indicators, segregated by class, as of June 30, 2016 and December 31, 2015:

June 30, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	111,732,989	$	748,949	$	1,388,481	$	-	$	113,870,419
Multi-family		32,613,191		-		4,184,634		-		36,797,825
Commercial		151,696,933		5,171,386		5,535,013		-		162,403,332
Construction and land		13,463,977		-		486,450		-		13,950,427
		309,507,090		5,920,335		11,594,578		-		327,022,003
Commercial business		99,726,671		2,449,651		692,874		-		102,869,196
Consumer:
Home equity		12,339,886		-		165,875		-		12,505,761
Automobile and other		3,923,405		-		66,120		-		3,989,525
		16,263,291		-		231,995		-		16,495,286
Total	$	425,497,052	$	8,369,986	$	12,519,447	$	-	$	446,386,485

December 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	109,161,526	$	772,127	$	859,057	$	-	$	110,792,710
Multi-family		37,571,827		2,614,581		995,659		-		41,182,067
Commercial		143,837,755		5,295,878		4,500,793		-		153,634,426
Construction and land		13,143,977		-		444,649		-		13,588,626
		303,715,085		8,682,586		6,800,158		-		319,197,829
Commercial business		85,604,981		3,323,003		815,527		-		89,743,511
Consumer:
Home equity		13,504,552		-		68,241		83,215		13,656,008
Automobile and other		3,510,289		-		4,849		8,558		3,523,696
		17,014,841		-		73,090		91,773		17,179,704
Total	$	406,334,907	$	12,005,589	$	7,688,775	$	91,773	$	426,121,044

The following tables provide details of impaired loans, segregated by class, as of and for the periods indicated. The unpaid contractual balance represents the recorded balance prior to any partial charge-offs. The recorded investment represents customer balances net of any partial charge-offs recognized on the loans.

	As of June 30, 2016						As of December 31, 2015
	Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Real estate loans:
One-to-four family	$	431,065	$	431,065	$	-	$	648,750	$	648,750	$	-
Multi-family		4,667,112		4,184,634		-		1,478,137		995,659		-
Commercial		2,149,411		1,959,509		-		2,246,797		2,193,291		-
Construction and land		176,353		176,353		-		186,888		186,888		-
		7,423,941		6,751,561		-		4,560,572		4,024,588		-
Commercial business		230,116		230,116		-		87,254		87,254		-
Consumer:
Home equity		50,957		50,957		-		52,242		52,242
Automobile and other		-		-		-		8,558		8,558		-
		50,957		50,957				60,800		60,800		-
Subtotal	$	7,705,014	$	7,032,634	$	-	$	4,708,626	$	4,172,642	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	1,003,845	$	1,003,845	$	309,439	$	257,224	$	257,224	$	116,724
Commercial		1,818,752		1,818,752		728,773		685,759		542,361		183,966
		2,822,597		2,822,597		1,038,212		942,983		799,585		300,690
Commercial business		250,343		250,343		230,210		498,849		498,849		259,787
Consumer:
Home equity		131,796		131,796		71,483		89,407		89,407		49,782
Automobile and other		66,120		66,120		9,345		-		-		-
		197,916		197,916		80,828		89,407		89,407		49,782
Subtotal		3,270,856		3,270,856		1,349,250		1,531,239		1,387,841		610,259
Total	$	10,975,870	$	10,303,490	$	1,349,250	$	6,239,865	$	5,560,483	$	610,259

	For the three months ended June 30, 2016						For the three months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	555,453	$	464	$	-	$	660,569	$	1,713	$	-
Multi-family		2,578,784		43,758		-		1,130,198		-		-
Commercial		1,973,177		9,191		-		1,271,873		14,142		-
Construction and land		178,997		2,003		-		854,331		2,236		-
		5,286,411		55,416		-		3,916,971		18,091		-
Commercial business		158,685		-		-		-		-		-
Consumer:
Home equity		62,649		253		-		54,226		257		-
Automobile and other		5,847		-		-		-		-		-
		68,496		253		-		54,226		257		-
Subtotal	$	5,513,592	$	55,669	$	-	$	3,971,197	$	18,348	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	881,912	$	-	$	-	$	545,364	$	6,415	$	-
Commercial		1,819,051		-		-		815,183		4,262		-
		2,700,963		-		-		1,360,547		10,677		-
Commercial business		328,005		1,809		-		189,200		3,650		-
Consumer:
Home equity		155,691		-		-		51,220		115		-
Automobile and other		33,060		169		-		-		-		-
		188,751		169		-		51,220		115		-
Subtotal		3,217,719		1,978		-		1,600,967		14,442		-
Total	$	8,731,311	$	57,647	$	-	$	5,572,164	$	32,790	$	-

	For the six months ended June 30, 2016						For the six months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	586,552	$	930	$	-	$	655,561	$	3,419	$	-
Multi-family		2,051,076		43,758		-		1,200,392		-		-
Commercial		2,046,548		27,186		-		1,104,093		14,142		-
Construction and land		181,627		4,065		-		1,115,897		4,503		-
		4,865,803		75,939		-		4,075,943		22,064		-
Commercial business		134,874		-		-		8,365		-		-
Consumer:
Home equity		59,180		507		-		54,668		513		-
Automobile and other		6,751		-		-		-		-		-
		65,931		507		-		54,668		513		-
Subtotal	$	5,066,608	$	76,446	$	-	$	4,138,976	$	22,577	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	673,683	$	4,506	$	-	$	630,085	$	12,126	$	-
Multi-family		-		-		-		-		-		-
Commercial		1,393,488		501		-		1,043,065		8,532		-
Construction and land		-		-		-		-		-		-
		2,067,171		5,007		-		1,673,150		20,658		-
Commercial business		384,953		5,263		-		164,615		5,543		-
Consumer:
Home equity		133,596		227		-		37,447		115		-
Automobile and other		22,040		169		-		-		-		-
		155,636		396		-		37,447		115		-
Subtotal		2,607,760		10,666		-		1,875,212		26,316		-
Total	$	7,674,368	$	87,112	$	-	$	6,014,188	$	48,893	$	-

Troubled Debt Restructurings:

The Company had allocations of $1,241,024 of specific reserves on $8,993,694 of loans to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2016. The Company had $380,593 of allocations of specific reserves on $3,925,262 of loans to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2015. The amount the Company had committed to lend to loan customers that are classified as troubled debt restructurings was not material as of June 30, 2016 or December 31, 2015.

During the three and six months ended June 30, 2016, 11 loans totaling $6,317,451 were modified as troubled debt restructurings. The modifications included one or a combination of the following: payment and maturity changes not available in the market; and a reduction of the stated interest rate of the loan.

During the three and six months ended June 30, 2015, three loans totaling $1,163,970 were modified as troubled debt restructurings. The modifications included payment and maturity changes not available in the market.

The following tables present loans, by class, modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2016 and 2015:

Three and six months ended June 30, 2016
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		1	$	748,641	$	748,641
Multi-family		3		3,569,850		3,569,850
Commercial		2		1,699,300		1,699,300
		6		6,017,791		6,017,791
Commercial business		2		144,062		144,062
Consumer:
Home equity		1		89,478		89,478
Automobile and other		2		66,120		66,120
		3		155,598		155,598
Total		11	$	6,317,451	$	6,317,451

The troubled debt restructurings described above resulted in a net decrease in the allowance for loan losses of $94,638 during the three months ended June 30, 2016. During the three months ended March 31, 2016 a relationship totaling $2.5 million was classified as impaired and a reserve of $1.0 million was established. This relationship was restructured during the three months ended June 30, 2016, but no additional reserves were required. We experienced a net increase in the allowance for loan losses of $876,747 during the six months ended June 30, 2016. There were no charge offs during the three and six months ended June 30, 2016.

Three and six months ended June 30, 2015
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Commercial		2		1,001,803		1,001,803
Commercial business		1		162,167		162,167
Total		3	$	1,163,970	$	1,163,970

There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2016 and 2015.

A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.

The recorded investment in consumer loans collateralized by residential real estate property that was in the process of foreclosure was not material as of June 30, 2016 and December 31, 2015.

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

6 Months Ended

Jun. 30, 2016

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

NOTE 4 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase are shown below.

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90  days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	21,817,155	$	-	$	-	$	-	$	21,817,155
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	21,817,155

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90  days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	19,732,766	$	-	$	-	$	-	$	19,732,766
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	19,732,766

Securities sold under agreements to repurchase were secured by securities with an approximate carrying amount of $41,259,000 and $26,458,000 at June 30, 2016 and December 31, 2015, respectively. The carrying amount at June 30, 2016 was comprised of $15,867,000 in securities issued by U.S. government agencies, $13,331,000 in mortgage-backed securities, and $12,061,000 in state and municipal securities. The carrying amount at December 31, 2015 was comprised of $13,962,000 in securities issued by U.S. government agencies, $8,419,000 in state and municipal securities, and $4,077,000 in mortgage-backed securities. Also included in total borrowings at June 30, 2016 and December 31, 2015 were Federal Home Loan Bank of Chicago (“FHLB”) advances of $15,999,000 and $15,996,000, respectively.

Given that the value of the securities that are pledged fluctuate due to market conditions, the Company has no control over the market value. If the market value of the securities pledged falls below the repurchase price, the Company is obligated to promptly transfer additional securities, per the terms of the agreements to repurchase.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 5 – EARNINGS PER SHARE

Basic and diluted earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income	$	651,401	$	1,212,480	$	1,664,749	$	2,683,734
Basic potential common shares:
Basic weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Dilutive potential common shares		-		-		-		-
Diluted weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Basic and diluted earnings per share	$	0.09	$	0.17	$	0.24	$	0.38

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2016

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 6 - FAIR VALUE MEASUREMENTS

The Company determines the fair market values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value.

· Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

· Level 2 - Inputs other than quoted prices included with Level 1 that are observable for the asset or liability either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived from or corroborated by market data by correlation or other means.

· Level 3 - Unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Securities: The fair value of available-for-sale securities are determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. For these investments, the pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. They also use model processes, such as the Option Adjusted Spread model to assess interest rate impact and develop prepayment scenarios. In the case of municipal securities, information on the Bloomberg terminal such as credit ratings, credit support, and call features are used to set the matrix values for the issues, which will be used to determine the yields from which the market values are calculated each month. Because they are not price quote valuations, the pricing methods are considered Level 2 inputs. At this time all of the Company’s securities fall within the Level 2 hierarchy for pricing. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company currently has no securities classified within Level 3. During the six months ended June 30, 2016, there were no transfers between Level 1 and Level 2. The valuation methodology was consistent for the six months ended June 30, 2016 and the year ended December 31, 2015.

Foreclosed Assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Foreclosed assets are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Impaired Loans:  The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for both foreclosed assets and collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the loan department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.

Mortgage Servicing Rights: Annually, loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. If the carrying amount exceeds fair value, impairment is recorded so that the servicing asset is carried at fair value. Fair value is determined based on market prices for comparable mortgage servicing contracts, when available, resulting in a Level 2 classification, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data which also results in a Level 2 classification.

Assets measured at fair value on a recurring basis segregated by fair value hierarchy level during the periods ended June 30, 2016 and December 31, 2015 are summarized below:

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	32,013,569	$	-	$	32,013,569
State and municipal securities		-		45,373,880		-		45,373,880
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		30,937,335		-		30,937,335
Total securities available for sale	$	-	$	108,328,285	$	-	$	108,328,285

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	29,048,102	$	-	$	29,048,102
State and municipal securities		-		45,734,239		-		45,734,239
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		28,970,772		-		28,970,772
Total securities available for sale	$	-	$	103,756,614	$	-	$	103,756,614

Assets measured at fair value on a nonrecurring basis by fair value hierarchy level during the periods ended June 30, 2016 and December 31, 2015 are summarized below:

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Construction and land	$	-	$	-	$	1,566,126	$	1,566,126
Total foreclosed assets	$	-	$	-	$	1,566,126	$	1,566,126
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	694,406	$	694,406
Commercial		-		-		1,089,979		1,089,979
		-		-		1,784,385		1,784,385
Commercial business		-		-		20,132		20,132
Consumer:
Home equity		-		-		60,314		60,314
Automobile and other		-		-		56,775		56,775
		-		-		117,089		117,089
Total impaired loans	$	-	$	-	$	1,921,606	$	1,921,606

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Commercial	$	-	$	-	$	19,000	$	19,000
Construction and land		-		-		604,500	$	604,500
Total foreclosed assets	$	-	$	-	$	623,500	$	623,500
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	140,500	$	140,500
Commercial		-		-		358,395		358,395
		-		-		498,895		498,895
Commercial business		-		-		239,062		239,062
Consumer:
Home equity		-		-		39,625		39,625
Total impaired loans	$	-	$	-	$	777,582	$	777,582
Mortgage Servicing Rights	$	-	$	1,109,720	$	-	$	1,109,720

Foreclosed assets are collateral dependent and are recorded at the fair value less costs to sell and may be revalued on a nonrecurring basis. Foreclosed assets measured at fair value less costs to sell on a nonrecurring basis at June 30, 2016, had a net carrying amount of $1,566,126, which was made up of the outstanding balance of $1,917,044, net of cumulative write-downs of $350,918, which included $45,195 of write-downs that occurred during the six months ended June 30, 2016. At December 31, 2015, foreclosed assets had a net carrying amount of $623,500, which was made up of the outstanding balance of $1,337,678, net of cumulative write-downs of $714,178 which includes $355,500 that occurred during the year ended December 31, 2015.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,270,856, with a valuation allowance of $1,349,250 at June 30, 2016, resulting in a net increase in provision for loan losses of $738,991 for the six months ended June 30, 2016. At December 31, 2015, impaired loans had a principal balance of $1,387,841, with a valuation allowance of $610,259.

The following table presents quantitative information about Level 3 fair value measurements for significant categories of financial instruments measured at fair value on a non-recurring basis at June 30, 2016:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	1,566,126	Sales Comparison	Adjustment for difference   between comparable sales	-11% to 31%		11.5	%
Impaired loans:
Real estate loans:
One-to-four family	$	504,626	Cost Approach	Adjustment for depreciation  and other factors	6.6%		6.6	%
One-to-four family	$	189,780	Fair Value of Collateral	Adjustment based on lease  purchase agreement	0% to 6%		6.2	%
Commercial		118,968	Sales Comparison	Adjustment for difference   between comparable sales	-53% to -34%		-42.2	%
Commercial		971,011	Income Approach	Investment Capitalization Rates	8.7%		8.7	%
Commercial business		20,132	Sales Comparison	Adjustment for difference   between comparable sales	-48% to 27%		5.2	%
Consumer loans:
Automobile and other		56,775	Fair Value of Collateral	Adjustment for depreciation  and other factors	-20% to -14%		-16.9	%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	604,500	Sales Comparison	Adjustment for difference   between comparable sales	-29% to 5%		-8.9	%
Impaired loans:
Real estate loans:
One-to-four family	$	140,500	Sales Comparison	Adjustment for difference   between comparable sales	-19% to -7%		-13.0	%
Commercial		88,000	Sales Comparison	Adjustment for difference   between comparable sales	9% to 16%		12.8	%
Commercial		270,395	Income Approach	Investment Capitalization Rates	9.0%		9.0	%
Commercial business		121,094	Fair Value of Collateral	Discount for type of business   assets	0% to 10%		7.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2016

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS

FASB ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework established by ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents approximate fair values given the short-term nature and active market for U.S. currency and are classified as Level 1.

Interest-Earning Time Deposits: Due to the short-term nature of these deposits, the carrying amounts of these deposits approximate fair values. However, since it is unusual to observe a quoted price in an active market during the outstanding term, these deposits are classified as Level 2.

Federal Home Loan Bank Stock: The Company is required to maintain these equity securities as a member of the FHLB and in amounts as required by the FHLB. These equity securities are "restricted" in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily attainable.

Federal Reserve Bank Stock: The Company is required to maintain these equity securities as a member of the Federal Reserve Bank and in amounts as required by this institution. These equity securities are "restricted" in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily attainable.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segmented by type such as real estate, commercial business, and consumer loans. Each loan segment is further segregated by fixed and adjustable rate interest terms and by performing and non-performing classifications. The fair value of fixed rate loans is estimated by either observable market prices or by discounting future cash flows using discount rates that reflect the Company’s current pricing for loans with similar characteristics, such as loan type, pricing and remaining maturity, resulting in a Level 3 classification. Impaired loans that have no specific reserve are classified as Level 3. Impaired loans that have been written down to the fair value of the corresponding collateral, less estimated costs to sell, are not included in this table as those amounts were presented previously. The fair value computed is not necessarily an exit price.

Loans Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third-party investors resulting in a Level 2 classification.

Accrued Interest Receivable: The carrying amount of accrued interest receivable approximates its fair value. Accrued interest receivable related to interest-earning time deposits and securities is classified as Level 2. Accrued interest receivable related to loans is classified as Level 3.

Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified as Level 1. The carrying amounts for interest-bearing money market and savings accounts approximate their fair values at the reporting date and are classified as Level 1. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Federal Home Loan Bank Advances: The fair value of FHLB advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances resulting in a Level 2 classification.

Securities Sold Under Agreements to Repurchase: The carrying amounts of securities sold under agreements to repurchase approximate fair value resulting in a Level 2 classification.

Subordinated Debentures: This debenture is a floating rate instrument which re-prices quarterly. The fair value of variable rate trust preferred debentures approximate carrying value resulting in a Level 2 classification.

Accrued Interest Payable: The carrying amount of accrued interest payable approximates its fair value. Accrued interest payable related to interest-bearing money market and savings accounts is classified as Level 1. All other accrued interest payable is classified as Level 2.

The following information presents estimated fair values of the Company’s financial instruments as of June 30, 2016 and December 31, 2015 that have not been previously presented and the methods and assumptions used to estimate those fair values.

			Fair Value Measurements at June 30, 2016 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	66,628,349	$	66,628,349	$	-	$	-	$	66,628,349
Interest-earning time deposits		1,930,000		-		1,930,000		-		1,930,000
Federal Home Loan Bank stock		997,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		438,478,870		-		-		445,409,350		445,409,350
Loans held for sale		592,450		-		592,450		-		592,450
Accrued interest receivable		1,589,201		-		520,040		1,069,161		1,589,201
Financial liabilities:
Non-interest bearing deposits		78,715,230		78,715,230		-		-		78,715,230
Interest-bearing deposits		460,874,608		325,646,790		136,103,659		-		461,750,449
Federal Home Loan Bank advances		15,999,355		-		16,481,205		-		16,481,205
Securities sold under agreements to repurchase		21,817,155		-		21,817,155		-		21,817,155
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		254,015		15,928		238,087		-		254,015

			Fair Value Measurements at December 31, 2015 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	79,232,566	$	79,232,566	$	-	$	-	$	79,232,566
Interest-earning time deposits		1,685,000		-		1,685,000		-		1,685,000
Federal Home Loan Bank stock		1,747,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		419,686,001		-		-		421,795,305		421,795,305
Loans held for sale		1,078,785		-		1,078,785		-		1,078,785
Accrued interest receivable		1,620,309		-		510,231		1,110,078		1,620,309
Financial liabilities:
Non-interest bearing deposits		69,296,354		69,296,354		-		-		69,296,354
Interest-bearing deposits		463,861,939		330,689,715		133,976,643		-		464,666,358
Federal Home Loan Bank advances		15,995,485		-		16,315,262		-		16,315,262
Securities sold under agreement to repurchase		19,732,766		-		19,732,766		-		19,732,766
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		227,947		14,621		213,326		-		227,947

In addition, other assets and liabilities of the Company that are not defined as financial instruments, such as property and equipment, are not included in the above disclosures.

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ACCUMULATED OTHER COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2016

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables summarize the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2016, and summarize the significant amounts reclassified out of each component of accumulated other comprehensive income for the six months ended June 30, 2016. There was no reclassification out of accumulated other comprehensive income for the three months ended June 30, 2016.

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities		Total
Accumulated Other Comprehensive Income at April 1, 2016	$	1,029,620	$	1,029,620
Other comprehensive income before reclassifications		467,442		467,442
Amount reclassified from accumulated other comprehensive income		-		-
Net current-period other comprehensive income		467,442		467,442
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062	$	1,497,062

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2016	$	397,994		$	397,994
Other comprehensive income before reclassifications		1,116,868			1,116,868
Amount reclassified from accumulated other comprehensive income(2)		(17,800	)		(17,800	)
Net current-period other comprehensive income		1,099,068			1,099,068
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062		$	1,497,062

⁽¹⁾ All amounts are net of tax.

⁽²⁾ See table below for details about reclassifications.

Reclassifications out of Accumulated Other Comprehensive Income
For the Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	29,181		Gain on sale of securities
		(11,381	)	Tax expense
Total reclassifications for the period	$	17,800		Net of tax

The following tables summarize the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2015. There was no reclassification out of accumulated other comprehensive income for these periods.

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at April 1, 2015	$	718,274		$	718,274
Other comprehensive loss before reclassifications		(696,968	)		(696,968	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(696,968	)		(696,968	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2015	$	197,331		$	197,331
Other comprehensive loss before reclassifications		(176,025	)		(176,025	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(176,025	)		(176,025	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

On July 15, 2016, First Mid received approval of the Merger from the Board of Governors of the Federal Reserve System. Subject to the satisfaction of customary closing conditions in the Merger Agreement and the approval of the stockholders of both First Mid and First Clover Leaf, the Merger is anticipated to be completed in the second half of 2016.

On July 26, 2016, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.06 per share for the quarter ended June 30, 2016. The dividend will be payable to stockholders of record as of August 19, 2016 and is expected to be paid on August 26, 2016.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements: The following accounting standards were recently issued relating to the financial services industry:

In May 2014, the Financial Accounting Standard Board (the “FASB”) issued an update creating FASB Topic 606, Revenue from Contracts with Customers.  The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.  We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

In January 2016, the FASB issued an update (ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities). The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As 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 (“HTM”) debt securities. The update amends the accounting for credit losses on available-for-sale securities (“AFS”), whereby credit losses 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. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on our consolidated financial statements.

Reclassifications

Reclassifications: Certain reclassifications have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s net income or total stockholders’ equity.

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SECURITIES AVAILABLE FOR SALE (Tables)

6 Months Ended

Jun. 30, 2016

SECURITIES AVAILABLE FOR SALE

Summary of amortized cost and fair values of securities with gross unrealized gains and losses

	June 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	31,502,726	$	510,843	$	-		$	32,013,569
State and municipal securities		43,672,468		1,723,981		(22,569	)		45,373,880
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		30,695,390		268,618		(26,673	)		30,937,335
	$	105,874,085	$	2,503,442	$	(49,242	)	$	108,328,285

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	29,183,789	$	26,006	$	(161,693	)	$	29,048,102
State and municipal securities		44,746,083		1,156,547		(168,391	)		45,734,239
Other securities		3,501		-		-			3,501
Mortgage-backed: residential		29,170,791		60,300		(260,319	)		28,970,772
	$	103,104,164	$	1,242,853	$	(590,403	)	$	103,756,614

Schedule of unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position

	June 30, 2016
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
State and municipal securities	$	299,277	$	(935	)	$	1,704,091	$	(21,634	)	$	2,003,368	$	(22,569	)
Mortgage-backed: residential		-		-			5,393,861		(26,673	)		5,393,861		(26,673	)
	$	299,277	$	(935	)	$	7,097,952	$	(48,307	)	$	7,397,229	$	(49,242	)

	December 31, 2015
	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
U.S. government agency obligations	$	15,928,702	$	(82,008	)	$	5,934,944	$	(79,685	)	$	21,863,646	$	(161,693	)
State and municipal securities		7,666,691		(66,224	)		4,927,928		(102,167	)		12,594,619		(168,391	)
Mortgage-backed: residential		18,251,546		(183,188	)		4,227,473		(77,131	)		22,479,019		(260,319	)
	$	41,846,939	$	(331,420	)	$	15,090,345	$	(258,983	)	$	56,937,284	$	(590,403	)

Schedule of amortized cost and fair value by contractual maturity

	Amortized		Fair
	Cost		Value
Due in one year or less	$	8,206,342	$	8,249,908
Due after one year through five years		29,114,362		29,699,080
Due after five years through ten years		27,735,538		28,865,845
Due after ten years		10,118,952		10,572,616
Other securities - non-maturing		3,501		3,501
Mortgage-backed: residential		30,695,390		30,937,335
	$	105,874,085	$	108,328,285

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LOANS (Tables)

6 Months Ended

Jun. 30, 2016

LOANS

Schedule of components of loans

	At June 30,						At December 31,
	2016						2015
	Amount			Percent			Amount			Percent
Real estate loans:
One-to-four family	$	113,870,419			25.5	%	$	110,792,710			26.0	%
Multi-family		36,797,825			8.2			41,182,067			9.7
Commercial		162,403,332			36.5			153,634,426			36.0
Construction and land		13,950,427			3.1			13,588,626			3.2
		327,022,003			73.3			319,197,829			74.9
Commercial business		102,869,196			23.0			89,743,511			21.1
Consumer:
Home equity		12,505,761			2.8			13,656,008			3.2
Automobile and other		3,989,525			0.9			3,523,696			0.8
		16,495,286			3.7			17,179,704			4.0
Total gross loans		446,386,485			100.0	%		426,121,044			100.0	%
Deferred loan origination costs, net		239,241						228,764
Allowance for loan losses		(6,225,250	)					(5,886,225	)
Loans, net	$	440,400,476					$	420,463,583

Schedule of past-due loans

June 30, 2016
	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	-	$	192,863	$	365,269	$	558,132	$	113,312,287	$	113,870,419	$	-
Multi-family		-		-		-		-		36,797,825		36,797,825		-
Commercial		113,082		709,773		165,956		988,811		161,414,521		162,403,332		-
Construction and land		-		-		-		-		13,950,427		13,950,427		-
		113,082		902,636		531,225		1,546,943		325,475,060		327,022,003		-
Commercial business		80,282		-		179,522		259,804		102,609,392		102,869,196		-
Consumer:
Home equity		-		-		42,318		42,318		12,463,443		12,505,761		-
Automobile and other		-		-		-		-		3,989,525		3,989,525		-
		-		-		42,318		42,318		16,452,968		16,495,286		-
Total	$	193,364	$	902,636	$	753,065	$	1,849,065	$	444,537,420	$	446,386,485	$	-

December 31, 2015
	Loans 30-59 Days Past  Due		Loans 60-89 Days Past  Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	331,479	$	259,240	$	33,839	$	624,558	$	110,168,152	$	110,792,710	$	-
Multi-family		-		-		-		-		41,182,067		41,182,067		-
Commercial		-		-		111,706		111,706		153,522,720		153,634,426		-
Construction and land		-		-		-		-		13,588,626		13,588,626		-
		331,479		259,240		145,545		736,264		318,461,565		319,197,829		-
Commercial business		-		-		87,254		87,254		89,656,257		89,743,511		-
Consumer:
Home equity		57,625		-		89,407		147,032		13,508,976		13,656,008		-
Automobile and other		500		-		-		500		3,523,196		3,523,696		-
		58,125		-		89,407		147,532		17,032,172		17,179,704		-
Total	$	389,604	$	259,240	$	322,206	$	971,050	$	425,149,994	$	426,121,044	$	-

Schedule of non-accrual loans

	June 30,		December 31,
	2016		2015
Real estate loans:
One-to-four family	$	1,388,481	$	601,833
Multi-family		614,784		995,659
Commercial		3,147,074		1,245,023
Construction and land		-		-
		5,150,339		2,842,515
Commercial business		323,584		263,233
Consumer:
Home equity		165,875		124,627
Automobile and other		66,120		8,558
		231,995		133,185
Total non-accrual loans	$	5,705,918	$	3,238,933

Schedule of activity in the allowance for loan losses

Three months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,158,110	$	-		$	-	$	37,680		$	1,195,790
Multi-family		411,519		-			3,000		(33,409	)		381,110
Commercial		2,449,438		-			2,060		(9,782	)		2,441,716
Construction and land		437,211		-			-		48,570			485,781
		4,456,278		-			5,060		43,059			4,504,397
Commercial business		1,328,516		-			1,103		64,252			1,393,871
Consumer
Home equity		280,466		-			12,442		(46,033	)		246,875
Automobile and other		71,460		(75	)		-		8,722			80,107
		351,926		(75	)		12,442		(37,311	)		326,982
Total	$	6,136,720	$	(75	)	$	18,605	$	70,000		$	6,225,250

Three months ended June 30, 2015
	Beginning Balance		Charge-offs		Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,315,813	$	-	$	-	$	(201,071	)	$	1,114,742
Multi-family		439,661		-		4,752		29,155			473,568
Commercial		2,110,850		-		3,971		76,378			2,191,199
Construction and land		729,089		-		-		(61,623	)		667,466
		4,595,413		-		8,723		(157,161	)		4,446,975
Commercial business		1,051,713		-		11,663		123,272			1,186,648
Consumer
Home equity		220,365		-		-		30,522			250,887
Automobile and other		10,816		-		331		3,367			14,514
		231,181		-		331		33,889			265,401
Total	$	5,878,307	$	-	$	20,717	$	-		$	5,899,024

Six months ended June 30, 2016
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,139,730	$	-		$	984	$	55,076		$	1,195,790
Multi-family		474,368		-			6,000		(99,258	)		381,110
Commercial		1,984,088		-			4,838		452,790			2,441,716
Construction and land		497,992		-			-		(12,211	)		485,781
		4,096,178		-			11,822		396,397			4,504,397
Commercial business		1,434,687		-			8,233		(49,049	)		1,393,871
Consumer:
Home equity		279,670		-			12,442		(45,237	)		246,875
Automobile and other		75,690		(13,546	)		74		17,889			80,107
		355,360		(13,546	)		12,516		(27,348	)		326,982
Total	$	5,886,225	$	(13,546	)	$	32,571	$	320,000		$	6,225,250

Six months ended June 30, 2015
	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
Real estate loans:
One-to-four family	$	1,119,762	$	(25,258	)	$	-	$	20,238		$	1,114,742
Multi-family		436,833		-			5,752		30,983			473,568
Commercial		1,650,290		(25,742	)		4,701		561,950			2,191,199
Construction and land		1,194,917		-			811,350		(1,338,801	)		667,466
		4,401,802		(51,000	)		821,803		(725,630	)		4,446,975
Commercial business		951,215		-			65,953		169,480			1,186,648
Consumer:
Home equity		198,150		-			-		52,737			250,887
Automobile and other		10,275		-			826		3,413			14,514
		208,425		-			826		56,150			265,401
Total	$	5,561,442	$	(51,000	)	$	888,582	$	(500,000	)	$	5,899,024

Schedule of allocation of the allowance for loan losses and the loan balances between loans evaluated both individually and collectively

June 30, 2016
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	309,439	$	886,351	$	1,195,790	$	1,434,910	$	112,435,509	$	113,870,419
Multi-family		-		381,110		381,110		4,184,634		32,613,191		36,797,825
Commercial		728,773		1,712,943		2,441,716		3,778,261		158,625,071		162,403,332
Construction and land		-		485,781		485,781		176,353		13,774,074		13,950,427
		1,038,212		3,466,185		4,504,397		9,574,158		317,447,845		327,022,003
Commercial business		230,210		1,163,661		1,393,871		480,459		102,388,737		102,869,196
Consumer:
Home equity		71,483		175,392		246,875		182,753		12,323,008		12,505,761
Automobile and other		9,345		70,762		80,107		66,120		3,923,405		3,989,525
		80,828		246,154		326,982		248,873		16,246,413		16,495,286
Total	$	1,349,250	$	4,876,000	$	6,225,250	$	10,303,490	$	436,082,995	$	446,386,485

December 31, 2015
	Period-end allowance allocated to loans:						Loans evaluated for impairment:
	Individually evaluated for impairment		Collectively evaluated for impairment		Ending Balance		Individually		Collectively		Ending Balance
Real estate loans:
One-to-four family	$	116,724	$	1,023,006	$	1,139,730	$	905,974	$	109,886,736	$	110,792,710
Multi-family		-		474,368		474,368		995,659		40,186,408		41,182,067
Commercial		183,966		1,800,122		1,984,088		2,735,652		150,898,774		153,634,426
Construction and land		-		497,992		497,992		186,888		13,401,738		13,588,626
		300,690		3,795,488		4,096,178		4,824,173		314,373,656		319,197,829
Commercial business		259,787		1,174,900		1,434,687		586,103		89,157,408		89,743,511
Consumer:
Home equity		49,782		229,888		279,670		141,649		13,514,359		13,656,008
Automobile and other		-		75,690		75,690		8,558		3,515,138		3,523,696
		49,782		305,578		355,360		150,207		17,029,497		17,179,704
Total	$	610,259	$	5,275,966	$	5,886,225	$	5,560,483	$	420,560,561	$	426,121,044

Schedule of credit quality indicators

June 30, 2016
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	111,732,989	$	748,949	$	1,388,481	$	-	$	113,870,419
Multi-family		32,613,191		-		4,184,634		-		36,797,825
Commercial		151,696,933		5,171,386		5,535,013		-		162,403,332
Construction and land		13,463,977		-		486,450		-		13,950,427
		309,507,090		5,920,335		11,594,578		-		327,022,003
Commercial business		99,726,671		2,449,651		692,874		-		102,869,196
Consumer:
Home equity		12,339,886		-		165,875		-		12,505,761
Automobile and other		3,923,405		-		66,120		-		3,989,525
		16,263,291		-		231,995		-		16,495,286
Total	$	425,497,052	$	8,369,986	$	12,519,447	$	-	$	446,386,485

December 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	109,161,526	$	772,127	$	859,057	$	-	$	110,792,710
Multi-family		37,571,827		2,614,581		995,659		-		41,182,067
Commercial		143,837,755		5,295,878		4,500,793		-		153,634,426
Construction and land		13,143,977		-		444,649		-		13,588,626
		303,715,085		8,682,586		6,800,158		-		319,197,829
Commercial business		85,604,981		3,323,003		815,527		-		89,743,511
Consumer:
Home equity		13,504,552		-		68,241		83,215		13,656,008
Automobile and other		3,510,289		-		4,849		8,558		3,523,696
		17,014,841		-		73,090		91,773		17,179,704
Total	$	406,334,907	$	12,005,589	$	7,688,775	$	91,773	$	426,121,044

Schedule of impaired loans

	As of June 30, 2016						As of December 31, 2015
	Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Contractual Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Real estate loans:
One-to-four family	$	431,065	$	431,065	$	-	$	648,750	$	648,750	$	-
Multi-family		4,667,112		4,184,634		-		1,478,137		995,659		-
Commercial		2,149,411		1,959,509		-		2,246,797		2,193,291		-
Construction and land		176,353		176,353		-		186,888		186,888		-
		7,423,941		6,751,561		-		4,560,572		4,024,588		-
Commercial business		230,116		230,116		-		87,254		87,254		-
Consumer:
Home equity		50,957		50,957		-		52,242		52,242
Automobile and other		-		-		-		8,558		8,558		-
		50,957		50,957				60,800		60,800		-
Subtotal	$	7,705,014	$	7,032,634	$	-	$	4,708,626	$	4,172,642	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	1,003,845	$	1,003,845	$	309,439	$	257,224	$	257,224	$	116,724
Commercial		1,818,752		1,818,752		728,773		685,759		542,361		183,966
		2,822,597		2,822,597		1,038,212		942,983		799,585		300,690
Commercial business		250,343		250,343		230,210		498,849		498,849		259,787
Consumer:
Home equity		131,796		131,796		71,483		89,407		89,407		49,782
Automobile and other		66,120		66,120		9,345		-		-		-
		197,916		197,916		80,828		89,407		89,407		49,782
Subtotal		3,270,856		3,270,856		1,349,250		1,531,239		1,387,841		610,259
Total	$	10,975,870	$	10,303,490	$	1,349,250	$	6,239,865	$	5,560,483	$	610,259

	For the three months ended June 30, 2016						For the three months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	555,453	$	464	$	-	$	660,569	$	1,713	$	-
Multi-family		2,578,784		43,758		-		1,130,198		-		-
Commercial		1,973,177		9,191		-		1,271,873		14,142		-
Construction and land		178,997		2,003		-		854,331		2,236		-
		5,286,411		55,416		-		3,916,971		18,091		-
Commercial business		158,685		-		-		-		-		-
Consumer:
Home equity		62,649		253		-		54,226		257		-
Automobile and other		5,847		-		-		-		-		-
		68,496		253		-		54,226		257		-
Subtotal	$	5,513,592	$	55,669	$	-	$	3,971,197	$	18,348	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	881,912	$	-	$	-	$	545,364	$	6,415	$	-
Commercial		1,819,051		-		-		815,183		4,262		-
		2,700,963		-		-		1,360,547		10,677		-
Commercial business		328,005		1,809		-		189,200		3,650		-
Consumer:
Home equity		155,691		-		-		51,220		115		-
Automobile and other		33,060		169		-		-		-		-
		188,751		169		-		51,220		115		-
Subtotal		3,217,719		1,978		-		1,600,967		14,442		-
Total	$	8,731,311	$	57,647	$	-	$	5,572,164	$	32,790	$	-

	For the six months ended June 30, 2016						For the six months ended June 30, 2015
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Real estate loans:
One-to-four family	$	586,552	$	930	$	-	$	655,561	$	3,419	$	-
Multi-family		2,051,076		43,758		-		1,200,392		-		-
Commercial		2,046,548		27,186		-		1,104,093		14,142		-
Construction and land		181,627		4,065		-		1,115,897		4,503		-
		4,865,803		75,939		-		4,075,943		22,064		-
Commercial business		134,874		-		-		8,365		-		-
Consumer:
Home equity		59,180		507		-		54,668		513		-
Automobile and other		6,751		-		-		-		-		-
		65,931		507		-		54,668		513		-
Subtotal	$	5,066,608	$	76,446	$	-	$	4,138,976	$	22,577	$	-
With an allowance recorded:
Real estate loans:
One-to-four family	$	673,683	$	4,506	$	-	$	630,085	$	12,126	$	-
Multi-family		-		-		-		-		-		-
Commercial		1,393,488		501		-		1,043,065		8,532		-
Construction and land		-		-		-		-		-		-
		2,067,171		5,007		-		1,673,150		20,658		-
Commercial business		384,953		5,263		-		164,615		5,543		-
Consumer:
Home equity		133,596		227		-		37,447		115		-
Automobile and other		22,040		169		-		-		-		-
		155,636		396		-		37,447		115		-
Subtotal		2,607,760		10,666		-		1,875,212		26,316		-
Total	$	7,674,368	$	87,112	$	-	$	6,014,188	$	48,893	$	-

Schedule of loans by class that were modified as troubled debt restructurings

Three and six months ended June 30, 2016
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
One-to-four family		1	$	748,641	$	748,641
Multi-family		3		3,569,850		3,569,850
Commercial		2		1,699,300		1,699,300
		6		6,017,791		6,017,791
Commercial business		2		144,062		144,062
Consumer:
Home equity		1		89,478		89,478
Automobile and other		2		66,120		66,120
		3		155,598		155,598
Total		11	$	6,317,451	$	6,317,451

Three and six months ended June 30, 2015
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate loans:
Commercial		2		1,001,803		1,001,803
Commercial business		1		162,167		162,167
Total		3	$	1,163,970	$	1,163,970

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Tables)

6 Months Ended

Jun. 30, 2016

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Schedule of securities sold under agreements to repurchase

	June 30, 2016
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90  days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	21,817,155	$	-	$	-	$	-	$	21,817,155
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	21,817,155

	December 31, 2015
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to  30 days		30 - 90  days		Greater than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions	$	19,732,766	$	-	$	-	$	-	$	19,732,766
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet									$	19,732,766

XML

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2016

EARNINGS PER SHARE

Schedule of basic and diluted earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income	$	651,401	$	1,212,480	$	1,664,749	$	2,683,734
Basic potential common shares:
Basic weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Dilutive potential common shares		-		-		-		-
Diluted weighted average shares outstanding		7,005,883		7,006,967		7,005,883		7,007,124
Basic and diluted earnings per share	$	0.09	$	0.17	$	0.24	$	0.38

XML

FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2016

FAIR VALUE MEASUREMENTS

Schedule of assets measured at fair value on a recurring basis segregated by fair value hierarchy level

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	32,013,569	$	-	$	32,013,569
State and municipal securities		-		45,373,880		-		45,373,880
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		30,937,335		-		30,937,335
Total securities available for sale	$	-	$	108,328,285	$	-	$	108,328,285

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Securities:
U.S. government agency obligations	$	-	$	29,048,102	$	-	$	29,048,102
State and municipal securities		-		45,734,239		-		45,734,239
Other securities		-		3,501		-		3,501
Mortgage-backed: residential		-		28,970,772		-		28,970,772
Total securities available for sale	$	-	$	103,756,614	$	-	$	103,756,614

Schedule of assets measured at fair value on a nonrecurring basis by fair value hierarchy level

	Fair Value Measurements at June 30, 2016 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Construction and land	$	-	$	-	$	1,566,126	$	1,566,126
Total foreclosed assets	$	-	$	-	$	1,566,126	$	1,566,126
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	694,406	$	694,406
Commercial		-		-		1,089,979		1,089,979
		-		-		1,784,385		1,784,385
Commercial business		-		-		20,132		20,132
Consumer:
Home equity		-		-		60,314		60,314
Automobile and other		-		-		56,775		56,775
		-		-		117,089		117,089
Total impaired loans	$	-	$	-	$	1,921,606	$	1,921,606

	Fair Value Measurements at December 31, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Foreclosed assets:
Real estate:
Commercial	$	-	$	-	$	19,000	$	19,000
Construction and land		-		-		604,500	$	604,500
Total foreclosed assets	$	-	$	-	$	623,500	$	623,500
Impaired loans:
Real estate loans:
One-to-four family	$	-	$	-	$	140,500	$	140,500
Commercial		-		-		358,395		358,395
		-		-		498,895		498,895
Commercial business		-		-		239,062		239,062
Consumer:
Home equity		-		-		39,625		39,625
Total impaired loans	$	-	$	-	$	777,582	$	777,582
Mortgage Servicing Rights	$	-	$	1,109,720	$	-	$	1,109,720

Schedule of quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis

The following table presents quantitative information about Level 3 fair value measurements for significant categories of financial instruments measured at fair value on a non-recurring basis at June 30, 2016:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	1,566,126	Sales Comparison	Adjustment for difference   between comparable sales	-11% to 31%		11.5	%
Impaired loans:
Real estate loans:
One-to-four family	$	504,626	Cost Approach	Adjustment for depreciation  and other factors	6.6%		6.6	%
One-to-four family	$	189,780	Fair Value of Collateral	Adjustment based on lease  purchase agreement	0% to 6%		6.2	%
Commercial		118,968	Sales Comparison	Adjustment for difference   between comparable sales	-53% to -34%		-42.2	%
Commercial		971,011	Income Approach	Investment Capitalization Rates	8.7%		8.7	%
Commercial business		20,132	Sales Comparison	Adjustment for difference   between comparable sales	-48% to 27%		5.2	%
Consumer loans:
Automobile and other		56,775	Fair Value of Collateral	Adjustment for depreciation  and other factors	-20% to -14%		-16.9	%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015:

	Fair Value		Valuation Techniques	Unobservable Inputs	Range	Weighted Average
Foreclosed assets:
Real estate:
Construction and land	$	604,500	Sales Comparison	Adjustment for difference   between comparable sales	-29% to 5%		-8.9	%
Impaired loans:
Real estate loans:
One-to-four family	$	140,500	Sales Comparison	Adjustment for difference   between comparable sales	-19% to -7%		-13.0	%
Commercial		88,000	Sales Comparison	Adjustment for difference   between comparable sales	9% to 16%		12.8	%
Commercial		270,395	Income Approach	Investment Capitalization Rates	9.0%		9.0	%
Commercial business		121,094	Fair Value of Collateral	Discount for type of business   assets	0% to 10%		7.0	%

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

FAIR VALUE OF FINANCIAL INSTRUMENTS

Schedule of estimated fair values of the company's financial instruments

			Fair Value Measurements at June 30, 2016 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	66,628,349	$	66,628,349	$	-	$	-	$	66,628,349
Interest-earning time deposits		1,930,000		-		1,930,000		-		1,930,000
Federal Home Loan Bank stock		997,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		438,478,870		-		-		445,409,350		445,409,350
Loans held for sale		592,450		-		592,450		-		592,450
Accrued interest receivable		1,589,201		-		520,040		1,069,161		1,589,201
Financial liabilities:
Non-interest bearing deposits		78,715,230		78,715,230		-		-		78,715,230
Interest-bearing deposits		460,874,608		325,646,790		136,103,659		-		461,750,449
Federal Home Loan Bank advances		15,999,355		-		16,481,205		-		16,481,205
Securities sold under agreements to repurchase		21,817,155		-		21,817,155		-		21,817,155
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		254,015		15,928		238,087		-		254,015

			Fair Value Measurements at December 31, 2015 Using:
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair
	Amount		(Level 1)		(Level 2)		(Level 3)		Value
Financial assets:
Cash and cash equivalents	$	79,232,566	$	79,232,566	$	-	$	-	$	79,232,566
Interest-earning time deposits		1,685,000		-		1,685,000		-		1,685,000
Federal Home Loan Bank stock		1,747,763		-		-		-		N/A
Federal Reserve Bank stock		1,676,700		-		-		-		N/A
Loans, net (excluding impaired loans at fair value)		419,686,001		-		-		421,795,305		421,795,305
Loans held for sale		1,078,785		-		1,078,785		-		1,078,785
Accrued interest receivable		1,620,309		-		510,231		1,110,078		1,620,309
Financial liabilities:
Non-interest bearing deposits		69,296,354		69,296,354		-		-		69,296,354
Interest-bearing deposits		463,861,939		330,689,715		133,976,643		-		464,666,358
Federal Home Loan Bank advances		15,995,485		-		16,315,262		-		16,315,262
Securities sold under agreement to repurchase		19,732,766		-		19,732,766		-		19,732,766
Subordinated debentures		4,000,000		-		4,000,000		-		4,000,000
Accrued interest payable		227,947		14,621		213,326		-		227,947

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

6 Months Ended

Jun. 30, 2016

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Schedule of changes within each classification of accumulated other comprehensive income (loss), net of tax

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities		Total
Accumulated Other Comprehensive Income at April 1, 2016	$	1,029,620	$	1,029,620
Other comprehensive income before reclassifications		467,442		467,442
Amount reclassified from accumulated other comprehensive income		-		-
Net current-period other comprehensive income		467,442		467,442
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062	$	1,497,062

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2016(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2016	$	397,994		$	397,994
Other comprehensive income before reclassifications		1,116,868			1,116,868
Amount reclassified from accumulated other comprehensive income(2)		(17,800	)		(17,800	)
Net current-period other comprehensive income		1,099,068			1,099,068
Accumulated Other Comprehensive Income at June 30, 2016	$	1,497,062		$	1,497,062

⁽¹⁾ All amounts are net of tax.

⁽²⁾ See table below for details about reclassifications.

Changes in Accumulated Other Comprehensive Income by Component
For the Three Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at April 1, 2015	$	718,274		$	718,274
Other comprehensive loss before reclassifications		(696,968	)		(696,968	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(696,968	)		(696,968	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

Changes in Accumulated Other Comprehensive Income by Component
For the Six Months Ended June 30, 2015(1)
	Unrealized Gains and Losses on Available-for-Sale Securities			Total
Accumulated Other Comprehensive Income at January 1, 2015	$	197,331		$	197,331
Other comprehensive loss before reclassifications		(176,025	)		(176,025	)
Amount reclassified from accumulated other comprehensive income		-			-
Net current-period other comprehensive loss		(176,025	)		(176,025	)
Accumulated Other Comprehensive Income at June 30, 2015	$	21,306		$	21,306

⁽¹⁾ All amounts are net of tax.

Schedule of significant amounts reclassified out of each component of accumulated other comprehensive income

Reclassifications out of Accumulated Other Comprehensive Income
For the Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	29,181		Gain on sale of securities
		(11,381	)	Tax expense
Total reclassifications for the period	$	17,800		Net of tax

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SECURITIES AVAILABLE FOR SALE (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 105,874,085	$ 103,104,164
Gross Unrealized Gains	2,503,442	1,242,853
Gross Unrealized (Losses)	(49,242)	(590,403)
Fair Value	108,328,285	103,756,614
U.S. government agency obligations
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	31,502,726	29,183,789
Gross Unrealized Gains	510,843	26,006
Gross Unrealized (Losses)		(161,693)
Fair Value	32,013,569	29,048,102
State and municipal securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	43,672,468	44,746,083
Gross Unrealized Gains	1,723,981	1,156,547
Gross Unrealized (Losses)	(22,569)	(168,391)
Fair Value	45,373,880	45,734,239
Other securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,501	3,501
Gross Unrealized Gains
Gross Unrealized (Losses)
Fair Value	3,501	3,501
Mortgage-backed: residential
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	30,695,390	29,170,791
Gross Unrealized Gains	268,618	60,300
Gross Unrealized (Losses)	(26,673)	(260,319)
Fair Value	$ 30,937,335	$ 28,970,772

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SECURITIES AVAILABLE FOR SALE (Details 1) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 299,277	$ 41,846,939
Less than 12 Months, Unrealized Losses	(935)	(331,420)
12 Months or More, Fair Value	7,097,952	15,090,345
12 Months or More, Unrealized Losses	(48,307)	(258,983)
Total Fair Value	7,397,229	56,937,284
Total Unrealized Losses	(49,242)	(590,403)
U.S. government agency obligations
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value		15,928,702
Less than 12 Months, Unrealized Losses		(82,008)
12 Months or More, Fair Value		5,934,944
12 Months or More, Unrealized Losses		(79,685)
Total Fair Value		21,863,646
Total Unrealized Losses		(161,693)
State and municipal securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	299,277	7,666,691
Less than 12 Months, Unrealized Losses	(935)	(66,224)
12 Months or More, Fair Value	1,704,091	4,927,928
12 Months or More, Unrealized Losses	(21,634)	(102,167)
Total Fair Value	2,003,368	12,594,619
Total Unrealized Losses	(22,569)	(168,391)
Mortgage-backed: residential
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value		18,251,546
Less than 12 Months, Unrealized Losses		(183,188)
12 Months or More, Fair Value	5,393,861	4,227,473
12 Months or More, Unrealized Losses	(26,673)	(77,131)
Total Fair Value	5,393,861	22,479,019
Total Unrealized Losses	$ (26,673)	$ (260,319)

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SECURITIES AVAILABLE FOR SALE (Details 2)	Jun. 30, 2016 USD ($)
Amortized Cost
Due in one year or less	$ 8,206,342
Due after one year through five years	29,114,362
Due after five years through ten years	27,735,538
Due after ten years	10,118,952
Amortized Cost	105,874,085
Fair Value
Due in one year or less	8,249,908
Due after one year through five years	29,699,080
Due after five years through ten years	28,865,845
Due after ten years	10,572,616
Fair Value	108,328,285
Other securities - non-maturing
Amortized Cost
Securities without a single maturity date	3,501
Fair Value
Securities without a single maturity date	3,501
Mortgage-backed: residential
Amortized Cost
Securities without a single maturity date	30,695,390
Fair Value
Securities without a single maturity date	$ 30,937,335

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SECURITIES AVAILABLE FOR SALE (Detail Textuals)	6 Months Ended
	Jun. 30, 2016 USD ($) Security	Dec. 31, 2015 USD ($) Security
Schedule of Available-for-sale Securities [Line Items]
Number of securities in an unrealized loss position | Security	10	67
Carrying amount of securities pledged to secure deposits	$ 90,223,000	$ 66,882,000
Maximum percentage of holdings of securities of any one issuer, other than the U.S. Government and its agencies	10.00%
Proceeds from the sale of securities	$ 3,686,240
Gross realized gains	29,489
Gross realized losses	$ 308
State and municipal securities
Schedule of Available-for-sale Securities [Line Items]
Number of securities in an unrealized loss position | Security	4
Mortgage-backed: residential
Schedule of Available-for-sale Securities [Line Items]
Number of securities in an unrealized loss position | Security	6

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LOANS (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015	Mar. 31, 2016	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Loans
Total gross loans, amount	$ 446,386,485	$ 426,121,044
Deferred loan origination costs, net	239,241	228,764
Allowance for loan losses	(6,225,250)	(5,886,225)	$ (6,136,720)	$ (5,899,024)	$ (5,878,307)	$ (5,561,442)
Loans, net	$ 440,400,476	$ 420,463,583
Total gross loans, percentage	100.00%	100.00%
Commercial business
Loans
Total gross loans, amount	$ 102,869,196	$ 89,743,511
Allowance for loan losses	$ (1,393,871)	$ (1,434,687)	(1,328,516)	(1,186,648)	(1,051,713)	(951,215)
Total gross loans, percentage	23.00%	21.10%
Consumer
Loans
Total gross loans, amount	$ 16,495,286	$ 17,179,704
Allowance for loan losses	$ (326,982)	$ (355,360)	(351,926)	(265,401)	(231,181)	(208,425)
Total gross loans, percentage	3.70%	4.00%
Consumer | Home Equity
Loans
Total gross loans, amount	$ 12,505,761	$ 13,656,008
Allowance for loan losses	$ (246,875)	$ (279,670)	(280,466)	(250,887)	(220,365)	(198,150)
Total gross loans, percentage	2.80%	3.20%
Consumer | Automobile and other
Loans
Total gross loans, amount	$ 3,989,525	$ 3,523,696
Allowance for loan losses	$ (80,107)	$ (75,690)	(71,460)	(14,514)	(10,816)	(10,275)
Total gross loans, percentage	0.90%	0.80%
Real estate
Loans
Total gross loans, amount	$ 327,022,003	$ 319,197,829
Allowance for loan losses	$ (4,504,397)	$ (4,096,178)	(4,456,278)	(4,446,975)	(4,595,413)	(4,401,802)
Total gross loans, percentage	73.30%	74.90%
Real estate | One-to-four family loans
Loans
Total gross loans, amount	$ 113,870,419	$ 110,792,710
Allowance for loan losses	$ (1,195,790)	$ (1,139,730)	(1,158,110)	(1,114,742)	(1,315,813)	(1,119,762)
Total gross loans, percentage	25.50%	26.00%
Real estate | Multi-family loans
Loans
Total gross loans, amount	$ 36,797,825	$ 41,182,067
Allowance for loan losses	$ (381,110)	$ (474,368)	(411,519)	(473,568)	(439,661)	(436,833)
Total gross loans, percentage	8.20%	9.70%
Real estate | Commercial loans
Loans
Total gross loans, amount	$ 162,403,332	$ 153,634,426
Allowance for loan losses	$ (2,441,716)	$ (1,984,088)	(2,449,438)	(2,191,199)	(2,110,850)	(1,650,290)
Total gross loans, percentage	36.50%	36.00%
Real estate | Construction and land loans
Loans
Total gross loans, amount	$ 13,950,427	$ 13,588,626
Allowance for loan losses	$ (485,781)	$ (497,992)	$ (437,211)	$ (667,466)	$ (729,089)	$ (1,194,917)
Total gross loans, percentage	3.10%	3.20%

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LOANS (Details 1) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Past-due loans
Total Past Due Loans	$ 1,849,065	$ 971,050
Current Loans	444,537,420	425,149,994
Ending Balance	446,386,485	426,121,044
Accruing Loans 90 or More Days Past Due
Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans	193,364	389,604
Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans	902,636	259,240
Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	753,065	322,206
Commercial business
Past-due loans
Total Past Due Loans	259,804	87,254
Current Loans	102,609,392	89,656,257
Ending Balance	102,869,196	89,743,511
Accruing Loans 90 or More Days Past Due
Commercial business | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans	80,282
Commercial business | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Commercial business | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	179,522	87,254
Consumer
Past-due loans
Total Past Due Loans	42,318	147,532
Current Loans	16,452,968	17,032,172
Ending Balance	16,495,286	17,179,704
Accruing Loans 90 or More Days Past Due
Consumer | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans		58,125
Consumer | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Consumer | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	42,318	89,407
Consumer | Home Equity
Past-due loans
Total Past Due Loans	42,318	147,032
Current Loans	12,463,443	13,508,976
Ending Balance	12,505,761	13,656,008
Accruing Loans 90 or More Days Past Due
Consumer | Home Equity | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans		57,625
Consumer | Home Equity | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Consumer | Home Equity | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	42,318	89,407
Consumer | Automobile and other
Past-due loans
Total Past Due Loans		500
Current Loans	3,989,525	3,523,196
Ending Balance	3,989,525	3,523,696
Accruing Loans 90 or More Days Past Due
Consumer | Automobile and other | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans		500
Consumer | Automobile and other | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Consumer | Automobile and other | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans
Real estate
Past-due loans
Total Past Due Loans	1,546,943	736,264
Current Loans	325,475,060	318,461,565
Ending Balance	327,022,003	319,197,829
Accruing Loans 90 or More Days Past Due
Real estate | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans	113,082	331,479
Real estate | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans	902,636	259,240
Real estate | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	531,225	145,545
Real estate | One-to-four family loans
Past-due loans
Total Past Due Loans	558,132	624,558
Current Loans	113,312,287	110,168,152
Ending Balance	113,870,419	110,792,710
Accruing Loans 90 or More Days Past Due
Real estate | One-to-four family loans | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans		331,479
Real estate | One-to-four family loans | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans	192,863	259,240
Real estate | One-to-four family loans | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	365,269	33,839
Real estate | Multi-family loans
Past-due loans
Total Past Due Loans
Current Loans	36,797,825	41,182,067
Ending Balance	36,797,825	41,182,067
Accruing Loans 90 or More Days Past Due
Real estate | Multi-family loans | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans
Real estate | Multi-family loans | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Real estate | Multi-family loans | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans
Real estate | Commercial loans
Past-due loans
Total Past Due Loans	988,811	111,706
Current Loans	161,414,521	153,522,720
Ending Balance	162,403,332	153,634,426
Accruing Loans 90 or More Days Past Due
Real estate | Commercial loans | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans	113,082
Real estate | Commercial loans | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans	709,773
Real estate | Commercial loans | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans	165,956	111,706
Real estate | Construction and land loans
Past-due loans
Total Past Due Loans
Current Loans	13,950,427	13,588,626
Ending Balance	13,950,427	13,588,626
Accruing Loans 90 or More Days Past Due
Real estate | Construction and land loans | Loans 30-59 Days Past Due
Past-due loans
Total Past Due Loans
Real estate | Construction and land loans | Loans 60-89 Days Past Due
Past-due loans
Total Past Due Loans
Real estate | Construction and land loans | Loans 90 or More Days Past Due
Past-due loans
Total Past Due Loans

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LOANS (Details 2) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Past-due loans
Total non-accrual loans	$ 5,705,918	$ 3,238,933
Commercial business
Past-due loans
Total non-accrual loans	323,584	263,233
Consumer
Past-due loans
Total non-accrual loans	231,995	133,185
Consumer | Home Equity
Past-due loans
Total non-accrual loans	165,875	124,627
Consumer | Automobile and other
Past-due loans
Total non-accrual loans	66,120	8,558
Real estate
Past-due loans
Total non-accrual loans	5,150,339	2,842,515
Real estate | One-to-four family loans
Past-due loans
Total non-accrual loans	1,388,481	601,833
Real estate | Multi-family loans
Past-due loans
Total non-accrual loans	614,784	995,659
Real estate | Commercial loans
Past-due loans
Total non-accrual loans	3,147,074	1,245,023
Real estate | Construction and land loans
Past-due loans
Total non-accrual loans

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LOANS (Details 3) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Changes in allowance for loan losses
Beginning Balance	$ 6,136,720	$ 5,878,307	$ 5,886,225	$ 5,561,442
Charge-offs	(75)		(13,546)	(51,000)
Recoveries	18,605	20,717	32,571	888,582
Provision	70,000		320,000	(500,000)
Ending Balance	6,225,250	5,899,024	6,225,250	5,899,024
Commercial business
Changes in allowance for loan losses
Beginning Balance	1,328,516	1,051,713	1,434,687	951,215
Charge-offs
Recoveries	1,103	11,663	8,233	65,953
Provision	64,252	123,272	(49,049)	169,480
Ending Balance	1,393,871	1,186,648	1,393,871	1,186,648
Consumer
Changes in allowance for loan losses
Beginning Balance	351,926	231,181	355,360	208,425
Charge-offs	(75)		(13,546)
Recoveries	12,442	331	12,516	826
Provision	(37,311)	33,889	(27,348)	56,150
Ending Balance	326,982	265,401	326,982	265,401
Consumer | Home Equity
Changes in allowance for loan losses
Beginning Balance	280,466	220,365	279,670	198,150
Charge-offs
Recoveries	12,442		12,442
Provision	(46,033)	30,522	(45,237)	52,737
Ending Balance	246,875	250,887	246,875	250,887
Consumer | Automobile and other
Changes in allowance for loan losses
Beginning Balance	71,460	10,816	75,690	10,275
Charge-offs	(75)		(13,546)
Recoveries		331	74	826
Provision	8,722	3,367	17,889	3,413
Ending Balance	80,107	14,514	80,107	14,514
Real estate
Changes in allowance for loan losses
Beginning Balance	4,456,278	4,595,413	4,096,178	4,401,802
Charge-offs				(51,000)
Recoveries	5,060	8,723	11,822	821,803
Provision	43,059	(157,161)	396,397	(725,630)
Ending Balance	4,504,397	4,446,975	4,504,397	4,446,975
Real estate | One-to-four family loans
Changes in allowance for loan losses
Beginning Balance	1,158,110	1,315,813	1,139,730	1,119,762
Charge-offs				(25,258)
Recoveries			984
Provision	37,680	(201,071)	55,076	20,238
Ending Balance	1,195,790	1,114,742	1,195,790	1,114,742
Real estate | Multi-family loans
Changes in allowance for loan losses
Beginning Balance	411,519	439,661	474,368	436,833
Charge-offs
Recoveries	3,000	4,752	6,000	5,752
Provision	(33,409)	29,155	(99,258)	30,983
Ending Balance	381,110	473,568	381,110	473,568
Real estate | Commercial loans
Changes in allowance for loan losses
Beginning Balance	2,449,438	2,110,850	1,984,088	1,650,290
Charge-offs				(25,742)
Recoveries	2,060	3,971	4,838	4,701
Provision	(9,782)	76,378	452,790	561,950
Ending Balance	2,441,716	2,191,199	2,441,716	2,191,199
Real estate | Construction and land loans
Changes in allowance for loan losses
Beginning Balance	437,211	729,089	497,992	1,194,917
Charge-offs
Recoveries				811,350
Provision	48,570	(61,623)	(12,211)	(1,338,801)
Ending Balance	$ 485,781	$ 667,466	$ 485,781	$ 667,466

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LOANS (Details 4) - USD ($)	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Period-end allowance allocated to loans:
Individually evaluated for impairment	$ 1,349,250		$ 610,259
Collectively evaluated for impairment	4,876,000		5,275,966
Ending Balance	6,225,250	$ 6,136,720	5,886,225	$ 5,899,024	$ 5,878,307	$ 5,561,442
Loans evaluated for impairment:
Individually	10,303,490		5,560,483
Collectively	436,082,995		420,560,561
Ending Balance	446,386,485		426,121,044
Commercial business
Period-end allowance allocated to loans:
Individually evaluated for impairment	230,210		259,787
Collectively evaluated for impairment	1,163,661		1,174,900
Ending Balance	1,393,871	1,328,516	1,434,687	1,186,648	1,051,713	951,215
Loans evaluated for impairment:
Individually	480,459		586,103
Collectively	102,388,737		89,157,408
Ending Balance	102,869,196		89,743,511
Consumer
Period-end allowance allocated to loans:
Individually evaluated for impairment	80,828		49,782
Collectively evaluated for impairment	246,154		305,578
Ending Balance	326,982	351,926	355,360	265,401	231,181	208,425
Loans evaluated for impairment:
Individually	248,873		150,207
Collectively	16,246,413		17,029,497
Ending Balance	16,495,286		17,179,704
Consumer | Home Equity
Period-end allowance allocated to loans:
Individually evaluated for impairment	71,483		49,782
Collectively evaluated for impairment	175,392		229,888
Ending Balance	246,875	280,466	279,670	250,887	220,365	198,150
Loans evaluated for impairment:
Individually	182,753		141,649
Collectively	12,323,008		13,514,359
Ending Balance	12,505,761		13,656,008
Consumer | Automobile and other
Period-end allowance allocated to loans:
Individually evaluated for impairment	9,345
Collectively evaluated for impairment	70,762		75,690
Ending Balance	80,107	71,460	75,690	14,514	10,816	10,275
Loans evaluated for impairment:
Individually	66,120		8,558
Collectively	3,923,405		3,515,138
Ending Balance	3,989,525		3,523,696
Real estate
Period-end allowance allocated to loans:
Individually evaluated for impairment	1,038,212		300,690
Collectively evaluated for impairment	3,466,185		3,795,488
Ending Balance	4,504,397	4,456,278	4,096,178	4,446,975	4,595,413	4,401,802
Loans evaluated for impairment:
Individually	9,574,158		4,824,173
Collectively	317,447,845		314,373,656
Ending Balance	327,022,003		319,197,829
Real estate | One-to-four family loans
Period-end allowance allocated to loans:
Individually evaluated for impairment	309,439		116,724
Collectively evaluated for impairment	886,351		1,023,006
Ending Balance	1,195,790	1,158,110	1,139,730	1,114,742	1,315,813	1,119,762
Loans evaluated for impairment:
Individually	1,434,910		905,974
Collectively	112,435,509		109,886,736
Ending Balance	113,870,419		110,792,710
Real estate | Multi-family loans
Period-end allowance allocated to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	381,110		474,368
Ending Balance	381,110	411,519	474,368	473,568	439,661	436,833
Loans evaluated for impairment:
Individually	4,184,634		995,659
Collectively	32,613,191		40,186,408
Ending Balance	36,797,825		41,182,067
Real estate | Commercial loans
Period-end allowance allocated to loans:
Individually evaluated for impairment	728,773		183,966
Collectively evaluated for impairment	1,712,943		1,800,122
Ending Balance	2,441,716	2,449,438	1,984,088	2,191,199	2,110,850	1,650,290
Loans evaluated for impairment:
Individually	3,778,261		2,735,652
Collectively	158,625,071		150,898,774
Ending Balance	162,403,332		153,634,426
Real estate | Construction and land loans
Period-end allowance allocated to loans:
Individually evaluated for impairment
Collectively evaluated for impairment	485,781		497,992
Ending Balance	485,781	$ 437,211	497,992	$ 667,466	$ 729,089	$ 1,194,917
Loans evaluated for impairment:
Individually	176,353		186,888
Collectively	13,774,074		13,401,738
Ending Balance	$ 13,950,427		$ 13,588,626

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LOANS (Details 5) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Credit quality indicators
Total loans	$ 446,386,485	$ 426,121,044
Pass
Credit quality indicators
Total loans	425,497,052	406,334,907
Special Mention
Credit quality indicators
Total loans	8,369,986	12,005,589
Substandard
Credit quality indicators
Total loans	12,519,447	7,688,775
Doubtful
Credit quality indicators
Total loans		91,773
Commercial business
Credit quality indicators
Total loans	102,869,196	89,743,511
Commercial business | Pass
Credit quality indicators
Total loans	99,726,671	85,604,981
Commercial business | Special Mention
Credit quality indicators
Total loans	2,449,651	3,323,003
Commercial business | Substandard
Credit quality indicators
Total loans	692,874	815,527
Commercial business | Doubtful
Credit quality indicators
Total loans
Consumer
Credit quality indicators
Total loans	16,495,286	17,179,704
Consumer | Pass
Credit quality indicators
Total loans	16,263,291	17,014,841
Consumer | Special Mention
Credit quality indicators
Total loans
Consumer | Substandard
Credit quality indicators
Total loans	231,995	73,090
Consumer | Doubtful
Credit quality indicators
Total loans		91,773
Consumer | Home Equity
Credit quality indicators
Total loans	12,505,761	13,656,008
Consumer | Home Equity | Pass
Credit quality indicators
Total loans	12,339,886	13,504,552
Consumer | Home Equity | Special Mention
Credit quality indicators
Total loans
Consumer | Home Equity | Substandard
Credit quality indicators
Total loans	165,875	68,241
Consumer | Home Equity | Doubtful
Credit quality indicators
Total loans		83,215
Consumer | Automobile and other
Credit quality indicators
Total loans	3,989,525	3,523,696
Consumer | Automobile and other | Pass
Credit quality indicators
Total loans	3,923,405	3,510,289
Consumer | Automobile and other | Special Mention
Credit quality indicators
Total loans
Consumer | Automobile and other | Substandard
Credit quality indicators
Total loans	66,120	4,849
Consumer | Automobile and other | Doubtful
Credit quality indicators
Total loans		8,558
Real estate
Credit quality indicators
Total loans	327,022,003	319,197,829
Real estate | Pass
Credit quality indicators
Total loans	309,507,090	303,715,085
Real estate | Special Mention
Credit quality indicators
Total loans	5,920,335	8,682,586
Real estate | Substandard
Credit quality indicators
Total loans	11,594,578	6,800,158
Real estate | Doubtful
Credit quality indicators
Total loans
Real estate | One-to-four family loans
Credit quality indicators
Total loans	113,870,419	110,792,710
Real estate | One-to-four family loans | Pass
Credit quality indicators
Total loans	111,732,989	109,161,526
Real estate | One-to-four family loans | Special Mention
Credit quality indicators
Total loans	748,949	772,127
Real estate | One-to-four family loans | Substandard
Credit quality indicators
Total loans	1,388,481	859,057
Real estate | One-to-four family loans | Doubtful
Credit quality indicators
Total loans
Real estate | Multi-family loans
Credit quality indicators
Total loans	36,797,825	41,182,067
Real estate | Multi-family loans | Pass
Credit quality indicators
Total loans	32,613,191	37,571,827
Real estate | Multi-family loans | Special Mention
Credit quality indicators
Total loans		2,614,581
Real estate | Multi-family loans | Substandard
Credit quality indicators
Total loans	4,184,634	995,659
Real estate | Multi-family loans | Doubtful
Credit quality indicators
Total loans
Real estate | Commercial loans
Credit quality indicators
Total loans	162,403,332	153,634,426
Real estate | Commercial loans | Pass
Credit quality indicators
Total loans	151,696,933	143,837,755
Real estate | Commercial loans | Special Mention
Credit quality indicators
Total loans	5,171,386	5,295,878
Real estate | Commercial loans | Substandard
Credit quality indicators
Total loans	5,535,013	4,500,793
Real estate | Commercial loans | Doubtful
Credit quality indicators
Total loans
Real estate | Construction and land loans
Credit quality indicators
Total loans	13,950,427	13,588,626
Real estate | Construction and land loans | Pass
Credit quality indicators
Total loans	13,463,977	13,143,977
Real estate | Construction and land loans | Special Mention
Credit quality indicators
Total loans
Real estate | Construction and land loans | Substandard
Credit quality indicators
Total loans	486,450	444,649
Real estate | Construction and land loans | Doubtful
Credit quality indicators
Total loans

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LOANS (Details 6) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Unpaid Contractual Principal Balance
With no related allowance recorded	$ 7,705,014	$ 4,708,626
With an allowance recorded	3,270,856	1,531,239
Total	10,975,870	6,239,865
Recorded Investment
With no related allowance recorded	7,032,634	4,172,642
With an allowance recorded	3,270,856	1,387,841
Total	10,303,490	5,560,483
Allowance for Loan Losses Allocated
With an allowance recorded	1,349,250	610,259
Total	1,349,250	610,259
Commercial business
Unpaid Contractual Principal Balance
With no related allowance recorded	230,116	87,254
With an allowance recorded	250,343	498,849
Recorded Investment
With no related allowance recorded	230,116	87,254
With an allowance recorded	250,343	498,849
Allowance for Loan Losses Allocated
With an allowance recorded	230,210	259,787
Consumer
Unpaid Contractual Principal Balance
With no related allowance recorded	50,957	60,800
With an allowance recorded	197,916	89,407
Recorded Investment
With no related allowance recorded	50,957	60,800
With an allowance recorded	197,916	89,407
Allowance for Loan Losses Allocated
With an allowance recorded	80,828	49,782
Consumer | Home Equity
Unpaid Contractual Principal Balance
With no related allowance recorded	50,957	52,242
With an allowance recorded	131,796	89,407
Recorded Investment
With no related allowance recorded	50,957	52,242
With an allowance recorded	131,796	89,407
Allowance for Loan Losses Allocated
With an allowance recorded	71,483	49,782
Consumer | Automobile and other
Unpaid Contractual Principal Balance
With no related allowance recorded		8,558
With an allowance recorded	66,120
Recorded Investment
With no related allowance recorded		8,558
With an allowance recorded	66,120
Allowance for Loan Losses Allocated
With an allowance recorded	9,345
Real estate
Unpaid Contractual Principal Balance
With no related allowance recorded	7,423,941	4,560,572
With an allowance recorded	2,822,597	942,983
Recorded Investment
With no related allowance recorded	6,751,561	4,024,588
With an allowance recorded	2,822,597	799,585
Allowance for Loan Losses Allocated
With an allowance recorded	1,038,212	300,690
Real estate | One-to-four family loans
Unpaid Contractual Principal Balance
With no related allowance recorded	431,065	648,750
With an allowance recorded	1,003,845	257,224
Recorded Investment
With no related allowance recorded	431,065	648,750
With an allowance recorded	1,003,845	257,224
Allowance for Loan Losses Allocated
With an allowance recorded	309,439	116,724
Real estate | Multi-family loans
Unpaid Contractual Principal Balance
With no related allowance recorded	4,667,112	1,478,137
Recorded Investment
With no related allowance recorded	4,184,634	995,659
Real estate | Commercial loans
Unpaid Contractual Principal Balance
With no related allowance recorded	2,149,411	2,246,797
With an allowance recorded	1,818,752	685,759
Recorded Investment
With no related allowance recorded	1,959,509	2,193,291
With an allowance recorded	1,818,752	542,361
Allowance for Loan Losses Allocated
With an allowance recorded	728,773	183,966
Real estate | Construction and land loans
Unpaid Contractual Principal Balance
With no related allowance recorded	176,353	186,888
Recorded Investment
With no related allowance recorded	$ 176,353	$ 186,888

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LOANS (Details 7) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Average Recorded Investment
With no related allowance recorded	$ 5,513,592	$ 3,971,197	$ 5,066,608	$ 4,138,976
With an allowance recorded	3,217,719	1,600,967	2,607,760	1,875,212
Total	8,731,311	5,572,164	7,674,368	6,014,188
Interest Income Recognized
With no related allowance recorded	55,669	18,348	76,446	22,577
With an allowance recorded	1,978	14,442	10,666	26,316
Total	57,647	32,790	87,112	48,893
Cash Basis Interest Recognized
Commercial business
Average Recorded Investment
With no related allowance recorded	158,685		134,874	8,365
With an allowance recorded	328,005	189,200	384,953	164,615
Interest Income Recognized
With no related allowance recorded
With an allowance recorded	1,809	3,650	5,263	5,543
Cash Basis Interest Recognized
Consumer
Average Recorded Investment
With no related allowance recorded	68,496	54,226	65,931	54,668
With an allowance recorded	188,751	51,220	155,636	37,447
Interest Income Recognized
With no related allowance recorded	253	257	507	513
With an allowance recorded	169	115	396	115
Cash Basis Interest Recognized
Consumer | Home Equity
Average Recorded Investment
With no related allowance recorded	62,649	54,226	59,180	54,668
With an allowance recorded	155,691	51,220	133,596	37,447
Interest Income Recognized
With no related allowance recorded	253	257	507	513
With an allowance recorded		115	227	115
Cash Basis Interest Recognized
Consumer | Automobile and other
Average Recorded Investment
With no related allowance recorded	5,847		6,751
With an allowance recorded	33,060		22,040
Interest Income Recognized
With no related allowance recorded
With an allowance recorded	169		169
Cash Basis Interest Recognized
Real estate
Average Recorded Investment
With no related allowance recorded	5,286,411	3,916,971	4,865,803	4,075,943
With an allowance recorded	2,700,963	1,360,547	2,067,171	1,673,150
Interest Income Recognized
With no related allowance recorded	55,416	18,091	75,939	22,064
With an allowance recorded		10,677	5,007	20,658
Cash Basis Interest Recognized
Real estate | One-to-four family loans
Average Recorded Investment
With no related allowance recorded	555,453	660,569	586,552	655,561
With an allowance recorded	881,912	545,364	673,683	630,085
Interest Income Recognized
With no related allowance recorded	464	1,713	930	3,419
With an allowance recorded		6,415	4,506	12,126
Cash Basis Interest Recognized
Real estate | Multi-family loans
Average Recorded Investment
With no related allowance recorded	2,578,784	1,130,198	2,051,076	1,200,392
With an allowance recorded
Interest Income Recognized
With no related allowance recorded	43,758		43,758
With an allowance recorded
Cash Basis Interest Recognized
Real estate | Commercial loans
Average Recorded Investment
With no related allowance recorded	1,973,177	1,271,873	2,046,548	1,104,093
With an allowance recorded	1,819,051	815,183	1,393,488	1,043,065
Interest Income Recognized
With no related allowance recorded	9,191	14,142	27,186	14,142
With an allowance recorded		4,262	501	8,532
Cash Basis Interest Recognized
Real estate | Construction and land loans
Average Recorded Investment
With no related allowance recorded	178,997	854,331	181,627	1,115,897
With an allowance recorded
Interest Income Recognized
With no related allowance recorded	2,003	2,236	4,065	4,503
With an allowance recorded
Cash Basis Interest Recognized

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LOANS (Details 8)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	11	3	11	3
Pre-Modification Outstanding Recorded Investment	$ 6,317,451	$ 1,163,970	$ 6,317,451	$ 1,163,970
Post-Modification Outstanding Recorded Investment	$ 6,317,451	$ 1,163,970	$ 6,317,451	$ 1,163,970
Commercial business
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	2	1	2	1
Pre-Modification Outstanding Recorded Investment	$ 144,062	$ 162,167	$ 144,062	$ 162,167
Post-Modification Outstanding Recorded Investment	$ 144,062	$ 162,167	$ 144,062	$ 162,167
Consumer
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	3		3
Pre-Modification Outstanding Recorded Investment	$ 155,598		$ 155,598
Post-Modification Outstanding Recorded Investment	$ 155,598		$ 155,598
Consumer | Home Equity
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	1		1
Pre-Modification Outstanding Recorded Investment	$ 89,478		$ 89,478
Post-Modification Outstanding Recorded Investment	$ 89,478		$ 89,478
Consumer | Automobile and other
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	2		2
Pre-Modification Outstanding Recorded Investment	$ 66,120		$ 66,120
Post-Modification Outstanding Recorded Investment	$ 66,120		$ 66,120
Real estate
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	6		6
Pre-Modification Outstanding Recorded Investment	$ 6,017,791		$ 6,017,791
Post-Modification Outstanding Recorded Investment	$ 6,017,791		$ 6,017,791
Real estate | One-to-four family loans
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	1		1
Pre-Modification Outstanding Recorded Investment	$ 748,641		$ 748,641
Post-Modification Outstanding Recorded Investment	$ 748,641		$ 748,641
Real estate | Multi-family loans
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	3		3
Pre-Modification Outstanding Recorded Investment	$ 3,569,850		$ 3,569,850
Post-Modification Outstanding Recorded Investment	$ 3,569,850		$ 3,569,850
Real estate | Commercial
Financing Receivable, Modifications [Line Items]
Number of Contracts | Loan	2	2	2	2
Pre-Modification Outstanding Recorded Investment	$ 1,699,300	$ 1,001,803	$ 1,699,300	$ 1,001,803
Post-Modification Outstanding Recorded Investment	$ 1,699,300	$ 1,001,803	$ 1,699,300	$ 1,001,803

XML

LOANS (Detail Textuals)	3 Months Ended			6 Months Ended
	Jun. 30, 2016 USD ($) Loan	Mar. 31, 2016 USD ($)	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Dec. 31, 2015 USD ($)
LOANS
Loan to value ratio occasionally exceeded for loans secured by single-family dwellings (as a percent)				90.00%
Secured by single-family dwellings with loan to value ratios exceeding 90% expressed	1.83%			1.83%		2.07%
Amount of allocations of specific reserves	$ 1,241,024			$ 1,241,024		$ 380,593
Amount of loans to customers whose loan terms have been modified	$ 8,993,694			$ 8,993,694		$ 3,925,262
Number of loans modified as troubled debt restructurings | Loan	11		3	11	3
Recorded investment of loans modified as troubled debt restructurings	$ 6,317,451		$ 1,163,970	$ 6,317,451	$ 1,163,970
Increase (decrease) in allowance for loan losses as result of TDRs	$ (94,638)			$ 876,747
Amount of loan identified as impaired		$ 2,500,000
Amount of reserve established as result of loan impaired		$ 1,000,000
Number of days past due to indicate payment default on troubled debt restructurings				60 days

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	$ 21,817,155	$ 19,732,766
Gross amount of recognized liabilities for repurchase agreements in Consolidated Balance Sheet	21,817,155	19,732,766
Overnight and Continuous
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements and repurchase-to-maturity transactions	21,817,155	19,732,766
Up to 30 days
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements and repurchase-to-maturity transactions
30 - 90 days
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements and repurchase-to-maturity transactions
Greater than 90 days
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements and repurchase-to-maturity transactions

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Detail Textuals) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
FHLB advances	$ 15,999,000	$ 15,996,000
Assets Sold under Agreements to Repurchase [Line Items]
Securities sold under agreements to repurchase, carrying amount	41,259,000	26,458,000
U.S. government agencies
Assets Sold under Agreements to Repurchase [Line Items]
Securities sold under agreements to repurchase, carrying amount	15,867,000	13,962,000
State and municipal securities
Assets Sold under Agreements to Repurchase [Line Items]
Securities sold under agreements to repurchase, carrying amount	12,061,000	8,419,000
Mortgage-backed securities
Assets Sold under Agreements to Repurchase [Line Items]
Securities sold under agreements to repurchase, carrying amount	$ 13,331,000	$ 4,077,000

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EARNINGS PER SHARE (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
EARNINGS PER SHARE
Net income (in dollars)	$ 651,401	$ 1,212,480	$ 1,664,749	$ 2,683,734
Basic potential common shares:
Basic weighted average shares outstanding	7,005,883	7,006,967	7,005,883	7,007,124
Dilutive potential common shares
Diluted weighted average shares outstanding	7,005,883	7,006,967	7,005,883	7,007,124
Basic and diluted earnings per share (in dollars per share)	$ 0.09	$ 0.17	$ 0.24	$ 0.38

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FAIR VALUE MEASUREMENTS (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Assets:
Total securities available for sale	$ 108,328,285	$ 103,756,614
U.S. government agency obligations
Assets:
Total securities available for sale	32,013,569	29,048,102
State and municipal securities
Assets:
Total securities available for sale	45,373,880	45,734,239
Other securities
Assets:
Total securities available for sale	3,501	3,501
Mortgage-backed: residential
Assets:
Total securities available for sale	30,937,335	28,970,772
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total securities available for sale
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government agency obligations
Assets:
Total securities available for sale
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | State and municipal securities
Assets:
Total securities available for sale
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other securities
Assets:
Total securities available for sale
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed: residential
Assets:
Total securities available for sale
Recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Total securities available for sale	108,328,285	103,756,614
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government agency obligations
Assets:
Total securities available for sale	32,013,569	29,048,102
Recurring basis | Significant Other Observable Inputs (Level 2) | State and municipal securities
Assets:
Total securities available for sale	45,373,880	45,734,239
Recurring basis | Significant Other Observable Inputs (Level 2) | Other securities
Assets:
Total securities available for sale	3,501	3,501
Recurring basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed: residential
Assets:
Total securities available for sale	30,937,335	28,970,772
Recurring basis | Significant Unobservable Inputs (Level 3)
Assets:
Total securities available for sale
Recurring basis | Significant Unobservable Inputs (Level 3) | U.S. government agency obligations
Assets:
Total securities available for sale
Recurring basis | Significant Unobservable Inputs (Level 3) | State and municipal securities
Assets:
Total securities available for sale
Recurring basis | Significant Unobservable Inputs (Level 3) | Other securities
Assets:
Total securities available for sale
Recurring basis | Significant Unobservable Inputs (Level 3) | Mortgage-backed: residential
Assets:
Total securities available for sale
Recurring basis | Total
Assets:
Total securities available for sale	108,328,285	103,756,614
Recurring basis | Total | U.S. government agency obligations
Assets:
Total securities available for sale	32,013,569	29,048,102
Recurring basis | Total | State and municipal securities
Assets:
Total securities available for sale	45,373,880	45,734,239
Recurring basis | Total | Other securities
Assets:
Total securities available for sale	3,501	3,501
Recurring basis | Total | Mortgage-backed: residential
Assets:
Total securities available for sale	$ 30,937,335	$ 28,970,772

XML

FAIR VALUE MEASUREMENTS (Details 1) - Non-recurring basis - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Foreclosed assets
Assets measured at fair value on a nonrecurring basis
Fair Value	$ 1,566,126	$ 623,500
Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage Servicing Rights
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreclosed assets
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreclosed assets | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreclosed assets | Real estate | Construction and land
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Commercial business
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Consumer
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Consumer | Home Equity
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Consumer | Automobile And Other
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Real estate
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Real estate | One-to-four family loans
Assets measured at fair value on a nonrecurring basis
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Mortgage Servicing Rights
Assets measured at fair value on a nonrecurring basis
Fair Value		1,109,720
Significant Other Observable Inputs (Level 2) | Foreclosed assets
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Foreclosed assets | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Foreclosed assets | Real estate | Construction and land
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Commercial business
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Consumer
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Consumer | Home Equity
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Consumer | Automobile And Other
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Real estate
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Real estate | One-to-four family loans
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Other Observable Inputs (Level 2) | Impaired loans | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Unobservable Inputs (Level 3) | Mortgage Servicing Rights
Assets measured at fair value on a nonrecurring basis
Fair Value
Significant Unobservable Inputs (Level 3) | Foreclosed assets
Assets measured at fair value on a nonrecurring basis
Fair Value	1,566,126	623,500
Significant Unobservable Inputs (Level 3) | Foreclosed assets | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value		19,000
Significant Unobservable Inputs (Level 3) | Foreclosed assets | Real estate | Construction and land
Assets measured at fair value on a nonrecurring basis
Fair Value	1,566,126	604,500
Significant Unobservable Inputs (Level 3) | Impaired loans
Assets measured at fair value on a nonrecurring basis
Fair Value	1,921,606	777,582
Significant Unobservable Inputs (Level 3) | Impaired loans | Commercial business
Assets measured at fair value on a nonrecurring basis
Fair Value	20,132	239,062
Significant Unobservable Inputs (Level 3) | Impaired loans | Consumer
Assets measured at fair value on a nonrecurring basis
Fair Value	117,089
Significant Unobservable Inputs (Level 3) | Impaired loans | Consumer | Home Equity
Assets measured at fair value on a nonrecurring basis
Fair Value	60,314	39,625
Significant Unobservable Inputs (Level 3) | Impaired loans | Consumer | Automobile And Other
Assets measured at fair value on a nonrecurring basis
Fair Value	56,775
Significant Unobservable Inputs (Level 3) | Impaired loans | Real estate
Assets measured at fair value on a nonrecurring basis
Fair Value	1,784,385	498,895
Significant Unobservable Inputs (Level 3) | Impaired loans | Real estate | One-to-four family loans
Assets measured at fair value on a nonrecurring basis
Fair Value	694,406	140,500
Significant Unobservable Inputs (Level 3) | Impaired loans | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value	1,089,979	358,395
Total | Mortgage Servicing Rights
Assets measured at fair value on a nonrecurring basis
Fair Value		1,109,720
Total | Foreclosed assets
Assets measured at fair value on a nonrecurring basis
Fair Value	1,566,126	623,500
Total | Foreclosed assets | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value		19,000
Total | Foreclosed assets | Real estate | Construction and land
Assets measured at fair value on a nonrecurring basis
Fair Value	1,566,126	604,500
Total | Impaired loans
Assets measured at fair value on a nonrecurring basis
Fair Value	1,921,606	777,582
Total | Impaired loans | Commercial business
Assets measured at fair value on a nonrecurring basis
Fair Value	20,132	239,062
Total | Impaired loans | Consumer
Assets measured at fair value on a nonrecurring basis
Fair Value	117,089
Total | Impaired loans | Consumer | Home Equity
Assets measured at fair value on a nonrecurring basis
Fair Value	60,314	39,625
Total | Impaired loans | Consumer | Automobile And Other
Assets measured at fair value on a nonrecurring basis
Fair Value	56,775
Total | Impaired loans | Real estate
Assets measured at fair value on a nonrecurring basis
Fair Value	1,784,385	498,895
Total | Impaired loans | Real estate | One-to-four family loans
Assets measured at fair value on a nonrecurring basis
Fair Value	694,406	140,500
Total | Impaired loans | Real estate | Commercial
Assets measured at fair value on a nonrecurring basis
Fair Value	$ 1,089,979	$ 358,395

XML

FAIR VALUE MEASUREMENTS (Details 2) - Non-recurring basis - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Foreclosed assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,566,126	$ 623,500
Unobservable Inputs | Foreclosed assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,566,126	623,500
Unobservable Inputs | Foreclosed assets | Real estate | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		19,000
Unobservable Inputs | Foreclosed assets | Real estate | Construction and land
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,566,126	$ 604,500
Unobservable Inputs | Foreclosed assets | Real estate | Construction and land | Sales Comparison | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	(11.00%)	(29.00%)
Unobservable Inputs | Foreclosed assets | Real estate | Construction and land | Sales Comparison | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	31.00%	5.00%
Unobservable Inputs | Foreclosed assets | Real estate | Construction and land | Sales Comparison | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	11.50%	(8.90%)
Unobservable Inputs | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,921,606	$ 777,582
Unobservable Inputs | Impaired loans | Commercial business
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 20,132	239,062
Unobservable Inputs | Impaired loans | Commercial business | Sales Comparison | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	(48.00%)
Unobservable Inputs | Impaired loans | Commercial business | Sales Comparison | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	27.00%
Unobservable Inputs | Impaired loans | Commercial business | Sales Comparison | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	5.20%
Unobservable Inputs | Impaired loans | Commercial business | Fair Value Of Collateral
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		$ 121,094
Unobservable Inputs | Impaired loans | Commercial business | Fair Value Of Collateral | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount for type of business assets		0.00%
Unobservable Inputs | Impaired loans | Commercial business | Fair Value Of Collateral | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount for type of business assets		10.00%
Unobservable Inputs | Impaired loans | Commercial business | Fair Value Of Collateral | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount for type of business assets		7.00%
Unobservable Inputs | Impaired loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 117,089
Unobservable Inputs | Impaired loans | Consumer | Home Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	60,314	$ 39,625
Unobservable Inputs | Impaired loans | Consumer | Automobile and other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 56,775
Unobservable Inputs | Impaired loans | Consumer | Automobile and other | Fair Value Of Collateral | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for depreciation and other factors	(20.00%)
Unobservable Inputs | Impaired loans | Consumer | Automobile and other | Fair Value Of Collateral | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for depreciation and other factors	(14.00%)
Unobservable Inputs | Impaired loans | Consumer | Automobile and other | Fair Value Of Collateral | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for depreciation and other factors	(16.90%)
Unobservable Inputs | Impaired loans | Real estate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,784,385	498,895
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	694,406	$ 140,500
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Sales Comparison | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales		(19.00%)
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Sales Comparison | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales		(7.00%)
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Sales Comparison | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales		(13.00%)
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Fair Value Of Collateral
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 189,780
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Fair Value Of Collateral | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment based on lease purchase agreement	0.00%
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Fair Value Of Collateral | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment based on lease purchase agreement	6.00%
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Fair Value Of Collateral | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for depreciation and other factors	6.20%
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Cost Approach
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 504,626
Adjustment for depreciation and other factors	6.60%
Unobservable Inputs | Impaired loans | Real estate | One-to-four family loans | Cost Approach | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for depreciation and other factors	6.60%
Unobservable Inputs | Impaired loans | Real estate | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 1,089,979	$ 358,395
Unobservable Inputs | Impaired loans | Real estate | Commercial | Sales Comparison
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 118,968	$ 88,000
Unobservable Inputs | Impaired loans | Real estate | Commercial | Sales Comparison | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	(53.00%)	9.00%
Unobservable Inputs | Impaired loans | Real estate | Commercial | Sales Comparison | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	(34.00%)	16.00%
Unobservable Inputs | Impaired loans | Real estate | Commercial | Sales Comparison | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Adjustment for difference between comparable sales	(42.20%)	12.80%
Unobservable Inputs | Impaired loans | Real estate | Commercial | Income Approach
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 971,011	$ 270,395
Investment Capitalization Rates	8.70%	9.00%
Unobservable Inputs | Impaired loans | Real estate | Commercial | Income Approach | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment Capitalization Rates	8.70%	9.00%

XML

FAIR VALUE MEASUREMENTS (Detail Textuals) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding balance	$ 446,386,485		$ 426,121,044
Write-down on foreclosed assets	45,195	$ 12,000
Principal balance	3,270,856		1,387,841
Valuation allowance	1,349,250		610,259
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Principal balance	3,270,856		1,387,841
Valuation allowance	1,349,250		610,259
Increase or (decrease) in provision for loan losses	738,991
Non-recurring basis | Foreclosed assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying value	1,566,126		623,500
Outstanding balance	1,917,044		1,337,678
Cumulative write-downs	350,918		714,178
Write-down on foreclosed assets	$ 45,195		$ 355,500

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Financial assets:
Federal Reserve Bank stock	$ 1,676,700	$ 1,676,700
Accrued interest receivable	1,589,201	1,620,309
Financial liabilities:
Non-interest bearing deposits	78,715,230	69,296,354
Interest-bearing deposits	460,874,608	463,861,939
Accrued interest payable	254,015	227,947
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and cash equivalents	66,628,349	79,232,566
Interest-earning time deposits
Federal Home Loan Bank stock
Federal Reserve Bank stock
Loans, net (excluding impaired loans at fair value)
Loans held for sale
Accrued interest receivable
Financial liabilities:
Non-interest bearing deposits	78,715,230	69,296,354
Interest-bearing deposits	325,646,790	330,689,715
Federal Home Loan Bank advances
Securities sold under agreement to repurchase
Subordinated debentures
Accrued interest payable	15,928	14,621
Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and cash equivalents
Interest-earning time deposits	1,930,000	1,685,000
Federal Home Loan Bank stock
Federal Reserve Bank stock
Loans, net (excluding impaired loans at fair value)
Loans held for sale	592,450	1,078,785
Accrued interest receivable	520,040	510,231
Financial liabilities:
Non-interest bearing deposits
Interest-bearing deposits	136,103,659	133,976,643
Federal Home Loan Bank advances	16,481,205	16,315,262
Securities sold under agreement to repurchase	21,817,155	19,732,766
Subordinated debentures	4,000,000	4,000,000
Accrued interest payable	238,087	213,326
Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents
Interest-earning time deposits
Federal Home Loan Bank stock
Federal Reserve Bank stock
Loans, net (excluding impaired loans at fair value)	445,409,350	421,795,305
Loans held for sale
Accrued interest receivable	1,069,161	1,110,078
Financial liabilities:
Non-interest bearing deposits
Interest-bearing deposits
Federal Home Loan Bank advances
Securities sold under agreement to repurchase
Subordinated debentures
Accrued interest payable
Carrying Amount
Financial assets:
Cash and cash equivalents	66,628,349	79,232,566
Interest-earning time deposits	1,930,000	1,685,000
Federal Home Loan Bank stock	997,763	1,747,763
Federal Reserve Bank stock	1,676,700	1,676,700
Loans, net (excluding impaired loans at fair value)	438,478,870	419,686,001
Loans held for sale	592,450	1,078,785
Accrued interest receivable	1,589,201	1,620,309
Financial liabilities:
Non-interest bearing deposits	78,715,230	69,296,354
Interest-bearing deposits	460,874,608	463,861,939
Federal Home Loan Bank advances	15,999,355	15,995,485
Securities sold under agreement to repurchase	21,817,155	19,732,766
Subordinated debentures	4,000,000	4,000,000
Accrued interest payable	254,015	227,947
Fair Value
Financial assets:
Cash and cash equivalents	66,628,349	79,232,566
Interest-earning time deposits	1,930,000	1,685,000
Federal Home Loan Bank stock	0	0
Federal Reserve Bank stock	0	0
Loans, net (excluding impaired loans at fair value)	445,409,350	421,795,305
Loans held for sale	592,450	1,078,785
Accrued interest receivable	1,589,201	1,620,309
Financial liabilities:
Non-interest bearing deposits	78,715,230	69,296,354
Interest-bearing deposits	461,750,449	464,666,358
Federal Home Loan Bank advances	16,481,205	16,315,262
Securities sold under agreement to repurchase	21,817,155	19,732,766
Subordinated debentures	4,000,000	4,000,000
Accrued interest payable	$ 254,015	$ 227,947

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016		Jun. 30, 2015
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Accumulated Other Comprehensive Income (loss) at the beginning of the period	[1]	$ 1,029,620	$ 718,274	$ 397,994		$ 197,331
Other comprehensive income (loss) before reclassifications	[1]	467,442	(696,968)	1,116,868		(176,025)
Amount reclassified from accumulated other comprehensive income (Loss)	[1]			(17,800)	[2]
Total other comprehensive income (loss)	[1]	467,442	(696,968)	1,099,068		(176,025)
Accumulated Other Comprehensive Income (loss) at the end of the period	[1]	1,497,062	21,306	1,497,062		21,306
Unrealized Gains and Losses on Available-for-Sale Securities
Changes in Accumulated Other Comprehensive Income (Loss) by Component
Accumulated Other Comprehensive Income (loss) at the beginning of the period	[1]	1,029,620	718,274	397,994		197,331
Other comprehensive income (loss) before reclassifications	[1]	467,442	(696,968)	1,116,868		(176,025)
Amount reclassified from accumulated other comprehensive income (Loss)	[1]			(17,800)	[2]
Total other comprehensive income (loss)	[1]	467,442	(696,968)	1,099,068		(176,025)
Accumulated Other Comprehensive Income (loss) at the end of the period	[1]	$ 1,497,062	$ 21,306	$ 1,497,062		$ 21,306

[1] All amounts are net of tax.

[2] See table below for details about reclassifications.

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 1) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax expense	$ (56,646)	$ (457,170)	$ (352,878)	$ (1,075,024)
Net of tax	$ 651,401	$ 1,212,480	1,664,749	$ 2,683,734
Unrealized gains and losses on available-for-sale securities | Reclassifications out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of securities			29,181
Tax expense			(11,381)
Net of tax			$ 17,800

XML

SUBSEQUENT EVENTS (Detail Textuals) - Subsequent Events	1 Months Ended
	Jul. 26, 2016 $ / shares
Subsequent events
Common Stock, Dividends Payable, Amount Per Share	$ 0.06
Common Stock, Dividends Payable, Date Declared	Jul. 26, 2016
Common Stock, Dividends Payable, Date of Record	Aug. 19, 2016
Common Stock, Dividends Payable, Date to be Paid	Aug. 26, 2016