10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2016

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period of _________ 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)	(I.R.S. Employer Identification Number)

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

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

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

x 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 the registrant was required to submit and post such filings).

x Yes        ¨ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. 

¨  Large Accelerated Filer	¨  Accelerated Filer
¨  Non-Accelerated Filer	x  Smaller Reporting Company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes        x No

As of August 1, 2016, there were 1,798,544 shares of the Registrant’s common stock issued and outstanding.

JACKSONVILLE BANCORP, INC.

FORM 10-Q

June 30, 2016

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statement of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4	Controls and Procedures	56
PART II	OTHER INFORMATION	57
Item 1.	Legal Proceedings	57
Item 1.A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
	Signatures	59
EXHIBITS
	Section 302 Certifications
	Section 906 Certification
	XBRL Instance Document
	XBRL Taxonomy Extension Schema Document
	XBRL Taxonomy Calculation Linkbase Document
	XBRL Taxonomy Extension Definition Linkbase Document
	XBRL Taxonomy Label Linkbase Document
	XBRL Taxonomy Presentation Linkbase Document

PART I – FINANCIAL INFORMATION

JACKSONVILLE BANCORP, INC.

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2016			2015
ASSETS	(Unaudited)
Cash and cash equivalents	$	9,636,838		$	4,103,432
Interest-earning time deposits in banks		2,486,000			2,724,000
Investment securities - available for sale		67,620,547			64,294,937
Mortgage-backed securities - available for sale		24,521,854			23,178,395
Federal Home Loan Bank stock		363,800			1,113,800
Other investment securities		59,134			62,223
Loans held for sale - net		80,481			539,000
Loans receivable - net of allowance for loan losses of $2,958,565 and $2,919,594 as of  June 30, 2016 and December 31, 2015		188,950,575			193,039,879
Premises and equipment - net		4,569,997			4,728,157
Cash surrender value of life insurance		7,182,518			7,093,640
Accrued interest receivable		1,982,561			1,715,676
Goodwill		2,726,567			2,726,567
Capitalized mortgage servicing rights, net of valuation allowance of $41,247 and $47,354  as of June 30, 2016 and December 31, 2015		587,762			597,713
Real estate owned		220,000			330,981
Deferred income taxes		1,273,549			1,583,067
Other assets		725,860			811,007
Total Assets	$	312,988,043		$	308,642,474
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	$	254,261,041		$	239,281,930
Other borrowings		3,535,881			15,131,710
Advance payments by borrowers for taxes and insurance		1,172,034			990,917
Accrued interest payable		104,919			118,335
Deferred compensation payable		4,591,510			4,492,594
Income taxes payable		29,515			49,291
Dividends payable		179,831			1,934,834
Other liabilities		1,272,010			1,076,363
Total liabilities		265,146,741			263,075,974
Commitments and contingencies		-			-
Preferred stock, $0.01 par value - authorized 10,000,000 shares;  none issued and outstanding		-			-
Common stock, $0.01 par value - authorized 25,000,000 shares; issued 1,798,314 shares  as of June 30, 2016 and 1,791,513 shares as of December 31, 2015		17,983			17,915
Additional paid-in-capital		13,786,098			13,664,914
Retained earnings		32,567,999			31,305,040
Less: Unallocated ESOP shares		(199,790	)		(211,710	)
Accumulated other comprehensive income		1,669,012			790,341
Total stockholders' equity		47,841,302			45,566,500
Total Liabilities and Stockholders' Equity	$	312,988,043		$	308,642,474

See accompanying notes to the condensed consolidated financial statements.

1

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME  

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)				(Unaudited)
INTEREST INCOME:
Loans	$	2,302,183	$	2,345,009	$	4,630,961	$	4,688,363
Investment securities		437,575		393,613		873,405		774,436
Mortgage-backed securities		96,881		114,006		227,184		286,373
Other		13,146		6,951		27,370		11,899
Total interest income		2,849,785		2,859,579		5,758,920		5,761,071
INTEREST EXPENSE:
Deposits		244,181		288,148		486,032		597,075
Other borrowings		3,003		4,993		10,062		10,116
Total interest expense		247,184		293,141		496,094		607,191
NET INTEREST INCOME		2,602,601		2,566,438		5,262,826		5,153,880
PROVISION FOR LOAN LOSSES		30,000		35,000		60,000		65,000
NET INTEREST INCOME AFTER PROVISION  FOR LOAN LOSSES		2,572,601		2,531,438		5,202,826		5,088,880
NON-INTEREST INCOME:
Fiduciary activities		82,670		68,813		162,674		147,439
Commission income		286,240		400,676		634,806		708,789
Service charges on deposit accounts		173,212		169,294		340,399		325,730
Mortgage banking operations, net		58,002		52,588		83,274		95,528
Net realized gains on sales of available-for-sale securities		106,537		78,860		208,098		212,076
Loan servicing fees		83,589		85,481		168,115		172,961
ATM and bank card interchange income		174,758		162,889		335,403		315,628
Other		69,662		73,934		140,976		178,314
Total non-interest income		1,034,670		1,092,535		2,073,745		2,156,465
NON-INTEREST EXPENSE:
Salaries and employee benefits		1,680,543		1,623,598		3,382,683		3,261,840
Occupancy and equipment		250,041		243,920		506,982		499,314
Data processing and telecommunications		146,746		141,718		283,359		289,365
Professional		50,769		50,873		106,605		96,610
Postage and office supplies		58,689		59,333		123,325		114,443
ATM and bank card expense		102,246		89,560		189,895		174,617
Other		274,999		251,429		503,745		568,503
Total non-interest expense		2,564,033		2,460,431		5,096,594		5,004,692
INCOME BEFORE INCOME TAXES		1,043,238		1,163,542		2,179,977		2,240,653
INCOME TAXES		277,732		327,139		587,093		617,993
NET INCOME	$	765,506	$	836,403	$	1,592,884	$	1,622,660
		-
NET INCOME PER COMMON SHARE - BASIC	$	0.43	$	0.47	$	0.90	$	0.91
NET INCOME PER COMMON SHARE - DILUTED	$	0.43	$	0.47	$	0.89	$	0.91
DIVIDENDS DECLARED PER SHARE	$	0.10	$	0.08	$	0.20	$	0.16

See accompanying notes to the condensed consolidated financial statements.

2

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2016		2015			2016		2015
	(Unaudited)					(Unaudited)
Net Income	$	765,506	$	836,403		$	1,592,884	$	1,622,660
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-  for-sale securities, net of taxes of $365,437 and   $(467,102) for the three months ended June 30,  2016 and 2015, respectively, and $523,401 and  $(168,180) for the six months ended June 30,  2016 and 2015, respectively.		709,380		(906,729	)		1,016,016		(326,468	)
Less: reclassification adjustment for realized gains  included in net income, net of taxes of   $36,222 and $26,813, for the three months  ended June 30, 2016 and 2015, respectively.  and $70,753 and $72,106 for the six months  ended June 30, 2016 and 2015, respectively.		70,315		52,047			137,345		139,970
		639,065		(958,776	)		878,671		(466,438	)
Comprehensive Income (Loss)	$	1,404,571	$	(122,373	)	$	2,471,555	$	1,156,222

See accompanying notes to condensed consolidated financial statements.

3

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

													Accumulated
				Additional									Other		Total
	Common			Paid-in			Retained			Unallocated			Comprehensive		Stockholders'
(Unaudited)	Stock			Capital			Earnings			ESOP Shares			Income		Equity
BALANCE, DECEMBER 31, 2015	$	17,915		$	13,664,914		$	31,305,040		$	(211,710	)	$	790,341	$	45,566,500
Net Income		-			-			1,592,884			-			-		1,592,884
Other comprehensive income		-			-			-			-			878,671		878,671
Stock repurchases		(45	)		(119,270	)		-			-			-		(119,315	)
Exercise of stock options		113			173,536			-			-			-		173,649
Tax benefit of non-qualified options		-			3,696			-			-			-		3,696
Vesting options expense		-			44,711			-			-			-		44,711
Shares held by ESOP, committed to be released		-			18,511			-			11,920			-		30,431
Dividends ($0.20 per share)		-			-			(329,925	)		-			-		(329,925	)
BALANCE, JUNE 30, 2016	$	17,983		$	13,786,098		$	32,567,999		$	(199,790	)	$	1,669,012	$	47,841,302

See accompanying notes to condensed consolidated financial statements.

4

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,
	2016			2015
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,592,884		$	1,622,660
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion:
Premises and equipment		190,835			192,926
Amortization of investment premiums and discounts, net		249,993			360,551
Accretion of loan discounts		(259	)		(259	)
Net realized gains on sales of available-for-sale securities		(208,098	)		(212,076	)
Provision for loan losses		60,000			65,000
Mortgage banking operations, net		(83,274	)		(95,528	)
Gain on sale of real estate owned		(59,609	)		(7,607	)
Shares held by ESOP commited to be released		30,431			26,415
Tax benefit related to stock options exercised		3,696			4,138
Stock option compensation expense		44,711			44,711
Changes in income taxes payable		(19,776	)		(299,055	)
Changes in assets and liabilities		(124,711	)		(5,999	)
Net cash provided by operations before loan sales		1,676,823			1,695,877
Origination of loans for sale to secondary market		(6,434,650	)		(8,652,121	)
Proceeds from sales of loans to secondary market		6,984,075			8,754,154
Net cash provided by operating activities		2,226,248			1,797,910
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-earning time deposits		238,000			(1,974,000	)
Purchases of investment and mortgage-backed securities		(32,416,045	)		(17,594,920	)
Maturity or call of investment securities available-for-sale		4,600,000			1,000,000
Sale of investment securities available-for-sale		21,630,529			19,675,553
Sale of Federal Home Loan Bank stock		750,000			-
Principal payments on mortgage-backed and investment securities		2,808,961			3,173,649
Proceeds from sale of real estate owned		149,202			47,085
Net change in loans		4,045,382			(377,948	)
Additions to premises and equipment		(32,675	)		(59,099	)
Net cash provided by investing activities		1,773,354			3,890,320

(Continued)

5

JACKSONVILLE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

	Six Months Ended
	June 30,
	2016			2015
	(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits	$	14,979,111		$	(7,417,691	)
Net change in other borrowings		(11,595,830	)		727,058
Increase in advance payments by borrowers for taxes and insurance		181,117			66,257
Exercise of stock options		173,649			261,364
Stock repurchases		(119,315	)		(624,038	)
Dividends paid - common stock		(2,084,928	)		(282,803	)
Net cash provided by (used in) financing activities		1,533,804			(7,269,853	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		5,533,406			(1,581,623	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		4,103,432			9,611,638
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	9,636,838		$	8,030,015
ADDITIONAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on deposits	$	497,923		$	619,983
Interest on other borrowings		11,587			10,179
Income taxes paid		750,000			916,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in settlement of loans	$	114,400		$	180,325
Loans to facilitate sales of real estate owned		127,900			-

See accompanying notes to condensed consolidated financial statements.

6

JACKSONVILLE BANCORP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. FINANCIAL STATEMENTS

The accompanying interim condensed consolidated financial statements include the accounts of Jacksonville Bancorp, Inc. and its wholly-owned subsidiary, Jacksonville Savings Bank (the “Bank”) and its wholly-owned subsidiary, Financial Resources Group, Inc. (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the preceding unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial condition of the Company as of June 30, 2016 and the results of its operations for the three and six month periods ended June 30, 2016 and 2015. The results of operations for the three and six month periods are not necessarily indicative of the results which may be expected for the entire year, or any other interim period. The condensed consolidated balance sheet of the Company as of December 31, 2015 has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 filed as an exhibit to the Company’s Form 10-K filed in March 2016. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP) and to prevailing practices within the industry.

Certain amounts included in the 2015 consolidated statements have been reclassified to conform to the 2016 presentation.

2. NEW ACCOUNTING PRONOUNCEMENTS

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. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which provides a one-year deferral of ASU 2014-09. 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. Early adoption would be permitted, but not before the original public entity effective date.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing agreement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU No. 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company’s current method of accounting for fees paid in a cloud computing arrangement is consistent with the accounting guidance provided by ASU No. 2015-05. Therefore, the adoption of ASU No. 2015-05 did not have a material impact on the Company’s consolidated financial statements.

7

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019. The Company has not yet determined the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

3. EARNINGS PER SHARE

Earnings Per Share - Basic earnings per share is determined by dividing net income for the period by the weighted average number of common shares. Diluted earnings per share considers the potential effects of the exercise of the outstanding stock options under the Company’s stock option plans. Average shares outstanding exclude unallocated employee stock ownership plan (ESOP) shares.

8

The following reflects earnings per share calculations for basic and diluted methods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income available to common  shareholders	$	765,506	$	836,403	$	1,592,884	$	1,622,660
Basic average shares outstanding		1,775,726		1,774,375		1,773,321		1,774,828
Diluted potential common shares:
Stock option equivalents		16,458		14,442		15,044		13,618
Diluted average shares outstanding		1,792,184		1,788,817		1,788,365		1,788,446
Basic earnings per share	$	0.43	$	0.47	$	0.90	$	0.91
Diluted earnings per share	$	0.43	$	0.47	$	0.89	$	0.91

4. STOCK–BASED COMPENSATION

In connection with our 2010 second step conversion and related stock offering, the ESOP purchased an additional 41,614 shares for the exclusive benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase the 41,614 shares (approximately 4% of the common stock issued in the offering). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Bank and dividends received by the ESOP, with funds from any contributions on ESOP assets. Contributions will be applied to repay interest on the loan first, and the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants. Participants will vest on a pro-rata basis and reach 100% vesting in the accrued benefits under the ESOP after six years. Vesting is accelerated upon retirement, death, or disability of the participant or a change in control of the Bank. Forfeitures will be reallocated to remaining plan participants. Benefits may be payable upon retirement, death, disability, separation from service, or termination of the ESOP. Since the Bank’s annual contributions are discretionary, benefits payable under the ESOP cannot be estimated.

The Company is accounting for its ESOP in accordance with ASC Topic 718, “Employers Accounting for Employee Stock Ownership Plans.” Accordingly, the debt of the ESOP is eliminated in consolidation and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheet. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from the collateral, the Company reports compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends, if any, on unallocated shares are recorded as a reduction of debt and accrued interest.

9

A summary of ESOP shares at June 30, 2016 and 2015 is shown below.

	June 30, 2016		June 30, 2015
Unearned shares		18,787		23,845
Shares committed for release		1,192		1,146
Allocated shares		61,659		55,919
Total ESOP shares		81,638		80,910
Fair value of unearned shares	$	544,228	$	562,027

On April 24, 2012, our shareholders approved the 2012 Stock Option Plan. On this same date, the compensation committee of the board of directors approved the awards of 104,035 options to purchase Company common stock. The stock options vest over a five-year period and expire ten years after issuance. Apart from the vesting schedule, there are no performance-based conditions or any other material conditions applicable to the options issued.

The following table summarizes stock option activity for the six months ended June 30, 2016.

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2015		61,120		$	15.65
Granted		-			-
Exercised		(11,332	)		15.65
Forfeited		-			-
Outstanding, June 30, 2016		49,788		$	15.65		5.75	$	577,043
Exercisable, June 30, 2016		27,853		$	15.65		5.75	$	322,816

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The value is based upon a closing price of $27.24 per share on June 30, 2016.

10

5. LOAN PORTFOLIO COMPOSITION

At June 30, 2016 and December 31, 2015, the composition of the Company’s loan portfolio is shown below.

	June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
Real estate loans:
One-to-four family residential	$	45,994,916		24.4	%	$	47,395,344		24.6	%
Commercial		40,409,491		21.4			40,381,680		20.9
Agricultural		41,126,629		21.8			41,223,190		21.3
Home equity		11,203,055		5.9			11,691,545		6.1
Total real estate loans		138,734,091		73.5			140,691,759		72.9
Commercial loans		25,747,471		13.6			25,453,058		13.2
Agricultural loans		13,424,032		7.1			16,102,856		8.3
Consumer loans		14,021,513		7.4			13,741,093		7.1
Total loans receivable		191,927,107		101.6			195,988,766		101.5
Less:
Net deferred loan fees		17,967		0.0			29,293		0.0
Allowance for loan losses		2,958,565		1.6			2,919,594		1.5
Total loans receivable, net	$	188,950,575		100.0	%	$	193,039,879		100.0	%

The Company believes that originating or purchasing 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 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. 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 30 days.

11

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 or an attorney’s opinion based on a title search of the property is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the Bank’s 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.

The Company originates for resale to Freddie Mac and the Federal Home Loan Bank 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 net interest income. In the low interest rate environment that has existed over the past five years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio. In addition, during this period borrowers have shown a preference for fixed-rate loans. 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 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 provide 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. During periods of rising interest rates the risk of delinquencies and defaults on adjustable-rate mortgage loans increases due to the upward adjustment of interest costs to the borrower, which may result in increased loan losses.

12

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 that, among other things, 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 the 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 28% of the applicant’s total monthly income. In addition, total monthly obligations of the applicant, including mortgage payments, generally should not exceed 38% 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, or an attorney’s title opinion, 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 Real Estate Loans - The Company originates and purchases commercial real estate loans. Commercial real estate loans are secured primarily by improved properties such as multi-family residential, retail facilities and office buildings, restaurants and other non-residential buildings. The maximum loan-to-value ratio for commercial real estate loans originated is generally 80%. 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 the fixed-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 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 80% of the value of the real estate. Written appraisals are usually obtained from either licensed or certified appraisers on all commercial 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.

13

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 flows from the project are reduced, the borrower’s ability to repay the loan may be impaired.

Agricultural Real Estate Loans - The Company originates and purchases agricultural real estate loans. The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 80%. 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 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.

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 80% 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 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 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 flows are reduced, the borrower’s ability to repay the loan may be impaired.

Home Equity Loans – The Company originates home equity loans and lines of credit, which 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 existing 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.

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.

14

Home equity loans entail greater risks than one-to-four family residential mortgage loans, which are secured by first lien mortgages. 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 - The Company originates commercial 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 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. Unsecured business loans are originated on a limited basis 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. 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. The 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 review them 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.

Agricultural Business Loans - The Company originates 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 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. The repayment of agricultural business loans is generally dependent on the successful operation of the farm operation. Personal guarantees are generally obtained from the borrower as a condition to originating agricultural business loans.

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. The financial strength of each applicant is assessed 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. Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan. 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.

15

The repayment of agricultural business loans generally is dependent on the successful operation of a farm and can be adversely affected by fluctuations in crop prices, increase in interest rates, and changes in weather conditions. These developments may result in smaller harvests and less income for farmers which may adversely affect such borrower’s ability to repay a loan, and potentially result in an increase in the level of problem loans and loan losses in our agricultural portfolio. While not required, the majority of our agricultural business loans are covered by crop insurance, which provides protection against loss due to lower crop yields as a result of unfavorable weather conditions.

Consumer Loans – The Company originates consumer loans, including automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans. Consumer loans are generally offered on a fixed-rate basis. Automobile loans are offered 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. Automobile loans are generally originated with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value. In the case of a new car loan, 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.

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 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.

16

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 and for the periods ended June 30, 2016, June 30, 2015, and December 31, 2015.

	June 30, 2016
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2016	$	864,863		$	900,422		$	202,004	$	201,537		$	345,975		$	160,370		$	161,474		$	98,046		$	2,934,691
Provision charged to expense		(27,142	)		10,337			3,629		(4,161	)		26,196			2,293			19,485			(637	)		30,000
Losses charged off		(6,414	)		-			-		-			-			-			(11,899	)		-			(18,313	)
Recoveries		5,205			2,971			-		525			116			-			3,370			-			12,187
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Beginning Balance, January 1, 2016	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346		$	169,381		$	101,946		$	2,919,594
Provision charged to expense		24,501			(6,796	)		3,715		47,598			(14,449	)		(683	)		10,651			(4,537	)		60,000
Losses charged off		(26,879	)		-			-		-			-			-			(11,899	)		-			(38,778	)
Recoveries		9,286			3,000			-		1,050			116			-			4,297			-			17,749
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Ending balance:
individually evaluated for impairment	$	240,962		$	523,618		$	-	$	9,561		$	111,625		$	-		$	-		$	-		$	885,766
Ending balance:
collectively evaluated for impairment	$	595,550		$	390,112		$	205,633	$	188,340		$	260,662		$	162,663		$	172,430		$	97,409		$	2,072,799
Loans:
Ending balance	$	45,994,916		$	40,409,491		$	41,126,629	$	11,203,055		$	25,747,471		$	13,424,032		$	14,021,513		$	-		$	191,927,107
Ending balance:
individually evaluated for impairment	$	638,345		$	1,408,875		$	-	$	61,786		$	256,547		$	-		$	-		$	-		$	2,365,553
Ending balance:
collectively evaluated for impairment	$	45,356,571		$	39,000,616		$	41,126,629	$	11,141,269		$	25,490,924		$	13,424,032		$	14,021,513		$	-		$	189,561,554

17

	June 30, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2015	$	1,032,299		$	799,534		$	212,051	$	162,167		$	401,231		$	116,529	$	159,703		$	87,482		$	2,970,996
Provision charged to expense		(15,895	)		41,544			1,759		(4,591	)		(9,263	)		8,533		19,578			(6,665	)		35,000
Losses charged off		(105,118	)		-			-		-			-			-		(6,822	)		-			(111,940	)
Recoveries		19,447			6,346			-		525			26			-		2,646			-			28,990
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Beginning Balance, January 1, 2015	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356		$	2,956,264
Provision charged to expense		16,844			4,334			18,264		(57,014	)		(29,926	)		67,128		17,909			27,461			65,000
Losses charged off		(105,118	)		(27,464	)		-		-			-			-		(13,252	)		-			(145,834	)
Recoveries		19,747			15,091			-		9,538			111			-		3,129			-			47,616
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Ending balance:
individually evaluated for impairment	$	192,916		$	430,596		$	-	$	9,982		$	141,946		$	-	$	-		$	-		$	775,440
Ending balance:
collectively evaluated for impairment	$	737,817		$	416,828		$	213,810	$	148,119		$	250,048		$	125,062	$	175,105		$	80,817		$	2,147,606
Loans:
Ending balance	$	42,895,033		$	39,843,156		$	43,624,784	$	11,182,130		$	25,113,932		$	12,227,735	$	12,906,675		$	-		$	187,793,445
Ending balance:
individually evaluated for impairment	$	681,410		$	1,569,830		$	862,765	$	43,046		$	221,519		$	375,979	$	1,149		$	-		$	3,755,698
Ending balance:
collectively evaluated for impairment	$	42,213,623		$	38,273,326		$	42,762,019	$	11,139,084		$	24,892,413		$	11,851,756	$	12,905,526		$	-		$	184,037,747

18

	December 31, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance, December 31, 2014	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356	$	2,956,264
Provision charged to expense		(10,386	)		29,238			6,372		(53,188	)		(35,327	)		105,412		49,289			48,590		140,000
Losses charged off		(199,392	)		(27,464	)		-		(13,724	)		-			-		(53,249	)		-		(293,829	)
Recoveries		40,122			60,289			-		10,588			138			-		6,022			-		117,159
Ending balance, December 31, 2015	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346	$	169,381		$	101,946	$	2,919,594
Ending balance:
individually evaluated for impairment	$	176,079		$	487,205		$	-	$	9,922		$	127,458		$	-	$	-		$	-	$	800,664
Ending balance:
collectively evaluated for impairment	$	653,525		$	430,321		$	201,918	$	139,331		$	259,162		$	163,346	$	169,381		$	101,946	$	2,118,930
Loans:
Ending balance	$	47,395,344		$	40,381,680		$	41,223,190	$	11,691,545		$	25,453,058		$	16,102,856	$	13,741,093		$	-	$	195,988,766
Ending balance:
individually evaluated for impairment	$	658,734		$	1,598,530		$	839,546	$	58,340		$	277,628		$	406,950	$	428		$	-	$	3,840,156
Ending balance:
collectively evaluated for impairment	$	46,736,610		$	38,783,150		$	40,383,644	$	11,633,205		$	25,175,430		$	15,695,906	$	13,740,665		$	-	$	192,148,610

19

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

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 size and composition 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 the scheduled payments of principal or interest will not be able to be collected 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, individual consumer and residential loans are not separately identified 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 the 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.  

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

20

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 $500,000, new commercial and commercial real estate loans, and watch list credits 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.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2016 and December 31, 2015.

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	43,154,776	$	44,120,334	$	37,869,883	$	37,628,385	$	41,126,629	$	40,383,644	$	10,415,807	$	11,324,889
Special Mention		1,160,680		1,323,266		447,626		454,194		-		839,546		563,621		68,044
Substandard		1,679,460		1,951,744		2,091,982		2,299,101		-		-		223,627		298,612
Total	$	45,994,916	$	47,395,344	$	40,409,491	$	40,381,680	$	41,126,629	$	41,223,190	$	11,203,055	$	11,691,545

	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	25,444,203	$	25,117,982	$	12,787,458	$	15,110,606	$	13,817,414	$	13,501,477	$	184,616,170	$	187,187,317
Special Mention		41,968		51,196		636,574		992,250		18,291		52,656		2,868,760		3,781,152
Substandard		261,300		283,880		-		-		185,808		186,960		4,442,177		5,020,297
Total	$	25,747,471	$	25,453,058	$	13,424,032	$	16,102,856	$	14,021,513	$	13,741,093	$	191,927,107	$	195,988,766

21

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2016 and December 31, 2015.

	June 30, 2016
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	172,411	$	49,690	$	457,399	$	679,500	$	45,315,416	$	45,994,916	$	-
Commercial real estate		-		-		734,173		734,173		39,675,318		40,409,491		-
Agricultural real estate		-		-		-		-		41,126,629		41,126,629		-
Home equity		-		57,722		26,098		83,820		11,119,235		11,203,055		-
Commercial		32,504		39,203		-		71,707		25,675,764		25,747,471		-
Agricultural		-		-		-		-		13,424,032		13,424,032		-
Consumer		125,886		28,756		43,062		197,704		13,823,809		14,021,513		-
Total	$	330,801	$	175,371	$	1,260,732	$	1,766,904	$	190,160,203	$	191,927,107	$	-

	December 31, 2015
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	345,169	$	77,588	$	623,055	$	1,045,812	$	46,349,532	$	47,395,344	$	-
Commercial real estate		-		-		766,840		766,840		39,614,840		40,381,680		-
Agricultural real estate		-		-		-		-		41,223,190		41,223,190		-
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		-
Commercial		-		-		-		-		25,453,058		25,453,058		-
Agricultural		-		-		-		-		16,102,856		16,102,856		-
Consumer		183,526		5,972		6,031		195,529		13,545,564		13,741,093		-
Total	$	550,817	$	149,865	$	1,465,441	$	2,166,123	$	193,822,643	$	195,988,766	$	-

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 non-accrual or charged-off at an earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual 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 principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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.

22

The following tables present impaired loans at or for the three and six months ended June 30, 2016 and for the year ended December 31, 2015.

	Three Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	203,060	$	2,863	$	3,087
Commercial real estate		368,248		368,248		-		476,130		1,333		-
Home equity		52,225		52,225		-		53,293		908		920
Commercial		80,172		80,172		-		118,609		1,430		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		556,807		8,088		6,221
Commercial real estate		1,040,627		1,040,627		523,618		1,103,023		16,585		20,089
Home equity		9,561		9,561		9,561		9,982		253		180
Commercial		176,375		176,375		111,625		179,634		485		92
Total:
One-to-four family residential		638,345		638,345		240,962		759,867		10,951		9,308
Commercial real estate		1,408,875		1,408,875		523,618		1,579,153		17,918		20,089
Home equity		61,786		61,786		9,561		63,275		1,161		1,100
Commercial		256,547		256,547		111,625		298,243		1,915		524
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,700,538	$	31,945	$	31,021

23

	Six Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	204,264	$	5,815	$	6,068
Commercial real estate		368,248		368,248		-		451,875		11,128		5,400
Home equity		52,225		52,225		-		52,498		1,810		1,822
Commercial		80,172		80,172		-		99,433		2,431		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		561,936		16,144		11,974
Commercial real estate		1,040,627		1,040,627		523,618		1,105,566		33,251		42,647
Home equity		9,561		9,561		9,561		9,982		505		361
Commercial		176,375		176,375		111,625		184,643		4,144		3,534
Total:
One-to-four family residential		638,345		638,345		240,962		766,200		21,959		18,042
Commercial real estate		1,408,875		1,408,875		523,618		1,557,441		44,379		48,047
Home equity		61,786		61,786		9,561		62,480		2,315		2,183
Commercial		256,547		256,547		111,625		284,076		6,575		3,966
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,670,197	$	75,228	$	72,238

24

	Year Ended December 31, 2015
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	111,166	$	111,166	$	-	$	211,346	$	12,248	$	12,042
Commercial real estate		516,560		516,560		-		663,640		34,155		34,586
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		80,172		80,172		-		83,509		634		150
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		48,418		48,418		-		43,342		3,333		3,331
Consumer		428		428		-		1,160		78		82
Loans with a specific allowance:
One-to-four family residential		547,568		547,568		176,079		568,790		32,908		25,352
Commercial real estate		1,081,970		1,081,970		487,205		1,118,044		67,505		47,864
Commercial		197,456		197,456		127,458		269,496		11,517		11,139
Home equity		9,922		9,922		9,922		9,982		810		722
Total:
One-to-four family residential		658,734		658,734		176,079		780,136		45,156		37,394
Commercial real estate		1,598,530		1,598,530		487,205		1,781,684		101,660		82,450
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		277,628		277,628		127,458		353,005		12,151		11,289
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		58,340		58,340		9,922		53,324		4,143		4,053
Consumer		428		428		-		1,160		78		82
Total	$	3,840,156	$	3,840,156	$	800,664	$	4,141,743	$	217,926	$	180,961

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDRs), where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of time, usually at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon on the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

25

The following table presents the recorded balance, at original cost, of TDRs, as of June 30, 2016 and December 31, 2015.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	764,358	$	723,421
Commercial real estate		1,647,798		1,708,013
Agricultural real estate		-		-
Home equity		8,050		10,897
Commercial loans		40,926		57,783
Agricultural loans		-		-
Consumer loans		89,146		109,340
Total	$	2,550,278	$	2,609,454

The following table presents the recorded balance, at original cost, of TDRs, which were performing according to the terms of the restructuring, as of June 30, 2016 and December 31, 2015.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	519,628	$	526,004
Commercial real estate		891,592		941,173
Agricultural real estate		-		-
Home equity		7,768		10,897
Commercial loans		36,174		57,783
Agricultural loans		-		-
Consumer loans		7,623		86,255
Total	$	1,462,785	$	1,622,112

The following tables present loans modified as TDRs during the three and six months ended June 30, 2016 and 2015.

	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	40,934
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		-		-
Total		-	$	-		1	$	40,934

26

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	103,434
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		1		2,497		1		2,497
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		1		66,650		2		68,589
Total		2	$	69,147		4	$	174,520

2016 Modifications

The Company modified one residential real estate loan with a recorded investment of $40,934. The modification was made to restructure the loan and capitalize delinquent real estate taxes. The modification did not result in a write-off of the principal balance.

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 six month period ended June 30, 2016, three residential real estate loans of $184,804 and one commercial loan of $734,173 were considered defaulted TDRs as they were more than 90 days past due at June 30, 2016. Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

2015 Modifications

The Company modified one residential real estate loan with a recorded investment of $103,434. The modification was made to consolidate and restructure delinquent loans into a workout. The modification did not result in a write-off of the principal balance.

The Company modified one home equity loan with a recorded investment of $2,497. The modification was made to extend the term to lower the payment amount. The modification did not result in a write-off of the principal balance.

The Company modified two consumer loans with a recorded investment of $68,589. The modifications were made to extend the payment schedule three and four months, respectively. The modifications did not result in a write-off of the principal balance.

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 six month period ended June 30, 2015, three residential real estate loans of $197,941, one commercial loan of $794,110 and one home equity loan of $3,138 were considered defaulted TDRs as they were more than 90 days past due at June 30, 2015. Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

27

The following table presents the Company’s nonaccrual loans at June 30, 2016 and December 31, 2015. This table excludes performing troubled debt restructurings.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	555,223	$	911,283
Commercial real estate		794,867		840,449
Agricultural real estate		-		-
Home equity		81,182		118,502
Commercial loans		4,753		9,314
Agricultural loans		-		-
Consumer loans		168,287		141,605
Total	$	1,604,312	$	2,021,153

6. INVESTMENTS

The amortized cost and approximate fair value of securities, all of which are classified as available-for-sale, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2016:
U.S. government and agencies	$	23,402,502	$	393,863	$	(10,373	)	$	23,785,992
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		424,443		(10,742	)		24,521,854
Municipal bonds		42,102,941		1,755,608		(23,994	)		43,834,555
	$	89,613,596	$	2,573,914	$	(45,109	)	$	92,142,401
December 31, 2015:
U.S. government and agencies	$	15,979,475	$	44,972	$	(85,750	)	$	15,938,697
Mortgage-backed securities (government- sponsored enterprises - residential)		23,067,200		211,987		(100,792	)		23,178,395
Municipal bonds		47,229,171		1,306,328		(179,259	)		48,356,240
	$	86,275,846	$	1,563,287	$	(365,801	)	$	87,473,332

The amortized cost and fair value of available-for-sale securities at June 30, 2016, 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.

28

	Amortized		Fair
	Cost		Value
Within one year	$	1,022,863	$	1,028,376
More than one year to five years		9,040,013		9,379,342
More than five years to ten years		33,399,985		34,500,726
After ten years		22,042,582		22,712,103
		65,505,443		67,620,547
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		24,521,854
	$	89,613,596	$	92,142,401

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $41,990,000 at June 30, 2016 and $25,681,000 at December 31, 2015.

The carrying value of securities sold under agreement to repurchase amounted to $3,536,000 at June 30, 2016 and $7,591,000 at December 31, 2015. At June 30, 2016, we had $4,499,000 of repurchase agreements secured by mortgage backed securities, $741,000 secured by time deposits in other banks, and $550,000 in repurchase agreements secured by U.S. government agency bonds. All of our repurchase agreements mature overnight. The right of offset for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default. The collateral is held by the Company in a segregated custodial account. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained.

Gross gains of $107,000 and $79,000 and gross losses of $0 resulting from sales of available-for-sale securities were realized during the three months ended June 30, 2016 and 2015, respectively. Gross gains of $211,000 and $244,000 and gross losses of $3,000 and $32,000 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2016 and 2015, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2016 and December 31, 2015 were $10,332,000, and $30,677,000, respectively, which were approximately 11% and 35% of the Company’s available-for-sale investment portfolio.

Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

29

The following table shows the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at June 30, 2016 and December 31, 2015.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2016:
U.S. government agencies	$	(10,373	)	$	1,651,921	$	-		$	-	$	(10,373	)	$	1,651,921
Mortgage-backed securities (government sponsored enterprises - residential)		(10,742	)		5,587,647		-			-		(10,742	)		5,587,647
Municipal bonds		(13,040	)		2,347,998		(10,954	)		744,540	$	(23,994	)	$	3,092,538
Total	$	(34,155	)	$	9,587,566	$	(10,954	)	$	744,540	$	(45,109	)	$	10,332,106
December 31, 2015:
U.S. government agencies	$	(49,205	)	$	8,591,014	$	(36,545	)	$	1,809,745	$	(85,750	)	$	10,400,759
Mortgage-backed securities (government sponsored enterprises - residential)		(45,886	)		5,843,754		(54,906	)		2,257,674		(100,792	)		8,101,428
Municipal bonds		(48,383	)		5,440,291		(130,876	)		6,734,290		(179,259	)		12,174,581
Total	$	(143,474	)	$	19,875,059	$	(222,327	)	$	10,801,709	$	(365,801	)	$	30,676,768

The unrealized losses on the Company’s investments in municipal bonds, U.S. government agencies, and mortgage-backed securities were caused by interest rate increases. The contractual terms of these 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 these investments to be other-than-temporarily impaired at June 30, 2016 and December 31, 2015.

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

	June 30, 2016			December 31, 2015
Net unrealized gains on securities available-for-sale	$	2,528,805		$	1,197,486
Tax effect		(859,793	)		(407,145	)
Net-of-tax amount	$	1,669,012		$	790,341

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8. 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 three and six months ended June 30, 2016 and 2015, were as follows:

	Amounts Reclassified
	from AOCI
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			Statements of Income
Unrealized gains on available     -for-sale securities	$	106,537		$	78,860		$	208,098		$	212,076		Net realized gains on sales of available-for-sale securities
Tax effect		(36,222	)		(26,813	)		(70,753	)		(72,106	)	Income taxes
Total reclassification out of   AOCI	$	70,315		$	52,047		$	137,345		$	139,970		Net reclassified amount

9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability 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 or liabilities

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

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

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying condensed 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 June 30, 2016 and December 31, 2015:

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			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agencies	$	23,785,992	$	-	$	23,785,992	$	-
Mortgage-backed securities (Government sponsored enterprises - residential)		24,521,854		-		24,521,854		-
Municipal bonds		43,834,555		-		43,834,555		-

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and   agencies	$	15,938,697	$	-	$	15,938,697	$	-
Mortgage-backed securities   (Government sponsored   enterprises - residential)		23,178,395		-		23,178,395		-
Municipal bonds		48,356,240		-		48,356,240		-

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 condensed 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 period ended June 30, 2016.

Available-for-Sale Securities - Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. 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, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections, and cash flows. 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.

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 June 30, 2016 and December 31, 2015:

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			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	622,572	$	-	$	-	$	622,572
Real estate owned		72,000		-		-		72,000

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	899,981	$	-	$	-	$	899,981

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 condensed consolidated balance sheets, as well as the general classification of such assets 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.

Real Estate Owned – Real estate owned is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of real estate owned is based on appraisals or evaluations. Real estate owned is classified within Level 3 of the fair value hierarchy.

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Appraisals of real estate owned are obtained when the real estate is acquired 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 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.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements (dollars in thousands).

	Fair Value at 6/30/16		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	72,000	Market comparable properties	Comparability adjustments (%)		30	%
Collateral-dependent impaired loans		622,572	Market comparable properties	Marketability discount		25% – 50% (40%)

	Fair Value at 12/31/15		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans		899,981	Market comparable properties	Marketability discount		20% – 30% (25%)

Fair Value of 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 June 30, 2016 and December 31, 2015

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	June 30, 2016
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	9,636,838	$	9,636,838	$	-	$	-
Interest-earning time deposits in banks		2,486,000		2,486,000		-		-
Other investments		59,134		-		59,134		-
Loans held for sale		80,481		-		80,481		-
Loans, net of allowance for loan losses		188,950,575		-		-		188,965,506
Federal Home Loan Bank stock		363,800		-		363,800		-
Interest receivable		1,982,561		-		1,982,561		-
Financial Liabilities
Deposits		254,261,041		-		176,198,419		79,147,083
Short-term borrowings		3,535,881		-		3,535,881		-
Advances from borrowers for taxes and insurance		1,172,034		-		1,172,034		-
Interest payable		104,919		-		104,919		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

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			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	4,103,432	$	4,103,432	$	-	$	-
Interest-earning time deposits		2,724,000		2,724,000		-		-
Other investments		62,223		-		62,223		-
Loans held for sale		539,000		-		539,000		-
Loans, net of allowance for loan losses		193,039,879		-		-		193,006,301
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		1,715,676		-		1,715,676		-
Financial Liabilities
Deposits		239,281,930		-		160,227,406		80,300,060
Short-term borrowings		15,131,710		-		6,631,710		8,500,000
Advances from borrowers for taxes and insurance		990,917		-		990,917		-
Interest payable		118,335		-		118,335		-
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-Earning Time Deposits in Banks, 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.

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10. MORTGAGE SERVICING RIGHTS

Activity in the balance of mortgage servicing rights, measured using the amortization method, for the six month period ended June 30, 2016 and the year ended December 31, 2015 was as follows:

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	645,067		$	689,603
Servicing rights capitalized		27,776			73,650
Amortization of servicing rights		(43,834	)		(118,186	)
Change in valuation allowance		-			-
Balance, end of period	$	629,009		$	645,067

Activity in the valuation allowance for mortgage servicing rights for the six month period ended June 30, 2016 and the year ended December 31, 2015 was as follows:

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	47,354		$	56,969
Additions		-			-
Reductions		(6,107	)		(9,615	)
Balance, end of period	$	41,247		$	47,354

11. INCOME TAXES

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense for the six months ended June 30, 2016 and 2015 is shown below.

	June 30, 2016			June 30, 2015
Computed at the statutory rate (34%)	$	741,192		$	761,822
Increase (decrease) resulting from
Tax exempt interest		(223,220	)		(214,944	)
State income taxes, net		97,943			99,455
Increase in cash surrender value		(29,234	)		(29,640	)
Other, net		412			1,300
Actual tax expense	$	587,093		$	617,993

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12. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers in the way of commitments to extend credit. Commitments to extend credit 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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. Substantially all of the Company's loans are to borrowers located in Cass, Morgan, Macoupin, Montgomery, and surrounding counties in Illinois.

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JACKSONVILLE BANCORP, INC.

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

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

Forward Looking Statements

This Form 10-Q contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors that could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, the effect of disruptions in the financial markets, changes in interest rates, general economic conditions, deposit flows, demand for mortgage and other loans, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation, including the Dodd-Frank Act; and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing of products and services.

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 judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Loan Losses - The Company believes 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 judgement, deserve current recognition in estimating loan losses. The evaluation includes a review of all loans on which full collectibility 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 obtains 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 the Company’s 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.

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Foreclosed Assets – Foreclosed assets primarily consist of real estate owned. 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 other real estate owned could differ from the original estimate. If it is determined that fair value of an asset declines subsequent to foreclosure, the asset is written down through a charge to non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned are netted and posted to non-interest 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.

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.

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. The Company estimates 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, the Company estimates fair value. Other factors such as model assumptions and market dislocations can affect estimates of fair value. Due to judgments and uncertainties involved in the estimation process, the estimates could result in materially different results under different assumptions and conditions.

The above listing is not intended to be a comprehensive list of all our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management’s judgement in their application. There are also areas in which management’s judgement in selecting any available alternative would not produce a materially different result.

Basel III

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 new rule became applicable to Jacksonville Savings Bank beginning in January 2015. The new rule includes a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%, as well as a 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 capital conservation buffer will be phased in beginning in the first quarter of 2016 at 0.625% and will be fully phased in beginning in the first quarter of 2019.

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Financial Condition

June 30, 2016 Compared to December 31, 2015

Total assets at June 30, 2016 were $313.0 million, an increase of $4.3 million, or 1.4%, from $308.6 million at December 31, 2015. The increase in total assets was primarily due to a $5.5 million increase in cash and cash equivalents and a $4.6 million increase in investment and mortgage-backed securities. The increase was partially offset by a decrease of $4.0 million in loans receivable.

Cash and cash equivalents increased $5.5 million, or 134.8%, to $9.6 million at June 30, 2016, from $4.1 million at December 31, 2015. Investment and mortgage-backed securities were $92.1 million at June 30, 2016, an increase of $4.6 million, or 5.3%, from $87.5 million at December 31, 2015. The increase was due to increases of $3.3 million in investment securities (consisting of $7.8 million in U.S. government and agency securities offset by a $4.5 million decrease in municipal bonds) and $1.3 million in mortgage-backed securities. The growth in the investment and mortgage-backed securities portfolios resulted from the investment of cash derived from deposit growth.

Net loans receivable (excluding loans held for sale) decreased $4.0 million, or 2.1%, to $189.0 million at June 30, 2016 from $193.0 million at December 31, 2015. The decrease in loans was primarily due to decreases of $2.7 million in agricultural business loans, reflecting paydowns on lines of credit, and $1.4 million in residential real estate loans.

At June 30, 2016 and December 31, 2015, goodwill totaled $2.7 million. At these dates, our goodwill was not impaired.

Total deposits increased $15.0 million, or 6.3%, to $254.3 million at June 30, 2016 from $239.3 million at December 31, 2015. The increase was primarily due to a $16.0 million increase in transaction accounts, reflecting an increase of $16.2 million in seasonal public funds. Other borrowings, which consisted of $3.5 million in overnight repurchase agreements at June 30, 2016, decreased $11.6 million, or 76.6%, from December 31, 2015. FHLB advances totaling $8.5 million were paid off during the first quarter of 2016, such that none remained outstanding at June 30, 2016. The repurchase agreements are a cash management service provided to our commercial deposit customers.

Total stockholders’ equity increased $2.3 million, or 5.0%, to $47.8 million at June 30, 2016, compared to $45.5 million at December 31, 2015. The increase in stockholders’ equity was the result of $1.6 million in net income and an $879,000 increase in accumulated other comprehensive income, partially offset by the payment of $330,000 in cash dividends. Accumulated other comprehensive income increased primarily due to an increase in unrealized gains, net of tax, on available-for-sale securities reflecting changes in market prices for securities in our portfolio due to a decrease in market interest rates. Accumulated other comprehensive income does not include changes in the fair value of other financial instruments included in the condensed consolidated balance sheet.

Results of Operations

Comparison of Operating Results for the Three Months Ended June 30, 2016 and 2015

General: Net income for the three months ended June 30, 2016 was $766,000, or $0.43 per common share, basic and diluted, compared to net income of $836,000, or $0.47 per common share, basic and diluted, for the three months ended June 30, 2015. The $70,000 decrease in net income during the second quarter of 2016, as compared to the second quarter of 2015, reflected a decrease of $57,000 in non-interest income and an increase of $103,000 in non-interest expense, partially offset by an increase of $36,000 in net interest income and decreases of $5,000 in provision for loan losses and $49,000 in income taxes.

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Interest Income: Total interest income for the three months ended June 30, 2016 decreased $10,000, or 0.3%, compared to the same period of 2015. The decrease in interest income reflected decreases of $43,000 in interest income on loans and $17,000 in interest income on mortgage-backed securities, partially offset by increases of $44,000 in interest income on investment securities and $6,000 in interest income on other interest-earning assets.

Interest income on loans decreased $43,000 to $2.3 million during the second quarter of 2016, as compared to the second quarter of 2015, primarily due to a decrease in the average yield of loans. The average yield decreased 21 basis points to 4.76% during the second quarter of 2016, compared to 4.97% during the second quarter of 2015, due to the continuing low interest rate environment. The average balance of the loan portfolio increased $5.0 million to $193.7 million during the second quarter of 2016, as compared to the second quarter of 2015. The increase in the average balance of the loan portfolio reflected increases in the average balance of agricultural business loans and residential real estate loans due to an increase in new loan originations.

Interest income on investment securities increased $44,000 to $438,000 during the second quarter of 2016 compared to the second quarter of 2015. The increase reflected a $7.5 million increase in the average balance of the investment securities portfolio to $61.7 million during the second quarter of 2016, compared to $54.2 million during the second quarter of 2015. The increase in the average balance of investment securities reflected the investment of proceeds from deposit growth during this same time period. The average yield of investment securities decreased 7 basis points to 2.83% during the second quarter of 2016 from 2.90% during the second quarter of 2015, due to the continuing low interest rate environment. The majority of our investment portfolio consists of municipal bonds, which are exempt from federal taxation, resulting in a higher tax-equivalent yield.

Interest income on mortgage-backed securities decreased $17,000 to $97,000 during the second quarter of 2016, compared to the second quarter of 2015. The decrease reflected an $11.6 million decrease in the average balance of mortgage-backed securities to $21.2 million during the second quarter of 2016, compared to $32.8 million during the second quarter of 2015. The decrease in the average balance of mortgage-backed securities reflected the use of sales and payment proceeds to fund new loan originations and the purchase of investment securities during this same time period. The average yield of mortgage-backed securities increased 44 basis points to 1.83% for the second quarter of 2016, compared to 1.39% for the second quarter of 2015. The average yield benefited from lower premium amortization resulting from slower national prepayment speeds on mortgage-backed securities.

Interest income on other interest-earning assets, consisting of interest-earning demand and time deposit accounts and federal funds sold, increased $6,000 to $13,000 during the second quarter of 2016, compared to the second quarter of 2015. The average yield on other interest-earning assets increased to 0.72% during the second quarter of 2016 from 0.41% during the second quarter of 2015. The average balance of these accounts increased to $7.3 million for the three months ended June 30, 2016 compared to $6.8 million for the three months ended June 30, 2015. The increase in the average yield and average balance reflected an increase in the average balance of higher-yielding time deposit accounts during this same time frame.

Interest Expense: Total interest expense decreased $46,000, or 15.7%, to $247,000 during the three months ended June 30, 2016 compared to $293,000 during the three months ended June 30, 2015. The lower interest expense reflected a $44,000 decrease in the cost of deposits.

Interest expense on deposits decreased $44,000 to $244,000 during the second quarter of 2016 compared to $288,000 during the second quarter of 2015. The decrease in interest expense on deposits was primarily due to a decrease in the average rate paid on our deposits during the second quarter of 2016. The average rate paid on deposits decreased 10 basis points to 0.45% during the second quarter of 2016 from 0.55% during the second quarter of 2015. The decrease reflected the low rate environment, as well as a change in the composition of our deposits to lower-cost transaction accounts from higher-cost time deposits. The average balance of deposits increased $5.6 million to $216.6 million during the second quarter of 2016, compared to $211.0 million during the second quarter of 2015. The increase reflected a $17.0 million increase in the average balance of transaction accounts, partially offset by an $11.4 million decrease in the average balance of time deposit accounts.

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Interest paid on borrowed funds, which consisted of overnight repurchase agreements and FHLB advances, decreased $2,000 to $3,000 during the second quarter of 2016, compared to the same period of 2015. The average balance of borrowed funds decreased $5.7 million to $3.8 million during the second quarter of 2016 compared to $9.5 million during the second quarter of 2015, reflecting the use of overnight FHLB advances during 2015. The average rate paid on borrowed funds increased to 0.32% during the second quarter of 2016 compared to 0.21% during the second quarter of 2015.

Net Interest Income. As a result of the changes in interest income and interest expense noted above, net interest income increased by $36,000, or 1.4%, to $2.6 million during the three months ended June 30, 2016, compared to the three months ended June 30, 2015. Our net interest margin increased to 3.67% during the second quarter of 2016 from 3.64% during the second quarter of 2015. Our interest rate spread increased to 3.57% during the second quarter of 2016 from 3.52% during the second quarter of 2015. Our ratio of interest earning assets to interest bearing liabilities was 1.29x and 1.28x during the three months ended June 30, 2016 and June 30, 2015, 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 inherent losses in the loan portfolio, in accordance with accounting principles generally accepted in the United States of America.

The provision for loan losses decreased $5,000 to $30,000 during the second quarter of 2016, from $35,000 during the second quarter of 2015 due to decreases in net charge-offs, nonperforming assets, and delinquent loans. Net charge-offs decreased to $6,000 during the second quarter of 2016, compared to $83,000 during the second quarter of 2015.

The allowance for loan losses increased $39,000 to $3.0 million at June 30, 2016 from December 31, 2015. Loans delinquent 30 days or more decreased to $1.8 million, or 0.92% of total loans, as of June 30, 2016, from $2.2 million, or 1.11% of total loans, as of December 31, 2015. Loans delinquent 30 days or more totaled $2.0 million, or 1.08% of total loans at June 30, 2015.

Provisions for loan losses have been 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 credit. This review also considered the local economy and the level of bankruptcies and foreclosures in our market area. The following table sets forth information regarding nonperforming assets at the dates indicated.

43

	June 30, 2016			December 31, 2015
Nonaccrual loans:
One-to-four family residential	$	555,223		$	911,283
Commercial real estate		794,867			840,449
Commercial business		4,753			9,314
Home equity		81,182			118,503
Consumer		168,287			141,604
Total	$	1,604,312		$	2,021,153
Accruing loans delinquent more than 90 days:
Total	$	-		$	-
Foreclosed assets:
One-to-four family residential		220,000			217,101
Commercial real estate		-			113,880
Total	$	220,000		$	330,981
Total nonperforming assets	$	1,824,312		$	2,352,134
Total nonperforming loans as a percentage of total loans		0.84	%		1.03	%
Total nonperforming assets as a percentage of total assets		0.58	%		0.76	%

Nonperforming assets decreased $528,000 to $1.8 million, or 0.58% of total assets, as of June 30, 2016, compared to $2.4 million, or 0.76% of total assets, as of December 31, 2015. The decrease in nonperforming assets was due to decreases of $417,000 in nonperforming loans and $111,000 in foreclosed assets.

The following table shows the aggregate principal amount of potential problem credits on the Company’s watch list at June 30, 2016 and December 31, 2015. All nonaccrual loans are automatically placed on the watch list. The $912,000 decrease in Special Mention credits during the first half of 2016 reflected the $1.2 million payoff of an agricultural borrower during the second quarter of 2016. The $578,000 decrease in Substandard credits during this same time frame reflected the financial improvement of a $350,000 commercial borrower who was removed from the watch list during the second quarter of 2016.

	June 30, 2016		December 31, 2015
Special Mention credits	$	2,868,760	$	3,781,151
Substandard credits		4,442,177		5,020,297
Total watch list credits	$	7,310,937	$	8,801,448

Non-Interest Income: Non-interest income decreased $57,000, or 5.3%, to $1.0 million during the three months ended June 30, 2016 from $1.1 million for the same period in 2015. The decrease in non-interest income resulted primarily from a decrease of $114,000 in commission income, partially offset by an increase of $28,000 in gains on the sales of available-for-sale securities. Commission income, while benefitting from account growth, was impacted by a decrease in annuity sales. The increase in gains on the sales of securities reflected an increase to $7.8 million in securities sold during the second quarter of 2016, compared to $5.2 million during the same period of 2015. Securities sales during 2016 and 2015 were primarily made to reduce the volatility to interest rate changes and eliminate faster paying, low-yielding mortgage-backed securities.

44

Non-Interest Expense: Total non-interest expense increased $103,000, or 4.2%, to $2.6 million for the three months ended June 30, 2016, compared to the same period of 2015. The increase was primarily due to an increase of $57,000 in salaries and employee benefit expense and $24,000 in other non-interest expense. The increase in salaries and benefits expense reflected normal cost and benefit accrual increases. The increase in other non-interest expense includes increases in advertising expense and real estate owned expense.

Income Taxes: The provision for income taxes decreased $49,000 to $278,000 during the second quarter of 2016 compared to the same period of 2015. The decrease in the income tax provision reflected a decrease in taxable income. The effective tax rate was 26.6% and 28.1% during the three months ended June 30, 2016 and 2015, respectively.

Comparison of Operating Results for the Six Months Ended June 30, 2016 and 2015

General: Net income during the six months ended June 30, 2016 was $1,593,000, or $0.90 per common share, basic, and $0.89 per common share, diluted, compared to net income of $1,623,000, or $0.91 per common share, basic and diluted, during the six months ended June 30, 2015. The $30,000 decrease in net income reflected a decrease of $83,000 in non-interest income and an increase of $92,000 in non-interest expense, partially offset by an increase of $109,000 in net interest income and decreases of $5,000 in the provision for loan losses and $31,000 in income taxes.

Interest Income: Total interest income during the six months ended June 30, 2016 decreased $2,000 to $5.8 million compared to the same period of 2015. The decrease in interest income reflected decreases of $57,000 in interest income on loans and $59,000 in interest income on mortgage-backed securities, partially offset by increases of $99,000 in interest income on investment securities and $15,000 in interest income on other interest-earnings assets.

Interest income on loans decreased $57,000 to $4.6 million during the six months ended June 30, 2016, compared to the same period of 2015. The decrease in interest income on loans was primarily due to a decrease in the average yield of loans. The average yield on loans decreased 21 basis points to 4.80% during the first six months of 2016 from 5.01% during the first six months of 2015. The decrease in the average yield on loans reflected lower market rates of interest and the competitive lending environment. The average balance of the loan portfolio increased $5.8 million to $192.9 million during the first six months of 2016 from $187.1 million during the first six months of 2015. The increase in the average balance of the loan portfolio reflected increases in the average balance of agricultural business loans and residential real estate loans. While actual loan balances decreased during the first six months of 2016, the balances were elevated during the first half of the year resulting in higher average balances.

Interest income on investment securities increased $99,000 to $874,000 during the six months ended June 30, 2016 from $775,000 for the same period of 2015. The increase in interest income reflected an $8.3 million increase in the average balance of the investment portfolio to $61.3 million during the first six months of 2016. The increase in the average balance of investment securities reflected the investment of proceeds from deposit growth. The average yield of investment securities decreased to 2.85% during the first six months of 2016 from 2.92% for the first six months of 2015. The majority of our investment portfolio consists of municipal bonds, which are exempt from federal taxation, resulting in a higher tax-equivalent yield.

Interest income on mortgage-backed securities decreased $59,000 to $227,000 during the six months ended June 30, 2016, compared to $286,000 for the same period of 2015. The decrease reflected a $13.8 million decrease in the average balance of mortgage-backed securities to $21.2 million during the first half of 2016, reflecting the use of sales and payment proceeds for the origination of new loans and the purchase of investment securities. The average yield of mortgage-backed securities increased 51 basis points to 2.14% for the first half of 2016, compared to 1.63% for the first half of 2015. The average yield of mortgage-backed securities 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 $155,000 to $122,000 during the first six months of 2016, compared to $277,000 during the first six months of 2015. The decrease in premium amortization also reflected the decrease in the average volume of mortgage-backed securities.

45

Interest income on other interest-earning assets, consisting of interest-earning demand and time deposit accounts and federal funds sold, increased $15,000 to $27,000 during the first half of 2016, compared to $12,000 for the first half of 2015. The average yield on other interest-earning assets increased 59 basis points to 0.87% during the first half of 2016 from 0.28% during the first half of 2015. The increase in the average yield reflected an increase in the average balance of higher-yielding time deposit accounts during this same time frame. The average balance of other interest-earning assets decreased $2.2 million to $6.3 million during the six months ended June 30, 2016 compared to $8.5 million for the six months ended June 30, 2015.

Interest Expense: Total interest expense decreased $111,000, or 18.3%, to $496,000 during the six months ended June 30, 2016 compared to $607,000 during the six months ended June 30, 2015. The lower interest expense reflected a $111,000 decrease in the cost of deposits.

Interest expense on deposits decreased $111,000 to $486,000 for the six months ended June 30, 2016 compared to $597,000 for the six months ended June 30, 2015. The decrease in interest expense on deposits was primarily due to a decrease of 10 basis points in the average rate paid on deposits to 0.46% during the first half of 2016 from 0.56% during the first half of 2015, as a result of the low interest rate environment. The decrease in the average cost of deposits has been impacted by a change in the composition of our deposits to lower-cost transaction accounts from higher-cost time deposits. The average balance of deposits increased to $212.6 million for the first half of 2016 compared to $212.3 million for the first half of 2015. The increase reflected a $13.1 million increase in the average balance of transaction accounts, partially offset by a $12.8 million decrease in the average balance of time deposit accounts.

Interest paid on borrowed funds, which consisted of overnight repurchase agreements and FHLB advances, equaled $10,000 during the first six months of 2016 and 2015. The average rate paid on borrowed funds increased to 0.31% during the first half of 2016 compared to 0.22% during the first half of 2015. The average balance of borrowed funds decreased $2.8 million to $6.4 million during the first half of 2016, compared to $9.2 million for the first half of 2015.

Net Interest Income. As a result of the changes in interest income and interest expense noted above, net interest income increased by $109,000, or 2.1%, to $5.3 million for the six months ended June 30, 2016 from $5.2 million for the six months ended June 30, 2015. Our net interest margin increased to 3.74% for the first half of 2016 from 3.63% for the first half of 2015. Our interest rate spread increased to 3.64% during the first half of 2016 from 3.51% during the first half of 2015.

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 inherent losses in the loan portfolio, in accordance with accounting principles generally accepted in the United States of America. The following table shows the activity in the allowance for loan losses for the six months ended June 30, 2016 and 2015.

46

	Six Months Ended
	June 30, 2016		June 30, 2015
Balance at beginning of period	$	2,919,594	$	2,956,264
Charge-offs:
One-to-four family residential		26,879		105,118
Commercial real estate		-		27,464
Consumer		11,899		13,252
Total		38,778		145,834
Recoveries:
One-to-four family residential		9,286		19,747
Commercial real estate		3,000		15,091
Commercial business		116		111
Home equity		1,050		9,538
Consumer		4,297		3,129
Total		17,749		47,616
Net loan charge-offs		21,029		98,218
Additions charged to operations		60,000		65,000
Balance at end of period	$	2,958,565	$	2,923,046

The allowance for loan losses increased $36,000 to $3.0 million at June 30, 2016, from $2.9 million at June 30, 2015. The increase was the result of the provision for loan losses exceeding net charge-offs. The provision decreased $5,000 to $60,000 during the first six months of 2016, compared to $65,000 during the first six months of 2015, due to decreased charge-offs and nonperforming assets. Net charge-offs decreased $77,000 to $21,000 during the first half of 2016, compared to $98,000 during the first half of 2015.

Non-Interest Income: Non-interest income decreased $83,000, or 3.8%, to $2.1 million for the six months ended June 30, 2016, compared to $2.2 million for the six months ended June 30, 2015. The decrease in non-interest income resulted primarily from decreases of $74,000 in commission income and $12,000 in net income from mortgage banking operations. The decrease in commission income reflected a decrease in annuity sales. Net income on mortgage banking operations decreased due to a lower volume of loan sales in the first half of 2016, as we sold $7.0 million of loans to the secondary market during the first half of 2016, compared to $8.8 million during the same period of 2015. The lower volume of sales reflected a decreased volume of mortgage originations, which are affected by changes in market interest rates.

Non-Interest Expense: Total non-interest expense increased $92,000, or 1.8%, to $5.1 million for the six months ended June 30, 2016 compared to the same period of 2015. The increase in non-interest expense consisted primarily of an increase of $121,000 in salaries and benefits expense, partially offset by a $50,000 decrease in real estate owned expense. The increase in salaries and benefits expense reflected normal cost and benefit accrual increases. The decrease in real estate owned expense reflected $60,000 in gains on the sales of properties during the first half of 2016.

Income Taxes: The provision for income taxes decreased $31,000 to $587,000 during the first six months of 2016 compared to the same period of 2015. The decrease in the income tax provision reflected a lower level of taxable income. The effective tax rate was 26.9% and 27.6% during the six months ended June 30, 2016 and 2015, respectively.

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Liquidity and Capital Resources

The Company’s most liquid assets are cash and cash equivalents. The levels of these assets are dependent on the Company’s operating, financing, and investing activities. At June 30, 2016 and December 31, 2015, cash and cash equivalents totaled $9.6 million and $4.1 million, respectively. The Company’s primary sources of funds include principal and interest repayments on loans (both scheduled payments and prepayments), maturities of investment securities and principal repayments from mortgage-backed securities (both scheduled payments and prepayments). During the six months ended June 30, 2016, the most significant sources of funds have been sales of investment and mortgage-backed securities, deposit growth, and principal repayments on loans and mortgage-backed securities. These funds have been used primarily for purchases of U.S. Agency, municipal and mortgage-backed securities and reduce other borrowings.

While scheduled loan repayments and proceeds from maturing investment securities and principal repayments on mortgage-backed securities are relatively predictable, deposit flows and prepayments are more influenced by interest rates, general and local economic conditions, and competition. The Company attempts to price its deposits to meet asset-liability objectives and stay competitive with local market conditions.

Liquidity management is both a short- and long-term responsibility of management. The Company adjusts its investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) projected purchases of investment and mortgage-backed securities, (iii) expected deposit flows, (iv) yields available on interest-earning deposits, and (v) liquidity of its asset/liability management program. Excess liquidity is generally invested in interest-earning overnight deposits and other short-term U.S. agency obligations. If the Company requires funds beyond its ability to generate them internally, it has the ability to borrow funds from the FHLB. The Company may borrow from the FHLB under a blanket agreement which assigns all investments in FHLB 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 a maximum of 30% of the Company’s total assets or twenty times the balance of FHLB stock held by the Company. At June 30, 2016, the Company had no outstanding FHLB advances and approximately $87.4 million available to it under the above-mentioned borrowing arrangement.

The Company maintains minimum levels of liquid assets as established by the Board of Directors. The Company’s liquidity ratios at June 30, 2016 and December 31, 2015 were 31.2% and 32.0%, respectively. This ratio represents the volume of short-term liquid assets as a percentage of net deposits and borrowings due within one year.

The Company must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments. The Company anticipates that it will have sufficient funds available to meet its current commitments principally through the use of current liquid assets and through its borrowing capacity discussed above. The following table summarizes these commitments at June 30, 2016 and December 31, 2015.

	June 30, 2016		December 31, 2015
Commitments to fund loans	$	39,843,842	$	36,996,683
Standby letters of credit		110,000		110,000

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, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and Tier 1 capital (as defined) to average assets (as defined). In addition, the Bank is subject to the new capital conservation buffer, which will be phased in beginning in the first quarter of 2016 at 0.625% of risk-weighted assets. The capital conservation buffer will continue to increase 0.625% each year until fully phased in at 2.50% of risk-weighted assets beginning in the first quarter of 2019. Management believes that at June 30, 2016, the Bank met all its capital adequacy requirements and is well capitalized.

48

Under Illinois law, Illinois-chartered savings banks are required to maintain a minimum core capital to total assets ratio of 3%. The Illinois Commissioner of Savings and Residential Finance (the “Commissioner”) is authorized to require a savings bank to maintain a higher minimum capital level if the Commissioner determines that the savings bank’s financial condition or history, management or earnings prospects are not adequate. If a savings bank’s core capital ratio falls below the required level, the Commissioner may direct the savings bank to adhere to a specific written plan established by the Commissioner 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 June 30, 2016, the Bank’s core capital ratio was 13.52% of total average assets, which substantially exceeded the required amount.

The Bank is also required to maintain regulatory capital requirements imposed by the Federal Deposit Insurance Corporation. At June 30, 2016, minimum requirements and the Bank's actual ratios are as follows:

	June 30, 2016			Minimum			Minimum Required
	Actual			Required			With Capital Buffer
Tier 1 Capital to Average Assets		13.52	%		4.00	%		4.000	%
Common Equity Tier 1		18.91	%		4.50	%		5.125	%
Tier 1 Capital to Risk-Weighted Assets		18.91	%		6.00	%		6.625	%
Total Capital to Risk-Weighted Assets		20.16	%		8.00	%		8.625	%

Effect of Inflation and Changing Prices

The condensed consolidated financial statements and related financial data presented herein have been prepared in accordance with GAAP which require the measurement of financial position and operating results in terms of historical dollars, without considering the change in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

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The following table sets forth the average balances and interest rates (costs) on the Company’s assets and liabilities during the periods presented.

Consolidated Average Balance Sheet and Interest Rates
(Dollars in thousands)
	Three Months Ended June 30,
	2016							2015
	Average							Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earnings assets:
Loans	$	193,655	$	2,302		4.76	%	$	188,611	$	2,345		4.97	%
Investment securities		61,745		438		2.83	%		54,208		394		2.90	%
Mortgage-backed securities		21,231		97		1.83	%		32,814		114		1.39	%
Other		7,265		13		0.72	%		6,756		7		0.41	%
Total interest-earning assets		283,896		2,850		4.02	%		282,389		2,860		4.05	%
Non-interest earnings assets		19,784							20,178
Total assets	$	303,680						$	302,567
Interest-bearing liabilities:
Interest-bearing checking	$	52,383	$	35		0.27	%	$	38,989	$	12		0.13	%
Savings accounts		44,253		21		0.19	%		40,512		20		0.19	%
Certificates of deposit		77,185		160		0.83	%		88,595		228		1.03	%
Money market savings		35,267		25		0.29	%		35,228		25		0.29	%
Money market deposits		7,513		3		0.15	%		7,725		3		0.15	%
Total interest-bearing deposits		216,601		244		0.45	%		211,049		288		0.55	%
Federal Home Loan Bank advances		24		-		0.18	%		5,000		4		0.33	%
Short-term borrowings		3,778		3		0.32	%		4,519		1		0.07	%
Total borrowings		3,802		3		0.32	%		9,519		5		0.21	%
Total interest-bearing liabilities		220,403		247		0.45	%		220,568		293		0.53	%
Non-interest bearing liabilities		36,403							35,984
Stockholders' equity		46,874							46,015
Total liabilities/stockholders' equity	$	303,680						$	302,567
Net interest income			$	2,603						$	2,567
Interest rate spread (average yield earned minus average rate paid)						3.57	%						3.52	%
Net interest margin (net interest income divided by average interest-earning assets)						3.67	%						3.64	%

50

The following table sets forth the changes in rate and changes in volume of the Company’s interest earning assets and liabilities for the comparative three month periods.

Analysis of Volume and Rate Changes
(In thousands)
Three Months Ended June 30,
	2016 Compared to 2015
	Increase(Decrease) Due to
	Rate			Volume			Net
Interest-earnings assets:
Loans	$	(104	)	$	61		$	(43	)
Investment securities		(10	)		54			44
Mortgage-backed securities		30			(47	)		(17	)
Other		5			1			6
Total net change in income on interest-earning assets		(79	)		69			(10	)
Interest-bearing liabilities:
Interest-bearing checking		17			5			22
Savings accounts		-			2			2
Certificates of deposit		(41	)		(27	)		(68	)
Money market savings		-			-			-
Money market deposits		-			-			-
Total interest-bearing deposits		(24	)		(20	)		(44	)
Federal Home Loan Bank advances		(1	)		(3	)		(4	)
Short-term borrowings		2			-			2
Total borrowings		1			(3	)		(2	)
Total net change in expense on interest-bearing liabilities		(23	)		(23	)		(46	)
Net change in net interest income	$	(56	)	$	92		$	36

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The following table sets forth the average balances and interest rates (costs) on the Company’s assets and liabilities during the periods presented.

Consolidated Average Balance Sheet and Interest Rates
(Dollars in thousands)
	Six Months Ended June 30,
	2016							2015
	Average							Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earnings assets:
Loans	$	192,863	$	4,631		4.80	%	$	187,047	$	4,688		5.01	%
Investment securities		61,299		874		2.85	%		53,007		775		2.92	%
Mortgage-backed securities		21,213		227		2.14	%		35,045		286		1.63	%
Other		6,318		27		0.87	%		8,479		12		0.28	%
Total interest-earning assets		281,693		5,759		4.09	%		283,578		5,761		4.06	%
Non-interest earnings assets		20,110							20,155
Total assets	$	301,803						$	303,733
Interest-bearing liabilities:
Interest-bearing checking	$	49,040	$	62		0.25	%	$	39,033	$	25		0.13	%
Savings accounts		43,200		42		0.19	%		39,729		40		0.20	%
Certificates of deposit		77,769		326		0.84	%		90,573		476		1.05	%
Money market savings		35,225		51		0.29	%		35,280		50		0.29	%
Money market deposits		7,393		5		0.15	%		7,682		6		0.14	%
Total interest-bearing deposits		212,627		486		0.46	%		212,297		597		0.56	%
Federal Home Loan Bank advances		2,484		4		0.29	%		5,000		8		0.33	%
Short-term borrowings		3,914		6		0.33	%		4,214		2		0.09	%
Total borrowings		6,398		10		0.31	%		9,214		10		0.22	%
Total interest-bearing liabilities		219,025		496		0.45	%		221,511		607		0.55	%
Non-interest bearing liabilities		36,247							36,435
Stockholders' equity		46,531							45,787
Total liabilities/stockholders' equity	$	301,803						$	303,733
Net interest income			$	5,263						$	5,154
Interest rate spread (average yield earned minus average rate paid)						3.64	%						3.51	%
Net interest margin (net interest income divided by average interest-earning assets)						3.74	%						3.63	%

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The following table sets forth the changes in rate and changes in volume of the Company’s interest earning assets and liabilities for the comparative six month periods.

Analysis of Volume and Rate Changes
(In thousands)
Six Months Ended June 30,
	2016 Compared to 2015
	Increase(Decrease) Due to
	Rate			Volume			Net
Interest-earnings assets:
Loans	$	(200	)	$	143		$	(57	)
Investment securities		(20	)		119			99
Mortgage-backed securities		74			(133	)		(59	)
Other		19			(4	)		15
Total net change in income on interest-earning assets		(127	)		125			(2	)
Interest-bearing liabilities:
Interest-bearing checking		29			8			37
Savings accounts		(1	)		3			2
Certificates of deposit		(88	)		(62	)		(150	)
Money market savings		-			-			-
Money market deposits		-			-			-
Total interest-bearing deposits		(60	)		(51	)		(111	)
Federal Home Loan Bank advances		(1	)		(4	)		(5	)
Short-term borrowings		5			-			5
Total borrowings		4			(4	)		-
Total net change in expense on interest-bearing liabilities		(56	)		(55	)		(111	)
Net change in net interest income	$	(71	)	$	180		$	109

53

JACKSONVILLE BANCORP, INC.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s policy in recent years has been to reduce its interest rate risk by better matching the maturities of its interest rate sensitive assets and liabilities, selling its long-term fixed-rate residential mortgage loans with terms of 15 years or more to the secondary market, originating adjustable rate loans, and balloon loans with terms ranging from three to five years 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 loans. Our portfolio of mortgage-backed securities also provides monthly cash flows. The remaining investment portfolio has been structured to better match the maturities and rates of its interest-bearing liabilities. With respect to liabilities, the Company has attempted to increase its 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 the Company’s asset and liability policies. The ALCO meets quarterly to review interest rate risk and trends, as well as liquidity and capital ratio requirements.

The Company uses a comprehensive asset/liability software package provided by a third-party vendor to perform interest rate sensitivity analysis for all product categories. The primary focus of the Company’s analysis is on 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 the Company’s interest rate 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.

The following table shows projected results at June 30, 2016 and December 31, 2015 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
	(Dollars in thousands)
	June 30, 2016					December 31, 2015					ALCO
Rate Shock:		$ Change		% Change			$ Change		% Change			Benchmark
+ 300 basis points		(176	)	-1.58	%		(344	)	-3.00	%		> (20.00)	%
+ 200 basis points		(129	)	-1.16	%		(242	)	-2.10	%		> (12.50)	%
+ 100 basis points		(56	)	-0.51	%		(119	)	-1.04	%		> (12.50)	%
- 100 basis points		(145	)	-1.30	%		(88	)	-0.76	%		> (20.00)	%

The table above indicates that as of June 30, 2016, in the event of a 200 basis point increase in interest rates, we would experience a 1.16% decrease in net interest income. In the event of a 100 basis point decrease in interest rates, we would experience a 1.30% decrease in net interest income.

The foregoing computations are based upon numerous assumptions, including relative levels of market interest rates, prepayments, and deposit mix. The computed estimates should not be relied upon as a projection of actual results. Despite the limitations on precision inherent in these computations, management believes that the information provided is reasonably indicative of the effect of changes in interest rate levels on the net earning capacity of the Company’s current mix of interest earning assets and interest bearing liabilities. Management continues to use the results of these computations, along with the results of its computer model projections, in order to maximize current earnings while positioning the Company to minimize the effect of a prolonged shift in interest rates that would adversely affect future results of operations.

54

At the present time, the most significant market risk affecting the Company is interest rate risk. Other market risks such as foreign currency exchange risk and commodity price risk do not occur in the normal business of the Company. The Company also is not currently using trading activities or derivative instruments to control interest rate risk.

55

JACKSONVILLE BANCORP, INC.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13(a)-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13(a)-15(e) that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

56

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

At June 30, 2016, the Company is not involved in any pending legal proceedings other than non-material legal proceedings undertaken in the normal course of business.

Item 1.A. Risk Factors

There have been no material changes in the Company’s risk factors from those disclosed in its annual report on Form 10-K, other than as noted below:

A new accounting standard will likely require us to increase our allowance for loan losses and may have a material adverse effect on our financial condition and results of operations.

The Financial Accounting Standards Board has adopted a new accounting standard that will be effective for the Company and the Bank for our first fiscal year after December 15, 2019.  This standard, referred to as Current Expected Credit Loss, or CECL, will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.  This will change the current method of providing allowances for loan losses that are probable, which would likely require us to increase our allowance for loan losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan losses.  Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our financial condition and results of operations.

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

The following table sets forth the issuer purchases of equity securities during the prior three months.

	Total number of shares purchased	Average price paid per share	Total number of shares purchased under publicly announced plan	Maximum number of shares that may be purchased under the repurchase plan (1)
April 1 – April 30	-	-	-	18,758
May 1 – May 31	-	-	-	18,758
June 1 – June 30	-	-	-	18,758

(1) On October 16, 2013, the Company announced the adoption of a stock repurchase program under which the Company can repurchase up to 92,018 shares of its common stock, or approximately 5% of the then current outstanding shares. The program provides 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 repurchase of 73,260 shares permitted under the program. The program will continue until it is completed or terminated by the Company’s Board of Directors.

Item 3. Defaults Upon Senior Securities

None.

57

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1 - Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)

31.2 - Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)

32.1 - Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 INS - XBRL Instance Document

101 SCH - XBRL Taxonomy Extension Schema Document

101 CAL - XBRL Taxonomy Calculation Linkbase Document

101 DEF - XBRL Taxonomy Extension Definition Linkbase Document

101 LAB - XBRL Taxonomy Label Linkbase Document

101 PRE - XBRL Taxonomy Presentation Linkbase Document

58

SIGNATURES

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

	JACKSONVILLE BANCORP, INC.
	Registrant
Date:  08/10/2016	/s/ Richard A. Foss
	Richard A. Foss
	President and Chief Executive Officer
	/s/ Diana S. Tone
	Diana S. Tone
	Chief Financial Officer

59

EXHIBITS

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 quarterly report on Form 10-Q of Jacksonville Bancorp, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal controls over financial reporting, or caused such internal controls 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 principle;

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 period covered by this report based on such evaluation; and

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

5. The registrant’s other certifying officer(s) 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 controls over financial reporting.

08/10/2016	/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 quarterly report on Form 10-Q of Jacksonville Bancorp, Inc.;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal controls over financial reporting, or caused such internal controls 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 principle;

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 period covered by this report based on such evaluation; and

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

5. The registrant’s other certifying officer(s) 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 controls over financial reporting.

08/10/16	/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 Quarterly Report of Jacksonville Bancorp, Inc. (“Company”) on Form 10-Q for the period ending June 30, 2016 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.

08/10/16	/s/Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer
08/10/16	/s/Diana S. Tone
Date	Diana S. Tone
	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 01, 2016
Document And Entity Information Abstract
Entity Registrant Name	Jacksonville Bancorp, Inc.
Entity Central Index Key	0001484949
Trading Symbol	jxsb
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock Shares Outstanding		1,798,544
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2016	Dec. 31, 2015
ASSETS
Cash and cash equivalents	$ 9,636,838	$ 4,103,432
Interest-earning time deposits in banks	2,486,000	2,724,000
Investment securities - available for sale	67,620,547	64,294,937
Mortgage-backed securities - available for sale	24,521,854	23,178,395
Federal Home Loan Bank stock	363,800	1,113,800
Other investment securities	59,134	62,223
Loans held for sale - net	80,481	539,000
Loans receivable - net of allowance for loan losses of $2,958,565 and $2,919,594 as of June 30, 2016 and December 31, 2015	188,950,575	193,039,879
Premises and equipment - net	4,569,997	4,728,157
Cash surrender value of life insurance	7,182,518	7,093,640
Accrued interest receivable	1,982,561	1,715,676
Goodwill	2,726,567	2,726,567
Capitalized mortgage servicing rights, net of valuation allowance of $41,247 and $47,354 as of June 30, 2016 and December 31, 2015	587,762	597,713
Real estate owned	220,000	330,981
Deferred income taxes	1,273,549	1,583,067
Other assets	725,860	811,007
Total Assets	312,988,043	308,642,474
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	254,261,041	239,281,930
Other borrowings	3,535,881	15,131,710
Advance payments by borrowers for taxes and insurance	1,172,034	990,917
Accrued interest payable	104,919	118,335
Deferred compensation payable	4,591,510	4,492,594
Income taxes payable	29,515	49,291
Dividends payable	179,831	1,934,834
Other liabilities	1,272,010	1,076,363
Total liabilities	265,146,741	263,075,974
Commitments and contingencies
Preferred stock, $0.01 par value - authorized 10,000,000 shares; none issued and outstanding
Common stock, $0.01 par value - authorized 25,000,000 shares; issued 1,798,314 shares as of June 30, 2016 and 1,791,513 shares as of December 31, 2015	17,983	17,915
Additional paid-in-capital	13,786,098	13,664,914
Retained earnings	32,567,999	31,305,040
Less: Unallocated ESOP shares	(199,790)	(211,710)
Accumulated other comprehensive income	1,669,012	790,341
Total stockholders' equity	47,841,302	45,566,500
Total Liabilities and Stockholders' Equity	$ 312,988,043	$ 308,642,474

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Allowance for loan losses of loans receivable (in dollars)	$ 2,958,565	$ 2,919,594
Valuation allowance on mortgage servicing rights (in dollars)	$ 41,247	$ 47,354
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	0	0
Preferred stock, shares outstanding	0	0
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	1,798,314	1,791,513

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
INTEREST INCOME:
Loans	$ 2,302,183	$ 2,345,009	$ 4,630,961	$ 4,688,363
Investment securities	437,575	393,613	873,405	774,436
Mortgage-backed securities	96,881	114,006	227,184	286,373
Other	13,146	6,951	27,370	11,899
Total interest income	2,849,785	2,859,579	5,758,920	5,761,071
INTEREST EXPENSE:
Deposits	244,181	288,148	486,032	597,075
Other borrowings	3,003	4,993	10,062	10,116
Total interest expense	247,184	293,141	496,094	607,191
NET INTEREST INCOME	2,602,601	2,566,438	5,262,826	5,153,880
PROVISION FOR LOAN LOSSES	30,000	35,000	60,000	65,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	2,572,601	2,531,438	5,202,826	5,088,880
NON-INTEREST INCOME:
Fiduciary activities	82,670	68,813	162,674	147,439
Commission income	286,240	400,676	634,806	708,789
Service charges on deposit accounts	173,212	169,294	340,399	325,730
Mortgage banking operations, net	58,002	52,588	83,274	95,528
Net realized gains on sales of available-for-sale securities	106,537	78,860	208,098	212,076
Loan servicing fees	83,589	85,481	168,115	172,961
ATM and bank card interchange income	174,758	162,889	335,403	315,628
Other	69,662	73,934	140,976	178,314
Total non-interest income	1,034,670	1,092,535	2,073,745	2,156,465
NON-INTEREST EXPENSE:
Salaries and employee benefits	1,680,543	1,623,598	3,382,683	3,261,840
Occupancy and equipment	250,041	243,920	506,982	499,314
Data processing and telecommunications	146,746	141,718	283,359	289,365
Professional	50,769	50,873	106,605	96,610
Postage and office supplies	58,689	59,333	123,325	114,443
ATM and bank card expense	102,246	89,560	189,895	174,617
Other	274,999	251,429	503,745	568,503
Total non-interest expense	2,564,033	2,460,431	5,096,594	5,004,692
INCOME BEFORE INCOME TAXES	1,043,238	1,163,542	2,179,977	2,240,653
INCOME TAXES	277,732	327,139	587,093	617,993
NET INCOME	$ 765,506	$ 836,403	$ 1,592,884	$ 1,622,660
NET INCOME PER COMMON SHARE - BASIC (in dollars per share)	$ 0.43	$ 0.47	$ 0.90	$ 0.91
NET INCOME PER COMMON SHARE - DILUTED (in dollars per share)	0.43	0.47	0.89	0.91
DIVIDENDS DECLARED PER SHARE (in dollars per share)	$ 0.10	$ 0.08	$ 0.20	$ 0.16

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 765,506	$ 836,403	$ 1,592,884	$ 1,622,660
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available- for-sale securities, net of taxes of $365,437 and $(467,102) for the three months ended June 30, 2016 and 2015, respectively, and $523,401 and $(168,180) for the six months ended June 30, 2016 and 2015, respectively.	709,380	(906,729)	1,016,016	(326,468)
Less: reclassification adjustment for realized gains included in net income, net of taxes of $36,222 and $26,813, for the three months ended June 30, 2016 and 2015, respectively. and $70,753 and $72,106 for the six months ended June 30, 2016 and 2015, respectively.	70,315	52,047	137,345	139,970
Total other comprehensive income (loss)	639,065	(958,776)	878,671	(466,438)
Comprehensive Income (Loss)	$ 1,404,571	$ (122,373)	$ 2,471,555	$ 1,156,222

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Parentheticals) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Taxes on unrealized appreciation (depreciation) on available-for-sale securities	$ 365,437	$ (467,102)	$ 523,401	$ (168,180)
Taxes on reclassification adjustment for realized gains included in net income	$ 36,222	$ 26,813	$ 70,753	$ 72,106

XML

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) - 6 months ended Jun. 30, 2016 - USD ($)	Common Stock	Additional Paid-in Capital	Retained Earnings	Unallocated ESOP Shares	Accumulated Other Comprehensive Income	Total
BALANCE at Dec. 31, 2015	$ 17,915	$ 13,664,914	$ 31,305,040	$ (211,710)	$ 790,341	$ 45,566,500
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income			1,592,884			1,592,884
Other comprehensive income					878,671	878,671
Stock repurchases	(45)	(119,270)				(119,315)
Exercise of stock options	113	173,536				173,649
Tax benefit of non-qualified options		3,696				3,696
Vesting options expense		44,711				44,711
Shares held by ESOP, committed to be released		18,511		11,920		30,431
Dividends ($0.20 per share)			(329,925)			(329,925)
BALANCE at Jun. 30, 2016	$ 17,983	$ 13,786,098	$ 32,567,999	$ (199,790)	$ 1,669,012	$ 47,841,302

XML

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Parentheticals)	6 Months Ended
	Jun. 30, 2016 $ / shares
Statement Of Stockholders Equity [Abstract]
Dividends, per share (in dollars per share)	$ 0.20

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,592,884	$ 1,622,660
Depreciation, amortization and accretion:
Premises and equipment	190,835	192,926
Amortization of investment premiums and discounts, net	249,993	360,551
Accretion of loan discounts	(259)	(259)
Net realized gains on sales of available-for-sale securities	(208,098)	(212,076)
Provision for loan losses	60,000	65,000
Mortgage banking operations, net	(83,274)	(95,528)
Gain on sale of real estate owned	(59,609)	(7,607)
Shares held by ESOP committed to be released	30,431	26,415
Tax benefit related to stock options exercised	3,696	4,138
Stock option compensation expense	44,711	44,711
Changes in income taxes payable	(19,776)	(299,055)
Changes in assets and liabilities	(124,711)	(5,999)
Net cash provided by operations before loan sales	1,676,823	1,695,877
Origination of loans for sale to secondary market	(6,434,650)	(8,652,121)
Proceeds from sales of loans to secondary market	6,984,075	8,754,154
Net cash provided by operating activities	2,226,248	1,797,910
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-earning time deposits	238,000	(1,974,000)
Purchases of investment and mortgage-backed securities	(32,416,045)	(17,594,920)
Maturity or call of investment securities available-for-sale	4,600,000	1,000,000
Sale of investment securities available-for-sale	21,630,529	19,675,553
Sale of Federal Home Loan Bank stock	750,000
Principal payments on mortgage-backed and investment securities	2,808,961	3,173,649
Proceeds from sale of real estate owned	149,202	47,085
Net change in loans	4,045,382	(377,948)
Additions to premises and equipment	(32,675)	(59,099)
Net cash provided by investing activities	1,773,354	3,890,320
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits	14,979,111	(7,417,691)
Net change in other borrowings	(11,595,830)	727,058
Increase in advance payments by borrowers for taxes and insurance	181,117	66,257
Exercise of stock options	173,649	261,364
Stock repurchases	(119,315)	(624,038)
Dividends paid - common stock	(2,084,928)	(282,803)
Net cash provided by (used in) financing activities	1,533,804	(7,269,853)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	5,533,406	(1,581,623)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	4,103,432	9,611,638
CASH AND CASH EQUIVALENTS, END OF PERIOD	9,636,838	8,030,015
Cash paid during the year for:
Interest on deposits	497,923	619,983
Interest on other borrowings	11,587	10,179
Income taxes paid	750,000	916,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Real estate acquired in settlement of loans	114,400	$ 180,325
Loans to facilitate sales of real estate owned	$ 127,900

XML

FINANCIAL STATEMENTS

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

FINANCIAL STATEMENTS

1. FINANCIAL STATEMENTS

The accompanying interim condensed consolidated financial statements include the accounts of Jacksonville Bancorp, Inc. and its wholly-owned subsidiary, Jacksonville Savings Bank (the “Bank”) and its wholly-owned subsidiary, Financial Resources Group, Inc. (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated.

In the opinion of management, the preceding unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial condition of the Company as of June 30, 2016 and the results of its operations for the three and six month periods ended June 30, 2016 and 2015. The results of operations for the three and six month periods are not necessarily indicative of the results which may be expected for the entire year, or any other interim period. The condensed consolidated balance sheet of the Company as of December 31, 2015 has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 filed as an exhibit to the Company’s Form 10-K filed in March 2016. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP) and to prevailing practices within the industry.

Certain amounts included in the 2015 consolidated statements have been reclassified to conform to the 2016 presentation.

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NEW ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2016

Accounting Changes And Error Corrections [Abstract]

NEW ACCOUNTING PRONOUNCEMENTS

2. NEW ACCOUNTING PRONOUNCEMENTS

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. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which provides a one-year deferral of ASU 2014-09. 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. Early adoption would be permitted, but not before the original public entity effective date.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing agreement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU No. 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company’s current method of accounting for fees paid in a cloud computing arrangement is consistent with the accounting guidance provided by ASU No. 2015-05. Therefore, the adoption of ASU No. 2015-05 did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2019. The Company has not yet determined the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

EARNINGS PER SHARE

3. EARNINGS PER SHARE

Earnings Per Share - Basic earnings per share is determined by dividing net income for the period by the weighted average number of common shares. Diluted earnings per share considers the potential effects of the exercise of the outstanding stock options under the Company’s stock option plans. Average shares outstanding exclude unallocated employee stock ownership plan (ESOP) shares.

The following reflects earnings per share calculations for basic and diluted methods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income available to common  shareholders	$	765,506	$	836,403	$	1,592,884	$	1,622,660
Basic average shares outstanding		1,775,726		1,774,375		1,773,321		1,774,828
Diluted potential common shares:
Stock option equivalents		16,458		14,442		15,044		13,618
Diluted average shares outstanding		1,792,184		1,788,817		1,788,365		1,788,446
Basic earnings per share	$	0.43	$	0.47	$	0.90	$	0.91
Diluted earnings per share	$	0.43	$	0.47	$	0.89	$	0.91

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Share based Payments [Abstract]

STOCK-BASED COMPENSATION

4. STOCK–BASED COMPENSATION

In connection with our 2010 second step conversion and related stock offering, the ESOP purchased an additional 41,614 shares for the exclusive benefit of eligible employees. The ESOP borrowed funds from the Company in an amount sufficient to purchase the 41,614 shares (approximately 4% of the common stock issued in the offering). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Bank and dividends received by the ESOP, with funds from any contributions on ESOP assets. Contributions will be applied to repay interest on the loan first, and the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants. Participants will vest on a pro-rata basis and reach 100% vesting in the accrued benefits under the ESOP after six years. Vesting is accelerated upon retirement, death, or disability of the participant or a change in control of the Bank. Forfeitures will be reallocated to remaining plan participants. Benefits may be payable upon retirement, death, disability, separation from service, or termination of the ESOP. Since the Bank’s annual contributions are discretionary, benefits payable under the ESOP cannot be estimated.

The Company is accounting for its ESOP in accordance with ASC Topic 718, “Employers Accounting for Employee Stock Ownership Plans.” Accordingly, the debt of the ESOP is eliminated in consolidation and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheet. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from the collateral, the Company reports compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends, if any, on unallocated shares are recorded as a reduction of debt and accrued interest.

A summary of ESOP shares at June 30, 2016 and 2015 is shown below.

	June 30, 2016		June 30, 2015
Unearned shares		18,787		23,845
Shares committed for release		1,192		1,146
Allocated shares		61,659		55,919
Total ESOP shares		81,638		80,910
Fair value of unearned shares	$	544,228	$	562,027

On April 24, 2012, our shareholders approved the 2012 Stock Option Plan. On this same date, the compensation committee of the board of directors approved the awards of 104,035 options to purchase Company common stock. The stock options vest over a five-year period and expire ten years after issuance. Apart from the vesting schedule, there are no performance-based conditions or any other material conditions applicable to the options issued.

The following table summarizes stock option activity for the six months ended June 30, 2016.

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2015		61,120		$	15.65
Granted		-			-
Exercised		(11,332	)		15.65
Forfeited		-			-
Outstanding, June 30, 2016		49,788		$	15.65		5.75	$	577,043
Exercisable, June 30, 2016		27,853		$	15.65		5.75	$	322,816

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The value is based upon a closing price of $27.24 per share on June 30, 2016.

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LOAN PORTFOLIO COMPOSITION

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

LOAN PORTFOLIO COMPOSITION

5. LOAN PORTFOLIO COMPOSITION

At June 30, 2016 and December 31, 2015, the composition of the Company’s loan portfolio is shown below.

	June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
Real estate loans:
One-to-four family residential	$	45,994,916		24.4	%	$	47,395,344		24.6	%
Commercial		40,409,491		21.4			40,381,680		20.9
Agricultural		41,126,629		21.8			41,223,190		21.3
Home equity		11,203,055		5.9			11,691,545		6.1
Total real estate loans		138,734,091		73.5			140,691,759		72.9
Commercial loans		25,747,471		13.6			25,453,058		13.2
Agricultural loans		13,424,032		7.1			16,102,856		8.3
Consumer loans		14,021,513		7.4			13,741,093		7.1
Total loans receivable		191,927,107		101.6			195,988,766		101.5
Less:
Net deferred loan fees		17,967		0.0			29,293		0.0
Allowance for loan losses		2,958,565		1.6			2,919,594		1.5
Total loans receivable, net	$	188,950,575		100.0	%	$	193,039,879		100.0	%

The Company believes that originating or purchasing 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 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. 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 30 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 or an attorney’s opinion based on a title search of the property is generally required on loans secured by real property.

One-to-Four Family Mortgage Loans - Historically, the Bank’s 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.

The Company originates for resale to Freddie Mac and the Federal Home Loan Bank 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 net interest income. In the low interest rate environment that has existed over the past five years, the adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of the loan portfolio. In addition, during this period borrowers have shown a preference for fixed-rate loans. 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 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 provide 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. During periods of rising interest rates the risk of delinquencies and defaults on adjustable-rate mortgage loans increases due to the upward adjustment of interest costs to the borrower, which may result 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 that, among other things, 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 the 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 28% of the applicant’s total monthly income. In addition, total monthly obligations of the applicant, including mortgage payments, generally should not exceed 38% 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, or an attorney’s title opinion, 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 Real Estate Loans - The Company originates and purchases commercial real estate loans. Commercial real estate loans are secured primarily by improved properties such as multi-family residential, retail facilities and office buildings, restaurants and other non-residential buildings. The maximum loan-to-value ratio for commercial real estate loans originated is generally 80%. 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 the fixed-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 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 80% of the value of the real estate. Written appraisals are usually obtained from either licensed or certified appraisers on all commercial 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 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 flows from the project are reduced, the borrower’s ability to repay the loan may be impaired.

Agricultural Real Estate Loans - The Company originates and purchases agricultural real estate loans. The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 80%. 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 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.

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 80% 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 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 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 flows are reduced, the borrower’s ability to repay the loan may be impaired.

Home Equity Loans – The Company originates home equity loans and lines of credit, which 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 existing 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.

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.

Home equity loans entail greater risks than one-to-four family residential mortgage loans, which are secured by first lien mortgages. 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 - The Company originates commercial 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 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. Unsecured business loans are originated on a limited basis 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. 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. The 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 review them 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.

Agricultural Business Loans - The Company originates 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 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. The repayment of agricultural business loans is generally dependent on the successful operation of the farm operation. Personal guarantees are generally obtained from the borrower as a condition to originating agricultural business loans.

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. The financial strength of each applicant is assessed 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. Financial statements are requested at least annually and reviewed for substantial deviations or changes that might affect repayment of the loan. 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.

The repayment of agricultural business loans generally is dependent on the successful operation of a farm and can be adversely affected by fluctuations in crop prices, increase in interest rates, and changes in weather conditions. These developments may result in smaller harvests and less income for farmers which may adversely affect such borrower’s ability to repay a loan, and potentially result in an increase in the level of problem loans and loan losses in our agricultural portfolio. While not required, the majority of our agricultural business loans are covered by crop insurance, which provides protection against loss due to lower crop yields as a result of unfavorable weather conditions.

Consumer Loans – The Company originates consumer loans, including automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans. Consumer loans are generally offered on a fixed-rate basis. Automobile loans are offered 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. Automobile loans are generally originated with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value. In the case of a new car loan, 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.

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 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.

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 and for the periods ended June 30, 2016, June 30, 2015, and December 31, 2015.

	June 30, 2016
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2016	$	864,863		$	900,422		$	202,004	$	201,537		$	345,975		$	160,370		$	161,474		$	98,046		$	2,934,691
Provision charged to expense		(27,142	)		10,337			3,629		(4,161	)		26,196			2,293			19,485			(637	)		30,000
Losses charged off		(6,414	)		-			-		-			-			-			(11,899	)		-			(18,313	)
Recoveries		5,205			2,971			-		525			116			-			3,370			-			12,187
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Beginning Balance, January 1, 2016	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346		$	169,381		$	101,946		$	2,919,594
Provision charged to expense		24,501			(6,796	)		3,715		47,598			(14,449	)		(683	)		10,651			(4,537	)		60,000
Losses charged off		(26,879	)		-			-		-			-			-			(11,899	)		-			(38,778	)
Recoveries		9,286			3,000			-		1,050			116			-			4,297			-			17,749
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Ending balance:
individually evaluated for impairment	$	240,962		$	523,618		$	-	$	9,561		$	111,625		$	-		$	-		$	-		$	885,766
Ending balance:
collectively evaluated for impairment	$	595,550		$	390,112		$	205,633	$	188,340		$	260,662		$	162,663		$	172,430		$	97,409		$	2,072,799
Loans:
Ending balance	$	45,994,916		$	40,409,491		$	41,126,629	$	11,203,055		$	25,747,471		$	13,424,032		$	14,021,513		$	-		$	191,927,107
Ending balance:
individually evaluated for impairment	$	638,345		$	1,408,875		$	-	$	61,786		$	256,547		$	-		$	-		$	-		$	2,365,553
Ending balance:
collectively evaluated for impairment	$	45,356,571		$	39,000,616		$	41,126,629	$	11,141,269		$	25,490,924		$	13,424,032		$	14,021,513		$	-		$	189,561,554

	June 30, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2015	$	1,032,299		$	799,534		$	212,051	$	162,167		$	401,231		$	116,529	$	159,703		$	87,482		$	2,970,996
Provision charged to expense		(15,895	)		41,544			1,759		(4,591	)		(9,263	)		8,533		19,578			(6,665	)		35,000
Losses charged off		(105,118	)		-			-		-			-			-		(6,822	)		-			(111,940	)
Recoveries		19,447			6,346			-		525			26			-		2,646			-			28,990
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Beginning Balance, January 1, 2015	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356		$	2,956,264
Provision charged to expense		16,844			4,334			18,264		(57,014	)		(29,926	)		67,128		17,909			27,461			65,000
Losses charged off		(105,118	)		(27,464	)		-		-			-			-		(13,252	)		-			(145,834	)
Recoveries		19,747			15,091			-		9,538			111			-		3,129			-			47,616
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Ending balance:
individually evaluated for impairment	$	192,916		$	430,596		$	-	$	9,982		$	141,946		$	-	$	-		$	-		$	775,440
Ending balance:
collectively evaluated for impairment	$	737,817		$	416,828		$	213,810	$	148,119		$	250,048		$	125,062	$	175,105		$	80,817		$	2,147,606
Loans:
Ending balance	$	42,895,033		$	39,843,156		$	43,624,784	$	11,182,130		$	25,113,932		$	12,227,735	$	12,906,675		$	-		$	187,793,445
Ending balance:
individually evaluated for impairment	$	681,410		$	1,569,830		$	862,765	$	43,046		$	221,519		$	375,979	$	1,149		$	-		$	3,755,698
Ending balance:
collectively evaluated for impairment	$	42,213,623		$	38,273,326		$	42,762,019	$	11,139,084		$	24,892,413		$	11,851,756	$	12,905,526		$	-		$	184,037,747

	December 31, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance, December 31, 2014	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356	$	2,956,264
Provision charged to expense		(10,386	)		29,238			6,372		(53,188	)		(35,327	)		105,412		49,289			48,590		140,000
Losses charged off		(199,392	)		(27,464	)		-		(13,724	)		-			-		(53,249	)		-		(293,829	)
Recoveries		40,122			60,289			-		10,588			138			-		6,022			-		117,159
Ending balance, December 31, 2015	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346	$	169,381		$	101,946	$	2,919,594
Ending balance:
individually evaluated for impairment	$	176,079		$	487,205		$	-	$	9,922		$	127,458		$	-	$	-		$	-	$	800,664
Ending balance:
collectively evaluated for impairment	$	653,525		$	430,321		$	201,918	$	139,331		$	259,162		$	163,346	$	169,381		$	101,946	$	2,118,930
Loans:
Ending balance	$	47,395,344		$	40,381,680		$	41,223,190	$	11,691,545		$	25,453,058		$	16,102,856	$	13,741,093		$	-	$	195,988,766
Ending balance:
individually evaluated for impairment	$	658,734		$	1,598,530		$	839,546	$	58,340		$	277,628		$	406,950	$	428		$	-	$	3,840,156
Ending balance:
collectively evaluated for impairment	$	46,736,610		$	38,783,150		$	40,383,644	$	11,633,205		$	25,175,430		$	15,695,906	$	13,740,665		$	-	$	192,148,610

Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral.  These estimates are affected by changing economic conditions and the economic prospects of borrowers.

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 size and composition 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 the scheduled payments of principal or interest will not be able to be collected 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, individual consumer and residential loans are not separately identified 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 the 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.  

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 $500,000, new commercial and commercial real estate loans, and watch list credits 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.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2016 and December 31, 2015.

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	43,154,776	$	44,120,334	$	37,869,883	$	37,628,385	$	41,126,629	$	40,383,644	$	10,415,807	$	11,324,889
Special Mention		1,160,680		1,323,266		447,626		454,194		-		839,546		563,621		68,044
Substandard		1,679,460		1,951,744		2,091,982		2,299,101		-		-		223,627		298,612
Total	$	45,994,916	$	47,395,344	$	40,409,491	$	40,381,680	$	41,126,629	$	41,223,190	$	11,203,055	$	11,691,545

	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	25,444,203	$	25,117,982	$	12,787,458	$	15,110,606	$	13,817,414	$	13,501,477	$	184,616,170	$	187,187,317
Special Mention		41,968		51,196		636,574		992,250		18,291		52,656		2,868,760		3,781,152
Substandard		261,300		283,880		-		-		185,808		186,960		4,442,177		5,020,297
Total	$	25,747,471	$	25,453,058	$	13,424,032	$	16,102,856	$	14,021,513	$	13,741,093	$	191,927,107	$	195,988,766

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2016 and December 31, 2015.

	June 30, 2016
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	172,411	$	49,690	$	457,399	$	679,500	$	45,315,416	$	45,994,916	$	-
Commercial real estate		-		-		734,173		734,173		39,675,318		40,409,491		-
Agricultural real estate		-		-		-		-		41,126,629		41,126,629		-
Home equity		-		57,722		26,098		83,820		11,119,235		11,203,055		-
Commercial		32,504		39,203		-		71,707		25,675,764		25,747,471		-
Agricultural		-		-		-		-		13,424,032		13,424,032		-
Consumer		125,886		28,756		43,062		197,704		13,823,809		14,021,513		-
Total	$	330,801	$	175,371	$	1,260,732	$	1,766,904	$	190,160,203	$	191,927,107	$	-

	December 31, 2015
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	345,169	$	77,588	$	623,055	$	1,045,812	$	46,349,532	$	47,395,344	$	-
Commercial real estate		-		-		766,840		766,840		39,614,840		40,381,680		-
Agricultural real estate		-		-		-		-		41,223,190		41,223,190		-
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		-
Commercial		-		-		-		-		25,453,058		25,453,058		-
Agricultural		-		-		-		-		16,102,856		16,102,856		-
Consumer		183,526		5,972		6,031		195,529		13,545,564		13,741,093		-
Total	$	550,817	$	149,865	$	1,465,441	$	2,166,123	$	193,822,643	$	195,988,766	$	-

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 non-accrual or charged-off at an earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual 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 principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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 at or for the three and six months ended June 30, 2016 and for the year ended December 31, 2015.

	Three Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	203,060	$	2,863	$	3,087
Commercial real estate		368,248		368,248		-		476,130		1,333		-
Home equity		52,225		52,225		-		53,293		908		920
Commercial		80,172		80,172		-		118,609		1,430		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		556,807		8,088		6,221
Commercial real estate		1,040,627		1,040,627		523,618		1,103,023		16,585		20,089
Home equity		9,561		9,561		9,561		9,982		253		180
Commercial		176,375		176,375		111,625		179,634		485		92
Total:
One-to-four family residential		638,345		638,345		240,962		759,867		10,951		9,308
Commercial real estate		1,408,875		1,408,875		523,618		1,579,153		17,918		20,089
Home equity		61,786		61,786		9,561		63,275		1,161		1,100
Commercial		256,547		256,547		111,625		298,243		1,915		524
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,700,538	$	31,945	$	31,021

	Six Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	204,264	$	5,815	$	6,068
Commercial real estate		368,248		368,248		-		451,875		11,128		5,400
Home equity		52,225		52,225		-		52,498		1,810		1,822
Commercial		80,172		80,172		-		99,433		2,431		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		561,936		16,144		11,974
Commercial real estate		1,040,627		1,040,627		523,618		1,105,566		33,251		42,647
Home equity		9,561		9,561		9,561		9,982		505		361
Commercial		176,375		176,375		111,625		184,643		4,144		3,534
Total:
One-to-four family residential		638,345		638,345		240,962		766,200		21,959		18,042
Commercial real estate		1,408,875		1,408,875		523,618		1,557,441		44,379		48,047
Home equity		61,786		61,786		9,561		62,480		2,315		2,183
Commercial		256,547		256,547		111,625		284,076		6,575		3,966
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,670,197	$	75,228	$	72,238

	Year Ended December 31, 2015
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	111,166	$	111,166	$	-	$	211,346	$	12,248	$	12,042
Commercial real estate		516,560		516,560		-		663,640		34,155		34,586
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		80,172		80,172		-		83,509		634		150
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		48,418		48,418		-		43,342		3,333		3,331
Consumer		428		428		-		1,160		78		82
Loans with a specific allowance:
One-to-four family residential		547,568		547,568		176,079		568,790		32,908		25,352
Commercial real estate		1,081,970		1,081,970		487,205		1,118,044		67,505		47,864
Commercial		197,456		197,456		127,458		269,496		11,517		11,139
Home equity		9,922		9,922		9,922		9,982		810		722
Total:
One-to-four family residential		658,734		658,734		176,079		780,136		45,156		37,394
Commercial real estate		1,598,530		1,598,530		487,205		1,781,684		101,660		82,450
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		277,628		277,628		127,458		353,005		12,151		11,289
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		58,340		58,340		9,922		53,324		4,143		4,053
Consumer		428		428		-		1,160		78		82
Total	$	3,840,156	$	3,840,156	$	800,664	$	4,141,743	$	217,926	$	180,961

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDRs), where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of time, usually at least six months.

When loans are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected cash flows, discounted at the contractual interest rate of the original loan agreement, or based upon on the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

The following table presents the recorded balance, at original cost, of TDRs, as of June 30, 2016 and December 31, 2015.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	764,358	$	723,421
Commercial real estate		1,647,798		1,708,013
Agricultural real estate		-		-
Home equity		8,050		10,897
Commercial loans		40,926		57,783
Agricultural loans		-		-
Consumer loans		89,146		109,340
Total	$	2,550,278	$	2,609,454

The following table presents the recorded balance, at original cost, of TDRs, which were performing according to the terms of the restructuring, as of June 30, 2016 and December 31, 2015.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	519,628	$	526,004
Commercial real estate		891,592		941,173
Agricultural real estate		-		-
Home equity		7,768		10,897
Commercial loans		36,174		57,783
Agricultural loans		-		-
Consumer loans		7,623		86,255
Total	$	1,462,785	$	1,622,112

The following tables present loans modified as TDRs during the three and six months ended June 30, 2016 and 2015.

	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	40,934
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		-		-
Total		-	$	-		1	$	40,934

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	103,434
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		1		2,497		1		2,497
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		1		66,650		2		68,589
Total		2	$	69,147		4	$	174,520

2016 Modifications

The Company modified one residential real estate loan with a recorded investment of $40,934. The modification was made to restructure the loan and capitalize delinquent real estate taxes. The modification did not result in a write-off of the principal balance.

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 six month period ended June 30, 2016, three residential real estate loans of $184,804 and one commercial loan of $734,173 were considered defaulted TDRs as they were more than 90 days past due at June 30, 2016. Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

2015 Modifications

The Company modified one residential real estate loan with a recorded investment of $103,434. The modification was made to consolidate and restructure delinquent loans into a workout. The modification did not result in a write-off of the principal balance.

The Company modified one home equity loan with a recorded investment of $2,497. The modification was made to extend the term to lower the payment amount. The modification did not result in a write-off of the principal balance.

The Company modified two consumer loans with a recorded investment of $68,589. The modifications were made to extend the payment schedule three and four months, respectively. The modifications did not result in a write-off of the principal balance.

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 six month period ended June 30, 2015, three residential real estate loans of $197,941, one commercial loan of $794,110 and one home equity loan of $3,138 were considered defaulted TDRs as they were more than 90 days past due at June 30, 2015. Default occurs when a loan is 90 days or more past due, transferred to nonaccrual or charged-off, and is within twelve months of restructuring.

The following table presents the Company’s nonaccrual loans at June 30, 2016 and December 31, 2015. This table excludes performing troubled debt restructurings.

	June 30, 2016		December 31, 2015
One-to-four family residential	$	555,223	$	911,283
Commercial real estate		794,867		840,449
Agricultural real estate		-		-
Home equity		81,182		118,502
Commercial loans		4,753		9,314
Agricultural loans		-		-
Consumer loans		168,287		141,605
Total	$	1,604,312	$	2,021,153

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INVESTMENTS

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

6. INVESTMENTS

The amortized cost and approximate fair value of securities, all of which are classified as available-for-sale, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2016:
U.S. government and agencies	$	23,402,502	$	393,863	$	(10,373	)	$	23,785,992
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		424,443		(10,742	)		24,521,854
Municipal bonds		42,102,941		1,755,608		(23,994	)		43,834,555
	$	89,613,596	$	2,573,914	$	(45,109	)	$	92,142,401
December 31, 2015:
U.S. government and agencies	$	15,979,475	$	44,972	$	(85,750	)	$	15,938,697
Mortgage-backed securities (government- sponsored enterprises - residential)		23,067,200		211,987		(100,792	)		23,178,395
Municipal bonds		47,229,171		1,306,328		(179,259	)		48,356,240
	$	86,275,846	$	1,563,287	$	(365,801	)	$	87,473,332

The amortized cost and fair value of available-for-sale securities at June 30, 2016, 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.

	Amortized		Fair
	Cost		Value
Within one year	$	1,022,863	$	1,028,376
More than one year to five years		9,040,013		9,379,342
More than five years to ten years		33,399,985		34,500,726
After ten years		22,042,582		22,712,103
		65,505,443		67,620,547
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		24,521,854
	$	89,613,596	$	92,142,401

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $41,990,000 at June 30, 2016 and $25,681,000 at December 31, 2015.

The carrying value of securities sold under agreement to repurchase amounted to $3,536,000 at June 30, 2016 and $7,591,000 at December 31, 2015. At June 30, 2016, we had $4,499,000 of repurchase agreements secured by mortgage backed securities, $741,000 secured by time deposits in other banks, and $550,000 in repurchase agreements secured by U.S. government agency bonds. All of our repurchase agreements mature overnight. The right of offset for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default. The collateral is held by the Company in a segregated custodial account. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained.

Gross gains of $107,000 and $79,000 and gross losses of $0 resulting from sales of available-for-sale securities were realized during the three months ended June 30, 2016 and 2015, respectively. Gross gains of $211,000 and $244,000 and gross losses of $3,000 and $32,000 resulting from sales of available-for-sale securities were realized during the six months ended June 30, 2016 and 2015, respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2016 and December 31, 2015 were $10,332,000, and $30,677,000, respectively, which were approximately 11% and 35% of the Company’s available-for-sale investment portfolio.

Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at June 30, 2016 and December 31, 2015.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2016:
U.S. government agencies	$	(10,373	)	$	1,651,921	$	-		$	-	$	(10,373	)	$	1,651,921
Mortgage-backed securities (government sponsored enterprises - residential)		(10,742	)		5,587,647		-			-		(10,742	)		5,587,647
Municipal bonds		(13,040	)		2,347,998		(10,954	)		744,540	$	(23,994	)	$	3,092,538
Total	$	(34,155	)	$	9,587,566	$	(10,954	)	$	744,540	$	(45,109	)	$	10,332,106
December 31, 2015:
U.S. government agencies	$	(49,205	)	$	8,591,014	$	(36,545	)	$	1,809,745	$	(85,750	)	$	10,400,759
Mortgage-backed securities (government sponsored enterprises - residential)		(45,886	)		5,843,754		(54,906	)		2,257,674		(100,792	)		8,101,428
Municipal bonds		(48,383	)		5,440,291		(130,876	)		6,734,290		(179,259	)		12,174,581
Total	$	(143,474	)	$	19,875,059	$	(222,327	)	$	10,801,709	$	(365,801	)	$	30,676,768

The unrealized losses on the Company’s investments in municipal bonds, U.S. government agencies, and mortgage-backed securities were caused by interest rate increases. The contractual terms of these 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 these investments to be other-than-temporarily impaired at June 30, 2016 and December 31, 2015.

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ACCUMULATED OTHER COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

7. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

	June 30, 2016			December 31, 2015
Net unrealized gains on securities available-for-sale	$	2,528,805		$	1,197,486
Tax effect		(859,793	)		(407,145	)
Net-of-tax amount	$	1,669,012		$	790,341

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

6 Months Ended

Jun. 30, 2016

Changes In Accumulated Other Comprehensive Income (Aoci) By Component [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT

8. 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 three and six months ended June 30, 2016 and 2015, were as follows:

	Amounts Reclassified
	from AOCI
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			Statements of Income
Unrealized gains on available     -for-sale securities	$	106,537		$	78,860		$	208,098		$	212,076		Net realized gains on sales of available-for-sale securities
Tax effect		(36,222	)		(26,813	)		(70,753	)		(72,106	)	Income taxes
Total reclassification out of   AOCI	$	70,315		$	52,047		$	137,345		$	139,970		Net reclassified amount

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

9. DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability 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 or liabilities

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

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

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying condensed 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 June 30, 2016 and December 31, 2015:

			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agencies	$	23,785,992	$	-	$	23,785,992	$	-
Mortgage-backed securities (Government sponsored enterprises - residential)		24,521,854		-		24,521,854		-
Municipal bonds		43,834,555		-		43,834,555		-

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and   agencies	$	15,938,697	$	-	$	15,938,697	$	-
Mortgage-backed securities   (Government sponsored   enterprises - residential)		23,178,395		-		23,178,395		-
Municipal bonds		48,356,240		-		48,356,240		-

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 condensed 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 period ended June 30, 2016.

Available-for-Sale Securities - Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. 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, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections, and cash flows. 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.

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 June 30, 2016 and December 31, 2015:

			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	622,572	$	-	$	-	$	622,572
Real estate owned		72,000		-		-		72,000

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	899,981	$	-	$	-	$	899,981

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 condensed consolidated balance sheets, as well as the general classification of such assets 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.

Real Estate Owned – Real estate owned is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of real estate owned is based on appraisals or evaluations. Real estate owned is classified within Level 3 of the fair value hierarchy.

Appraisals of real estate owned are obtained when the real estate is acquired 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 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.

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements (dollars in thousands).

	Fair Value at 6/30/16		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	72,000	Market comparable properties	Comparability adjustments (%)		30	%
Collateral-dependent impaired loans		622,572	Market comparable properties	Marketability discount		25% – 50% (40%)

	Fair Value at 12/31/15		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans		899,981	Market comparable properties	Marketability discount		20% – 30% (25%)

Fair Value of 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 June 30, 2016 and December 31, 2015

	June 30, 2016
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	9,636,838	$	9,636,838	$	-	$	-
Interest-earning time deposits in banks		2,486,000		2,486,000		-		-
Other investments		59,134		-		59,134		-
Loans held for sale		80,481		-		80,481		-
Loans, net of allowance for loan losses		188,950,575		-		-		188,965,506
Federal Home Loan Bank stock		363,800		-		363,800		-
Interest receivable		1,982,561		-		1,982,561		-
Financial Liabilities
Deposits		254,261,041		-		176,198,419		79,147,083
Short-term borrowings		3,535,881		-		3,535,881		-
Advances from borrowers for taxes and insurance		1,172,034		-		1,172,034		-
Interest payable		104,919		-		104,919		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	4,103,432	$	4,103,432	$	-	$	-
Interest-earning time deposits		2,724,000		2,724,000		-		-
Other investments		62,223		-		62,223		-
Loans held for sale		539,000		-		539,000		-
Loans, net of allowance for loan losses		193,039,879		-		-		193,006,301
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		1,715,676		-		1,715,676		-
Financial Liabilities
Deposits		239,281,930		-		160,227,406		80,300,060
Short-term borrowings		15,131,710		-		6,631,710		8,500,000
Advances from borrowers for taxes and insurance		990,917		-		990,917		-
Interest payable		118,335		-		118,335		-
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-Earning Time Deposits in Banks, 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.

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MORTGAGE SERVICING RIGHTS

6 Months Ended

Jun. 30, 2016

Transfers and Servicing [Abstract]

MORTGAGE SERVICING RIGHTS

10. MORTGAGE SERVICING RIGHTS

Activity in the balance of mortgage servicing rights, measured using the amortization method, for the six month period ended June 30, 2016 and the year ended December 31, 2015 was as follows:

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	645,067		$	689,603
Servicing rights capitalized		27,776			73,650
Amortization of servicing rights		(43,834	)		(118,186	)
Change in valuation allowance		-			-
Balance, end of period	$	629,009		$	645,067

Activity in the valuation allowance for mortgage servicing rights for the six month period ended June 30, 2016 and the year ended December 31, 2015 was as follows:

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	47,354		$	56,969
Additions		-			-
Reductions		(6,107	)		(9,615	)
Balance, end of period	$	41,247		$	47,354

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INCOME TAXES

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

11. INCOME TAXES

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense for the six months ended June 30, 2016 and 2015 is shown below.

	June 30, 2016			June 30, 2015
Computed at the statutory rate (34%)	$	741,192		$	761,822
Increase (decrease) resulting from
Tax exempt interest		(223,220	)		(214,944	)
State income taxes, net		97,943			99,455
Increase in cash surrender value		(29,234	)		(29,640	)
Other, net		412			1,300
Actual tax expense	$	587,093		$	617,993

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

12. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers in the way of commitments to extend credit. Commitments to extend credit 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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. Substantially all of the Company's loans are to borrowers located in Cass, Morgan, Macoupin, Montgomery, and surrounding counties in Illinois.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of earnings per share calculations for basic and diluted methods

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Net income available to common  shareholders	$	765,506	$	836,403	$	1,592,884	$	1,622,660
Basic average shares outstanding		1,775,726		1,774,375		1,773,321		1,774,828
Diluted potential common shares:
Stock option equivalents		16,458		14,442		15,044		13,618
Diluted average shares outstanding		1,792,184		1,788,817		1,788,365		1,788,446
Basic earnings per share	$	0.43	$	0.47	$	0.90	$	0.91
Diluted earnings per share	$	0.43	$	0.47	$	0.89	$	0.91

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Share based Payments [Abstract]

Schedule of summary of ESOP shares

	June 30, 2016		June 30, 2015
Unearned shares		18,787		23,845
Shares committed for release		1,192		1,146
Allocated shares		61,659		55,919
Total ESOP shares		81,638		80,910
Fair value of unearned shares	$	544,228	$	562,027

Schedule of stock option activity

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Instrinsic
	Options			Price/Share		Life (in years)		Value
Outstanding, December 31, 2015		61,120		$	15.65
Granted		-			-
Exercised		(11,332	)		15.65
Forfeited		-			-
Outstanding, June 30, 2016		49,788		$	15.65		5.75	$	577,043
Exercisable, June 30, 2016		27,853		$	15.65		5.75	$	322,816

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LOAN PORTFOLIO COMPOSITION (Tables)

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Schedule of composition of loan portfolio

	June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
Real estate loans:
One-to-four family residential	$	45,994,916		24.4	%	$	47,395,344		24.6	%
Commercial		40,409,491		21.4			40,381,680		20.9
Agricultural		41,126,629		21.8			41,223,190		21.3
Home equity		11,203,055		5.9			11,691,545		6.1
Total real estate loans		138,734,091		73.5			140,691,759		72.9
Commercial loans		25,747,471		13.6			25,453,058		13.2
Agricultural loans		13,424,032		7.1			16,102,856		8.3
Consumer loans		14,021,513		7.4			13,741,093		7.1
Total loans receivable		191,927,107		101.6			195,988,766		101.5
Less:
Net deferred loan fees		17,967		0.0			29,293		0.0
Allowance for loan losses		2,958,565		1.6			2,919,594		1.5
Total loans receivable, net	$	188,950,575		100.0	%	$	193,039,879		100.0	%

Schedule of allowance for loan losses and recorded investment in loans based on portfolio segment and impairment method

	June 30, 2016
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural			Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2016	$	864,863		$	900,422		$	202,004	$	201,537		$	345,975		$	160,370		$	161,474		$	98,046		$	2,934,691
Provision charged to expense		(27,142	)		10,337			3,629		(4,161	)		26,196			2,293			19,485			(637	)		30,000
Losses charged off		(6,414	)		-			-		-			-			-			(11,899	)		-			(18,313	)
Recoveries		5,205			2,971			-		525			116			-			3,370			-			12,187
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Beginning Balance, January 1, 2016	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346		$	169,381		$	101,946		$	2,919,594
Provision charged to expense		24,501			(6,796	)		3,715		47,598			(14,449	)		(683	)		10,651			(4,537	)		60,000
Losses charged off		(26,879	)		-			-		-			-			-			(11,899	)		-			(38,778	)
Recoveries		9,286			3,000			-		1,050			116			-			4,297			-			17,749
Ending balance, June 30, 2016	$	836,512		$	913,730		$	205,633	$	197,901		$	372,287		$	162,663		$	172,430		$	97,409		$	2,958,565
Ending balance:
individually evaluated for impairment	$	240,962		$	523,618		$	-	$	9,561		$	111,625		$	-		$	-		$	-		$	885,766
Ending balance:
collectively evaluated for impairment	$	595,550		$	390,112		$	205,633	$	188,340		$	260,662		$	162,663		$	172,430		$	97,409		$	2,072,799
Loans:
Ending balance	$	45,994,916		$	40,409,491		$	41,126,629	$	11,203,055		$	25,747,471		$	13,424,032		$	14,021,513		$	-		$	191,927,107
Ending balance:
individually evaluated for impairment	$	638,345		$	1,408,875		$	-	$	61,786		$	256,547		$	-		$	-		$	-		$	2,365,553
Ending balance:
collectively evaluated for impairment	$	45,356,571		$	39,000,616		$	41,126,629	$	11,141,269		$	25,490,924		$	13,424,032		$	14,021,513		$	-		$	189,561,554

	June 30, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated			Total
Allowance for Loan Losses:
Beginning Balance, April 1, 2015	$	1,032,299		$	799,534		$	212,051	$	162,167		$	401,231		$	116,529	$	159,703		$	87,482		$	2,970,996
Provision charged to expense		(15,895	)		41,544			1,759		(4,591	)		(9,263	)		8,533		19,578			(6,665	)		35,000
Losses charged off		(105,118	)		-			-		-			-			-		(6,822	)		-			(111,940	)
Recoveries		19,447			6,346			-		525			26			-		2,646			-			28,990
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Beginning Balance, January 1, 2015	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356		$	2,956,264
Provision charged to expense		16,844			4,334			18,264		(57,014	)		(29,926	)		67,128		17,909			27,461			65,000
Losses charged off		(105,118	)		(27,464	)		-		-			-			-		(13,252	)		-			(145,834	)
Recoveries		19,747			15,091			-		9,538			111			-		3,129			-			47,616
Ending balance, June 30, 2015	$	930,733		$	847,424		$	213,810	$	158,101		$	391,994		$	125,062	$	175,105		$	80,817		$	2,923,046
Ending balance:
individually evaluated for impairment	$	192,916		$	430,596		$	-	$	9,982		$	141,946		$	-	$	-		$	-		$	775,440
Ending balance:
collectively evaluated for impairment	$	737,817		$	416,828		$	213,810	$	148,119		$	250,048		$	125,062	$	175,105		$	80,817		$	2,147,606
Loans:
Ending balance	$	42,895,033		$	39,843,156		$	43,624,784	$	11,182,130		$	25,113,932		$	12,227,735	$	12,906,675		$	-		$	187,793,445
Ending balance:
individually evaluated for impairment	$	681,410		$	1,569,830		$	862,765	$	43,046		$	221,519		$	375,979	$	1,149		$	-		$	3,755,698
Ending balance:
collectively evaluated for impairment	$	42,213,623		$	38,273,326		$	42,762,019	$	11,139,084		$	24,892,413		$	11,851,756	$	12,905,526		$	-		$	184,037,747

	December 31, 2015
				Commercial			Agricultural
	1-4 Family			Real Estate			Real Estate		Home Equity			Commercial			Agricultural		Consumer			Unallocated		Total
Allowance for Loan Losses:
Beginning Balance, December 31, 2014	$	999,260		$	855,463		$	195,546	$	205,577		$	421,809		$	57,934	$	167,319		$	53,356	$	2,956,264
Provision charged to expense		(10,386	)		29,238			6,372		(53,188	)		(35,327	)		105,412		49,289			48,590		140,000
Losses charged off		(199,392	)		(27,464	)		-		(13,724	)		-			-		(53,249	)		-		(293,829	)
Recoveries		40,122			60,289			-		10,588			138			-		6,022			-		117,159
Ending balance, December 31, 2015	$	829,604		$	917,526		$	201,918	$	149,253		$	386,620		$	163,346	$	169,381		$	101,946	$	2,919,594
Ending balance:
individually evaluated for impairment	$	176,079		$	487,205		$	-	$	9,922		$	127,458		$	-	$	-		$	-	$	800,664
Ending balance:
collectively evaluated for impairment	$	653,525		$	430,321		$	201,918	$	139,331		$	259,162		$	163,346	$	169,381		$	101,946	$	2,118,930
Loans:
Ending balance	$	47,395,344		$	40,381,680		$	41,223,190	$	11,691,545		$	25,453,058		$	16,102,856	$	13,741,093		$	-	$	195,988,766
Ending balance:
individually evaluated for impairment	$	658,734		$	1,598,530		$	839,546	$	58,340		$	277,628		$	406,950	$	428		$	-	$	3,840,156
Ending balance:
collectively evaluated for impairment	$	46,736,610		$	38,783,150		$	40,383,644	$	11,633,205		$	25,175,430		$	15,695,906	$	13,740,665		$	-	$	192,148,610

Schedule of credit risk profile of loan portfolio based on rating category and payment activity

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Home Equity
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	43,154,776	$	44,120,334	$	37,869,883	$	37,628,385	$	41,126,629	$	40,383,644	$	10,415,807	$	11,324,889
Special Mention		1,160,680		1,323,266		447,626		454,194		-		839,546		563,621		68,044
Substandard		1,679,460		1,951,744		2,091,982		2,299,101		-		-		223,627		298,612
Total	$	45,994,916	$	47,395,344	$	40,409,491	$	40,381,680	$	41,126,629	$	41,223,190	$	11,203,055	$	11,691,545

	Commercial				Agricultural				Consumer				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2016		2015		2016		2015		2016		2015		2016		2015
Rating:
Pass	$	25,444,203	$	25,117,982	$	12,787,458	$	15,110,606	$	13,817,414	$	13,501,477	$	184,616,170	$	187,187,317
Special Mention		41,968		51,196		636,574		992,250		18,291		52,656		2,868,760		3,781,152
Substandard		261,300		283,880		-		-		185,808		186,960		4,442,177		5,020,297
Total	$	25,747,471	$	25,453,058	$	13,424,032	$	16,102,856	$	14,021,513	$	13,741,093	$	191,927,107	$	195,988,766

Schedule of loan portfolio aging analysis

	June 30, 2016
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	172,411	$	49,690	$	457,399	$	679,500	$	45,315,416	$	45,994,916	$	-
Commercial real estate		-		-		734,173		734,173		39,675,318		40,409,491		-
Agricultural real estate		-		-		-		-		41,126,629		41,126,629		-
Home equity		-		57,722		26,098		83,820		11,119,235		11,203,055		-
Commercial		32,504		39,203		-		71,707		25,675,764		25,747,471		-
Agricultural		-		-		-		-		13,424,032		13,424,032		-
Consumer		125,886		28,756		43,062		197,704		13,823,809		14,021,513		-
Total	$	330,801	$	175,371	$	1,260,732	$	1,766,904	$	190,160,203	$	191,927,107	$	-

	December 31, 2015
	30-59 Days		60-89 Days		Greater than 90		Total						Total Loans >90
	Past Due		Past Due		Days Past Due		Past Due		Current		Total Loans		Days & Accruing
One-to-four family residential	$	345,169	$	77,588	$	623,055	$	1,045,812	$	46,349,532	$	47,395,344	$	-
Commercial real estate		-		-		766,840		766,840		39,614,840		40,381,680		-
Agricultural real estate		-		-		-		-		41,223,190		41,223,190		-
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		-
Commercial		-		-		-		-		25,453,058		25,453,058		-
Agricultural		-		-		-		-		16,102,856		16,102,856		-
Consumer		183,526		5,972		6,031		195,529		13,545,564		13,741,093		-
Total	$	550,817	$	149,865	$	1,465,441	$	2,166,123	$	193,822,643	$	195,988,766	$	-

Schedule of impaired loan

	Three Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	203,060	$	2,863	$	3,087
Commercial real estate		368,248		368,248		-		476,130		1,333		-
Home equity		52,225		52,225		-		53,293		908		920
Commercial		80,172		80,172		-		118,609		1,430		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		556,807		8,088		6,221
Commercial real estate		1,040,627		1,040,627		523,618		1,103,023		16,585		20,089
Home equity		9,561		9,561		9,561		9,982		253		180
Commercial		176,375		176,375		111,625		179,634		485		92
Total:
One-to-four family residential		638,345		638,345		240,962		759,867		10,951		9,308
Commercial real estate		1,408,875		1,408,875		523,618		1,579,153		17,918		20,089
Home equity		61,786		61,786		9,561		63,275		1,161		1,100
Commercial		256,547		256,547		111,625		298,243		1,915		524
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,700,538	$	31,945	$	31,021

	Six Months Ended June 30, 2016
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	101,631	$	101,631	$	-	$	204,264	$	5,815	$	6,068
Commercial real estate		368,248		368,248		-		451,875		11,128		5,400
Home equity		52,225		52,225		-		52,498		1,810		1,822
Commercial		80,172		80,172		-		99,433		2,431		432
Loans with a specific allowance:
One-to-four family residential		536,714		536,714		240,962		561,936		16,144		11,974
Commercial real estate		1,040,627		1,040,627		523,618		1,105,566		33,251		42,647
Home equity		9,561		9,561		9,561		9,982		505		361
Commercial		176,375		176,375		111,625		184,643		4,144		3,534
Total:
One-to-four family residential		638,345		638,345		240,962		766,200		21,959		18,042
Commercial real estate		1,408,875		1,408,875		523,618		1,557,441		44,379		48,047
Home equity		61,786		61,786		9,561		62,480		2,315		2,183
Commercial		256,547		256,547		111,625		284,076		6,575		3,966
Total	$	2,365,553	$	2,365,553	$	885,766	$	2,670,197	$	75,228	$	72,238

	Year Ended December 31, 2015
							Average				Interest
			Unpaid				Impairment in		Interest		Income
	Recorded		Principal		Specific		Impaired		Income		Recognized
	Balance		Balance		Allowance		Loans		Recognized		Cash Basis
Loans without a specific allowance:
One-to-four family residential	$	111,166	$	111,166	$	-	$	211,346	$	12,248	$	12,042
Commercial real estate		516,560		516,560		-		663,640		34,155		34,586
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		80,172		80,172		-		83,509		634		150
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		48,418		48,418		-		43,342		3,333		3,331
Consumer		428		428		-		1,160		78		82
Loans with a specific allowance:
One-to-four family residential		547,568		547,568		176,079		568,790		32,908		25,352
Commercial real estate		1,081,970		1,081,970		487,205		1,118,044		67,505		47,864
Commercial		197,456		197,456		127,458		269,496		11,517		11,139
Home equity		9,922		9,922		9,922		9,982		810		722
Total:
One-to-four family residential		658,734		658,734		176,079		780,136		45,156		37,394
Commercial real estate		1,598,530		1,598,530		487,205		1,781,684		101,660		82,450
Agricultural real estate		839,546		839,546		-		864,705		43,335		44,885
Commercial		277,628		277,628		127,458		353,005		12,151		11,289
Agricultural business		406,950		406,950		-		307,729		11,403		808
Home equity		58,340		58,340		9,922		53,324		4,143		4,053
Consumer		428		428		-		1,160		78		82
Total	$	3,840,156	$	3,840,156	$	800,664	$	4,141,743	$	217,926	$	180,961

Schedule of recorded balance at original cost of troubled debt restructurings

	June 30, 2016		December 31, 2015
One-to-four family residential	$	764,358	$	723,421
Commercial real estate		1,647,798		1,708,013
Agricultural real estate		-		-
Home equity		8,050		10,897
Commercial loans		40,926		57,783
Agricultural loans		-		-
Consumer loans		89,146		109,340
Total	$	2,550,278	$	2,609,454

Schedule of recorded balance at original cost of troubled debt restructurings performing according to terms of restructuring

	June 30, 2016		December 31, 2015
One-to-four family residential	$	519,628	$	526,004
Commercial real estate		891,592		941,173
Agricultural real estate		-		-
Home equity		7,768		10,897
Commercial loans		36,174		57,783
Agricultural loans		-		-
Consumer loans		7,623		86,255
Total	$	1,462,785	$	1,622,112

Schedule of loans modified as troubled debt restructurings

	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	40,934
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		-		-		-		-
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		-		-		-		-
Total		-	$	-		1	$	40,934

	Three Months Ended				Six Months Ended
	June 30, 2015				June 30, 2015
	Number of		Recorded		Number of		Recorded
	Modifications		Investment		Modifications		Investment
One-to-four family residential		-	$	-		1	$	103,434
Commercial real estate		-		-		-		-
Agricultural real estate		-		-		-		-
Home equity		1		2,497		1		2,497
Commercial loans		-		-		-		-
Agricultural loans		-		-		-		-
Consumer loans		1		66,650		2		68,589
Total		2	$	69,147		4	$	174,520

Schedule of nonaccrual loans

	June 30, 2016		December 31, 2015
One-to-four family residential	$	555,223	$	911,283
Commercial real estate		794,867		840,449
Agricultural real estate		-		-
Home equity		81,182		118,502
Commercial loans		4,753		9,314
Agricultural loans		-		-
Consumer loans		168,287		141,605
Total	$	1,604,312	$	2,021,153

XML

INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and approximate fair values of available for sale securities

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2016:
U.S. government and agencies	$	23,402,502	$	393,863	$	(10,373	)	$	23,785,992
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		424,443		(10,742	)		24,521,854
Municipal bonds		42,102,941		1,755,608		(23,994	)		43,834,555
	$	89,613,596	$	2,573,914	$	(45,109	)	$	92,142,401
December 31, 2015:
U.S. government and agencies	$	15,979,475	$	44,972	$	(85,750	)	$	15,938,697
Mortgage-backed securities (government- sponsored enterprises - residential)		23,067,200		211,987		(100,792	)		23,178,395
Municipal bonds		47,229,171		1,306,328		(179,259	)		48,356,240
	$	86,275,846	$	1,563,287	$	(365,801	)	$	87,473,332

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

	Amortized		Fair
	Cost		Value
Within one year	$	1,022,863	$	1,028,376
More than one year to five years		9,040,013		9,379,342
More than five years to ten years		33,399,985		34,500,726
After ten years		22,042,582		22,712,103
		65,505,443		67,620,547
Mortgage-backed securities (government- sponsored enterprises - residential)		24,108,153		24,521,854
	$	89,613,596	$	92,142,401

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

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
June 30, 2016:
U.S. government agencies	$	(10,373	)	$	1,651,921	$	-		$	-	$	(10,373	)	$	1,651,921
Mortgage-backed securities (government sponsored enterprises - residential)		(10,742	)		5,587,647		-			-		(10,742	)		5,587,647
Municipal bonds		(13,040	)		2,347,998		(10,954	)		744,540	$	(23,994	)	$	3,092,538
Total	$	(34,155	)	$	9,587,566	$	(10,954	)	$	744,540	$	(45,109	)	$	10,332,106
December 31, 2015:
U.S. government agencies	$	(49,205	)	$	8,591,014	$	(36,545	)	$	1,809,745	$	(85,750	)	$	10,400,759
Mortgage-backed securities (government sponsored enterprises - residential)		(45,886	)		5,843,754		(54,906	)		2,257,674		(100,792	)		8,101,428
Municipal bonds		(48,383	)		5,440,291		(130,876	)		6,734,290		(179,259	)		12,174,581
Total	$	(143,474	)	$	19,875,059	$	(222,327	)	$	10,801,709	$	(365,801	)	$	30,676,768

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Schedule of accumulated other comprehensive income

	June 30, 2016			December 31, 2015
Net unrealized gains on securities available-for-sale	$	2,528,805		$	1,197,486
Tax effect		(859,793	)		(407,145	)
Net-of-tax amount	$	1,669,012		$	790,341

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT (Tables)

6 Months Ended

Jun. 30, 2016

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
	Three Months Ended						Six Months Ended						Affected Line Item in the
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			Statements of Income
Unrealized gains on available     -for-sale securities	$	106,537		$	78,860		$	208,098		$	212,076		Net realized gains on sales of available-for-sale securities
Tax effect		(36,222	)		(26,813	)		(70,753	)		(72,106	)	Income taxes
Total reclassification out of   AOCI	$	70,315		$	52,047		$	137,345		$	139,970		Net reclassified amount

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

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

			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agencies	$	23,785,992	$	-	$	23,785,992	$	-
Mortgage-backed securities (Government sponsored enterprises - residential)		24,521,854		-		24,521,854		-
Municipal bonds		43,834,555		-		43,834,555		-

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and   agencies	$	15,938,697	$	-	$	15,938,697	$	-
Mortgage-backed securities   (Government sponsored   enterprises - residential)		23,178,395		-		23,178,395		-
Municipal bonds		48,356,240		-		48,356,240		-

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

			June 30, 2016
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	622,572	$	-	$	-	$	622,572
Real estate owned		72,000		-		-		72,000

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets  for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans (collateral dependent)	$	899,981	$	-	$	-	$	899,981

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

	Fair Value at 6/30/16		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Real estate owned	$	72,000	Market comparable properties	Comparability adjustments (%)		30	%
Collateral-dependent impaired loans		622,572	Market comparable properties	Marketability discount		25% – 50% (40%)

	Fair Value at 12/31/15		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans		899,981	Market comparable properties	Marketability discount		20% – 30% (25%)

Schedule of estimated fair values of other financial instrument

	June 30, 2016
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	9,636,838	$	9,636,838	$	-	$	-
Interest-earning time deposits in banks		2,486,000		2,486,000		-		-
Other investments		59,134		-		59,134		-
Loans held for sale		80,481		-		80,481		-
Loans, net of allowance for loan losses		188,950,575		-		-		188,965,506
Federal Home Loan Bank stock		363,800		-		363,800		-
Interest receivable		1,982,561		-		1,982,561		-
Financial Liabilities
Deposits		254,261,041		-		176,198,419		79,147,083
Short-term borrowings		3,535,881		-		3,535,881		-
Advances from borrowers for taxes and insurance		1,172,034		-		1,172,034		-
Interest payable		104,919		-		104,919		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

			December 31, 2015
			Fair Value Measurements Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	4,103,432	$	4,103,432	$	-	$	-
Interest-earning time deposits		2,724,000		2,724,000		-		-
Other investments		62,223		-		62,223		-
Loans held for sale		539,000		-		539,000		-
Loans, net of allowance for loan losses		193,039,879		-		-		193,006,301
Federal Home Loan Bank stock		1,113,800		-		1,113,800		-
Interest receivable		1,715,676		-		1,715,676		-
Financial Liabilities
Deposits		239,281,930		-		160,227,406		80,300,060
Short-term borrowings		15,131,710		-		6,631,710		8,500,000
Advances from borrowers for taxes and insurance		990,917		-		990,917		-
Interest payable		118,335		-		118,335		-
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		-		-		-		-
Letters of credit		-		-		-		-
Lines of credit		-		-		-		-

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MORTGAGE SERVICING RIGHTS (Tables)

6 Months Ended

Jun. 30, 2016

Transfers and Servicing [Abstract]

Schedule of activity in balance of mortgage servicing rights measured using amortization method

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	645,067		$	689,603
Servicing rights capitalized		27,776			73,650
Amortization of servicing rights		(43,834	)		(118,186	)
Change in valuation allowance		-			-
Balance, end of period	$	629,009		$	645,067

Schedule of activity in valuation allowance for mortgage servicing rights

	June 30, 2016			December 31, 2015
Balance, beginning of period	$	47,354		$	56,969
Additions		-			-
Reductions		(6,107	)		(9,615	)
Balance, end of period	$	41,247		$	47,354

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Schedule of reconciliation of income tax expense at statutory rate to actual income tax expense

	June 30, 2016			June 30, 2015
Computed at the statutory rate (34%)	$	741,192		$	761,822
Increase (decrease) resulting from
Tax exempt interest		(223,220	)		(214,944	)
State income taxes, net		97,943			99,455
Increase in cash surrender value		(29,234	)		(29,640	)
Other, net		412			1,300
Actual tax expense	$	587,093		$	617,993

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EARNINGS PER SHARE - Earnings Per Share Calculations for Basic and Diluted Methods (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net income available to common shareholders	$ 765,506	$ 836,403	$ 1,592,884	$ 1,622,660
Basic average shares outstanding	1,775,726	1,774,375	1,773,321	1,774,828
Diluted potential common shares:
Stock option equivalents	16,458	14,442	15,044	13,618
Diluted average shares outstanding	1,792,184	1,788,817	1,788,365	1,788,446
Basic earnings per share (in dollars per share)	$ 0.43	$ 0.47	$ 0.90	$ 0.91
Diluted earnings per share (in dollars per share)	$ 0.43	$ 0.47	$ 0.89	$ 0.91

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STOCK-BASED COMPENSATION - Summary of ESOP Shares (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Disclosure Of Compensation Related Costs Share based Payments [Abstract]
Unearned shares	18,787	23,845
Shares committed for release	1,192	1,146
Allocated shares	61,659	55,919
Total ESOP shares	81,638	80,910
Fair value of unearned shares	$ 544,228	$ 562,027

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STOCK-BASED COMPENSATION - Stock Option Activity (Details 1) - Stock Options	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
Shares
Outstanding, December 31, 2015 | shares	61,120
Granted | shares
Exercised | shares	(11,332)
Forfeited | shares
Outstanding, June 30, 2016 | shares	49,788
Exercisable, June 30, 2016 | shares	27,853
Weighted Average Exercise price/Share
Outstanding, December 31, 2015 | $ / shares	$ 15.65
Granted | $ / shares
Exercised | $ / shares	15.65
Forfeited | $ / shares
Outstanding, June 30, 2016 | $ / shares	15.65
Exercisable, June 30, 2016 | $ / shares	$ 15.65
Weighted Average Remaining Contractual Life (in years)
Outstanding, June 30, 2016	5 years 9 months
Exercisable, June 30, 2016	5 years 9 months
Aggregate Intrinsic Value
Outstanding, June 30, 2016 | $	$ 577,043
Exercisable, June 30, 2016 | $	$ 322,816

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STOCK-BASED COMPENSATION (Detail Textuals) - $ / shares	1 Months Ended	6 Months Ended
	Apr. 24, 2012	Jun. 30, 2016
Stock Options
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock reserved and awarded	104,035
Vesting period	5 years
Award expiration period	10 years
Closing price per share		$ 27.24
Employee Stock Ownership Plan (ESOP)
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
ESOP purchased an additional shares		41,614
ESOP shares, percentage of common stock issued in the offering		4.00%
Maximum loan repayment term		20 years
Vesting period		6 years

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LOAN PORTFOLIO COMPOSITION - Composition of Loan Portfolio (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 191,927,107	$ 195,988,766	$ 187,793,445
Less: Net deferred loan fees	17,967	29,293
Less: Allowance for loan losses	2,958,565	2,919,594
Total loans receivable, net	$ 188,950,575	$ 193,039,879
Total loans receivable, percentage	101.60%	101.50%
Less: Net deferred loan fees, percentage	0.00%	0.00%
Less: Allowance for loan losses, percentage	1.60%	1.50%
Total loans receivable, net, percentage	100.00%	100.00%
Real estate loans
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 138,734,091	$ 140,691,759
Total loans receivable, percentage	73.50%	72.90%
Real estate loans | One-to-four family residential
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 45,994,916	$ 47,395,344	42,895,033
Total loans receivable, percentage	24.40%	24.60%
Real estate loans | Commercial
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 40,409,491	$ 40,381,680	39,843,156
Total loans receivable, percentage	21.40%	20.90%
Real estate loans | Agricultural
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 41,126,629	$ 41,223,190	43,624,784
Total loans receivable, percentage	21.80%	21.30%
Real estate loans | Home equity
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 11,203,055	$ 11,691,545	11,182,130
Total loans receivable, percentage	5.90%	6.10%
Commercial loans
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 25,747,471	$ 25,453,058	25,113,932
Total loans receivable, percentage	13.60%	13.20%
Agricultural loans
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 13,424,032	$ 16,102,856	12,227,735
Total loans receivable, percentage	7.10%	8.30%
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Total loans receivable	$ 14,021,513	$ 13,741,093	$ 12,906,675
Total loans receivable, percentage	7.40%	7.10%

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LOAN PORTFOLIO COMPOSITION - Balance in Allowances for Loan Losses and Recorded Investment in Loans Based on Portfolio Segment and Impairment Method (Details 1) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Allowance for Loan Losses:
Beginning Balance	$ 2,934,691	$ 2,970,996	$ 2,919,594	$ 2,956,264	$ 2,956,264
Provision charged to expense	30,000	35,000	60,000	65,000	140,000
Losses charged off	(18,313)	(111,940)	(38,778)	(145,834)	(293,829)
Recoveries	12,187	28,990	17,749	47,616	117,159
Ending balance	2,958,565	2,923,046	2,958,565	2,923,046	2,919,594
Ending balance: individually evaluated for impairment, ending balance	885,766	775,440	885,766	775,440	800,664
Ending balance: collectively evaluated for impairment, ending balance	2,072,799	2,147,606	2,072,799	2,147,606	2,118,930
Loans:
Ending balance	191,927,107	187,793,445	191,927,107	187,793,445	195,988,766
Ending balance: individually evaluated for impairment, ending balance	2,365,553	3,755,698	2,365,553	3,755,698	3,840,156
Ending balance: collectively evaluated for impairment, ending balance	189,561,554	184,037,747	189,561,554	184,037,747	192,148,610
Real estate loans
Loans:
Ending balance	138,734,091		138,734,091		140,691,759
Real estate loans | 1-4 Family
Allowance for Loan Losses:
Beginning Balance	864,863	1,032,299	829,604	999,260	999,260
Provision charged to expense	(27,142)	(15,895)	24,501	16,844	(10,386)
Losses charged off	(6,414)	(105,118)	(26,879)	(105,118)	(199,392)
Recoveries	5,205	19,447	9,286	19,747	40,122
Ending balance	836,512	930,733	836,512	930,733	829,604
Ending balance: individually evaluated for impairment, ending balance	240,962	192,916	240,962	192,916	176,079
Ending balance: collectively evaluated for impairment, ending balance	595,550	737,817	595,550	737,817	653,525
Loans:
Ending balance	45,994,916	42,895,033	45,994,916	42,895,033	47,395,344
Ending balance: individually evaluated for impairment, ending balance	638,345	681,410	638,345	681,410	658,734
Ending balance: collectively evaluated for impairment, ending balance	45,356,571	42,213,623	45,356,571	42,213,623	46,736,610
Real estate loans | Commercial Real Estate
Allowance for Loan Losses:
Beginning Balance	900,422	799,534	917,526	855,463	855,463
Provision charged to expense	10,337	41,544	(6,796)	4,334	29,238
Losses charged off				(27,464)	(27,464)
Recoveries	2,971	6,346	3,000	15,091	60,289
Ending balance	913,730	847,424	913,730	847,424	917,526
Ending balance: individually evaluated for impairment, ending balance	523,618	430,596	523,618	430,596	487,205
Ending balance: collectively evaluated for impairment, ending balance	390,112	416,828	390,112	416,828	430,321
Loans:
Ending balance	40,409,491	39,843,156	40,409,491	39,843,156	40,381,680
Ending balance: individually evaluated for impairment, ending balance	1,408,875	1,569,830	1,408,875	1,569,830	1,598,530
Ending balance: collectively evaluated for impairment, ending balance	39,000,616	38,273,326	39,000,616	38,273,326	38,783,150
Real estate loans | Agricultural Real Estate
Allowance for Loan Losses:
Beginning Balance	202,004	212,051	201,918	195,546	195,546
Provision charged to expense	3,629	1,759	3,715	18,264	6,372
Losses charged off
Recoveries
Ending balance	205,633	213,810	205,633	213,810	201,918
Ending balance: individually evaluated for impairment, ending balance
Ending balance: collectively evaluated for impairment, ending balance	205,633	213,810	205,633	213,810	201,918
Loans:
Ending balance	41,126,629	43,624,784	41,126,629	43,624,784	41,223,190
Ending balance: individually evaluated for impairment, ending balance		862,765		862,765	839,546
Ending balance: collectively evaluated for impairment, ending balance	41,126,629	42,762,019	41,126,629	42,762,019	40,383,644
Real estate loans | Home equity
Allowance for Loan Losses:
Beginning Balance	201,537	162,167	149,253	205,577	205,577
Provision charged to expense	(4,161)	(4,591)	47,598	(57,014)	(53,188)
Losses charged off					(13,724)
Recoveries	525	525	1,050	9,538	10,588
Ending balance	197,901	158,101	197,901	158,101	149,253
Ending balance: individually evaluated for impairment, ending balance	9,561	9,982	9,561	9,982	9,922
Ending balance: collectively evaluated for impairment, ending balance	188,340	148,119	188,340	148,119	139,331
Loans:
Ending balance	11,203,055	11,182,130	11,203,055	11,182,130	11,691,545
Ending balance: individually evaluated for impairment, ending balance	61,786	43,046	61,786	43,046	58,340
Ending balance: collectively evaluated for impairment, ending balance	11,141,269	11,139,084	11,141,269	11,139,084	11,633,205
Commercial
Allowance for Loan Losses:
Beginning Balance	345,975	401,231	386,620	421,809	421,809
Provision charged to expense	26,196	(9,263)	(14,449)	(29,926)	(35,327)
Losses charged off
Recoveries	116	26	116	111	138
Ending balance	372,287	391,994	372,287	391,994	386,620
Ending balance: individually evaluated for impairment, ending balance	111,625	141,946	111,625	141,946	127,458
Ending balance: collectively evaluated for impairment, ending balance	260,662	250,048	260,662	250,048	259,162
Loans:
Ending balance	25,747,471	25,113,932	25,747,471	25,113,932	25,453,058
Ending balance: individually evaluated for impairment, ending balance	256,547	221,519	256,547	221,519	277,628
Ending balance: collectively evaluated for impairment, ending balance	25,490,924	24,892,413	25,490,924	24,892,413	25,175,430
Agricultural
Allowance for Loan Losses:
Beginning Balance	160,370	116,529	163,346	57,934	57,934
Provision charged to expense	2,293	8,533	(683)	67,128	105,412
Losses charged off
Recoveries
Ending balance	162,663	125,062	162,663	125,062	163,346
Ending balance: individually evaluated for impairment, ending balance
Ending balance: collectively evaluated for impairment, ending balance	162,663	125,062	162,663	125,062	163,346
Loans:
Ending balance	13,424,032	12,227,735	13,424,032	12,227,735	16,102,856
Ending balance: individually evaluated for impairment, ending balance		375,979		375,979	406,950
Ending balance: collectively evaluated for impairment, ending balance	13,424,032	11,851,756	13,424,032	11,851,756	15,695,906
Consumer
Allowance for Loan Losses:
Beginning Balance	161,474	159,703	169,381	167,319	167,319
Provision charged to expense	19,485	19,578	10,651	17,909	49,289
Losses charged off	(11,899)	(6,822)	(11,899)	(13,252)	(53,249)
Recoveries	3,370	2,646	4,297	3,129	6,022
Ending balance	172,430	175,105	172,430	175,105	169,381
Ending balance: individually evaluated for impairment, ending balance
Ending balance: collectively evaluated for impairment, ending balance	172,430	175,105	172,430	175,105	169,381
Loans:
Ending balance	14,021,513	12,906,675	14,021,513	12,906,675	13,741,093
Ending balance: individually evaluated for impairment, ending balance		1,149		1,149	428
Ending balance: collectively evaluated for impairment, ending balance	14,021,513	12,905,526	14,021,513	12,905,526	13,740,665
Unallocated
Allowance for Loan Losses:
Beginning Balance	98,046	87,482	101,946	53,356	53,356
Provision charged to expense	(637)	(6,665)	(4,537)	27,461	48,590
Losses charged off
Recoveries
Ending balance	97,409	80,817	97,409	80,817	101,946
Ending balance: individually evaluated for impairment, ending balance
Ending balance: collectively evaluated for impairment, ending balance	97,409	80,817	97,409	80,817	101,946
Loans:
Ending balance
Ending balance: individually evaluated for impairment, ending balance
Ending balance: collectively evaluated for impairment, ending balance

XML

LOAN PORTFOLIO COMPOSITION - Credit Risk Profile of Loan Portfolio based on Rating Category and Payment Activity (Details 2) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	$ 191,927,107	$ 195,988,766	$ 187,793,445
Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	184,616,170	187,187,317
Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	2,868,760	3,781,152
Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	4,442,177	5,020,297
Real estate loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	138,734,091	140,691,759
Real estate loans | 1-4 Family
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	45,994,916	47,395,344	42,895,033
Real estate loans | 1-4 Family | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	43,154,776	44,120,334
Real estate loans | 1-4 Family | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	1,160,680	1,323,266
Real estate loans | 1-4 Family | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	1,679,460	1,951,744
Real estate loans | Commercial Real Estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	40,409,491	40,381,680	39,843,156
Real estate loans | Commercial Real Estate | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	37,869,883	37,628,385
Real estate loans | Commercial Real Estate | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	447,626	454,194
Real estate loans | Commercial Real Estate | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	2,091,982	2,299,101
Real estate loans | Agricultural Real Estate
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	41,126,629	41,223,190	43,624,784
Real estate loans | Agricultural Real Estate | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	41,126,629	40,383,644
Real estate loans | Agricultural Real Estate | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross		839,546
Real estate loans | Agricultural Real Estate | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Real estate loans | Home equity
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	11,203,055	11,691,545	11,182,130
Real estate loans | Home equity | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	10,415,807	11,324,889
Real estate loans | Home equity | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	563,621	68,044
Real estate loans | Home equity | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	223,627	298,612
Commercial
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	25,747,471	25,453,058	25,113,932
Commercial | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	25,444,203	25,117,982
Commercial | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	41,968	51,196
Commercial | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	261,300	283,880
Agricultural
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	13,424,032	16,102,856	12,227,735
Agricultural | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	12,787,458	15,110,606
Agricultural | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	636,574	992,250
Agricultural | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross
Consumer loans
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	14,021,513	13,741,093	$ 12,906,675
Consumer loans | Pass
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	13,817,414	13,501,477
Consumer loans | Special Mention
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	18,291	52,656
Consumer loans | Substandard
Accounts Notes And Loans Receivable [Line Items]
Loans receivable gross	$ 185,808	$ 186,960

XML

LOAN PORTFOLIO COMPOSITION - Loan Portfolio Aging Analysis (Details 3) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 1,766,904	$ 2,166,123
Current	190,160,203	193,822,643
Total Loans	191,927,107	195,988,766	$ 187,793,445
Total Loans >90 Days & Accruing
30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	330,801	550,817
60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	175,371	149,865
Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,260,732	1,465,441
Real estate loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	138,734,091	140,691,759
Real estate loans | One-to-four family residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	679,500	1,045,812
Current	45,315,416	46,349,532
Total Loans	45,994,916	47,395,344	42,895,033
Total Loans >90 Days & Accruing
Real estate loans | One-to-four family residential | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	172,411	345,169
Real estate loans | One-to-four family residential | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	49,690	77,588
Real estate loans | One-to-four family residential | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	457,399	623,055
Real estate loans | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	734,173	766,840
Current	39,675,318	39,614,840
Total Loans	40,409,491	40,381,680	39,843,156
Total Loans >90 Days & Accruing
Real estate loans | Commercial real estate | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Real estate loans | Commercial real estate | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Real estate loans | Commercial real estate | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	734,173	766,840
Real estate loans | Agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Current	41,126,629	41,223,190
Total Loans	41,126,629	41,223,190	43,624,784
Total Loans >90 Days & Accruing
Real estate loans | Agricultural real estate | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Real estate loans | Agricultural real estate | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Real estate loans | Agricultural real estate | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Real estate loans | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	83,820	157,942
Current	11,119,235	11,533,603
Total Loans	11,203,055	11,691,545	11,182,130
Total Loans >90 Days & Accruing
Real estate loans | Home equity | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		22,122
Real estate loans | Home equity | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	57,722	66,305
Real estate loans | Home equity | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	26,098	69,515
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	71,707
Current	25,675,764	25,453,058
Total Loans	25,747,471	25,453,058	25,113,932
Total Loans >90 Days & Accruing
Commercial | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	32,504
Commercial | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	39,203
Commercial | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Agricultural
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Current	13,424,032	16,102,856
Total Loans	13,424,032	16,102,856	12,227,735
Total Loans >90 Days & Accruing
Agricultural | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Agricultural | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Agricultural | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	197,704	195,529
Current	13,823,809	13,545,564
Total Loans	14,021,513	13,741,093	$ 12,906,675
Total Loans >90 Days & Accruing
Consumer | 30-59 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	125,886	183,526
Consumer | 60-89 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	28,756	5,972
Consumer | Greater than 90 Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 43,062	$ 6,031

XML

LOAN PORTFOLIO COMPOSITION - Impaired Loans (Details 4) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
Recorded Balance, Total	$ 2,365,553	$ 2,365,553	$ 3,840,156
Unpaid Principal Balance, Total	2,365,553	2,365,553	3,840,156
Specific Allowance, Total	885,766	885,766	800,664
Average Impairment in Impaired Loans, Total	2,700,538	2,670,197	4,141,743
Interest Income Recognized, Total	31,945	75,228	217,926
Interest Income Recognized Cash Basis, Total	31,021	72,238	180,961
Real estate loans | One-to-four family residential
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance	101,631	101,631	111,166
Loans without a specific valuation allowance, Unpaid Principal Balance	101,631	101,631	111,166
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	203,060	204,264	211,346
Loans without a specific valuation allowance, Interest Income Recognized	2,863	5,815	12,248
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	3,087	6,068	12,042
Loans with a specific valuation allowance, Recorded Balance	536,714	536,714	547,568
Loans with a specific valuation allowance, Unpaid Principal Balance	536,714	536,714	547,568
Loans with a specific valuation allowance, Specific Allowance	240,962	240,962	176,079
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	556,807	561,936	568,790
Loans with a specific valuation allowance, Interest Income Recognized	8,088	16,144	32,908
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	6,221	11,974	25,352
Recorded Balance, Total	638,345	638,345	658,734
Unpaid Principal Balance, Total	638,345	638,345	658,734
Specific Allowance, Total	240,962	240,962	176,079
Average Impairment in Impaired Loans, Total	759,867	766,200	780,136
Interest Income Recognized, Total	10,951	21,959	45,156
Interest Income Recognized Cash Basis, Total	9,308	18,042	37,394
Real estate loans | Commercial real estate
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance	368,248	368,248	516,560
Loans without a specific valuation allowance, Unpaid Principal Balance	368,248	368,248	516,560
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	476,130	451,875	663,640
Loans without a specific valuation allowance, Interest Income Recognized	1,333	11,128	34,155
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis		5,400	34,586
Loans with a specific valuation allowance, Recorded Balance	1,040,627	1,040,627	1,081,970
Loans with a specific valuation allowance, Unpaid Principal Balance	1,040,627	1,040,627	1,081,970
Loans with a specific valuation allowance, Specific Allowance	523,618	523,618	487,205
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	1,103,023	1,105,566	1,118,044
Loans with a specific valuation allowance, Interest Income Recognized	16,585	33,251	67,505
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	20,089	42,647	47,864
Recorded Balance, Total	1,408,875	1,408,875	1,598,530
Unpaid Principal Balance, Total	1,408,875	1,408,875	1,598,530
Specific Allowance, Total	523,618	523,618	487,205
Average Impairment in Impaired Loans, Total	1,579,153	1,557,441	1,781,684
Interest Income Recognized, Total	17,918	44,379	101,660
Interest Income Recognized Cash Basis, Total	20,089	48,047	82,450
Real estate loans | Agricultural real estate
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance			839,546
Loans without a specific valuation allowance, Unpaid Principal Balance			839,546
Loans without a specific valuation allowance, Average Impairment in Impaired Loans			864,705
Loans without a specific valuation allowance, Interest Income Recognized			43,335
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis			44,885
Recorded Balance, Total			839,546
Unpaid Principal Balance, Total			839,546
Specific Allowance, Total
Average Impairment in Impaired Loans, Total			864,705
Interest Income Recognized, Total			43,335
Interest Income Recognized Cash Basis, Total			44,885
Real estate loans | Home equity
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance	52,225	52,225	48,418
Loans without a specific valuation allowance, Unpaid Principal Balance	52,225	52,225	48,418
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	53,293	52,498	43,342
Loans without a specific valuation allowance, Interest Income Recognized	908	1,810	3,333
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	920	1,822	3,331
Loans with a specific valuation allowance, Recorded Balance	9,561	9,561	9,922
Loans with a specific valuation allowance, Unpaid Principal Balance	9,561	9,561	9,922
Loans with a specific valuation allowance, Specific Allowance	9,561	9,561	9,922
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	9,982	9,982	9,982
Loans with a specific valuation allowance, Interest Income Recognized	253	505	810
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	180	361	722
Recorded Balance, Total	61,786	61,786	58,340
Unpaid Principal Balance, Total	61,786	61,786	58,340
Specific Allowance, Total	9,561	9,561	9,922
Average Impairment in Impaired Loans, Total	63,275	62,480	53,324
Interest Income Recognized, Total	1,161	2,315	4,143
Interest Income Recognized Cash Basis, Total	1,100	2,183	4,053
Commercial
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance	80,172	80,172	80,172
Loans without a specific valuation allowance, Unpaid Principal Balance	80,172	80,172	80,172
Loans without a specific valuation allowance, Average Impairment in Impaired Loans	118,609	99,433	83,509
Loans without a specific valuation allowance, Interest Income Recognized	1,430	2,431	634
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	432	432	150
Loans with a specific valuation allowance, Recorded Balance	176,375	176,375	197,456
Loans with a specific valuation allowance, Unpaid Principal Balance	176,375	176,375	197,456
Loans with a specific valuation allowance, Specific Allowance	111,625	111,625	127,458
Loans with a specific valuation allowance, Average Impairment in Impaired Loans	179,634	184,643	269,496
Loans with a specific valuation allowance, Interest Income Recognized	485	4,144	11,517
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	92	3,534	11,139
Recorded Balance, Total	256,547	256,547	277,628
Unpaid Principal Balance, Total	256,547	256,547	277,628
Specific Allowance, Total	111,625	111,625	127,458
Average Impairment in Impaired Loans, Total	298,243	284,076	353,005
Interest Income Recognized, Total	1,915	6,575	12,151
Interest Income Recognized Cash Basis, Total	$ 524	$ 3,966	11,289
Agricultural business
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance			406,950
Loans without a specific valuation allowance, Unpaid Principal Balance			406,950
Loans without a specific valuation allowance, Average Impairment in Impaired Loans			307,729
Loans without a specific valuation allowance, Interest Income Recognized			11,403
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis			808
Recorded Balance, Total			406,950
Unpaid Principal Balance, Total			406,950
Specific Allowance, Total
Average Impairment in Impaired Loans, Total			307,729
Interest Income Recognized, Total			11,403
Interest Income Recognized Cash Basis, Total			808
Consumer
Financing Receivable, Impaired [Line Items]
Loans without a specific valuation allowance, Recorded Balance			428
Loans without a specific valuation allowance, Unpaid Principal Balance			428
Loans without a specific valuation allowance, Average Impairment in Impaired Loans			1,160
Loans without a specific valuation allowance, Interest Income Recognized			78
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis			82
Recorded Balance, Total			428
Unpaid Principal Balance, Total			428
Specific Allowance, Total
Average Impairment in Impaired Loans, Total			1,160
Interest Income Recognized, Total			78
Interest Income Recognized Cash Basis, Total			$ 82

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LOAN PORTFOLIO COMPOSITION - Recorded Balance at Original Cost of Troubled Debt Restructurings (Details 5) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	$ 2,550,278	$ 2,609,454
Real estate loans | One-to-four family residential
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	764,358	723,421
Real estate loans | Commercial real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	1,647,798	1,708,013
Real estate loans | Agricultural real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost
Real estate loans | Home equity
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	8,050	10,897
Commercial loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	40,926	57,783
Agricultural loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost
Consumer loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost	$ 89,146	$ 109,340

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LOAN PORTFOLIO COMPOSITION - Recorded Balance at Original Cost of Troubled Debt Restructurings which were Performing According to Terms of Restructuring (Details 6) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	$ 1,462,785	$ 1,622,112
Real estate loans | One-to-four family residential
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	519,628	526,004
Real estate loans | Commercial real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	891,592	941,173
Real estate loans | Agricultural real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing
Real estate loans | Home equity
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	7,768	10,897
Commercial loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	36,174	57,783
Agricultural loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing
Consumer loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, original cost, performing	$ 7,623	$ 86,255

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LOAN PORTFOLIO COMPOSITION - Loans Modified as Troubled Debt Restructurings (Details 7)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan		2	1	4
Troubled debt restructurings, recorded investment | $		$ 69,147	$ 40,934	$ 174,520
Real estate loans | One-to-four family residential
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan			1	1
Troubled debt restructurings, recorded investment | $			$ 40,934	$ 103,434
Real estate loans | Commercial real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment | $
Real estate loans | Agricultural real estate
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment | $
Real estate loans | Home equity
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan		1		1
Troubled debt restructurings, recorded investment | $		$ 2,497		$ 2,497
Commercial loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment | $
Agricultural loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment | $
Consumer loans
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings, number of modification | Loan		1		2
Troubled debt restructurings, recorded investment | $		$ 66,650		$ 68,589

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LOAN PORTFOLIO COMPOSITION - Nonaccrual Loans (Details 8) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 1,604,312	$ 2,021,153
Real estate loans | One-to-four family residential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	555,223	911,283
Real estate loans | Commercial real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	794,867	840,449
Real estate loans | Agricultural real estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Real estate loans | Home equity
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	81,182	118,502
Commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	4,753	9,314
Agricultural loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Consumer loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 168,287	$ 141,605

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LOAN PORTFOLIO COMPOSITION (Detail Textuals)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2016 USD ($) Loan	Jun. 30, 2015 USD ($) Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount			$ 500,000
Troubled debt restructurings, number of modification | Loan		2	1	4
Troubled debt restructurings, recorded investment		$ 69,147	$ 40,934	$ 174,520
Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan commitments reimbursement period			45 days
Percentage of total applicant's monthly mortgage payment total monthly income			28.00%
Percentage of applicant's total monthly obligations to total monthly income			38.00%
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
One-to-Four Family Mortgage Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			1 year
One-to-Four Family Mortgage Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			5 years
Automobile Loans | Purchase Price
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			80.00%
Real estate loans | One-to-Four Family Mortgage Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			80.00%
Troubled debt restructurings, number of modification | Loan			1	1
Troubled debt restructurings, recorded investment			$ 40,934	$ 103,434
Real estate loans | One-to-Four Family Mortgage Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			30 years
Real estate loans | Commercial Real Estate Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings default loans, number of modification | Loan			1	1
TDR's defaulted as they were more than 90 days past due			$ 734,173	$ 794,110
Real estate loans | Commercial Real Estate Loans | Minimum
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
Real estate loans | Commercial Real Estate Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			5 years
Loan to value ratios			80.00%
Real estate loans | Agricultural Real Estate Loans | Minimum
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
Real estate loans | Agricultural Real Estate Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term			5 years
Loan to value ratios			80.00%
Real estate loans | Home Equity Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings default loans, number of modification | Loan				1
Troubled debt restructurings, number of modification | Loan		1		1
Troubled debt restructurings, recorded investment		$ 2,497		$ 2,497
TDR's defaulted as they were more than 90 days past due				$ 3,138
Real estate loans | Home Equity Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			10 years
Loan to value ratios			95.00%
Real estate loans | Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings default loans, number of modification | Loan			3	3
TDR's defaulted as they were more than 90 days past due			$ 184,804	$ 197,941
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment
Commercial | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			3 years
Commercial | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			5 years
Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modification | Loan
Troubled debt restructurings, recorded investment
Agricultural | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			5 years
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modification | Loan		1		2
Troubled debt restructurings, recorded investment		$ 66,650		$ 68,589
Consumer loans | Purchase Price
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			80.00%
Consumer loans | NADA Book Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios			100.00%
Consumer loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			60 months
Freddie Mac and Federal Home Loan Bank Mortgage Loan | Real estate loans | One-to-Four Family Mortgage Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term			15 years

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INVESTMENTS - Amortized Cost and Approximate Fair Value of Available-for-Sale Securities (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	$ 89,613,596	$ 86,275,846
Gross Unrealized Gains	2,573,914	1,563,287
Gross Unrealized Losses	(45,109)	(365,801)
Available-for-sale securities, Fair Value	92,142,401	87,473,332
U.S. government and agencies
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	23,402,502	15,979,475
Gross Unrealized Gains	393,863	44,972
Gross Unrealized Losses	(10,373)	(85,750)
Available-for-sale securities, Fair Value	23,785,992	15,938,697
Mortgage-backed securities (government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	24,108,153	23,067,200
Gross Unrealized Gains	424,443	211,987
Gross Unrealized Losses	(10,742)	(100,792)
Available-for-sale securities, Fair Value	24,521,854	23,178,395
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, Amortized Cost	42,102,941	47,229,171
Gross Unrealized Gains	1,755,608	1,306,328
Gross Unrealized Losses	(23,994)	(179,259)
Available-for-sale securities, Fair Value	$ 43,834,555	$ 48,356,240

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INVESTMENTS - Amortized Cost and Fair Value of Available-for-Sale Securities by Contractual Maturities (Details 1) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Amortized Cost
Within one year	$ 1,022,863
More than one year to five years	9,040,013
More than five years to ten years	33,399,985
After ten years	22,042,582
Available-for-sale securities, single maturity date, amortized cost	65,505,443
Mortgage-backed securities (government- sponsored enterprises - residential)	24,108,153
Available-for-sale securities, amortized cost, total	89,613,596
Fair Value
Within one year	1,028,376
More than one year to five years	9,379,342
More than five years to ten years	34,500,726
After ten years	22,712,103
Available-for-sale securities, single maturity date, fair value	67,620,547	$ 64,294,937
Mortgage-backed securities (government- sponsored enterprises - residential)	24,521,854	$ 23,178,395
Available-for-sale securities, fair value, total	$ 92,142,401

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INVESTMENTS - Gross Unrealized Losses and Fair Value in Continuous Loss Position (Details 2) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	$ (34,155)	$ (143,474)
Less Than Twelve Months, Fair Value	9,587,566	19,875,059
Twelve Months or More, Gross Unrealized Losses	(10,954)	(222,327)
Twelve Months or More, Fair Value	744,540	10,801,709
Gross Unrealized Losses	(45,109)	(365,801)
Fair Value	10,332,106	30,676,768
U.S. government agencies
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(10,373)	(49,205)
Less Than Twelve Months, Fair Value	1,651,921	8,591,014
Twelve Months or More, Gross Unrealized Losses		(36,545)
Twelve Months or More, Fair Value		1,809,745
Gross Unrealized Losses	(10,373)	(85,750)
Fair Value	1,651,921	10,400,759
Mortgage-backed securities (government-sponsored enterprises - residential)
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(10,742)	(45,886)
Less Than Twelve Months, Fair Value	5,587,647	5,843,754
Twelve Months or More, Gross Unrealized Losses		(54,906)
Twelve Months or More, Fair Value		2,257,674
Gross Unrealized Losses	(10,742)	(100,792)
Fair Value	5,587,647	8,101,428
Municipal bonds
Investments, Unrealized Loss Position [Line Items]
Less Than Twelve Months, Gross Unrealized Losses	(13,040)	(48,383)
Less Than Twelve Months, Fair Value	2,347,998	5,440,291
Twelve Months or More, Gross Unrealized Losses	(10,954)	(130,876)
Twelve Months or More, Fair Value	744,540	6,734,290
Gross Unrealized Losses	(23,994)	(179,259)
Fair Value	$ 3,092,538	$ 12,174,581

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INVESTMENTS (Detail Textuals) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Investments, Unrealized Loss Position [Line Items]
Securities pledged as collateral	$ 41,990,000		$ 41,990,000		$ 25,681,000
Securities sold under agreements to repurchase	3,536,000		3,536,000		7,591,000
Gross realized gains on sales of available-for-sale securities	107,000	$ 79,000	211,000	$ 244,000
Gross realized losses on sales of available-for-sale securities	0	$ 0	3,000	$ 32,000
Debt securities, fair value	$ 10,332,000		$ 10,332,000		$ 30,677,000
Percentage of available-for-sale investment portfolio	11.00%		11.00%		35.00%
Time deposits in other banks
Investments, Unrealized Loss Position [Line Items]
Repurchase agreements secured by debt	$ 741,000		$ 741,000
Mortgage backed securities
Investments, Unrealized Loss Position [Line Items]
Repurchase agreements secured by debt	4,499,000		4,499,000
U.S. government agency bonds
Investments, Unrealized Loss Position [Line Items]
Repurchase agreements secured by debt	$ 550,000		$ 550,000

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ACCUMULATED OTHER COMPREHENSIVE INCOME - Other Comprehensive Income Components and Related Taxes (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net-of-tax amount	$ 1,669,012	$ 790,341
Unrealized gains (losses) on available-for-sale securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net unrealized gains on securities available-for-sale	2,528,805	1,197,486
Tax effect	(859,793)	(407,145)
Net-of-tax amount	$ 1,669,012	$ 790,341

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) BY COMPONENT - Amount Reclassified from Accumulated Other Comprehensive Income and Affected Line Items in Statements of Income (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	$ (36,222)	$ (26,813)	$ (70,753)	$ (72,106)
Total reclassification out of AOCI	70,315	52,047	137,345	139,970
Reclassification out of Accumulated Other Comprehensive Income | Income taxes
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax effect	(36,222)	(26,813)	(70,753)	(72,106)
Reclassification out of Accumulated Other Comprehensive Income | Net reclassified amount
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassification out of AOCI	70,315	52,047	137,345	139,970
Reclassification out of Accumulated Other Comprehensive Income | Unrealized gains (losses) on available-for-sale securities | Net realized gains on sales of available-for-sale securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized gains on sales of available-for-sale securities	$ 106,537	$ 78,860	$ 208,098	$ 212,076

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Fair Value Measurements of Assets Recognized in Balance Sheets on Recurring Basis (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	$ 92,142,401	$ 87,473,332
U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	23,785,992	15,938,697
Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	24,521,854	23,178,395
Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	43,834,555	48,356,240
Recurring | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	23,785,992	15,938,697
Recurring | Mortgage-backed securities (government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	24,521,854	23,178,395
Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	43,834,555	48,356,240
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
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
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
Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	23,785,992	15,938,697
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	24,521,854	23,178,395
Recurring | Significant Other Observable Inputs (Level 2) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	43,834,555	48,356,240
Recurring | Significant Unobservable Inputs (Level 3) | U.S. Government and agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
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
Recurring | Significant Unobservable Inputs (Level 3) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Fair Value Measurement of Assets Measured at Fair Value on Nonrecurring Basis (Details 1) - Nonrecurring - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 622,572	$ 899,981
Real estate owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	72,000
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
Quoted Prices in Active Markets for Identical Assets (Level 1) | Real estate owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
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
Significant Other Observable Inputs (Level 2) | Real estate owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
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	622,572	$ 899,981
Significant Unobservable Inputs (Level 3) | Real estate owned
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 72,000

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES- Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Details 2) - Significant Unobservable Inputs (Level 3) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 72,000
Valuation Technique	Market comparable properties
Unobservable Inputs	Comparability adjustments
Real estate owned | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Comparability adjustments (%)	30.00%
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	$ 622,572	$ 899,981
Valuation Technique	Market comparable properties	Market comparable properties
Unobservable Inputs	Marketability discount	Marketability discount
Collateral-dependent impaired loans | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	25.00%	20.00%
Collateral-dependent impaired loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	50.00%	30.00%
Collateral-dependent impaired loans | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	40.00%	25.00%

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DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES - Estimated Fair Values of Other Financial Instruments (Details 3) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Carrying Amount
Financial Assets
Cash and cash equivalents	$ 9,636,838	$ 4,103,432
Interest-earning time deposits	2,486,000	2,724,000
Other investments	59,134	62,223
Loans held for sale	80,481	539,000
Loans, net of allowance for loan losses	188,950,575	193,039,879
Federal Home Loan Bank stock	363,800	1,113,800
Interest receivable	1,982,561	1,715,676
Financial Liabilities
Deposits	254,261,041	239,281,930
Short-term borrowings	3,535,881	15,131,710
Advances from borrowers for taxes and insurance	1,172,034	990,917
Interest payable	104,919	118,335
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value Measurement | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial Assets
Cash and cash equivalents	9,636,838	4,103,432
Interest-earning time deposits	2,486,000	2,724,000
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 Measurement | Significant Other Observable Inputs (Level 2)
Financial Assets
Cash and cash equivalents
Interest-earning time deposits
Other investments	59,134	62,223
Loans held for sale	80,481	539,000
Loans, net of allowance for loan losses
Federal Home Loan Bank stock	363,800	1,113,800
Interest receivable	1,982,561	1,715,676
Financial Liabilities
Deposits	176,198,419	160,227,406
Short-term borrowings	3,535,881	6,631,710
Advances from borrowers for taxes and insurance	1,172,034	990,917
Interest payable	104,919	118,335
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value Measurement | Significant Unobservable Inputs (Level 3)
Financial Assets
Cash and cash equivalents
Interest-earning time deposits
Other investments
Loans held for sale
Loans, net of allowance for loan losses	188,965,506	193,006,301
Federal Home Loan Bank stock
Interest receivable
Financial Liabilities
Deposits	79,147,083	80,300,060
Short-term borrowings		8,500,000
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

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MORTGAGE SERVICING RIGHTS- Activity in the balance of Mortgage Servicing Rights Measured using Amortization Method (Details) - Mortgage servicing rights - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Servicing Asset at Amortized Cost, Balance [Roll Forward]
Balance, beginning of period	$ 645,067	$ 689,603
Servicing rights capitalized	27,776	73,650
Amortization of servicing rights	(43,834)	(118,186)
Change in valuation allowance
Balance, end of period	$ 629,009	$ 645,067

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MORTGAGE SERVICING RIGHTS - Activity in the valuation allowance for mortgage servicing rights (Details 1) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Valuation Allowance for Impairment of Recognized Servicing Assets [Roll Forward]
Balance, beginning of period	$ 47,354
Balance, end of period	41,247	$ 47,354
Mortgage servicing rights
Valuation Allowance for Impairment of Recognized Servicing Assets [Roll Forward]
Balance, beginning of period	47,354	56,969
Additions
Reductions	(6,107)	(9,615)
Balance, end of period	$ 41,247	$ 47,354

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INCOME TAXES - Reconciliation of Income Tax Expense at Statutory Rate to Actual Income Tax Expense (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Computed at the statutory rate (34%)			$ 741,192	$ 761,822
Increase (decrease) resulting from
Tax exempt interest			(223,220)	(214,944)
State income taxes, net			97,943	99,455
Increase in cash surrender value			(29,234)	(29,640)
Other, net			412	1,300
Actual tax expense	$ 277,732	$ 327,139	$ 587,093	$ 617,993

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INCOME TAXES - Reconciliation of Income Tax Expense at Statutory Rate to Actual Income Tax Expense (Parentheticals) (Details)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Statutory income tax rate	34.00%	34.00%