10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2014.

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: 001-34821

JACKSONVILLE BANCORP, INC.

(Exact name of registrant as specified in its charter) 

Maryland	36-4670835
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1211 West Morton Avenue, Jacksonville, Illinois	62650
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (217) 245-4111

Securities registered pursuant to Section 12(b) of the Act:

	Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value		The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES ☐ NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES ☐ NO ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒ 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 ☒ NO ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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 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 ☐                                                                Smaller reporting company ☒

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐    NO ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2014, as reported by the Nasdaq Capital Market, was approximately $38.6 million.

As of March 1, 2015, there were issued and outstanding 1,800,123 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) Proxy Statement for the 2015 Annual Meeting of Stockholders of the Registrant (Part III).

(2) Annual Report to Stockholders (Parts II and IV).

TABLE OF CONTENTS

ITEM 1.	Business	2
ITEM 1A.	Risk Factors	38
ITEM 1B.	Unresolved Staff Comments	44
ITEM 2.	Properties	45
ITEM 3.	Legal Proceedings	45
ITEM 4.	Mine Safety Disclosures	45
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
ITEM 6.	Selected Financial Data	46
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	47
ITEM 8.	Financial Statements and Supplementary Data	47
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
ITEM 9A.	Controls and Procedures	47
ITEM 9B.	Other Information	48
ITEM 10.	Directors, Executive Officers and Corporate Governance	48
ITEM 11.	Executive Compensation	48
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	48
ITEM 14.	Principal Accountant Fees and Services	48
ITEM 15.	Exhibits and Financial Statement Schedules	48

PART I

ITEM 1.          Business

Jacksonville Bancorp, Inc.

Jacksonville Bancorp, Inc. (or the “Company”) is a Maryland corporation. On July 14, 2010, Jacksonville Bancorp, Inc. completed its conversion from the mutual holding company structure and the related public offering and is now a stock holding company that is fully owned by the public. Jacksonville Savings Bank is 100% owned by the Company and the Company is 100% owned by public stockholders. On June 28, 2013, Jacksonville Savings Bank terminated its election to be regulated as a savings and loan holding company pursuant to Section 10(l) of the Home Owners Loan Act. On this same date, Jacksonville Bancorp, Inc. became a bank holding company.

The Company’s only significant asset is its investment in Jacksonville Savings Bank. At December 31, 2014, Jacksonville Bancorp, Inc. had consolidated assets of $311.9 million, total deposits of $245.9 million, and stockholders’ equity of $45.0 million.

Jacksonville Savings Bank

Jacksonville Savings Bank is an Illinois-chartered savings bank headquartered in Jacksonville, Illinois. We conduct our business from our main office and five branches, two of which are located in Jacksonville and one of which is located in each of the following Illinois communities: Virden, Litchfield, and Chapin. We were originally chartered in 1916 as an Illinois-chartered mutual savings and loan association and converted to a mutual savings bank in 1992. In 1995, Jacksonville Savings Bank converted to an Illinois chartered stock savings bank and reorganized from the mutual to the mutual holding company form of organization. We have been a member of the Federal Home Loan Bank System since 1932. Our deposits are insured by the Federal Deposit Insurance Corporation.

We are a community-oriented savings bank engaged primarily in the business of attracting retail deposits from the general public in our market area and using such funds, together with borrowings and funds from other sources, to originate mortgage loans secured by one- to four-family residential real estate, commercial and agricultural real estate and home equity loans. We also originate commercial and agricultural business loans and consumer loans. Additionally, we invest in United States Government agency securities, bank-qualified, general obligation municipal issues, and mortgage-backed securities issued or guaranteed by the United States Government or enterprises thereof. We maintain a portion of our assets in liquid investments, such as overnight funds at the Federal Home Loan Bank.

Our principal sources of funds are customer deposits, proceeds from the sale of loans, short-term borrowings, funds received from the repayment and prepayment of loans and mortgage-backed securities, and the sale, call, or maturity of investment securities. Principal sources of income are interest income on loans and investments, sales of loans and securities, service charges, commissions, card interchange income and other fees. Our principal expenses are interest paid on deposits, employee compensation and benefits, occupancy and equipment expense and data processing and telecommunications expense.

We operate an investment center at our main office. The investment center is operated through Financial Resources Group, Inc., Jacksonville Savings Bank’s wholly-owned subsidiary.

Our principal executive office is located at 1211 W. Morton, Jacksonville, Illinois, and our telephone number at that address is (217) 245-4111. Our website address is www.jacksonvillesavings.com. Information on this website is not and should not be considered to be a part of this Annual Report.

2

Market Area

Our market area is Morgan, Macoupin, Montgomery and Cass counties, Illinois. Our offices are located in communities that can generally be characterized as stable to low growth residential communities of predominantly one- to four-family residences. Our market for deposits is concentrated in the communities surrounding our main office and five branch offices. We are the largest independent financial institution headquartered in Morgan County.

The economy of our market area consists primarily of agriculture and related businesses, light industry and state and local government. The largest employers in our market area are Reynolds, Passavant Area Hospital, and the State of Illinois. As of December 2014, unemployment rates in our market area were: 5.7% in Cass County, 6.2% in Macoupin County, 8.2% in Montgomery County and 6.0% in Morgan County. This compared with unemployment rates of 6.2% in Illinois and 5.6% in the United States as a whole.

Competition

We encounter significant competition both in attracting deposits and in originating real estate and other loans. Our most direct competition for deposits historically has come from commercial banks, other savings banks, savings associations and credit unions in our market area, and we expect continued strong competition from such financial institutions in the foreseeable future. We compete for deposits by offering depositors a high level of personal service and expertise together with a wide range of financial services. Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Morgan, Macoupin and Montgomery counties, Illinois. As of June 30, 2014, our FDIC-insured deposit market share in the counties we serve (out of 30 bank and thrift institutions with offices in Morgan, Macoupin and Montgomery Counties, Illinois) was 10.2%. Such data does not reflect deposits held by credit unions.

The competition for real estate and other loans comes principally from commercial banks, mortgage banking companies, government sponsored entities and other savings banks and savings associations. This competition for loans has increased substantially in recent years as a result of the large number of institutions competing in our market areas as well as the increased efforts by commercial banks to increase mortgage loan originations.

We compete for loans primarily through the interest rates and loan fees we charge and the efficiency and quality of services we provide to borrowers and home builders. Factors that affect competition include general and local economic conditions, current interest rate levels and the volatility of the mortgage markets.

Lending Activities

General. Historically, our principal lending activity has been the origination of mortgage loans secured by one- to four-family residential properties in our local market area. Over the past several years, we have increased our emphasis on originating loans secured by commercial and agricultural real estate. We also originate commercial and agricultural business loans secured by collateral other than real estate as well as unsecured commercial and agricultural business loans. We also originate home equity and consumer loans. At December 31, 2014, our loans receivable totaled $187.7 million, of which $44.6 million, or 24.2%, consisted of one- to four-family residential mortgage loans. The remainder of our loans receivable at December 31, 2014 consisted of commercial real estate loans totaling $40.5 million, or 21.9% of net loans, agricultural real estate loans totaling $40.1 million, or 21.7% of net loans, commercial business loans totaling $26.8 million, or 14.5% of net loans, consumer loans totaling $12.6 million, or 6.8% of net loans, agricultural business loans totaling $11.8 million, or 6.4% of net loans, and home equity loans totaling $11.3 million, or 6.1% of net loans.

We have made our interest-earning assets more interest rate sensitive by, among other things, originating variable interest rate loans, such as adjustable-rate mortgage loans and balloon loans with terms ranging from three to five years, as well as medium-term consumer loans and commercial business loans. Our ability to originate adjustable-rate mortgage loans is substantially affected by market interest rates.

3

We originate fixed-rate residential mortgage loans secured by one- to four-family residential properties with terms up to 30 years. We sell a significant portion of our one- to four-family fixed-rate residential mortgage loan originations with terms of generally 15 years or greater directly to the secondary market. During the years ended December 31, 2014 and 2013, we sold $12.5 million and $24.5 million of fixed-rate residential mortgage loans, respectively. Loans are generally sold without recourse and with servicing retained.

At December 31, 2014, we were servicing $137.9 million in loans for which we received servicing income of $362,000 for the year ended December 31, 2014. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned as loan servicing fees in noninterest income. The amortization of mortgage servicing rights is netted from the gains on sale of loans, both cash gains as well as the capitalized gains, and is included in mortgage banking operations, net, in noninterest income.

4

Loan Portfolio Composition.Set forth below are selected data relating to the composition of our loan portfolio, by type of loan as of the dates indicated, excluding loans held for sale of $236,000, $262,000, $712,000, $447,000 and $280,000 for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

	At December 31,
	2014					2013					2012						2011					2010
	Amount		Percent			Amount		Percent			Amount			Percent			Amount		Percent			Amount		Percent
	(Dollars in Thousands)
Real estate loans:
One- to four-family residential (1)	$	44,561		24.2	%	$	44,286		24.5	%	$	41,386			23.8	%	$	39,472		23.1	%	$	37,227		21.1	%
Commercial (2)		40,475		21.9			38,921		21.5			30,973			17.8			40,170		23.5			45,362		25.7
Agricultural		40,119		21.7			35,006		19.4			37,392			21.5			29,971		17.5			28,164		16.0
Home equity (3)		11,283		6.1			11,729		6.5			12,734			7.4			16,043		9.4			19,526		11.1
Total real estate loans		136,438		73.9			129,942		71.9			122,485			70.5			125,656		73.5			130,279		73.9
Commercial business loans		26,814		14.5			29,947		16.6			29,046			16.7			23,198		13.6			22,810		12.9
Agricultural business loans		11,845		6.4			10,560		5.9			10,983			6.3			9,591		5.6			8,176		4.6
Consumer loans		12,587		6.8			13,606		7.5			14,572			8.4			15,756		9.2			18,190		10.3
Total loans receivable		187,684		101.6			184,055		101.9			177,086			101.9			174,201		101.9			179,455		101.7
Less:
Unearned premium on purchased loans, unearned discount and deferred loan fees, net		9		—			9		—			(6	)		—			39		—			49		—
Allowance for loan losses		2,956		1.6			3,406		1.9			3,339			1.9			3,297		1.9			2,964		1.7
Total loans receivable, net	$	184,719		100.0	%	$	180,640		100.0	%	$	173,753			100.0	%	$	170,865		100.0	%	$	176,442		100.0	%

(1) Includes one- to four-family real estate construction loans of $1.2 million, $328,000, $1.9 million, $686,000 and $503,000 for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

(2) Includes commercial real estate construction loans of $3.3 million, $4.7 million, $495,000, $0 and $2.1 million for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

(3) Includes real estate construction loans of $140,000, $0, $40,000, $0 and $453,000 for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively.

5

   One- to Four-Family Mortgage Loans. Historically our primary lending origination activity has been one- to four-family, owner-occupied, residential mortgage loans secured by property located in our market area. We generate loans through our marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses. We generally limit our one- to four-family loan originations to the financing of loans secured by properties located within our market area. At December 31, 2014, $44.6 million, or 24.2% of our net loan portfolio, was invested in mortgage loans secured by one- to four-family residences.

Our fixed-rate one- to four-family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines. We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency, which is currently $417,000 for single-family homes. At December 31, 2014, we had two one- to four-family residential mortgage loans with principal balances in excess of $417,000, commonly referred to as jumbo loans.

We originate for resale to the secondary market fixed-rate one- to four-family residential mortgage loans with terms of 15 years or more. Our fixed-rate mortgage loans amortize monthly with principal and interest due each month. Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option. We offer fixed-rate one- to four-family residential mortgage loans with terms of up to 30 years without prepayment penalty.

We currently offer adjustable-rate mortgage loans for terms ranging up to 30 years. We generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination. Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan. In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on our net interest income. In the low interest rate environment that has existed over the past few years, our adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of our loan portfolio. We have used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years. Adjustable-rate mortgage loans secured by one- to four-family residential real estate totaled $16.6 million, or 37.3% of our total one- to four-family residential real estate loans receivable at December 31, 2014. The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, our interest rate risk position and our competitors’ loan products. During 2014, we originated $19.5 million of fixed-rate residential mortgage loans, most of which were subsequently sold in the secondary market, and $4.3 million of adjustable-rate mortgage loans which were held in our portfolio.

Adjustable-rate mortgage loans make our loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet our underwriting criteria, but are unable to qualify for a fixed-rate mortgage. However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans. Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase. It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased loan losses.

Our residential first mortgage loans customarily include due-on-sale clauses, which give us the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan. Due-on-sale clauses are a means of imposing assumption fees and increasing the interest rate on our mortgage portfolio during periods of rising interest rates.

When underwriting residential real estate loans, we review and verify each loan applicant’s income and credit history. Management believes that stability of income and past credit history are integral parts in the underwriting process. Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 30% of the applicant’s total monthly income. In addition, total monthly obligations of the applicant, including mortgage payments, should not generally exceed 43% of total monthly income. Written appraisals are generally required on real estate property offered to secure an applicant’s loan. For one- to four-family real estate loans with loan to value ratios of over 80%, we generally require private mortgage insurance. We require fire and casualty insurance on all properties securing real estate loans. We may require title insurance, or an attorney’s title opinion, as circumstances warrant.

6

We do not offer an “interest only” mortgage loan product on one- to four-family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Commercial Real Estate Loans. We originate and purchase commercial real estate loans. At December 31, 2014, $40.5 million, or 21.9%, of our net loan portfolio consisted of commercial real estate loans. During 2014, loan originations secured by commercial real estate totaled $15.5 million as compared to $11.1 million in 2013. Our commercial real estate loans are secured primarily by improved properties such as multi-family residential properties, retail facilities and office buildings, restaurants, and other non-residential buildings. At December 31, 2014, our commercial real estate loan portfolio included $6.8 million in loans secured by multi-family residential properties, $4.5 million in loans secured by restaurants, $5.4 million in loans secured by hotels, and $23.8 million in loans secured by other commercial properties. The maximum loan-to-value ratio for commercial real estate loans we originate is generally 80%. Our commercial real estate loans are generally written up to terms of five years with adjustable interest rates. The rates are generally tied to the prime rate and generally have a specified floor. Many of our fixed-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We have $6.5 million of interest only commercial real estate loans. We purchase from time to time commercial real estate loan participations primarily from outside our market area where we are not the lead lender. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards. At December 31, 2014, commercial real estate loan participations totaled $8.4 million, or 20.7% of the commercial real estate loan portfolio consisting primarily of loan participations outside of our market area which totaled $6.1 million, or 15.1% of the commercial real estate loan portfolio. At December 31, 2014, we had one loan participation located in central Illinois with a balance of $794,000 delinquent 60 days or more.

At December 31, 2014, our largest commercial real estate loan was secured by a hotel with a principal balance of $3.5 million and was performing in accordance with its terms. At December 31, 2014, our largest commercial real estate loan participation was secured by a manufacturing facility with a principal balance of $1.3 million and was performing in accordance with its terms.

Our underwriting standards for commercial real estate include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan. We emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%). In underwriting a loan, we consider the value of the real estate offered as collateral in relation to the proposed loan amount. Generally, the loan amount cannot be greater than 80% of the value of the real estate. We usually obtain written appraisals from either licensed or certified appraisers on all commercial real estate loans in excess of $250,000. We assess the creditworthiness of the applicant by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by commercial real estate generally involve a greater degree of credit risk than one- to four-family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related business and real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

7

Agricultural Real Estate Loans. We originate and purchase agricultural real estate loans. At December 31, 2014, $40.1 million, or 21.7% of our net loan portfolio, consisted of agricultural real estate loans. During 2014, loan originations secured by agricultural real estate totaled $6.7 million, as compared to $4.6 million in 2013. The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 75%. Our agricultural real estate loans are generally written up to terms of five years with adjustable interest rates. The rates are generally tied to the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years, or five-years and generally have a specified floor. Many of our fixed-rate agricultural real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We purchase from time to time agricultural real estate loan participations primarily from other local institutions within our market area. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards. At December 31, 2014, agricultural real estate loan participations totaled $4.3 million, or 10.7% of the agricultural real estate loan portfolio. At December 31, 2014, we had no agricultural real estate loan participations delinquent 60 days or more. At December 31, 2014, our largest agricultural real estate loan was secured by farmland, had a principal balance of $2.8 million and was performing in accordance with its terms.

Our underwriting standards for agricultural real estate include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The income approach is primarily utilized to determine whether income generated from the applicant’s farm operation or real estate offered as collateral is adequate to repay the loan. We emphasize the ratio of the property’s projected cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%). In underwriting a loan, we consider the value of the real estate offered as collateral in relation to the proposed loan amount. Generally, the loan amount cannot be greater than 75% of the value of the real estate. We usually obtain written appraisals from either licensed or certified appraisers on all agricultural real estate loans in excess of $250,000. We assess the creditworthiness of the applicant by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by agricultural real estate generally involve a greater degree of credit risk and carry larger loan balances than one- to four-family residential mortgage loans. This increased credit risk is a result of several factors, including the effects of general economic and market conditions on farm operations and the successful operation or management of the properties securing the loans. The repayment of loans secured by agricultural estate is typically dependent upon the successful operation of the farm and real estate property. If the cash flow is reduced, the borrower’s ability to repay the loan may be impaired.

Home Equity Loans.At December 31, 2014, home equity loans totaled $11.3 million, or 6.1%, of our net loan portfolio. Our home equity loans and lines of credit are generally secured by the borrower’s principal residence. The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral less the amount of any prior mortgages or related liabilities. Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which we determine based upon market conditions. Such loans may be fully amortized over the life of the loan or have a balloon feature. Generally, the maximum term for home equity loans is 10 years.

Our underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. At December 31, 2014, home equity loans 90 days or more delinquent totaled $58,000, or 0.5% of total home equity loans. The largest delinquent loan in this category at December 31, 2014 had a principal balance of $27,000 and was secured by a residential mortgage. No assurance can be given, however, that our delinquency rate or loss experience on home equity loans will not increase in the future.

8

Home equity loans entail greater risks than one- to four-family residential mortgage loans, which are secured by first lien mortgages. In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage or depreciation in the value of the property or loss of equity to the first lien position. Further, home equity loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

Commercial Business Loans. We originate commercial business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. We also purchase participations of commercial business loans from other lenders, which may be made to borrowers outside our market area. Commercial business loans totaled $26.8 million, or 14.5% of our net loan portfolio at December 31, 2014. At December 31, 2014, commercial business loan participations totaled $1.2 million, or 4.5% of the commercial business loan portfolio. Of this amount, commercial business loan participations outside of our market area represented $1.2 million, or 4.5% of the commercial business loan portfolio. Commercial business loans are generally secured by equipment and inventory and generally are offered with adjustable rates tied to the prime rate or the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years and various terms of maturity generally from three years to five years. On a limited basis, we will originate unsecured business loans in those instances where the applicant’s financial strength and creditworthiness has been established. Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business. We generally obtain personal guarantees from the borrower or a third party as a condition to originating business loans. During the year ended December 31, 2014, we originated $19.5 million in commercial business loans. At that date, our largest commercial business loan was a $6.0 million line of credit. This loan was performing in accordance with its terms at December 31, 2014.

Our underwriting standards for commercial business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business. We assess the financial strength of each applicant through the review of financial statements and tax returns provided by the applicant. The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records. We periodically review business loans following origination. We request financial statements at least annually and review them for substantial deviations or changes that might affect repayment of the loan. Our loan officers may also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral. Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Agricultural Business Loans. We originate agricultural business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. Agricultural business loans totaled $11.8 million, or 6.4% of our net loan portfolio at December 31, 2014. Agricultural business loans are generally secured by equipment and blanket security agreements on all farm assets. These loans are generally offered with fixed rates with terms up to five years. Agricultural business loans generally bear lower interest rates than residential loans due to competitive market pressures. While the repayment of our agricultural business loans is generally dependent on the successful operation of the farm operation, we have experienced a good history of low default rates. We generally obtain personal guarantees from the borrower as a condition to originating agricultural business loans. During the year ended December 31, 2014, we originated $11.5 million in agricultural business loans. At December 31, 2014, our largest agricultural business loan was a line of credit of $600,000. This loan was performing in accordance with its terms at December 31, 2014.

9

Our underwriting standards for agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business. We assess the financial strength of each applicant through the review of financial statements, pro-forma cash flow statements, and tax returns provided by the applicant. The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records. We request financial statements at least annually and review them for substantial deviations or changes that might affect repayment of the loan. Our loan officers may also visit the premises of borrowers to observe the operation, facilities, equipment, and personnel and to inspect the pledged collateral. Underwriting standards for agricultural business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Consumer Loans.As of December 31, 2014, consumer loans totaled $12.6 million, or 6.8%, of our net loan portfolio. The principal types of consumer loans we offer are automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans. We generally offer consumer loans on a fixed-rate basis.

At December 31, 2014, consumer loans secured by automobiles totaled $5.2 million, or 2.8% of our net loan portfolio. We offer automobile loans with maturities of up to 60 months for new automobiles. Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile. We generally originate automobile loans with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value, although the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with us.

Our underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. Consumer loans 90 days or more delinquent at December 31, 2014 totaled $17,000, or 0.1% of total consumer loans. No assurance can be given, however, that our delinquency rate or loss experience on consumer loans will not increase in the future.

Consumer loans entail greater risks than one- to four-family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured. In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation. Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Such events would increase our risk of loss on unsecured loans. Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default.

10

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2014. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	One- to Four-Family Real Estate					Commercial Real Estate					Agricultural Real Estate					Home Equity
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in Thousands)
Due During the Years Ending December 31,
2015	$	7,110		5.93	%	$	11,480		5.55	%	$	2,532		3.20	%	$	1,160		6.32	%
2016		2,742		6.24			4,171		4.20			181		6.31			1,254		6.70
2017		2,658		6.32			1,517		5.10			102		4.25			959		6.48
2018 to 2019		4,141		5.20			12,983		4.62			209		5.21			2,684		6.56
2020 to 2024		2,484		6.05			3,824		5.12			3,025		4.71			4,206		5.42
2025 to 2029		7,191		4.76			3,828		5.42			2,561		4.75			542		6.09
2030 and beyond		18,235		5.20			2,672		4.93			31,509		4.30			478		5.86
Total	$	44,561		5.43	%	$	40,475		5.01	%	$	40,119		4.31	%	$	11,283		6.07	%

	Commercial Business					Agricultural Business					Consumer					Total
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in Thousands)
Due During the Years Ending December 31,
2015	$	13,375		4.00	%	$	10,022		4.01	%	$	1,519		7.33	%	$	47,198		4.80	%
2016		1,972		4.30			131		4.00			2,170		7.42			12,621		5.49
2017		2,050		4.75			116		5.56			2,223		7.29			9,625		5.99
2018 to 2019		5,660		5.18			800		5.02			3,495		5.85			29,972		5.14
2020 to 2024		1,840		5.03			776		4.31			646		7.92			16,801		5.32
2025 to 2029		1,917		3.34			—		—			776		8.53			16,815		4.97
2030 and beyond		—		—			—		—			1,758		8.43			54,652		4.78
Total	$	26,814		4.37	%	$	11,845		4.12	%	$	12,587		7.19	%	$	187,684		5.02	%

The following table sets forth at December 31, 2014, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2015. At December 31, 2014, fixed-rate loans include $10.6 million in fixed-rate balloon payment loans with original maturities of five years or less. The total dollar amount of fixed-rate loans and adjustable-rate loans due after December 31, 2015, was $67.1 million and $73.4 million, respectively.

	Due after December 31, 2015
	Fixed		Adjustable		Total
	(In Thousands)
Real estate loans:
One- to four-family residential	$	20,856	$	16,595	$	37,451
Commercial		17,790		11,205		28,995
Agricultural		752		36,835		37,587
Home equity/home improvement		4,312		5,811		10,123
Commercial business loans		10,655		2,784		13,439
Agricultural business loans		1,823		—		1,823
Consumer		10,905		163		11,068
Total loans	$	67,093	$	73,393	$	140,486

11

Loan Origination, Solicitation and Processing. Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers. Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing. In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by us. A loan application file is first reviewed by a loan officer in our loan department who checks applications for accuracy and completeness, and verifies the information provided. The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval. All residential real estate loans are then verified by our loan risk management department prior to closing. The board of directors has established individual lending authorities for each loan officer by loan type. Loans over an individual officer’s lending limits must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan. Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members. The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million. The board of directors ratifies all loans we originate. Once the loan is approved, the applicant is informed and a closing date is scheduled. We typically fund loan commitments within 45 days.

If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances. Title insurance is generally required on loans secured by real property.

Origination, Purchase and Sale of Loans. Set forth below is a table showing our loan originations, purchases, sales and repayments for the years indicated. It is our policy to originate for sale into the secondary market fixed-rate mortgage loans with maturities of 15 years or more and to originate for retention in our portfolio adjustable-rate mortgage loans and loans with balloon payments. Purchased loans consist of participations in commercial real estate, agricultural real estate, and commercial business loans originated by other financial institutions. We usually obtain commitments prior to selling fixed-rate mortgage loans.

	For the Years Ended December 31,
	2014		2013		2012		2011		2010
	(In Thousands)
Total loans receivable at beginning of year	$	184,055	$	177,086	$	174,201	$	179,455	$	176,042
Originations:
Real estate loans:
One- to four-family residential		23,848		39,825		68,471		44,583		54,052
Commercial		15,510		11,071		2,823		7,435		18,388
Agricultural		6,698		4,585		11,480		15,482		7,112
Home equity		3,236		3,598		3,243		4,081		5,073
Commercial business loans		19,508		19,397		20,920		14,326		11,692
Agricultural business loans		11,542		10,008		12,091		15,500		14,929
Consumer loans		7,255		9,239		8,375		10,833		16,355
Total originations		87,597		97,723		127,403		112,240		127,601
Participation loans purchased		2,678		3,878		6,093		3,227		4,328
Transfer of mortgage loans to foreclosed real estate owned		374		129		262		461		670
Repayments		73,728		70,043		77,672		88,033		80,471
Loan sales to secondary market		12,544		24,460		52,677		32,227		47,375
Total loans receivable at end of year	$	187,684	$	184,055	$	177,086	$	174,201	$	179,455

Loan Origination and Other Fees. In addition to interest earned on loans, we may charge loan origination fees. Our ability to charge loan origination fees is influenced by the demand for mortgage loans and competition from other lenders in our market area. To the extent that loans are originated or acquired for our portfolio, accounting standards require that we defer loan origination fees and costs and amortize such amounts as an adjustment of yield over the life of the loan by use of the level yield method. Fees deferred are recognized into income immediately upon the sale of the related loan. At December 31, 2014, we had $185,000 of deferred loan fees. Loan origination fees are a volatile source of income. Such fees vary with the volume and type of loans and commitments made and purchased and with competitive conditions in the mortgage markets, which in turn respond to the demand and availability of money.

12

In addition to loan origination fees, we also receive other fees that consist primarily of extension fees and late charges. We recognized fees of $92,000, $97,000 and $103,000 for the years ended December 31, 2014, 2013 and 2012, respectively.

Loan Concentrations.With certain exceptions, an Illinois-chartered savings bank may not make a loan or exceed credit for secured and unsecured loans for business, commercial, corporate or agricultural purposes to a single borrower in excess of 25% of the Bank’s total capital, as defined by regulation. At December 31, 2014, our loans-to-one borrower limit was $10.1 million. At December 31, 2014 we had no lending relationships in excess of our loans-to-one borrower limitation. At December 31, 2014, we had 28 borrowers with outstanding borrowings in excess of $1.0 million totaling in the aggregate $75.0 million or 39.9% of our total loan portfolio.

Delinquencies and Classified Assets

Our collection procedures provide that when a mortgage loan is either ten days (in the case of adjustable-rate mortgage and balloon loans) or 15 days (in the case of fixed-rate loans) past due, a computer-generated late charge notice is sent to the borrower requesting payment and assessing a late charge. If the mortgage loan remains delinquent, a telephone call is made or a letter is sent to the borrower stressing the importance of reinstating the loan and obtaining reasons for the delinquency. We also send a 30 day notice pursuant to Illinois law if a borrower’s primary residence is the collateral at issue. When a loan continues in a delinquent status for 90 days or more, and a repayment schedule has not been made or kept by the borrower, a notice of intent to foreclose upon the underlying property is then sent to the borrower, giving 10 days to cure the delinquency. If not cured, foreclosure proceedings are initiated. Consumer loans receive a ten-day grace period before a late charge is assessed. Collection efforts begin after the grace period expires. At December 31, 2014, 2013 and 2012, the percentage of non-performing loans to total loans receivable were 1.21%, 0.97% and 1.25%, respectively. At December 31, 2014, 2013 and 2012, the percentage of non-performing assets to total assets was 0.78%, 0.65% and 0.73%, respectively.

Nonperforming Assets and Delinquent Loans. Loans are reviewed on a regular basis and are placed on nonaccrual status when, in the opinion of management, the collection of additional interest is doubtful. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the loan is well secured and in the process of collection. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is charged against interest income. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of the loan.

Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision with consideration given to the need for additions to the allowance for loan losses and (if appropriate) partial or full charge-off. At December 31, 2014, we had no loans 90 days or more delinquent that were still accruing interest. Nonperforming assets increased by $375,000 to $2.4 million at December 31, 2014 as compared to $2.1 million at December 31, 2013. The increase in the level of nonperforming assets primarily reflected an increase of $482,000 in nonperforming loans, partially offset by a decrease of $107,000 in foreclosed assets. The increase in nonperforming loans primarily reflected the non-accrual status of a $794,000 loan participation secured by commercial real estate, which is in the process of foreclosure.

Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at the lower of the unpaid principal balance of the related loan, or its fair market value, less estimated selling expenses. Any further write-down of real estate owned is charged against earnings. At December 31, 2014, we owned $177,000 of property classified as real estate owned.

13

Nonperforming Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At December 31, 2014, 2013, 2012, 2011 and 2010, we had troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates) of $2.3 million, $2.6 million, $2.2 million, $2.0 million and $1.2 million, respectively.

	At December 31,
	2014			2013			2012			2011			2010
	(Dollars in Thousands)
Nonaccrual loans: (1)
Real estate loans:
One- to four-family residential	$	995		$	1,339		$	1,203		$	1,298		$	1,019
Commercial		932			208			560			362			1,360
Agricultural		123			—			—			—			—
Home equity		121			134			277			423			566
Commercial business loans		22			38			52			67			84
Agricultural business loans		—			—			—			—			—
Consumer loans		71			63			122			251			106
Total nonaccrual loans		2,264			1,782			2,214			2,401			3,135
Loans delinquent 90 days or greater and still accruing:
Real estate loans:
One- to four-family residential		—			—			—			—			—
Commercial		—			—			—			—			—
Agricultural		—			—			—			—			—
Home equity		—			—			—			—			—
Commercial business loans		—			—			—			—			—
Agricultural business loans		—			—			—			—			—
Consumer loans		—			—			—		—­			—
Total loans delinquent 90 days or greater and still accruing		—			—			—		—­				—
Total nonperforming loans		2,264			1,782			2,214			2,401			3,135
Real estate owned and foreclosed assets:
Real estate loans:
One- to four-family residential		40			133			—			49			207
Commercial		137			149			137			416			253
Agricultural		—			—			—			—			—
Home equity		—			—			—			—			—
Commercial business loans		—			—			—			—			—
Agricultural business loans		—			—			—			—			—
Consumer loans		—			2			—			—			—
Total real estate owned and foreclosed assets		177			284			137			435			460
Total nonperforming assets	$	2,441		$	2,066		$	2,351		$	2,836		$	3,595
Ratios:
Nonperforming loans to total loans		1.21	%		0.97	%		1.25	%		1.38	%		1.75	%
Nonperforming assets to total assets		0.78	%		0.65	%		0.73	%		0.92	%		1.19	%

(1) Includes nonaccrual troubled debt restructurings of $1.1 million, $412,000, $361,000, $211,000, and $746,000 for the years ended December 31, 2014, 2013, 2012, 2011, and 2010, respectively.

For the year ended December 31, 2014, gross interest income that would have been recorded had our nonaccrual loans and troubled debt restructurings been current in accordance with their original terms was $140,000. We did not recognize any interest income on such loans for the year ended December 31, 2014.

14

At December 31, 2014, we had no loans that were not currently classified as nonaccrual, 90 days past due or troubled debt restructurings where known information about possible credit problems of borrowers caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure as nonaccrual, 90 days past due or troubled debt restructurings.

The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated.

	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in Thousands)
At December 31, 2014
Real estate loans:
One- to four-family residential		5		287		9		613		14		900
Commercial		1		794		3		39		4		833
Agricultural		—		—		1		123		1		123
Home equity		2		12		5		58		7		70
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		3		5		6		17		9		22
Total loans		11	$	1,098		24	$	850		35	$	1,948
At December 31, 2013
Real estate loans:
One- to four-family residential		2	$	96		12	$	807		14	$	903
Commercial		2		68		2		78		4		146
Agricultural		—		—		—		—		—		—
Home equity		3		48		4		55		7		103
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		5		26		2		10		7		36
Total loans		12	$	238		20	$	950		32	$	1,188
At December 31, 2012
Real estate loans:
One- to four-family residential		5	$	213		15	$	985		20	$	1,198
Commercial		—		—		4		280		4		280
Agricultural		—		—		—		—		—		—
Home equity		4		71		6		136		10		207
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		2		64		4		34		6		98
Total loans		11	$	348		29	$	1,435		40	$	1,783
At December 31, 2011
Real estate loans:
One- to four-family residential		4	$	162		12	$	1,021		16	$	1,183
Commercial		—		—		2		49		2		49
Agricultural		—		—		—		—		—		—
Home equity		5		50		11		197		16		247
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		4		126		3		37		7		163
Total loans		13	$	338		28	$	1,304		41	$	1,642
At December 31, 2010
Real estate loans:
One- to four-family residential		4	$	162		15	$	847		19	$	1,009
Commercial		2		146		2		521		4		667
Agricultural		—		—		—		—		—		—
Home equity		2		10		9		275		11		285
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		6		77		4		9		10		86
Total loans		14	$	395		30	$	1,652		44	$	2,047

15

Classified Assets. Federal and state regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examination of insured institutions, Federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three categories for classified assets: “substandard,” “doubtful” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. For assets classified “substandard” and “doubtful,” the institution is required to establish general loan loss reserves in accordance with accounting principles generally accepted in the United States of America. Assets classified “loss” must be either completely written off or supported by a 100% specific reserve. We also maintain a category designated “special mention” which is established and maintained for assets not considered classified but having potential weaknesses or risk characteristics that could result in future problems. An institution is required to develop an in-house program to classify its assets, including investments in subsidiaries, on a regular basis and set aside appropriate loss reserves on the basis of such classification. As part of the periodic exams of Jacksonville Savings Bank by the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, the staff of such agencies reviews our classifications and determine whether such classifications are adequate. Such agencies have, in the past, and may in the future require us to classify certain assets which management has not otherwise classified or require a classification more severe than established by management. At December 31, 2014, our classified assets totaled $5.5 million, all of which were classified as substandard.

The total amount of classified and special mention loans increased $361,000, or 5.0%, to $7.6 million at December 31, 2014 from $7.2 million at December 31, 2013. The increase in classified and special mention loans during 2014 was due to an increase of $1.0 million in special mention loans, partially offset by a decrease of $678,000 in substandard loans. The increase in special mention loans reflects $1.3 million in additional loans listed as special mention, partially offset by $219,000 in principal reductions and $157,000 in loans that were upgraded to a pass rating during 2014. The decrease in substandard loans was primarily related to $796,000 in principal reductions, $690,000 in charge-offs, and $374,000 in loans transferred to foreclosed assets, partially offset by $1.3 million in additional loans classified as substandard during 2014.

16

The following table shows the principal amount of special mention and classified loans at December 31, 2014 and December 31, 2013.

	12/31/14		12/31/13
	(In Thousands)
Special Mention loans	$	2,096	$	1,057
Substandard loans		5,454		6,132
Total Special Mention and Substandard loans	$	7,550	$	7,189

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate to cover probable credit losses inherent in the loan portfolio at the balance sheet date. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, we do not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non-classified loans and is based on historical charge-off experience and expected loss given our internal risk rating process. The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for other qualitative factors is applied to the homogeneous pools of loans to estimate the incurred losses in the loan portfolio. The other qualitative factors considered by management include, but are not limited to, the following:

● changes in lending policies and procedures, including underwriting standards and collection practices;

● changes in national and local economic and business conditions and developments, including the condition of various market segments;

17

● changes in the nature and volume of the loan portfolio;

● changes in the experience, ability and depth of management and the lending staff;

● changes in the trend of the volume and severity of the past due, nonaccrual, and classified loans;

● changes in the quality of our loan review system and the degree of oversight by the board of directors;

● the existence of any concentrations of credit, and changes in the level of such concentrations; and

● the effect of external factors, such as competition and legal and regulatory requirements on the level of estimated credit losses in our current portfolio.

Commercial and agricultural real estate loans generally have higher credit risks compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, payment experience on loans secured by income-producing properties typically depend on the successful operation of the related real estate project and this may be subject to a greater extent to adverse conditions in the real estate market and in the general economy.

Commercial and agricultural business loans involve a greater risk of default than one- to four-residential mortgage loans of like duration since their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral if any. The repayment of agricultural loans can be greatly affected by weather conditions and commodity prices.

The allowance for loan losses decreased $450,000, or 13.2%, to $3.0 million at December 31, 2014 from $3.4 million at December 31, 2013. The decrease in the allowance was the result of net charge-offs exceeding the provision for loan losses. Net charge-offs increased $587,000 to $690,000 during 2014 from $103,000 during 2013.

Nonperforming assets increased $375,000 to $2.4 million at December 31, 2014, compared to $2.1 million at December 31, 2013. The increase in nonperforming assets was due to an increase of $482,000 in non-performing loans, partially offset by a decrease of $107,000 in foreclosed assets held at December 31, 2014 as compared to at December 31, 2013. The allowance for loan losses to nonperforming loans decreased to 130.57% at December 31, 2014 as compared to 191.14% at December 31, 2013.

Although we maintain our allowance for loan losses at a level which we consider to be adequate to provide for potential losses, there can be no assurance that such losses will not exceed the estimated amounts or that we will not be required to make additions to the allowance for loan losses in the future. Future additions to our allowance for loan losses and changes in the related ratio of the allowance for loan losses to nonperforming loans are dependent upon the economy, changes in real estate values and interest rates, the view of the regulatory authorities toward adequate loan loss reserve levels, and inflation. Management will continue to review the entire loan portfolio to determine the extent, if any, to which further additional loan loss provisions may be deemed necessary.

18

Analysis of the Allowance for Loan Losses. The following table summarizes changes in the allowance for loan losses by loan categories for each year indicated and additions to the allowance for loan losses, which have been charged to operations.

	For the Years Ended December 31,
	2014			2013			2012			2011			2010
	(Dollars in Thousands)
Balance at beginning of year	$	3,406		$	3,339		$	3,297		$	2,964		$	2,290
Charge-offs:
One- to four-family residential		100			162			82			130			99
Commercial real estate		288			—			357			306			787
Agricultural real estate		—			—			—			—			—
Home equity		5			63			80			25			88
Commercial business		285			—			—			—			144
Agricultural business		—			—			—			—			—
Consumer		26			67			67			25			11
Total charge-offs		704			292			586			486			1,129
Recoveries:
One- to four-family residential		2			16			27			—			21
Commercial real estate		5			136			89			25			25
Agricultural real estate		—			—			—			—			—
Home equity		3			15			14			7			13
Commercial business		—			7			3			156			6
Agricultural business		—			—			—			—			—
Consumer		4			15			6			6			13
Total recoveries		14			189			139			194			78
Net loans charge-offs		690			103			447			292			1,051
Additions charged to operations		240			170			490			625			1,725
Balance at end of year	$	2,956		$	3,406		$	3,339		$	3,297		$	2,964
Total loans outstanding	$	187,684		$	184,055		$	177,086		$	174,201		$	179,455
Average net loans outstanding	$	180,936		$	174,685		$	173,600		$	177,597		$	177,840
Allowance for loan losses as a percentage of total loans at end of year		1.57	%		1.85	%		1.89	%		1.89	%		1.65	%
Net loans charged off as a percent of average net loans outstanding		0.38	%		0.06	%		0.26	%		0.16	%		0.59	%
Allowance for loan losses to nonperforming loans		130.57	%		191.14	%		150.85	%		137.33	%		94.56	%
Allowance for loan losses to total nonperforming assets at end of year		121.10	%		164.90	%		142.05	%		116.24	%		82.46	%

19

Allocation of Allowance for Loan Losses. The following table sets forth the allocation of allowance for loan losses by loan category at the dates indicated. The table reflects the allowance for loan losses as a percentage of total loans receivable. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance by category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

	At December 31,
	2014					2013					2012
	Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
One- to four-family residential	$	999		23.7	%	$	856		24.1	%	$	741		23.4	%
Commercial real estate		855		21.6			746		21.1			829		17.5
Agricultural real estate		196		21.4			175		19.0			150		21.1
Home equity		206		6.0			202		6.4			329		7.2
Commercial business		422		14.3			1,034		16.3			934		16.4
Agricultural business		58		6.3			53		5.7			44		6.2
Consumer		167		6.7			185		7.4			151		8.2
Unallocated		53		—			155		—			161		—
Total	$	2,956		100	%	$	3,406		100	%	$	3,339		100	%

	At December 31,
	2011					2010
	Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
One- to four-family residential	$	697		22.7	%	$	561		20.7	%
Commercial real estate		1,108		23.1			1,194		25.3
Agricultural real estate		115		17.2			93		15.7
Home equity		309		9.2			300		10.9
Commercial business		712		13.3			473		12.7
Agricultural business		59		5.5			58		4.6
Consumer		138		9.0			164		10.1
Unallocated		159		—			121		—
Total	$	3,297		100	%	$	2,964		100	%

Investment Activities

General.The asset/liability management committee, consisting of our Chairman of the Board, President, Senior Vice President and Investment Officer, Vice President of Operations, Chief Financial Officer, and at least two outside directors from the board, has primary responsibility for establishing our investment policy and overseeing its implementation, subject to oversight by our entire board of directors. Authority to make investments under approved guidelines is delegated to the Senior Vice President and Investment Officer. The committee meets at least quarterly. All investment transactions are reported to the board of directors for ratification quarterly.

The investment policy is reviewed at least annually by the full board of directors. This policy dictates that investment decisions be made based on providing liquidity, meeting pledging requirements, generating a reasonable rate of return, minimizing our tax liability through the purchase of municipal securities, minimizing exposure to credit risk and ensuring consistency with our interest rate risk management strategy. During the prolonged period of low interest rates and weak loan demand, our investment activities are a more pronounced part of our operations.
 

Our current investment policy permits us to invest in U.S. treasuries, federal agency securities, mortgage-backed securities, investment grade corporate bonds, municipal bonds, short-term instruments, and other securities. Investments in municipal bonds will be correlated with Jacksonville Savings Bank’s current level of taxable income, the need for tax-exempt income, and investment in the community. The investment policy also permits investments in certificates of deposit, securities purchased under an agreement to resell, bankers acceptances, commercial paper and federal funds.

20

Our current investment policy generally does not permit investment in stripped mortgage-backed securities, short sales, derivatives, or in other high-risk securities. Federal and Illinois state law generally limit our investment activities to those permissible for a national bank.

The accounting rules require that, at the time of purchase, we designate a security as held to maturity, available-for-sale, or trading, depending on our ability and intent. Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. We only maintain a securities available-for-sale portfolio.

The portfolio consists primarily of mortgage-backed securities, municipal bonds and U.S. government and agency securities all of which are classified as available for sale. Mortgage-backed securities totaled $41.4 million at December 31, 2014. General obligation municipal bonds, most of which have been issued within the States of Illinois, Texas, and Missouri totaled $45.3 million at December 31, 2014. Our portfolio of U.S. Government and agency securities totaled $10.0 million at December 31, 2014. We expect the composition of our investment portfolio to continue to change based on liquidity needs associated with loan origination activities. During the year ended December 31, 2014, we had no investment securities that were deemed to be other than temporarily impaired.

Under Federal regulations, we are required to maintain a minimum amount of liquid assets that may be invested in specified short-term securities and certain other investments. Liquidity levels may be increased or decreased depending upon the yields on investment alternatives and upon management’s judgment as to the attractiveness of the yields then available in relation to other opportunities and its expectation of the level of yield that will be available in the future, as well as management’s projections as to the short-term demand for funds to be used in our loan originations and other activities.

Mortgage-Backed Securities. We invest in mortgage-backed securities insured or guaranteed by the United States Government or government sponsored enterprises. These securities, which consist of mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, had an amortized cost of $41.2 million, $49.5 million and $50.9 million at December 31, 2014, 2013 and 2012, respectively. The fair value of our mortgage-backed securities portfolio was $41.4 million, $48.3 million and $52.0 million at December 31, 2014, 2013 and 2012, respectively, and the weighted average rate as of December 31, 2014, 2013 and 2012 was 2.33%, 2.27% and 2.54%, respectively. At December 31, 2014, $41.4 million of the mortgage-backed securities in the investment portfolio had fixed rates of interest.

Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as Jacksonville Savings Bank. Some securities pools are guaranteed as to payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations. Finally, mortgage-backed securities are assigned lower risk-weightings for purposes of calculating our risk-based capital level.

Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

21

Municipal Bonds. At December 31, 2014, we held municipal bonds with a fair value of $45.3 million. All of our municipal bonds are general obligation bonds with full taxing authority and ratings (when available) of A or above. Nearly all of our municipal bonds are issued by local municipalities or school districts located in Illinois, Texas, or Missouri.

U.S. Government and Agency Securities. At December 31, 2014, we held U.S. Government and agency securities with a fair value of $10.0 million. These securities have an average expected life of 5.1 years. While these securities generally provide lower yields than other investments such as mortgage-backed securities, our current investment strategy is to maintain investments in such instruments to the extent appropriate for liquidity purposes, as collateral for borrowings, and for prepayment protection.

Investment Securities Portfolio. The following table sets forth the composition of our investment securities portfolio at the dates indicated. Investment securities do not include Federal Home Loan Bank of Chicago stock of $1.1 million. All of such securities were classified as available for sale.

	At December 31,
	2014				2013				2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Mortgage-backed securities:
Fannie Mae	$	24,023	$	24,241	$	23,435	$	23,013	$	25,565	$	26,245
Freddie Mac		12,492		12,491		14,447		14,022		11,067		11,264
Ginnie Mae		4,682		4,688		11,604		11,311		14,285		14,447
Total mortgage-backed securities		41,197		41,420		49,486		48,346		50,917		51,956
U.S. government and agencies		10,032		9,958		10,711		10,420		10,091		10,329
Municipal bonds		44,378		45,307		50,889		50,219		49,991		53,103
Total	$	95,607	$	96,685	$	111,086	$	108,985	$	110,999	$	115,388

22

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2014 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. All of such securities were classified as available for sale.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in Thousands)
Mortgage-backed securities:
Fannie Mae	$	—		—	%	$	—		—	%	$	862		2.69	%	$	23,161		2.41	%	$	24,023	$	24,241		2.42	%
FreddieMac		—		—			—		—			426		2.04			12,066		2.17			12,492		12,491		2.17
Ginnie Mae		—		—			—		—			306		3.19			4,376		2.24			4,682		4,688		2.31
Total mortgage-backed securities		—		—			—		—			1,594		2.61			39,603		2.32			41,197		41,420		2.33
U.S. government and agencies		500		2.30			3,980		2.02			3,491		2.13			2,061		1.97			10,032		9,958		2.06
Municipal bonds(1)		35		1.10			5,204		3.55			22,258		2.98			16,881		3.31			44,378		45,307		3.17
Total	$	535		2.22	%	$	9,184		2.89	%	$	27,343		2.81	%	$	58,545		2.59	%	$	95,607	$	96,685		2.68	%

(1) We used an assumed 34% tax rate in computing tax equivalent adjustments. The tax equivalent yield of municipal bonds was 1.67% for maturities of one year or less, 5.38% for maturities of more than one year through five years, 4.51% for maturities for more than five years through ten years, 5.01% for maturities of more than 10 years and 4.80% for the total municipal bonds securities portfolio at December 31, 2014. The tax equivalent adjustments to interest income of municipal bonds was less than $1,000 for maturities of one year or less, $95,000 for maturities of more than one year through five years, $341,000 for maturities for more than five years through ten years, $287,000 for maturities of more than 10 years and $723,000 for the total municipal bonds securities portfolio for the year ended December 31, 2014.

23

Sources of Funds

General. Deposits and borrowings are our major sources of funds for lending and other investment purposes. In addition, we derive funds from the repayment and prepayment of loans and mortgage-backed securities, operations, sales of loans into the secondary market, and the sale, call, or maturity of investment securities. Scheduled loan principal repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest rates and market conditions. Other sources of funds include advances from the Federal Home Loan Bank. For further information see “—Borrowings.” Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds from other sources or on a longer term basis for general business purposes.

Deposits. We attract consumer and commercial deposits principally from within our market areas through the offering of a broad selection of deposit instruments including interest-bearing checking accounts, noninterest-bearing checking accounts, savings accounts, money market accounts, term certificate accounts and individual retirement accounts. We will accept deposits of $100,000 or more and may offer negotiated interest rates on such deposits. At December 31, 2014, we had deposits of $100,000 or more from public entities that totaled $13.3 million. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. We regularly evaluate our internal cost of funds, survey rates offered by competing institutions, review our cash flow requirements for lending and liquidity and execute rate changes when deemed appropriate. We do not obtain funds through brokers, nor do we solicit funds outside our market area.

24

The following tables set forth the distribution of our average deposit accounts, by account type, for the years indicated.

	For the Years Ended December 31,
	2014								2013								2012
	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
	(Dollars in Thousands)
Deposit type:
Non-interest bearing checking	$	27,315		11.0	%		—	%	$	25,089		9.8	%		—	%	$	23,671		9.2	%		—	%
Interest-bearing checking		38,080		15.3			0.14			37,595		14.7			0.14			34,810		13.4			0.19
Savings accounts		37,323		15.0			0.21			34,860		13.7			0.22			31,791		12.3			0.38
Money market deposits		8,026		3.2			0.15			8,441		3.3			0.16			7,582		2.9			0.29
Money market savings		35,408		14.2			0.31			33,554		13.1			0.34			29,848		11.5			0.43
Certificates of deposit		102,890		41.3			1.15			116,036		45.4			1.30			131,527		50.7			1.48
Total deposits	$	249,042		100.00	%		0.58	%	$	255,575		100.00	%		0.69	%	$	259,229		100.00	%		0.88	%

The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.

	At December 31,
	2014		2013		2012
	(In Thousands)
Interest Rate:
Less than 1.00%	$	53,255	$	21,405	$	49,380
1.00% to 1.99%		21,607		60,177		43,290
2.00% to 2.99%		13,324		15,707		17,680
3.00% to 3.99%		6,414		10,863		11,793
4.00% to 4.99%		—		—		307
5.00% to 5.99%		—		—		415
Total	$	94,600	$	108,152	$	122,865

25

The following table sets forth, by interest rate ranges and scheduled maturity, information concerning our certificates of deposit at December 31, 2014.

	At December 31, 2014
	Period to Maturity
	Less Than or Equal to One Year		More Than One to Two Years		More Than Two to Three Years		More Than Three Years		Total		Percent of Total
	(Dollars in Thousands)
Interest Rate Range:
Less than 1.00%	$	37,486	$	13,620	$	1,600	$	549	$	53,255		56.3	%
1.00% to 1.99%		2,698		780		6,269		11,860		21,607		22.8
2.00% to 2.99%		5,313		5,814		2,188		9		13,324		14.1
3.00% to 3.99%		6,414		—		—		—		6,414		6.8
Total	$	51,911	$	20,214	$	10,057	$	12,418	$	94,600		100.0	%

As of December 31, 2014, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $37.5 million, of which $5.1 million were deposits from public entities. The following table set forth the maturity of those certificates as of December 31, 2014.

	At December 31, 2014
	(In Thousands)
Three months or less	$	6,271
Over three months through six months		5,263
Over six months through one year		8,367
Over one year to three years		11,956
Over three years		5,691
Total	$	37,548

Borrowings. Deposits are our primary source of funds for lending and investment activities. If the need arises, we may rely upon advances from the Federal Home Loan Bank to supplement our supply of available funds and to fund deposit withdrawals. We typically secure advances from the Federal Home Loan Bank with one- to four-family residential mortgage loans, United States Government and agency securities and mortgage-backed securities. The Federal Home Loan Bank functions as a central reserve bank providing credit for us and other member savings associations and financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our home mortgages, provided certain standards related to creditworthiness have been met. Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of a member institution’s stockholders’ equity or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness. At December 31, 2014, we had $5.0 million inFederal Home Loan Bank advances outstanding.

Other borrowings consist of securities sold under agreements to repurchase which are swept daily from commercial deposit accounts. We may be required to provide additional collateral based on the fair value of the underlying securities.

26

Our borrowings consist of advances from the Federal Home Loan Bank of Chicago and funds borrowed under repurchase agreements. At December 31, 2014, we had access to Federal Home Loan Bank advances of up to $27.0 million. The following table sets forth information concerning balances and interest rates on our Federal Home Loan Bank advances at or for the years indicated.

	At or For the Years Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Balance at end of year	$	5,000		$	10,800		$	700
Average balance during year	$	4,803		$	4,518		$	3
Maximum outstanding at any month end	$	12,000		$	15,500		$	700
Weighted average interest rate at end of year		0.33	%		0.13	%		0.30	%
Average interest rate during year		0.20	%		0.14	%		0.30	%

The following table sets forth information concerning balances and interest rates on our repurchase agreements at or for the years indicated.

	At or For the Years Ended December 31,
	2014			2013			2012
	(Dollars in thousands)
Balance at end of year	$	8,822		$	8,810		$	12,041
Average balance during year	$	5,996		$	6,208		$	6,367
Maximum outstanding at any month end	$	9,484		$	9,446		$	23,464
Weighted average interest rate at end of year		0.07	%		0.10	%		0.09	%
Average interest rate during year		0.08	%		0.13	%		0.23	%

Trust Services

We operate a full-service trust department which is primarily engaged in asset management. Investment securities and farm real estate comprise most of the $78.6 million of assets administered in 114 accounts as of December 31, 2014. We also provide institutional trust services for regional bond issuers. Trust fees collected in 2014 and 2013 totaled $291,000 and $253,000, respectively.

Subsidiary Activities

Jacksonville Savings Bank has one wholly owned subsidiary, Financial Resources Group, Inc. (“Financial Resources”), an Illinois corporation. Financial Resources operates an investment center engaged in the business of buying and selling stocks, bonds, annuities and mutual funds for its customers’ accounts. In addition, Financial Resources has historically engaged in the business of originating commercial business loans and commercial real estate loans. For the years ended December 31, 2014 and 2013, Financial Resources had gross revenues of $1.3 million and $1.2 million, respectively.

27

REGULATION AND SUPERVISION

General

Jacksonville Bancorp, Inc. is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. As such, it is registered with, subject to examination and supervision by and otherwise required to comply with the rules and, regulations of, the Federal Reserve Board. Jacksonville Bancorp, Inc., was previously regulated as a savings and loan holding company. However, in June 2013, Jacksonville Savings Bank revoked its previous election to have Jacksonville, Bancorp, Inc. regulated as a savings and loan holding company. As a result, Jacksonville Bancorp, Inc. is now regulated as a bank holding company.

Jacksonville Savings Bank is an Illinois-chartered savings bank subject to extensive regulation by the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation. Jacksonville Savings Bank’s deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation. Jacksonville Savings Bank must file reports with the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers or acquisitions with other depository institutions. There are periodic examinations of the Bank by the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corporation to review Jacksonville Savings Bank’s compliance with various regulatory requirements. Jacksonville Savings Bank is also subject to certain reserve requirements established by the Federal Reserve Board. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Illinois Department of Financial and Professional Regulation, the Federal Deposit Insurance Corporation, the Federal Reserve Board or Congress could have a material impact on the operations of Jacksonville Savings Bank.

Set forth below is a brief description of material regulatory requirements that are or will be applicable to Jacksonville Bancorp, Inc. and Jacksonville Savings Bank. The description is limited to certain material aspects of the statutes and regulations addressed, is not intended to be a complete description of such statutes and regulations and their effects on Jacksonville Bancorp, Inc. and Jacksonville Savings Bank and is qualified in its entirety by reference to the actual statutes and regulations involved.

Federal Legislation

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act has significantly changed the bank regulatory structure and is affecting the lending, investment, trading and operating activities of depository institutions and their holding companies. The Dodd-Frank Act eliminated the Office of Thrift Supervision, Jacksonville Bancorp, Inc.’s previous primary federal regulator, as of July 21, 2011.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with expansive powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets, such as Jacksonville Savings Bank, will continue to be examined for compliance with these laws by their applicable federal bank regulators. The legislation gave state attorneys general the ability to enforce applicable federal consumer protection laws and weakened federal preemption of state laws as to federal saving banks in certain respects.

28

The Dodd-Frank Act also broadened the base for Federal Deposit Insurance Corporation assessments for deposit insurance, permanently increased the maximum amount of deposit insurance to $250,000 per depositor. The Dodd-Frank Act also provided for originators of certain securitized loans to retain a percentage of the risk for transferred credits, directed the Federal Reserve Board to regulate pricing of certain debit card interchange fees, repealed restrictions on paying interest on checking accounts and contained a number of reforms related to mortgage origination. The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments.

The Dodd-Frank Act also required the Consumer Financial Protection Bureau to issue regulations requiring lenders to make a reasonable, good faith determination as to the ability of a prospective borrower to repay a residential mortgage loan. The “Ability to Repay” final rule, effective January 10, 2014, establishes a “qualified mortgage” safe harbor from liability for loans which have terms and features which are deemed to make the loan less risky.

Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of implementing regulations. Their impact on operations cannot yet fully be assessed. However, it is likely that the Dodd-Frank Act will increase regulatory burden, compliance costs and interest expense for Jacksonville Bancorp, Inc. and Jacksonville Savings Bank.

Illinois Savings Bank Regulation

As an Illinois-chartered savings bank, Jacksonville Savings Bank is subject to regulation and supervision by the Illinois Department of Financial and Professional Regulation. The Illinois Department of Financial and Professional Regulation’s regulation of Jacksonville Savings Bank covers, among other things, Jacksonville Savings Bank’s internal organization (i.e., charter, bylaws, capital requirements, transactions with directors and officers, and composition of the board of directors), as well as supervision of permissible activities and mergers and acquisitions. The lending and investment authority of Jacksonville Savings Bank is prescribed by Illinois law and regulations, as well as applicable Federal laws and regulations, and Jacksonville Savings Bank is prohibited from engaging in any activities not permitted by such laws and regulations. Jacksonville Savings Bank is required to file reports with, and is subject to periodic examinations at least once within every 18-month period by the Illinois Department of Financial and Professional Regulation. The Illinois Department of Financial and Professional Regulation also maintains extensive enforcement power to assure compliance with law and regulations and correct unsafe practices, including cease and desist orders, civil penalties and removal of directors and officers. The Illinois Department of Financial and Professional Regulation also may appoint a receiver or conservator for a savings bank under certain circumstances.

Under Illinois law, savings banks are required to maintain a minimum total capital to total assets ratio of 3%. The Illinois Department of Financial and Professional Regulation is authorized to require a savings bank to maintain a higher minimum capital level if the Illinois Department of Financial and Professional Regulation determines that the savings bank’s financial condition or history, management or earnings prospects are not adequate. If a savings bank’s total capital ratio falls below the required level, the Illinois Department of Financial and Professional Regulation may direct the savings bank to adhere to a specific written plan established by the Illinois Department of Financial and Professional Regulation to correct the savings bank’s capital deficiency, as well as a number of other restrictions on the savings bank’s operations, including a prohibition on the declaration of dividends by the savings bank’s board of directors.

Under Illinois law, a savings bank may make both secured and unsecured loans. However, loans for business, corporate, commercial or agricultural purposes, whether secured or unsecured, may not in the aggregate exceed 15% of a savings bank’s total assets unless authorized by the Illinois Department of Financial and Professional Regulation. With the prior written consent of the Illinois Department of Financial and Professional Regulation, savings banks may also engage in real estate development activities, provided that the total investment in any one project may not exceed 15% of total capital, and the total investment in all projects may not exceed 50% of total capital. The investment authority of state chartered banks is also constrained by federal law, as is explained later. The total loans and extensions of credit outstanding at one time, both direct and indirect, by a savings bank to any borrower may not exceed 25% of the savings bank’s total capital. At December 31, 2014, Jacksonville Savings Bank did not have any loans-to-one borrower which exceeded these limitations.

29

Illinois-chartered savings banks generally have all lending, investment and other powers which are possessed by federal savings banks based in Illinois. Recent federal and state legislative developments have reduced distinctions between commercial banks and savings institutions in Illinois with respect to lending and investment authority. As federal law has expanded the authority of federally chartered savings institutions to engage in activities previously reserved for commercial banks, Illinois legislation and regulations (“parity legislation”) have given Illinois-chartered savings banks, such as Jacksonville Savings Bank, the powers of federally chartered savings institutions.

The board of directors of a savings bank may declare dividends on its capital stock based upon the savings bank’s annualized net profits except (1) dividends may not be declared if the bank fails to meet its capital requirements, (2) dividends are limited to 100% of net income in that year and (3) if total capital is less than 6% of total assets, dividends are limited to 50% of net income without prior approval of the Illinois Department of Financial and Professional Regulation.

Branching and Interstate Banking. The establishment of branches by Jacksonville Savings Bank is subject to approval of the Illinois Department of Financial and Professional Regulation and Federal Deposit Insurance Corporation and geographic limits established by state laws. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), as amended, facilitates the interstate expansion and consolidation of banking organizations by permitting, among other things, (i) bank holding companies that are adequately capitalized and managed to acquire banks located in states outside their home state regardless of whether such acquisitions are authorized under the law of the host state, (ii) the interstate merger of banks, and (iii) banks to establish new branches on an interstate basis.

Investment Activities. Under federal law, all state-chartered banks and savings banks, and their subsidiaries, generally limited to activities as principal and equity investments of the type and in the amount authorized are national banks. There are certain exceptions. For example, the Federal Deposit Insurance Corporation is authorized to permit institutions to engage in state-authorized activities or investments not permitted for national banks (other than non-subsidiary equity investments) for institutions that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant risk to the deposit insurance fund. Federal law and Federal Deposit Insurance Corporation regulations impose certain quantitative and qualitative restrictions on such activities and on a bank’s dealings with a subsidiary that engages in specified activities.

Transactions with Related Parties. A savings bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated by the Board of Governors of the Federal Reserve System. An affiliate is generally a company that controls, is controlled by, or is under common control with an insured depository institution such as Jacksonville Savings Bank. Jacksonville Bancorp, Inc. is an affiliate of Jacksonville Savings Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements. In addition, applicable regulations prohibit a savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. Applicable regulators require savings banks to maintain detailed records of all transactions with affiliates.

Jacksonville Savings Bank’s authority to extend credit to its directors, executive officers and 10% or greater stockholders, as well as to entities controlled by such persons, is governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the Board of Governors of the Federal Reserve System. Among other things, these provisions require that extensions of credit to insiders:

(i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features, and

30

(ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Jacksonville Savings Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved in advance by Jacksonville Savings Bank’s board of directors. Extensions of credit to executive officers of Jacksonville Savings Bank are subject to additional restrictions based on the type of loan.

Capital Maintenance. Under Federal Deposit Insurance Corporation regulations, Jacksonville Savings Bank must maintain minimum levels of capital. The regulations established a minimum leverage capital requirement in 2014 of not less than 3% core capital to total assets for banks in the strongest financial and managerial condition, with the highest supervisory rating of the federal regulators for banks. For all other banks, the minimum leverage capital requirement was at least 4% of total assets in 2014. Core capital is composed of the sum of common stockholders’ equity, noncumulative perpetual preferred stock (including any related surplus) and minority interests in consolidated subsidiaries, minus all intangible assets (other than qualifying mortgage servicing rights and qualifying supervisory intangible core deposits), identified losses, investments in certain subsidiaries and unrealized gains (losses) on investment securities.

The Federal Deposit Insurance Corporation also requires that savings banks meet a risk-based capital standard. The risk-based capital standard required the maintenance of total capital (which is defined as core capital and supplementary capital) to risk weighted assets of 8.0% in 2014. In determining the amount of risk-weighted assets, all assets, including certain off balance sheet assets, are multiplied by a risk-weight of 0% to 200%, based on the risks the federal regulators believe are inherent in the type of asset. The components of core capital are equivalent to those discussed earlier under the leverage requirement. The components of supplementary capital currently include cumulative perpetual preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock and allowance for loan and lease losses. Allowance for loan and lease losses includible in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of capital counted toward supplementary capital cannot exceed 100% of core capital. At December 31, 2014, Jacksonville Savings Bank exceeded its applicable capital requirements.

In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the international Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), sets a uniform minimum leverage requirement at 4% of total assets, increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. The rule limits a bank’s capital distributions and certain discretionary bonus payments to executive officers if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule became effective January 1, 2015. The “capital conservation buffer” is being phased in from January 1, 2016 to January 1, 2019, when the full capital conservation buffer will be effective.

Prompt Corrective Regulatory Action. The Federal Deposit Insurance Corporation Improvement Act requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

31

The Federal Deposit Insurance Corporation may order savings banks which have insufficient capital to take corrective actions. For example, a savings bank that is categorized as “undercapitalized” would be subject to growth limitations, dividend restrictions and would be required to submit a capital restoration plan for regulator approval. A holding company that controls such a savings bank must guarantee that the savings bank complies with the restoration plan subject to certain limits. A “significantly undercapitalized” savings bank would be subject to additional restrictions. Savings banks deemed by the Federal Deposit Insurance Corporation to be “critically undercapitalized” would be subject to the appointment of a receiver or conservator within certain time frames.

At December 31, 2014, Jacksonville Savings Bank is “well capitalized” under the prompt corrective action rules.

The previously mentioned final regulatory capital rule that increases regulatory capital requirements adjusted the prompt corrective action categories accordingly effective January 1, 2015. Under the revised requirements, an institution must meet the following in order to be classified as “well capitalized”: (1) a common equity Tier 1 risk-based ratio of 6.5% (new standard); (2) a Tier 1 risk-based capital ratio of 8% (increased from 6%); (3) a total risk-based ratio of 10% (unchanged) and (4) a Tier 1 leverage ratio of 5% (unchanged).

Insurance of Deposit Accounts. Jacksonville Savings Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. Deposit accounts in Jacksonville Savings Bank are insured up to a maximum of $250,000 for each separately insured depositor.

The Federal Deposit Insurance Corporation imposes an assessment for deposit insurance on all depository institutions. Under the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s assessment rate depends upon the category to which it is assigned and certain adjustments specified by Federal Deposit Insurance Corporation regulations, with institutions deemed less risky paying lower rates. Assessment rates (inclusive of possible adjustments) currently range from 2 ½ to 45 basis points of each institution’s total assets less tangible capital. The Federal Deposit Insurance Corporation may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment rulemaking. The Federal Deposit Insurance Corporation’s current system represents a change, required by the Dodd-Frank Act, from its prior practice of basing the assessment on an institution’s volume of deposits.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation and the Federal Deposit Insurance Corporation has exercised that discretion by establishing a long term fund ratio of 2%.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of Jacksonville Savings Bank. Management cannot predict what assessment rates will be in the future.

In addition to the Federal Deposit Insurance Corporation assessments, the Financing Corporation is authorized to impose and collect, through the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the Financing Corporation are due to mature in 2017 through 2019. For the quarter ended December 31, 2014, the annualized Financing Corporation assessment was equal to 0.60 basis point of assessable assets less tangible capital.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation. Management of Jacksonville Savings Bank does not know of any practice, condition or violation that may lead to termination of our deposit insurance.

32

Enforcement

The Federal Deposit Insurance Corporation has primary federal enforcement responsibility over state savings banks. The Federal Deposit Insurance Corporation has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution or receivership or conservatorship in certain circumstances. Potential civil money penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day.

Community Reinvestment Act.Under the Community Reinvestment Act (“CRA”), as implemented by Federal Deposit Insurance Corporation regulations, a savings institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the Federal Deposit Insurance Corporation, in connection with its examination of a savings institution, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution.

Federal Home Loan Bank System. Jacksonville Savings Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Chicago, Jacksonville Savings Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2014, Jacksonville Savings Bank was in compliance with this requirement.

Federal Reserve System

Federal Reserve Board regulations require savings banks to maintain interest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At December 31, 2014, Jacksonville Savings Bank was in compliance with these reserve requirements.

Other Regulations

Interest and other charges collected or contracted for by Jacksonville Savings Bank are subject to state usury laws and federal laws concerning interest rates. Jacksonville Savings Bank’s operations are also subject to federal and state laws applicable to credit transactions, such as the:

● Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

● Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

● Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

● Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

33

● Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

● Truth in Savings Act;

● Illinois High Risk Home Loan Act, which protects borrowers who enter into high risk home loans;

● Illinois Predatory Lending Database Program, which helps provide counseling for homebuyers in connection with certain loans; and

● rules and regulations of the various federal and state agencies charged with the responsibility of implementing such laws.

The operations of Jacksonville Savings Bank also are subject to the:

● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

● Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

● The USA PATRIOT Act, which requires savings banks operating to, among other things, establish broadened anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

● The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

In June 2013, Jacksonville Bancorp, Inc. changed its status from that of a savings and loan holding company to that of a bank holding company through Jacksonville Savings Bank’s revocation of a previously-made election. By so doing, the previously applicable requirement that Jacksonville Savings Bank comply with the “Qualified Thrift Lender Test,” which limited commercial lending, was eliminated.

Jacksonville Bancorp, Inc. is now subject to examination, regulation, and periodic reporting as a bank holding company under the Bank Holding Company Act of 1956, as amended. Jacksonville Bancorp, Inc. will be required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior Federal Reserve Board approval would be required for the Jacksonville Bancorp, Inc. to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after such acquisition, it would, directly or indirectly, own or control more than 5% of any class of voting shares of the bank or bank holding company. In addition to the approval of the Federal Reserve Board, prior approval may also be necessary from other agencies having supervisory jurisdiction over the bank to be acquired before any bank acquisition can be completed.

34

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking.

The Dodd-Frank Act required the Federal Reserve Board to promulgate consolidated capital requirements for bank and savings and loan holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to their subsidiary depository institutions. Instruments such as cumulative preferred stock and trust-preferred securities, which are currently includable as Tier 1 capital, by bank holding companies within certain limits are no longer includable as Tier 1 capital, subject to certain grandfathering. The previously discussed final rule regarding regulatory capital requirements implements the Dodd-Frank Act’s directives as to holding company capital requirements.

In December 2014, legislation was passed by Congress that requires the Federal Reserve Board to revise its “Small Bank Holding Company Policy Statement” to exempt bank and savings and loan holding companies of less than $1.0 billion of consolidated assets from the consolidated capital requirements, provided that such companies meet certain other conditions such as not engaging in significant nonbanking activities. Currently, the small bank exemption applies only to bank holding companies (not savings and loan holding companies) of less than $500 million in consolidated assets. The Federal Reserve Board maintains authority to apply the consolidated capital requirements to any bank or savings and loan holding company as warranted for supervisory purposes. This legislation, when implemented by the Federal Reserve Board, may exempt Jacksonville Bancorp, Inc. from the consolidated capital requirements until its consolidated assets reach $1.0 billion.

A bank holding company is generally required to give the Federal Reserve Board prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

The Federal Reserve Board’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. The Dodd-Frank Act codified the source of strength doctrine.

35

The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to dividends in certain circumstances such as where the company’s net income for the past four quarters, net of dividends’ previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also provides for regulatory consultation prior to a holding company redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses or redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of a quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies could affect the ability of Jacksonville Bancorp, Inc. to pay dividends, repurchase shares of its stock or otherwise engage in capital distributions.

The status of Jacksonville Bancorp, Inc. as a registered bank holding company under the Bank Holding Company Act does not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as Jacksonville Bancorp, Inc. unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the company’s directors, or a determination by the regulator that the acquiror has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, is the case with Jacksonville Bancorp, Inc., the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.

TAXATION

Federal Taxation

General. Jacksonville Bancorp, Inc. and Jacksonville Savings Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Jacksonville Bancorp, Inc. or Jacksonville Savings Bank.

36

Method of Accounting. For federal income tax purposes, Jacksonville Bancorp, Inc. currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal and state income tax returns.

Bad Debt Reserves. Historically, Jacksonville Savings Bank has been subject to special provisions in the tax law regarding allowable tax bad debt deductions and related reserves. Tax law changes were enacted in 1996, pursuant to the Small Business Protection Act of 1996 (the “1996 Act”), that repealed the percentage of taxable income method by qualifying savings institutions to determine deductions for bad debts. This change was effective for taxable years beginning after 1995 and required the recapture of “applicable excess reserves” of a savings institution, of which Jacksonville Savings Bank is, into taxable income over a six year period. The applicable excess reserve is generally the excess of its bad debt reserves as of the close of its last taxable year beginning before January 1, 1996 over the balance of such reserves as of the close of its last taxable year beginning before January 1, 1988.

Currently, Jacksonville Savings Bank utilizes the experience method to account for bad debt deductions for income tax purposes as defined in Internal Revenue Code Section 585. Under this method, the annual deduction is the amount necessary to increase the balance of the reserve at the close of the taxable year to the greater of the amount which bears the same ratio to loans outstanding at the close of the taxable year as the total net charge offs sustained during the current and preceding five taxable years bear to the sum of the loans outstanding at the close of those six years or the lower of (i) the balance in the reserve account at the close of the base year, (the last taxable year beginning before 1988), or (ii) if the amount of outstanding loans at the close of the taxable year is less than the amount of outstanding loans at the close of the base year, the amount which bears the same ratio to outstanding loans at the close of the taxable year as the balance of the reserve at the close of the base year bears to the amount of outstanding loans at the close of the base year.

Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income if Jacksonville Savings Bank failed to meet certain thrift asset and definitional tests.

At December 31, 2014, Jacksonville Savings Bank’s total federal pre-base year reserve was approximately $2.6 million. However, under current law, base-year reserves remain subject to recapture if Jacksonville Savings Bank makes certain non-dividend distributions, repurchases any of its stock, pays dividends in excess of tax earnings and profits, or ceases to maintain a bank charter.

Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended (the “Code”), imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of AMT may be used as credits against regular tax liabilities in future years.

Net Operating Loss Carryovers. Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. However, as a result of recent legislation, subject to certain limitations, the carryback period for net operating losses incurred in 2008 or 2009 (but not both years) has been expanded to five years. At December 31, 2014, Jacksonville Bancorp, Inc. had no federal tax loss carryforward. The Company has an Illinois carryforward of approximately $99,000 at December 31, 2014. Illinois legislation suspended the use of these loss carryforwards for tax year 2011. For tax years 2012 and 2013, the State of Illinois allowed up to $100,000 of loss to be utilized in each year. There is no limitation for tax year 2014. Three years have been added to the expiration of said net loss years.

Corporate Dividends-Received Deduction. Jacksonville Bancorp, Inc. may exclude from its federal taxable income 100% of dividends received from Jacksonville Savings Bank as a wholly owned subsidiary. The corporate dividends received deduction is 80% when the dividend is received from a corporation having at least 20% of its stock owned by the recipient corporation. A 70% dividends-received deduction is available for dividends received from corporations owning less than 20% by the recipient corporation.

37

State Taxation

The State of Illinois imposes a tax on the Illinois taxable income of corporations, including savings banks, at the rate of 9.50%.

Illinois taxable income is generally similar to federal taxable income except that interest from state and municipal obligations is taxable and no deduction is allowed for state income taxes. However, a deduction is allowed for certain U.S. Government and agency obligations. Jacksonville Savings Bank’s state income tax returns have not been audited by Illinois tax authorities during the past five years. As a Maryland business corporation, Jacksonville Bancorp, Inc. is required to file annual returns and pay annual fees to the State of Maryland.

Personnel

As of December 31, 2014, Jacksonville Savings Bank and its subsidiary had a total of 87 full-time and 15 part-time employees. None of Jacksonville Savings Bank’s employees is represented by a collective bargaining group. Management believes that it has good working relations with its employees.

Availability of Annual Report on Form 10-K

Our Annual Report on Form 10-K is available on our website at www.Jacksonvillesavings.com. Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K.

ITEM 1A.               Risk Factors

In addition to risk disclosed elsewhere in this Annual Report, the following are risks associated with our business and operations.

Non-residential loans increase our exposure to credit risks.

Over the last several years, we have increased our non-residential lending in order to improve the average yield of our interest-earning assets and reduce the average maturity of our loan portfolio. At December 31, 2014, our portfolio of commercial real estate loans totaled $40.5 million, or 21.9% of our total loans, compared to $38.9 million, or 21.5% of our total loans at December 31, 2013. At December 31, 2014, our portfolio of agricultural real estate loans totaled $40.1 million, or 21.7% of our total loans, compared to $35.0 million, or 19.4% of our total loans at December 31, 2013. Our portfolio of agricultural business loans totaled $11.8 million, or 6.4% of our total loans at December 31, 2014, compared to $10.6 million, or 5.9% of our total loans at December 31, 2013. Our portfolio of commercial business loans totaled $26.8 million, or 14.5% of our total loans at December 31, 2014, compared to $29.9 million, or 16.6% of our total loans at December 31, 2013. These business loans are typically secured by equipment or inventory. It is difficult to assess the future performance of our non-residential loan portfolio due to the recent origination or purchase of many of these loans. These loans may have delinquency or charge-off rates above our historical experience, which could adversely affect our future performance.

These loans generally have more risk than one- to four-family residential mortgage loans. Because the repayment of commercial and agricultural real estate loans and commercial and agricultural business loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of these loans can be affected by adverse conditions in the real estate market or the local economy. Loans secured by agricultural real estate and agricultural businesses which rely on the successful operation of a farm can be adversely affected by fluctuations in crop prices and changes in weather conditions. These developments may result in smaller harvests and less income for farmers which may adversely impact such borrower’s ability to repay a loan. Many of our borrowers also have more than one commercial and agricultural real estate loan or commercial and agricultural business loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Finally, if we foreclose on a commercial and agricultural real estate or commercial loan, our holding period for the collateral, if any, typically is longer than for one- to four-family residential mortgage loans because there are fewer potential purchasers of the collateral. Because we plan to continue to increase our originations of commercial and agricultural real estate and commercial loans, it may be necessary to increase the level of our allowance for loan losses because of the increased risk characteristics associated with these types of loans. Any such increase to our allowance for loan losses would adversely affect our earnings.

38

Our loan portfolio has significant concentrations among a small number of borrowers and, as a result, we could be adversely affected by difficulties experienced by a small number of borrowers.

As a result of large loan concentrations among a relatively small number of borrowers, we could incur significant losses if these borrowers are unable to repay their loans. At December 31, 2014, we had 28 borrowers with aggregate loan balances of $75.0 million, which represented 39.9% of our total loan portfolio at that date. These loans are primarily commercial and agricultural real estate loans and commercial and agricultural business loans, including purchased loan participations. Aggregate loan balances to these borrowers ranged from $1.0 million to $8.2 million for our largest borrower. While we seek to control our risk and minimize losses on these large loan concentrations, if one or more of our large borrowers were to default on their loans we could incur significant losses.

A portion of our loan portfolio consists of loan participations secured by properties outside our market area. Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.

We occasionally purchase commercial real estate and commercial business loan participations secured by properties outside our market area in which we are not the lead lender. We have purchased loan participations secured by properties in diverse geographic areas such as in Nebraska, Missouri, Minnesota, North Dakota, Wisconsin, Iowa, and Tennessee. These participations are secured by various types of collateral such as office buildings, hotels, and condominium developments. Loan participations may have a higher risk of loss than loans we originate because we rely on the lead lender to monitor the performance of the loan. Moreover, our decision regarding the classification of a loan participation and loan loss provisions associated with a loan participation are made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate. At December 31, 2014, our loan participations totaled $14.1 million, or 7.5% of our loan portfolio. At December 31, 2014, commercial real estate loan participations outside our market area totaled $6.1 million, or 15.1% of the commercial real estate loan portfolio, and commercial business loan participations outside our market area totaled $1.2 million, or 4.5% of the commercial business loan portfolio. At December 31, 2014, one loan participation located in central Illinois with a balance of $794,000 was delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.

If the allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which may have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. If our assumptions are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to the allowance. Additions to the allowance would decrease our net income. At December 31, 2014, our allowance for loan losses was $3.0 million, or 1.57% of total loans and 130.57% of non-performing loans, compared to $3.4 million, or 1.85% of total loans and 191.14% of non-performing loans, at December 31, 2013.

In determining the amount of the allowance for loan losses, management reviews delinquent loans for potential impairments in our carrying value. Additionally, we apply a factor to the loan portfolio principally based on historical loss experience applied to the composition of the loan portfolio and integrated with management’s perception of risk in the economy. Since we use assumptions regarding individual loans and the economy, the current allowance for loan losses may not be sufficient to cover actual loan losses, and increases in the allowance may be necessary. Consequently, we may need to significantly increase the provision for losses on loans, particularly if one or more of our larger loans or credit relationships becomes delinquent or if we expand non-residential lending such as commercial and agricultural real estate loans. As we continue to increase our originations of such loans, increased provisions for loan losses may be necessary, which would decrease our earnings.

39

Bank regulators periodically review our allowance for loan losses and may require an increase to the provision for loan losses or further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our financial condition and results of operations.

If our non-performing assets increase, our earnings will suffer.

At December 31, 2014, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent, and foreclosed real estate assets) totaled $2.4 million, which is an increase of $375,000 from our non-performing assets at December 31, 2013. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. We must reserve for probable losses which results in additional provisions for loan losses. As circumstances warrant, we must write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, we have legal fees associated with the resolution of problem assets as well as additional costs such as taxes, insurance and maintenance related to our other real estate owned. The resolution of non-performing assets also requires the active involvement of management, which can adversely affect the amount of time we devote to the income-producing activities of Jacksonville Savings Bank. If our estimate of the allowance for loan losses is inadequate, we will have to increase the allowance accordingly.

We could experience further impairment losses on the value of our mortgage servicing rights.

A significant aspect of our business is the origination of one- to four-family residential mortgage loans for sale on a servicing retained basis. The fees we receive for servicing such loans are referred to as mortgage servicing rights. At December 31, 2014, the unpaid principal balance of mortgage loans serviced for others was $137.9 million. Mortgage servicing rights fair values are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. If the fair value of our mortgage servicing rights is less than the carrying value of such rights, we may be required to recognize an impairment loss. Such impairment can occur due to changes in interest rates, loan performance or prepayment of the underlying mortgage. We did not recognize any impairment during 2014.

Changes in interest rates could adversely affect our financial condition and results of operations.

Our financial condition and results of operations are significantly affected by changes in interest rates. Our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings. Because our interest-bearing liabilities generally reprice or mature more quickly than our interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income.

Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. Also, increases in interest rates may extend the life of fixed-rate assets, which would restrict our ability to reinvest in higher yielding alternatives, and may result in customers withdrawing certificates of deposit early so long as the early withdrawal penalty is less than the interest they could receive from higher interest rates.

40

Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2014, the fair value of our portfolio of investment securities and mortgage-backed securities totaled $96.7 million. Gross unrealized losses on these securities totaled $879,000 at December 31, 2014.

Any rise in market interest rates may result in increased payments for borrowers who have adjustable rate mortgage loans, thereby increasing the possibility of default.

If we are unable to borrow funds, we may not be able to meet the cash flow requirements of our depositors, creditors, and borrowers, or the operating cash needed to fund corporate expansion and other corporate activities.

Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. Our liquidity is used to make loans and to repay deposit liabilities as they become due or are demanded by customers. Liquidity policies and procedures are established by the board, with operating limits set based upon the ratio of loans to deposits and percentage of assets funded with non-core or wholesale funding. We regularly monitor our overall liquidity position to ensure various alternative strategies exist to cover unanticipated events that could affect liquidity. We also establish policies and monitor guidelines to diversify our wholesale funding sources to avoid concentrations in any one market source. Wholesale funding sources include federal funds purchased, securities sold under repurchase agreements, non-core deposits, and debt. Jacksonville Savings Bank is a member of the Federal Home Loan Bank of Chicago, which provides funding through advances to members that are collateralized with mortgage-related assets.

We maintain a portfolio of available-for-sale securities that can be used as a secondary source of liquidity. There are other sources of liquidity available to us should they be needed. These sources include the sale of loans, the ability to acquire national market, non-core deposits, issuance of additional collateralized borrowings such as Federal Home Loan Bank advances and federal funds purchased, and the issuance of preferred or common securities.

If our stock price remains below book value, we will continue to evaluate our goodwill balances for impairment quarterly, and if the values of our businesses have declined, we could recognize an impairment charge for our goodwill.

During 2014, management reviewed goodwill for impairment on a quarterly basis. Management’s analysis concluded that our goodwill was not impaired as of December 31, 2014. It is possible that the assumptions and conclusions regarding the valuation of our business could change adversely, which could result in the recognition of impairment for our goodwill, which could have a material adverse effect on our financial condition and results of operations.

41

Our business may be adversely affected by a decline in the national and local economies.

Our operations are significantly affected by national and local economic conditions. Substantially all of our loans, excluding purchased loan participations, are to businesses and individuals in Cass, Morgan, Macoupin and Montgomery Counties, Illinois and surrounding communities. All of our branches and most of our deposit customers are also located in these counties. A decline in the economy both nationally and in our market area could have a material adverse effect on our business, financial condition, results of operations and prospects. In particular, if these counties have experienced declines in real estate values, increased foreclosures and higher unemployment rates.

A deterioration in economic conditions in our market area could result in the following consequences, any of which could have a material adverse effect on our business, financial condition and results of operations:

● demand for our products and services may decline;

● loan delinquencies, problem assets and foreclosures may increase;

● collateral for our loans may continue to decline in value; and

● the amount of our low-cost or non-interest bearing deposits may decrease.

Strong competition may limit growth and profitability.

Competition in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, government sponsored entities, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than we have and may offer certain services that we do not or cannot provide. Our profitability depends upon our ability to successfully compete in our market areas.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by the Illinois Department of Financial and Professional Regulation, the Federal Reserve Board and the Federal Deposit Insurance Corporation. Such regulators govern the activities in which we may engage, primarily for the protection of depositors and the Deposit Insurance Fund. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s allowance for loan losses and determine the level of deposit insurance premiums assessed. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance premiums, could have a material impact on our operations. Because our business is highly regulated, the laws and applicable regulations are subject to frequent change. Any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts. In addition, there have been proposals made by members of Congress that would reduce the amount delinquent borrowers are otherwise contractually obligated to pay on their mortgage loans and limit the ability of lenders to foreclose on mortgage collateral.

42

The potential exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards. Moreover, bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders requiring capital ratios in excess of regulatory requirements. Bank regulatory agencies, such as the Illinois Department of Financial and Professional Regulation, the Federal Reserve Board and the Federal Deposit Insurance Corporation, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws and regulations may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws and regulations may significantly affect the markets in which we do business, the markets for and value of our loans and investments, the fees we can charge, and our ongoing operations, costs and profitability. Legislative proposals limiting our rights as a creditor may result in credit losses or increased expense in pursuing our remedies as a creditor.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures to prevent such damage, there can be no assurance that these security measures will be successful. In addition, advances in computer capabilities, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our financial condition and results of operations.

We will become subject to more stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or constrain us from paying dividends or repurchasing shares.

In July 2013, the FDIC approved a new rule that will substantially amend the regulatory risk-based capital rules applicable to Jacksonville Savings Bank. The final rule implements the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.

The final rule includes new minimum risk-based capital and leverage ratios, which will be effective for Jacksonville Savings Bank on January 1, 2015, and revised the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The final rule also establishes a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

The application of more stringent capital requirements for Jacksonville Savings Bank could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions such as the inability to pay dividends or repurchase shares if we were to be unable to comply with such requirements.

43

Income from secondary mortgage market operations is volatile, and we may incur losses with respect to our secondary mortgage market operations that could negatively affect our earnings.

A key component of our strategy is to sell in the secondary market the longer term, conforming fixed-rate residential mortgage loans that we originate, earning non-interest income in the form of gains on sale. When interest rates rise, the demand for mortgage loans tend to fall and may reduce the number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand. Although we sell, and intend to continue selling, most loans in the secondary market with limited or no recourse, we are required, and will continue to be required, to give customary representations and warranties to the buyers relating to compliance with applicable law. If we breach those representations and warranties, the buyers will be able to require us to repurchase the loans and we may incur a loss on the repurchase.

New regulations could restrict our ability to originate and sell mortgage loans.

The Consumer Financial Protection Bureau has issued a rule which became effective in January, 2014 designed to clarify for lenders how they can avoid monetary damages under the Dodd-Frank Act, which would hold lenders accountable for ensuring a borrower’s ability to repay a mortgage. Loans that meet this “qualified mortgage“ definition will be presumed to have complied with the new ability-to-repay standard. Under the Consumer Financial Protection Bureau’s rule, a “qualified mortgage” loan must not contain certain specified features, including:

● excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans);

● interest-only payments;

● negative-amortization; and

● terms longer than 30 years.

Also, to qualify as a “qualified mortgage,” a borrower’s total monthly debt-to-income ratio may not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments. The Consumer Financial Protection Bureau’s rule on qualified mortgages could limit our ability or desire to make certain types of loans or loans to certain borrowers, or could make it more expensive/and or time consuming to make these loans, which could limit our growth or profitability.

Our stock price may be volatile due to limited trading volume.

Our common stock is traded on the NASDAQ Capital Market. However, the average daily trading volume in Jacksonville Bancorp, Inc.’s common stock has been relatively small, averaging less than 1,000 shares per day during 2014. As a result, trades involving a relatively small number of shares may have a significant effect on the market price of the common stock, and it may be difficult for investors to acquire or dispose of large blocks of stock without significantly affecting the market price.

ITEM 1B.               Unresolved Staff Comments

Not applicable.

44

ITEM 2.                  Properties

We conduct our business through our main office and two branch offices located in Jacksonville, and branch offices located in Virden, Litchfield, and Chapin, Illinois. The following table sets forth certain information concerning the main office and each branch office at December 31, 2014. At December 31, 2014, our premises and equipment had an aggregate net book value of approximately $4.9 million. We believe that our branch facilities are adequate to meet the present and immediately foreseeable needs. All facilities are owned.

Location	Year Occupied	Net Book Value at December 31, 2014
		(In Thousands)
Main Office
1211 West Morton Avenue
Jacksonville, Illinois	1994	$	3,475
Branch Office (1)
225 West State Street
Jacksonville, Illinois	1961		244
Branch Office (1)
903 South Main
Jacksonville, Illinois	1989		132
Branch Office
501 North State Street
Litchfield, Illinois	1997		469
Branch Office
100 North Dye
Virden, Illinois	1986		159
Branch Office
510 Superior
Chapin, Illinois	2000		467

(1)   Transaction facilities only.

ITEM 3.                  Legal Proceedings

At December 31, 2014, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which management believes are immaterial to our financial condition, our results of operations and our cash flows.

ITEM 4.                  Mine Safety Disclosures.

None.

45

PART II

ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The “Stockholder Information” section of our annual report to stockholders for the fiscal year ended December 31, 2014 (the “2014 Annual Report to Stockholders”) is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

During the fourth quarter of 2014, the Company repurchased shares of its common stock as follows:

Period	Number of shares purchased	Average purchase price paid per share	Total shares purchased	Maximum number of shares that may be purchased under the repurchase program (1)
Oct 1 – Oct 31	—	—	—	61,018
Nov 1 – Nov 30	11,760	21.50	11,760	49,258
Dec 1 – Dec 31	7,500	22.00	7,500	41,758
Total	19,260	21.69	19,260	41,758

(1) On October 16, 2013, the Company announced the adoption of a stock repurchase program under which the Company could repurchase up to 92,018 shares of its common stock, or approximately 5% of the then current outstanding shares. The program provided for repurchases through open market or private transactions, through block trades, and pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The Company has completed the purchase of 50,260 shares permitted under the program.

Set forth below is information as of December 31, 2014 regarding equity compensation plans. The plan that has been approved by the stockholders is the 2012 Stock Option Plan. Other than our Employee Stock Ownership Plan, we do not have any equity compensation plans that were not approved by our stockholders.

Plan	Number of securities to be issued upon exercise of outstanding options and rights	Weighted average exercise price	Number of securities remaining available for issuance under plan
Equity compensation plans approved by stockholders	85,835	15.65	1,785
Equity compensation plans not approved by stockholders	—	—	—
Total	85,835	15.65	1,785

ITEM 6.Selected Financial Data

The “Selected Consolidated Financial Information” section of the 2014 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2014 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

46

ITEM 7A.Quantitative and Qualitative Disclosures about Market Risk

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2014 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

ITEM 8.Financial Statements and Supplementary Data

The material identified in Item 15(a)(1) hereof is incorporated herein by reference.

ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.Controls and Procedures

(a)           Evaluation of disclosure controls and procedures.

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined by the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)           Management’s Report on Internal Control over Financial Reporting

The management of Jacksonville Bancorp, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (1992). Based on that assessment, management concludes that, as of December 31, 2014, the Company’s internal control over financial reporting is effective.

47

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in the annual report.

(c)           Changes in internal controls.

There were no significant changes made in our internal control over financial reporting during the quarter ended December 31, 2014 that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 9B.Other Information

None.

PART III

ITEM 10.Directors, Executive Officers and Corporate Governance

Information concerning our directors and certain officers is incorporated by reference hereunder in the Proxy Statement for the 2015 Annual Meeting.

ITEM 11.Executive Compensation

Information with respect to management compensation required under this item is incorporated by reference hereunder in the Proxy Statement for the 2015 Annual Meeting.

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required under this item is incorporated by reference to the Proxy Statement for the 2015 Annual Meeting.

ITEM 13.Certain Relationships and Related Transactions and Director Independence

Information required under this item is incorporated by reference to the Proxy Statement for the 2015 Annual Meeting.

ITEM 14.Principal Accountant Fees and Services

Information required under this item is incorporated by reference to the Proxy Statement for the 2015 Annual Meeting.

PART IV

ITEM 15.Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

The documents filed as a part of this Form 10-K are:

(A) Report of Independent Registered Public Accounting Firm;

(B) Consolidated Balance Sheets - December 31, 2014 and 2013;

48

(C) Consolidated Statements of Income - years ended December 31, 2014 and 2013;

(D) Consolidated Statements of Comprehensive Income – years ended December 31, 2014 and 2013;

(E) Consolidated Statements of Stockholders’ Equity - years ended December 31, 2014 and 2013;

(F) Consolidated Statements of Cash Flows - years ended December 31, 2014 and 2013; and

(G) Notes to Consolidated Financial Statements.

(a)(2)       Financial Statement Schedules

All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Notes to Consolidated Financial Statements.

(a)(3)       Exhibits

3.1	Articles of Incorporation(1)
3.2	Bylaws(2)
4	Stock Certificate of Jacksonville Bancorp, Inc.(3)
10.1	Employment Agreement between Jacksonville Savings Bank and Andrew F. Applebee(4)
10.2	Employment Agreement between Jacksonville Savings Bank and Richard A. Foss(5)
10.3	Employment Agreement between Jacksonville Savings Bank and John Williams(6)
10.4	Change in Control Agreement between Jacksonville Savings Bank and Diana S. Tone(7)
10.5	Amendmentsto the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock Option Plans(8)
10.6	Jacksonville Savings Bank Supplemental Life Insurance Plan(9)
10.7	Amended and Restated Jacksonville Savings Bank Salary Continuation Plan 1(10)
10.8	Jacksonville Savings Bank Long-Term Deferred Compensation Plan, as amended(11)
10.9	Deferred Compensation Agreement between Chapin State Bank and John C. Williams(12)
10.10	Director’s Compensation Agreement between Chapin State Bank and John C. Williams(13)
10.11	Deferred Compensation Agreement between Chapin State Bank and Dean H. Hess(14)
10.12	Director’s Compensation Agreement between Chapin State Bank and Dean H. Hess(15)
10.13	Jacksonville Bancorp 2012 Stock Option Plan(16)
13	2014 Annual Report to Stockholders
14	Code of Ethics(17)
21	Subsidiaries
23	Consent of BKD LLP to incorporate financial statements into Registration Statements on Form S-8
31.1	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(2)	Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(3)	Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

49

(4)	Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2009 (File No. 000-49792).
(5)	Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).
(6)	Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).
(7)	Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(8)	Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(9)	Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(10)	Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2012 (File No. 001-34821).
(11)	Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(12)	Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(13)	Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(14)	Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(15)	Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(16)	Incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 20, 2013 (File No. 333-186754).
(17)	Incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2004 (File No. 000-49792).

50

Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Jacksonville Bancorp, Inc.
Date: March 13, 2015	By:	/s/ Richard A. Foss
		Richard A. Foss, President
		and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:	/s/ Richard A. Foss	By:	/s/ Andrew F. Applebee
	Richard A. Foss, President,		Andrew F. Applebee, Chairman of the Board
	Chief Executive Officer and Director
Date: March 13, 2015		Date: March 13, 2015
By:	/s/ Diana S. Tone	By:	/s/ Dean H. Hess
	Diana S. Tone		Dean H. Hess, Director
	Chief Financial Officer
Date: March 13, 2015		Date: March 13, 2015
By:	/s/ John L. Eyth	By:	/s/ Peggy S. Davidsmeyer
	John L. Eyth, Director		Peggy S. Davidsmeyer, Director
Date: March 13, 2015		Date: March 13, 2015
By:	/s/ Harmon B. Deal, III	By:	/s/ John C. Williams
	HarmonB. Deal, III, Director		John C. Williams, Director
			Senior Vice President and Trust Officer
Date: March 13, 2015		Date: March 13, 2015
By:	/s/ John M. Buchanan
	John M. Buchanan, Director
Date: March 13, 2015

51

EXHIBIT INDEX

3.1	Articles of Incorporation(1)
3.2	Bylaws(2)
4	Stock Certificate of Jacksonville Bancorp, Inc.(3)
10.1	Employment Agreement between Jacksonville Savings Bank and Andrew F. Applebee(4)
10.2	Employment Agreement between Jacksonville Savings Bank and Richard A. Foss(5)
10.3	Employment Agreement between Jacksonville Savings Bank and John Williams(6)
10.4	Change in Control Agreement between Jacksonville Savings Bank and Diana S. Tone(7)
10.5	Amendmentsto the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock Option Plans(8)
10.6	Jacksonville Savings Bank Supplemental Life Insurance Plan(9)
10.7	Amended and Restated Jacksonville Savings Bank Salary Continuation Plan 1(10)
10.8	Jacksonville Savings Bank Long-Term Deferred Compensation Plan, as amended(11)
10.9	Deferred Compensation Agreement between Chapin State Bank and John C. Williams(12)
10.10	Director’s Compensation Agreement between Chapin State Bank and John C. Williams(13)
10.11	Deferred Compensation Agreement between Chapin State Bank and Dean H. Hess(14)
10.12	Director’s Compensation Agreement between Chapin State Bank and Dean H. Hess(15)
10.13	Jacksonville Bancorp 2012 Stock Option Plan(16)
13	2014 Annual Report to Stockholders
14	Code of Ethics(17)
21	Subsidiaries
23	Consent of BKD LLP to incorporate financial statements into Registration Statements on Form S-8
31.1	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(2)	Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(3)	Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(4)	Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2009 (File No. 000-49792).
(5)	Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).
(6)	Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).
(7)	Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(8)	Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(9)	Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(10)	Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2012 (File No. 001-34821).
(11)	Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(12)	Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

52

(13)	Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(14)	Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(15)	Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).
(16)	Incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 20, 2013 (File No. 333-186754).
(17)	Incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2004 (File No. 000-49792).

53

EX-13

Exhibit 13

Jacksonville Bancorp, Inc.

2014 Annual Report

To Our Shareholders:

Thanks to a continued low interest rate environment, 2014 can be declared another good year for Jacksonville Bancorp, Inc. We once again achieved earnings results significantly better than the average of our peer group. Your company posted net income of nearly $3.0 million and achieved a return on assets just under 1.00% at 0.96%.

One of the financial highlights of 2014 was a $4 million growth in our loan portfolio, particularly considering the current environment of low loan demand in our markets. We are proud to have an experienced group of lenders, some of whom are now starting to serve the third generation of the same family. Research shows the millennial generation prefers to conduct business with individuals who serve as financial advisors not just providers of service. The level of expertise of our lenders bodes well for serving the important millennial market in the future.

Maximizing non-interest income and minimizing non-interest expense continue to be critical factors in attaining solid bottom line results. We fared well in both areas in 2014. Our trust and brokerage operations continued to grow and provide considerable non-interest income. Both departments are key components of our ability to provide customers the financial products they will need throughout their lifetimes.

We made strides in controlling non-interest expense in 2014. An in-depth internal marketing campaign was successful in encouraging customers to enroll in eStatements. eStatements give our customers access to their account information 24 hours a day every day of the year. They also benefit the environment and reduce expense for the bank.

As the use of debit cards continues to expand, effectively managing the bank’s electronic funds transfer program can have an impact on financial results. In 2014, we renegotiated our contracts to prepare for the implementation of EMV/chip cards in 2015 and began realizing an approximately $5,000 reduction in monthly expense. As a result of the renegotiated contracts, over the five year term the combined effect of reduced expense and increased income is estimated to be well over $500,000.

Technology is a significant expense for all financial companies and wisely spending technology dollars is always a challenge. In 2014, we completed a project to upgrade the bank’s network and data lines to improve line speed and provide backup connections with separate vendors. It was money well spent and has benefitted our customers by enabling our staff to serve them more expeditiously.

We are pleased to report several additional stock repurchases were made in 2014 under our previously announced 2013 buy-back program. We continue to believe the program is an effective use of capital. With it and all of our ongoing efforts to manage your company in the best way possible, we constantly strive to enhance shareholder value. Thank you for your continued support.

Sincerely, 

Andrew F. Applebee                                                            Richard A. Foss

Chairman of the Board                                                         President and CEO

Table of Contents
	Page
Business of the Company	1
Selected Consolidated Financial Information	2
Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Report of Independent Registered Public Accounting Firm	20
Consolidated Financial Statements	21
Notes to Consolidated Financial Statements	29
Common Stock Information	83
Directors and Executive Officers	84
Corporate Information	85
Annual Meeting	85

Business of the Company

Jacksonville Bancorp, Inc. (the “Company”) is a Maryland corporation.  On July 14, 2010, Jacksonville Bancorp, Inc. completed its conversion from the mutual holding company structure and the related public offering and is now a stock holding company that is fully owned by the public.  The Company owns 100% of Jacksonville Savings Bank.

Jacksonville Savings Bank is an Illinois-chartered savings bank headquartered in Jacksonville, Illinois.  We conduct our business from our main office and five branches, two of which are located in Jacksonville and one of which is located in each of the following Illinois communities: Virden, Litchfield, and Chapin.  We were originally chartered in 1916 as an Illinois-chartered mutual savings and loan association and converted to a mutual savings bank in 1992.  In 1995, Jacksonville Savings Bank converted to an Illinois-chartered stock savings bank and reorganized into the mutual holding company form of organization.  We have been a member of the Federal Home Loan Bank System since 1932.  Our deposits are insured by the Federal Deposit Insurance Corporation.

We are a community-oriented savings bank engaged primarily in the business of attracting retail deposits from the general public in our market area and using such funds, together with borrowings and funds from other sources, to originate mortgage loans secured by one-to-four family residential real estate, commercial and agricultural real estate and home equity loans. We also originate commercial and agricultural business loans and consumer loans.  Additionally, we invest in United States Government agency securities, bank-qualified, general obligation municipal issues, and mortgage-backed securities issued or guaranteed by the United States Government or enterprises thereof.  We maintain a portion of our assets in liquid investments, such as overnight funds at the Federal Home Loan Bank.

Our principal sources of funds are customer deposits, proceeds from the sale of loans, short-term borrowings, funds received from the repayment and prepayment of loans and mortgage-backed securities, and the sale, call, or maturity of investment securities.  Principal sources of income are interest income on loans and investments, sales of loans and securities, service charges, commissions, card interchange income and other fees.  Our principal expenses are interest paid on deposits, employee compensation and benefits, occupancy and equipment expense, and data processing and telecommunications expense.

We operate a full service trust department and an investment center.  The investment center is operated through Financial Resources Group, Inc., Jacksonville Savings Bank’s wholly-owned subsidiary.

1

Selected Consolidated Financial Information

The following tables set forth certain information concerning the consolidated financial position, consolidated data from operations and performance ratios of the Company at the dates and for the years indicated.  Selected quarterly financial data for each of the last two years is set forth at Note 20 to the Consolidated Financial Statements.

	At December 31,
	2014		2013		2012		2011		2010
	(In thousands)
Selected Financial Condition Data:
Total assets	$	311,925	$	318,419	$	321,446	$	307,289	$	301,481
Cash and cash equivalents		9,612		6,099		7,294		11,388		8,943
Investment securities		55,265		60,639		63,431		62,258		52,872
Mortgage-backed securities		41,420		48,346		51,956		40,364		41,995
Loans, net(1)		184,954		180,902		174,465		171,312		176,722
Federal Home Loan Bank of Chicago stock, at cost		1,114		1,114		1,114		1,114		1,114
Foreclosed assets, net		177		282		137		435		460
Bank owned life insurance		6,913		6,815		6,613		4,403		4,239
Deposits		245,942		251,738		258,521		254,240		256,424
Federal Home Loan Bank of Chicago advances		5,000		10,800		700		—		—
Short-term borrowings		8,822		8,810		12,041		6,518		4,018
Stockholders’ equity		45,016		41,139		44,120		41,165		35,678

	For the Years Ended December 31,
	2014		2013		2012		2011		2010
	(In thousands, except per share amounts)
Selected Operating Data:
Interest income	$	11,892	$	12,078	$	12,791	$	13,867	$	13,529
Interest expense		1,451		1,782		2,303		2,879		3,953
Net interest income		10,441		10,296		10,488		10,988		9,576
Provision for loan losses		240		170		490		625		1,725
Net interest income after provision for loan losses		10,201		10,126		9,998		10,363		7,851
Noninterest income		3,919		4,443		4,882		3,996		4,197
Noninterest expense		10,213		10,167		9,976		9,814		9,576
Income before income tax		3,907		4,402		4,904		4,545		2,472
Provision for income taxes		934		1,188		1,337		1,259		406
Net income	$	2,973	$	3,214	$	3,567	$	3,286	$	2,066
Earnings per share:
Basic	$	1.66	$	1.73	$	1.89	$	1.74	$	1.09
Diluted	$	1.65	$	1.73	$	1.89	$	1.74	$	1.08
Dividends per share	$	0.32	$	0.31	$	0.40	$	0.30	$	0.30

(1)Includes loans held for sale of $236,000, $262,000, $712,000, $447,000, and $280,000, at December 31, 2014, 2013, 2012, 2011, and 2010, respectively.

2

	At or For the Years Ended December 31,
	2014			2013			2012			2011			2010
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets (ratio of net income to average total assets)		0.96	%		1.02	%		1.14	%		1.08	%		0.70	%
Return on average equity (ratio of net income to average equity)		6.80	%		7.51	%		8.25	%		8.57	%		6.77	%
Interest rate spread(1)		3.48	%		3.38	%		3.46	%		3.68	%		3.30	%
Net interest margin(2)		3.61	%		3.51	%		3.62	%		3.87	%		3.51	%
Efficiency ratio(3)		71.12	%		68.98	%		64.90	%		65.50	%		69.53	%
Dividend pay-out ratio		19.20	%		17.60	%		21.00	%		17.14	%		20.37	%
Non-interest expense to average total assets		3.29	%		3.23	%		3.20	%		3.23	%		3.25	%
Average interest-earning assets to average interest-bearing liabilities		124.52	%		121.63	%		119.76	%		118.84	%		114.78	%
Average equity to average total assets		14.08	%		13.58	%		13.86	%		12.60	%		10.37	%
Asset Quality Ratios:
Nonperforming assets to total assets		0.78	%		0.65	%		0.73	%		0.92	%		1.19	%
Nonperforming loans to total loans		1.21	%		0.97	%		1.25	%		1.38	%		1.75	%
Allowance for loan losses to nonperforming loans		130.57	%		191.14	%		150.85	%		137.33	%		94.56	%
Allowance for loan losses to gross loans(4)		1.57	%		1.85	%		1.88	%		1.89	%		1.65	%
Capital Ratios (Bank):
Total capital (to risk-weighted assets)		18.81	%		18.15	%		17.72	%		16.67	%		14.77	%
Tier I capital (to risk-weighted assets)		17.56	%		16.89	%		16.46	%		15.42	%		13.52	%
Tier I capital (to total assets)		12.25	%		11.51	%		10.89	%		10.35	%		9.25	%
Other Data:
Number of offices		6			6			7			7			7
Full time equivalent employees		96			98			104			104			104

(1) The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the year.

(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the year.

(3) The efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

(4) Gross loans include loans held for sale.

3

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding our financial condition and results of operations.  The information contained in this section should be read in conjunction with our consolidated financial statements and the accompanying notes.

Certain statements in this annual report and throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risk, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statement.  Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and experiences of the Company, are generally identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project”, or similar expressions.  Factors that impact such forward looking statements include, among others, changes in general economic conditions, changes in interest rates and competition.  We decline any obligation to publicly announce future events or developments that may affect the forward-looking statements herein.

Operating Strategy – Overview

Our business consists principally of attracting deposits from the general public and using deposits and borrowings to originate mortgage loans secured by one-to-four family residences, commercial real estate and agricultural real estate. In addition, we originate commercial and agricultural business loans and consumer loans.  Our net income, like other financial institutions, is primarily dependent on our net interest income, which is the difference between the income earned on our interest-earning assets, such as loans and investments, and the cost of our interest-bearing liabilities, primarily deposits and borrowings.  Our net income is also affected by provisions for loan losses and other noninterest income and expenses.  General economic conditions, particularly changes in market interest rates, government legislation, monetary policies, and attendant actions of the regulatory authorities are the external influences affecting many of the factors of our net income.

Management has implemented various strategies designed to enhance our profitability.  These strategies include reducing our exposure to interest rate risk by selling fixed-rate loans, offering other fee-based services to our customers, and improving operating efficiencies.  We recognize the need to establish and adhere to strict loan underwriting criteria and guidelines.  We generally limit our investment portfolio to securities issued by the United States Government and Government sponsored enterprises, mortgage-backed securities collateralized by United States Government sponsored enterprises, and bank-qualified general obligation municipal issues.

While still significantly lower than pre-recession levels, market rates continued to rise during 2014 resulting in fewer originations of fixed-rate residential loans for sale to the secondary market.  During the years ended December 31, 2014 and 2013, we sold $12.5 million and $24.5 million, respectively, of fixed-rate residential mortgage loans.  We do not have subprime mortgage or Alt-A loan products.  All of our mortgage-backed securities are issued by United States Government or United States Government sponsored enterprises.  The lower prepayments on the underlying residential loans have had a beneficial effect on our income from mortgage-backed securities due to reduced premium amortization during 2014, as compared to 2013.  Changes in market rates also impact the market value of our investment and mortgage-backed securities portfolios classified as available-for-sale.  The increases and decreases in market value are reflected in other comprehensive income (loss).

4

We continue to service our existing borrowers and originate new loans to credit-worthy borrowers in an effort to meet the credit needs of our community.  We intend to remain a community-oriented financial institution dedicated to meeting the credit and financial services needs of our customers in our market area.

Critical Accounting Policies and Use of Significant Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America.  Actual results could differ significantly from those estimates under different assumptions and conditions.  Management believes the following discussion addresses our most critical accounting policies and significant estimates, which are those that are most important to the portrayal of our financial condition and results and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Loan Losses. We believe the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of the consolidated financial statements.  The allowance for loan losses is a material estimate that is particularly susceptible to significant changes in the near term and is established through a provision for loan losses.  The allowance is based upon past loan experience and other factors which, in management’s judgment, deserve current recognition in estimating loan losses.  The evaluation includes a review of all loans on which full collectability may not be reasonably assured.  Other factors considered by management include the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and historical losses on each portfolio category.  In connection with the determination of the allowance for loan losses, management uses independent appraisals for significant properties, which collateralize loans.  Management uses the available information to make such determinations.  If circumstances differ substantially from the assumptions used in making determinations, future adjustments to the allowance for loan losses may be necessary and results of operations could be affected.  While we believe we have established our existing allowance for loan losses in conformity with accounting principles generally accepted in the United States of America, there can be no assurance that regulators, in reviewing our loan portfolio, will not request an increase in the allowance for loan losses.  Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that increases to the allowance will not be necessary if loan quality deteriorates.

Foreclosed Assets. Foreclosed assets, consisting of real estate owned acquired through loan foreclosures, are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  The adjustment at the time of foreclosure is recorded through the allowance for loan losses.  Due to the subjective nature of establishing fair value when the asset is acquired, the actual fair value of the foreclosed asset could differ from the original estimate.  If it is determined that the fair value has declined subsequent to foreclosure, the asset is written down through a charge to noninterest expense.  Operating costs associated with the assets after acquisition are also recorded as noninterest expense.  Gains and losses on the disposition of foreclosed assets are netted and posted to noninterest expense.

Deferred Income Tax Assets/Liabilities. Our net deferred income tax asset arises from differences in the dates that items of income and expense enter into our reported income and taxable income.  Deferred tax assets and liabilities are established for these items as they arise.  From an accounting standpoint, deferred tax assets are reviewed to determine that they are realizable based upon the historical level of our taxable income, estimates of our future taxable income and the reversals of deferred tax liabilities.  In most cases, the realization of the deferred tax asset is based on our future profitability.  If we were to experience net operating losses for tax purposes in a future period, the realization of our deferred tax assets would be evaluated for a potential valuation reserve.

5

Impairment of Goodwill.Goodwill, an intangible asset with an indefinite life, was recorded on our balance sheet in prior periods as a result of acquisition activity.  Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently.  During 2014, goodwill was evaluated quarterly due to market conditions.

Mortgage Servicing Rights.Mortgage servicing rights are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments.  Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise.

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.  We estimate the fair value of financial instruments using a variety of valuation methods.  Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value.  When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value.  When observable market prices do not exist, we estimate fair value.  Other factors such as model assumptions and market dislocations can affect estimates of fair value.

Recent Accounting Pronouncements

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-04, Troubled Debt Restructurings by Creditors (Subtopic 310-40:  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure which affects all creditors who obtain physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015 which the entity’s annual or interim financial statements have not been made available for issuance. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards).  The guidance requires an entity to recognize the 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 and services.  For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied either retrospectively or using the modified retrospective approach.  Early adoption is not permitted.  Management is evaluating the new guidance, but does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements.

6

Recent Developments

On July 2, 2013, the Board of Governors of the Federal Reserve System announced its approval of the final rule to implement the Basel III regulatory capital reforms, among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Federal Deposit Insurance Corporation adopted the new rule on July 9, 2013.  The approved rule includes a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%, as well as a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets.  The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking institutions.  The phase-in for banking institutions such as Jacksonville Savings Bank began in January 2015, while the phase-in for larger banks began in January 2014.  Management believes the Bank will be in compliance with the new standards in 2015.

Financial Condition

Total assets at December 31, 2014 were $311.9 million, a decrease of $6.5 million, or 2.0%, from $318.4 million at December 31, 2013.  The decrease in total assets was primarily due to a $12.3 million decrease in investment and mortgage-backed securities, partially offset by increases of $4.1 million in net loans and $3.5 million in cash and cash equivalents.

Available-for-sale investment securities decreased $5.4 million, or 8.9%, to $55.3 million at December 31, 2014 from $60.6 million at December 31, 2013.  Available-for-sale mortgage-backed securities decreased $6.9 million, or 14.3%, to $41.4 million at December 31, 2014 from $48.3 million at December 31, 2013.  The decrease in investment and mortgage-backed securities was primarily due to the need to fund a decrease in deposits and other borrowings.  Cash and cash equivalents increased $3.5 million, or 57.6%, to $9.6 million at December 31, 2014, reflecting a $3.7 million increase in federal funds sold.

Net loans increased $4.1 million, or 2.3%, to $184.7 million at December 31, 2014 from $180.6 million at December 31, 2013.  The increase in loans was primarily due to increases of $5.1 million in agricultural real estate loans, reflecting increased land sale activity, $1.6 million in commercial real estate loans, and $1.3 million in agricultural business loans.  The increase in net loans was partially offset by a decrease of $3.1 million in commercial business loans, reflecting repayments on lines of credit.  The loan portfolio continues to be affected by low loan demand.

At December 31, 2014 and 2013, we had $2.7 million recorded in goodwill.  At these dates our goodwill was not impaired.  At December 31, 2014, we also had $633,000 in mortgage servicing rights, net of the valuation allowance.  Our mortgage servicing rights asset represented approximately 46 basis points of the $137.9 million in loans that we serviced.  We obtain an independent valuation of the mortgage servicing rights at least annually.  Our most recent valuation was obtained as of December 31, 2014, which reported a market value of approximately $980,000.

Total deposits decreased $5.8 million, or 2.3%, to $245.9 million at December 31, 2014.  The mix of our deposits has changed during 2014 with a decrease of $13.6 million in higher-cost time deposits, partially offset by an increase of $7.8 million in low-cost transaction accounts.  Transaction accounts have continued to grow, and time deposits have declined, as customers have preferred to maintain short-term, liquid deposits in the current low interest rate environment.  Other borrowings decreased $5.8 million during the year to $13.8 million as of December 31, 2014, primarily due to a decrease of $5.8 million in advances from the FHLB.  The remainder of other borrowings consisted of overnight repurchase agreements, which are provided as a service to our commercial deposit customers.

7

Stockholders’ equity increased $3.9 million, or 9.4%, to $45.0 million at December 31, 2014.  The increase in stockholders’ equity was primarily the result of net income of $3.0 million, partially offset by $1.0 million in stock repurchases and $571,000 in cash dividends paid.  Stockholders’ equity also benefitted from the increase to $711,000 of other comprehensive income at December 31, 2014, compared to $1.4 million of other comprehensive loss at December 31, 2013.  Other comprehensive income (loss) consisted of the increase in net unrealized gains, net of tax, on available-for-sale securities reflecting changes in market prices for securities in our portfolio. Other comprehensive income (loss) does not include changes in the fair value of other financial instruments included on the balance sheet.  Our tangible book value per share increased to $23.50 as of December 31, 2014 from $20.96 at December 31, 2013.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

General

Net income for the year ended December 31, 2014 totaled $3.0 million, or $1.66 per basic common share and $1.65 per diluted common share, compared to net income for the year ended December 31, 2013 of $3.2 million, or $1.73 per basic and diluted common share.  The decrease of $241,000 in net income reflected a decrease of $524,000 in noninterest income and increases of $70,000 in the provision for loan losses and $45,000 in noninterest expense, partially offset by an increase of $144,000 in net interest income and a decrease of $254,000 in income taxes.

Interest Income

Interest income decreased to $11.9 million for the year ended December 31, 2014 from $12.1 million for the year ended December 31, 2013.  The $186,000 decrease in interest income resulted from decreased income of $213,000 on loans, $42,000 on investment securities, and $35,000 on other interest-earning assets, partially offset by an increase of $104,000 on mortgage-backed securities.

Interest income on loans decreased $213,000 to $9.2 million for the year ended December 31, 2014 from $9.4 million for the year ended December 31, 2013 due to a decrease in the average yield of loans.  The average yield of the loan portfolio decreased 30 basis points to 5.06% during 2014 from 5.36% during 2013.  The decrease in the average yield reflected lower market rates of interest and the competitive lending environment.  The decrease in the average yield was partially offset by an increase of $6.2 million to $180.9 million in average loans during 2014.  The increase in the average balance of loans was primarily due to growth in the average balance of residential real estate loans due to the retention of additional loans held in portfolio and commercial real estate loans.

Interest income on investment securities decreased $42,000 to $1.8 million for the year ended December 31, 2014.  The decrease resulted primarily from a decrease of $1.5 million in the average balance of the investment securities portfolio to $58.9 million during 2014.  The decrease in the average balance of investment securities reflected the use of investment proceeds to fund the decrease in deposits during this same time frame.  The average yield of investment securities remained unchanged at 2.97% during 2014 and 2013.  The majority of our investment portfolio consists of municipal bonds which are exempt from federal taxation, resulting in a reduction in income tax expense.  Adjusting for this benefit, the tax equivalent yield of the investment portfolio equaled 4.31% for 2014 compared to 4.30% for 2013.

Interest income on mortgage-backed securities increased $104,000 to $981,000 for the year ended December 31, 2014 from $877,000 for the year ended December 31, 2013.  The increase reflected a 36 basis points increase in the average yield of mortgage-backed securities to 2.09% during 2014 from 1.73% during 2013.  The average yield benefitted from lower premium amortization resulting from slower national prepayment speeds on mortgage-backed securities.  The amortization of premiums on mortgage-backed securities, which reduces the average yield, decreased $218,000 to $502,000 during 2014.  The increase in the average yield was partially offset by a decrease of $3.8 million in the average balance of mortgage-backed securities to $46.9 million during 2014.  The decrease in the average balance reflected the use of sales and repayment proceeds to fund the decrease in deposits during this same time frame.

8

Interest income from other interest-earning assets, which consisted of interest-earning demand and time deposits and federal funds sold, decreased to $2,000 during the year ended December 31, 2014, from $37,000 for the year ended December 31, 2013.  The $35,000 decrease was due to decreases in the average yield and average balance of these investments.  The average yield on these investments decreased to 0.06% during 2014 from 0.49% during 2013, reflecting the decrease in higher-yielding time deposit accounts which matured during the fourth quarter of 2013.  The average balance of these investments decreased $4.7 million to $2.8 million during 2014, reflecting decreases in the average balance of time deposit accounts and federal funds sold.

Interest Expense

Total interest expense decreased $330,000 to $1.5 million during the year ended December 31, 2014 from $1.8 million during the year ended December 31, 2013.  The decrease in interest expense was due to a decrease of $330,000 in the cost of deposits.

Interest expense on deposits decreased $330,000 to $1.4 million during the year ended December 31, 2014 from $1.7 million during the year ended December 31, 2013.  The decrease in interest expense on deposits was primarily due to a 12 basis point decrease in the average rate paid on deposits to 0.65% during 2014 from 0.77% during 2013.  The decrease reflected low short-term market interest rates which continued during 2014 and the change in the composition of our deposits to a higher percentage of low-cost transaction accounts.  The decrease in interest expense was also impacted by a decrease of $8.8 million in the average balance of deposits to $221.7 million during 2014 from $230.5 million during 2013.  The decrease in the average balance of deposits was primarily due to a $13.1 million decrease in the average balance of time deposits, partially offset by a $4.3 million increase in the average balance of lower-cost transaction accounts.

Interest paid on borrowed funds totaled $15,000 in 2014 and 2013.  Borrowed funds consisted of overnight repurchase agreements and advances from the FHLB.  The average rate paid on borrowed funds remained unchanged at 0.14% during 2014 and 2013.  The average balance of borrowed funds also remained steady at $10.8 million during 2014 compared to $10.7 million during 2013.

Net Interest Income

As a result of the changes in interest income and interest expense noted above, net interest income increased by $144,000, or 1.4%, to $10.4 million in 2014 from $10.3 million in 2013.  Our interest rate spread increased by 10 basis points to 3.48% during 2014 from 3.38% during 2013.  Our net interest margin increased 10 basis points to 3.61% during 2014 from 3.51% during 2013.  Our ratio of average interest earning assets to average interest bearing liabilities for the years ended December 31, 2014 and 2013 was 1.25x and 1.22x, respectively.

Provision for Loan Losses

The provision for loan losses is determined by management as the amount needed to replenish the allowance for loan losses, after net charge-offs have been deducted, to a level considered adequate to absorb known and probable losses in the loan portfolio, in accordance with accounting principles generally accepted in the United States of America.

9

The allowance for loan losses decreased $450,000 during 2014 to $3.0 million as of December 31, 2014.  The decrease was the result of net charge-offs exceeding the provision for loan losses.  We recorded a provision for loan losses of $240,000 for the year ended December 31, 2014, compared to $170,000 during 2013.  The $70,000 increase in the provision reflected the higher level of nonperforming loans.  Net charge-offs increased $587,000 to $690,000 during 2014 from $103,000 during 2013.  The increase in net charge-offs was primarily due to the charge-off of $285,000 during 2014 on loans to one commercial business borrower and $194,000 on two loans secured by commercial real estate.

The provisions in 2014 and 2013 were made to bring the allowance for loan losses to a level deemed adequate following management’s evaluation of the repayment capacity and collateral protection afforded by each problem loan identified by management.  The review also considered the local economy and the level of bankruptcies and foreclosures in our market area.

10

The following table sets forth the composition of our non-performing assets at December 31, 2014 and 2013, respectively.

	December 31, 2014			December 31, 2013
	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
One- to four-family residential	$	995		$	1,339
Commercial		932			208
Agricultural		123			—
Home equity		121			134
Commercial business loans		22			38
Agricultural business loans		—			—
Consumer loans		71			63
Total non-accrual loans		2,264			1,782
Loans delinquent 90 days or greater and still accruing:
Real estate loans:
One- to four-family residential		—			—
Commercial		—			—
Agricultural		—			—
Home equity		—			—
Commercial business loans		—			—
Agricultural business loans		—			—
Consumer loans		—			—
Total loans delinquent 90 days or greater and still accruing		—			—
Total nonperforming loans		2,264			1,782
Other real estate owned and foreclosed assets:
Real estate loans:
One- to four-family residential		40			133
Commercial		137			149
Agricultural		—			—
Home equity		—			—
Commercial business loans		—			—
Agricultural business loans		—			—
Consumer loans					2
Total  other real estate owned and foreclosed assets		177			284
Total nonperforming assets	$	2,441		$	2,066
Ratios:
Nonperforming loans to total loans		1.21	%		0.97	%
Nonperforming assets to total assets		0.78			0.65

Management monitors all past due loans and nonperforming assets.  Such loans are placed under close supervision with consideration given to the need for additions to the allowance for loan losses and (if appropriate) partial or full charge-off.  At December 31, 2014, we had no loans 90 days or more delinquent which were still accruing interest.  Nonperforming assets increased by $375,000 to $2.4 million at December 31, 2014 as compared to $2.1 million at December 31, 2013.  The increase in the level of nonperforming assets reflected an increase of $482,000 in nonperforming loans, partially offset by a decrease of $107,000 in foreclosed assets.  The increase in nonperforming loans primarily reflected the non-accrual status of a $794,000 loan secured by commercial real estate, which is in the process of foreclosure.

The allowance for loan losses as a percentage of nonperforming loans decreased to 130.57% at December 31, 2014, as compared to 191.14% at December 31, 2013.  This decrease was due to both a decrease in the allowance for loan losses and an increase in nonperforming loans during 2014.  The allowance for loan losses at $3.0 million represented 1.57% of total loans at December 31, 2014.  On this same date, nonperforming loans totaled 1.21% of total loans.  We have an experienced chief lending officer and collections and loan review departments which monitor the loan portfolio and seek to prevent any deterioration of asset quality.

11

The following table shows the principal amount of special mention and classified loans at December 31, 2014 and December 31, 2013.

	December 31, 2014		December 31, 2013
	(In thousands)
Special Mention loans	$	2,096	$	1,057
Substandard loans		5,454		6,132
Total Special Mention and Substandard loans	$	7,550	$	7,189

The total amount of classified and special mention loans increased $361,000 to $7.6 million at December 31, 2014 from $7.2 million at December 31, 2013.  The increase in classified and special mention loans during 2014 was due to an increase of $1,039,000 in special mention loans, partially offset by a decrease of $678,000 in substandard loans.  The increase in special mention loans reflected $1.3 million in additional loans listed as special mention, partially offset by $219,000 in principal reductions and $157,000 in loans that were upgraded to a pass rating during 2014.  The decrease in substandard loans was primarily related to $796,000 in principal reductions, $690,000 in charge-offs, and $374,000 transferred to foreclosed assets, partially offset by $1.3 million in additional loans classified as substandard during 2014.

Noninterest Income

Noninterest income decreased $524,000, or 11.8%, to $3.9 million for the year ended December 31, 2014, compared to $4.4 million for the year ended December 31, 2013.  The decrease in noninterest income resulted primarily from decreases of $489,000 in gains on the sale of available-for-sale securities, $114,000 in net income from mortgage banking operations and $112,000 from service charges on deposits, partially offset by increases of $145,000 in commission income and $64,000 in ATM and bank card interchange income.

The decrease in gains on the sale of securities reflected changing market conditions.  Securities totaling $31.3 million were sold during 2014, compared to $29.2 million during 2013.  The sales during 2014 were primarily made to reduce the volatility to interest rate changes in municipal bonds and to eliminate faster-paying mortgage-backed securities.  The decrease in mortgage banking income was due to a lower volume of loan sales, as we sold $12.5 million of loans in the secondary market during 2014, compared to $24.5 million during 2013.  The lower volume of sales reflected a reduced volume of mortgage originations, which are affected by gradual increases in market interest rates.  The decrease in service charges on deposits reflected a decrease in fees related to nonsufficient funds.  The increase in commission income reflected the improved market conditions and increased account activity during 2014.  A higher volume of transactions contributed to the increase in ATM and debit card interchange income.

12

Noninterest Expense

Total noninterest expense increased $45,000, or 0.5%, to $10.2 million for the year ended December 31, 2014, compared to the year ended December 31, 2013.  The increase in noninterest expense was primarily due to an increase of $249,000 in professional fees, reflecting non-recurring legal and consulting expenses during 2014.  The increase in fees was partially offset by a decrease of $93,000 in data processing and telecommunications expense, a decrease of $47,000 in occupancy expense, and the one-time charges totaling $75,000 related to the sale of our former main office building and the closure of one of our limited-service branch facilities during 2013.  The decrease in occupancy expense was primarily attributed to the disposition of these facilities.  A decrease in non-recurring consulting expenses related to software upgrades and training during 2013 contributed to the decrease in data processing and telecommunications expense.

Income Taxes

The provision for income taxes decreased $254,000 to $934,000 during 2014 compared to 2013. The decrease in the income tax provision reflected a decrease in taxable income.  Our effective tax rate was 23.9% for 2014 and 27.0% for 2013, reflecting the impact of tax-exempt income.

13

Average Balances and Yields

The following table sets forth, for the years indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin, and ratio of average interest-earning assets to average interest-bearing liabilities.

	For the Years Ended December 31,
	2014							2013
	Average Outstanding Balance		Interest		Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	180,936	$	9,158		5.06	%	$	174,685	$	9,371		5.36	%
Investment securities (2)		58,883		1,751		2.97			60,389		1,793		2.97
Mortgage-backed securities		46,939		981		2.09			50,762		877		1.73
Cash and cash equivalents		2,792		2		0.06			7,499		37		0.49
Total interest-earning assets		289,550		11,892		4.10	%		293,335		12,078		4.12	%
Non-interest-earning assets		21,029							21,649
Total assets	$	310,579						$	314,984
Interest-bearing liabilities:
Interest bearing checking	$	38,080	$	54		0.14	%	$	37,595	$	53		0.14	%
Savings accounts		37,323		80		0.21			34,860		76		0.22
Certificates of deposit		102,890		1,180		1.15			116,036		1,512		1.30
Money market savings		35,408		110		0.31			33,554		112		0.34
Money market deposits		8,026		12		0.15			8,441		14		0.16
Total interest-bearing deposits		221,727		1,436		0.65			230,486		1,767		0.77
Federal Home Loan Bank advances		4,803		10		0.20			4,481		7		0.14
Short-term borrowings		5,996		5		0.08			6,196		8		0.13
Total borrowings		10,799		15		0.14			10,677		15		0.14
Total interest-bearing liabilities		232,526		1,451		0.62	%		241,163		1,782		0.74	%
Non-interest-bearing liabilities		34,320							31,043
Total liabilities		266,846							272,206
Stockholders’ equity		43,733							42,778
Total liabilities and stockholders’ equity	$	310,579						$	314,984
Net interest income			$	10,441						$	10,296
Net interest rate spread (3)						3.48	%						3.38	%
Net interest-earning assets (4)			$	57,024						$	52,172
Net interest margin (5)						3.61	%						3.51	%
Average interest-earning assets to average interest-bearing liabilities						124.52	%						121.63	%

(1)	Includes non-accrual loans and loans held for sale and fees of $92,000 for 2014 and $97,000 for 2013.
(2)	Includes Federal Home Loan Bank stock and U.S. Agency securities.
(3)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(4)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(5)	Net interest margin represents net interest income divided by average total interest-earning assets.

14

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the fiscal years indicated.  The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).  The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).  The net column represents the sum of the prior columns.  For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	Years Ended December 31,
	2014 vs. 2013
	Increase (Decrease) Due to						Total Increase (Decrease)
	Rate			Volume
	(In thousands)
Interest-earning assets:
Loans	$	(541	)	$	328		$	(213	)
Investment securities		3			(45	)		(42	)
Mortgage-backed securities		173			(69	)		104
Cash and cash equivalents		(20	)		(15	)		(35	)
Total interest-earning assets	$	(385	)	$	199		$	(186	)
Interest-bearing liabilities:
Interest bearing checking	$	—		$	1		$	1
Savings accounts		(1	)		5			4
Certificates of deposit		(170	)		(161	)		(331	)
Money market savings		(8	)		6			(2	)
Money market deposits		(1	)		(1	)		(2	)
Total interest-bearing deposits		(180	)		(150	)		(330	)
Federal Home Loan Bank advances		3			—			3
Short-term borrowings		(3	)		—			(3	)
Total interest-bearing liabilities		—			—			—
Change in net interest income	$	(205	)	$	349		$	144

15

Asset and Liability Management

As a financial institution, we face risk from interest rate volatility.  Fluctuations in interest rates affect both our level of income and expense on a large portion of our assets and liabilities.  Fluctuations in interest rates also affect the market value of all interest-earning assets.

The primary goal of our interest rate risk management strategy is to maximize net interest income while maintaining an acceptable interest rate risk profile.  We seek to coordinate asset and liability decisions so that, under changing interest rate scenarios, net interest income remains within an acceptable range.

Our policy in recent years has been to reduce our interest rate risk by better matching the maturities of our interest rate sensitive assets and liabilities, selling our long-term fixed-rate residential mortgage loans with terms of 15 years or more to the secondary market, originating adjustable rate loans, and originating consumer and commercial business loans, which typically are for a shorter duration and at higher rates of interest than one- to four-family residential mortgage loans.  Our portfolio of mortgage-backed securities also provides monthly cash flow.  The remaining investment portfolio has been structured to better match the maturities and rates of our interest-bearing liabilities.  With respect to liabilities, we have attempted to increase our savings and transaction deposit accounts, which management believes are more resistant to changes in interest rates than certificate accounts.  The board of directors appoints the Asset-Liability Management Committee (“ALCO”), which is responsible for reviewing our asset and liability management policies.  The ALCO meets quarterly to review interest rate risk and trends, as well as liquidity and capital requirements.

We use comprehensive asset/liability software provided by a third-party vendor to perform interest rate sensitivity analysis for all product categories.  The primary focus of our analysis is the effect of interest rate increases and decreases on net interest income.  Management believes that this analysis reflects the potential effects on current earnings of interest rate changes.  Call criteria and prepayment assumptions are taken into consideration for investment securities and loans.  All of our interest sensitive assets and liabilities are analyzed by product type and repriced based upon current offering rates.  The software performs interest rate sensitivity analysis by performing rate shocks of plus or minus 300 basis points in 100 basis point increments.  As a result of the historically low interest rate environment, the table below only shows the change in our assets and liabilities based upon a 100 basis point decrease in interest rates.

The following table shows projected results at December 31, 2014 and 2013, of the impact on net interest income from an immediate change in interest rates, as well as the benchmarks established by the ALCO.  The results are shown as a dollar and percentage change in net interest income over the next twelve months.

	Change in Net Interest Income
	December 31, 2014						December 31, 2013						ALCO Benchmark
Rate Shock	$ Change			% Change			$ Change			% Change
	(Dollars in thousands)
+300 basis points		(167	)		(1.47	)%		(148	)		(1.27	)%	>(20.00	)%
+200 basis points		(116	)		(1.02	)		(95	)		(0.82	)	>(20.00	)%
+100 basis points		(46	)		(0.40	)		(32	)		(0.28	)	>(12.50	)%
(100) basis points		(180	)		(1.59	)		(207	)		(1.78	)	>(12.50	)%

The table above indicates that at December 31, 2014, in the event of a 200 basis point increase in interest rates, we would experience a 1.02% decrease in net interest income.  In the event of a 100 basis point decrease in interest rates, we would experience a 1.59% decrease in net interest income.

16

The effects of interest rates on net interest income are not predictable. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, prepayments, and deposit run-offs, and should not be relied upon as indicative of actual results. Certain shortcomings are inherent in these computations. Although some assets and liabilities may have similar maturity or periods of repricing, they may react at different times and in different degrees to changes in market interest rates. Rates on other types of assets and liabilities may lag behind changes in market interest rates. Assets, such as adjustable rate mortgage loans, generally have features that restrict changes in interest rates on a short-term basis and over the life of the asset. After a change in interest rates, prepayments and early withdrawal levels could deviate significantly from those assumed in making the calculations set forth above. Additionally, increased credit risk may result if our borrowers are unable to meet their repayment obligations as interest rates increase.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future short-term financial obligations.  Our ALCO Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies.  At December 31, 2014, we had access to immediately available funds of an additional $21.2 million from the Federal Home Loan Bank of Chicago and approximately $51.2 million in overnight federal funds purchased.

We regularly adjust our investments in liquid assets based upon our assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our asset/liability management program.  Excess liquid assets are invested generally in interest-earning deposits and short- and intermediate-term securities.

Our most liquid assets are cash and cash equivalents.  The levels of these assets are dependent on our operating, financing, and investing activities.  At December 31, 2014 and 2013, cash and cash equivalents totaled $9.6 million and $6.1 million, respectively.  Our primary sources of funds include customer deposits, proceeds from sales of loans, maturities and sales of investments, and principal repayments from loans and mortgage-backed securities (both scheduled and prepayments).  During the years ended December 31, 2014 and 2013, the most significant sources of funds have been loan sales, investment sales and principal payments, and short-term borrowings.

Our cash and cash equivalents increased $3.5 million during the year ended December 31, 2014, compared to a decrease of $1.2 million during the year ended December 31, 2013.  Net cash provided by operating activities increased to $5.5 million during 2014 from $5.1 million during 2013.  Net cash provided by investing activities increased to $10.8 million during 2014 from the $4.3 million in cash used during 2013.  Cash provided by sales and maturities of investment and mortgage-backed securities, net of purchases, increased to $15.2 million during 2014 from the $124,000 net cash used during 2013.  Cash used in net loan originations and payments decreased to $4.4 million during 2014 from $7.2 million during 2013.  Cash used in financing activities increased to $12.8 million during 2014 from the $2.0 million in cash used during 2013.  The increase was primarily due to a decrease in short-term borrowings during 2014.

While loan sales and principal repayments on mortgage-backed securities are relatively predictable, deposit flows and early prepayments are more influenced by interest rates, general economic conditions, and competition.  We attempt to price our deposits to meet asset/liability objectives and stay competitive with local market conditions.

17

Liquidity management is both a short- and long-term responsibility of management.  We adjust our investments in liquid assets based upon management’s assessment of expected loan demand, projected purchases of investment and mortgage-backed securities, expected deposit flows, yields available on interest-bearing deposits, and liquidity of its asset/liability management program.  Excess liquidity is generally invested in interest-earning overnight deposits, federal funds sold, and other short-term U.S. agency obligations.  We use securities sold under agreements to repurchase as an additional funding source.  The agreements represent our obligations to third parties and are secured by investments which we pledge as collateral.  At December 31, 2014, we had $8.8 million in outstanding repurchase agreements, which were utilized for overnight funding.

If we require funds beyond our ability to generate them internally, we have the ability to borrow funds from the Federal Home Loan Bank.  We may borrow from the Federal Home Loan Bank under a blanket agreement which assigns all investments in Federal Home Loan Bank stock as well as qualifying first mortgage loans equal to 150% of the outstanding balance as collateral to secure the amounts borrowed.  This borrowing arrangement is limited to the lesser of 30% of our total assets, 75% of the balance of qualifying one- to four-family residential loans, or twenty times the balance of Federal Home Loan Bank stock held by us.  At December 31, 2014, we had $5.0 million in outstanding advances and a remaining borrowing capacity of approximately $21.2 million.

We maintain levels of liquid assets as established by the board of directors.  Our liquidity ratio, adjusted for pledged assets, at December 31, 2014 and 2013 was 37.6% and 39.0%, respectively.  This ratio represents the volume of short-term liquid assets as a percentage of net deposits and borrowings due within one year.

We must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments.  We anticipate that we will have sufficient funds available to meet our current commitments principally through the use of current liquid assets and through our borrowing capacity discussed above.  The following table summarizes our outstanding loan commitments at December 31, 2014 and 2013.

	December 31, 2014		December 31, 2013
	(In thousands)
Commitments to fund loans	$	34,734	$	41,694
Standby letters of credit		255		360

Quantitative measures established by regulation to ensure capital adequacy require Jacksonville Savings Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets and Tier I capital to average assets.  At December 31, 2014, Jacksonville Savings Bank met all capital adequacy requirements to which it is subject.

The Director of the Illinois Department of Financial and Professional Regulation is authorized to require a savings bank to maintain a minimum capital level based upon the savings bank’s financial condition or history, management or earnings.  If a savings bank’s core capital ratio falls below the required level, the Director may direct the savings bank to adhere to a specific written plan established by the Director to correct the savings bank’s capital deficiency, as well as a number of other restrictions on the savings bank’s operations, including a prohibition on the declaration of dividends by the savings bank’s board of directors.  At December 31, 2014, Jacksonville Savings Bank’s core capital ratio was 12.25% of total adjusted average assets, which exceeded the required ratio of 4.00%.

18

As of December 31, 2014, the Federal Deposit Insurance Corporation categorized Jacksonville Savings Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, Jacksonville Savings Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below.  There are no conditions or events since that notification that management believes have changed Jacksonville Savings Bank’s category.  Jacksonville Savings Bank’s actual capital ratios at December 31, 2014 and 2013 are presented in the table below.

	Well Capitalized			December 31, 2014 Actual			December 31, 2013 Actual
Tier 1 Capital to Average Assets		5.00	%		12.25	%		11.51	%
Tier 1 Capital to Risk-Weighted Assets		6.00	%		17.56	%		16.89	%
Total Capital to Risk-Weighted Assets		10.00	%		18.81	%		18.15	%

Effect of Inflation and Changing Prices

The consolidated financial statements and related notes of Jacksonville Bancorp, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).  GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the increased cost of our operations.  Unlike industrial companies, our assets and liabilities are primarily monetary in nature.  As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

* * * * * *

19

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors, and Stockholders

Jacksonville Bancorp, Inc.

Jacksonville, Illinois

We have audited the accompanying consolidated balance sheets of Jacksonville Bancorp, Inc. (Company) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity and cash flows for the years then ended.  The Company’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  Our audits also include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Jacksonville Bancorp, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Decatur, Illinois

March 13, 2015

20

Jacksonville Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2014 and 2013

Assets

	2014		2013
Cash and due from banks	$	6,427,536	$	2,796,331
Interest-earning demand deposits in banks		3,184,102		3,302,539
Cash and cash equivalents		9,611,638		6,098,870
Available-for-sale securities:
Investment securities		55,264,976		60,638,942
Mortgage-backed securities		41,419,921		48,345,655
Other investments		73,766		81,918
Loans held for sale		235,600		262,461
Loans, net of allowance for loan losses of $2,956,264 and $3,406,434 at December 31, 2014 and 2013		184,718,612		180,639,502
Premises and equipment, net of accumulated depreciation of $5,742,785 and $7,096,401 at December 31, 2014 and 2013		4,945,983		5,178,978
Federal Home Loan Bank stock		1,113,800		1,113,800
Foreclosed assets held for sale, net		176,671		281,918
Cash surrender value of life insurance		6,912,917		6,815,059
Interest receivable		1,713,243		1,817,415
Deferred income taxes		1,486,206		2,703,110
Mortgage servicing rights, net of valuation allowance of $56,969 and $73,392 as of December 31, 2014 and 2013		632,634		673,576
Goodwill		2,726,567		2,726,567
Other assets		892,118		1,041,005
Total assets	$	311,924,652	$	318,418,776

21

Jacksonville Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2014 and 2013

Liabilities and Stockholders’ Equity

	2014			2013
Liabilities
Deposits
Demand	$	30,976,025		$	29,976,167
Savings, NOW and money market		120,365,974			113,610,655
Time		94,599,563			108,151,569
Total deposits		245,941,562			251,738,391
Short-term borrowings		13,821,730			19,610,297
Deferred compensation		4,252,720			3,999,371
Advances from borrowers for taxes and insurance		962,762			857,814
Interest payable		166,052			210,226
Income taxes payable		200,781			34,621
Other liabilities		1,562,947			829,260
Total liabilities		266,908,554			277,279,980
Stockholders’ Equity
Preferred stock, $.01 par value, authorized 10,000,000 shares; none issued and outstanding		—			—
Common stock, $.01 par value; authorized 25,000,000 shares; issued 1,799,483 – December 31, 2014 and 1,832,860 – December 31, 2013		17,995			18,329
Additional paid-in capital		13,900,743			14,561,085
Retained earnings		30,635,787			28,233,876
Accumulated other comprehensive income (loss)		711,483			(1,386,964	)
Unallocated ESOP shares		(249,910	)		(287,530	)
Total stockholders’ equity		45,016,098			41,138,796
Total liabilities and stockholders’ equity	$	311,924,652		$	318,418,776

See Notes to Consolidated Financial Statements

22

Jacksonville Bancorp, Inc.

Consolidated Statements of Income

Years Ended December 31, 2014 and 2013

	2014		2013
Interest and Fee Income
Loans, including fees	$	9,157,672	$	9,370,899
Debt securities
Taxable		225,722		238,419
Tax-exempt		1,525,723		1,554,595
Mortgage-backed securities		981,032		877,300
Other		1,759		36,552
Total interest income		11,891,908		12,077,765
Interest Expense
Deposits		1,436,803		1,766,740
Short-term borrowings		5,085		8,175
Federal Home Loan Bank advances		9,570		6,356
Total interest expense		1,451,458		1,781,271
Net Interest Income		10,440,450		10,296,494
Provision for Loan Losses		240,000		170,000
Net Interest Income After Provision for Loan Losses		10,200,450		10,126,494
Noninterest Income
Fiduciary activities		290,681		252,831
Commission income		1,201,869		1,056,380
Service charges on deposit accounts		714,425		826,082
Mortgage banking operations, net		124,564		238,974
Net realized gains on sales of available-for-sale securities		408,753		897,901
Loan servicing fees		361,586		372,219
Increase in cash surrender value of life insurance		185,986		194,841
ATM and bank card interchange income		494,360		430,639
Other		136,875		173,003
Total noninterest income		3,919,099		4,442,870

See Notes to Consolidated Financial Statements

23

Jacksonville Bancorp, Inc.

Consolidated Statements of Income

Years Ended December 31, 2014 and 2013

	2014		2013
Noninterest Expense
Salaries and employee benefits	$	6,480,468	$	6,501,277
Occupancy and equipment		974,361		1,021,638
Data processing and telecommunications		531,554		624,134
Professional		532,096		283,447
Marketing		112,713		133,421
Postage and office supplies		235,090		266,128
Deposit insurance premium		153,137		156,125
ATM and bank card expense		282,574		245,448
Other		910,756		935,802
Total noninterest expense		10,212,749		10,167,420
Income Before Income Taxes		3,906,800		4,401,944
Provision for Income Taxes		934,046		1,188,299
Net Income	$	2,972,754	$	3,213,645
Basic Earnings Per Share	$	1.66	$	1.73
Diluted Earnings Per Share	$	1.65	$	1.73
Cash Dividends Per Share	$	0.32	$	0.31

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31, 2014 and 2013

	2014		2013
Net Income	$	2,972,754	$	3,213,645
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $1,219,994 and $(1,901,395) for 2014 and 2013, respectively		2,368,224		(3,690,942	)
Less:  reclassification adjustment for realized gains included in net income, net of taxes of $138,976 and $305,286 for 2014 and 2013, respectively		269,777		592,615
		2,098,447		(4,283,557	)
Comprehensive Income (Loss)	$	5,071,201	$	(1,069,912	)

See Notes to Consolidated Financial Statements

24

Jacksonville Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2014 and 2013

							Additional
	Issued Common Stock						Paid-in			Retained
	Shares			Amount			Capital			Earnings
Balance, January 1, 2013		1,908,556			19,086			15,943,273			25,585,757
Net income		—			—			—			3,213,645
Other comprehensive income (loss)		—			—			—			—
Stock repurchases		(81,698	)		(817	)		(1,596,142	)		—
Exercise of stock options		6,002			60			88,398			—
Tax benefit of nonqualified options		—			—			1,796			—
Stock-based compensation expense		—			—			90,162			—
Common shares held by ESOP, committed to be released		—			—			33,598			—
Dividends on common stock, $.31 per share		—			—			—			(565,526	)
Balance, December 31, 2013		1,832,860			18,329			14,561,085			28,233,876
Net income		—			—			—			2,972,754
Other comprehensive income		—			—			—			—
Stock repurchases		(48,478	)		(485	)		(1,028,203	)		—
Exercise of stock options		15,101			151			230,827			—
Tax benefit of nonqualified options		—			—			3,513			—
Stock-based compensation expense		—			—			90,163			—
Common shares held by ESOP, committed to be released		—			—			43,358			—
Dividends on common stock, $.32 per share		—			—			—			(570,843	)
Balance, December 31, 2014		1,799,483		$	17,995		$	13,900,743		$	30,635,787

See Notes to Consolidated Financial Statements

25

Jacksonville Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2014 and 2013

	Accumulated
	Other
	Comprehensive			Unallocated
	Income (Loss)			ESOP			Total
Balance, January 1, 2013		2,896,593			(324,380	)		44,120,329
Net income		—			—			3,213,645
Other comprehensive income (loss)		(4,283,557	)		—			(4,283,557	)
Stock repurchases		—			—			(1,596,959	)
Exercise of stock options		—			—			88,458
Tax benefit of nonqualified options		—			—			1,796
Stock-based compensation expense		—			—			90,162
Common shares held by ESOP, committed to be released		—			36,850			70,448
Dividends on common stock, $.31 per share		—			—			(565,526	)
Balance, December 31, 2013		(1,386,964	)		(287,530	)		41,138,796
Net income		—			—			2,972,754
Other comprehensive income		2,098,447			—			2,098,447
Stock repurchases		—			—			(1,028,688	)
Exercise of stock options		—			—			230,978
Tax benefit of nonqualified options		—			—			3,513
Stock-based compensation expense		—			—			90,163
Common shares held by ESOP, committed to be released		—			37,620			80,978
Dividends on common stock, $.32 per share		—			—			(570,843	)
Balance, December 31, 2014	$	711,483		$	(249,910	)	$	45,016,098

See Notes to Consolidated Financial Statements

26

Jacksonville Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2014 and 2013

	2014			2013
Operating Activities
Net income	$	2,972,754		$	3,213,645
Items not requiring (providing) cash
Depreciation and amortization		385,385			382,299
Provision for loan losses		240,000			170,000
Amortization of premiums and discounts on securities and loans		724,332			948,972
Deferred income taxes		135,886			(31,880	)
Net realized gains on available-for-sale securities		(408,753	)		(897,901	)
Loss from sale/disposal of premises and equipment		—			75,360
Amortization of mortgage servicing rights		127,647			170,523
Recovery of mortgage servicing rights asset		—			(33,649	)
Increase in cash surrender value of life insurance, net		(97,858	)		(202,417	)
Gains on sales of foreclosed assets		(9,122	)		—
Shares held by ESOP committed to be released		80,978			70,448
Stock-based compensation expense		90,163			90,162
Changes in
Interest receivable		104,172			236,057
Other assets		(89,576	)		339,036
Interest payable		(44,174	)		(66,531	)
Other liabilities		1,153,196			(92,216	)
Origination of loans held for sale		(12,358,997	)		(23,747,987	)
Proceeds from sales of loans held for sale		12,543,780			24,459,995
Net cash provided by operating activities		5,549,813			5,083,916
Investing Activities
Net change in interest-earning time deposits		—			2,972,000
Purchases of available-for-sale securities		(23,850,584	)		(43,336,382	)
Proceeds from maturities and payments  of available-for-sale securities		7,764,734			13,997,055
Proceeds from the sales of available-for-sale investments and other investments		31,257,071			29,214,848
Net change in loans		(4,387,125	)		(7,185,004	)
Purchase of premises and equipment		(152,390	)		(268,232	)
Proceeds from sale of premises and equipment		—			286,371
Proceeds from the sale of foreclosed assets		176,737			—
Net cash provided by (used in) investing activities		10,808,443			(4,319,344	)

See Notes to Consolidated Financial Statements

27

Jacksonville Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2014 and 2013

	2014			2013
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	$	7,755,177		$	7,930,755
Net decrease in certificates of deposit		(13,552,006	)		(14,713,093	)
Net increase (decrease) in short-term borrowings		(5,788,567	)		6,869,687
Net increase in advances from borrowers for taxes and insurance		104,948			25,469
Stock repurchase		(1,028,688	)		(1,596,959	)
Proceeds from stock options exercised		234,491			90,254
Dividends paid		(570,843	)		(565,526	)
Net cash used in financing activities		(12,845,488	)		(1,959,413	)
Increase (Decrease) in Cash and Cash Equivalents		3,512,768			(1,194,841	)
Cash and Cash Equivalents, Beginning of Year		6,098,870			7,293,711
Cash and Cash Equivalents, End of Year	$	9,611,638		$	6,098,870
Supplemental Cash Flows Information
Interest paid	$	1,495,632		$	1,847,802
Income taxes paid	$	632,000		$	1,399,673
Sale and financing of foreclosed assets	$	298,000		$	—
Real estate acquired in settlement of loans	$	374,116		$	129,078
Dividends declared not paid	$	143,959		$	147,229
Exercise and retirement of shares in stock option plan	$	101,130		$	63,445

See Notes to Consolidated Financial Statements

28

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 1:          Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Jacksonville Bancorp, Inc. (the “Company”) is a Maryland corporation.  The Company owns 100% of Jacksonville Savings Bank (the “Bank”).  The Bank was founded in 1916 as an Illinois-chartered savings and loan association and converted to an Illinois-chartered savings bank in 1992.  The Bank is headquartered in Jacksonville, Illinois and operates five branches in addition to its main office.  The Bank’s deposits have been federally insured since 1945 by the Federal Deposit Insurance Corporation (“FDIC”).  The Bank has been a member of the Federal Home Loan Bank (“FHLB”) System since 1932.

The Bank is a community-oriented savings bank engaged primarily in the business of attracting retail deposits from the general public in the Bank’s market area and using such funds together with borrowings and funds from other sources to originate consumer loans and mortgage loans secured by one-to-four family residential real estate.  The Bank also originates commercial real estate loans, multi-family real estate loans, commercial business loans, and agricultural loans.  When possible, the Bank emphasizes the origination of mortgage loans with adjustable interest rates (“ARM”), as well as fixed-rate balloon loans with terms ranging from three to five years, consumer loans, which are primarily home equity loans secured by second mortgages, commercial business loans, and agricultural loans.  The Bank also offers trust and investment services.  The investment center, Berthel Fisher and Company Financial Services, Inc., is operated through the Bank’s wholly-owned subsidiary, Financial Resources Group, Inc.

The Company is subject to competition from other financial institutions and nonfinancial institutions providing financial products.  Additionally, the Company is subject to the regulations of certain regulatory agencies and undergoes periodic examinations by those regulatory agencies.

The significant accounting and reporting policies of the Company and its subsidiary follow:

Principles of Consolidation and Financial Statement Presentation

The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s wholly owned subsidiary, Financial Resources Group, Inc.  Significant intercompany accounts and transactions have been eliminated in consolidation.  Based on the Company’s approach to decision making, it has decided that its business is comprised of a single segment.

The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and conform to predominate practice within the banking industry.

29

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, fair value of securities, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of loan servicing rights, valuation of deferred tax assets and goodwill impairment.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.  At December 31, 2014 and 2013, cash equivalents consisted primarily of federal funds sold and interest-earning demand deposits in banks.

At December 31, 2014, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

Interest-earning time deposits in banks are generally short-term and are carried at cost.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).  Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities.  Gains and losses on the sale of securities are recorded on the settlement date and are determined using the specific identification method.

For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

30

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Other Investments

Other investments at December 31, 2014 and 2013 include local municipal bonds and equity investments in local community development organizations.  The municipal bonds mature ratably through the year 2030.  These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income.  Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes collectibility of the principal is unlikely.  Subsequent recoveries, if any, are credited to the allowance.

31

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process.  Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation.  Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for each major depreciable classification of premises and equipment are as follows:

Buildings and improvements	35-40 years
Equipment	3-5 years

32

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system.  The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis.  Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.  Revenue and expenses from operations and changes in the valuation allowance are included in income or expense from foreclosed assets.

Bank-owned Life Insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value.  Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  The goodwill was not deemed impaired as of December 31, 2014 or 2013.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets.  Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer.  Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.  The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.  These variables change from quarter to quarter as market conditions and projected interest rates change.

33

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The Company subsequently measures each class of servicing asset using either the fair value or the amortization method.  The Company has elected to subsequently measure the mortgage servicing rights under the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.  Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment.  Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type.  Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche.  The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment.  Changes in valuation allowances are reported as a separate line item in noninterest expense on the consolidated income statement.  Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans.  The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned in loan servicing fees in non-interest income.  The amortization of mortgage servicing rights is netted from the gains on sale of loans, both cash gains as well as the capitalized gains, and is included in mortgage banking operations, net in non-interest income.

Stock Options

At December 31, 2014 and 2013, the Company has a stock-based employee compensation plan, which is described more fully in Note 15.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company — put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

34

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes).  The income tax accounting guidance results in two components of income tax expense:  current and deferred.  Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.  The Company determines deferred income taxes using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.  Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination.  The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.  A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.  The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment.  With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2011.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each period.  Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

35

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes.  Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities.

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company.  Fees from trust activities are recorded as revenue over the period in which the service is provided.  Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department.  This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes.  Generally, the actual trust fee is charged to each account on a monthly basis.  Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred.  The Company managed or administered approximately 114 and 110 trust accounts with assets totaling approximately $78.6 million and $71.8 million at December 31, 2014 and 2013, respectively.

Reclassifications

Certain amounts included in the 2013 consolidated statements have been reclassified to conform to the 2014 presentation.

Recent and Future Accounting Requirements

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-04, Troubled Debt Restructurings by Creditors (Subtopic 310-40:  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure which affects all creditors who obtain physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015 which the entity’s annual or interim financial statements have not been made available for issuance. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

36

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards).  The guidance requires an entity to recognize the 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 and services.  For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied either retrospectively or using the modified retrospective approach.  Early adoption is not permitted.  Management is evaluating the new guidance, but does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements.

37

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 2:          Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank.  The reserve required at December 31, 2014 and 2013, was $1,402,000 and $1,310,000, respectively.

Note 3:          Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale Securities
December 31, 2014:
U.S. Government and federal agencies	$	10,031,683	$	65,328	$	(138,738	)	$	9,958,273
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,196,695		433,757		(210,531	)		41,419,921
Municipal bonds		44,378,515		1,457,977		(529,789	)		45,306,703
	$	95,606,893	$	1,957,062	$	(879,058	)	$	96,684,897
December 31, 2013:
U.S. Government and federal agencies	$	10,710,675	$	114,936	$	(405,535	)	$	10,420,076
Mortgage-backed securities (Government-sponsored enterprises - residential)		49,486,337		219,222		(1,359,904	)		48,345,655
Municipal bonds		50,889,046		1,053,134		(1,723,314	)		50,218,866
	$	111,086,058	$	1,387,292	$	(3,488,753	)	$	108,984,597

38

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The amortized cost and fair value of available-for-sale securities at December 31, 2014, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale
	Amortized Cost		Fair Value
Within one year	$	535,664	$	544,411
One to five years		9,184,010		9,490,518
Five to ten years		25,748,781		26,064,641
After ten years		18,941,743		19,165,406
		54,410,198		55,264,976
Mortgage-backed securities		41,196,695		41,419,921
Totals	$	95,606,893	$	96,684,897

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $21,121,613 at December 31, 2014 and $20,420,437 at December 31, 2013.

The carrying value of securities sold under agreements to repurchase amounted to $9,165,462 and $9,541,242 at December 31, 2014 and 2013, respectively.

Gross gains of $429,105 and $907,908 and gross losses of $(20,352) and $(10,007) resulting from sales of available-for-sale securities were realized for 2014 and 2013, respectively.  The tax provision applicable to these net realized gains amounted to $138,976 and $305,286, respectively.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.  Total fair value of these investments at December 31, 2014 and 2013, was $40,587,408 and $71,198,051, which is approximately 42% and 65%, respectively, of the Company’s available-for-sale investment portfolio.  The declines primarily resulted from recent changes in market interest rates.

Management believes the declines in fair value for these securities are temporary.

39

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following table shows the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2014 and 2013:

	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	2,955,829	$	(28,208	)	$	3,949,940	$	(110,530	)	$	6,905,769	$	(138,738	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		2,061,203		(13,358	)		13,725,099		(197,173	)		15,786,302		(210,531	)
Municipal bonds		3,953,168		(44,654	)		13,942,169		(485,135	)		17,895,337		(529,789	)
Total temporarily impaired securities	$	8,970,200	$	(86,220	)	$	31,617,208	$	(792,838	)	$	40,587,408	$	(879,058	)

	December 31, 2013
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	5,824,808	$	(367,005	)	$	470,324	$	(38,530	)	$	6,295,132	$	(405,535	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		33,521,545		(1,065,542	)		6,087,526		(294,362	)		39,609,071		(1,359,904	)
Municipal bonds		22,534,325		(1,462,733	)		2,759,523		(260,581	)		25,293,848		(1,723,314	)
Total temporarily impaired securities	$	61,880,678	$	(2,895,280	)	$	9,317,373	$	(593,473	)	$	71,198,051	$	(3,488,753	)

U.S. Government Agencies

The unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

40

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Residential Mortgage-backed Securities

The unrealized losses on the Company’s investment in residential mortgage-backed securities were caused by interest rate increases.  The Company expects to recover the amortized cost basis over the term of the securities.  Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Municipal Bonds

The unrealized losses on the Company’s investments in securities of municipal bonds were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Note 4:          Loans and Allowance for Loan Losses

Classes of loans at December 31, include:

	2014		2013
Mortgage loans on real estate
Residential 1-4 family	$	44,561,089	$	44,286,657
Commercial		40,474,855		38,920,692
Agricultural		40,119,130		35,005,662
Home equity		11,283,264		11,729,112
Total mortgage loans on real estate		136,438,338		129,942,123
Commercial loans		26,813,880		29,946,928
Agricultural		11,844,973		10,559,593
Consumer		12,587,101		13,605,897
		187,684,292		184,054,541
Less
Net deferred loan fees		9,416		8,605
Allowance for loan losses		2,956,264		3,406,434
Net loans	$	184,718,612	$	180,639,502

41

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The Company’s loan portfolio includes loan participations purchased from other institutions.  The outstanding balance of these purchased loans totaled $14,064,902 and $14,210,231 as of December 31, 2014 and 2103, respectively.  Participations purchased during the years ended December 31, 2014 and 2013 totaled $2,677,750 and $3,877,762, respectively.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment.  Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords.  The Company maintains lending policies and procedures in place designed to focus lending efforts on the types, locations, and duration of loans most appropriate for the business model and markets.  The Company’s principal lending activities include the origination of one-to four-family residential mortgage loans, multi-family loans, commercial real estate loans, agricultural loans, home equity lines of credits, commercial business loans, and consumer loans.  The primary lending market includes the Illinois counties of Morgan, Macoupin and Montgomery.  Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers.  Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing.  In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company.  A loan application file is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness, and verifies the information provided.  The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval.  All residential real estate loans are then verified by our loan risk management department prior to closing.  The board of directors has established individual lending authorities for each loan officer by loan type.  Loans over an individual officer’s lending limit must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan.  Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members.  The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million.  The board of directors ratifies all loans that are originated.  Once the loan is approved, the applicant is informed and a closing date is scheduled.  Loan commitments are typically funded within 45 days.

If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances.  Title insurance is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the primary lending origination activity has been one-to-four family, owner-occupied, residential mortgage loans secured by property located in the Company’s market area.  The Company generates loans through marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses.  Generally, one-to-four family loan originations are limited to the financing of loans secured by properties located within the Company’s market area.  

42

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Fixed-rate one-to-four family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines.  The Company generally originates both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency for the secondary market.

The Company originates for resale to the secondary market fixed-rate one-to-four family residential mortgage loans with terms of 15 years or more.  The fixed-rate mortgage loans amortize monthly with principal and interest due each month.  Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option.  The Company offers fixed-rate one-to-four family residential mortgage loans with terms of up to 30 years without prepayment penalty.

The Company currently offers adjustable-rate mortgage loans for terms ranging up to 30 years.  They generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination.  Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan.  In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on the net interest income.  In the low interest rate environment that has existed over the past two years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio.  The Company has used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years.  The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, interest rate risk position and competitors’ loan products.

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased loan losses.

Residential first mortgage loans customarily include due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of imposing assumption fees and increasing the interest rate on mortgage portfolio during periods of rising interest rates.

When underwriting residential real estate loans, the Company reviews and verifies each loan applicant’s income and credit history.  Management believes that stability of income and past credit history are integral parts in the underwriting process.  Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 30% of the applicant’s total monthly income.  In addition, total monthly obligations of the applicant, including mortgage payments, should not generally exceed 43% of total monthly income.  Written appraisals are generally required on real estate property offered to secure an applicant’s loan.  For one-to-four family real estate loans with loan to value ratios of over 80%, private mortgage insurance is generally required.  Fire and casualty insurance is also required on all properties securing real estate loans.  Title insurance may be required, as circumstances warrant.

43

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The Company does not offer an “interest only” mortgage loan product on one-to-four family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).  They also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.  The Company does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Commercial and Agricultural Real Estate Loans - The Company originates and purchases commercial and agricultural real estate loans.  Commercial and agricultural real estate loans are secured primarily by improved properties such as farms, retail facilities and office buildings, churches and other non-residential buildings.  The maximum loan-to-value ratio for commercial and agricultural real estate loans originated is generally 75%.  The commercial and agricultural real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the prime rate and generally have a specified floor.  Many of the adjustable-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity.  The Company purchases from time to time commercial real estate loan participations primarily from outside the Company’s market area.  All participation loans are approved following a review to ensure that the loan satisfies the underwriting standards.

Underwriting standards for commercial and agricultural real estate loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan.  There is an emphasis on the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, the value of the real estate offered as collateral in relation to the proposed loan amount is considered.  Generally, the loan amount cannot be greater than 75% of the value of the real estate.  Written appraisals are usually obtained from either licensed or certified appraisers on all commercial and agricultural real estate loans in excess of $250,000.  Creditworthiness of the applicant is assessed by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by commercial and agricultural real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans.  Furthermore, the repayment of loans secured by commercial and agricultural real estate is typically dependent upon the successful operation of the related business and real estate property.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

44

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Commercial and Agricultural Business Loans - The Company originates commercial and agricultural business loans to borrowers located in the Company’s market area which are secured by collateral other than real estate or which can be unsecured.  Commercial business loan participations are also purchased from other lenders, which may be made to borrowers outside the Company’s market area.  Commercial and agricultural business loans are generally secured by accounts receivable, equipment, and inventory and generally are offered with adjustable rates tied to the prime rate or the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years and various terms of maturity generally from three years to five years.  Unsecured business loans are originated on a limited basis in those instances where the applicant’s financial strength and creditworthiness has been established.  Commercial and agricultural business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business.  Personal guarantees are generally obtained from the borrower or a third party as a condition to originating its business loans.

Underwriting standards for commercial and agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  Financial strength of each applicant is assessed through the review of financial statements and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Business loans are periodically reviewed following origination.  Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan.  Loan officers also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral.  Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Home Equity and Consumer Loans – The Company originates home equity and other consumer loans.  Home equity loans and lines of credit are generally secured by the borrower’s principal residence.  The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral including the amount of any prior mortgages or related liabilities.  Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which are determined based upon market conditions.  Such loans may be fully amortized over the life of the loan or have a balloon feature.  Generally, the maximum term for home equity loans is 10 years.

45

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The principal types of other consumer loans offered are loans secured by automobiles, deposit accounts, and mobile homes.  Unsecured consumer loans are also generated.  Consumer loans are generally offered on a fixed-rate basis.  Automobile loans with maturities of up to 60 months are offered for new automobiles.  Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile.  Automobile loans with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value are generally originated, although the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with the Company.

Underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  The length of employment with the borrower’s present employer is also considered, as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Consumer loans entail greater risks than one-to-four family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation.  Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Such events would increase the risk of loss on unsecured loans.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default. 

46

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2014 and 2013:

	December 31, 2014
	1-4 Family			Commercial Real Estate			Agricultural Real Estate		Commercial			Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	856,144		$	745,760		$	175,028	$	1,034,189		$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Provision charged to expense		241,875			392,009			20,518		(327,057	)		5,136		5,887			3,950			(102,318	)		240,000
Losses charged off		(100,319	)		(287,474	)		—		(285,411	)		—		(5,403	)		(25,781	)		—			(704,388	)
Recoveries		1,560			5,168			—		88			—		3,100			4,302			—			14,218
Balance, end of year	$	999,260		$	855,463		$	195,546	$	421,809		$	57,934	$	205,577		$	167,319		$	53,356		$	2,956,264
Ending balance: individually evaluated for impairment	$	183,196		$	348,240		$	—	$	154,089		$	—	$	9,982		$	—		$	—		$	695,507
Ending balance: collectively evaluated for impairment	$	816,064		$	507,223		$	195,546	$	267,720		$	57,934	$	195,595		$	167,319		$	53,356		$	2,260,757
Loans:
Ending balance	$	44,561,089		$	40,474,855		$	40,119,130	$	26,813,880		$	11,844,973	$	11,283,264		$	12,587,101		$	—		$	187,684,292
Ending balance: individually evaluated for impairment	$	713,962		$	1,690,251		$	1,009,889	$	240,805		$	258,140	$	37,531		$	8,469		$	—		$	3,959,047
Ending balance: collectively evaluated for impairment	$	43,847,127		$	38,784,604		$	39,109,241	$	26,573,075		$	11,586,833	$	11,245,733		$	12,578,632		$	—		$	183,725,245

	December 31, 2013
	1-4 Family			Commercial Real Estate			Agricultural Real Estate		Commercial		Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	741,029		$	828,873		$	149,568	$	934,251	$	43,930	$	328,996		$	151,474		$	161,343		$	3,339,464
Provision charged to expense		261,492			(218,949	)		25,460		92,597		8,868		(78,628	)		84,829			(5,669	)		170,000
Losses charged off		(162,448	)		—			—		—		—		(63,410	)		(66,467	)		—			(292,325	)
Recoveries		16,071			135,836			—		7,341		—		15,035			15,012			—			189,295
Balance, end of year	$	856,144		$	745,760		$	175,028	$	1,034,189	$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Ending balance: individually evaluated for impairment	$	—		$	248,857		$	—	$	622,730	$	—	$	—		$	10,836		$	—		$	882,423
Ending balance: collectively evaluated for impairment	$	856,144		$	496,903		$	175,028	$	411,459	$	52,798	$	201,993		$	174,012		$	155,674		$	2,524,011
Loans:
Ending balance	$	44,286,657		$	38,920,692		$	35,005,662	$	29,946,928	$	10,559,593	$	11,729,112		$	13,605,897		$	—		$	184,054,541
Ending balance: individually evaluated for impairment	$	563,524		$	1,531,078		$	—	$	662,730	$	—	$	71,548		$	101,089		$	—		$	2,929,969
Ending balance: collectively evaluated for impairment	$	43,723,133		$	37,389,614		$	35,005,662	$	29,284,198	$	10,559,593	$	11,657,564		$	13,504,808		$	—		$	181,124,572

47

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $750,000, new commercial and commercial real estate loans, and watch list credits over $75,000 are reviewed annually by our loan review department in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  During the periods presented, none of our loans were classified as Doubtful.

48

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2014 and 2013:

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2014		2013		2014		2013		2014		2013		2014		2013
Pass	$	41,530,699	$	41,061,498	$	38,122,972	$	36,489,660	$	39,109,241	$	35,005,662	$	26,563,823	$	29,231,227
Special Mention		655,049		775,545		53,750		57,488		887,048		—		—		—
Substandard		2,375,341		2,449,614		2,298,133		2,373,544		122,841		—		250,057		715,701
Total	$	44,561,089	$	44,286,657	$	40,474,855	$	38,920,692	$	40,119,130	$	35,005,662	$	26,813,880	$	29,946,928

	Agricultural Business				Home Equity				Consumer
	2014		2013		2014		2013		2014		2013
Pass	$	11,586,833	$	10,559,593	$	10,833,853	$	11,215,416	$	12,386,412	$	13,302,507
Special Mention		258,140		—		162,103		155,515		80,544		68,480
Substandard		—		—		287,308		358,181		120,145		234,910
Total	$	11,844,973	$	10,559,593	$	11,283,264	$	11,729,112	$	12,587,101	$	13,605,897

The following tables present the Company’s loan portfolio aging analysis as of December 31, 2014 and 2013:

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
1-4 Family	$	420,086	$	286,622	$	613,534	$	1,320,242	$	43,240,847	$	44,561,089	$	—
Commercial real estate		—		794,110		39,023		833,133		39,641,722		40,474,855		—
Agricultural real estate		—		—		122,841		122,841		39,996,289		40,119,130		—
Commercial		—		—		—		—		26,813,880		26,813,880		—
Agricultural business		—		—		—		—		11,844,973		11,844,973		—
Home equity		96,971		11,561		58,360		166,892		11,116,372		11,283,264		—
Consumer		90,558		5,531		16,560		112,649		12,474,452		12,587,101		—
Total	$	607,615	$	1,097,824	$	850,318	$	2,555,757	$	185,128,535	$	187,684,292	$	—

	December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
1-4 Family	$	350,539	$	95,782	$	806,877	$	1,253,198	$	43,033,459	$	44,286,657	$	—
Commercial real estate		—		68,216		78,281		146,497		38,774,195		38,920,692		—
Agricultural real estate		—		—		—		—		35,005,662		35,005,662		—
Commercial		—		—		—		—		29,946,928		29,946,928		—
Agricultural business		—		—		—		—		10,559,593		10,559,593		—
Home equity		156,331		47,585		55,288		259,204		11,469,908		11,729,112		—
Consumer		108,452		26,212		9,900		144,564		13,461,333		13,605,897		—
Total	$	615,322	$	237,795	$	950,346	$	1,803,463	$	182,251,078	$	184,054,541	$	—

49

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses.  Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans.  The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms.  Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.  Restructured loans in compliance with modified terms are classified as impaired.

50

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following tables present impaired loans for the years ended December 31, 2014 and 2013:

	December 31, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	129,272	$	129,272	$	—	$	220,541	$	12,818	$	13,076
Commercial real estate		564,610		564,610		—		757,616		19,826		18,816
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		27,549		27,549		—		29,505		2,881		2,939
Consumer		8,469		8,469		—		12,285		951		964
Loans with a specific valuation allowance
1-4 Family		584,690		584,690		183,196		604,031		28,722		26,783
Commercial real estate		1,125,641		1,125,641		348,240		1,134,401		66,864		60,012
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Home equity		9,982		9,982		9,982		9,993		247		187
Total:
1-4 family		713,962		713,962		183,196		824,572		41,540		39,859
Commercial real estate		1,690,251		1,690,251		348,240		1,892,017		86,690		78,828
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		37,531		37,531		9,982		39,498		3,128		3,126
Consumer		8,469		8,469		—		12,285		951		964
Total	$	3,959,047	$	3,959,047	$	695,507	$	4,484,374	$	218,710	$	189,536

51

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

	December 31, 2013
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	563,524	$	563,524	$	—	$	652,373	$	27,250	$	25,347
Commercial real estate		63,293		63,293		—		96,019		5,282		5,327
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		4,528		4,528		—		6,419		453		442
Loans with a specific valuation allowance
Commercial real estate		1,467,785		1,467,785		248,857		1,488,243		79,719		74,028
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Consumer		96,561		96,561		10,836		99,401		1,586		1,576
Total:
1-4 family		563,524		563,524		—		652,373		27,250		25,347
Commercial real estate		1,531,078		1,531,078		248,857		1,584,262		85,001		79,355
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		101,089		101,089		10,836		105,820		2,039		2,018
Total	$	2,929,969	$	2,929,969	$	882,423	$	3,135,112	$	151,772	$	143,621

The following table presents the Company’s nonaccrual loans at December 31, 2014 and 2013.  This table excludes performing troubled debt restructurings.

	2014		2013
1-4 family	$	994,855	$	1,339,487
Commercial real estate		932,578		208,297
Agricultural real estate		122,841		—
Commercial		22,438		37,939
Agricultural business		—		—
Home equity		120,698		133,823
Consumer		70,643		62,617
Total	$	2,264,053	$	1,782,163

52

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

At December 31, 2014 and 2013, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired.  The modification of terms of such loans included one or a combination of the following:  an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of December 31, 2014 and 2013.

	2014		2013
1-4 family	$	747,470	$	661,880
Commercial real estate		1,265,079		1,137,667
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		15,379		79,087
Consumer		42,786		43,559
Total	$	2,283,293	$	2,597,676

The following table presents the recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring, as of December 31, 2014 and 2013.

	2014		2013
1-4 family	$	567,931	$	591,000
Commercial real estate		470,969		1,074,194
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		12,074		13,015
Consumer		42,786		42,059
Total	$	1,306,339	$	2,395,751

53

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following table presents loans modified as troubled debt restructurings during the years ended December 31, 2014 and 2013.

	Year Ended December 31, 2014				Year Ended December 31, 2013
	Number of Modifications		Recorded Investment		Number of Modifications		Recorded Investment
1-4 family		3	$	201,879		8	$	522,819
Commercial real estate		1		386,355		3		175,649
Agricultural real estate		—		—		—		—
Commercial		—		—		1		40,644
Agricultural business		—		—		—		—
Home equity		—		—		—		—
Consumer		1		15,953		1		27,593
Total		5	$	604,187		13	$	766,705

2014 Modifications

The Company modified three one-to-four family residential real estate loans, with a recorded investment of $201,879, which were deemed TDR’s.  Two of the loans were restructured with the interest and real estate taxes capitalized to the balance of the note.  One of the loans was extended without the full collection of accrued interest.  None of the modifications resulted in a reduced interest rate or a write-off of the principal balance.

The Company modified one commercial real estate loan with a total recorded balance of $386,355, which was deemed a TDR.  The loan was restructured to provide additional funds for cash flow needs of the borrower.  The modification did not result in a reduced interest rate or a write-off of the principal balance.

The Company modified one consumer loan with a recorded investment of $15,953, which was deemed a TDR.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduced interest rate or a write-off of the principal balance.

2013 Modifications

The Company modified eight one-to-four family residential real estate loans, with a recorded investment of $522,819, which were deemed to be TDR’s.  One of the loans was restructured with interest capitalized.  One of the loans was restructured after a principal write-off of $35,871.  Three of the loans were restructured with delinquent real estate taxes capitalized.  Three of the loans were restructured with a reduced interest rate and the accrued interest capitalized to the balance of the note.  None of the modifications resulted in a write-off of the principal balance.

The Company modified three commercial real estate loans with a total recorded balance of $175,649, which were deemed TDR’s.  The loans were restructured to change the payment schedule to interest only for a period of time.

54

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The Company modified one commercial loan with a total recorded balance of $40,644, which was deemed a TDR.  The modification was made to capitalize delinquent taxes.

The Company also modified one consumer loan with a recorded investment of $27,593.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

TDRs with Defaults

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the year ended December 31, 2014, one residential real estate loan of $38,737 and one home equity loan of $3,305 were considered TDR’s defaulted as they were more than 90 days past due at December 31, 2014.  In addition, three residential real estate loans of $140,549, two commercial real estate loans of $840,115, two commercial loans of $22,437, and one consumer loan of $25,055 were considered TDR’s defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

During the year ended December 31, 2013, two residential real estate loans of $70,880 were considered TDR’s defaulted as they were more than 90 days past due at December 31, 2013.  In addition, four one-to-four family residential real estate loans of $206,299, one commercial real estate loan of $61,980, two commercial business loans of $37,939, two home equity loans of $7,558, and one consumer loan of $27,593 were considered TDR’s defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

Note 5:          Premises and Equipment

Major classifications of premises and equipment, stated at cost, are as follows:

	2014			2013
Land	$	773,186		$	773,186
Buildings and improvements		6,661,148			6,694,149
Equipment		3,254,434			4,808,044
		10,688,768			12,275,379
Less accumulated depreciation		(5,742,785	)		(7,096,401	)
Net premises and equipment	$	4,945,983		$	5,178,978

55

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 6:          Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates.  The unpaid principal balance of mortgage loans serviced for others was $137,877,795 and $145,883,259 at December 31, 2014 and 2013, respectively.

The following summarized the activity pertaining to mortgage servicing rights measured using the amortization method, along with the aggregate activity in related valuation allowances:

	2014			2013
Mortgage servicing rights
Balance, beginning of year	$	746,968		$	793,715
Additions		53,859			101,538
Amortization		(111,224	)		(148,285	)
Balance at end of year		689,603			746,968
Valuation allowances
Balance at beginning of year		73,392			129,279
Additions due to decreases in market value		—			—
Reduction due to increases in market value		—			(33,649	)
Reduction due to payoff of loans		(16,423	)		(22,238	)
Balances at end of year		56,969			73,392
Mortgage servicing assets, net	$	632,634		$	673,576
Fair value disclosures
Fair value as of the beginning of the period	$	1,120,000		$	765,029
Fair value as of the end of the period	$	979,699		$	1,120,000

In prior years, a valuation allowance of $428,030 was necessary to adjust the aggregate cost basis of the mortgage servicing right asset to fair value.  The valuation allowance was adjusted during 2013 and 2014 due to payments received on the related loans as well as changes in the estimated market value on the mortgage servicing rights asset.

Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.  For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights.

56

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 7:          Interest-bearing Deposits

Interest-bearing deposits in denominations of $100,000 or more totaled $96,271,806 at December 31, 2014 and $96,951,245 at December 31, 2013.

The following table represents deposit interest expense by deposit type:

	December 31,
	2014		2013
Savings, NOW and Money Market	$	257,214	$	256,010
Certificates of deposit		1,179,589		1,510,730
Total deposit interest expense	$	1,436,803	$	1,766,740

At December 31, 2014, the scheduled maturities of time deposits are as follows:

2015	$	51,911,089
2016		20,213,799
2017		10,056,961
2018		5,760,161
2019		6,657,553
	$	94,599,563

Note 8:          Short-term Borrowings

Short-term borrowings include securities sold under agreements to repurchase totaling $8,821,730 and $8,810,297 at December 31, 2014 and 2013, respectively.

Securities sold under agreements to repurchase consist of obligations of the Company to other parties.  The obligations are secured by investments and such collateral is held by the Company.  The maximum amount of outstanding agreements at any month end during 2014 and 2013 totaled $9,483,795 and $9,445,747, respectively, and the monthly average of such agreements totaled $6,229,604 and $6,208,142 for 2014 and 2013, respectively.  The agreements at December 31, 2014, are all for overnight borrowings.

Also included in short-term borrowings are advances with the Federal Home Loan Bank (FHLB) of which $5,000,000 and $10,800,000 had been extended as of December 31, 2014 and 2013, respectively.  The advances mature in 2015 and are secured by mortgage loans totaling $42,384,000 at December 31, 2014.  Advances, at an interest rate of 0.33%, are subject to restrictions or penalties in the event of prepayment.

57

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 9:          Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal and state of Illinois jurisdictions.  During the years ended December 31, 2014 and 2013, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:

	2014		2013
Taxes currently payable
Federal	$	798,160	$	813,409
State		—		406,770
Deferred income taxes		135,886		(31,880	)
Income tax expense	$	934,046	$	1,188,299

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	2014			2013
Computed at the statutory rate (34%)	$	1,328,312		$	1,496,661
Increase (decrease) resulting from
Tax exempt interest		(503,089	)		(509,850	)
State income taxes, net		173,879			264,287
Increase in cash surrender value		(63,235	)		(66,246	)
Other		(1,821	)		3,447
Actual tax expense	$	934,046		$	1,188,299
Tax expense as a percentage of pre-tax income		23.91	%		26.99	%

58

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:

	2014			2013
Deferred tax assets
Allowance for loan losses	$	1,060,419		$	1,241,702
Deferred compensation		1,712,570			1,610,547
State net operating loss carryforward		4,749			186,497
Unrealized losses on available-for-sale securities		—			714,497
Other		40,270			840
		2,818,008			3,754,083
Deferred tax liabilities
Unrealized gains on available-for-sale securities		(366,521	)		—
Depreciation		(478,427	)		(536,706	)
Federal Home Loan Bank stock dividends		(152,224	)		(152,224	)
Prepaid expenses		(79,868	)		(90,794	)
Mortgage servicing rights		(254,762	)		(271,249	)
		(1,331,802	)		(1,050,973	)
Net deferred tax asset	$	1,486,206		$	2,703,110

At December 31, 2014 and 2013, the Company had Illinois net operating loss carryforwards totaling approximately $98,574 and $3,870,846, respectively, which will expire in varying amounts between 2018 and 2022.  Recent Illinois legislation limited the use of these loss carryovers for tax years 2011 through 2013 and the expiration dates were extended by three years.  Management believes the Company will produce taxable earnings in the future which will enable the net operating loss carryforwards to be utilized prior to expiration.

Retained earnings at December 31, 2014 and 2013, include approximately $2,600,000, for which no deferred federal income tax liability has been recognized.  These amounts represent an allocation of income to bad debt deductions for tax purposes only.  Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate.  The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $1,000,000 at December 31, 2014 and 2013.

59

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 10:        Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

	2014			2013
Net unrealized gain (loss) on securities available-for-sale	$	1,078,004		$	(2,101,461	)
Tax effect		(366,521	)		714,497
Net-of-tax amount	$	711,483		$	(1,386,964	)

Note 11:        Changes in Accumulated Other Comprehensive Income (AOCI) by Component

Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2014 and 2013, were as follows:

	Amounts Reclassified from AOCI						Affected Line Item in the
	2014			2013			Statements of Income
Unrealized gains on available-for-sale securities	$	408,753		$	897,901		Realized gain on sale of securities
							Total reclassified amount before tax
		(138,976	)		(305,286	)	Tax expense
	$	269,777		$	592,615		Net reclassified amount

Note 12:        Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the 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.  The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.  Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined).  Management believes, as of December 31, 2014 and 2013, that the Bank meets all capital adequacy requirements to which it is subject.

60

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

As of December 31, 2014, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts (in thousands) and ratios are also presented in the table.

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Total risk-based capital (to risk-weighted assets)	$	40,252		18.81	%	$	17,119		8.0	%	$	21,399		10.0	%
Tier I capital (to risk-weighted assets)		37,574		17.56			8,560		4.0			12,839		6.0
Tier I capital (to average assets)		37,574		12.25			12,269		4.0			15,336		5.0
Tangible capital (to adjusted tangible assets)		37,574		12.25			4,601		1.5			—		N/A
As of December 31, 2013
Total risk-based capital (to risk-weighted assets)	$	38,766		18.15	%	$	17,089		8.0	%	$	21,361		10.0	%
Tier I capital (to risk-weighted assets)		36,087		16.89			8,544		4.0			12,817		6.0
Tier I capital (to average assets)		36,087		11.51			12,546		4.0			15,682		5.0
Tangible capital (to adjusted tangible assets)		36,087		11.51			4,705		1.5			—		N/A

61

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following is a reconciliation of the Bank equity amount included in the consolidated balance sheets to the amounts (in thousands) reflected above for regulatory capital purposes as of December 31:

	2014		2013
Bank equity	$	41,012	$	37,427
Less net unrealized gain (loss)		711		(1,387	)
Less disallowed goodwill		2,727		2,727
Tier 1 capital		37,574		36,087
Plus allowance for loan losses		2,678		2,679
Total risked-based capital	$	40,252	$	38,766

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.  As of December 31, 2014, the Bank has $1,396,844 available for the payment of dividends without prior regulatory approval.

On January 19, 2010, the Boards of Directors of the Company, Jacksonville Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion and Reorganization of Jacksonville Bancorp, MHC (the “Plan”) pursuant to which Jacksonville Bancorp, MHC undertook a “second-step” conversion and ceased to exist. Jacksonville Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July 14, 2010.

In accordance with Board of Governors of the Federal Reserve System regulations, at the time of the reorganization, the Company substantially restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their accounts at the Bank after conversion. The Bank will establish a parallel liquidation account to support the Company’s liquidation account in the event the Company does not have sufficient assets to fund its obligations under its liquidation account. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts. In the event of a complete liquidation of the Bank or the Company, each account holder will be entitled to receive a distribution in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

Note 13:        Related Party Transactions

At December 31, 2014 and 2013, the Company had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties) in the amount of $3,523,047 and $3,852,658, respectively.

Annual activity consisted of the following:

	2014			2013
Balance beginning of year	$	3,852,658		$	4,052,339
Additions		1,876,445			1,156,220
Repayments		(2,206,056	)		(1,355,901	)
Balance, end of year	$	3,523,047		$	3,852,658

Deposits from related parties held by the Company at December 31, 2014 and 2013 totaled approximately $3,112,000 and $3,117,000, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons.  Further, in management’s opinion, these loans did not involve more than normal risk of collectibility or present other unfavorable features.

62

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 14:        Employee Benefits

401(k) Plan — The Company maintains a 401(k) savings plan for eligible employees.  The Company’s contributions to this plan were $232,567 and $224,099 for the years ended December 31, 2014 and 2013, respectively.  The plan invests some of its assets in deposit accounts at the Company which earned interest at a rate of 1.85% for the year ended December 31, 2014 and 1.85% to 2.00% for the year ended December 31, 2013.

Deferred Compensation Plan — The Company maintains a deferred compensation plan for certain key officers and employees.  Contributions are determined annually by the Company’s Board of Directors.  Effective in 2005, the Company froze this plan and no contributions to this plan were made for the years ended December 31, 2014 or 2013.  The plan accrues interest at a variable rate which fluctuates based on Moody’s Corporate Bond Average Index.  The amount recorded on the consolidated balance sheets as deferred compensation was $2,451,200 and $2,374,940 as of December 31, 2014 and 2013, respectively.  Compensation expense related to the plan was $140,714 and $139,308 for the years ended December 31, 2014 and 2013, respectively.

The Company has also entered into deferred compensation agreements with certain key officers and employees.  The agreements provide for monthly payments at retirement or death.  The charge to expense for this plan reflects the accrual using the principal and interest method over the vesting period of the present value of benefits due each participant on the full eligibility date using a 4.75% discount rate.  The amount recorded on the consolidated balance sheets as deferred compensation was $1,801,520 and $1,624,431 as of December 31, 2014 and 2013, respectively.  Compensation expense related to the plans was $241,745 and $302,138 for the years ended December 31, 2014 and 2013, respectively.

Employee Stock Ownership Plan (ESOP) — The ESOP is a noncontributory defined contribution plan which covers substantially all employees.  The Company may contribute to the Plan, at its discretion, an amount determined by the Board of Directors.

As part of the second step conversion, in July 2010 the Company acquired 41,614 additional shares of Company common stock at $10 per share in the conversion with funds provided by a loan from the Company.  Accordingly, $416,140 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity.  Shares are released to participants proportionately as the loan is repaid.  Dividends on allocated shares are recorded as dividends and charged to retained earnings.  Dividends on unallocated shares are used to repay the loan and are treated as compensation expense.  Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company, are made to the ESOP.

63

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

ESOP expense for the years ended December 31, 2014 and 2013 was $80,978 and $70,448, respectively.

	2014		2013
Allocated shares	$	54,519	$	55,515
Shares committed for allocation		3,767		3,680
Unearned shares		24,991		28,758
Total ESOP shares		83,277		87,953
Fair value of unearned shares at December 31	$	574,793	$	562,219

Note 15:        Stock Option Plans

The Jacksonville Savings Bank and Jacksonville Bancorp, MHC 1996 Stock Option Plan was adopted on April 23, 1996 and is administered by the Board of Directors.  A total of 83,625 shares of common stock were reserved and awarded under the Plan.  Awards expire ten years after the grant date and are exercisable at a price of $8.83 per share.  In 2004, 5,600 shares related to this plan were reissued at a price of $14.00 per share.  The Jacksonville Savings Bank 2001 Stock Option Plan was adopted on April 30, 2001 and is administered by the Stock Benefits Committee.  A total of 87,100 shares of common stock were reserved and awarded under the Plan during 2001 that expire ten years after the grant date and are exercisable at a price of $10.00 per share.

The Jacksonville Bancorp, Inc. 2012 Stock Option Plan, which is shareholder approved, permits the grant of share options and shares to its employees for up to 104,035 shares of common stock.  The Company believes that such awards better align the interests of its employees with those of its shareholders.  All shares were awarded as of the approval date, expire ten years after the grant date, and are exercisable at a price of $15.65 per share.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table.  Expected volatility is based on historical volatility of the Company’s stock and other factors.  The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.  The expected term of options granted represents the period of time that options are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  The discount rate for post-vesting restrictions is estimated based on the Company’s credit-adjusted risk-free rate of return.

64

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

A summary of option activity under the Plans as of December 31, 2014 and 2013, and changes during the years then ended, is presented below:

	2014
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		101,336		$	15.63
Granted		—			—
Exercised		(15,101	)		15.53
Forfeited or expired		(400	)		15.65
Outstanding, end of year		85,835		$	15.65		7.25	$	630,887
Exercisable, end of year		23,600		$	15.65		7.25	$	173,460

65

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

	2013
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		107,338		$	15.60
Granted		—			—
Exercised		(6,002	)		15.04
Forfeited or expired		—			—
Outstanding, end of year		101,336		$	15.63		8.17	$	397,049
Exercisable, end of year		18,151		$	15.55		7.78	$	72,628

The total intrinsic value of options exercised during the years ended December 31, 2014 and 2013 was $90,606 and $24,548, respectively.

As of December 31, 2014, there was $202,804 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2012 Plan.  That cost is expected to be recognized over a weighted-average period of 3 years.  The total fair value of shares vested during the year ended December 31, 2014 and 2013 was $90,163 and $90,162.  The recognized tax benefit related thereto was $34,622 and $36,309 for the years ended December 31, 2014 and 2013, respectively.

A summary of the status of the Company’s nonvested shares as of December 31, 2014 and 2013, and changes during the year then ended, is presented below:

	December 31, 2014
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		83,185		$	4.34
Granted		—			—
Vested		(20,550	)		4.34
Forfeited		(400	)		—
Nonvested, end of year		62,235		$	4.34

66

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

	December 31, 2013
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		104,035		$	4.34
Granted		—			—
Vested		(20,850	)		4.34
Forfeited		—			—
Nonvested, end of year		83,185		$	4.34

Note 16:        Earnings Per Share

Earnings per share (EPS) were computed as follows:

	Year Ended December 31, 2014
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	2,972,754
Basic earnings per share
Income available to common stockholders				1,791,888	$	1.66
Effect of dilutive securities
Stock options				11,173
Diluted earnings per share
Income available to common stockholders	$	2,972,754		1,803,061	$	1.65

67

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

	Year Ended December 31, 2013
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,213,645
Basic earnings per share
Income available to common stockholders				1,853,240	$	1.73
Effect of dilutive securities
Stock options				296
Diluted earnings per share
Income available to common stockholders	$	3,213,645		1,853,536	$	1.73

Options to purchases 100,235 shares of common stock were outstanding at December 31, 2013, but were not included in the computation of diluted EPS because the shares were considered antidilutive for the year ended December 31, 2013.

Note 17:        Disclosures about Fair Value of Assets

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

68

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	9,958,273	$	—	$	9,958,273	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,419,921		—		41,419,921		—
Municipal bonds		45,306,703		—		45,306,703		—

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	10,420,076	$	—	$	10,420,076	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		48,345,655		—		48,345,655		—
Municipal bonds		50,218,866		—		50,218,866		—

69

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the year ended December 31, 2014.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.  The Company has no Level 1 securities.  If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models.  Such securities are classified in Level 2 of the valuation hierarchy.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.  The Company did not have securities considered Level 3 as of December 31, 2014 or December 31, 2013.

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,147,400	$	—	$	—	$	1,147,400

70

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,219,185	$	—	$	—	$	1,219,185
Mortgage servicing rights		673,576		—		—		673,576

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $(265,687) and $(23,206) at December 31, 2014 and 2013.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices.  Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.  Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

71

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Mortgage servicing rights are tested for impairment on at least an annual basis.  The Company uses a third-party to measure mortgage servicing rights through the completion of a proprietary model.  Inputs to the model are reviewed by the Company.  Fair value adjustments on mortgage servicing rights were $0 and $33,649 at December 31, 2014 and 2013.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements.

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,147,400	Market comparable properties	Marketability discount		20% – 30% (25	%)

	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,219,185	Market comparable properties	Marketability discount		20% – 30% (25	%)
Mortgage servicing rights	$	673,576	Discounted cash flow	Discount rate PSA standard prepayment model rate		8% - 12.5% (10.24%) 144 – 342 (164	)

72

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Fair Value of Other Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	9,611,638	$	9,611,638	$	—	$	—
Other investments		73,766		—		73,766		—
Loans held for sale		235,600		—		235,600		—
Loans, net of allowance for loan losses		184,718,612		—		—		184,573,401
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,713,243		—		1,713,243		—
Financial liabilities
Deposits		245,941,562		—		151,341,999		96,956,400
Short-term borrowings		13,821,730		—		8,821,730		4,996,109
Advances from borrowers for taxes and insurance		962,762		—		962,762		—
Interest payable		166,052		—		166,052		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

73

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

			December 31, 2013
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	6,098,870	$	6,098,870	$	—	$	—
Other investments		81,918		—		81,918		—
Loans held for sale		262,461		—		262,461		—
Loans, net of allowance for loan losses		180,639,502		—		—		178,866,833
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,817,415		—		1,817,415		—
Financial liabilities
Deposits		251,738,391		—		143,586,822		111,116,837
Short-term borrowings		19,610,297		—		19,610,297		—
Advances from borrowers for taxes and insurance		857,814		—		857,814		—
Interest payable		210,226		—		210,226		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

74

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest Receivable, Federal Home Loan Bank Stock, and Other Investments

The carrying amount approximates fair value.

Loans Held for Sale

For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

Loans

The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.  

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.  The carrying amount approximates fair value.  The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings, Interest Payable, and Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Commitments to Originate Loans, Letters of Credit, and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

75

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 18:        Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations.  Estimates related to the allowance for loan losses are reflected in the note regarding loans.  Current vulnerabilities due to certain concentrations of credit risk are discussed in the note on commitments and credit risk.  Other significant estimates not discussed in those notes include:

General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

Goodwill

As discussed in Note 1, the Company annually tests its goodwill for impairment.  At the most recent testing date, the fair value of the banking reporting unit exceeded its carrying value.  Estimated fair value was based principally on forecasts of future income.  Management believes it has applied reasonable judgment in developing its estimates; however, unforeseen negative changes in the national, state or local economic environment may negatively impact those estimates in the near term.

Note 19:        Commitments and Credit Risk

The Company grants agribusiness, commercial and residential loans to customers in Cass, Morgan, Macoupin, Montgomery and surrounding counties in Illinois.  The Company’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets.  Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions and the agricultural economy in these counties.  The Company also purchases participation loans from out of territory areas.

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At December 31, 2014 and 2013, the Company had outstanding commitments to originate loans aggregating approximately $3,493,500 and $9,242,300, respectively.  The commitments extended over varying periods of time with the majority being disbursed within a one-year period.  Loan commitments at fixed rates of interest amounted to $2,702,000 and $4,676,300 at December 31, 2014 and 2013, respectively, with the remainder at floating market rates.  The range of fixed rates was 2.88% to 8.00% as of December 31, 2014.

76

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.  Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations.  The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.  Should the Company be obliged to perform under the standby letters of credit, the Company may seek recourse from the customer for reimbursement of amounts paid.

The Company had total outstanding standby letters of credit amounting to $255,340 and $360,000 at December 31, 2014 and 2013, respectively, with terms of one year or less.  At December 31, 2014 and 2013, the Company’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Lines of credit generally have fixed expiration dates.  Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.  Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At December 31, 2014, the Company had unused lines of credit to borrowers aggregating approximately $21,498,070 and $9,742,393 for commercial lines and open-ended consumer lines, respectively.  At December 31, 2013, unused lines of credit to borrowers aggregated approximately $22,038,305 for commercial lines and $10,413,745 for open-ended consumer lines.

77

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 20:        Quarterly Results of Operations (Unaudited)

	Year Ended December 31, 2014
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,921,442	$	2,946,212	$	2,978,484	$	3,045,770
Interest expense		337,222		353,542		371,036		389,658
Net interest income		2,584,220		2,592,670		2,607,448		2,656,112
Provision for loan losses		150,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,434,220		2,562,670		2,577,448		2,626,112
Noninterest income		949,801		1,024,088		947,678		997,532
Noninterest expense		2,548,408		2,470,123		2,723,872		2,470,346
Income before income taxes		835,613		1,116,635		801,254		1,153,298
Income tax expense		183,641		260,619		176,277		313,509
Net income	$	651,972	$	856,016	$	624,977	$	839,789
Basic earnings per share	$	0.37	$	0.48	$	0.35	$	0.47
Diluted earnings per share	$	0.36	$	0.47	$	0.35	$	0.47

78

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

	Year Ended December 31, 2013
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	3,139,867	$	3,061,017	$	2,924,714	$	2,952,167
Interest expense		415,265		439,617		454,298		472,091
Net interest income		2,724,602		2,621,400		2,470,416		2,480,076
Provision for loan losses		130,000		10,000		—		30,000
Net interest income after provision for loan losses		2,594,602		2,611,400		2,470,416		2,450,076
Noninterest income		918,665		1,010,359		1,027,808		1,486,038
Noninterest expense		2,650,580		2,564,351		2,467,610		2,484,879
Income before income taxes		862,687		1,057,408		1,030,614		1,451,235
Income tax expense		207,234		271,739		270,539		438,787
Net income	$	655,453	$	785,669	$	760,075	$	1,012,448
Basic earnings per share	$	0.36	$	0.43	$	0.41	$	0.54
Diluted earnings per share	$	0.36	$	0.42	$	0.41	$	0.54

79

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Note 21:        Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets

	December 31,
	2014		2013
Assets
Cash and due from banks	$	3,847,179	$	3,479,895
Investment in common stock of subsidiary		41,012,112		37,426,345
Loan receivable from subsidiary		254,385		291,037
Other assets		96,993		130,137
Total assets	$	45,210,669	$	41,327,414
Liabilities
Other liabilities	$	194,571	$	188,618
Stockholders’ Equity		45,016,098		41,138,796
Total liabilities and stockholders’ equity	$	45,210,669	$	41,327,414

80

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Condensed Statements of Income and Comprehensive Income (Loss)

	Year Ending December 31,
	2014			2013
Income
Dividends from subsidiary	$	2,000,000		$	1,500,000
Other income		12,245			14,177
Total income		2,012,245			1,514,177
Expenses
Other expenses		707,692			465,624
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		1,304,553			1,048,553
Income Tax Benefit		(271,357	)		(182,847	)
Income Before Equity in Undistributed Income of Subsidiary		1,575,910			1,231,400
Equity in Undistributed Income of Subsidiary		1,396,844			1,982,245
Net Income	$	2,972,754		$	3,213,645
Comprehensive Income (Loss)	$	5,071,201		$	(1,069,912	)

81

Jacksonville Bancorp, Inc. 

Notes to Consolidated Financial Statements 

December 31, 2014 and 2013

Condensed Statements of Cash Flows

	Year Ending December 31,
	2014			2013
Operating Activities
Net income	$	2,972,754		$	3,213,645
Items not providing cash, net		(1,396,844	)		(1,982,245	)
Stock-based compensation expense		90,163			90,162
Change in other assets and liabilities, net		29,599			112,013
Net cash provided by operating activities		1,695,672			1,433,575
Investing Activity
Loan payment from subsidiary		36,652			35,527
Net cash provided by investing activities		36,652			35,527
Financing Activities
Dividends paid		(570,843	)		(565,526	)
Stock repurchase		(1,028,688	)		(1,596,959	)
Exercise of stock options		234,491			90,254
Net cash used in financing activities		(1,365,040	)		(2,072,231	)
Net Change in Cash and Cash Equivalents		367,284			(603,129	)
Cash and Cash Equivalents at Beginning of Year		3,479,895			4,083,024
Cash and Cash Equivalents at End of Year	$	3,847,179		$	3,479,895

82

Common Stock Information

Our common stock is traded on the Nasdaq Capital Market under the symbol “JXSB”.  As of December 31, 2014, we had approximately 736 stockholders of record, including brokers, who held 1,799,483 shares of our outstanding common stock.

The following table sets forth market price and dividend information for our common stock for the two years ended December 31, 2014.

	Price Per Share				Cash
	High		Low		Dividend Declared
2014
Fourth quarter	$	24.00	$	21.75	$	0.080
Third quarter		23.90		21.14		0.080
Second quarter		22.95		20.00		0.080
First quarter		21.90		19.40		0.080
2013
Fourth quarter	$	19.78	$	19.28	$	0.080
Third quarter		19.99		19.00		0.075
Second quarter		19.80		18.75		0.075
First quarter		19.80		17.25		0.075

For a discussion of the restrictions on the Company’s ability to pay dividends, see Note 12 to the Consolidated Financial Statements.

83

Directors and Executive Officers

Directors	Executive Officers
Andrew F. Applebee   Chairman of the Board	Andrew F. Applebee   Chairman of the Board
Richard A. Foss   President and Chief Executive Officer	Richard A. Foss   President and Chief Executive Officer
John C. Williams   Senior Vice President and Trust Officer	John C. Williams   Senior Vice President and Trust Officer
John M. Buchanan   Certified Funeral Service Practitioner   Buchanan & Cody Funeral Home and Crematory, Inc.	John D. Eilering   Vice President – Operations / Corporate Secretary
Peggy S. Davidsmeyer   Administrator   Knollwood Retirement Village	Laura A. Marks   Senior Vice President – Retail Banking
Harmon B. Deal, III   Investment Advisor   L.A. Burton & Associates	Chris A. Royal   Senior Vice President and Chief Lending Officer
John L. Eyth   Certified Public Accountant   Zumbahlen Eyth Surratt Foote & Flynn, Ltd.	Diana S. Tone   Chief Financial Officer
Dean H. Hess   Self-employed farmer

84

Corporate Information

Corporate Headquarters	Transfer Agent
1211 West Morton	Hickory Point Bank & Trust, fsb
Jacksonville, Illinois  62650	P.O. Box 2557
(217) 245-4111	Decatur, Illinois  62525-2557
Website:  www.jacksonvillesavings.com	(217) 872-6373
E-mail:  info@jacksonvillesavings.com
Special Counsel	Independent Registered Public Accounting Firm
Luse Gorman, P.C.	BKD, LLP
5335 Wisconsin Ave., N.W., Suite 780	225 North Water Street, Suite 400
Washington, D.C.  20015	Decatur, Illinois  62525-1580
(202) 274-2000	(217) 429-2411

Annual Meeting

The Annual Meeting of the Stockholders will be held April 28, 2015 at 1:30 p.m., central time, at our main office at 1211 West Morton, Jacksonville, Illinois.

General Inquiries

A copy of our Annual Report to the SEC on Form 10-K may be obtained without charge by written request of stockholders to Diana Tone or by calling us at (217) 245-4111.  The Form 10-K is also available on our website at www.jacksonvillesavings.com.  Our Code of Ethics, Audit Committee Charter, Nominating and Corporate Governance Committee Charter, Compensation Committee Charter, and Beneficial Ownership reports of our directors and executive officers are also available on our website.

FDIC Disclaimer

This Annual Report has not been reviewed or confirmed for accuracy or relevance by the FDIC.

85

EX-21

Exhibit 21

	Subsidiaries
Jacksonville Savings Bank	100% owned by Jacksonville Bancorp, Inc.
Financial Resources Group, Inc.	100% ownership by Jacksonville Savings Bank

EX-23

Exhibit 23
 

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-168355) and the Registration Statement on Form S-8 (No. 333-186754) of our report dated March 13, 2015, included in the Annual Report on Form 10-K of Jacksonville Bancorp, Inc. for the year ended December 31, 2014.

/s/ BKD, LLP

Decatur, Illinois

March 13, 2015

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

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

I, Richard A. Foss, certify that:

1. I have reviewed this annual report on Form 10-K of Jacksonville Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers 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 controlover financial reporting (as defined in Exchange Act Rules 13-a-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; and

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers 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 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.

March 13, 2015	/s/ Richard A. Foss
Date	Richard A. Foss
	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, Diana S. Tone, certify that:

1. I have reviewed this annual report on Form 10-K of Jacksonville Bancorp, Inc.;

5. 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;

6. 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;

7. The registrant’s other certifying officers 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 13-a-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; and

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers 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 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.

March 13, 2015	/s/ Diana S. Tone
Date	Diana S. Tone
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacksonville Bancorp, Inc. (“Company”) on Form 10-K for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard A. Foss, President and Chief Executive Officer and I, Diana S. Tone, Chief Financial Officer of the Company certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002:

(1) the Report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and

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

March 13, 2015	/s/ Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer
March 13, 2015	/s/ Diana S. Tone
Date	Diana S. Tone
	Chief Financial Officer

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Schedule of components of accumulated other comprehensive income included in stockholders' equity

	2014			2013
Net unrealized gain (loss) on securities available-for-sale	$	1,078,004		$	(2,101,461	)
Tax effect		(366,521	)		714,497
Net-of-tax amount	$	711,483		$	(1,386,964	)

XML

Securities - Gross unrealized losses and fair value in a continuous unrealized loss position (Details 2) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 8,970,200	$ 61,880,678
Less than 12 Months, Unrealized Losses	(86,220)	(2,895,280)
12 Months or More, Fair Value	31,617,208	9,317,373
12 Months or More, Unrealized Losses	(792,838)	(593,473)
Fair Value	40,587,408	71,198,051
Unrealized Losses	(879,058)	(3,488,753)
U.S. Government agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	2,955,829	5,824,808
Less than 12 Months, Unrealized Losses	(28,208)	(367,005)
12 Months or More, Fair Value	3,949,940	470,324
12 Months or More, Unrealized Losses	(110,530)	(38,530)
Fair Value	6,905,769	6,295,132
Unrealized Losses	(138,738)	(405,535)
Mortgage-backed securities (Government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	2,061,203	33,521,545
Less than 12 Months, Unrealized Losses	(13,358)	(1,065,542)
12 Months or More, Fair Value	13,725,099	6,087,526
12 Months or More, Unrealized Losses	(197,173)	(294,362)
Fair Value	15,786,302	39,609,071
Unrealized Losses	(210,531)	(1,359,904)
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	3,953,168	22,534,325
Less than 12 Months, Unrealized Losses	(44,654)	(1,462,733)
12 Months or More, Fair Value	13,942,169	2,759,523
12 Months or More, Unrealized Losses	(485,135)	(260,581)
Fair Value	17,895,337	25,293,848
Unrealized Losses	$ (529,789)	$ (1,723,314)

XML

Condensed Financial Information (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of Condensed Balance Sheets

Condensed Balance Sheets

	December 31,
	2014		2013
Assets
Cash and due from banks	$	3,847,179	$	3,479,895
Investment in common stock of subsidiary		41,012,112		37,426,345
Loan receivable from subsidiary		254,385		291,037
Other assets		96,993		130,137
Total assets	$	45,210,669	$	41,327,414
Liabilities
Other liabilities	$	194,571	$	188,618
Stockholders’ Equity		45,016,098		41,138,796
Total liabilities and stockholders’ equity	$	45,210,669	$	41,327,414

Schedule of Condensed Statements of Income and Comprehensive Income

Condensed Statements of Income and Comprehensive Income (Loss)

	Year Ending December 31,
	2014			2013
Income
Dividends from subsidiary	$	2,000,000		$	1,500,000
Other income		12,245			14,177
Total income		2,012,245			1,514,177
Expenses
Other expenses		707,692			465,624
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		1,304,553			1,048,553
Income Tax Benefit		(271,357	)		(182,847	)
Income Before Equity in Undistributed Income of Subsidiary		1,575,910			1,231,400
Equity in Undistributed Income of Subsidiary		1,396,844			1,982,245
Net Income	$	2,972,754		$	3,213,645
Comprehensive Income (Loss)	$	5,071,201		$	(1,069,912	)

Schedule of Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

	Year Ending December 31,
	2014			2013
Operating Activities
Net income	$	2,972,754		$	3,213,645
Items not providing cash, net		(1,396,844	)		(1,982,245	)
Stock-based compensation expense		90,163			90,162
Change in other assets and liabilities, net		29,599			112,013
Net cash provided by operating activities		1,695,672			1,433,575
Investing Activity
Loan payment from subsidiary		36,652			35,527
Net cash provided by investing activities		36,652			35,527
Financing Activities
Dividends paid		(570,843	)		(565,526	)
Stock repurchase		(1,028,688	)		(1,596,959	)
Exercise of stock options		234,491			90,254
Net cash used in financing activities		(1,365,040	)		(2,072,231	)
Net Change in Cash and Cash Equivalents		367,284			(603,129	)
Cash and Cash Equivalents at Beginning of Year		3,479,895			4,083,024
Cash and Cash Equivalents at End of Year	$	3,847,179		$	3,479,895

XML

Interest-bearing Deposits - Scheduled maturities of time deposits (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Banking and Thrift [Abstract]
2015	$ 51,911,089
2016	20,213,799
2017	10,056,961
2018	5,760,161
2019	6,657,553
Time deposits	$ 94,599,563	$ 108,151,569

XML

Securities - (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]
Securities pledged as collateral	$ 21,121,613	$ 20,420,437
Securities sold under agreements to repurchase	9,165,462	9,541,242
Gross realized gains on sales of available-for-sale securities	429,105	907,908
Gross realized losses on sales of available-for-sale securities	(20,352)	(10,007)
Reclassification adjustment for realized gains (losses) included in net income, taxes	138,976	305,286
Debt securities, fair value	$ 40,587,408	$ 71,198,051
Percentage of available-for-sale investment portfolio	42.00%	65.00%

XML

Accumulated Other Comprehensive Income (Loss) - Components of accumulated other comprehensive income included in stockholders' equity (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net-of-tax amount	$ 711,483	$ (1,386,964)
Net unrealized gain (loss) on securities available-for-sale
Accumulated Other Comprehensive Income (Loss) [Line Items]
Gain (loss) on securities available-for-sale, before tax	1,078,004	(2,101,461)
Tax effect	(366,521)	714,497
Net-of-tax amount	$ 711,483	$ (1,386,964)

XML

Disclosures about Fair Value of Assets (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Schedule of fair value measurements of assets recognized in balance sheets on recurring basis

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	9,958,273	$	—	$	9,958,273	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,419,921		—		41,419,921		—
Municipal bonds		45,306,703		—		45,306,703		—

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	10,420,076	$	—	$	10,420,076	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		48,345,655		—		48,345,655		—
Municipal bonds		50,218,866		—		50,218,866		—

Schedule of fair value measurement of assets measured at fair value on nonrecurring basis

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,147,400	$	—	$	—	$	1,147,400

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,219,185	$	—	$	—	$	1,219,185
Mortgage servicing rights		673,576		—		—		673,576

Schedule of quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,147,400	Market comparable properties	Marketability discount		20% – 30%(25	%)

	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,219,185	Market comparable properties	Marketability discount		20% – 30%(25	%)
Mortgage servicing rights	$	673,576	Discounted cash flow	Discount rate PSA standard prepayment model rate		8% - 12.5%(10.24%)  144 – 342 (164	)

Schedule of estimated fair values of other financial instruments

			December 31, 2014
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	9,611,638	$	9,611,638	$	—	$	—
Other investments		73,766		—		73,766		—
Loans held for sale		235,600		—		235,600		—
Loans, net of allowance for loan losses		184,718,612		—		—		184,573,401
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,713,243		—		1,713,243		—
Financial liabilities
Deposits		245,941,562		—		151,341,999		96,956,400
Short-term borrowings		13,821,730		—		8,821,730		4,996,109
Advances from borrowers for taxes and insurance		962,762		—		962,762		—
Interest payable		166,052		—		166,052		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

			December 31, 2013
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	6,098,870	$	6,098,870	$	—	$	—
Other investments		81,918		—		81,918		—
Loans held for sale		262,461		—		262,461		—
Loans, net of allowance for loan losses		180,639,502		—		—		178,866,833
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,817,415		—		1,817,415		—
Financial liabilities
Deposits		251,738,391		—		143,586,822		111,116,837
Short-term borrowings		19,610,297		—		19,610,297		—
Advances from borrowers for taxes and insurance		857,814		—		857,814		—
Interest payable		210,226		—		210,226		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

XML

Securities (Tables)

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities

	Amortized Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale Securities
December 31, 2014:
U.S. Government and federal agencies	$	10,031,683	$	65,328	$	(138,738	)	$	9,958,273
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,196,695		433,757		(210,531	)		41,419,921
Municipal bonds		44,378,515		1,457,977		(529,789	)		45,306,703
	$	95,606,893	$	1,957,062	$	(879,058	)	$	96,684,897
December 31, 2013:
U.S. Government and federal agencies	$	10,710,675	$	114,936	$	(405,535	)	$	10,420,076
Mortgage-backed securities (Government-sponsored enterprises - residential)		49,486,337		219,222		(1,359,904	)		48,345,655
Municipal bonds		50,889,046		1,053,134		(1,723,314	)		50,218,866
	$	111,086,058	$	1,387,292	$	(3,488,753	)	$	108,984,597

Schedule of amortized cost and fair value of available-for-sale securities by contractual maturity

	Available-for-sale
	Amortized Cost		Fair Value
Within one year	$	535,664	$	544,411
One to five years		9,184,010		9,490,518
Five to ten years		25,748,781		26,064,641
After ten years		18,941,743		19,165,406
		54,410,198		55,264,976
Mortgage-backed securities		41,196,695		41,419,921
Totals	$	95,606,893	$	96,684,897

Schedule of gross unrealized losses and fair value in a continuous unrealized loss position

	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	2,955,829	$	(28,208	)	$	3,949,940	$	(110,530	)	$	6,905,769	$	(138,738	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		2,061,203		(13,358	)		13,725,099		(197,173	)		15,786,302		(210,531	)
Municipal bonds		3,953,168		(44,654	)		13,942,169		(485,135	)		17,895,337		(529,789	)
Total temporarily impaired securities	$	8,970,200	$	(86,220	)	$	31,617,208	$	(792,838	)	$	40,587,408	$	(879,058	)

	December 31, 2013
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	5,824,808	$	(367,005	)	$	470,324	$	(38,530	)	$	6,295,132	$	(405,535	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		33,521,545		(1,065,542	)		6,087,526		(294,362	)		39,609,071		(1,359,904	)
Municipal bonds		22,534,325		(1,462,733	)		2,759,523		(260,581	)		25,293,848		(1,723,314	)
Total temporarily impaired securities	$	61,880,678	$	(2,895,280	)	$	9,317,373	$	(593,473	)	$	71,198,051	$	(3,488,753	)

XML

Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax expense	$ (138,976)	$ (305,286)
Net reclassified amount	269,777	592,615
Amounts Reclassified from AOCI | Net unrealized gain (loss) on securities available-for-sale
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of securities, Total reclassified amount before tax	408,753	897,901
Tax expense	(138,976)	(305,286)
Net reclassified amount	$ 269,777	$ 592,615

XML

Income Taxes - Components of provision for income taxes (Details) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Taxes currently payable
Federal									$ 798,160	$ 813,409
State										406,770
Deferred income taxes									135,886	(31,880)
Income tax expense	$ 183,641	$ 260,619	$ 176,277	$ 313,509	$ 207,234	$ 271,739	$ 270,539	$ 438,787	$ 934,046	$ 1,188,299

XML

Stock Option Plans (Detail Textuals) (USD $)	12 Months Ended		1 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Apr. 23, 1996	Dec. 31, 2004	Apr. 30, 2001	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Method used	Black-Scholes option valuation model
Intrinsic value of option exercised	$ 90,606	$ 24,548
Weighted-average period to recognize compensation cost	3 years
Fair value of share vested	90,163	90,162
Recognized tax benefit	34,622	36,309
1996 Stock Option plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved and awarded			83,625	5,600
Award expiration period			10 years
Exercise price per share			$ 8.83	$ 14.00
2001 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved and awarded					87,100
Award expiration period					10 years
Exercise price per share					$ 10.00
2012 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation costs	$ 202,804
2012 Stock Option Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved and awarded						104,035
Award expiration period						10 years
Exercise price per share						$ 15.65

XML

Loans and Allowance for Loan Losses - Balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method (Details 1) (Loans Receivable, USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Allowance for loan losses:
Balance, beginning of year	$ 3,406,434	$ 3,339,464
Provision charged to expense	240,000	170,000
Losses charged off	(704,388)	(292,325)
Recoveries	14,218	189,295
Balance, end of year	2,956,264	3,406,434
Ending balance: individually evaluated for impairment	695,507	882,423
Ending balance: collectively evaluated for impairment	2,260,757	2,524,011
Loans:
Ending balance	187,684,292	184,054,541
Ending balance: individually evaluated for impairment	3,959,047	2,929,969
Ending balance: collectively evaluated for impairment	183,725,245	181,124,572
1-4 family
Allowance for loan losses:
Balance, beginning of year	856,144	741,029
Provision charged to expense	241,875	261,492
Losses charged off	(100,319)	(162,448)
Recoveries	1,560	16,071
Balance, end of year	999,260	856,144
Ending balance: individually evaluated for impairment	183,196
Ending balance: collectively evaluated for impairment	816,064	856,144
Loans:
Ending balance	44,561,089	44,286,657
Ending balance: individually evaluated for impairment	713,962	563,524
Ending balance: collectively evaluated for impairment	43,847,127	43,723,133
Commercial Real Estate
Allowance for loan losses:
Balance, beginning of year	745,760	828,873
Provision charged to expense	392,009	(218,949)
Losses charged off	(287,474)
Recoveries	5,168	135,836
Balance, end of year	855,463	745,760
Ending balance: individually evaluated for impairment	348,240	248,857
Ending balance: collectively evaluated for impairment	507,223	496,903
Loans:
Ending balance	40,474,855	38,920,692
Ending balance: individually evaluated for impairment	1,690,251	1,531,078
Ending balance: collectively evaluated for impairment	38,784,604	37,389,614
Agricultural Real Estate
Allowance for loan losses:
Balance, beginning of year	175,028	149,568
Provision charged to expense	20,518	25,460
Losses charged off
Recoveries
Balance, end of year	195,546	175,028
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	195,546	175,028
Loans:
Ending balance	40,119,130	35,005,662
Ending balance: individually evaluated for impairment	1,009,889
Ending balance: collectively evaluated for impairment	39,109,241	35,005,662
Commercial
Allowance for loan losses:
Balance, beginning of year	1,034,189	934,251
Provision charged to expense	(327,057)	92,597
Losses charged off	(285,411)
Recoveries	88	7,341
Balance, end of year	421,809	1,034,189
Ending balance: individually evaluated for impairment	154,089	622,730
Ending balance: collectively evaluated for impairment	267,720	411,459
Loans:
Ending balance	26,813,880	29,946,928
Ending balance: individually evaluated for impairment	240,805	662,730
Ending balance: collectively evaluated for impairment	26,573,075	29,284,198
Agricultural
Allowance for loan losses:
Balance, beginning of year	52,798	43,930
Provision charged to expense	5,136	8,868
Losses charged off
Recoveries
Balance, end of year	57,934	52,798
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	57,934	52,798
Loans:
Ending balance	11,844,973	10,559,593
Ending balance: individually evaluated for impairment	258,140
Ending balance: collectively evaluated for impairment	11,586,833	10,559,593
Home equity
Allowance for loan losses:
Balance, beginning of year	201,993	328,996
Provision charged to expense	5,887	(78,628)
Losses charged off	(5,403)	(63,410)
Recoveries	3,100	15,035
Balance, end of year	205,577	201,993
Ending balance: individually evaluated for impairment	9,982
Ending balance: collectively evaluated for impairment	195,595	201,993
Loans:
Ending balance	11,283,264	11,729,112
Ending balance: individually evaluated for impairment	37,531	71,548
Ending balance: collectively evaluated for impairment	11,245,733	11,657,564
Consumer
Allowance for loan losses:
Balance, beginning of year	184,848	151,474
Provision charged to expense	3,950	84,829
Losses charged off	(25,781)	(66,467)
Recoveries	4,302	15,012
Balance, end of year	167,319	184,848
Ending balance: individually evaluated for impairment		10,836
Ending balance: collectively evaluated for impairment	167,319	174,012
Loans:
Ending balance	12,587,101	13,605,897
Ending balance: individually evaluated for impairment	8,469	101,089
Ending balance: collectively evaluated for impairment	12,578,632	13,504,808
Unallocated
Allowance for loan losses:
Balance, beginning of year	155,674	161,343
Provision charged to expense	(102,318)	(5,669)
Losses charged off
Recoveries
Balance, end of year	53,356	155,674
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	53,356	155,674
Loans:
Ending balance
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment

XML

Income Taxes - Tax effects of temporary differences related to deferred taxes shown on balance sheets (Details 2) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Deferred tax assets
Allowance for loan losses	$ 1,060,419	$ 1,241,702
Deferred compensation	1,712,570	1,610,547
State net operating loss carryforward	4,749	186,497
Unrealized losses on available-for-sale securities		714,497
Other	40,270	840
Deferred tax assets, gross, total	2,818,008	3,754,083
Deferred tax liabilities
Unrealized gains on available-for-sale securities	(366,521)
Depreciation	(478,427)	(536,706)
Federal Home Loan Bank stock dividends	(152,224)	(152,224)
Prepaid expenses	(79,868)	(90,794)
Mortgage servicing rights	(254,762)	(271,249)
Deferred tax liabilities, gross, total	(1,331,802)	(1,050,973)
Net deferred tax asset	$ 1,486,206	$ 2,703,110

XML

Employee Benefits (Detail Textuals) (USD $)	1 Months Ended	12 Months Ended
	Jul. 31, 2010	Dec. 31, 2014	Dec. 31, 2013
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		$ 4,252,720	$ 3,999,371
Purchase of shares for ESOP	41,614
Price paid per share	$ 10
Common stock acquired by the ESOP	416,140
ESOP compensation expense		80,978	70,448
Deferred Compensation Plan
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		2,451,200	2,374,940
Compensation expense		140,714	139,308
Deferred compensation agreements
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		1,801,520	1,624,431
Compensation expense		241,745	302,138
Deferred compensation discount rate		4.75%
401(k) Plan
Employee Benefits Disclosure [Line Items]
Contribution by employer		$ 232,567	$ 224,099
Annual interest rate		1.85%
401(k) Plan | Minimum
Employee Benefits Disclosure [Line Items]
Annual interest rate			1.85%
401(k) Plan | Maximum
Employee Benefits Disclosure [Line Items]
Annual interest rate			2.00%

XML

Regulatory Matters - Reconciliation of bank equity amount for regulatory capital purposes (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Regulatory Matters [Abstract]
Bank equity	$ 41,012	$ 37,427
Less net unrealized gain (loss)	711	(1,387)
Less disallowed goodwill	2,727	2,727
Tier 1 capital	37,574	36,087
Plus allowance for loan losses	2,678	2,679
Total risked-based capital	$ 40,252	$ 38,766

XML

Stock Option Plans - Summary of option activity (Details) (Stock Options, USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Stock Options
Shares
Outstanding, beginning of year	101,336	107,338
Granted
Exercised	(15,101)	(6,002)
Forfeited or expired	(400)
Outstanding, end of year	85,835	101,336
Exercisable, end of year	23,600	18,151
Weighted Average Exercise price
Outstanding, beginning of year	$ 15.63	$ 15.60
Granted
Exercised	$ 15.53	$ 15.04
Forfeited or expired	$ 15.65
Outstanding, end of year	$ 15.65	$ 15.63
Exercisable, end of year	$ 15.65	$ 15.55
Weighted Average Remaining Contractual Term
Outstanding, end of year	7 years 3 months	8 years 2 months 1 day
Exercisable, end of year	7 years 3 months	7 years 9 months 11 days
Aggregate Intrinsic Value
Outstanding, end of year	$ 630,887	$ 397,049
Exercisable, end of year	$ 173,460	$ 72,628

XML

Income Taxes (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Taxes [Line Items]
Retained earnings for which no deferred federal income tax liability has been recognized	$ 2,600,000	2,600,000
Deferred income tax liabilities that would have been recorded if they were expected to reverse into taxable income in the foreseeable future	1,000,000	1,000,000
Illinois
Income Taxes [Line Items]
Operating loss carry forwards	$ 98,574	3,870,846
Operating loss carryforwards limitations	Recent Illinois legislation limited the use of these loss carryovers for tax years 2011 through 2013 and the expiration dates were extended by three years. Management believes the Company will produce taxable earnings in the future which will enable the net operating loss carryforwards to be utilized prior to expiration.
Illinois | Minimum
Income Taxes [Line Items]
Operating loss carryforwards expiration year	2018
Illinois | Maximum
Income Taxes [Line Items]
Operating loss carryforwards expiration year		2022

XML

Interest-bearing Deposits (Detail Textuals) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Banking and Thrift [Abstract]
Interest-bearing deposits in denominations of $100,000 or more	$ 96,271,806	$ 96,951,245

XML

Earnings Per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 16:        Earnings Per Share

Earnings per share (EPS) were computed as follows:

	Year Ended December 31, 2014
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	2,972,754
Basic earnings per share
Income available to common stockholders				1,791,888	$	1.66
Effect of dilutive securities
Stock options				11,173
Diluted earnings per share
Income available to common stockholders	$	2,972,754		1,803,061	$	1.65

	Year Ended December 31, 2013
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,213,645
Basic earnings per share
Income available to common stockholders				1,853,240	$	1.73
Effect of dilutive securities
Stock options				296
Diluted earnings per share
Income available to common stockholders	$	3,213,645		1,853,536	$	1.73

Options to purchases 100,235 shares of common stock were outstanding at December 31, 2013, but were not included in the computation of diluted EPS because the shares were considered antidilutive for the year ended December 31, 2013.

XML

Nature of Operations and Summary of Significant Accounting Policies (Detail Textuals) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 Trust Branche	Dec. 31, 2013 Trust
Nature Of Operations And Significant Accounting Policies [Line Items]
Percentage of ownership interests in Jacksonville Savings Bank	100.00%
Number of branches	3
Loan past due period	90 days
Number of trust accounts managed or administered	114	110
Assets held in fiduciary or agency capacities	$ 78.6	$ 71.8
Mortgages | Minimum
Nature Of Operations And Significant Accounting Policies [Line Items]
Fixed-rate balloon loans term	3 years
Mortgages | Maximum
Nature Of Operations And Significant Accounting Policies [Line Items]
Fixed-rate balloon loans term	5 years

XML

Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Schedule of annual activity of loans outstanding to related parties

	2014			2013
Balance beginning of year	$	3,852,658		$	4,052,339
Additions		1,876,445			1,156,220
Repayments		(2,206,056	)		(1,355,901	)
Balance, end of year	$	3,523,047		$	3,852,658

XML

Income Taxes - Reconciliation of income tax expense at the statutory rate to actual income tax expense (Parentheticals) (Details 1)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Statutory rate	34.00%	34.00%

XML

Commitments and Credit Risk (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Outstanding commitments to originate loans
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	3,493,500	$ 9,242,300
Outstanding commitments to originate loans | Fixed Income Interest Rate
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	2,702,000	4,676,300
Outstanding commitments to originate loans | Fixed Income Interest Rate | Minimum
Commitments and Contingencies Disclosure [Line Items]
Loan commitments, fixed rate of interest	2.88%
Outstanding commitments to originate loans | Fixed Income Interest Rate | Maximum
Commitments and Contingencies Disclosure [Line Items]
Loan commitments, fixed rate of interest	8.00%
Standby Letters of Credit
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	255,340	360,000
Unused lines of Credit | Commercial lines
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	21,498,070	22,038,305
Unused lines of Credit | Open-ended consumer lines
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	9,742,393	$ 10,413,745

XML

Interest-bearing Deposits (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Schedule of deposit interest expense by deposit type

	December 31,
	2014		2013
Savings, NOW and Money Market	$	257,214	$	256,010
Certificates of deposit		1,179,589		1,510,730
Total deposit interest expense	$	1,436,803	$	1,766,740

Schedule of scheduled maturities of time deposits

2015	$	51,911,089
2016		20,213,799
2017		10,056,961
2018		5,760,161
2019		6,657,553
	$	94,599,563

XML

Securities - Amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	$ 95,606,893	$ 111,086,058
Available-for-sale securities, gross unrealized gains	1,957,062	1,387,292
Available-for-sale securities, gross unrealized losses	(879,058)	(3,488,753)
Available-for-sale securities, fair value	96,684,897	108,984,597
U.S. Government and federal agencies
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	10,031,683	10,710,675
Available-for-sale securities, gross unrealized gains	65,328	114,936
Available-for-sale securities, gross unrealized losses	(138,738)	(405,535)
Available-for-sale securities, fair value	9,958,273	10,420,076
Mortgage-backed securities (Government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	41,196,695	49,486,337
Available-for-sale securities, gross unrealized gains	433,757	219,222
Available-for-sale securities, gross unrealized losses	(210,531)	(1,359,904)
Available-for-sale securities, fair value	41,419,921	48,345,655
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	44,378,515	50,889,046
Available-for-sale securities, gross unrealized gains	1,457,977	1,053,134
Available-for-sale securities, gross unrealized losses	(529,789)	(1,723,314)
Available-for-sale securities, fair value	$ 45,306,703	$ 50,218,866

XML

Loan Servicing - Mortgage servicing rights measured using Amortization Method with Aggregate activity in related valuation allowances (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2008
Valuation allowances
Balance at beginning of year			$ 428,030
Balances at end of year	56,969	73,392	428,030
Mortgage servicing assets, net	632,634	673,576
Mortgage servicing rights
Mortgage servicing rights
Balance, beginning of year	746,968	793,715
Additions	53,859	101,538
Amortization	(111,224)	(148,285)
Balance at end of year	689,603	746,968
Valuation allowances
Balance at beginning of year	73,392	129,279
Additions due to decreases in market value
Reduction due to increases in market value		(33,649)
Reduction due to payoff of loans	(16,423)	(22,238)
Balances at end of year	56,969	73,392
Mortgage servicing assets, net	632,634	673,576
Fair value disclosures
Fair value as of the beginning of the period	1,120,000	765,029
Fair value as of the end of the period	$ 979,699	$ 1,120,000

XML

Loans and Allowance for Loan Losses - Nonaccrual loans (Details 5) (Loans Receivable, USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 2,264,053	$ 1,782,163
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	994,855	1,339,487
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	932,578	208,297
Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	122,841
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	22,438	37,939
Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	120,698	133,823
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 70,643	$ 62,617

XML

Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly results of operations

	Year Ended December 31, 2014
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,921,442	$	2,946,212	$	2,978,484	$	3,045,770
Interest expense		337,222		353,542		371,036		389,658
Net interest income		2,584,220		2,592,670		2,607,448		2,656,112
Provision for loan losses		150,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,434,220		2,562,670		2,577,448		2,626,112
Noninterest income		949,801		1,024,088		947,678		997,532
Noninterest expense		2,548,408		2,470,123		2,723,872		2,470,346
Income before income taxes		835,613		1,116,635		801,254		1,153,298
Income tax expense		183,641		260,619		176,277		313,509
Net income	$	651,972	$	856,016	$	624,977	$	839,789
Basic earnings per share	$	0.37	$	0.48	$	0.35	$	0.47
Diluted earnings per share	$	0.36	$	0.47	$	0.35	$	0.47

	Year Ended December 31, 2013
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	3,139,867	$	3,061,017	$	2,924,714	$	2,952,167
Interest expense		415,265		439,617		454,298		472,091
Net interest income		2,724,602		2,621,400		2,470,416		2,480,076
Provision for loan losses		130,000		10,000		—		30,000
Net interest income after provision for loan losses		2,594,602		2,611,400		2,470,416		2,450,076
Noninterest income		918,665		1,010,359		1,027,808		1,486,038
Noninterest expense		2,650,580		2,564,351		2,467,610		2,484,879
Income before income taxes		862,687		1,057,408		1,030,614		1,451,235
Income tax expense		207,234		271,739		270,539		438,787
Net income	$	655,453	$	785,669	$	760,075	$	1,012,448
Basic earnings per share	$	0.36	$	0.43	$	0.41	$	0.54
Diluted earnings per share	$	0.36	$	0.42	$	0.41	$	0.54

XML

Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Operating Activities
Net income	$ 2,972,754	$ 3,213,645
Items not requiring (providing) cash
Depreciation and amortization	385,385	382,299
Provision for loan losses	240,000	170,000
Amortization of premiums and discounts on securities and loans	724,332	948,972
Deferred income taxes	135,886	(31,880)
Net realized gains on available-for-sale securities	(408,753)	(897,901)
Loss from sale/disposal of premises and equipment		75,360
Amortization of mortgage servicing rights	127,647	170,523
Recovery of mortgage servicing rights asset		(33,649)
Increase in cash surrender value of life insurance, net	(97,858)	(202,417)
Gains on sales of foreclosed assets	(9,122)
Shares held by ESOP committed to be released	80,978	70,448
Stock-based compensation expense	90,163	90,162
Changes in
Interest receivable	104,172	236,057
Other assets	(89,576)	339,036
Interest payable	(44,174)	(66,531)
Other liabilities	1,153,196	(92,216)
Origination of loans held for sale	(12,358,997)	(23,747,987)
Proceeds from sales of loans held for sale	12,543,780	24,459,995
Net cash provided by operating activities	5,549,813	5,083,916
Investing Activities
Net change in interest-earning time deposits		2,972,000
Purchases of available-for-sale securities	(23,850,584)	(43,336,382)
Proceeds from maturities and payments of available-for-sale securities	7,764,734	13,997,055
Proceeds from the sales of available-for-sale investments and other investments	31,257,071	29,214,848
Net change in loans	(4,387,125)	(7,185,004)
Purchase of premises and equipment	(152,390)	(268,232)
Proceeds from sale of premises and equipment		286,371
Proceeds from the sale of foreclosed assets	176,737
Net cash provided by (used in) investing activities	10,808,443	(4,319,344)
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	7,755,177	7,930,755
Net decrease in certificates of deposit	(13,552,006)	(14,713,093)
Net increase (decrease) in short-term borrowings	(5,788,567)	6,869,687
Net increase in advances from borrowers for taxes and insurance	104,948	25,469
Stock repurchase	(1,028,688)	(1,596,959)
Proceeds from stock options exercised	234,491	90,254
Dividends paid	(570,843)	(565,526)
Net cash used in financing activities	(12,845,488)	(1,959,413)
Increase (Decrease) in Cash and Cash Equivalents	3,512,768	(1,194,841)
Cash and Cash Equivalents, Beginning of Year	6,098,870	7,293,711
Cash and Cash Equivalents, End of Year	9,611,638	6,098,870
Supplemental Cash Flows Information
Interest paid	1,495,632	1,847,802
Income taxes paid	632,000	1,399,673
Sale and financing of foreclosed assets	298,000
Real estate acquired in settlement of loans	374,116	129,078
Dividends declared not paid	143,959	147,229
Exercise and retirement of shares in stock option plan	$ 101,130	$ 63,445

XML

Loans and Allowance for Loan Losses - Recorded balance, at original cost, of troubled debt restructurings (Details 6) (Loans Receivable, USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	$ 2,283,293	$ 2,597,676
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	747,470	661,880
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	1,265,079	1,137,667
Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	212,579	675,483
Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	15,379	79,087
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	$ 42,786	$ 43,559

XML

Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of summary of ESOP expense

	2014		2013
Allocated shares	$	54,519	$	55,515
Shares committed for allocation		3,767		3,680
Unearned shares		24,991		28,758
Total ESOP shares		83,277		87,953
Fair value of unearned shares at December 31	$	574,793	$	562,219

XML

Quarterly Results of Operations (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations (Unaudited)

Note 20:        Quarterly Results of Operations (Unaudited)

	Year Ended December 31, 2014
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,921,442	$	2,946,212	$	2,978,484	$	3,045,770
Interest expense		337,222		353,542		371,036		389,658
Net interest income		2,584,220		2,592,670		2,607,448		2,656,112
Provision for loan losses		150,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,434,220		2,562,670		2,577,448		2,626,112
Noninterest income		949,801		1,024,088		947,678		997,532
Noninterest expense		2,548,408		2,470,123		2,723,872		2,470,346
Income before income taxes		835,613		1,116,635		801,254		1,153,298
Income tax expense		183,641		260,619		176,277		313,509
Net income	$	651,972	$	856,016	$	624,977	$	839,789
Basic earnings per share	$	0.37	$	0.48	$	0.35	$	0.47
Diluted earnings per share	$	0.36	$	0.47	$	0.35	$	0.47

	Year Ended December 31, 2013
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	3,139,867	$	3,061,017	$	2,924,714	$	2,952,167
Interest expense		415,265		439,617		454,298		472,091
Net interest income		2,724,602		2,621,400		2,470,416		2,480,076
Provision for loan losses		130,000		10,000		—		30,000
Net interest income after provision for loan losses		2,594,602		2,611,400		2,470,416		2,450,076
Noninterest income		918,665		1,010,359		1,027,808		1,486,038
Noninterest expense		2,650,580		2,564,351		2,467,610		2,484,879
Income before income taxes		862,687		1,057,408		1,030,614		1,451,235
Income tax expense		207,234		271,739		270,539		438,787
Net income	$	655,453	$	785,669	$	760,075	$	1,012,448
Basic earnings per share	$	0.36	$	0.43	$	0.41	$	0.54
Diluted earnings per share	$	0.36	$	0.42	$	0.41	$	0.54

XML

Commitments and Credit Risk

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Credit Risk

Note 19:        Commitments and Credit Risk

The Company grants agribusiness, commercial and residential loans to customers in Cass, Morgan, Macoupin, Montgomery and surrounding counties in Illinois.  The Company’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets.  Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions and the agricultural economy in these counties.  The Company also purchases participation loans from out of territory areas.

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At December 31, 2014 and 2013, the Company had outstanding commitments to originate loans aggregating approximately $3,493,500 and $9,242,300, respectively.  The commitments extended over varying periods of time with the majority being disbursed within a one-year period.  Loan commitments at fixed rates of interest amounted to $2,702,000 and $4,676,300 at December 31, 2014 and 2013, respectively, with the remainder at floating market rates.  The range of fixed rates was 2.88% to 8.00% as of December 31, 2014.

Standby Letters of Credit

Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions.  Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations.  The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers.  Should the Company be obliged to perform under the standby letters of credit, the Company may seek recourse from the customer for reimbursement of amounts paid.

The Company had total outstanding standby letters of credit amounting to $255,340 and $360,000 at December 31, 2014 and 2013, respectively, with terms of one year or less.  At December 31, 2014 and 2013, the Company’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Credit

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Lines of credit generally have fixed expiration dates.  Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements.  Each customer’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty.  Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.  Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At December 31, 2014, the Company had unused lines of credit to borrowers aggregating approximately $21,498,070 and $9,742,393 for commercial lines and open-ended consumer lines, respectively.  At December 31, 2013, unused lines of credit to borrowers aggregated approximately $22,038,305 for commercial lines and $10,413,745 for open-ended consumer lines.

XML

Condensed Financial Information (Parent Company Only) - Condensed Statements of Income and Comprehensive Income (Loss) (Details 1) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Income
Total income	$ 2,921,442	$ 2,946,212	$ 2,978,484	$ 3,045,770	$ 3,139,867	$ 3,061,017	$ 2,924,714	$ 2,952,167	$ 11,891,908	$ 12,077,765
Expenses
Income Tax Benefit	183,641	260,619	176,277	313,509	207,234	271,739	270,539	438,787	934,046	1,188,299
Net Income	651,972	856,016	624,977	839,789	655,453	785,669	760,075	1,012,448	2,972,754	3,213,645
Comprehensive Income (Loss)									5,071,201	(1,069,912)
Parent Company
Income
Dividends from subsidiary									2,000,000	1,500,000
Other income									12,245	14,177
Total income									2,012,245	1,514,177
Expenses
Other expenses									707,692	465,624
Income Before Income Tax and Equity in Undistributed Income of Subsidiary									1,304,553	1,048,553
Income Tax Benefit									(271,357)	(182,847)
Income Before Equity in Undistributed Income of Subsidiary									1,575,910	1,231,400
Equity in Undistributed Income of Subsidiary									1,396,844	1,982,245
Net Income									2,972,754	3,213,645
Comprehensive Income (Loss)									$ 5,071,201	$ (1,069,912)

XML

Loans and Allowance for Loan Losses - Classes of loans (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Less Allowance for loan losses	$ 2,956,264	$ 3,406,434
Net loans	184,718,612	180,639,502
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	187,684,292	184,054,541
Less Net deferred loan fees	9,416	8,605
Less Allowance for loan losses	2,956,264	3,406,434
Net loans	184,718,612	180,639,502
Loans Receivable | Mortgage loans on real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	136,438,338	129,942,123
Loans Receivable | Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	44,561,089	44,286,657
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	40,474,855	38,920,692
Loans Receivable | Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	40,119,130	35,005,662
Loans Receivable | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,283,264	11,729,112
Loans Receivable | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	26,813,880	29,946,928
Loans Receivable | Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,844,973	10,559,593
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 12,587,101	$ 13,605,897

XML

Stock Option Plans (Tables)

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of summary of option activity

	2014
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		101,336		$	15.63
Granted		—			—
Exercised		(15,101	)		15.53
Forfeited or expired		(400	)		15.65
Outstanding, end of year		85,835		$	15.65		7.25	$	630,887
Exercisable, end of year		23,600		$	15.65		7.25	$	173,460

	2013
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		107,338		$	15.60
Granted		—			—
Exercised		(6,002	)		15.04
Forfeited or expired		—			—
Outstanding, end of year		101,336		$	15.63		8.17	$	397,049
Exercisable, end of year		18,151		$	15.55		7.78	$	72,628

Schedule of summary of the status of nonvested shares

	December 31, 2014
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		83,185		$	4.34
Granted		—			—
Vested		(20,550	)		4.34
Forfeited		(400	)		—
Nonvested, end of year		62,235		$	4.34

	December 31, 2013
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		104,035		$	4.34
Granted		—			—
Vested		(20,850	)		4.34
Forfeited		—			—
Nonvested, end of year		83,185		$	4.34

XML

Condensed Financial Information (Parent Company Only)

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information (Parent Company Only)

Note 21:        Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets

	December 31,
	2014		2013
Assets
Cash and due from banks	$	3,847,179	$	3,479,895
Investment in common stock of subsidiary		41,012,112		37,426,345
Loan receivable from subsidiary		254,385		291,037
Other assets		96,993		130,137
Total assets	$	45,210,669	$	41,327,414
Liabilities
Other liabilities	$	194,571	$	188,618
Stockholders’ Equity		45,016,098		41,138,796
Total liabilities and stockholders’ equity	$	45,210,669	$	41,327,414

Condensed Statements of Income and Comprehensive Income (Loss)

	Year Ending December 31,
	2014			2013
Income
Dividends from subsidiary	$	2,000,000		$	1,500,000
Other income		12,245			14,177
Total income		2,012,245			1,514,177
Expenses
Other expenses		707,692			465,624
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		1,304,553			1,048,553
Income Tax Benefit		(271,357	)		(182,847	)
Income Before Equity in Undistributed Income of Subsidiary		1,575,910			1,231,400
Equity in Undistributed Income of Subsidiary		1,396,844			1,982,245
Net Income	$	2,972,754		$	3,213,645
Comprehensive Income (Loss)	$	5,071,201		$	(1,069,912	)

Condensed Statements of Cash Flows

	Year Ending December 31,
	2014			2013
Operating Activities
Net income	$	2,972,754		$	3,213,645
Items not providing cash, net		(1,396,844	)		(1,982,245	)
Stock-based compensation expense		90,163			90,162
Change in other assets and liabilities, net		29,599			112,013
Net cash provided by operating activities		1,695,672			1,433,575
Investing Activity
Loan payment from subsidiary		36,652			35,527
Net cash provided by investing activities		36,652			35,527
Financing Activities
Dividends paid		(570,843	)		(565,526	)
Stock repurchase		(1,028,688	)		(1,596,959	)
Exercise of stock options		234,491			90,254
Net cash used in financing activities		(1,365,040	)		(2,072,231	)
Net Change in Cash and Cash Equivalents		367,284			(603,129	)
Cash and Cash Equivalents at Beginning of Year		3,479,895			4,083,024
Cash and Cash Equivalents at End of Year	$	3,847,179		$	3,479,895

XML

Nature of Operations and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Principles of Consolidation and Financial Statement Presentation

Principles of Consolidation and Financial Statement Presentation

The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s wholly owned subsidiary, Financial Resources Group, Inc.  Significant intercompany accounts and transactions have been eliminated in consolidation.  Based on the Company’s approach to decision making, it has decided that its business is comprised of a single segment.

The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and conform to predominate practice within the banking industry.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, fair value of securities, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of loan servicing rights, valuation of deferred tax assets and goodwill impairment.

Cash Equivalents

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.  At December 31, 2014 and 2013, cash equivalents consisted primarily of federal funds sold and interest-earning demand deposits in banks.

At December 31, 2014, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

Interest-earning Time Deposits in Banks

Interest-earning time deposits in banks are generally short-term and are carried at cost.

Securities

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).  Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities.  Gains and losses on the sale of securities are recorded on the settlement date and are determined using the specific identification method.

For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

Other Investments

Other Investments

Other investments at December 31, 2014 and 2013 include local municipal bonds and equity investments in local community development organizations.  The municipal bonds mature ratably through the year 2030.  These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income.  Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes collectibility of the principal is unlikely.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process.  Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Premises and Equipment

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation.  Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for each major depreciable classification of premises and equipment are as follows:

Buildings and improvements	35-40 years
Equipment	3-5 years

Federal Home Loan Bank Stock

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system.  The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Assets Held for Sale

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis.  Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.  Revenue and expenses from operations and changes in the valuation allowance are included in income or expense from foreclosed assets.

Bank-owned Life Insurance

Bank-owned Life Insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value.  Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.

Goodwill

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  The goodwill was not deemed impaired as of December 31, 2014 or 2013.

Mortgage Servicing Rights

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets.  Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer.  Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.  The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.  These variables change from quarter to quarter as market conditions and projected interest rates change.

The Company subsequently measures each class of servicing asset using either the fair value or the amortization method.  The Company has elected to subsequently measure the mortgage servicing rights under the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.  Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment.  Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type.  Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche.  The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment.  Changes in valuation allowances are reported as a separate line item in noninterest expense on the consolidated income statement.  Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans.  The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned in loan servicing fees in non-interest income.  The amortization of mortgage servicing rights is netted from the gains on sale of loans, both cash gains as well as the capitalized gains, and is included in mortgage banking operations, net in non-interest income.

Stock Options

Stock Options

At December 31, 2014 and 2013, the Company has a stock-based employee compensation plan, which is described more fully in Note 15.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company — put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes).  The income tax accounting guidance results in two components of income tax expense:  current and deferred.  Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.  The Company determines deferred income taxes using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.  Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination.  The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.  A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.  The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment.  With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2011.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each period.  Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes.  Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities.

Trust Assets

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company.  Fees from trust activities are recorded as revenue over the period in which the service is provided.  Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department.  This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes.  Generally, the actual trust fee is charged to each account on a monthly basis.  Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred.  The Company managed or administered approximately 114 and 110 trust accounts with assets totaling approximately $78.6 million and $71.8 million at December 31, 2014 and 2013, respectively.

Reclassifications

Reclassifications

Certain amounts included in the 2013 consolidated statements have been reclassified to conform to the 2014 presentation.

Recent and Future Accounting Requirements

Recent and Future Accounting Requirements

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-04, Troubled Debt Restructurings by Creditors (Subtopic 310-40:  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure which affects all creditors who obtain physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015 which the entity’s annual or interim financial statements have not been made available for issuance. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards).  The guidance requires an entity to recognize the 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 and services.  For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied either retrospectively or using the modified retrospective approach.  Early adoption is not permitted.  Management is evaluating the new guidance, but does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements.

XML

Consolidated Statements of Stockholders' Equity (Parentheticals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Statement Of Stockholders Equity [Abstract]
Dividends on common stock (in dollars per share)	$ 0.32	$ 0.31

XML

Nature of Operations and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Schedule of estimated useful lives of premises and equipment

Buildings and improvements	35-40 years
Equipment	3-5 years

XML

Related Party Transactions - Annual activity of loans outstanding to related parties (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Loans and Leases Receivable, Related Parties [Roll Forward]
Balance beginning of year	$ 3,852,658	$ 4,052,339
Additions	1,876,445	1,156,220
Repayments	(2,206,056)	(1,355,901)
Balance, end of year	$ 3,523,047	$ 3,852,658

XML

Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Tables)

12 Months Ended

Dec. 31, 2014

Changes In Accumulated Other Comprehensive Income Aoci By Component [Abstract]

Schedule of reclassified from AOCI and the affected line items in the statements of income

	Amounts Reclassified from AOCI						Affected Line Item in the
	2014			2013			Statements of Income
Unrealized gains on available-for-sale securities	$	408,753		$	897,901		Realized gain on sale of securities
							Total reclassified amount before tax
		(138,976	)		(305,286	)	Tax expense
	$	269,777		$	592,615		Net reclassified amount

XML

Securities - Amortized cost and fair value of available-for-sale securities by contractual maturity (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Available-for-sale, amortized cost
Within one year	$ 535,664
One to five years	9,184,010
Five to ten years	25,748,781
After ten years	18,941,743
Available-for-sale securities, amortized cost, subtotal	54,410,198
Mortgage-backed securities, amortized cost	41,196,695
Available-for-sale securities, amortized cost	95,606,893	111,086,058
Available-for-sale securities, fair value
Within one year	544,411
One to five years	9,490,518
Five to ten years	26,064,641
After ten years	19,165,406
Available-for-sale Securities, fair value	55,264,976	60,638,942
Mortgage-backed securities, fair value	41,419,921	48,345,655
Available-for-sale securities, fair value	$ 96,684,897	$ 108,984,597

XML

Short-term Borrowings (Detail Textuals) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	$ 9,165,462	$ 9,541,242
Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	8,821,730	8,810,297
Federal Home Loan Bank advances, maturity year	2015
Interest on FHLB advances	0.33%
Maximum | Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	9,483,795	9,445,747
Monthly Average | Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	6,229,604	6,208,142
Overnight Advance | Short-term Debt
Short-term Debt [Line Items]
Advances from Federal Home Loan Banks	5,000,000	10,800,000
Secured by Mortgage Loan | Short-term Debt
Short-term Debt [Line Items]
Advances from Federal Home Loan Banks	$ 42,384,000

XML

Consolidated Balance Sheets (USD $)	Dec. 31, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 6,427,536	$ 2,796,331
Interest-earning demand deposits in banks	3,184,102	3,302,539
Cash and cash equivalents	9,611,638	6,098,870
Available-for-sale securities:
Investment securities	55,264,976	60,638,942
Mortgage-backed securities	41,419,921	48,345,655
Other investments	73,766	81,918
Loans held for sale	235,600	262,461
Loans, net of allowance for loan losses of $2,956,264 and $3,406,434 at December 31, 2014 and 2013	184,718,612	180,639,502
Premises and equipment, net of accumulated depreciation of $5,742,785 and $7,096,401 at December 31, 2014 and 2013	4,945,983	5,178,978
Federal Home Loan Bank stock	1,113,800	1,113,800
Foreclosed assets held for sale, net	176,671	281,918
Cash surrender value of life insurance	6,912,917	6,815,059
Interest receivable	1,713,243	1,817,415
Deferred income taxes	1,486,206	2,703,110
Mortgage servicing rights, net of valuation allowance of $56,969 and $73,392 as of December 31, 2014 and 2013	632,634	673,576
Goodwill	2,726,567	2,726,567
Other assets	892,118	1,041,005
Total assets	311,924,652	318,418,776
Deposits
Demand	30,976,025	29,976,167
Savings, NOW and money market	120,365,974	113,610,655
Time	94,599,563	108,151,569
Total deposits	245,941,562	251,738,391
Short-term borrowings	13,821,730	19,610,297
Deferred compensation	4,252,720	3,999,371
Advances from borrowers for taxes and insurance	962,762	857,814
Interest payable	166,052	210,226
Income taxes payable	200,781	34,621
Other liabilities	1,562,947	829,260
Total liabilities	266,908,554	277,279,980
Stockholders' Equity
Preferred stock, $.01 par value, authorized 10,000,000 shares; none issued and outstanding
Common stock, $.01 par value; authorized 25,000,000 shares; issued 1,799,483 - December 31, 2014 and 1,832,860 - December 31, 2013	17,995	18,329
Additional paid-in capital	13,900,743	14,561,085
Retained earnings	30,635,787	28,233,876
Accumulated other comprehensive income (loss)	711,483	(1,386,964)
Unallocated ESOP shares	(249,910)	(287,530)
Total stockholders' equity	45,016,098	41,138,796
Total liabilities and stockholders' equity	$ 311,924,652	$ 318,418,776

XML

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Schedule of computation of earnings per share

	Year Ended December 31, 2014
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	2,972,754
Basic earnings per share
Income available to common stockholders				1,791,888	$	1.66
Effect of dilutive securities
Stock options				11,173
Diluted earnings per share
Income available to common stockholders	$	2,972,754		1,803,061	$	1.65

	Year Ended December 31, 2013
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,213,645
Basic earnings per share
Income available to common stockholders				1,853,240	$	1.73
Effect of dilutive securities
Stock options				296
Diluted earnings per share
Income available to common stockholders	$	3,213,645		1,853,536	$	1.73

XML

Disclosures about Fair Value of Assets (Detail Textuals) (Significant Unobservable Inputs (Level 3), USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ (265,687)	$ (23,206)
Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ 0	$ 33,649

XML

Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
Taxes on unrealized appreciation (depreciation) on available-for-sale securities	$ 1,219,994	$ (1,901,395)
Taxes on reclassification adjustment for realized gains included in net income	$ 138,976	$ 305,286

XML

Disclosures about Fair Value of Assets - Quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements (Details 2) (Significant Unobservable Inputs (Level 3), USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Collateral-dependent impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 1,147,400	$ 1,219,185
Valuation Technique	Market comparable properties	Market comparable properties
Unobservable Inputs	Marketability discount	Marketability discount
Marketability discount	25.00%	25.00%
Collateral-dependent impaired loans | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	20.00%	20.00%
Collateral-dependent impaired loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	30.00%	30.00%
Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis		$ 673,576
Valuation Technique		Discounted cash flow
Unobservable Inputs		Discount rate PSA standard prepayment model rate
Discount rate		10.24%
PSA standard prepayment model rate		164.00%
Mortgage servicing rights | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate		8.00%
PSA standard prepayment model rate		144.00%
Mortgage servicing rights | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate		12.50%
PSA standard prepayment model rate		342.00%

XML

Loans and Allowance for Loan Losses - Loan portfolio aging analysis (Details 3) (Loans Receivable, USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	$ 607,615	$ 615,322
60-89 Days Past Due	1,097,824	237,795
Greater Than 90 Days	850,318	950,346
Total Past Due	2,555,757	1,803,463
Current	185,128,535	182,251,078
Total Loans Receivable	187,684,292	184,054,541
Total Loans > 90 Days & Accruing
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	420,086	350,539
60-89 Days Past Due	286,622	95,782
Greater Than 90 Days	613,534	806,877
Total Past Due	1,320,242	1,253,198
Current	43,240,847	43,033,459
Total Loans Receivable	44,561,089	44,286,657
Total Loans > 90 Days & Accruing
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due	794,110	68,216
Greater Than 90 Days	39,023	78,281
Total Past Due	833,133	146,497
Current	39,641,722	38,774,195
Total Loans Receivable	40,474,855	38,920,692
Total Loans > 90 Days & Accruing
Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days	122,841
Total Past Due	122,841
Current	39,996,289	35,005,662
Total Loans Receivable	40,119,130	35,005,662
Total Loans > 90 Days & Accruing
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	26,813,880	29,946,928
Total Loans Receivable	26,813,880	29,946,928
Total Loans > 90 Days & Accruing
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due
60-89 Days Past Due
Greater Than 90 Days
Total Past Due
Current	11,844,973	10,559,593
Total Loans Receivable	11,844,973	10,559,593
Total Loans > 90 Days & Accruing
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	96,971	156,331
60-89 Days Past Due	11,561	47,585
Greater Than 90 Days	58,360	55,288
Total Past Due	166,892	259,204
Current	11,116,372	11,469,908
Total Loans Receivable	11,283,264	11,729,112
Total Loans > 90 Days & Accruing
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	90,558	108,452
60-89 Days Past Due	5,531	26,212
Greater Than 90 Days	16,560	9,900
Total Past Due	112,649	144,564
Current	12,474,452	13,461,333
Total Loans Receivable	12,587,101	13,605,897
Total Loans > 90 Days & Accruing

XML

Condensed Financial Information (Parent Company Only) - Condensed Balance Sheets (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash and due from banks	$ 6,427,536	$ 2,796,331
Other assets	892,118	1,041,005
Total assets	311,924,652	318,418,776
Liabilities
Other liabilities	1,562,947	829,260
Stockholders' Equity	45,016,098	41,138,796	44,120,329
Total liabilities and stockholders' equity	311,924,652	318,418,776
Parent Company
Assets
Cash and due from banks	3,847,179	3,479,895
Investment in common stock of subsidiary	41,012,112	37,426,345
Loan receivable from subsidiary	254,385	291,037
Other assets	96,993	130,137
Total assets	45,210,669	41,327,414
Liabilities
Other liabilities	194,571	188,618
Stockholders' Equity	45,016,098	41,138,796
Total liabilities and stockholders' equity	$ 45,210,669	$ 41,327,414

XML

Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Schedule of premises and equipment

	2014			2013
Land	$	773,186		$	773,186
Buildings and improvements		6,661,148			6,694,149
Equipment		3,254,434			4,808,044
		10,688,768			12,275,379
Less accumulated depreciation		(5,742,785	)		(7,096,401	)
Net premises and equipment	$	4,945,983		$	5,178,978

XML

Loans and Allowance for Loan Losses (Detail Textuals) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan participations outstanding balance	$ 14,064,902	$ 14,210,231
Loan participations purchased during period	2,677,750	3,877,762
Loan commitments funded Period	45 days
Annual loan review for watch list credits	75,000
One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	201,879	522,819
Troubled debt restructurings, number of modifications	3	8
TDR's defaulted as they were more than 90 days past due		206,299
Troubled debt restructurings, subsequent default, number of modifications		4
Number of loans restructured with reduced interest rate and accrued interest capitalized		3
Principal write-off		35,871
One-to-four family residential | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of total applicant's monthly mortgage payment total monthly income	30.00%
Percentage of applicant's total monthly obligations to total monthly income	43.00%
One-to-four family residential | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Origination of loan for resale to secondary market fixed rate period	15 years
Loan to value ratios	80.00%
One-to-four family residential | Adjustable rate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	30 years
Interest rate adjustments per year, maximum	2.00%
Interest rate adjustments cap on interest rate increases over the life of the loan	6.00%
One-to-four family residential | Adjustable rate loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term	5 years
One-to-four family residential | Adjustable rate loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term	1 year
Commercial Real Estate Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	386,355	175,649
Troubled debt restructurings, number of modifications	1	3
TDR's defaulted as they were more than 90 days past due	840,115	61,980
Troubled debt restructurings, subsequent default, number of modifications	2	1
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	10 years
Loan to value ratios	95.00%
TDR's defaulted as they were more than 90 days past due	3,305	7,558
Troubled debt restructurings, subsequent default, number of modifications	1	2
Consumer loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	10 years
Loan to value ratios	95.00%
Troubled debt restructurings, recorded investment	15,953	27,593
Troubled debt restructurings, number of modifications	1	1
TDR's defaulted as they were more than 90 days past due	25,055	27,593
Troubled debt restructurings, subsequent default, number of modifications	1	1
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	140,549
Troubled debt restructurings, number of modifications	3
TDR's defaulted as they were more than 90 days past due	38,737	70,880
Troubled debt restructurings, subsequent default, number of modifications	1	2
Commercial Real Estate and Commercial Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan amount that requires risk rating verification	750,000
Commercial and Agricultural Real Estate Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Minimum ratio of property's projected net cash flow to loan's debt service requirement	120.00%
Loan value that requires written appraisals from licensed or certified appraisers	250,000
Loan to value ratios	75.00%
Commercial business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment		40,644
Troubled debt restructurings, number of modifications		1
TDR's defaulted as they were more than 90 days past due	22,437	37,939
Troubled debt restructurings, subsequent default, number of modifications	2	2
Automobile loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Automobile loan term	60 months
Automobile loan | Purchase price
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratio	80.00%
Automobile loan | Nada Book Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratio	100.00%
Officer | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	750,000
Director | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	1,000,000
Board of Directors | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	$ 1,000,000

XML

Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Note 13:        Related Party Transactions

At December 31, 2014 and 2013, the Company had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties) in the amount of $3,523,047 and $3,852,658, respectively.

Annual activity consisted of the following:

	2014			2013
Balance beginning of year	$	3,852,658		$	4,052,339
Additions		1,876,445			1,156,220
Repayments		(2,206,056	)		(1,355,901	)
Balance, end of year	$	3,523,047		$	3,852,658

Deposits from related parties held by the Company at December 31, 2014 and 2013 totaled approximately $3,112,000 and $3,117,000, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons.  Further, in management’s opinion, these loans did not involve more than normal risk of collectibility or present other unfavorable features.

XML

Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Schedule of mortgage servicing rights measured using amortization method with aggregate activity in related valuation allowances

	2014			2013
Mortgage servicing rights
Balance, beginning of year	$	746,968		$	793,715
Additions		53,859			101,538
Amortization		(111,224	)		(148,285	)
Balance at end of year		689,603			746,968
Valuation allowances
Balance at beginning of year		73,392			129,279
Additions due to decreases in market value		—			—
Reduction due to increases in market value		—			(33,649	)
Reduction due to payoff of loans		(16,423	)		(22,238	)
Balances at end of year		56,969			73,392
Mortgage servicing assets, net	$	632,634		$	673,576
Fair value disclosures
Fair value as of the beginning of the period	$	1,120,000		$	765,029
Fair value as of the end of the period	$	979,699		$	1,120,000

XML

Quarterly Results of Operations (Unaudited) (Details) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Interest income	$ 2,921,442	$ 2,946,212	$ 2,978,484	$ 3,045,770	$ 3,139,867	$ 3,061,017	$ 2,924,714	$ 2,952,167	$ 11,891,908	$ 12,077,765
Interest expense	337,222	353,542	371,036	389,658	415,265	439,617	454,298	472,091	1,451,458	1,781,271
Net interest income	2,584,220	2,592,670	2,607,448	2,656,112	2,724,602	2,621,400	2,470,416	2,480,076	10,440,450	10,296,494
Provision for loan losses	150,000	30,000	30,000	30,000	130,000	10,000		30,000	240,000	170,000
Net interest income after provision for loan losses	2,434,220	2,562,670	2,577,448	2,626,112	2,594,602	2,611,400	2,470,416	2,450,076	10,200,450	10,126,494
Noninterest income	949,801	1,024,088	947,678	997,532	918,665	1,010,359	1,027,808	1,486,038	3,919,099	4,442,870
Noninterest expense	2,548,408	2,470,123	2,723,872	2,470,346	2,650,580	2,564,351	2,467,610	2,484,879	10,212,749	10,167,420
Income before income taxes	835,613	1,116,635	801,254	1,153,298	862,687	1,057,408	1,030,614	1,451,235	3,906,800	4,401,944
Income tax expense	183,641	260,619	176,277	313,509	207,234	271,739	270,539	438,787	934,046	1,188,299
Net income	$ 651,972	$ 856,016	$ 624,977	$ 839,789	$ 655,453	$ 785,669	$ 760,075	$ 1,012,448	$ 2,972,754	$ 3,213,645
Basic earnings per share (in dollars per share)	$ 0.37	$ 0.48	$ 0.35	$ 0.47	$ 0.36	$ 0.43	$ 0.41	$ 0.54	$ 1.66	$ 1.73
Diluted earnings per share (in dollars per share)	$ 0.36	$ 0.47	$ 0.35	$ 0.47	$ 0.36	$ 0.42	$ 0.41	$ 0.54	$ 1.65	$ 1.73

XML

Stock Option Plans

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plans

Note 15:        Stock Option Plans

The Jacksonville Savings Bank and Jacksonville Bancorp, MHC 1996 Stock Option Plan was adopted on April 23, 1996 and is administered by the Board of Directors.  A total of 83,625 shares of common stock were reserved and awarded under the Plan.  Awards expire ten years after the grant date and are exercisable at a price of $8.83 per share.  In 2004, 5,600 shares related to this plan were reissued at a price of $14.00 per share.  The Jacksonville Savings Bank 2001 Stock Option Plan was adopted on April 30, 2001 and is administered by the Stock Benefits Committee.  A total of 87,100 shares of common stock were reserved and awarded under the Plan during 2001 that expire ten years after the grant date and are exercisable at a price of $10.00 per share.

The Jacksonville Bancorp, Inc. 2012 Stock Option Plan, which is shareholder approved, permits the grant of share options and shares to its employees for up to 104,035 shares of common stock.  The Company believes that such awards better align the interests of its employees with those of its shareholders.  All shares were awarded as of the approval date, expire ten years after the grant date, and are exercisable at a price of $15.65 per share.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table.  Expected volatility is based on historical volatility of the Company’s stock and other factors.  The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.  The expected term of options granted represents the period of time that options are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  The discount rate for post-vesting restrictions is estimated based on the Company’s credit-adjusted risk-free rate of return.

A summary of option activity under the Plans as of December 31, 2014 and 2013, and changes during the years then ended, is presented below:

	2014
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		101,336		$	15.63
Granted		—			—
Exercised		(15,101	)		15.53
Forfeited or expired		(400	)		15.65
Outstanding, end of year		85,835		$	15.65		7.25	$	630,887
Exercisable, end of year		23,600		$	15.65		7.25	$	173,460

	2013
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		107,338		$	15.60
Granted		—			—
Exercised		(6,002	)		15.04
Forfeited or expired		—			—
Outstanding, end of year		101,336		$	15.63		8.17	$	397,049
Exercisable, end of year		18,151		$	15.55		7.78	$	72,628

The total intrinsic value of options exercised during the years ended December 31, 2014 and 2013 was $90,606 and $24,548, respectively.

As of December 31, 2014, there was $202,804 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2012 Plan.  That cost is expected to be recognized over a weighted-average period of 3 years.  The total fair value of shares vested during the year ended December 31, 2014 and 2013 was $90,163 and $90,162.  The recognized tax benefit related thereto was $34,622 and $36,309 for the years ended December 31, 2014 and 2013, respectively.

A summary of the status of the Company’s nonvested shares as of December 31, 2014 and 2013, and changes during the year then ended, is presented below:

	December 31, 2014
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		83,185		$	4.34
Granted		—			—
Vested		(20,550	)		4.34
Forfeited		(400	)		—
Nonvested, end of year		62,235		$	4.34

	December 31, 2013
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		104,035		$	4.34
Granted		—			—
Vested		(20,850	)		4.34
Forfeited		—			—
Nonvested, end of year		83,185		$	4.34

XML

Loan Servicing - (Detail Textuals) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2008
Transfers and Servicing [Abstract]
Unpaid principal balance of mortgage loans serviced for others	$ 137,877,795	$ 145,883,259
Capitalized mortgage servicing rights, valuation allowance	$ 56,969	$ 73,392	$ 428,030

XML

Consolidated Statements of Stockholders' Equity (USD $)	Issued Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Unallocated ESOP	Total
Balance at Dec. 31, 2012	$ 19,086	$ 15,943,273	$ 25,585,757	$ 2,896,593	$ (324,380)	$ 44,120,329
Balance (in shares) at Dec. 31, 2012	1,908,556
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			3,213,645			3,213,645
Other comprehensive income (loss)				(4,283,557)		(4,283,557)
Stock repurchases	(817)	(1,596,142)				(1,596,959)
Stock repurchases (in shares)	(81,698)
Exercise of stock options	60	88,398				88,458
Exercise of stock options (in shares)	6,002
Tax benefit of nonqualified options		1,796				1,796
Stock-based compensation expense		90,162				90,162
Common shares held by ESOP, committed to be released		33,598			36,850	70,448
Dividends on common stock, $.31 in 2013 and $.32 in 2014 per share			(565,526)			(565,526)
Balance at Dec. 31, 2013	18,329	14,561,085	28,233,876	(1,386,964)	(287,530)	41,138,796
Balance (in shares) at Dec. 31, 2013	1,832,860
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			2,972,754			2,972,754
Other comprehensive income (loss)				2,098,447		2,098,447
Stock repurchases	(485)	(1,028,203)				(1,028,688)
Stock repurchases (in shares)	(48,478)
Exercise of stock options	151	230,827				230,978
Exercise of stock options (in shares)	15,101
Tax benefit of nonqualified options		3,513				3,513
Stock-based compensation expense		90,163				90,163
Common shares held by ESOP, committed to be released		43,358			37,620	80,978
Dividends on common stock, $.31 in 2013 and $.32 in 2014 per share			(570,843)			(570,843)
Balance at Dec. 31, 2014	$ 17,995	$ 13,900,743	$ 30,635,787	$ 711,483	$ (249,910)	$ 45,016,098
Balance (in shares) at Dec. 31, 2014	1,799,483

XML

Consolidated Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Allowance for loan losses of loans receivable (in dollars)	$ 2,956,264	$ 3,406,434
Accumulated depreciation on premises and equipment (in dollars)	5,742,785	7,096,401
Valuation allowance on mortgage servicing rights (in dollars)	$ 56,969	$ 73,392
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	1,799,483	1,832,860

XML

Short-term Borrowings

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Short-term Borrowings

Note 8:          Short-term Borrowings

Short-term borrowings include securities sold under agreements to repurchase totaling $8,821,730 and $8,810,297 at December 31, 2014 and 2013, respectively.

Securities sold under agreements to repurchase consist of obligations of the Company to other parties.  The obligations are secured by investments and such collateral is held by the Company.  The maximum amount of outstanding agreements at any month end during 2014 and 2013 totaled $9,483,795 and $9,445,747, respectively, and the monthly average of such agreements totaled $6,229,604 and $6,208,142 for 2014 and 2013, respectively.  The agreements at December 31, 2014, are all for overnight borrowings.

Also included in short-term borrowings are advances with the Federal Home Loan Bank (FHLB) of which $5,000,000 and $10,800,000 had been extended as of December 31, 2014 and 2013, respectively.  The advances mature in 2015 and are secured by mortgage loans totaling $42,384,000 at December 31, 2014.  Advances, at an interest rate of 0.33%, are subject to restrictions or penalties in the event of prepayment.

XML

Disclosures about Fair Value of Assets - Fair value measurement of assets measured at fair value on nonrecurring basis (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Significant Unobservable Inputs (Level 3) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 1,147,400	$ 1,219,185
Significant Unobservable Inputs (Level 3) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis		673,576
Nonrecurring | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	1,147,400	1,219,185
Nonrecurring | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis		673,576
Nonrecurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Significant Other Observable Inputs (Level 2) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Significant Other Observable Inputs (Level 2) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis

XML

Earnings Per Share - (Detail Textuals) (Stock Options)	12 Months Ended
	Dec. 31, 2013
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities share amount	100,235

XML

Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Mar. 01, 2015	Jun. 30, 2014
Document And Entity Information Abstract
Entity Registrant Name	Jacksonville Bancorp, Inc.
Entity Central Index Key	0001484949
Trading Symbol	jxsb
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Well Known Seasoned Issuer	No
Entity Common Stock Shares Outstanding		1,800,123
Entity Public Float			$ 38.6
Document Type	10-K
Document Period End Date	Dec. 31, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY

XML

Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 9:          Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal and state of Illinois jurisdictions.  During the years ended December 31, 2014 and 2013, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:

	2014		2013
Taxes currently payable
Federal	$	798,160	$	813,409
State		—		406,770
Deferred income taxes		135,886		(31,880	)
Income tax expense	$	934,046	$	1,188,299

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	2014			2013
Computed at the statutory rate (34%)	$	1,328,312		$	1,496,661
Increase (decrease) resulting from
Tax exempt interest		(503,089	)		(509,850	)
State income taxes, net		173,879			264,287
Increase in cash surrender value		(63,235	)		(66,246	)
Other		(1,821	)		3,447
Actual tax expense	$	934,046		$	1,188,299
Tax expense as a percentage of pre-tax income		23.91	%		26.99	%

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:

	2014			2013
Deferred tax assets
Allowance for loan losses	$	1,060,419		$	1,241,702
Deferred compensation		1,712,570			1,610,547
State net operating loss carryforward		4,749			186,497
Unrealized losses on available-for-sale securities		—			714,497
Other		40,270			840
		2,818,008			3,754,083
Deferred tax liabilities
Unrealized gains on available-for-sale securities		(366,521	)		—
Depreciation		(478,427	)		(536,706	)
Federal Home Loan Bank stock dividends		(152,224	)		(152,224	)
Prepaid expenses		(79,868	)		(90,794	)
Mortgage servicing rights		(254,762	)		(271,249	)
		(1,331,802	)		(1,050,973	)
Net deferred tax asset	$	1,486,206		$	2,703,110

At December 31, 2014 and 2013, the Company had Illinois net operating loss carryforwards totaling approximately $98,574 and $3,870,846, respectively, which will expire in varying amounts between 2018 and 2022.  Recent Illinois legislation limited the use of these loss carryovers for tax years 2011 through 2013 and the expiration dates were extended by three years.  Management believes the Company will produce taxable earnings in the future which will enable the net operating loss carryforwards to be utilized prior to expiration.

Retained earnings at December 31, 2014 and 2013, include approximately $2,600,000, for which no deferred federal income tax liability has been recognized.  These amounts represent an allocation of income to bad debt deductions for tax purposes only.  Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate.  The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $1,000,000 at December 31, 2014 and 2013.

XML

Regulatory Matters - Bank's actual capital amounts and ratios (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Regulatory Matters [Abstract]
Total risk-based capital (to risk-weighted assets), Actual Amount	$ 40,252	$ 38,766
Total risk-based capital (to risk-weighted assets), Actual Ratio	18.81%	18.15%
Total risk-based capital (to risk-weighted assets), Minimum Capital Requirement Amount	17,119	17,089
Total risk-based capital (to risk-weighted assets), Minimum Capital Requirement Ratio	8.00%	8.00%
Total risk-based capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	21,399	21,361
Total risk-based capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier I capital (to risk-weighted assets), Actual Amount	37,574	36,087
Tier I capital (to risk-weighted assets), Actual Ratio	17.56%	16.89%
Tier I capital (to risk-weighted assets), Minimum Capital Requirement Amount	8,560	8,544
Tier I capital (to risk-weighted assets), Minimum Capital Requirement Ratio	4.00%	4.00%
Tier I capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	12,839	12,817
Tier I capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	6.00%	6.00%
Tier I capital (to average assets) Actual Amount	37,574	36,087
Tier I capital (to average assets), Actual Ratio	12.25%	11.51%
Tier I capital (to average assets), Minimum Capital Requirement Amount	12,269	12,546
Tier I capital (to average assets), Minimum Capital Requirement Ratio	4.00%	4.00%
Tier I capital (to average assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	15,336	15,682
Tier I capital (to average assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%
Tangible capital (to adjusted tangible assets), Actual Amount	37,574	36,087
Tangible capital (to adjusted tangible assets), Actual Ratio	12.25%	11.51%
Tangible capital (to adjusted tangible assets), Minimum Capital Requirement Amount	$ 4,601	$ 4,705
Tangible capital (to adjusted tangible assets), Minimum Capital Requirement Ratio	1.50%	1.50%

XML

Earnings Per Share - Computation of earnings per share (Details) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Earnings Per Share [Abstract]
Income available to common stockholders, basic									$ 2,972,754	$ 3,213,645
Income available to common stockholders, diluted									$ 2,972,754	$ 3,213,645
Weighted average shares, basic									1,791,888	1,853,240
Effect of dilutive securities, stock options									11,173	296
Weighted average shares, diluted									1,803,061	1,853,536
Basic earnings per share	$ 0.37	$ 0.48	$ 0.35	$ 0.47	$ 0.36	$ 0.43	$ 0.41	$ 0.54	$ 1.66	$ 1.73
Diluted earnings per share	$ 0.36	$ 0.47	$ 0.35	$ 0.47	$ 0.36	$ 0.42	$ 0.41	$ 0.54	$ 1.65	$ 1.73

XML

Consolidated Statements of Income (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Interest and Fee Income
Loans, including fees	$ 9,157,672	$ 9,370,899
Debt securities
Taxable	225,722	238,419
Tax-exempt	1,525,723	1,554,595
Mortgage-backed securities	981,032	877,300
Other	1,759	36,552
Total interest income	11,891,908	12,077,765
Interest Expense
Deposits	1,436,803	1,766,740
Short-term borrowings	5,085	8,175
Federal Home Loan Bank advances	9,570	6,356
Total interest expense	1,451,458	1,781,271
Net Interest Income	10,440,450	10,296,494
Provision for Loan Losses	240,000	170,000
Net Interest Income After Provision for Loan Losses	10,200,450	10,126,494
Noninterest Income
Fiduciary activities	290,681	252,831
Commission income	1,201,869	1,056,380
Service charges on deposit accounts	714,425	826,082
Mortgage banking operations, net	124,564	238,974
Net realized gains on sales of available-for-sale securities	408,753	897,901
Loan servicing fees	361,586	372,219
Increase in cash surrender value of life insurance	185,986	194,841
ATM and bank card interchange income	494,360	430,639
Other	136,875	173,003
Total noninterest income	3,919,099	4,442,870
Noninterest Expense
Salaries and employee benefits	6,480,468	6,501,277
Occupancy and equipment	974,361	1,021,638
Data processing and telecommunications	531,554	624,134
Professional	532,096	283,447
Marketing	112,713	133,421
Postage and office supplies	235,090	266,128
Deposit insurance premium	153,137	156,125
ATM and bank card expense	282,574	245,448
Other	910,756	935,802
Total noninterest expense	10,212,749	10,167,420
Income Before Income Taxes	3,906,800	4,401,944
Provision for Income Taxes	934,046	1,188,299
Net Income	$ 2,972,754	$ 3,213,645
Basic Earnings Per Share (in dollars per share)	$ 1.66	$ 1.73
Diluted Earnings Per Share (in dollars per share)	$ 1.65	$ 1.73
Cash Dividends Per Share (in dollars per share)	$ 0.32	$ 0.31

XML

Securities

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Securities

Note 3:          Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

	Amortized Cost		Gross  Unrealized  Gains		Gross Unrealized  Losses			Fair Value
Available-for-sale Securities
December 31, 2014:
U.S. Government and federal agencies	$	10,031,683	$	65,328	$	(138,738	)	$	9,958,273
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,196,695		433,757		(210,531	)		41,419,921
Municipal bonds		44,378,515		1,457,977		(529,789	)		45,306,703
	$	95,606,893	$	1,957,062	$	(879,058	)	$	96,684,897
December 31, 2013:
U.S. Government and federal agencies	$	10,710,675	$	114,936	$	(405,535	)	$	10,420,076
Mortgage-backed securities (Government-sponsored enterprises - residential)		49,486,337		219,222		(1,359,904	)		48,345,655
Municipal bonds		50,889,046		1,053,134		(1,723,314	)		50,218,866
	$	111,086,058	$	1,387,292	$	(3,488,753	)	$	108,984,597

The amortized cost and fair value of available-for-sale securities at December 31, 2014, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale
	Amortized Cost		Fair Value
Within one year	$	535,664	$	544,411
One to five years		9,184,010		9,490,518
Five to ten years		25,748,781		26,064,641
After ten years		18,941,743		19,165,406
		54,410,198		55,264,976
Mortgage-backed securities		41,196,695		41,419,921
Totals	$	95,606,893	$	96,684,897

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $21,121,613 at December 31, 2014 and $20,420,437 at December 31, 2013.

The carrying value of securities sold under agreements to repurchase amounted to $9,165,462 and $9,541,242 at December 31, 2014 and 2013, respectively.

Gross gains of $429,105 and $907,908 and gross losses of $(20,352) and $(10,007) resulting from sales of available-for-sale securities were realized for 2014 and 2013, respectively.  The tax provision applicable to these net realized gains amounted to $138,976 and $305,286, respectively.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.  Total fair value of these investments at December 31, 2014 and 2013, was $40,587,408 and $71,198,051, which is approximately 42% and 65%, respectively, of the Company’s available-for-sale investment portfolio.  The declines primarily resulted from recent changes in market interest rates.

Management believes the declines in fair value for these securities are temporary.

The following table shows the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2014 and 2013:

	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	2,955,829	$	(28,208	)	$	3,949,940	$	(110,530	)	$	6,905,769	$	(138,738	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		2,061,203		(13,358	)		13,725,099		(197,173	)		15,786,302		(210,531	)
Municipal bonds		3,953,168		(44,654	)		13,942,169		(485,135	)		17,895,337		(529,789	)
Total temporarily impaired securities	$	8,970,200	$	(86,220	)	$	31,617,208	$	(792,838	)	$	40,587,408	$	(879,058	)

	December 31, 2013
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	5,824,808	$	(367,005	)	$	470,324	$	(38,530	)	$	6,295,132	$	(405,535	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		33,521,545		(1,065,542	)		6,087,526		(294,362	)		39,609,071		(1,359,904	)
Municipal bonds		22,534,325		(1,462,733	)		2,759,523		(260,581	)		25,293,848		(1,723,314	)
Total temporarily impaired securities	$	61,880,678	$	(2,895,280	)	$	9,317,373	$	(593,473	)	$	71,198,051	$	(3,488,753	)

U.S. Government Agencies

The unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Residential Mortgage-backed Securities

The unrealized losses on the Company’s investment in residential mortgage-backed securities were caused by interest rate increases.  The Company expects to recover the amortized cost basis over the term of the securities.  Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

Municipal Bonds

The unrealized losses on the Company’s investments in securities of municipal bonds were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

XML

Restriction on Cash and Due From Banks

12 Months Ended

Dec. 31, 2014

Restricted Cash and Investments [Abstract]

Restriction on Cash and Due From Banks

Note 2:          Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank.  The reserve required at December 31, 2014 and 2013, was $1,402,000 and $1,310,000, respectively.

XML

Employee Benefits

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Employee Benefits

Note 14:        Employee Benefits

401(k) Plan — The Company maintains a 401(k) savings plan for eligible employees.  The Company’s contributions to this plan were $232,567 and $224,099 for the years ended December 31, 2014 and 2013, respectively.  The plan invests some of its assets in deposit accounts at the Company which earned interest at a rate of 1.85% for the year ended December 31, 2014 and 1.85% to 2.00% for the year ended December 31, 2013.

Deferred Compensation Plan — The Company maintains a deferred compensation plan for certain key officers and employees.  Contributions are determined annually by the Company’s Board of Directors.  Effective in 2005, the Company froze this plan and no contributions to this plan were made for the years ended December 31, 2014 or 2013.  The plan accrues interest at a variable rate which fluctuates based on Moody’s Corporate Bond Average Index.  The amount recorded on the consolidated balance sheets as deferred compensation was $2,451,200 and $2,374,940 as of December 31, 2014 and 2013, respectively.  Compensation expense related to the plan was $140,714 and $139,308 for the years ended December 31, 2014 and 2013, respectively.

The Company has also entered into deferred compensation agreements with certain key officers and employees.  The agreements provide for monthly payments at retirement or death.  The charge to expense for this plan reflects the accrual using the principal and interest method over the vesting period of the present value of benefits due each participant on the full eligibility date using a 4.75% discount rate.  The amount recorded on the consolidated balance sheets as deferred compensation was $1,801,520 and $1,624,431 as of December 31, 2014 and 2013, respectively.  Compensation expense related to the plans was $241,745 and $302,138 for the years ended December 31, 2014 and 2013, respectively.

Employee Stock Ownership Plan (ESOP) — The ESOP is a noncontributory defined contribution plan which covers substantially all employees.  The Company may contribute to the Plan, at its discretion, an amount determined by the Board of Directors.

As part of the second step conversion, in July 2010 the Company acquired 41,614 additional shares of Company common stock at $10 per share in the conversion with funds provided by a loan from the Company.  Accordingly, $416,140 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity.  Shares are released to participants proportionately as the loan is repaid.  Dividends on allocated shares are recorded as dividends and charged to retained earnings.  Dividends on unallocated shares are used to repay the loan and are treated as compensation expense.  Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company, are made to the ESOP.

ESOP expense for the years ended December 31, 2014 and 2013 was $80,978 and $70,448, respectively.

	2014		2013
Allocated shares	$	54,519	$	55,515
Shares committed for allocation		3,767		3,680
Unearned shares		24,991		28,758
Total ESOP shares		83,277		87,953
Fair value of unearned shares at December 31	$	574,793	$	562,219

XML

Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 10:        Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

	2014			2013
Net unrealized gain (loss) on securities available-for-sale	$	1,078,004		$	(2,101,461	)
Tax effect		(366,521	)		714,497
Net-of-tax amount	$	711,483		$	(1,386,964	)

XML

Related Party Transactions (Detail Textuals) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Related Party Transactions [Abstract]
Loans outstanding to related parties	$ 3,523,047	$ 3,852,658	$ 4,052,339
Deposits from related parties	$ 3,112,000	$ 3,117,000

XML

Loan Servicing

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Loan Servicing

Note 6:          Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets.  The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates.  The unpaid principal balance of mortgage loans serviced for others was $137,877,795 and $145,883,259 at December 31, 2014 and 2013, respectively.

The following summarized the activity pertaining to mortgage servicing rights measured using the amortization method, along with the aggregate activity in related valuation allowances:

	2014			2013
Mortgage servicing rights
Balance, beginning of year	$	746,968		$	793,715
Additions		53,859			101,538
Amortization		(111,224	)		(148,285	)
Balance at end of year		689,603			746,968
Valuation allowances
Balance at beginning of year		73,392			129,279
Additions due to decreases in market value		—			—
Reduction due to increases in market value		—			(33,649	)
Reduction due to payoff of loans		(16,423	)		(22,238	)
Balances at end of year		56,969			73,392
Mortgage servicing assets, net	$	632,634		$	673,576
Fair value disclosures
Fair value as of the beginning of the period	$	1,120,000		$	765,029
Fair value as of the end of the period	$	979,699		$	1,120,000

In prior years, a valuation allowance of $428,030 was necessary to adjust the aggregate cost basis of the mortgage servicing right asset to fair value.  The valuation allowance was adjusted during 2013 and 2014 due to payments received on the related loans as well as changes in the estimated market value on the mortgage servicing rights asset.

Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value.  For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights.

XML

Loans and Allowance for Loan Losses - Impaired loans (Details 4) (Loans Receivable, USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Balance, Total	$ 3,959,047	$ 2,929,969
Unpaid Principal Balance, Total	3,959,047	2,929,969
Specific Allowance, Total	695,507	882,423
Average Investment in Impaired Loans, Total	4,484,374	3,135,112
Interest Income Recognized, Total	218,710	151,772
Interest Income Recognized Cash Basis, Total	189,536	143,621
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	129,272	563,524
Loans without a specific valuation allowance, Unpaid Principal Balance	129,272	563,524
Loans without a specific valuation allowance, Average Investment in Impaired Loans	220,541	652,373
Loans without a specific valuation allowance, Interest Income Recognized	12,818	27,250
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	13,076	25,347
Loans with a specific valuation allowance, Recorded Balance	584,690
Loans with a specific valuation allowance, Unpaid Principal Balance	584,690
Loans with a specific valuation allowance, Specific Allowance	183,196
Loans with a specific valuation allowance, Average Investment in Impaired Loans	604,031
Loans with a specific valuation allowance, Interest Income Recognized	28,722
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	26,783
Recorded Balance, Total	713,962	563,524
Unpaid Principal Balance, Total	713,962	563,524
Specific Allowance, Total	183,196
Average Investment in Impaired Loans, Total	824,572	652,373
Interest Income Recognized, Total	41,540	27,250
Interest Income Recognized Cash Basis, Total	39,859	25,347
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	564,610	63,293
Loans without a specific valuation allowance, Unpaid Principal Balance	564,610	63,293
Loans without a specific valuation allowance, Average Investment in Impaired Loans	757,616	96,019
Loans without a specific valuation allowance, Interest Income Recognized	19,826	5,282
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	18,816	5,327
Loans with a specific valuation allowance, Recorded Balance	1,125,641	1,467,785
Loans with a specific valuation allowance, Unpaid Principal Balance	1,125,641	1,467,785
Loans with a specific valuation allowance, Specific Allowance	348,240	248,857
Loans with a specific valuation allowance, Average Investment in Impaired Loans	1,134,401	1,488,243
Loans with a specific valuation allowance, Interest Income Recognized	66,864	79,719
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	60,012	74,028
Recorded Balance, Total	1,690,251	1,531,078
Unpaid Principal Balance, Total	1,690,251	1,531,078
Specific Allowance, Total	348,240	248,857
Average Investment in Impaired Loans, Total	1,892,017	1,584,262
Interest Income Recognized, Total	86,690	85,001
Interest Income Recognized Cash Basis, Total	78,828	79,355
Agricultural Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	1,009,889
Loans without a specific valuation allowance, Unpaid Principal Balance	1,009,889
Loans without a specific valuation allowance, Average Investment in Impaired Loans	1,037,661
Loans without a specific valuation allowance, Interest Income Recognized	58,253
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	49,159
Recorded Balance, Total	1,009,889
Unpaid Principal Balance, Total	1,009,889
Specific Allowance, Total
Average Investment in Impaired Loans, Total	1,037,661
Interest Income Recognized, Total	58,253
Interest Income Recognized Cash Basis, Total	49,159
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans with a specific valuation allowance, Recorded Balance	240,805	662,730
Loans with a specific valuation allowance, Unpaid Principal Balance	240,805	662,730
Loans with a specific valuation allowance, Specific Allowance	154,089	622,730
Loans with a specific valuation allowance, Average Investment in Impaired Loans	319,812	726,269
Loans with a specific valuation allowance, Interest Income Recognized	14,425	34,465
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	16,554	33,921
Recorded Balance, Total	240,805	662,730
Unpaid Principal Balance, Total	240,805	662,730
Specific Allowance, Total	154,089	622,730
Average Investment in Impaired Loans, Total	319,812	726,269
Interest Income Recognized, Total	14,425	34,465
Interest Income Recognized Cash Basis, Total	16,554	33,921
Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	258,140
Loans without a specific valuation allowance, Unpaid Principal Balance	258,140
Loans without a specific valuation allowance, Average Investment in Impaired Loans	358,529
Loans without a specific valuation allowance, Interest Income Recognized	13,723
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	1,046
Recorded Balance, Total	258,140
Unpaid Principal Balance, Total	258,140
Specific Allowance, Total
Average Investment in Impaired Loans, Total	358,529
Interest Income Recognized, Total	13,723
Interest Income Recognized Cash Basis, Total	1,046
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	27,549	71,548
Loans without a specific valuation allowance, Unpaid Principal Balance	27,549	71,548
Loans without a specific valuation allowance, Average Investment in Impaired Loans	29,505	66,388
Loans without a specific valuation allowance, Interest Income Recognized	2,881	3,017
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	2,939	2,980
Loans with a specific valuation allowance, Recorded Balance	9,982
Loans with a specific valuation allowance, Unpaid Principal Balance	9,982
Loans with a specific valuation allowance, Specific Allowance	9,982
Loans with a specific valuation allowance, Average Investment in Impaired Loans	9,993
Loans with a specific valuation allowance, Interest Income Recognized	247
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	187
Recorded Balance, Total	37,531	71,548
Unpaid Principal Balance, Total	37,531	71,548
Specific Allowance, Total	9,982
Average Investment in Impaired Loans, Total	39,498	66,388
Interest Income Recognized, Total	3,128	3,017
Interest Income Recognized Cash Basis, Total	3,126	2,980
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	8,469	4,528
Loans without a specific valuation allowance, Unpaid Principal Balance	8,469	4,528
Loans without a specific valuation allowance, Average Investment in Impaired Loans	12,285	6,419
Loans without a specific valuation allowance, Interest Income Recognized	951	453
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	964	442
Loans with a specific valuation allowance, Recorded Balance		96,561
Loans with a specific valuation allowance, Unpaid Principal Balance		96,561
Loans with a specific valuation allowance, Specific Allowance		10,836
Loans with a specific valuation allowance, Average Investment in Impaired Loans		99,401
Loans with a specific valuation allowance, Interest Income Recognized		1,586
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis		1,576
Recorded Balance, Total	8,469	101,089
Unpaid Principal Balance, Total	8,469	101,089
Specific Allowance, Total		10,836
Average Investment in Impaired Loans, Total	12,285	105,820
Interest Income Recognized, Total	951	2,039
Interest Income Recognized Cash Basis, Total	$ 964	$ 2,018

XML

Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans and Allowance for Loan Losses

Note 4:          Loans and Allowance for Loan Losses

Classes of loans at December 31, include:

	2014		2013
Mortgage loans on real estate
Residential 1-4 family	$	44,561,089	$	44,286,657
Commercial		40,474,855		38,920,692
Agricultural		40,119,130		35,005,662
Home equity		11,283,264		11,729,112
Total mortgage loans on real estate		136,438,338		129,942,123
Commercial loans		26,813,880		29,946,928
Agricultural		11,844,973		10,559,593
Consumer		12,587,101		13,605,897
		187,684,292		184,054,541
Less
Net deferred loan fees		9,416		8,605
Allowance for loan losses		2,956,264		3,406,434
Net loans	$	184,718,612	$	180,639,502

The Company’s loan portfolio includes loan participations purchased from other institutions.  The outstanding balance of these purchased loans totaled $14,064,902 and $14,210,231 as of December 31, 2014 and 2103, respectively.  Participations purchased during the years ended December 31, 2014 and 2013 totaled $2,677,750 and $3,877,762, respectively.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment.  Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords.  The Company maintains lending policies and procedures in place designed to focus lending efforts on the types, locations, and duration of loans most appropriate for the business model and markets.  The Company’s principal lending activities include the origination of one-to four-family residential mortgage loans, multi-family loans, commercial real estate loans, agricultural loans, home equity lines of credits, commercial business loans, and consumer loans.  The primary lending market includes the Illinois counties of Morgan, Macoupin and Montgomery.  Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, builders, attorneys and walk-in customers.  Upon receipt of a loan application, a credit report is obtained to verify specific information relating to the applicant’s employment, income, and credit standing.  In the case of a real estate loan, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent appraiser approved by the Company.  A loan application file is first reviewed by a loan officer in the loan department who checks applications for accuracy and completeness, and verifies the information provided.  The financial resources of the borrower and the borrower’s credit history, as well as the collateral securing the loan, are considered an integral part of each risk evaluation prior to approval.  All residential real estate loans are then verified by our loan risk management department prior to closing.  The board of directors has established individual lending authorities for each loan officer by loan type.  Loans over an individual officer’s lending limit must be approved by the officers’ loan committee consisting of the chairman of the board, president, chief lending officer and all lending officers, which meets three times a week, and has lending authority up to $750,000 depending on the type of loan.  Loans to borrowers with an aggregate principal balance over this limit, up to $1.0 million, must be approved by the directors’ loan committee, which meets weekly and consists of the chairman of the board, president, senior vice president, chief lending officer and at least two outside directors, plus all lending officers as non-voting members.  The board of directors approves all loans to borrowers with an aggregate principal balance over $1.0 million.  The board of directors ratifies all loans that are originated.  Once the loan is approved, the applicant is informed and a closing date is scheduled.  Loan commitments are typically funded within 45 days.

If the loan is approved, the borrower must provide proof of fire and casualty insurance on the property serving as collateral which insurance must be maintained during the full term of the loan; flood insurance is required in certain instances.  Title insurance is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the primary lending origination activity has been one-to-four family, owner-occupied, residential mortgage loans secured by property located in the Company’s market area.  The Company generates loans through marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses.  Generally, one-to-four family loan originations are limited to the financing of loans secured by properties located within the Company’s market area.  

Fixed-rate one-to-four family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines.  The Company generally originates both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency for the secondary market.

The Company originates for resale to the secondary market fixed-rate one-to-four family residential mortgage loans with terms of 15 years or more.  The fixed-rate mortgage loans amortize monthly with principal and interest due each month.  Residential real estate loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option.  The Company offers fixed-rate one-to-four family residential mortgage loans with terms of up to 30 years without prepayment penalty.

The Company currently offers adjustable-rate mortgage loans for terms ranging up to 30 years.  They generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination.  Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan.  In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on the net interest income.  In the low interest rate environment that has existed over the past two years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio.  The Company has used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years.  The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, interest rate risk position and competitors’ loan products.

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  It is possible that during periods of rising interest rates that the risk of delinquencies and defaults on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower, resulting in increased loan losses.

Residential first mortgage loans customarily include due-on-sale clauses, which gives the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of imposing assumption fees and increasing the interest rate on mortgage portfolio during periods of rising interest rates.

When underwriting residential real estate loans, the Company reviews and verifies each loan applicant’s income and credit history.  Management believes that stability of income and past credit history are integral parts in the underwriting process.  Generally, the applicant’s total monthly mortgage payment, including all escrow amounts, is limited to 30% of the applicant’s total monthly income.  In addition, total monthly obligations of the applicant, including mortgage payments, should not generally exceed 43% of total monthly income.  Written appraisals are generally required on real estate property offered to secure an applicant’s loan.  For one-to-four family real estate loans with loan to value ratios of over 80%, private mortgage insurance is generally required.  Fire and casualty insurance is also required on all properties securing real estate loans.  Title insurance may be required, as circumstances warrant.

The Company does not offer an “interest only” mortgage loan product on one-to-four family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan).  They also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.  The Company does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Commercial and Agricultural Real Estate Loans - The Company originates and purchases commercial and agricultural real estate loans.  Commercial and agricultural real estate loans are secured primarily by improved properties such as farms, retail facilities and office buildings, churches and other non-residential buildings.  The maximum loan-to-value ratio for commercial and agricultural real estate loans originated is generally 75%.  The commercial and agricultural real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the prime rate and generally have a specified floor.  Many of the adjustable-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity.  The Company purchases from time to time commercial real estate loan participations primarily from outside the Company’s market area.  All participation loans are approved following a review to ensure that the loan satisfies the underwriting standards.

Underwriting standards for commercial and agricultural real estate loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The income approach is primarily utilized to determine whether income generated from the applicant’s business or real estate offered as collateral is adequate to repay the loan.  There is an emphasis on the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120%).  In underwriting a loan, the value of the real estate offered as collateral in relation to the proposed loan amount is considered.  Generally, the loan amount cannot be greater than 75% of the value of the real estate.  Written appraisals are usually obtained from either licensed or certified appraisers on all commercial and agricultural real estate loans in excess of $250,000.  Creditworthiness of the applicant is assessed by reviewing a credit report, financial statements and tax returns of the applicant, as well as obtaining other public records regarding the applicant.

Loans secured by commercial and agricultural real estate generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances.  This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans.  Furthermore, the repayment of loans secured by commercial and agricultural real estate is typically dependent upon the successful operation of the related business and real estate property.  If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Commercial and Agricultural Business Loans - The Company originates commercial and agricultural business loans to borrowers located in the Company’s market area which are secured by collateral other than real estate or which can be unsecured.  Commercial business loan participations are also purchased from other lenders, which may be made to borrowers outside the Company’s market area.  Commercial and agricultural business loans are generally secured by accounts receivable, equipment, and inventory and generally are offered with adjustable rates tied to the prime rate or the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years and various terms of maturity generally from three years to five years.  Unsecured business loans are originated on a limited basis in those instances where the applicant’s financial strength and creditworthiness has been established.  Commercial and agricultural business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business.  Personal guarantees are generally obtained from the borrower or a third party as a condition to originating its business loans.

Underwriting standards for commercial and agricultural business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business.  Financial strength of each applicant is assessed through the review of financial statements and tax returns provided by the applicant.  The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records.  Business loans are periodically reviewed following origination.  Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan.  Loan officers also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral.  Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Home Equity and Consumer Loans – The Company originates home equity and other consumer loans.  Home equity loans and lines of credit are generally secured by the borrower’s principal residence.  The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral including the amount of any prior mortgages or related liabilities.  Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which are determined based upon market conditions.  Such loans may be fully amortized over the life of the loan or have a balloon feature.  Generally, the maximum term for home equity loans is 10 years.

The principal types of other consumer loans offered are loans secured by automobiles, deposit accounts, and mobile homes.  Unsecured consumer loans are also generated.  Consumer loans are generally offered on a fixed-rate basis.  Automobile loans with maturities of up to 60 months are offered for new automobiles.  Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile.  Automobile loans with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value are generally originated, although the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with the Company.

Underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income.  The length of employment with the borrower’s present employer is also considered, as well as the amount of time the borrower has lived in the local area.  Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Consumer loans entail greater risks than one-to-four family residential mortgage loans, particularly consumer loans secured by rapidly depreciating assets such as automobiles or loans that are unsecured.  In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation.  Further, consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.  Such events would increase the risk of loss on unsecured loans.  Finally, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans in the event of a default. 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2014 and 2013:

	December 31, 2014
	1-4 Family			Commercial  Real Estate			Agricultural  Real Estate		Commercial			Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	856,144		$	745,760		$	175,028	$	1,034,189		$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Provision charged to expense		241,875			392,009			20,518		(327,057	)		5,136		5,887			3,950			(102,318	)		240,000
Losses charged off		(100,319	)		(287,474	)		—		(285,411	)		—		(5,403	)		(25,781	)		—			(704,388	)
Recoveries		1,560			5,168			—		88			—		3,100			4,302			—			14,218
Balance, end of year	$	999,260		$	855,463		$	195,546	$	421,809		$	57,934	$	205,577		$	167,319		$	53,356		$	2,956,264
Ending balance: individually evaluated for impairment	$	183,196		$	348,240		$	—	$	154,089		$	—	$	9,982		$	—		$	—		$	695,507
Ending balance: collectively evaluated for impairment	$	816,064		$	507,223		$	195,546	$	267,720		$	57,934	$	195,595		$	167,319		$	53,356		$	2,260,757
Loans:
Ending balance	$	44,561,089		$	40,474,855		$	40,119,130	$	26,813,880		$	11,844,973	$	11,283,264		$	12,587,101		$	—		$	187,684,292
Ending balance: individually evaluated for impairment	$	713,962		$	1,690,251		$	1,009,889	$	240,805		$	258,140	$	37,531		$	8,469		$	—		$	3,959,047
Ending balance: collectively evaluated for impairment	$	43,847,127		$	38,784,604		$	39,109,241	$	26,573,075		$	11,586,833	$	11,245,733		$	12,578,632		$	—		$	183,725,245

	December 31, 2013
	1-4 Family			Commercial Real Estate			Agricultural Real Estate		Commercial		Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	741,029		$	828,873		$	149,568	$	934,251	$	43,930	$	328,996		$	151,474		$	161,343		$	3,339,464
Provision charged to expense		261,492			(218,949	)		25,460		92,597		8,868		(78,628	)		84,829			(5,669	)		170,000
Losses charged off		(162,448	)		—			—		—		—		(63,410	)		(66,467	)		—			(292,325	)
Recoveries		16,071			135,836			—		7,341		—		15,035			15,012			—			189,295
Balance, end of year	$	856,144		$	745,760		$	175,028	$	1,034,189	$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Ending balance: individually evaluated for impairment	$	—		$	248,857		$	—	$	622,730	$	—	$	—		$	10,836		$	—		$	882,423
Ending balance: collectively evaluated for impairment	$	856,144		$	496,903		$	175,028	$	411,459	$	52,798	$	201,993		$	174,012		$	155,674		$	2,524,011
Loans:
Ending balance	$	44,286,657		$	38,920,692		$	35,005,662	$	29,946,928	$	10,559,593	$	11,729,112		$	13,605,897		$	—		$	184,054,541
Ending balance: individually evaluated for impairment	$	563,524		$	1,531,078		$	—	$	662,730	$	—	$	71,548		$	101,089		$	—		$	2,929,969
Ending balance: collectively evaluated for impairment	$	43,723,133		$	37,389,614		$	35,005,662	$	29,284,198	$	10,559,593	$	11,657,564		$	13,504,808		$	—		$	181,124,572

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $750,000, new commercial and commercial real estate loans, and watch list credits over $75,000 are reviewed annually by our loan review department in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  During the periods presented, none of our loans were classified as Doubtful.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2014 and 2013:

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2014		2013		2014		2013		2014		2013		2014		2013
Pass	$	41,530,699	$	41,061,498	$	38,122,972	$	36,489,660	$	39,109,241	$	35,005,662	$	26,563,823	$	29,231,227
Special Mention		655,049		775,545		53,750		57,488		887,048		—		—		—
Substandard		2,375,341		2,449,614		2,298,133		2,373,544		122,841		—		250,057		715,701
Total	$	44,561,089	$	44,286,657	$	40,474,855	$	38,920,692	$	40,119,130	$	35,005,662	$	26,813,880	$	29,946,928

	Agricultural Business				Home Equity				Consumer
	2014		2013		2014		2013		2014		2013
Pass	$	11,586,833	$	10,559,593	$	10,833,853	$	11,215,416	$	12,386,412	$	13,302,507
Special Mention		258,140		—		162,103		155,515		80,544		68,480
Substandard		—		—		287,308		358,181		120,145		234,910
Total	$	11,844,973	$	10,559,593	$	11,283,264	$	11,729,112	$	12,587,101	$	13,605,897

The following tables present the Company’s loan portfolio aging analysis as of December 31, 2014 and 2013:

	December 31, 2014
	30-59 Days  Past Due		60-89 Days Past Due		Greater Than  90 Days		Total Past Due		Current		Total Loans  Receivable		Total Loans >  90 Days &  Accruing
1-4 Family	$	420,086	$	286,622	$	613,534	$	1,320,242	$	43,240,847	$	44,561,089	$	—
Commercial real estate		—		794,110		39,023		833,133		39,641,722		40,474,855		—
Agricultural real estate		—		—		122,841		122,841		39,996,289		40,119,130		—
Commercial		—		—		—		—		26,813,880		26,813,880		—
Agricultural business		—		—		—		—		11,844,973		11,844,973		—
Home equity		96,971		11,561		58,360		166,892		11,116,372		11,283,264		—
Consumer		90,558		5,531		16,560		112,649		12,474,452		12,587,101		—
Total	$	607,615	$	1,097,824	$	850,318	$	2,555,757	$	185,128,535	$	187,684,292	$	—

	December 31, 2013
	30-59 Days  Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans  Receivable		Total Loans >  90 Days &  Accruing
1-4 Family	$	350,539	$	95,782	$	806,877	$	1,253,198	$	43,033,459	$	44,286,657	$	—
Commercial real estate		—		68,216		78,281		146,497		38,774,195		38,920,692		—
Agricultural real estate		—		—		—		—		35,005,662		35,005,662		—
Commercial		—		—		—		—		29,946,928		29,946,928		—
Agricultural business		—		—		—		—		10,559,593		10,559,593		—
Home equity		156,331		47,585		55,288		259,204		11,469,908		11,729,112		—
Consumer		108,452		26,212		9,900		144,564		13,461,333		13,605,897		—
Total	$	615,322	$	237,795	$	950,346	$	1,803,463	$	182,251,078	$	184,054,541	$	—

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses.  Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans.  The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring.

The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms.  Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.  Restructured loans in compliance with modified terms are classified as impaired.

The following tables present impaired loans for the years ended December 31, 2014 and 2013:

	December 31, 2014
	Recorded  Balance		Unpaid  Principal  Balance		Specific  Allowance		Average  Investment in Impaired  Loans		Interest  Income  Recognized		Interest  Income  Recognized  Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	129,272	$	129,272	$	—	$	220,541	$	12,818	$	13,076
Commercial real estate		564,610		564,610		—		757,616		19,826		18,816
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		27,549		27,549		—		29,505		2,881		2,939
Consumer		8,469		8,469		—		12,285		951		964
Loans with a specific valuation allowance
1-4 Family		584,690		584,690		183,196		604,031		28,722		26,783
Commercial real estate		1,125,641		1,125,641		348,240		1,134,401		66,864		60,012
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Home equity		9,982		9,982		9,982		9,993		247		187
Total:
1-4 family		713,962		713,962		183,196		824,572		41,540		39,859
Commercial real estate		1,690,251		1,690,251		348,240		1,892,017		86,690		78,828
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		37,531		37,531		9,982		39,498		3,128		3,126
Consumer		8,469		8,469		—		12,285		951		964
Total	$	3,959,047	$	3,959,047	$	695,507	$	4,484,374	$	218,710	$	189,536

	December 31, 2013
	Recorded  Balance		Unpaid  Principal  Balance		Specific  Allowance		Average  Investment in Impaired  Loans		Interest  Income  Recognized		Interest  Income  Recognized  Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	563,524	$	563,524	$	—	$	652,373	$	27,250	$	25,347
Commercial real estate		63,293		63,293		—		96,019		5,282		5,327
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		4,528		4,528		—		6,419		453		442
Loans with a specific valuation allowance
Commercial real estate		1,467,785		1,467,785		248,857		1,488,243		79,719		74,028
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Consumer		96,561		96,561		10,836		99,401		1,586		1,576
Total:
1-4 family		563,524		563,524		—		652,373		27,250		25,347
Commercial real estate		1,531,078		1,531,078		248,857		1,584,262		85,001		79,355
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		101,089		101,089		10,836		105,820		2,039		2,018
Total	$	2,929,969	$	2,929,969	$	882,423	$	3,135,112	$	151,772	$	143,621

The following table presents the Company’s nonaccrual loans at December 31, 2014 and 2013.  This table excludes performing troubled debt restructurings.

	2014		2013
1-4 family	$	994,855	$	1,339,487
Commercial real estate		932,578		208,297
Agricultural real estate		122,841		—
Commercial		22,438		37,939
Agricultural business		—		—
Home equity		120,698		133,823
Consumer		70,643		62,617
Total	$	2,264,053	$	1,782,163

At December 31, 2014 and 2013, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired.  The modification of terms of such loans included one or a combination of the following:  an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of December 31, 2014 and 2013.

	2014		2013
1-4 family	$	747,470	$	661,880
Commercial real estate		1,265,079		1,137,667
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		15,379		79,087
Consumer		42,786		43,559
Total	$	2,283,293	$	2,597,676

The following table presents the recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring, as of December 31, 2014 and 2013.

	2014		2013
1-4 family	$	567,931	$	591,000
Commercial real estate		470,969		1,074,194
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		12,074		13,015
Consumer		42,786		42,059
Total	$	1,306,339	$	2,395,751

The following table presents loans modified as troubled debt restructurings during the years ended December 31, 2014 and 2013.

	Year Ended December 31, 2014				Year Ended December 31, 2013
	Number of  Modifications		Recorded  Investment		Number of  Modifications		Recorded  Investment
1-4 family		3	$	201,879		8	$	522,819
Commercial real estate		1		386,355		3		175,649
Agricultural real estate		—		—		—		—
Commercial		—		—		1		40,644
Agricultural business		—		—		—		—
Home equity		—		—		—		—
Consumer		1		15,953		1		27,593
Total		5	$	604,187		13	$	766,705

2014 Modifications

The Company modified three one-to-four family residential real estate loans, with a recorded investment of $201,879, which were deemed TDR’s.  Two of the loans were restructured with the interest and real estate taxes capitalized to the balance of the note.  One of the loans was extended without the full collection of accrued interest.  None of the modifications resulted in a reduced interest rate or a write-off of the principal balance.

The Company modified one commercial real estate loan with a total recorded balance of $386,355, which was deemed a TDR.  The loan was restructured to provide additional funds for cash flow needs of the borrower.  The modification did not result in a reduced interest rate or a write-off of the principal balance.

The Company modified one consumer loan with a recorded investment of $15,953, which was deemed a TDR.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduced interest rate or a write-off of the principal balance.

2013 Modifications

The Company modified eight one-to-four family residential real estate loans, with a recorded investment of $522,819, which were deemed to be TDR’s.  One of the loans was restructured with interest capitalized.  One of the loans was restructured after a principal write-off of $35,871.  Three of the loans were restructured with delinquent real estate taxes capitalized.  Three of the loans were restructured with a reduced interest rate and the accrued interest capitalized to the balance of the note.  None of the modifications resulted in a write-off of the principal balance.

The Company modified three commercial real estate loans with a total recorded balance of $175,649, which were deemed TDR’s.  The loans were restructured to change the payment schedule to interest only for a period of time.

The Company modified one commercial loan with a total recorded balance of $40,644, which was deemed a TDR.  The modification was made to capitalize delinquent taxes.

The Company also modified one consumer loan with a recorded investment of $27,593.  The modification was made to change the payment schedule to interest-only for a period of time.  The modification did not result in a reduction of the contractual interest rate or a write-off of the principal balance.

TDRs with Defaults

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses.  During the year ended December 31, 2014, one residential real estate loan of $38,737 and one home equity loan of $3,305 were considered TDR’s defaulted as they were more than 90 days past due at December 31, 2014.  In addition, three residential real estate loans of $140,549, two commercial real estate loans of $840,115, two commercial loans of $22,437, and one consumer loan of $25,055 were considered TDR’s defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

During the year ended December 31, 2013, two residential real estate loans of $70,880 were considered TDR’s defaulted as they were more than 90 days past due at December 31, 2013.  In addition, four one-to-four family residential real estate loans of $206,299, one commercial real estate loan of $61,980, two commercial business loans of $37,939, two home equity loans of $7,558, and one consumer loan of $27,593 were considered TDR’s defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

XML

Premises and Equipment

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 5:          Premises and Equipment

Major classifications of premises and equipment, stated at cost, are as follows:

	2014			2013
Land	$	773,186		$	773,186
Buildings and improvements		6,661,148			6,694,149
Equipment		3,254,434			4,808,044
		10,688,768			12,275,379
Less accumulated depreciation		(5,742,785	)		(7,096,401	)
Net premises and equipment	$	4,945,983		$	5,178,978

XML

Interest-bearing Deposits

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Interest-bearing Deposits

Note 7:          Interest-bearing Deposits

Interest-bearing deposits in denominations of $100,000 or more totaled $96,271,806 at December 31, 2014 and $96,951,245 at December 31, 2013.

The following table represents deposit interest expense by deposit type:

	December 31,
	2014		2013
Savings, NOW and Money Market	$	257,214	$	256,010
Certificates of deposit		1,179,589		1,510,730
Total deposit interest expense	$	1,436,803	$	1,766,740

At December 31, 2014, the scheduled maturities of time deposits are as follows:

2015	$	51,911,089
2016		20,213,799
2017		10,056,961
2018		5,760,161
2019		6,657,553
	$	94,599,563

XML

Loans and Allowance for Loan Losses - Loans modified as troubled debt restructurings (Details 8) (USD $)	12 Months Ended
	Dec. 31, 2014 Contract	Dec. 31, 2013 Contract
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications	3	8
Troubled debt restructurings, recorded investment	$ 201,879	$ 522,819
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications	5	13
Troubled debt restructurings, recorded investment	604,187	766,705
Loans Receivable | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications	3	8
Troubled debt restructurings, recorded investment	201,879	522,819
Loans Receivable | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications	1	3
Troubled debt restructurings, recorded investment	386,355	175,649
Loans Receivable | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications
Troubled debt restructurings, recorded investment
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications		1
Troubled debt restructurings, recorded investment		40,644
Loans Receivable | Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications
Troubled debt restructurings, recorded investment
Loans Receivable | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications
Troubled debt restructurings, recorded investment
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications	1	1
Troubled debt restructurings, recorded investment	$ 15,953	$ 27,593

XML

Employee Benefits - Summary of ESOP shares (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
Allocated shares	54,519	55,515
Shares committed for allocation	3,767	3,680
Unearned shares	24,991	28,758
Total ESOP shares	83,277	87,953
Fair value of unearned shares at December 31	$ 574,793	$ 562,219

XML

Premises and Equipment - Major classifications of premises and equipment, stated at cost (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 10,688,768	$ 12,275,379
Less accumulated depreciation	(5,742,785)	(7,096,401)
Net premises and equipment	4,945,983	5,178,978
Land
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	773,186	773,186
Buildings and improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	6,661,148	6,694,149
Equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 3,254,434	$ 4,808,044

XML

Loans and Allowance for Loan Losses - Recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring (Details 7) (Loans Receivable, USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 1,306,339	$ 2,395,751
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	567,931	591,000
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	470,969	1,074,194
Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	212,579	675,483
Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	12,074	13,015
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 42,786	$ 42,059

XML

Disclosures about Fair Value of Assets - Fair value measurements of assets recognized in balance sheets on recurring basis (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	$ 96,684,897	$ 108,984,597
Fair Value, Measurements, Recurring | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	9,958,273	10,420,076
Fair Value, Measurements, Recurring | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	41,419,921	48,345,655
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	45,306,703	50,218,866
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	9,958,273	10,420,076
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	41,419,921	48,345,655
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	45,306,703	50,218,866
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale

XML

Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Schedule of classes of loans

	2014		2013
Mortgage loans on real estate
Residential 1-4 family	$	44,561,089	$	44,286,657
Commercial		40,474,855		38,920,692
Agricultural		40,119,130		35,005,662
Home equity		11,283,264		11,729,112
Total mortgage loans on real estate		136,438,338		129,942,123
Commercial loans		26,813,880		29,946,928
Agricultural		11,844,973		10,559,593
Consumer		12,587,101		13,605,897
		187,684,292		184,054,541
Less
Net deferred loan fees		9,416		8,605
Allowance for loan losses		2,956,264		3,406,434
Net loans	$	184,718,612	$	180,639,502

Schedule of allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method

	December 31, 2014
	1-4 Family			Commercial  Real Estate			Agricultural  Real Estate		Commercial			Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	856,144		$	745,760		$	175,028	$	1,034,189		$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Provision charged to expense		241,875			392,009			20,518		(327,057	)		5,136		5,887			3,950			(102,318	)		240,000
Losses charged off		(100,319	)		(287,474	)		—		(285,411	)		—		(5,403	)		(25,781	)		—			(704,388	)
Recoveries		1,560			5,168			—		88			—		3,100			4,302			—			14,218
Balance, end of year	$	999,260		$	855,463		$	195,546	$	421,809		$	57,934	$	205,577		$	167,319		$	53,356		$	2,956,264
Ending balance: individually evaluated for impairment	$	183,196		$	348,240		$	—	$	154,089		$	—	$	9,982		$	—		$	—		$	695,507
Ending balance: collectively evaluated for impairment	$	816,064		$	507,223		$	195,546	$	267,720		$	57,934	$	195,595		$	167,319		$	53,356		$	2,260,757
Loans:
Ending balance	$	44,561,089		$	40,474,855		$	40,119,130	$	26,813,880		$	11,844,973	$	11,283,264		$	12,587,101		$	—		$	187,684,292
Ending balance: individually evaluated for impairment	$	713,962		$	1,690,251		$	1,009,889	$	240,805		$	258,140	$	37,531		$	8,469		$	—		$	3,959,047
Ending balance: collectively evaluated for impairment	$	43,847,127		$	38,784,604		$	39,109,241	$	26,573,075		$	11,586,833	$	11,245,733		$	12,578,632		$	—		$	183,725,245

	December 31, 2013
	1-4 Family			Commercial Real Estate			Agricultural Real Estate		Commercial		Agricultural		Home Equity			Consumer			Unallocated			Total
Allowance for loan losses:
Balance, beginning of year	$	741,029		$	828,873		$	149,568	$	934,251	$	43,930	$	328,996		$	151,474		$	161,343		$	3,339,464
Provision charged to expense		261,492			(218,949	)		25,460		92,597		8,868		(78,628	)		84,829			(5,669	)		170,000
Losses charged off		(162,448	)		—			—		—		—		(63,410	)		(66,467	)		—			(292,325	)
Recoveries		16,071			135,836			—		7,341		—		15,035			15,012			—			189,295
Balance, end of year	$	856,144		$	745,760		$	175,028	$	1,034,189	$	52,798	$	201,993		$	184,848		$	155,674		$	3,406,434
Ending balance: individually evaluated for impairment	$	—		$	248,857		$	—	$	622,730	$	—	$	—		$	10,836		$	—		$	882,423
Ending balance: collectively evaluated for impairment	$	856,144		$	496,903		$	175,028	$	411,459	$	52,798	$	201,993		$	174,012		$	155,674		$	2,524,011
Loans:
Ending balance	$	44,286,657		$	38,920,692		$	35,005,662	$	29,946,928	$	10,559,593	$	11,729,112		$	13,605,897		$	—		$	184,054,541
Ending balance: individually evaluated for impairment	$	563,524		$	1,531,078		$	—	$	662,730	$	—	$	71,548		$	101,089		$	—		$	2,929,969
Ending balance: collectively evaluated for impairment	$	43,723,133		$	37,389,614		$	35,005,662	$	29,284,198	$	10,559,593	$	11,657,564		$	13,504,808		$	—		$	181,124,572

Schedule of credit risk profile of the Company's loan portfolio based on rating category and payment activity

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2014		2013		2014		2013		2014		2013		2014		2013
Pass	$	41,530,699	$	41,061,498	$	38,122,972	$	36,489,660	$	39,109,241	$	35,005,662	$	26,563,823	$	29,231,227
Special Mention		655,049		775,545		53,750		57,488		887,048		—		—		—
Substandard		2,375,341		2,449,614		2,298,133		2,373,544		122,841		—		250,057		715,701
Total	$	44,561,089	$	44,286,657	$	40,474,855	$	38,920,692	$	40,119,130	$	35,005,662	$	26,813,880	$	29,946,928

	Agricultural Business				Home Equity				Consumer
	2014		2013		2014		2013		2014		2013
Pass	$	11,586,833	$	10,559,593	$	10,833,853	$	11,215,416	$	12,386,412	$	13,302,507
Special Mention		258,140		—		162,103		155,515		80,544		68,480
Substandard		—		—		287,308		358,181		120,145		234,910
Total	$	11,844,973	$	10,559,593	$	11,283,264	$	11,729,112	$	12,587,101	$	13,605,897

Schedule of loan portfolio aging analysis

	December 31, 2014
	30-59 Days  Past Due		60-89 Days Past Due		Greater Than  90 Days		Total Past Due		Current		Total Loans  Receivable		Total Loans >  90 Days &  Accruing
1-4 Family	$	420,086	$	286,622	$	613,534	$	1,320,242	$	43,240,847	$	44,561,089	$	—
Commercial real estate		—		794,110		39,023		833,133		39,641,722		40,474,855		—
Agricultural real estate		—		—		122,841		122,841		39,996,289		40,119,130		—
Commercial		—		—		—		—		26,813,880		26,813,880		—
Agricultural business		—		—		—		—		11,844,973		11,844,973		—
Home equity		96,971		11,561		58,360		166,892		11,116,372		11,283,264		—
Consumer		90,558		5,531		16,560		112,649		12,474,452		12,587,101		—
Total	$	607,615	$	1,097,824	$	850,318	$	2,555,757	$	185,128,535	$	187,684,292	$	—

	December 31, 2013
	30-59 Days  Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans  Receivable		Total Loans >  90 Days &  Accruing
1-4 Family	$	350,539	$	95,782	$	806,877	$	1,253,198	$	43,033,459	$	44,286,657	$	—
Commercial real estate		—		68,216		78,281		146,497		38,774,195		38,920,692		—
Agricultural real estate		—		—		—		—		35,005,662		35,005,662		—
Commercial		—		—		—		—		29,946,928		29,946,928		—
Agricultural business		—		—		—		—		10,559,593		10,559,593		—
Home equity		156,331		47,585		55,288		259,204		11,469,908		11,729,112		—
Consumer		108,452		26,212		9,900		144,564		13,461,333		13,605,897		—
Total	$	615,322	$	237,795	$	950,346	$	1,803,463	$	182,251,078	$	184,054,541	$	—

Schedule of impaired loans

	December 31, 2014
	Recorded  Balance		Unpaid  Principal  Balance		Specific  Allowance		Average  Investment in Impaired  Loans		Interest  Income  Recognized		Interest  Income  Recognized  Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	129,272	$	129,272	$	—	$	220,541	$	12,818	$	13,076
Commercial real estate		564,610		564,610		—		757,616		19,826		18,816
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		27,549		27,549		—		29,505		2,881		2,939
Consumer		8,469		8,469		—		12,285		951		964
Loans with a specific valuation allowance
1-4 Family		584,690		584,690		183,196		604,031		28,722		26,783
Commercial real estate		1,125,641		1,125,641		348,240		1,134,401		66,864		60,012
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Home equity		9,982		9,982		9,982		9,993		247		187
Total:
1-4 family		713,962		713,962		183,196		824,572		41,540		39,859
Commercial real estate		1,690,251		1,690,251		348,240		1,892,017		86,690		78,828
Agricultural real estate		1,009,889		1,009,889		—		1,037,661		58,253		49,159
Commercial		240,805		240,805		154,089		319,812		14,425		16,554
Agricultural business		258,140		258,140		—		358,529		13,723		1,046
Home equity		37,531		37,531		9,982		39,498		3,128		3,126
Consumer		8,469		8,469		—		12,285		951		964
Total	$	3,959,047	$	3,959,047	$	695,507	$	4,484,374	$	218,710	$	189,536

	December 31, 2013
	Recorded  Balance		Unpaid  Principal  Balance		Specific  Allowance		Average  Investment in Impaired  Loans		Interest  Income  Recognized		Interest  Income  Recognized  Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	563,524	$	563,524	$	—	$	652,373	$	27,250	$	25,347
Commercial real estate		63,293		63,293		—		96,019		5,282		5,327
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		4,528		4,528		—		6,419		453		442
Loans with a specific valuation allowance
Commercial real estate		1,467,785		1,467,785		248,857		1,488,243		79,719		74,028
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Consumer		96,561		96,561		10,836		99,401		1,586		1,576
Total:
1-4 family		563,524		563,524		—		652,373		27,250		25,347
Commercial real estate		1,531,078		1,531,078		248,857		1,584,262		85,001		79,355
Commercial		662,730		662,730		622,730		726,269		34,465		33,921
Home equity		71,548		71,548		—		66,388		3,017		2,980
Consumer		101,089		101,089		10,836		105,820		2,039		2,018
Total	$	2,929,969	$	2,929,969	$	882,423	$	3,135,112	$	151,772	$	143,621

Schedule of nonaccrual loans

	2014		2013
1-4 family	$	994,855	$	1,339,487
Commercial real estate		932,578		208,297
Agricultural real estate		122,841		—
Commercial		22,438		37,939
Agricultural business		—		—
Home equity		120,698		133,823
Consumer		70,643		62,617
Total	$	2,264,053	$	1,782,163

Schedule of recorded balance, at original cost, of troubled debt restructurings

	2014		2013
1-4 family	$	747,470	$	661,880
Commercial real estate		1,265,079		1,137,667
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		15,379		79,087
Consumer		42,786		43,559
Total	$	2,283,293	$	2,597,676

Schedule of recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring

	2014		2013
1-4 family	$	567,931	$	591,000
Commercial real estate		470,969		1,074,194
Agricultural real estate		—		—
Commercial		212,579		675,483
Agricultural business		—		—
Home equity		12,074		13,015
Consumer		42,786		42,059
Total	$	1,306,339	$	2,395,751

Schedule of loans modified as troubled debt restructurings

	Year Ended December 31, 2014				Year Ended December 31, 2013
	Number of  Modifications		Recorded  Investment		Number of  Modifications		Recorded  Investment
1-4 family		3	$	201,879		8	$	522,819
Commercial real estate		1		386,355		3		175,649
Agricultural real estate		—		—		—		—
Commercial		—		—		1		40,644
Agricultural business		—		—		—		—
Home equity		—		—		—		—
Consumer		1		15,953		1		27,593
Total		5	$	604,187		13	$	766,705

XML

Restriction on Cash and Due from Banks - (Detail Textuals) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Restricted Cash and Investments [Abstract]
Reserve funds in cash and/or on deposit with Federal Reserve Bank	$ 1,402,000	$ 1,310,000

XML

Regulatory Matters

12 Months Ended

Dec. 31, 2014

Regulatory Matters [Abstract]

Regulatory Matters

Note 12:        Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the 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.  The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.  Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined).  Management believes, as of December 31, 2014 and 2013, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2014, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts (in thousands) and ratios are also presented in the table.

	Actual					Minimum Capital  Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Total risk-based capital (to risk-weighted assets)	$	40,252		18.81	%	$	17,119		8.0	%	$	21,399		10.0	%
Tier I capital (to risk-weighted assets)		37,574		17.56			8,560		4.0			12,839		6.0
Tier I capital (to average assets)		37,574		12.25			12,269		4.0			15,336		5.0
Tangible capital (to adjusted tangible assets)		37,574		12.25			4,601		1.5			—		N/A
As of December 31, 2013
Total risk-based capital (to risk-weighted assets)	$	38,766		18.15	%	$	17,089		8.0	%	$	21,361		10.0	%
Tier I capital (to risk-weighted assets)		36,087		16.89			8,544		4.0			12,817		6.0
Tier I capital (to average assets)		36,087		11.51			12,546		4.0			15,682		5.0
Tangible capital (to adjusted tangible assets)		36,087		11.51			4,705		1.5			—		N/A

The following is a reconciliation of the Bank equity amount included in the consolidated balance sheets to the amounts (in thousands) reflected above for regulatory capital purposes as of December 31:

	2014		2013
Bank equity	$	41,012	$	37,427
Less net unrealized gain (loss)		711		(1,387	)
Less disallowed goodwill		2,727		2,727
Tier 1 capital		37,574		36,087
Plus allowance for loan losses		2,678		2,679
Total risked-based capital	$	40,252	$	38,766

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.  As of December 31, 2014, the Bank has $1,396,844 available for the payment of dividends without prior regulatory approval.

On January 19, 2010, the Boards of Directors of the Company, Jacksonville Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion and Reorganization of Jacksonville Bancorp, MHC (the “Plan”) pursuant to which Jacksonville Bancorp, MHC undertook a “second-step” conversion and ceased to exist. Jacksonville Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July 14, 2010.

In accordance with Board of Governors of the Federal Reserve System regulations, at the time of the reorganization, the Company substantially restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their accounts at the Bank after conversion. The Bank will establish a parallel liquidation account to support the Company’s liquidation account in the event the Company does not have sufficient assets to fund its obligations under its liquidation account. The liquidation accounts will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts. In the event of a complete liquidation of the Bank or the Company, each account holder will be entitled to receive a distribution in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

XML

Disclosures about Fair Value of Assets

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Disclosures about Fair Value of Assets

Note 17:        Disclosures about Fair Value of Assets

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	9,958,273	$	—	$	9,958,273	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		41,419,921		—		41,419,921		—
Municipal bonds		45,306,703		—		45,306,703		—

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	10,420,076	$	—	$	10,420,076	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		48,345,655		—		48,345,655		—
Municipal bonds		50,218,866		—		50,218,866		—

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the year ended December 31, 2014.

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.  The Company has no Level 1 securities.  If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models.  Such securities are classified in Level 2 of the valuation hierarchy.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.  The Company did not have securities considered Level 3 as of December 31, 2014 or December 31, 2013.

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,147,400	$	—	$	—	$	1,147,400

			December 31, 2013
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,219,185	$	—	$	—	$	1,219,185
Mortgage servicing rights		673,576		—		—		673,576

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $(265,687) and $(23,206) at December 31, 2014 and 2013.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices.  Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.  Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Mortgage servicing rights are tested for impairment on at least an annual basis.  The Company uses a third-party to measure mortgage servicing rights through the completion of a proprietary model.  Inputs to the model are reviewed by the Company.  Fair value adjustments on mortgage servicing rights were $0 and $33,649 at December 31, 2014 and 2013.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in nonrecurring Level 3 fair value measurements.

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,147,400	Market comparable properties	Marketability discount		20% – 30% (25	%)

	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,219,185	Market comparable properties	Marketability discount		20% – 30% (25	%)
Mortgage servicing rights	$	673,576	Discounted cash flow	Discount rate PSA standard prepayment model rate		8% - 12.5% (10.24%)  144 – 342 (164	)

Fair Value of Other Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2014 and 2013:

			December 31, 2014
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	9,611,638	$	9,611,638	$	—	$	—
Other investments		73,766		—		73,766		—
Loans held for sale		235,600		—		235,600		—
Loans, net of allowance for loan losses		184,718,612		—		—		184,573,401
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,713,243		—		1,713,243		—
Financial liabilities
Deposits		245,941,562		—		151,341,999		96,956,400
Short-term borrowings		13,821,730		—		8,821,730		4,996,109
Advances from borrowers for taxes and insurance		962,762		—		962,762		—
Interest payable		166,052		—		166,052		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

			December 31, 2013
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	6,098,870	$	6,098,870	$	—	$	—
Other investments		81,918		—		81,918		—
Loans held for sale		262,461		—		262,461		—
Loans, net of allowance for loan losses		180,639,502		—		—		178,866,833
Federal Home Loan Bank stock		1,113,800		—		1,113,800		—
Interest receivable		1,817,415		—		1,817,415		—
Financial liabilities
Deposits		251,738,391		—		143,586,822		111,116,837
Short-term borrowings		19,610,297		—		19,610,297		—
Advances from borrowers for taxes and insurance		857,814		—		857,814		—
Interest payable		210,226		—		210,226		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents, Interest Receivable, Federal Home Loan Bank Stock, and Other Investments

The carrying amount approximates fair value.

Loans Held for Sale

For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

Loans

The fair value of loans is estimated by discounting the future cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.  Loans with similar characteristics were aggregated for purposes of the calculations.  

Deposits

Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.  The carrying amount approximates fair value.  The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings, Interest Payable, and Advances from Borrowers for Taxes and Insurance

The carrying amount approximates fair value.

Commitments to Originate Loans, Letters of Credit, and Lines of Credit

The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.  For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.  The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

XML

Disclosures about Fair Value of Assets - Estimated fair values of other financial instruments (Details 3) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Carrying Amount
Financial assets
Cash and cash equivalents	$ 9,611,638	$ 6,098,870
Other investments	73,766	81,918
Loans held for sale	235,600	262,461
Loans, net of allowance for loan losses	184,718,612	180,639,502
Federal Home Loan Bank stock	1,113,800	1,113,800
Interest receivable	1,713,243	1,817,415
Financial liabilities
Deposits	245,941,562	251,738,391
Short-term borrowings	13,821,730	19,610,297
Advances from borrowers for taxes and insurance	962,762	857,814
Interest payable	166,052	210,226
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	9,611,638	6,098,870
Other investments
Loans held for sale
Loans, net of allowance for loan losses
Federal Home Loan Bank stock
Interest receivable
Financial liabilities
Deposits
Short-term borrowings
Advances from borrowers for taxes and insurance
Interest payable
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value | Significant Other Observable Inputs (Level 2)
Financial assets
Cash and cash equivalents
Other investments	73,766	81,918
Loans held for sale	235,600	262,461
Loans, net of allowance for loan losses
Federal Home Loan Bank stock	1,113,800	1,113,800
Interest receivable	1,713,243	1,817,415
Financial liabilities
Deposits	151,341,999	143,586,822
Short-term borrowings	8,821,730	19,610,297
Advances from borrowers for taxes and insurance	962,762	857,814
Interest payable	166,052	210,226
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value | Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents
Other investments
Loans held for sale
Loans, net of allowance for loan losses	184,573,401	178,866,833
Federal Home Loan Bank stock
Interest receivable
Financial liabilities
Deposits	96,956,400	111,116,837
Short-term borrowings	4,996,109
Advances from borrowers for taxes and insurance
Interest payable
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit

XML

Nature of Operations and Summary of Significant Accounting Policies - Estimated useful lives for each major depreciable classification of premises and equipment (Details)	12 Months Ended
	Dec. 31, 2014
Buildings and improvements
Nature Of Operations And Significant Accounting Policies [Line Items]
Premises and equipment estimated useful life	35-40 years
Equipment
Nature Of Operations And Significant Accounting Policies [Line Items]
Premises and equipment estimated useful life	3-5 years

XML

Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2014

Regulatory Matters [Abstract]

Schedule of bank's actual capital amounts and ratios

	Actual					Minimum Capital  Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014
Total risk-based capital (to risk-weighted assets)	$	40,252		18.81	%	$	17,119		8.0	%	$	21,399		10.0	%
Tier I capital (to risk-weighted assets)		37,574		17.56			8,560		4.0			12,839		6.0
Tier I capital (to average assets)		37,574		12.25			12,269		4.0			15,336		5.0
Tangible capital (to adjusted tangible assets)		37,574		12.25			4,601		1.5			—		N/A
As of December 31, 2013
Total risk-based capital (to risk-weighted assets)	$	38,766		18.15	%	$	17,089		8.0	%	$	21,361		10.0	%
Tier I capital (to risk-weighted assets)		36,087		16.89			8,544		4.0			12,817		6.0
Tier I capital (to average assets)		36,087		11.51			12,546		4.0			15,682		5.0
Tangible capital (to adjusted tangible assets)		36,087		11.51			4,705		1.5			—		N/A

Schedule of reconciliation of bank equity amount for regulatory capital purposes

	2014		2013
Bank equity	$	41,012	$	37,427
Less net unrealized gain (loss)		711		(1,387	)
Less disallowed goodwill		2,727		2,727
Tier 1 capital		37,574		36,087
Plus allowance for loan losses		2,678		2,679
Total risked-based capital	$	40,252	$	38,766

XML

Consolidated Statements of Comprehensive Income (Loss) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 2,972,754	$ 3,213,645
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $1,219,994 and $(1,901,395) for 2014 and 2013, respectively	2,368,224	(3,690,942)
Less: reclassification adjustment for realized gains included in net income, net of taxes of $138,976 and $305,286 for 2014 and 2013, respectively	269,777	592,615
Total other comprehensive income (loss)	2,098,447	(4,283,557)
Comprehensive Income (Loss)	$ 5,071,201	$ (1,069,912)

XML

Stock Option Plans - Summary of status of nonvested shares (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Shares
Nonvested, beginning of year	83,185	104,035
Granted
Vested	(20,550)	(20,850)
Forfeited	(400)
Nonvested, end of year	62,235	83,185
Weighted-Average Grant-Date Fair Value
Nonvested, beginning of year	$ 4.34	$ 4.34
Granted
Vested	$ 4.34	$ 4.34
Forfeited
Nonvested, end of year	$ 4.34	$ 4.34

XML

Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

Note 1:          Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Jacksonville Bancorp, Inc. (the “Company”) is a Maryland corporation.  The Company owns 100% of Jacksonville Savings Bank (the “Bank”).  The Bank was founded in 1916 as an Illinois-chartered savings and loan association and converted to an Illinois-chartered savings bank in 1992.  The Bank is headquartered in Jacksonville, Illinois and operates five branches in addition to its main office.  The Bank’s deposits have been federally insured since 1945 by the Federal Deposit Insurance Corporation (“FDIC”).  The Bank has been a member of the Federal Home Loan Bank (“FHLB”) System since 1932.

The Bank is a community-oriented savings bank engaged primarily in the business of attracting retail deposits from the general public in the Bank’s market area and using such funds together with borrowings and funds from other sources to originate consumer loans and mortgage loans secured by one-to-four family residential real estate.  The Bank also originates commercial real estate loans, multi-family real estate loans, commercial business loans, and agricultural loans.  When possible, the Bank emphasizes the origination of mortgage loans with adjustable interest rates (“ARM”), as well as fixed-rate balloon loans with terms ranging from three to five years, consumer loans, which are primarily home equity loans secured by second mortgages, commercial business loans, and agricultural loans.  The Bank also offers trust and investment services.  The investment center, Berthel Fisher and Company Financial Services, Inc., is operated through the Bank’s wholly-owned subsidiary, Financial Resources Group, Inc.

The Company is subject to competition from other financial institutions and nonfinancial institutions providing financial products.  Additionally, the Company is subject to the regulations of certain regulatory agencies and undergoes periodic examinations by those regulatory agencies.

The significant accounting and reporting policies of the Company and its subsidiary follow:

Principles of Consolidation and Financial Statement Presentation

The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s wholly owned subsidiary, Financial Resources Group, Inc.  Significant intercompany accounts and transactions have been eliminated in consolidation.  Based on the Company’s approach to decision making, it has decided that its business is comprised of a single segment.

The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America and conform to predominate practice within the banking industry.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, fair value of securities, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of loan servicing rights, valuation of deferred tax assets and goodwill impairment.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.  At December 31, 2014 and 2013, cash equivalents consisted primarily of federal funds sold and interest-earning demand deposits in banks.

At December 31, 2014, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

Interest-earning time deposits in banks are generally short-term and are carried at cost.

Securities

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).  Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities.  Gains and losses on the sale of securities are recorded on the settlement date and are determined using the specific identification method.

For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

Other Investments

Other investments at December 31, 2014 and 2013 include local municipal bonds and equity investments in local community development organizations.  The municipal bonds mature ratably through the year 2030.  These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate.  Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income.  Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income.  Loan losses are charged against the allowance when management believes collectibility of the principal is unlikely.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components.  The allocated component relates to loans that are classified as impaired.  For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process.  Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation.  Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for each major depreciable classification of premises and equipment are as follows:

Buildings and improvements	35-40 years
Equipment	3-5 years

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system.  The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis.  Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.  Revenue and expenses from operations and changes in the valuation allowance are included in income or expense from foreclosed assets.

Bank-owned Life Insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value.  Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present.  A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill.  If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment.  If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value.  Subsequent increases in goodwill value are not recognized in the financial statements.  The goodwill was not deemed impaired as of December 31, 2014 or 2013.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets.  Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer.  Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.  The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.  These variables change from quarter to quarter as market conditions and projected interest rates change.

The Company subsequently measures each class of servicing asset using either the fair value or the amortization method.  The Company has elected to subsequently measure the mortgage servicing rights under the amortization method.  Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income.  The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.  Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment.  Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type.  Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche.  The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment.  Changes in valuation allowances are reported as a separate line item in noninterest expense on the consolidated income statement.  Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Servicing fee income is recorded for fees earned for servicing loans.  The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned in loan servicing fees in non-interest income.  The amortization of mortgage servicing rights is netted from the gains on sale of loans, both cash gains as well as the capitalized gains, and is included in mortgage banking operations, net in non-interest income.

Stock Options

At December 31, 2014 and 2013, the Company has a stock-based employee compensation plan, which is described more fully in Note 15.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company — put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes).  The income tax accounting guidance results in two components of income tax expense:  current and deferred.  Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.  The Company determines deferred income taxes using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.  Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination.  The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.  A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.  The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment.  With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2011.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each period.  Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes.  Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities.

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company.  Fees from trust activities are recorded as revenue over the period in which the service is provided.  Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department.  This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes.  Generally, the actual trust fee is charged to each account on a monthly basis.  Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred.  The Company managed or administered approximately 114 and 110 trust accounts with assets totaling approximately $78.6 million and $71.8 million at December 31, 2014 and 2013, respectively.

Reclassifications

Certain amounts included in the 2013 consolidated statements have been reclassified to conform to the 2014 presentation.

Recent and Future Accounting Requirements

In January 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-04, Troubled Debt Restructurings by Creditors (Subtopic 310-40:  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure which affects all creditors who obtain physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable.  The ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015 which the entity’s annual or interim financial statements have not been made available for issuance. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are included in the scope of other standards).  The guidance requires an entity to recognize the 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 and services.  For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied either retrospectively or using the modified retrospective approach.  Early adoption is not permitted.  Management is evaluating the new guidance, but does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements.

XML

Loans and Allowance for Loan Losses - Credit risk profile of the company's loan portfolio based on rating category and payment activity (Details 2) (Loans Receivable, USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 187,684,292	$ 184,054,541
1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	44,561,089	44,286,657
1-4 family | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	41,530,699	41,061,498
1-4 family | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	655,049	775,545
1-4 family | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	2,375,341	2,449,614
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	40,474,855	38,920,692
Commercial Real Estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	38,122,972	36,489,660
Commercial Real Estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	53,750	57,488
Commercial Real Estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	2,298,133	2,373,544
Agricultural Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	40,119,130	35,005,662
Agricultural Real Estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	39,109,241	35,005,662
Agricultural Real Estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	887,048
Agricultural Real Estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	122,841
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	26,813,880	29,946,928
Commercial | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	26,563,823	29,231,227
Commercial | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross
Commercial | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	250,057	715,701
Agricultural Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,844,973	10,559,593
Agricultural Business | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,586,833	10,559,593
Agricultural Business | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	258,140
Agricultural Business | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross
Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,283,264	11,729,112
Home Equity | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	10,833,853	11,215,416
Home Equity | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	162,103	155,515
Home Equity | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	287,308	358,181
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	12,587,101	13,605,897
Consumer | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	12,386,412	13,302,507
Consumer | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	80,544	68,480
Consumer | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 120,145	$ 234,910

XML

Regulatory Matters (Detail Textuals) (USD $)	Dec. 31, 2014
Regulatory Matters [Abstract]
Dividend payment without prior regulatory approval	$ 1,396,844

XML

Interest-bearing Deposits - Deposit interest expense by deposit type (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Banking and Thrift [Abstract]
Savings, NOW and Money Market	$ 257,214	$ 256,010
Certificates of deposit	1,179,589	1,510,730
Total deposit interest expense	$ 1,436,803	$ 1,766,740

XML

Significant Estimates and Concentrations

12 Months Ended

Dec. 31, 2014

Risks and Uncertainties [Abstract]

Significant Estimates and Concentrations

Note 18:        Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations.  Estimates related to the allowance for loan losses are reflected in the note regarding loans.  Current vulnerabilities due to certain concentrations of credit risk are discussed in the note on commitments and credit risk.  Other significant estimates not discussed in those notes include:

General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

Goodwill

As discussed in Note 1, the Company annually tests its goodwill for impairment.  At the most recent testing date, the fair value of the banking reporting unit exceeded its carrying value.  Estimated fair value was based principally on forecasts of future income.  Management believes it has applied reasonable judgment in developing its estimates; however, unforeseen negative changes in the national, state or local economic environment may negatively impact those estimates in the near term.

XML

Income Taxes - Reconciliation of income tax expense at the statutory rate to actual income tax expense (Details 1) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Computed at the statutory rate (34%)									$ 1,328,312	$ 1,496,661
Increase (decrease) resulting from
Tax exempt interest									(503,089)	(509,850)
State income taxes, net									173,879	264,287
Increase in cash surrender value									(63,235)	(66,246)
Other									(1,821)	3,447
Actual tax expense	$ 183,641	$ 260,619	$ 176,277	$ 313,509	$ 207,234	$ 271,739	$ 270,539	$ 438,787	$ 934,046	$ 1,188,299
Tax expense as a percentage of pre-tax income									23.91%	26.99%

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Schedule of components of provision for income taxes

	2014		2013
Taxes currently payable
Federal	$	798,160	$	813,409
State		—		406,770
Deferred income taxes		135,886		(31,880	)
Income tax expense	$	934,046	$	1,188,299

Schedule of reconciliation of income tax expense at the statutory rate to actual income tax expense

	2014			2013
Computed at the statutory rate (34%)	$	1,328,312		$	1,496,661
Increase (decrease) resulting from
Tax exempt interest		(503,089	)		(509,850	)
State income taxes, net		173,879			264,287
Increase in cash surrender value		(63,235	)		(66,246	)
Other		(1,821	)		3,447
Actual tax expense	$	934,046		$	1,188,299
Tax expense as a percentage of pre-tax income		23.91	%		26.99	%

Schedule of tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets

	2014			2013
Deferred tax assets
Allowance for loan losses	$	1,060,419		$	1,241,702
Deferred compensation		1,712,570			1,610,547
State net operating loss carryforward		4,749			186,497
Unrealized losses on available-for-sale securities		—			714,497
Other		40,270			840
		2,818,008			3,754,083
Deferred tax liabilities
Unrealized gains on available-for-sale securities		(366,521	)		—
Depreciation		(478,427	)		(536,706	)
Federal Home Loan Bank stock dividends		(152,224	)		(152,224	)
Prepaid expenses		(79,868	)		(90,794	)
Mortgage servicing rights		(254,762	)		(271,249	)
		(1,331,802	)		(1,050,973	)
Net deferred tax asset	$	1,486,206		$	2,703,110

XML

Changes in Accumulated Other Comprehensive Income (AOCI) by Component

12 Months Ended

Dec. 31, 2014

Changes In Accumulated Other Comprehensive Income Aoci By Component [Abstract]

Changes in Accumulated Other Comprehensive Income (AOCI) by Component

Note 11:        Changes in Accumulated Other Comprehensive Income (AOCI) by Component

Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2014 and 2013, were as follows:

	Amounts Reclassified from AOCI						Affected Line Item in the
	2014			2013			Statements of Income
Unrealized gains on available-for-sale securities	$	408,753		$	897,901		Realized gain on sale of securities
							Total reclassified amount before tax
		(138,976	)		(305,286	)	Tax expense
	$	269,777		$	592,615		Net reclassified amount

XML

Condensed Financial Information (Parent Company Only) - Condensed Statements of Cash Flows (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Operating Activities
Net income	$ 2,972,754	$ 3,213,645
Stock-based compensation expense	90,163	90,162
Net cash provided by operating activities	5,549,813	5,083,916
Investing Activity
Net cash provided by investing activities	10,808,443	(4,319,344)
Financing Activities
Dividends paid	(570,843)	(565,526)
Stock repurchase	(1,028,688)	(1,596,959)
Exercise of stock options	234,491	90,254
Net cash used in financing activities	(12,845,488)	(1,959,413)
Net Change in Cash and Cash Equivalents	3,512,768	(1,194,841)
Cash and Cash Equivalents, Beginning of Year	6,098,870	7,293,711
Cash and Cash Equivalents, End of Year	9,611,638	6,098,870
Parent Company
Operating Activities
Net income	2,972,754	3,213,645
Items not providing cash, net	(1,396,844)	(1,982,245)
Stock-based compensation expense	90,163	90,162
Change in other assets and liabilities, net	29,599	112,013
Net cash provided by operating activities	1,695,672	1,433,575
Investing Activity
Loan payment from subsidiary	36,652	35,527
Net cash provided by investing activities	36,652	35,527
Financing Activities
Dividends paid	(570,843)	(565,526)
Stock repurchase	(1,028,688)	(1,596,959)
Exercise of stock options	234,491	90,254
Net cash used in financing activities	(1,365,040)	(2,072,231)
Net Change in Cash and Cash Equivalents	367,284	(603,129)
Cash and Cash Equivalents, Beginning of Year	3,479,895	4,083,024
Cash and Cash Equivalents, End of Year	$ 3,847,179	$ 3,479,895