10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2016.

or

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

For the transition period from ______________ to ______________.

Commission file number: 001-34821

JACKSONVILLE BANCORP, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

YES ¨         NO x

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

YES ¨         NO x

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

YES x  NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

YES x  NO ¨

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

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

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2016, as reported by the Nasdaq Capital Market, was approximately $49.0 million.

As of March 1, 2017, there were issued and outstanding 1,801,701 shares of the Registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) Proxy Statement for the 2017 Annual Meeting of Stockholders of the Registrant (Part III).

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

TABLE OF CONTENTS

ITEM 1.	Business	2
ITEM 1A.	Risk Factors	38
ITEM 1B.	Unresolved Staff Comments	45
ITEM 2.	Properties	45
ITEM 3.	Legal Proceedings	45
ITEM 4.	Mine Safety Disclosures.	45
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
ITEM 6.	Selected Financial Data	46
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	46
ITEM 8.	Financial Statements and Supplementary Data	47
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
ITEM 9A.	Controls and Procedures	47
ITEM 9B.	Other Information	48
ITEM 10.	Directors, Executive Officers and Corporate Governance	48
ITEM 11.	Executive Compensation	48
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	48
ITEM 14.	Principal Accountant Fees and Services	48
ITEM 15.	Exhibits and Financial Statement Schedules	48
ITEM 16.	Form 10-K Summary	50

PART I

ITEM 1.             Business

Jacksonville Bancorp, Inc.

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

The Company’s only significant asset is its investment in Jacksonville Savings Bank. At December 31, 2016, Jacksonville Bancorp, Inc. had consolidated assets of $319.3 million, total deposits of $258.7 million, and stockholders’ equity of $46.2 million.

Jacksonville Savings Bank

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

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

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

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

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

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Market Area

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

The economy of our market area consists primarily of agriculture and related businesses, light industry and state and local government. The largest employers in our market area are Reynolds, Passavant Area Hospital, and the State of Illinois. As of December 2016, unemployment rates in our market area were: 5.1% in Morgan County, 5.9% in Cass County, 5.7% in Macoupin County, and 7.3% in Montgomery County. This compared with unemployment rates of 5.6% in Illinois and 4.5% in the United States as a whole.

Competition

We encounter significant competition both in attracting deposits and in originating real estate and other loans. Our most direct competition for deposits historically has come from commercial banks, other savings banks, savings associations and credit unions in our market area, and we expect continued strong competition from such financial institutions in the foreseeable future. We compete for deposits by offering depositors a high level of personal service and expertise together with a wide range of financial services. Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Morgan, Macoupin and Montgomery counties, Illinois. As of June 30, 2016, our FDIC-insured deposit market share in the counties we serve was 10.3%, which ranked us as the second largest deposit holder out of 30 bank and thrift institutions with offices in Morgan, Macoupin, or Montgomery Counties, Illinois. Such data does not reflect deposits held by credit unions.

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

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

Lending Activities

General. Historically, our principal lending activity has been the origination of mortgage loans secured by one- to four-family residential properties in our local market area. Over the past several years, we have increased our emphasis on originating loans secured by commercial and agricultural real estate. We also originate commercial and agricultural business loans secured by collateral other than real estate as well as unsecured commercial and agricultural business loans. We also originate home equity and consumer loans. At December 31, 2016, our loans receivable totaled $187.5 million, of which $45.3 million, or 24.6%, consisted of one- to four-family residential mortgage loans. The remainder of our loans receivable at December 31, 2016 consisted of commercial real estate loans totaling $41.5 million, or 22.5% of net loans, agricultural real estate loans totaling $38.3 million, or 20.7% of net loans, commercial business loans totaling $21.6 million, or 11.7% of net loans, agricultural business loans totaling $14.7 million, or 7.9% of net loans, consumer loans totaling $14.5 million, or 7.9% of net loans, and home equity loans totaling $11.6 million, or 6.3% of net loans.

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

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We originate fixed-rate residential mortgage loans secured by one- to four-family residential properties with terms up to 30 years. We sell a significant portion of our one- to four-family fixed-rate residential mortgage loan originations with terms of generally 15 years or greater directly to the secondary market. During the years ended December 31, 2016 and 2015, we sold $20.7 million and $16.8 million of fixed-rate residential mortgage loans, respectively. Loans are generally sold without recourse and with servicing retained.

At December 31, 2016, we were servicing $130.5 million in loans for which we received servicing income of $333,000 for the year ended December 31, 2016. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal and are recorded as income when earned as loan servicing fees in noninterest income. The amortization of mortgage servicing rights is netted from the gains on sale of loans, both cash gains as well as the capitalized gains, and is included in mortgage banking operations, net, in noninterest income.

4

Loan Portfolio Composition. Set forth below are selected data relating to the composition of our loan portfolio, by type of loan as of the dates indicated, excluding loans held for sale of $503,000, $539,000, $236,000, $262,000 and $712,000 for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

	At December 31,
	2016					2015					2014					2013					2012
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent			Amount			Percent
	(Dollars in Thousands)
Real estate loans:
One- to four-family residential (1)	$	45,311		24.6	%	$	47,395		24.6	%	$	44,561		24.2	%	$	44,286		24.5	%	$	41,386			23.8	%
Commercial (2)		41,477		22.5			40,382		20.9			40,475		21.9			38,921		21.5			30,973			17.8
Agricultural		38,272		20.7			41,223		21.3			40,119		21.7			35,006		19.4			37,392			21.5
Home equity (3)		11,606		6.3			11,692		6.1			11,283		6.1			11,729		6.5			12,734			7.4
Total real estate loans		136,666		74.1			140,692		72.9			136,438		73.9			129,942		71.9			122,485			70.5
Commercial business loans		21,618		11.7			25,453		13.2			26,814		14.5			29,947		16.6			29,046			16.7
Agricultural business loans		14,650		7.9			16,103		8.3			11,845		6.4			10,560		5.9			10,983			6.3
Consumer loans		14,543		7.9			13,741		7.1			12,587		6.8			13,606		7.5			14,572			8.4
Total loans receivable		187,477		101.6			195,989		101.5			187,684		101.6			184,055		101.9			177,086			101.9
Less:
Unearned premium on purchased loans, unearned discount and deferred loan fees, net		22		—			29		—			9		—			9		—			(6	)		—
Allowance for loan losses		3,007		1.6			2,920		1.5			2,956		1.6			3,406		1.9			3,339			1.9
Total loans receivable, net	$	184,448		100.0	%	$	193,040		100.0	%	$	184,719		100.0	%	$	180,640		100.0	%	$	173,753			100.0	%

(1) Includes one- to four-family real estate construction loans of $1.3 million, $1.3 million, $1.2 million, $328,000 and $1.9 million for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(2) Includes commercial real estate construction loans of $9.6 million, $4.7 million, $3.3 million, $4.7 million and $495,000 for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(3) Includes real estate construction loans of $80,000, $80,000, $140,000, $0, and $40,000 for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

5

One- to Four-Family Mortgage Loans. Historically our primary lending origination activity has been one- to four-family, owner-occupied, residential mortgage loans secured by property located in our market area. We generate loans through our marketing efforts, existing customers and referrals, real estate brokers, builders and local businesses. We generally limit our one- to four-family loan originations to the financing of loans secured by properties located within our market area. At December 31, 2016, $45.3 million, or 24.6% of our net loan portfolio, was invested in mortgage loans secured by one- to four-family residences.

Our fixed-rate one- to four-family residential mortgage loans are generally conforming loans, underwritten according to secondary market guidelines. We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits established by the Federal Housing Finance Agency, which is currently $417,000 for single-family homes. At December 31, 2016, we had two one- to four-family residential mortgage loans with principal balances in excess of $417,000, commonly referred to as jumbo loans.

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

We currently offer adjustable-rate mortgage loans for terms ranging up to 30 years. We generally offer adjustable-rate mortgage loans that adjust between one and five years on the anniversary date of origination. Interest rate adjustments are up to two hundred basis points per year, with a cap of up to six hundred basis points on interest rate increases over the life of the loan. In a rising interest rate environment, such rate limitations may prevent adjustable-rate mortgage loans from repricing to market interest rates, which would have an adverse effect on our net interest income. In the low interest rate environment that has existed over the past few years, our adjustable-rate portfolio has repriced downward resulting in lower interest income from this portion of our loan portfolio. We have used different interest indices for adjustable-rate mortgage loans in the past such as the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years or five-years. Adjustable-rate mortgage loans secured by one- to four-family residential real estate totaled $18.3 million, or 40.4% of our total one- to four-family residential real estate loans receivable at December 31, 2016. The origination of fixed-rate mortgage loans versus adjustable-rate mortgage loans is monitored on an ongoing basis and is affected significantly by the level of market interest rates, customer preference, our interest rate risk position and our competitors’ loan products. During 2016, we originated $27.3 million of fixed-rate residential mortgage loans, most of which were subsequently sold in the secondary market, and $3.0 million of adjustable-rate mortgage loans which were held in our portfolio.

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

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

6

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

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

Commercial Real Estate Loans. We originate and purchase commercial real estate loans. At December 31, 2016, $41.5 million, or 22.5%, of our net loan portfolio consisted of commercial real estate loans. During 2016, loan originations secured by commercial real estate totaled $14.5 million as compared to $7.8 million in 2015. Our commercial real estate loans are secured primarily by improved properties such as multi-family residential properties, retail facilities and office buildings, hotels, restaurants, and other non-residential buildings. At December 31, 2016, our commercial real estate loan portfolio included $7.5 million in loans secured by multi-family residential properties, $4.0 million in loans secured by restaurants, $4.2 million in loans secured by hotels, and $25.8 million in loans secured by other commercial properties. The maximum loan-to-value ratio for commercial real estate loans we originate is generally 80%. Our commercial real estate loans are generally written up to terms of five years with adjustable interest rates.  The rates are generally tied to the prime rate and generally have a specified floor. Many of our fixed-rate commercial real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We have $893,000 of interest only commercial real estate loans at December 31, 2016. We purchase from time to time commercial real estate loan participations primarily from outside our market area where we are not the lead lender. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards. At December 31, 2016, commercial real estate loan participations totaled $8.2 million, or 19.7% of the commercial real estate loan portfolio consisting primarily of loan participations outside of our market area which totaled $7.4 million, or 17.9% of the commercial real estate loan portfolio. At December 31, 2016, we had no loan participations delinquent 60 days or more.

At December 31, 2016, our largest commercial real estate loan was secured by a hotel with a principal balance of $3.1 million and was performing in accordance with its terms. At December 31, 2016, our largest commercial real estate loan participation was secured by a manufacturing facility with a principal balance of $1.4 million and was performing in accordance with its terms.

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

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

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Agricultural Real Estate Loans. We originate and purchase agricultural real estate loans. At December 31, 2016, $38.3 million, or 20.7% of our net loan portfolio, consisted of agricultural real estate loans. During 2016, loan originations secured by agricultural real estate totaled $4.2 million, as compared to $8.7 million in 2015. The maximum loan-to-value ratio for agricultural real estate loans we originate is generally 75%. Our agricultural real estate loans are generally written up to terms of thirty years with adjustable interest rates.  The rates are generally tied to the average yield on U.S. Treasury securities, adjusted to a constant maturity of either one-year, three-years, or five-years and generally have a specified floor. Many of our fixed-rate agricultural real estate loans are not fully amortizing and therefore require a “balloon” payment at maturity. We purchase from time to time agricultural real estate loan participations primarily from other local institutions within our market area. All participation loans are approved following a review to ensure that the loan satisfies our underwriting standards. At December 31, 2016, agricultural real estate loan participations totaled $3.2 million, or 8.3% of the agricultural real estate loan portfolio. At December 31, 2016, we had no agricultural real estate loan participations delinquent 60 days or more. At December 31, 2016, our largest agricultural real estate loan was secured by farmland, had a principal balance of $5.0 million and was performing in accordance with its terms.

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

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

Home Equity Loans. At December 31, 2016, home equity loans totaled $11.6 million, or 6.3%, of our net loan portfolio. Our home equity loans and lines of credit are generally secured by the borrower’s principal residence. The maximum amount of a home equity loan or line of credit is generally 95% of the appraised value of a borrower’s real estate collateral less the amount of any prior mortgages or related liabilities. Home equity loans and lines of credit are approved with both fixed and adjustable interest rates which we determine based upon market conditions. Such loans may be fully amortized over the life of the loan or have a balloon feature. Generally, the maximum term for home equity loans is 10 years.

Our underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. At December 31, 2016, we had no home equity loans 90 days or more delinquent. No assurance can be given, however, that our delinquency rate or loss experience on home equity loans will not increase in the future.

8

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

Commercial Business Loans. We originate commercial business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. We also purchase participations of commercial business loans from other lenders, which may be made to borrowers outside our market area. Commercial business loans totaled $21.6 million, or 11.7% of our net loan portfolio at December 31, 2016. At December 31, 2016, commercial business loan participations totaled $651,000, or 3.0% of the commercial business loan portfolio. All of the commercial business loan participations were outside of our 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. On a limited basis, we will originate unsecured business loans in those instances where the applicant’s financial strength and creditworthiness has been established. Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business. We generally obtain personal guarantees from the borrower or a third party as a condition to originating business loans. During the year ended December 31, 2016, we originated $14.9 million in commercial business loans. At that date, our largest commercial business loan was a $5.0 million line of credit. This loan was performing in accordance with its terms at December 31, 2016.

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

Agricultural Business Loans. We originate agricultural business loans to borrowers located in our market area which are secured by collateral other than real estate or which can be unsecured. Agricultural business loans totaled $14.7 million, or 7.9% of our net loan portfolio at December 31, 2016. Agricultural business loans are generally secured by equipment and blanket security agreements on all farm assets. These loans are generally offered with fixed rates with terms up to five years. Agricultural business loans generally bear lower interest rates than residential loans due to competitive market pressures. While the repayment of our agricultural business loans is generally dependent on the successful operation of the farm operation, we have experienced a good history of low default rates. We generally obtain personal guarantees from the borrower as a condition to originating agricultural business loans. During the year ended December 31, 2016, we originated $15.4 million in agricultural business loans. At December 31, 2016, our largest agricultural business loan was a line of credit of $850,000. This loan was performing in accordance with its terms at December 31, 2016.

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

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Consumer Loans. As of December 31, 2016, consumer loans totaled $14.5 million, or 7.9%, of our net loan portfolio. The principal types of consumer loans we offer are automobile loans, loans secured by deposit accounts, unsecured loans and mobile home loans. We generally offer consumer loans on a fixed-rate basis.

At December 31, 2016, consumer loans secured by automobiles totaled $6.9 million, or 3.8% of our net loan portfolio. We generally offer automobile loans with maturities of up to 60 months for new automobiles. Loans secured by used automobiles will have maximum terms which vary depending upon the age of the automobile. We generally originate automobile loans with a loan-to-value ratio below the greater of 80% of the purchase price or 100% of NADA loan value, although the loan-to-value ratio may be greater or less depending on the borrower’s credit history, debt to income ratio, home ownership and other banking relationships with us.

Our underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. We also consider the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. Consumer loans 90 days or more delinquent at December 31, 2016 totaled $72,000, or 0.5% of total consumer loans. No assurance can be given, however, that our delinquency rate or loss experience on consumer loans will not increase in the future.

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

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Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2016. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	One- to Four-Family Real Estate					Commercial Real Estate					Agricultural Real Estate					Home Equity
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in Thousands)
Due During the Years Ending December 31,
2017	$	5,121		5.60	%	$	4,617		5.07	%	$	351		4.14	%	$	1,252		5.77	%
2018		3,645		4.78			7,946		4.70			75		4.95			1,057		5.94
2019		2,606		5.68			8,741		4.43			350		3.61			920		6.52
2020 to 2021		2,460		5.33			9,184		4.67			363		5.36			1,163		6.42
2022 to 2026		3,412		5.23			4,396		4.94			2,221		4.48			4,980		4.84
2027 to 2031		9,544		4.27			3,739		4.76			4,479		4.34			1,445		5.42
2032 and beyond		18,523		4.98			2,854		4.80			30,433		4.98			789		5.49
Total	$	45,311		4.96	%	$	41,477		4.65	%	$	38,272		4.86	%	$	11,606		5.45	%

	Commercial Business					Agricultural Business					Consumer					Total
	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Weighted Average Rate
	(Dollars in Thousands)
Due During the Years Ending December 31,
2017	$	6,792		4.36	%	$	10,112		3.96	%	$	1,915		6.53	%	$	30,160		4.75	%
2018		4,547		4.52			1,948		4.05			1,844		7.26			21,062		4.89
2019		1,193		4.60			382		4.46			2,419		6.68			16,611		5.02
2020 to 2021		4,484		4.39			1,581		4.67			5,197		4.85			24,432		4.82
2022 to 2026		3,762		4.00			627		4.64			1,288		6.14			20,686		4.81
2027 to 2031		840		2.40			—		—			1,100		7.94			21,147		4.57
2032 and beyond		—		—			—		—			780		8.80			53,379		4.58
Total	$	21,618		4.27	%	$	14,650		4.09	%	$	14,543		6.24	%	$	187,477		4.74	%

The following table sets forth at December 31, 2016, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2017. At December 31, 2016, fixed-rate loans include $8.0 million in fixed-rate balloon payment loans with original maturities of five years or less. The total dollar amount of fixed-rate loans and adjustable-rate loans due after December 31, 2017, was $76.1 million and $81.2 million, respectively.

	Due after December 31, 2017
	Fixed		Adjustable		Total
	(In Thousands)
Real estate loans:
One- to four-family residential	$	21,934	$	18,256	$	40,190
Commercial		23,916		12,944		36,860
Agricultural		1,691		36,230		37,921
Home equity		2,926		7,428		10,354
Commercial business loans		8,748		6,078		14,826
Agricultural business loans		4,538		—		4,538
Consumer		12,343		285		12,628
Total loans	$	76,096	$	81,221	$	157,317

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

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

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

	For the Years Ended December 31,
	2016		2015		2014		2013		2012
	(In Thousands)
Total loans receivable at beginning of year	$	195,989	$	187,684	$	184,055	$	177,086	$	174,201
Originations:
Real estate loans:
One- to four-family residential		30,268		32,225		23,848		39,825		68,471
Commercial		14,510		7,841		15,510		11,071		2,823
Agricultural		4,213		8,714		6,698		4,585		11,480
Home equity		4,929		4,881		3,236		3,598		3,243
Commercial business loans		14,908		13,977		19,508		19,397		20,920
Agricultural business loans		15,370		12,161		11,542		10,008		12,091
Consumer loans		9,958		9,536		7,255		9,239		8,375
Total originations		94,156		89,335		87,597		97,723		127,403
Participation loans purchased		2,157		2,609		2,678		3,878		6,093
Transfer of mortgage loans to foreclosed real estate owned		114		380		374		129		262
Repayments		84,036		66,413		73,728		70,043		77,672
Loan sales to secondary market		20,675		16,846		12,544		24,460		52,677
Total loans receivable at end of year	$	187,477	$	195,989	$	187,684	$	184,055	$	177,086

Loan Origination and Other Fees. In addition to interest earned on loans, we may charge loan origination fees. Our ability to charge loan origination fees is influenced by the demand for mortgage loans and competition from other lenders in our market area. To the extent that loans are originated or acquired for our portfolio, accounting standards require that we defer loan origination fees and costs and amortize such amounts as an adjustment of yield over the life of the loan by use of the level yield method. Fees deferred are recognized into income immediately upon the sale of the related loan. At December 31, 2016, we had $212,000 of deferred loan fees. Loan origination fees are a volatile source of income. Such fees vary with the volume and type of loans and commitments made and purchased and with competitive conditions in the mortgage markets, which in turn respond to the demand and availability of money.

In addition to loan origination fees, we also receive other fees that consist primarily of extension fees and late charges. We recognized fees of $93,000, $104,000 and $92,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

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Loan Concentrations. With certain exceptions, an Illinois-chartered savings bank may not make a loan or exceed credit for secured and unsecured loans for business, commercial, corporate or agricultural purposes to a single borrower in excess of 25% of the Bank’s total capital, as defined by regulation. At December 31, 2016, our loans-to-one borrower limit was $10.6 million. At December 31, 2016 we had no lending relationships in excess of our loans-to-one borrower limitation. At December 31, 2016, we had 27 borrowers with outstanding borrowings in excess of $1.0 million totaling in the aggregate $73.4 million or 39.2% of our total loan portfolio.

Delinquencies and Classified Assets

Our collection procedures provide that when a mortgage loan is either ten days (in the case of adjustable-rate mortgage and balloon loans) or 15 days (in the case of fixed-rate loans) past due, a computer-generated late charge notice is sent to the borrower requesting payment and assessing a late charge. If the mortgage loan remains delinquent, a telephone call is made or a letter is sent to the borrower stressing the importance of reinstating the loan and obtaining reasons for the delinquency. We also send a 30 day notice pursuant to Illinois law if a borrower’s primary residence is the collateral at issue. When a loan continues in a delinquent status for 90 days or more, and a repayment schedule has not been made or kept by the borrower, a notice of intent to foreclose upon the underlying property is then sent to the borrower, giving 10 days to cure the delinquency. If not cured, foreclosure proceedings are initiated after the loan is 120 days past due. Consumer loans receive a ten-day grace period before a late charge is assessed. Collection efforts begin after the grace period expires. At December 31, 2016, 2015 and 2014, the percentage of non-performing loans to total loans receivable were 0.82%, 1.03% and 1.21%, respectively. At December 31, 2016, 2015 and 2014, the percentage of non-performing assets to total assets was 0.48%, 0.76% and 0.78%, respectively.

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

Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision with consideration given to the need for additions to the allowance for loan losses and (if appropriate) partial or full charge-off. At December 31, 2016, we had no loans 90 days or more delinquent that were still accruing interest. Nonperforming assets decreased by $822,000 to $1.5 million at December 31, 2016 as compared to December 31, 2015. The decrease in the level of nonperforming assets primarily reflected decreases of $491,000 in nonperforming loans and $331,000 in foreclosed assets. The decrease in nonperforming loans primarily reflected the improvement in credits totaling $346,000 which were paying as agreed and removed from nonaccrual status during 2016.

Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at the lower of the unpaid principal balance of the related loan, or its fair market value, less estimated selling expenses. Any further write-down of real estate owned is charged against earnings. At December 31, 2016, we owned no property classified as real estate owned.

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Nonperforming Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At December 31, 2016, 2015, 2014, 2013 and 2012, we had troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates) of $2.5 million, $2.6 million, $2.3 million, $2.6 million and $2.2 million, respectively.

	At December 31,
	2016			2015			2014			2013			2012
	(Dollars in Thousands)
Nonaccrual loans: (1)
Real estate loans:
One- to four-family residential	$	590		$	911		$	995		$	1,339		$	1,203
Commercial		709			840			932			208			560
Agricultural		—			—			123			—			—
Home equity		50			119			121			134			277
Commercial business loans		17			9			22			38			52
Agricultural business loans		—			—			—			—			—
Consumer loans		164			142			71			63			122
Total nonaccrual loans		1,530			2,021			2,264			1,782			2,214
Loans delinquent 90 days or greater and still accruing:
Real estate loans:
One- to four-family residential		—			—			—			—			—
Commercial		—			—			—			—			—
Agricultural		—			—			—			—			—
Home equity		—			—			—			—			—
Commercial business loans		—			—			—			—			—
Agricultural business loans		—			—			—			—			—
Consumer loans		—			—			—			—			—
Total loans delinquent 90 days or greater and still accruing		—			—			—			—			—
Total nonperforming loans		1,530			2,021			2,264			1,782			2,214
Real estate owned and foreclosed assets:
Real estate loans:
One- to four-family residential		—			217			40			133			—
Commercial		—			114			137			149			137
Agricultural		—			—			—			—			—
Home equity		—			—			—			—			—
Commercial business loans		—			—			—			—			—
Agricultural business loans		—			—			—			—			—
Consumer loans		—			—			—			2			—
Total  real estate owned and foreclosed assets		—			331			177			284			137
Total nonperforming assets	$	1,530		$	2,352		$	2,441		$	2,066		$	2,351
Ratios:
Nonperforming loans to total loans		0.82	%		1.03	%		1.21	%		0.97	%		1.25	%
Nonperforming assets to total assets		0.48	%		0.76	%		0.78	%		0.65	%		0.73	%

(1) Includes nonaccrual troubled debt restructurings of $958,000, $1.3 million, $1.1 million, $412,000 and $361,000 for the years ended December 31, 2016, 2015, 2014, 2013, and 2012, respectively.

For the year ended December 31, 2016, gross interest income that would have been recorded had our nonaccrual loans and troubled debt restructurings been current in accordance with their original terms was $85,000. We did not recognize any interest income on such loans for the year ended December 31, 2016.

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At December 31, 2016, we had no loans that were not currently classified as nonaccrual, 90 days past due or troubled debt restructurings where known information about possible credit problems of borrowers caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms and that may result in disclosure as nonaccrual, 90 days past due or troubled debt restructurings.

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

	Loans Delinquent For
	60-89 Days				90 Days and Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in Thousands)
At December 31, 2016
Real estate loans:
One- to four-family residential		3		136		14		545		17		681
Commercial		1		16		—		—		1		16
Agricultural		—		—		—		—		—		—
Home equity		—		—		—		—		—		—
Commercial business loans		2		42		1		13		3		55
Agricultural business loans		—		—		—		—		—		—
Consumer loans		4		18		9		72		13		90
Total loans		10	$	212		24	$	630		34	$	842
At December 31, 2015
Real estate loans:
One- to four-family residential		4		78		9		623		13		701
Commercial		—		—		1		767		1		767
Agricultural		—		—		—		—		—		—
Home equity		3		66		3		69		6		135
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		3		6		2		6		5		12
Total loans		10	$	150		15	$	1,465		25	$	1,615
At December 31, 2014
Real estate loans:
One- to four-family residential		5		287		9		613		14		900
Commercial		1		794		3		39		4		833
Agricultural		—		—		1		123		1		123
Home equity		2		12		5		58		7		70
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		3		5		6		17		9		22
Total loans		11	$	1,098		24	$	850		35	$	1,948
At December 31, 2013
Real estate loans:
One- to four-family residential		2	$	96		12	$	807		14	$	903
Commercial		2		68		2		78		4		146
Agricultural		—		—		—		—		—		—
Home equity		3		48		4		55		7		103
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		5		26		2		10		7		36
Total loans		12	$	238		20	$	950		32	$	1,188
At December 31, 2012
Real estate loans:
One- to four-family residential		5	$	213		15	$	985		20	$	1,198
Commercial		—		—		4		280		4		280
Agricultural		—		—		—		—		—		—
Home equity		4		71		6		136		10		207
Commercial business loans		—		—		—		—		—		—
Agricultural business loans		—		—		—		—		—		—
Consumer loans		2		64		4		34		6		98
Total loans		11	$	348		29	$	1,435		40	$	1,783

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Classified Assets. Federal and state regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examination of insured institutions, Federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three categories for classified assets: “substandard,” “doubtful” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. For assets classified “substandard” and “doubtful,” the institution is required to establish general loan loss reserves in accordance with accounting principles generally accepted in the United States of America. Assets classified “loss” must be either completely written off or supported by a 100% specific reserve. We also maintain a category designated “special mention” which is established and maintained for assets not considered classified but having potential weaknesses or risk characteristics that could result in future problems. An institution is required to develop an in-house program to classify its assets, including investments in subsidiaries, on a regular basis and set aside appropriate loss reserves on the basis of such classification. As part of the periodic exams of Jacksonville Savings Bank by the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation, the staff of such agencies reviews our classifications and determine whether such classifications are adequate. Such agencies have, in the past, and may in the future require us to classify certain assets which management has not otherwise classified or require a classification more severe than established by management. At December 31, 2016, our classified assets totaled $5.2 million, all of which were classified as substandard.

The total amount of classified and special mention loans decreased $1.1 million, or 13.0%, to $7.7 million at December 31, 2016 from $8.8 million at December 31, 2015. The decrease in classified and special mention loans during 2016 was due to a decrease of $1.4 million in special mention loans, partially offset by an increase of $209,000 in substandard loans. The decrease in special mention loans reflects $1.5 million in principal reductions, partially offset by $274,000 in additional loans listed as special mention during 2016. The increase in substandard loans was primarily related to $1.2 million in additional loans classified as substandard, partially offset by $669,000 in principal reductions during 2016.

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The following table shows the principal amount of special mention and classified loans at December 31, 2016 and December 31, 2015.

	12/31/16		12/31/15
	(In Thousands)
Special Mention loans	$	2,431	$	3,781
Substandard loans		5,229		5,020
Total Special Mention and Substandard loans	$	7,660	$	8,801

Allowance for Loan Losses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The allowance for loan losses increased $88,000, or 3.0%, to $3.0 million at December 31, 2016 from $2.9 million at December 31, 2015. The increase in the allowance was the result of the provision for loan losses exceeding net charge-offs. Net charge-offs decreased $144,000 to $32,000 during 2016 from $177,000 during 2015. We recorded a provision for loan losses of $120,000 during 2016.

Nonperforming assets decreased $822,000 to $1.5 million at December 31, 2016, compared to December 31, 2015. The decrease in nonperforming assets was due to decreases of $491,000 in non-performing loans and $331,000 in foreclosed assets held at December 31, 2016 as compared to at December 31, 2015. The allowance for loan losses to nonperforming loans increased to 196.56% at December 31, 2016 as compared to 144.45% at December 31, 2015.

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

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

	For the Years Ended December 31,
	2016			2015			2014			2013			2012
	(Dollars in Thousands)
Balance at beginning of year	$	2,919		$	2,956		$	3,406		$	3,339		$	3,297
Charge-offs:
One- to four-family residential		38			199			100			162			82
Commercial real estate		—			28			288			—			357
Agricultural real estate		—			—			—			—			—
Home equity		—			14			5			63			80
Commercial business		—			—			285			—			—
Agricultural business		—			—			—			—			—
Consumer		44			53			26			67			67
Total charge-offs		82			294			704			292			586
Recoveries:
One- to four-family residential		26			40			2			16			27
Commercial real estate		15			60			5			136			89
Agricultural real estate		—			—			—			—			—
Home equity		2			11			3			15			14
Commercial business		—			—			—			7			3
Agricultural business		—			—			—			—			—
Consumer		7			6			4			15			6
Total recoveries		50			117			14			189			139
Net loans charge-offs		32			177			690			103			447
Additions charged to operations		120			140			240			170			490
Balance at end of year	$	3,007		$	2,919		$	2,956		$	3,406		$	3,339
Total loans outstanding	$	187,477		$	195,989		$	187,684		$	184,055		$	177,086
Average net loans outstanding	$	191,877		$	189,667		$	180,936		$	174,685		$	173,600
Allowance for loan losses as a percentage of total loans at end of year		1.60	%		1.49	%		1.57	%		1.85	%		1.89	%
Net loans charged off as a percent of average net loans outstanding		0.02	%		0.09	%		0.38	%		0.06	%		0.26	%
Allowance for loan losses to nonperforming loans		196.56	%		144.45	%		130.57	%		191.14	%		150.85	%
Allowance for loan losses to total nonperforming assets at end of year		196.56	%		124.13	%		121.10	%		164.90	%		142.05	%

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

	At December 31,
	2016					2015					2014
	Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans			Amount		Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
One- to four-family residential	$	832		24.2	%	$	830		24.2	%	$	999		23.7	%
Commercial real estate		1,045		22.1			918		20.6			855		21.6
Agricultural real estate		191		20.4			202		21.0			196		21.4
Home equity		174		6.2			149		6.0			206		6.0
Commercial business		301		11.5			387		13.0			422		14.3
Agricultural business		167		7.8			163		8.2			58		6.3
Consumer		183		7.8			169		7.0			167		6.7
Unallocated		114		—			101		—			53		—
Total	$	3,007		100	%	$	2,919		100	%	$	2,956		100	%

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

Investment Activities

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

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

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

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

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

The portfolio consists primarily of mortgage-backed securities, municipal bonds and U.S. government and agency securities all of which are classified as available for sale. Mortgage-backed securities totaled $44.4 million at December 31, 2016. General obligation municipal bonds, most of which have been issued within the States of Illinois and Missouri totaled $42.4 million at December 31, 2016. Our portfolio of U.S. Government and agency securities totaled $13.3 million at December 31, 2016. We expect the composition of our investment portfolio to continue to change based on liquidity needs associated with loan origination activities. During the year ended December 31, 2016, we had no investment securities that were deemed to be other than temporarily impaired.

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

Mortgage-Backed Securities. We invest in mortgage-backed securities insured or guaranteed by the United States Government or government sponsored enterprises. These securities, which consist of mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, had an amortized cost of $45.5 million, $23.1 million and $41.2 million at December 31, 2016, 2015 and 2014, respectively. The fair value of our mortgage-backed securities portfolio was $44.4 million, $23.2 million and $41.4 million at December 31, 2016, 2015 and 2014, respectively, and the weighted average rate as of December 31, 2016, 2015 and 2014 was 2.43%, 2.30% and 2.33%, respectively. At December 31, 2016, $44.4 million of the mortgage-backed securities in the investment portfolio had fixed rates of interest.

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

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

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Municipal Bonds. At December 31, 2016, we held municipal bonds with a fair value of $42.4 million. All of our municipal bonds are general obligation bonds with full taxing authority and ratings (when available) of A or above. Nearly all of our municipal bonds are issued by local municipalities or school districts located in Illinois or Missouri.

U.S. Government and Agency Securities. At December 31, 2016, we held U.S. Government and agency securities with a fair value of $13.3 million. These securities have an average expected life of 8.4 years. While these securities generally provide lower yields than other investments such as mortgage-backed securities, our current investment strategy is to maintain investments in such instruments to the extent appropriate for liquidity purposes, as collateral for borrowings, and for prepayment protection.

Investment Securities Portfolio. The following table sets forth the composition of our investment securities portfolio at the dates indicated. Investment securities do not include Federal Home Loan Bank of Chicago stock of $364,000. All of such securities were classified as available for sale.

	At December 31,
	2016				2015				2014
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Mortgage-backed securities:
Fannie Mae	$	26,283	$	25,735	$	16,367	$	16,453	$	24,023	$	24,241
Freddie Mac		19,174		18,678		6,368		6,397		12,492		12,491
Ginnie Mae		—		—		332		328		4,682		4,688
Total mortgage-backed securities		45,457		44,413		23,067		23,178		41,197		41,420
U.S. government and agencies		13,986		13,333		15,980		15,939		10,032		9,958
Municipal bonds		42,501		42,415		47,229		48,356		44,378		45,307
Total	$	101,944	$	100,161	$	86,276	$	87,473	$	95,607	$	96,685

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Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2016 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. All of such securities were classified as available for sale.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in Thousands)
Mortgage-backed securities:
Fannie Mae	$	—		—	%	$	—		—	%	$	—		—	%	$	26,283		2.28	%	$	26,283	$	25,735		2.28	%
Freddie Mac		—		—			—		—			—		—			19,174		2.54			19,174		18,678		2.54
Ginnie Mae		—		—			—		—			—		—			—		—			—		—		—
Total mortgage-backed securities		—		—			—		—			—		—			45,457		2.43			45,457		44,413		2.43
U.S. government and agencies		—		—			2,027		1.79			6,594		2.05			5,365		2.32			13,986		13,333		2.12
Municipal bonds(1)		1,037		2.83			7,174		3.31			20,704		3.11			13,586		3.03			42,501		42,415		3.11
Total	$	1,037		2.83	%	$	9,201		2.98	%	$	27,298		2.86	%	$	64,408		2.54	%	$	101,944	$	100,161		2.67	%

(1) We used an assumed 34% tax rate in computing tax equivalent adjustments. The tax equivalent yield of municipal bonds was 4.29% for maturities of one year or less, 5.02% for maturities of more than one year through five years, 4.71% for maturities for more than five years through ten years, 4.59% for maturities of more than 10 years and 4.71% for the total municipal bonds securities portfolio at December 31, 2016. The tax equivalent adjustments to interest income of municipal bonds was $15,000 for maturities of one year or less, $123,000 for maturities of more than one year through five years, $331,000 for maturities for more than five years through ten years, $212,000 for maturities of more than 10 years and $680,000 for the total municipal bonds securities portfolio for the year ended December 31, 2016.

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Sources of Funds

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

Deposits. We attract consumer and commercial deposits principally from within our market areas through the offering of a broad selection of deposit instruments including interest-bearing checking accounts, noninterest-bearing checking accounts, savings accounts, money market accounts, term certificate accounts and individual retirement accounts. We will accept deposits of $100,000 or more and may offer negotiated interest rates on such deposits. At December 31, 2016, we had deposits of $100,000 or more from public entities that totaled $26.8 million. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. We regularly evaluate our internal cost of funds, survey rates offered by competing institutions, review our cash flow requirements for lending and liquidity and execute rate changes when deemed appropriate. We do not obtain funds through brokers, nor do we solicit funds outside our market area.

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

	For the Years Ended December 31,
	2016								2015								2014
	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
	(Dollars in Thousands)
Deposit type:
Non-interest bearing checking	$	29,592		11.8	%		—	%	$	29,414		12.3	%		—	%	$	27,315		11.0	%		—	%
Interest-bearing checking		55,610		22.3			0.30			39,270		16.5			0.14			38,080		15.3			0.14
Savings accounts		43,265		17.3			0.20			39,954		16.8			0.20			37,323		15.0			0.21
Money market deposits		7,628		3.1			0.15			7,957		3.3			0.15			8,026		3.2			0.15
Money market savings		34,741		13.9			0.29			34,947		14.7			0.29			35,408		14.2			0.31
Certificates of deposit		78,988		31.6			0.83			86,614		36.4			0.98			102,890		41.3			1.15
Total deposits	$	249,824		100.00	%		0.41	%	$	238,156		100.00	%		0.46	%	$	249,042		100.00	%		0.58	%

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

	At December 31,
	2016		2015		2014
	(In Thousands)
Interest Rate:
Less than 1.00%	$	43,212	$	47,140	$	53,255
1.00% to 1.99%		34,771		24,093		21,607
2.00% to 2.99%		2,204		7,821		13,324
3.00% to 3.99%		—		—		6,414
Total	$	80,187	$	79,054	$	94,600

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The following table sets forth, by interest rate ranges and scheduled maturity, information concerning our certificates of deposit at December 31, 2016.

	At December 31, 2016
	Period to Maturity
	Less Than or Equal to One Year		More Than One to Two Years		More Than  Two to   Three Years		More Than   Three Years		Total		Percent of Total
	(Dollars in Thousands)
Interest Rate Range:
Less than 1.00%	$	31,820	$	9,725	$	1,489	$	178	$	43,212		53.9	%
1.00% to 1.99%		13,304		5,136		6,084		10,247		34,771		43.4
2.00% to 2.99%		2,195		9		—		—		2,204		2.7
Total	$	47,319	$	14,870	$	7,573	$	10,425	$	80,187		100.0	%

As of December 31, 2016, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $33.0 million, of which $5.0 million were deposits from public entities. The following table set forth the maturity of those certificates as of December 31, 2016.

	At December 31, 2016
		(In Thousands)
Three months or less	$	10,089
Over three months through six months		4,777
Over six months through one year		4,371
Over one year to three years		9,116
Over three years		4,620
Total	$	32,973

Borrowings. Deposits are our primary source of funds for lending and investment activities. If the need arises, we may rely upon advances from the Federal Home Loan Bank to supplement our supply of available funds and to fund deposit withdrawals. We typically secure advances from the Federal Home Loan Bank with mortgage loans, and small business and small farm loans. The Federal Home Loan Bank functions as a central reserve bank providing credit for us and other member savings associations and financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our loans, provided certain standards related to creditworthiness have been met. Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of a member institution’s stockholders’ equity or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness. At December 31, 2016, we had no Federal Home Loan Bank advances outstanding.

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

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Our borrowings consist of advances from the Federal Home Loan Bank of Chicago and funds borrowed under repurchase agreements. At December 31, 2016, we had access to Federal Home Loan Bank advances of up to $68.7 million. The following table sets forth information concerning balances and interest rates on our Federal Home Loan Bank advances at or for the years indicated.

	At or For the Years Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at end of year	$	—		$	8,500		$	5,000
Average balance during year	$	1,348		$	7,877		$	4,803
Maximum outstanding at any month end	$	9,000		$	14,200		$	12,000
Weighted average interest rate at end of year		—			0.16	%		0.33	%
Average interest rate during year		0.30	%		0.24	%		0.20	%

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

	At or For the Years Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at end of year	$	7,135		$	6,632		$	8,822
Average balance during year	$	5,247		$	6,009		$	5,996
Maximum outstanding at any month end	$	7,343		$	9,549		$	9,484
Weighted average interest rate at end of year		0.51	%		0.23	%		0.07	%
Average interest rate during year		0.35	%		0.12	%		0.08	%

Trust Services

We operate a full-service trust department which is primarily engaged in asset management. Investment securities and farm real estate comprise most of the $99.3 million of assets administered in 131 accounts as of December 31, 2016. We also provide institutional trust services for regional bond issuers. Trust fees collected in 2016 and 2015 totaled $329,000 and $289,000, respectively.

Subsidiary Activities

Jacksonville Savings Bank has one wholly owned subsidiary, Financial Resources Group, Inc. (“Financial Resources”), an Illinois corporation. Financial Resources operates an investment center engaged in the business of buying and selling stocks, bonds, annuities and mutual funds for its customers’ accounts. In addition, Financial Resources has historically engaged in the business of originating commercial business loans and commercial real estate loans. For the years ended December 31, 2016 and 2015, Financial Resources had gross revenues of $1.2 million and $1.4 million, respectively.

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REGULATION AND SUPERVISION [Update]

General

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

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

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

Federal Legislation

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act has significantly changed the bank regulatory structure and is affecting the lending, investment, trading and operating activities of depository institutions and their holding companies.

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

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

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The Dodd-Frank Act also required the Consumer Financial Protection Bureau to issue regulations requiring lenders to make a reasonable, good faith determination as to the ability of a prospective borrower to repay a residential mortgage loan. The “Ability to Repay” final rule, effective January 1, 2014, established a “qualified mortgage” safe harbor from liability for loans which have terms and features which are deemed to make the loan less risky.

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

Illinois Savings Bank Regulation

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

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

Under Illinois law, a savings bank may make both secured and unsecured loans. However, loans for business, corporate, commercial or agricultural purposes, whether secured or unsecured, may not in the aggregate exceed 15% of a savings bank’s total assets unless authorized by the Illinois Department of Financial and Professional Regulation. With the prior written consent of the Illinois Department of Financial and Professional Regulation, savings banks may also engage in real estate development activities, provided that the total investment in any one project may not exceed 15% of total capital, and the total investment in all projects may not exceed 50% of total capital. The investment authority of state chartered banks is also constrained by federal law, as is explained later. The total loans and extensions of credit outstanding at one time, both direct and indirect, by a savings bank to any borrower may not exceed 25% of the savings bank’s total capital. At December 31, 2016, Jacksonville Savings Bank did not have any loans-to-one borrower which exceeded these limitations.

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

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

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

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

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

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

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

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

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

Capital Maintenance. The federal banking agencies, including the FDIC, have adopted new regulations that implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), Jacksonville Savings Bank became subject to new capital requirements adopted by the FDIC. These new requirements created a new required ratio for common equity Tier 1 ("CETI") capital, increased the leverage and Tier 1 capital ratios, changed the risk weight of certain assets for purposes of the risk-based capital ratios, created an additional capital conservation buffer over the required capital ratios and changed what qualifies as capital for purposes of meeting these various capital requirements. Beginning in 2016, failure to maintain the required capital conservation buffer will limit the ability of Jacksonville Savings Bank to pay dividends or pay discretionary bonuses. The Company is exempt from consolidated capital requirements as those requirements do not apply to certain small bank holding companies with assets under $1 billion.

Under the new capital regulations, the minimum capital ratios are: (1) CETI capital ratio of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets: (3) a total capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio of 4.0%. CETI generally consists of common stock and retained earnings, subject to applicable regulatory adjustments and deductions.

There are a number of changes in what constitutes regulatory capital, some of which are subject to transition periods. These changes include the phasing-out of certain instruments as qualifying capital. Jacksonville Savings Bank does not use any of these instruments. Under the new requirements for total capital, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of CETI will be deducted from capital. Jacksonville Savings Bank has elected to permanently opt-out of the inclusion of accumulated other comprehensive income in its capital calculations, as permitted by the regulations. This opt-out will reduce the impact of market volatility on our regulatory capital levels.

The new requirements also include changes in the risk-weights of assets to better reflect credit risk and other risk exposures. These include a 150% risk weight (increased from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days past due or otherwise in non-accrual status; a 20% (increased from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; a 250% risk weight (increased from 100%) for mortgage servicing and deferred tax assets that are not deducted from capital; and increased risk weights (0% to 600%) for equity exposures.

In addition to the minimum CETI, Tier 1 and total capital ratios, Jacksonville Savings Bank will have to maintain a capital conservation buffer consisting of additional CETI capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends or paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement will be phased in beginning in January 2016 and in 2017 is 1.25% of risk-weighted assets and increasing each year until fully implemented in January 2019.

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

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

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

At December 31, 2016, Jacksonville Savings Bank is “well capitalized” under the prompt corrective action rules.

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

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

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, insured institutions were assigned a risk category based on supervisory evaluations, regulatory capital levels and certain other factors. An institution’s rate depended upon the category to which it is assigned, and certain adjustments specified by FDIC regulations. Institutions deemed less risky pay lower FDIC assessments. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

Effective July 1, 2016, the FDIC adopted changes that eliminated the risk categories. Assessments for most institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years. In conjunction with the Deposit Insurance Fund reserve ratio achieving 1.5%, the assessment range (inclusive of possible adjustments) was reduced for most banks and savings associations to 1.5 basis points to 30 basis points.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Jacksonville Savings Bank. Future insurance assessment rates cannot be predicted.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule order or regulatory condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.

In addition to the FDIC assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2016, the annualized FICO assessment was equal to 0.56 of a basis point of total assets less tangible capital.

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Enforcement

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

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

Federal Home Loan Bank System. Jacksonville Savings Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Chicago, Jacksonville Savings Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2016, Jacksonville Savings Bank was in compliance with this requirement.

Federal Reserve System

Federal Reserve Board regulations require savings banks to maintain interest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At December 31, 2016, Jacksonville Savings Bank was in compliance with these reserve requirements.

Other Regulations

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

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

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

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

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

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

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· Truth in Savings Act;

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

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

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

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

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

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

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

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

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

Holding Company Regulation

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

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

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

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking. The Company has not elected to become a financial holding company.

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

In December 2014, legislation was passed by Congress that requires the Federal Reserve Board to revise its “Small Bank Holding Company Policy Statement” to exempt bank and savings and loan holding companies of less than $1.0 billion of consolidated assets from the consolidated capital requirements, provided that such companies meet certain other conditions such as not engaging in significant nonbanking activities. Regulations adopting this amendment were effective May 15, 2015. Consequently, bank holding companies of under $1 billion in consolidated assets such as the Company remain exempt from consolidated regulatory capital requirements, unless the Federal Reserve Board determines otherwise in particular cases.

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

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

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

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

Change in Control Regulations

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

Sarbanes-Oxley Act of 2002

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

TAXATION

Federal Taxation

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

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

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

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

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

At December 31, 2016, Jacksonville Savings Bank’s total federal pre-base year reserve was approximately $2.6 million. However, under current law, base-year reserves remain subject to recapture if Jacksonville Savings Bank makes certain non-dividend distributions, repurchases any of its stock, pays dividends in excess of tax earnings and profits, or ceases to maintain a bank charter.

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

Net Operating Loss Carryovers.  Generally, a financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years.   At December 31, 2016, Jacksonville Bancorp, Inc. had no federal or Illinois tax loss carryforward.

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

State Taxation

The State of Illinois imposes a tax on the Illinois taxable income of corporations, including savings banks, at the rate of 7.75%.

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

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Personnel

As of December 31, 2016, Jacksonville Savings Bank and its subsidiary had a total of 85 full-time and 15 part-time employees. None of Jacksonville Savings Bank’s employees is represented by a collective bargaining group. Management believes that it has good working relations with its employees.

Availability of Annual Report on Form 10-K

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

ITEM 1A.           Risk Factors

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

Non-residential loans increase our exposure to credit risks.

Over the last several years, we have increased our non-residential lending in order to improve the average yield of our interest-earning assets and reduce the average maturity of our loan portfolio. At December 31, 2016, our portfolio of agricultural real estate loans totaled $38.3 million, or 20.7% of our total loans, compared to $37.4 million, or 21.5% of our total loans at December 31, 2012. At December 31, 2016, our portfolio of commercial real estate loans totaled $41.5 million, or 22.5% of our total loans, compared to $31.0 million, or 17.8% of our total loans at December 31, 2012. Our portfolio of agricultural business loans totaled $14.7 million, or 7.9% of our total loans at December 31, 2016, compared to $11.0 million, or 6.3% of our total loans at December 31, 2012. Our portfolio of commercial business loans totaled $21.6 million, or 11.7% of our total loans at December 31, 2016, compared to $29.0 million, or 16.7% of our total loans at December 31, 2012. These business loans are typically secured by equipment or inventory. It is difficult to assess the future performance of our non-residential loan portfolio due to the recent origination or purchase of many of these loans. These loans may have delinquency or charge-off rates above our historical experience, which could adversely affect our future performance.

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

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

As a result of large loan concentrations among a relatively small number of borrowers, we could incur significant losses if these borrowers are unable to repay their loans. At December 31, 2016, we had 27 borrowers with aggregate loan balances of $73.4 million, which represented 39.2% of our total loan portfolio at that date. These loans are primarily commercial and agricultural real estate loans and commercial and agricultural business loans, including purchased loan participations. Aggregate loan balances to these borrowers ranged from $1.1 million to $10.0 million for our largest borrower. While we seek to control our risk and minimize losses on these large loan concentrations, if one or more of our large borrowers were to default on their loans we could incur significant losses.

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

We occasionally purchase commercial real estate and commercial business loan participations secured by properties outside our market area in which we are not the lead lender. We have purchased loan participations secured by properties in diverse geographic areas such as in Minnesota, Tennessee, North Dakota, Michigan, and Iowa. These participations are secured by various types of collateral such as assisted living facilities, hotels, and apartment and condominium developments. Loan participations may have a higher risk of loss than loans we originate because we rely on the lead lender to monitor the performance of the loan. Moreover, our decision regarding the classification of a loan participation and loan loss provisions associated with a loan participation are made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate. At December 31, 2016, our loan participations totaled $12.0 million, or 6.4% of our loan portfolio. At December 31, 2016, commercial real estate loan participations outside our market area totaled $7.4 million, or 17.9% of the commercial real estate loan portfolio, and commercial business loan participations outside our market area totaled $476,000, or 2.2% of the commercial business loan portfolio. At December 31, 2016, no loan participations were delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.

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

Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which may have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. If our assumptions are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to the allowance. Additions to the allowance would decrease our net income. At December 31, 2016, our allowance for loan losses was $3.0 million, or 1.60% of total loans and 196.56% of non-performing loans, compared to $2.9 million, or 1.49% of total loans and 144.45% of non-performing loans, at December 31, 2015.

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

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

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

At December 31, 2016, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent, and foreclosed real estate assets) totaled $1.5 million, which is a decrease of $822,000 from our non-performing assets at December 31, 2015. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or real estate owned. We must reserve for probable losses which results in additional provisions for loan losses. As circumstances warrant, we must write down the value of properties in our other real estate owned portfolio to reflect changing market values. Additionally, we have legal fees associated with the resolution of problem assets as well as additional costs such as taxes, insurance and maintenance related to our other real estate owned. The resolution of non-performing assets also requires the active involvement of management, which can adversely affect the amount of time we devote to the income-producing activities of Jacksonville Savings Bank. If our estimate of the allowance for loan losses is inadequate, we will have to increase the allowance accordingly.

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

A significant aspect of our business is the origination of one- to four-family residential mortgage loans for sale on a servicing retained basis. The fees we receive for servicing such loans are referred to as mortgage servicing rights. At December 31, 2016, the unpaid principal balance of mortgage loans serviced for others was $130.5 million. Mortgage servicing rights fair values are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. If the fair value of our mortgage servicing rights is less than the carrying value of such rights, we may be required to recognize an impairment loss. Such impairment can occur due to changes in interest rates, loan performance or prepayment of the underlying mortgage. We did not recognize any impairment during 2016.

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

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

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

Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. At December 31, 2016, the fair value of our portfolio of investment securities and mortgage-backed securities totaled $100.2 million. Gross unrealized losses on these securities totaled $2.4 million at December 31, 2016.

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

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

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

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

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

During 2016, management reviewed goodwill for impairment on a quarterly basis. Management’s analysis concluded that our goodwill was not impaired as of December 31, 2016. It is possible that the assumptions and conclusions regarding the valuation of our business could change adversely, which could result in the recognition of impairment for our goodwill, which could have a material adverse effect on our financial condition and results of operations.

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

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

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

· demand for our products and services may decline;

· loan delinquencies, problem assets and foreclosures may increase;

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

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

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Strong competition may limit growth and profitability.

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

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

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

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

Jacksonville Savings Bank and Jacksonville Bancorp, Inc. are subject to extensive regulation, supervision and examination by the Illinois Department of Financial and Professional Regulation, the Federal Deposit Insurance Corporation and the Federal Reserve Board.  Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of federal deposit insurance funds and the depositors and borrowers of Jacksonville Savings Bank, rather than for our stockholders.  Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses.  These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.  Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firms.  These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations, as could our interpretation of those changes.

The Dodd-Frank Act has significantly changed the bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.  The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress.  The federal agencies have been given significant discretion in drafting the implementing rules and regulations, many of which are not in final form.  Consequently, the full impact of the Dodd-Frank Act may not be known for years. 

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws.  The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices.  The Consumer Financial Protection Bureau has examination and enforcement authority over all banks with more than $10 billion in assets.  Banks with $10 billion or less in assets continue to be examined for compliance with the consumer laws by their primary bank regulators.  The Dodd-Frank Act also weakened the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws. 

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The full impact of the Dodd-Frank Act on our business will not be known until all regulations implementing the statute are implemented.  As a result, we cannot at this time predict the extent to which the Dodd-Frank Act will impact our business, operations or financial condition.  However, compliance with the Dodd-Frank Act and its implementing regulations and policies has already resulted in changes to our business and operations, as well as additional costs, and diverted management’s time from other business activities, which adversely affects our financial condition and results of operations. 

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

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

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

Effective January 1, 2015, the FDIC implemented a new rule that substantially amended the regulatory risk-based capital rules applicable to Jacksonville Savings Bank. The new rule implemented the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act.

The rule includes new minimum risk-based capital and leverage ratios, and revised the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from prior rules); and (iv) a Tier 1 leverage ratio of 4%. The new rule also establishes a “capital conservation buffer” of 2.5% above the new regulatory minimum capital ratios, and results in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement will be phased in beginning in January 2016 and in 2017 is 1.25% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

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

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

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

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

Our common stock is traded on the NASDAQ Capital Market. However, the average daily trading volume in Jacksonville Bancorp, Inc.’s common stock has been relatively small, averaging less than 1,000 shares per day during 2016. As a result, trades involving a relatively small number of shares may have a significant effect on the market price of the common stock, and it may be difficult for investors to acquire or dispose of large blocks of stock without significantly affecting the market price.

A decrease in the corporate federal tax rate may impair our deferred tax assets.

A decrease to the corporate federal income tax rate may impair the Company’s deferred tax assets (“DTAs”).  At December 31, 2016, the Company’s net DTAs were approximately $2.7 million. While a decline in the corporate tax rate may lower the Company’s tax provision expense, it may also significantly impair the value of the Company’s DTAs in the year the rate decrease is enacted.  Such impairment could have a material adverse effect on the Company’s financial condition and results of operations.

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ITEM 1B.           Unresolved Staff Comments

Not applicable.

ITEM 2.              Properties

We conduct our business through our main office and two branch offices located in Jacksonville, and branch offices located in Virden, Litchfield, and Chapin, Illinois. The following table sets forth certain information concerning the main office and each branch office at December 31, 2016. At December 31, 2016, our premises and equipment had an aggregate net book value of approximately $4.5 million. We believe that our branch facilities are adequate to meet the present and immediately foreseeable needs. All facilities are owned.

			Net
			Book Value
	Year		at December 31,
Location	Occupied		2016
			(In Thousands)
Main Office
1211 West Morton Avenue
Jacksonville, Illinois		1994	$	3,157
Branch Office (1)
225 West State Street
Jacksonville, Illinois		1961		205
Branch Office (1)
903 South Main
Jacksonville, Illinois		1989		100
Branch Office
501 North State Street
Litchfield, Illinois		1997		459
Branch Office
100 North Dye
Virden, Illinois		1986		161
Branch Office
510 Superior
Chapin, Illinois		2000		417

(1) Transaction facilities only.

ITEM 3.              Legal Proceedings

At December 31, 2016, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which management believes are immaterial to our financial condition, our results of operations and our cash flows.

ITEM 4.              Mine Safety Disclosures.

None.

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PART II

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

The “Stockholder Information” section of our annual report to stockholders for the fiscal year ended December 31, 2016 (the “2016 Annual Report to Stockholders”) is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

During the fourth quarter of 2016, the Company repurchased shares of its common stock as follows:

Period	Number of shares purchased		Average purchase price paid per share		Total shares purchased		Maximum number of shares that may be purchased under the repurchase program (1)
Oct 1 – Oct 31		—		—		—		18,758
Nov 1 – Nov 30		—		—		—		18,758
Dec 1 – Dec 31		—		—		—		18,758
Total		—		—		—		18,758

(1) On October 16, 2013, the Company announced the adoption of a stock repurchase program under which the Company could repurchase up to 92,018 shares of its common stock, or approximately 5% of the then current outstanding shares. The program provided for repurchases through open market or private transactions, through block trades, and pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The Company has completed the purchase of 73,260 shares permitted under the program.

Set forth below is information as of December 31, 2016 regarding equity compensation plans. The plan that has been approved by the stockholders is the 2012 Stock Option Plan. Other than our Employee Stock Ownership Plan, we do not have any equity compensation plans that were not approved by our stockholders.

Plan	Number of securities to be issued upon exercise of outstanding options and rights		Weighted average exercise price		Number of securities remaining available for issuance under plan
Equity compensation plans approved by stockholders		47,488		15.65		1,785
Equity compensation plans not approved by stockholders		—		—		—
Total		47,488		15.65		1,785

ITEM 6.             Selected Financial Data

The “Selected Consolidated Financial Information” section of the 2016 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

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

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2016 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

ITEM 7A.          Quantitative and Qualitative Disclosures about Market Risk

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2016 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

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ITEM 8.             Financial Statements and Supplementary Data

The “Consolidated Financial Statements” section of the 2016 Annual Report to Stockholders is filed as an exhibit to this Form 10-K and is incorporated herein by reference.

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

None.

ITEM 9A.          Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

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

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

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

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

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment, management concludes that, as of December 31, 2016, the Company’s internal control over financial reporting is effective.

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

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(c) Changes in internal controls.

There were no significant changes made in our internal control over financial reporting during the quarter ended December 31, 2016 that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 9B.          Other Information

None.

PART III

ITEM 10.           Directors, Executive Officers and Corporate Governance

Information concerning our directors and certain officers is incorporated by reference hereunder in the Proxy Statement for the 2017 Annual Meeting.

ITEM 11.           Executive Compensation

Information with respect to management compensation required under this item is incorporated by reference hereunder in the Proxy Statement for the 2017 Annual Meeting.

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

Information required under this item is incorporated by reference to the Proxy Statement for the 2017 Annual Meeting.

ITEM 13.           Certain Relationships and Related Transactions and Director Independence

Information required under this item is incorporated by reference to the Proxy Statement for the 2017 Annual Meeting.

ITEM 14.           Principal Accountant Fees and Services

Information required under this item is incorporated by reference to the Proxy Statement for the 2017 Annual Meeting.

PART IV

ITEM 15.           Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

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

(A) Report of Independent Registered Public Accounting Firm;

(B) Consolidated Balance Sheets - December 31, 2016 and 2015;

(C) Consolidated Statements of Income - years ended December 31, 2016 and 2015;

(D) Consolidated Statements of Comprehensive Income – years ended December 31, 2016 and 2015;

48

(E) Consolidated Statements of Stockholders’ Equity - years ended December 31, 2016 and 2015;

(F) Consolidated Statements of Cash Flows - years ended December 31, 2016 and 2015; and

(G) Notes to Consolidated Financial Statements.

(a)(2) Financial Statement Schedules

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

(a)(3) Exhibits

3.1 Articles of Incorporation⁽¹⁾

3.2 Bylaws⁽²⁾

4 Stock Certificate of Jacksonville Bancorp, Inc.⁽³⁾

10.1 Employment Agreement between Jacksonville Savings Bank and Andrew F. Applebee⁽⁴⁾

10.2 Employment Agreement between Jacksonville Savings Bank and Richard A. Foss⁽⁵⁾

10.3 Employment Agreement between Jacksonville Savings Bank and John Williams⁽⁶⁾

10.4 Change in Control Agreement between Jacksonville Savings Bank and Diana S. Tone⁽⁷⁾

10.5 Amendments to the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock Option Plans⁽⁸⁾

10.6 Jacksonville Savings Bank Supplemental Life Insurance Plan⁽⁹⁾

10.7 Amended and Restated Jacksonville Savings Bank Salary Continuation Plan 1⁽¹⁰⁾

10.8 Jacksonville Savings Bank Long-Term Deferred Compensation Plan, as amended⁽¹¹⁾

10.9 Deferred Compensation Agreement between Chapin State Bank and John C. Williams⁽¹²⁾

10.10 Director’s Compensation Agreement between Chapin State Bank and John C. Williams⁽¹³⁾

10.11 Deferred Compensation Agreement between Chapin State Bank and Dean H. Hess⁽¹⁴⁾

10.12 Director’s Compensation Agreement between Chapin State Bank and Dean H. Hess⁽¹⁵⁾

10.13 Jacksonville Bancorp 2012 Stock Option Plan⁽¹⁶⁾

13 2016 Annual Report to Stockholders

14 Code of Ethics⁽¹⁷⁾

21 Subsidiaries

23 Consent of BKD LLP to incorporate financial statements into Registration Statements on Form S-8

31.1 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

(2) Incorporated by reference to Exhibit 3.2 to the Form 8-K filed with the Securities and Exchange Commission on February 22, 2017 (File No. 001-34821).

49

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

(4) Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2009 (File No. 000-49792).

(5) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).

(6) Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).

(7) Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(8) Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(9) Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(10) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2012 (File No. 001-34821).

(11) Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(12) Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(13) Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(14) Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(15) Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(16) Incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 20, 2013 (File No. 333-186754).

(17) Incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2004 (File No. 000-49792).

ITEM 16.          Form 10-K Summary

None.

50

Signatures

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

	Jacksonville Bancorp, Inc.
Date: March 9, 2017	By:	/s/ Richard A. Foss
		Richard A. Foss, President
		and Chief Executive Officer

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

By:	/s/ Richard A. Foss	By:	/s/ Andrew F. Applebee
	Richard A. Foss, President,		Andrew F. Applebee, Chairman of the Board
	Chief Executive Officer and Director
Date: March 9, 2017		Date: March 9, 2017

By:	/s/ Diana S. Tone	By:	/s/ Dean H. Hess
	Diana S. Tone		Dean H. Hess, Director
	Executive Vice President and Chief Financial Officer
Date: March 9, 2017		Date: March 9, 2017

By:	/s/ John L. Eyth	By:	/s/ Peggy S. Davidsmeyer
	John L. Eyth, Director		Peggy S. Davidsmeyer, Director
Date: March 9, 2017		Date: March 9, 2017

By:	/s/ Harmon B. Deal, III	By:	/s/ John C. Williams
	Harmon B. Deal, III, Director		John C. Williams, Director
	Senior Vice President and Trust Officer
Date: March 9, 2017		Date: March 9, 2017

By:	/s/ John M. Buchanan
	John M. Buchanan, Director
Date: March 9, 2017

51

EXHIBIT INDEX

3.1 Articles of Incorporation⁽¹⁾

3.2 Bylaws⁽²⁾

4 Stock Certificate of Jacksonville Bancorp, Inc.⁽³⁾

10.1 Employment Agreement between Jacksonville Savings Bank and Andrew F. Applebee⁽⁴⁾

10.2 Employment Agreement between Jacksonville Savings Bank and Richard A. Foss⁽⁵⁾

10.3 Employment Agreement between Jacksonville Savings Bank and John Williams⁽⁶⁾

10.4 Change in Control Agreement between Jacksonville Savings Bank and Diana S. Tone⁽⁷⁾

10.5 Amendments to the Jacksonville Savings Bank and Jacksonville Bancorp, MHC Stock Option Plans⁽⁸⁾

10.6 Jacksonville Savings Bank Supplemental Life Insurance Plan⁽⁹⁾

10.7 Amended and Restated Jacksonville Savings Bank Salary Continuation Plan 1⁽¹⁰⁾

10.8 Jacksonville Savings Bank Long-Term Deferred Compensation Plan, as amended⁽¹¹⁾

10.9 Deferred Compensation Agreement between Chapin State Bank and John C. Williams⁽¹²⁾

10.10 Director’s Compensation Agreement between Chapin State Bank and John C. Williams⁽¹³⁾

10.11 Deferred Compensation Agreement between Chapin State Bank and Dean H. Hess⁽¹⁴⁾

10.12 Director’s Compensation Agreement between Chapin State Bank and Dean H. Hess⁽¹⁵⁾

10.13 Jacksonville Bancorp 2012 Stock Option Plan⁽¹⁶⁾

13 2016 Annual Report to Stockholders

14 Code of Ethics⁽¹⁷⁾

21 Subsidiaries

23 Consent of BKD LLP to incorporate financial statements into Registration Statements on Form S-8

31.1 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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

(2) Incorporated by reference to Exhibit 3.2 to the Form 8-K filed with the Securities and Exchange Commission on February 22, 2017 (File No. 001-34821).

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

(4) Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2009 (File No. 000-49792).

(5) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).

(6) Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2008 (File No. 000-49792).

(7) Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(8) Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(9) Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

52

(10) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2012 (File No. 001-34821).

(11) Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(12) Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(13) Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(14) Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(15) Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 12, 2010 (File No. 333-165466).

(16) Incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 20, 2013 (File No. 333-186754).

(17) Incorporated by reference to Exhibit 14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2004 (File No. 000-49792).

53

EX-13

Exhibit 13

Jacksonville Bancorp, Inc.

2016 Annual Report

To Our Shareholders:

2016 was a momentous year for Jacksonville Bancorp, Inc. and Jacksonville Savings Bank.  Only once in a business’ lifetime does the opportunity to celebrate 100 years come along.  2016 was that year for Jacksonville Savings Bank. 

Our centennial celebration began in January when the Jacksonville Area Chamber of Commerce, at its annual meeting, named Jacksonville Savings Bank as its Business of the Year.  Planned festivities continued throughout the spring and summer months and culminated in October with a week-long series of bank sponsored community events. These included an art exhibit featuring Jacksonville artists past and present and a book signing by local journalist and author Greg Olson. The grand finale, a birthday party in the bank’s lobby, was highlighted by the announcement that, to commemorate our 100^th anniversary, Jacksonville Savings would be contributing $100,000 in gifts and pledges to fourteen area non-profit organizations in the markets we serve.

In addition to being a historical milestone, 2016 was another year of exceptional operating results for Jacksonville Bancorp, Inc.  Net income again topped $3 million.  Total assets grew 3.46% to $319 million and earnings per share increased to $1.72.  A major factor in our strong financial performance was our ability to maintain our net interest income, even as deposits grew 8.11% to $258.7 million. 

We are also pleased to report the asset quality of our loan portfolio remains solid.  The bank’s ratio of non-performing assets to total assets finished at a near all-time low of 0.48% and non-performing loans to total loans were well under 1.00%.  The strength of our loan portfolio enabled us to reduce 2016’s loan loss provision expense.

In 2016, Financial Resources Group, Inc., a wholly-owned subsidiary of Jacksonville Savings Bank, continued to successfully provide investment services to a growing clientele. The bank’s trust department finished the year just below $100 million in assets under management, a benchmark it is poised to exceed in 2017.  The revenue generated by these two departments, combined with our mortgage banking operation, enabled us to grow our non-interest income to a level which continues to exceed our peer group average.

While we always endeavor to deliver outstanding experiences to our existing customer base, we also want to appeal to new and upcoming generations.  To assist parents with educating their children about banking and to help youngsters develop good savings habits, we introduced a new children’s program that has been well received by our youngest customers.

A challenge for every community bank is to offer its customers the best in current technologies while continuing to make available the high level of personal service that sets community banks apart from their big bank brethren.  We continue to strive to achieve the greatest possible balance of these two critical ideals.

When you bank with us, your deposits are used locally to help meet the borrowing needs of the people and businesses in the markets we serve.  Reinvesting in our local economy benefits the community as a whole and is what defines us as a bank. It’s what we’ve been doing since our beginning in 1916 and a tradition we look forward to continuing in the next century of our history.

We thank you for your continued support. 

Sincerely,

Andrew F. Applebee	Richard A. Foss
Chairman of the Board	President and CEO

Table of Contents

	Page
Business of the Company	1
Selected Consolidated Financial Information	2
Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Report of Independent Registered Public Accounting Firm	20
Consolidated Financial Statements	21
Notes to Consolidated Financial Statements	29
Common Stock Information	87
Directors and Executive Officers	88
Corporate Information	89
Annual Meeting	89

Business of the Company

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

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

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

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

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

1

Selected Consolidated Financial Information

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

	At December 31,
	2016		2015		2014		2013		2012
	(In thousands)
Selected Financial Condition Data:
Total assets	$	319,319	$	308,642	$	311,925	$	318,419	$	321,446
Cash and cash equivalents		12,910		4,103		9,612		6,099		7,294
Investment securities		55,748		64,295		55,265		60,639		63,431
Mortgage-backed securities		44,413		23,178		41,420		48,346		51,956
Loans, net(1)		184,951		193,579		184,954		180,902		174,465
Federal Home Loan Bank of Chicago stock, at cost		364		1,114		1,114		1,114		1,114
Foreclosed assets, net		—		331		177		282		137
Bank owned life insurance		7,271		7,094		6,913		6,815		6,613
Deposits		258,678		239,282		245,942		251,738		258,521
Federal Home Loan Bank of Chicago advances		—		8,500		5,000		10,800		700
Short-term borrowings		7,135		6,632		8,822		8,810		12,041
Stockholders’ equity		46,246		45,567		45,016		41,139		44,120
	For the Years Ended December 31,
	2016		2015		2014		2013		2012
	(In thousands, except per share amounts)
Selected Operating Data:
Interest income	$	11,435	$	11,514	$	11,892	$	12,078	$	12,791
Interest expense		1,048		1,127		1,451		1,782		2,303
Net interest income		10,387		10,387		10,441		10,296		10,488
Provision for loan losses		120		140		240		170		490
Net interest income after provision for loan losses		10,267		10,247		10,201		10,126		9,998
Noninterest income		4,261		4,187		3,919		4,443		4,882
Noninterest expense		10,392		10,341		10,213		10,167		9,976
Income before income tax		4,136		4,093		3,907		4,402		4,904
Provision for income taxes		1,088		1,067		934		1,188		1,337
Net income	$	3,048	$	3,026	$	2,973	$	3,214	$	3,567
Earnings per share:
Basic	$	1.72	$	1.71	$	1.66	$	1.73	$	1.89
Diluted	$	1.70	$	1.70	$	1.65	$	1.73	$	1.89
Dividends per share	$	0.40	$	1.32	$	0.32	$	0.31	$	0.40

(1)       Includes loans held for sale of $503,000, $539,000, $236,000, $262,000, and $712,000, at December 31, 2016, 2015, 2014, 2013, and 2012, respectively.

2

	At or For the Years Ended December 31,
	2016			2015			2014			2013			2012
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets (ratio of net income to average total assets)		0.98	%		0.99	%		0.96	%		1.02	%		1.14	%
Return on average equity (ratio of net income to average equity)		6.45	%		6.57	%		6.80	%		7.51	%		8.25	%
Interest rate spread(1)		3.48	%		3.54	%		3.48	%		3.38	%		3.46	%
Net interest margin(2)		3.58	%		3.65	%		3.61	%		3.51	%		3.62	%
Efficiency ratio(3)		70.95	%		70.95	%		71.12	%		68.98	%		64.90	%
Dividend pay-out ratio		22.49	%		77.88	%		19.20	%		17.60	%		21.00	%
Non-interest expense to average total assets		3.35	%		3.39	%		3.29	%		3.23	%		3.20	%
Average interest-earning assets to average interest-bearing liabilities		127.86	%		127.68	%		124.52	%		121.63	%		119.76	%
Average equity to average total assets		15.23	%		15.11	%		14.08	%		13.58	%		13.86	%
Asset Quality Ratios:
Nonperforming assets to total assets		0.48	%		0.76	%		0.78	%		0.65	%		0.73	%
Nonperforming loans to total loans		0.82	%		1.03	%		1.21	%		0.97	%		1.25	%
Allowance for loan losses to nonperforming loans		196.56	%		144.45	%		130.57	%		191.14	%		150.85	%
Allowance for loan losses to gross loans(4)		1.60	%		1.49	%		1.57	%		1.85	%		1.88	%
Capital Ratios (Bank):
Total capital (to risk-weighted assets)		19.52	%		19.15	%		18.81	%		18.15	%		17.72	%
Tier I capital (to risk-weighted assets)		18.27	%		17.90	%		17.56	%		16.89	%		16.46	%
Common equity Tier I capital (to risk-weighted assets)		18.27	%		17.90	%		—			—			—
Tier I capital (to total assets)		12.58	%		12.82	%		12.25	%		11.51	%		10.89	%
Other Data:
Number of offices		6			6			6			6			7
Full time equivalent employees		91			93			96			98			104

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

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

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

(4) Gross loans include loans held for sale.

3

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

General

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

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

Operating Strategy – Overview

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

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

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

4

Critical Accounting Policies and Use of Significant Estimates

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

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

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

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

5

Impairment of Goodwill. Goodwill, an intangible asset with an indefinite life, was recorded on our balance sheet in prior periods as a result of acquisition activity. Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently. During 2016, goodwill was evaluated quarterly due to market conditions.

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

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

Recent Accounting Pronouncements

In 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 in the preliminary stage of evaluating the impact of 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 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.  The Company is currently reviewing its processes but 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 been receiving training and gathering historical data in order to determine the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

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In March 2016, FASB issued ASU 2016-09, Compensation – Stock Compensation (topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The new guidance will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is currently implementing the new processes and does not anticipate a significant impact on the Company’s financial statements.

In January 2017, FASB amended FASB ASC Topic 250, Simplifying the Test for Goodwill. The amendments in the update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has goodwill from a prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. During the current year, the Company performed its impairment assessment and determined that the Company’s goodwill was not impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

Financial Condition

Total assets at December 31, 2016 were $319.3 million, an increase of $10.7 million, or 3.5%, from $308.6 million at December 31, 2015. The increase in total assets was primarily due to a $21.2 million increase in mortgage-backed securities and an $8.8 million increase in cash and cash equivalents, partially offset by decreases of $8.6 million in net loans and $8.5 million in investment securities.

Available-for-sale mortgage-backed securities increased $21.2 million, or 91.6%, to $44.4 million at December 31, 2016 from $23.2 million at December 31, 2015. Available-for-sale investment securities decreased $8.5 million, or 13.3%, to $55.7 million at December 31, 2016 from $64.2 million at December 31, 2015. The decline in investment securities consisted of decreases of $5.9 million in municipal bonds and $2.6 million in U.S. government agency securities. Cash and cash equivalents increased $8.8 million to $12.9 million at December 31, 2016, reflecting a $3.5 million increase in federal funds sold. The growth in cash and cash equivalents and mortgage-backed securities resulted from the investment of cash derived from deposit growth.

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Net loans receivable (excluding loans held for sale) decreased $8.6 million, or 4.5%, to $184.4 million at December 31, 2016 from $193.0 million at December 31, 2015. The decrease in loans was primarily due to decreases of $3.8 million in commercial business loans, $3.0 million in agricultural real estate loans, $2.1 million in residential real estate loans, and $1.5 million in agricultural business loans. The decrease in agricultural real estate reflected payoffs, while the decreases in agricultural business and commercial business loans reflected paydowns on lines of credit.

At December 31, 2016 and 2015, we had $2.7 million recorded in goodwill. At these dates our goodwill was not impaired. At December 31, 2016, we also had $553,000 in mortgage servicing rights. Our mortgage servicing rights asset represented approximately 42 basis points of the $130.5 million in loans that we serviced. We obtain an independent valuation of the mortgage servicing rights at least annually. Our most recent valuation was obtained as of December 31, 2016, which reported a market value of approximately $899,000.

Total deposits increased $19.4 million, or 8.1%, to $258.7 million at December 31, 2016. The increase was primarily due to an $18.3 million increase in transaction accounts, which partially reflected an increase of $8.0 million in public funds. The remainder of the increase reflected growth in low-cost checking and savings accounts. Borrowings, which consisted of $7.1 million in overnight repurchase agreements at December 31, 2016, decreased $8.0 million, or 52.9%, from December 31, 2015. The repurchase agreements are a cash management service provided to our commercial deposit customers. FHLB advances totaling $8.5 million were paid off during the first quarter of 2016, such that none remained outstanding at December 31, 2016.

Stockholders’ equity increased $679,000, or 1.5%, to $46.2 million at December 31, 2016. The increase in stockholders’ equity was primarily the result of net income of $3.0 million, partially offset by $685,000 in cash dividends paid. Stockholders’ equity was also impacted by a decrease of $2.0 million in accumulated other comprehensive income (loss) during 2016. Other comprehensive income (loss) consisted of the decrease in net unrealized gains (losses), net of tax, on available-for-sale securities reflecting changes in market prices for securities in our portfolio. Other comprehensive income (loss) does not include changes in the fair value of other financial instruments included on the balance sheet. Our book value per share increased to $25.69 as of December 31, 2016 from $25.43 at December 31, 2015.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

General

Net income for the year ended December 31, 2016 totaled $3.05 million, or $1.72 per basic common share and $1.70 per diluted common share, compared to net income for the year ended December 31, 2015 of $3.03 million, or $1.71 per basic common share and $1.70 per diluted common share. Net income increased $22,000 during 2016, which reflected an increase of $75,000 in noninterest income and a decrease of $20,000 in the provision for loan losses, partially offset by a decrease of $1,000 in net interest income and increases of $51,000 in noninterest expense and $21,000 in income taxes.

Interest Income

Interest income decreased $80,000, or 0.7%, to $11.4 million for the year ended December 31, 2016 from $11.5 million for the year ended December 31, 2015. The $80,000 decrease in interest income resulted from decreased income of $114,000 on loans and $58,000 on mortgage-backed securities, partially offset by increases of $65,000 on investment securities and $27,000 on other interest-earning assets.

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Interest income on loans decreased $114,000 to $9.2 million for the year ended December 31, 2016 from $9.3 million for the year ended December 31, 2015, primarily due to a decrease in the average yield of loans. The average yield on loans decreased 12 basis points to 4.78% during 2016 from 4.90% during 2015. The decrease in the average yield reflected lower market rates of interest and the competitive lending environment. The decrease in the average yield was partially offset by an increase in the average balance of the loan portfolio, which increased $2.2 million to $191.9 million during 2016. The increase in the average balance of loans was primarily due to growth in the average balance of agricultural business loans, reflecting higher balances on lines of credit during the year.

Interest income on investment securities increased $65,000 to $1.7 million for the year ended December 31, 2016. The increase reflected a $3.5 million increase in the average balance of investment securities to $60.4 million during 2016 due to increased purchases of U.S. agency bonds to be used for pledging purposes for public funds. The average yield of investment securities decreased six basis points to 2.83% during 2016, due to the continuing low interest rate environment and the higher average balance of lower-yielding U.S. agency bonds. The majority of our investment portfolio consists of municipal bonds which are exempt from federal taxation, resulting in a reduction in income tax expense. Adjusting for this benefit, the tax equivalent yield of the investment portfolio equaled 3.94% for 2016 compared to 4.12% for 2015.

Interest income on mortgage-backed securities decreased $58,000 to $484,000 for the year ended December 31, 2016 from $542,000 for the year ended December 31, 2015. The decrease was primarily due to a decrease of $3.5 million in the average balance of mortgage-backed securities to $27.7 million during 2016. The decrease in the average balance reflected the use of sales and repayment proceeds for the origination of new loans. The decrease in interest income on mortgage-backed securities was partially offset by an increase in the average yield of mortgage-backed securities to 1.75% during 2016 from 1.74% during 2015. The average yield continues to be affected by low long-term rates, partially offset by the benefit of lower premium amortization, resulting from slower national prepayment speeds on mortgage-backed securities.

Interest income from other interest-earning assets, which consisted of interest-earning demand and time deposits and federal funds sold, increased to $62,000 during the year ended December 31, 2016, from $35,000 for the year ended December 31, 2015. The $27,000 increase was due to increases in the average balance and average yield of these investments. The average balance of other interest-earning assets increased $3.6 million to $10.0 million during 2016, reflecting an increase in the average balance of federal funds sold. The average yield on these investments increased to 0.62% during 2016 from 0.54% during 2015.

Interest Expense

Total interest expense decreased $79,000, or 7.0%, to $1.0 million during the year ended December 31, 2016 from $1.1 million during the year ended December 31, 2015. The decrease in interest expense was due to decreases of $76,000 in the cost of deposits and $3,000 in the cost of borrowings.

Interest expense on deposits decreased $76,000 to $1.0 million during the year ended December 31, 2016 from $1.1 million during the year ended December 31, 2015. The decrease in interest expense on deposits was primarily due to a decrease in the average rate of deposits. The average rate paid on deposits decreased six basis points to 0.47% during 2016 from 0.53% during 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 decrease in interest expense on deposits was partially offset by an increase of $11.5 million in the average balance of deposits to $220.2 million during 2016 from $208.7 million during 2015. The increase in the average balance of deposits was primarily due to a $19.1 million increase in the average balance of lower cost transaction accounts, partially offset by a decrease of $7.6 million in the average balance of time deposit accounts.

9

Interest paid on borrowed funds decreased $3,000 to $23,000 during 2016 from $26,000 during 2015. Borrowed funds consisted of overnight repurchase agreements and advances from the FHLB. The average balance of borrowed funds decreased $7.3 million to $6.6 million during 2016, reflecting the use of overnight funds from the FHLB during 2015. The average rate paid on borrowed funds increased to 0.35% during 2016 from 0.19% during 2015.

Net Interest Income

As a result of the changes in interest income and interest expense noted above, net interest income decreased by $1,000 to $10.4 million in 2016. Our interest rate spread decreased by six basis points to 3.48% during 2016 from 3.54% during 2015. Our net interest margin decreased seven basis points to 3.58% during 2016 from 3.65% during 2015. Our ratio of average interest earning assets to average interest bearing liabilities for the years ended December 31, 2016 and 2015 was 1.28x.

Provision for Loan Losses

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

The allowance for loan losses increased $88,000 during 2016 to $3.0 million as of December 31, 2016. The increase was the result of the provision for loan losses exceeding net charge-offs. We recorded a provision for loan losses of $120,000 for the year ended December 31, 2016, compared to $140,000 during 2015. The $20,000 decrease in the provision reflected the lower level of charge-offs and nonperforming loans in 2016, as compared to 2015. Net charge-offs decreased $144,000 to $32,000 during 2016 from $177,000 during 2015.

The provisions in 2016 and 2015 were made to bring the allowance for loan losses to a level deemed adequate following management’s evaluation of the repayment capacity and collateral protection afforded by each problem loan identified by management. The review also considered the local economy and the level of bankruptcies and foreclosures in our market area.

The following table sets forth the composition of our non-performing assets at December 31, 2016 and 2015, respectively.

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	December 31, 2016			December 31, 2015
	(Dollars in thousands)
Nonaccrual loans:
Real estate loans:
One- to four-family residential	$	590		$	911
Commercial		709			840
Agricultural		—			—
Home equity		50			119
Commercial business loans		17			9
Agricultural business loans		—			—
Consumer loans		164			142
Total nonaccrual loans		1,530			2,021
Loans delinquent 90 days or greater and still accruing:
Real estate loans:
One- to four-family residential		—			—
Commercial		—			—
Agricultural		—			—
Home equity		—			—
Commercial business loans		—			—
Agricultural business loans		—			—
Consumer loans		—			—
Total loans delinquent 90 days or greater and still accruing		—			—
Total nonperforming loans		1,530			2,021
Other real estate owned and foreclosed assets:
Real estate loans:
One- to four-family residential		—			217
Commercial		—			114
Agricultural		—			—
Home equity		—			—
Commercial business loans		—			—
Agricultural business loans		—			—
Consumer loans		—			—
Total  other real estate owned and foreclosed assets		—			331
Total nonperforming assets	$	1,530		$	2,352
Ratios:
Nonperforming loans to total loans		0.82	%		1.03	%
Nonperforming assets to total assets		0.48			0.76

Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision with consideration given to the need for additions to the allowance for loan losses and, if appropriate, partial or full charge-off. At December 31, 2016, we had no loans 90 days or more delinquent which were still accruing interest. Nonperforming assets decreased by $822,000 to $1.5 million at December 31, 2016. The decrease in the level of nonperforming assets reflected decreases of $491,000 in nonperforming loans and $331,000 in foreclosed assets. The decrease in nonperforming loans primarily reflected the improvement in certain loans totaling $346,000 which were removed from nonaccrual status during 2016.

The allowance for loan losses as a percentage of nonperforming loans increased to 196.56% at December 31, 2016, as compared to 144.45% at December 31, 2015. The increase in this coverage ratio was due to both an increase in the allowance for loan losses and a decrease in nonperforming loans during 2016. The allowance for loan losses at $3.0 million represented 1.60% of total loans at December 31, 2016. On this same date, nonperforming loans totaled 0.82% of total loans. We have an experienced chief lending officer, collections, and independent loan review program which monitor the loan portfolio and seek to prevent any deterioration of asset quality.

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The following table shows the principal amount of special mention and classified loans at December 31, 2016 and December 31, 2015.

	December 31, 2016		December 31, 2015
	(In thousands)
Special Mention loans	$	2,431	$	3,781
Substandard loans		5,229		5,020
Total Special Mention and Substandard loans	$	7,660	$	8,801

The total amount of classified and special mention loans decreased $1.1 million to $7.7 million at December 31, 2016 from $8.8 million at December 31, 2015. The decrease in classified and special mention loans during 2016 was due to a decrease of $1.4 million in special mention loans, partially offset by an increase of $209,000 in substandard loans. The decrease in special mention loans reflected $1.5 million in principal reductions, partially offset by $274,000 in additional loans listed as special mention during 2016. The increase in substandard loans was primarily related to $1.2 million in additional loans classified as substandard, partially offset by $669,000 in principal reductions during 2016.

Noninterest Income

Noninterest income increased $75,000, or 1.8%, to $4.3 million for the year ended December 31, 2016, compared to $4.2 million for the year ended December 31, 2015. The increase in noninterest income resulted primarily from increases of $79,000 in gains on the sales of available-for-sale securities, $78,000 in net income on mortgage banking operations, $68,000 from service charges on deposits and $45,000 in ATM and bank card interchange income, partially offset by a decrease of $191,000 in commission income.

The increase in gains on the sales of securities reflected a higher volume of sales, as securities totaling $39.3 million were sold during 2016, compared to $30.7 million during 2015. The sales during 2016 and 2015 were primarily made to reduce the volatility to interest rate changes, improve yields, and eliminate faster-paying mortgage-backed securities. The increase in mortgage banking income was due to a higher volume of loan sales, as we sold $20.7 million of loans in the secondary market during 2016, compared to $16.8 million in sales during 2015. The higher volume of sales reflected an increased volume of mortgage originations, which are affected by market interest rates. The increase in service charges on deposits reflected an increase in fees related to nonsufficient funds. ATM and debit card interchange income also increased reflecting a higher volume of transactions. The decrease in commission income reflected decreased sales income during 2016, as compared to 2015, partially offset by a growth in assets under management.

Noninterest Expense

Total noninterest expense increased $51,000, or 0.5%, to $10.4 million for the year ended December 31, 2016, compared to the year ended December 31, 2015. The increase in noninterest expense was primarily due to increases of $51,000 in occupancy and equipment expense, $40,000 in salaries and employee benefits, and $40,000 in marketing expense, partially offset by decreases of $27,000 in deposit insurance premiums, $24,000 in ATM and bank card expense, and $22,000 in data processing and telecommunications expense.

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The increase in occupancy expense primarily reflected higher repair and maintenance costs on bank facilities and higher service contracts on equipment during 2016. The increase in salaries and employee benefits expense reflected normal cost increases. Marketing expense increased due to additional advertising and promotion expenses related to the Bank’s 100^th anniversary celebration during 2016. Deposit insurance premiums benefitted from a lower rate schedule, which became effective July 1, 2016. The decrease in ATM and bank card expense reflected the extra expense related to our conversion to chip cards during 2015. The decrease in data processing fees during 2016 reflected the non-recurring expenses related to the redesign of our Company website and our conversion to a new loan documentation program during 2015.

Income Taxes

The provision for income taxes increased $21,000 to $1.1 million during 2016 compared to 2015. The increase in the income tax provision reflected a slight increase in taxable income. Our effective tax rate was 26.3% for 2016 and 26.1% for 2015, reflecting the impact of tax-exempt income.

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Average Balances and Yields

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

	For the Years Ended December 31,
	2016							2015							2014
	Average Outstanding Balance		Interest		Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate			Average Outstanding Balance		Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	191,887	$	9,180		4.78	%	$	189,667	$	9,294		4.90	%	$	180,936	$	9,158		5.06	%
Investment securities (2)		60,388		1,709		2.83			56,859		1,643		2.89			58,883		1,751		2.97
Mortgage-backed securities		27,701		484		1.75			31,248		542		1.74			46,939		981		2.09
Cash and cash equivalents		10,037		62		0.62			6,478		35		0.54			2,792		2		0.06
Total interest-earning assets		290,013		11,435		3.94	%		284,252		11,514		4.05	%		289,550		11,892		4.10	%
Non-interest-earning assets		20,253							20,702							21,029
Total assets	$	310,266						$	304,954						$	310,579
Interest-bearing liabilities:
Interest bearing checking	$	55,610	$	168		0.30	%	$	39,270	$	57		0.14	%	$	38,080	$	54		0.14	%
Savings accounts		43,265		86		0.20			39,954		80		0.20			37,323		80		0.21
Certificates of deposit		78,988		659		0.83			86,614		852		0.98			102,890		1,180		1.15
Money market savings		34,741		100		0.29			34,947		101		0.29			35,408		110		0.31
Money market deposits		7,628		12		0.15			7,957		11		0.15			8,026		12		0.15
Total interest-bearing deposits		220,232		1,025		0.47			208,742		1,101		0.53			221,727		1,436		0.65
Federal Home Loan Bank advances		1,348		4		0.30			7,877		19		0.24			4,803		10		0.20
Short-term borrowings		5,247		19		0.35			6,009		7		0.12			5,996		5		0.08
Total borrowings		6,595		23		0.35			13,886		26		0.19			10,799		15		0.14
Total interest-bearing liabilities		226,827		1,048		0.46	%		222,628		1,127		0.51	%		232,526		1,451		0.62	%
Non-interest-bearing liabilities		36,197							36,238							34,320
Total liabilities		263,024							258,866							266,846
Stockholders’ equity		47,242							46,088							43,733
Total liabilities and stockholders’ equity	$	310,266						$	304,954						$	310,579
Net interest income			$	10,387						$	10,387						$	10,441
Net interest rate spread (3)						3.48	%						3.54	%						3.48	%
Net interest-earning assets (4)			$	63,186						$	61,624						$	57,024
Net interest margin (5)						3.58	%						3.65	%						3.61	%
Average interest-earning assets to average interest-bearing liabilities						127.86	%						127.68	%						124.52	%

(1) Includes non-accrual loans and loans held for sale and fees of $93,000 for 2016, $104,000 for 2015, and $92,000 for 2014.

(2) Includes Federal Home Loan Bank stock and U.S. Agency securities.

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

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

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

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Rate/volume analysis

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

	Years Ended December 31, 2016 vs. 2015									Years Ended December 31, 2015 vs. 2014
	Increase (Decrease) Due to						Total Increase			Increase (Decrease) Due to						Total Increase
	Rate			Volume			(Decrease)			Rate			Volume			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	(222	)	$	108		$	(114	)	$	(296	)	$	433		$	137
Investment securities		(35	)		100			65			(49	)		(59	)		(108	)
Mortgage-backed securities		4			(62	)		(58	)		(148	)		(291	)		(439	)
Cash and cash equivalents		5			22			27			28			5			33
Total interest-earning assets	$	(248	)	$	168		$	(80	)	$	(465	)	$	88		$	(377	)
Interest-bearing liabilities:
Interest bearing checking	$	81		$	31		$	112		$	1		$	2		$	3
Savings accounts		(1	)		7			6			(5	)		5			—
Certificates of deposit		(122	)		(71	)		(193	)		(155	)		(173	)		(328	)
Money market savings		—			(1	)		(1	)		(8	)		(1	)		(9	)
Money market deposits		1			(1	)		—			(1	)		—			(1	)
Total interest-bearing deposits		(41	)		(35	)		(76	)		(168	)		(167	)		(335	)
Federal Home Loan Bank advances		3			(18	)		(15	)		2			7			9
Short-term borrowings		13			(1	)		12			2			—			2
		16			(19	)		(3	)		4			7			11
Total interest-bearing liabilities		(25	)		(54	)		(79	)		(164	)		(160	)		(324	)
Change in net interest income	$	(223	)	$	222		$	(1	)	$	(301	)	$	248		$	(53	)

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Asset and Liability Management

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

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

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

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

The following table shows projected results at December 31, 2016 and 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
	December 31, 2016						December 31, 2015						ALCO
Rate Shock	$ Change			% Change			$ Change			% Change			Benchmark
	(Dollars in thousands)
+300 basis points		(99	)		(0.87	)%		(344	)		(3.00	)%		>(20.00	)%
+200 basis points		(64	)		(0.56	)		(242	)		(2.10	)		>(20.00	)%
+100 basis points		(13	)		(0.12	)		(119	)		(1.04	)		>(12.50	)%
(100) basis points		(195	)		(1.70	)		(88	)		(0.76	)		>(12.50	)%

The table above indicates that at December 31, 2016, in the event of a 200 basis point increase in interest rates, we would experience a 0.56% decrease in net interest income. In the event of a 100 basis point decrease in interest rates, we would experience a 1.70% decrease in net interest income.

16

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

Liquidity and Capital Resources

Liquidity is the ability to meet current and future short-term financial obligations. Our ALCO Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs of our customers as well as unanticipated contingencies. At December 31, 2016, we had access to immediately available funds of an additional $68.7 million from the Federal Home Loan Bank of Chicago and approximately $36.6 million in overnight federal funds purchased.

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

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, and investing activities. At December 31, 2016 and 2015, cash and cash equivalents totaled $12.9 million and $4.1 million, respectively. Our primary sources of funds include customer deposits, proceeds from sales of loans, maturities and sales of investments, and principal repayments from loans and mortgage-backed securities (both scheduled and prepayments). During the years ended December 31, 2016 and 2015, the most significant sources of funds have been loan sales, investment sales and principal payments, and deposit growth.

Our cash and cash equivalents increased $8.8 million during the year ended December 31, 2016, compared to a decrease of $5.5 million during the year ended December 31, 2015. Net cash provided by operating activities increased to $4.2 million during 2016 from $3.2 million during 2015. Net cash used in investing activities increased to $4.6 million during 2016 from the $2.4 million used during 2015. Cash used in the purchase of investment and mortgage-backed securities, net of sales and maturities, increased to $16.0 million during 2016 from the $9.0 million cash provided during 2015. Cash provided by net loan originations and payments increased to $8.6 million during 2016 from $8.7 million used in 2015. Cash provided by financing activities increased to $9.2 million during 2016 from the $6.3 million in cash used during 2015. The increase was primarily due to the growth in deposit accounts during 2016.

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

17

Liquidity management is both a short- and long-term responsibility of management. We adjust our investments in liquid assets based upon management’s assessment of expected loan demand, projected purchases of investment and mortgage-backed securities, expected deposit flows, yields available on interest-earning deposits, and liquidity of its asset/liability management program. Excess liquidity is generally invested in interest-earning overnight deposits, federal funds sold, and other short-term U.S. agency obligations. We use securities sold under agreements to repurchase as an additional funding source. The agreements represent our obligations to third parties and are secured by investments which we pledge as collateral. At December 31, 2016, we had $7.1 million in outstanding repurchase agreements, which were utilized for overnight funding.

If we require funds beyond our ability to generate them internally, we have the ability to borrow funds from the Federal Home Loan Bank. We may borrow from the Federal Home Loan Bank under a blanket agreement which assigns all investments in Federal Home Loan Bank stock as well as qualifying loans as collateral to secure the amounts borrowed. This borrowing arrangement is limited to the lesser of 35% of our total assets, the balance of qualifying loans, or twenty times the balance of Federal Home Loan Bank stock held by us. At December 31, 2016, we had no outstanding advances and a remaining borrowing capacity of approximately $68.7 million.

We maintain levels of liquid assets as established by the board of directors. Our liquidity ratio, adjusted for pledged assets, at December 31, 2016 and 2015 was 36.3% 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.

We must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments. We anticipate that we will have sufficient funds available to meet our current commitments principally through the use of current liquid assets and through our borrowing capacity discussed above. The following table summarizes our outstanding loan commitments at December 31, 2016 and 2015.

	December 31, 2016		December 31, 2015
	(In thousands)
Commitments to fund loans	$	47,944	$	36,997
Standby letters of credit		110		110

Quantitative measures established by regulation to ensure capital adequacy require Jacksonville Savings Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier I, and common equity Tier 1 capital to risk-weighted assets and Tier I capital to average assets. At December 31, 2016, Jacksonville Savings Bank met all capital adequacy requirements to which it is subject.

The Director of the Illinois Department of Financial and Professional Regulation is authorized to require a savings bank to maintain a minimum capital level based upon the savings bank’s financial condition or history, management or earnings. If a savings bank’s core capital ratio falls below the required level, the Director may direct the savings bank to adhere to a specific written plan established by the Director to correct the savings bank’s capital deficiency, as well as a number of other restrictions on the savings bank’s operations, including a prohibition on the declaration of dividends by the savings bank’s board of directors. At December 31, 2016, Jacksonville Savings Bank’s core capital ratio was 12.58% of total adjusted average assets, which exceeded the required ratio of 4.00%.

18

As of December 31, 2016, the Federal Deposit Insurance Corporation categorized Jacksonville Savings Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, Jacksonville Savings Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed Jacksonville Savings Bank’s category. Jacksonville Savings Bank’s actual capital ratios at December 31, 2016 and 2015 are presented in the table below.

	Well Capitalized			December 31, 2016 Actual			December 31, 2015 Actual
Tier 1 Capital to Average Assets		5.00	%		12.58	%		12.82	%
Common Equity Tier 1 Capital to Risk-Weighted Assets		6.50	%		18.27	%		17.90	%
Tier 1 Capital to Risk-Weighted Assets		8.00	%		18.27	%		17.90	%
Total Capital to Risk-Weighted Assets		10.00	%		19.52	%		19.15	%

Effect of Inflation and Changing Prices

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

*  *  *  *  *  *

19

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors, and Stockholders

Jacksonville Bancorp, Inc.

Jacksonville, Illinois

We have audited the accompanying consolidated balance sheets of Jacksonville Bancorp, Inc. (Company) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Jacksonville Bancorp, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD LLP

Decatur, Illinois

March 9, 2017

20

Jacksonville Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2016 and 2015

Assets

	2016		2015
Cash and due from banks	$	5,984,640	$	2,385,846
Interest-earning demand deposits in banks		6,925,284		1,717,586
Cash and cash equivalents		12,909,924		4,103,432
Interest-earning time deposits in banks		750,000		2,724,000
Available-for-sale securities:
Investment securities		55,748,263		64,294,937
Mortgage-backed securities		44,413,177		23,178,395
Other investments		55,481		62,223
Loans held for sale		503,003		539,000
Loans, net of allowance for loan losses of $3,007,395 and $2,919,594 at December 31, 2016 and 2015		184,448,003		193,039,879
Premises and equipment, net of accumulated depreciation of $6,519,729 and $6,126,823 at December 31, 2016 and 2015		4,498,653		4,728,157
Federal Home Loan Bank stock		363,800		1,113,800
Foreclosed assets held for sale, net		—		330,981
Cash surrender value of life insurance		7,271,438		7,093,640
Interest receivable		1,588,545		1,715,676
Deferred income taxes		2,738,789		1,583,067
Income taxes receivable		45,444		—
Mortgage servicing rights, net of valuation allowance of $0 and $47,354 as of December 31, 2016 and 2015		552,827		597,713
Goodwill		2,726,567		2,726,567
Other assets		704,845		811,007
Total assets	$	319,318,759	$	308,642,474

See Notes to Consolidated Financial Statements

21

Jacksonville Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2016 and 2015

Liabilities and Stockholders’ Equity

	2016			2015
Liabilities
Deposits
Demand	$	33,633,972		$	31,426,710
Savings, NOW and money market		144,857,452			128,800,696
Time		80,186,536			79,054,524
Total deposits		258,677,960			239,281,930
Short-term borrowings		7,135,182			15,131,710
Deferred compensation		4,680,268			4,492,594
Advances from borrowers for taxes and insurance		1,102,204			990,917
Interest payable		106,755			118,335
Income taxes payable		—			49,291
Dividends payable		179,904			1,934,834
Other liabilities		1,190,921			1,076,363
Total liabilities		273,073,194			263,075,974
Stockholders’ Equity
Preferred stock, $.01 par value, authorized 10,000,000 shares; none issued and outstanding		—			—
Common stock, $.01 par value; authorized 25,000,000 shares; issued 1,800,244 – December 31, 2016 and 1,791,513 – December 31, 2015		18,002			17,915
Additional paid-in capital		13,908,728			13,664,914
Retained earnings		33,667,499			31,305,040
Accumulated other comprehensive income (loss)		(1,176,294	)		790,341
Unallocated ESOP shares		(172,370	)		(211,710	)
Total stockholders’ equity		46,245,565			45,566,500
Total liabilities and stockholders’ equity	$	319,318,759		$	308,642,474

See Notes to Consolidated Financial Statements

22

Jacksonville Bancorp, Inc.

Consolidated Statements of Income

Years Ended December 31, 2016 and 2015

	2016		2015
Interest and Fee Income
Loans, including fees	$	9,179,752	$	9,294,256
Debt securities
Taxable		410,510		287,066
Tax-exempt		1,298,051		1,356,056
Mortgage-backed securities		484,264		542,453
Other		62,407		35,033
Total interest income		11,434,984		11,514,864
Interest Expense
Deposits		1,025,232		1,101,262
Short-term borrowings		19,064		7,130
Federal Home Loan Bank advances		4,030		18,981
Total interest expense		1,048,326		1,127,373
Net Interest Income		10,386,658		10,387,491
Provision for Loan Losses		120,000		140,000
Net Interest Income After Provision for Loan Losses		10,266,658		10,247,491
Noninterest Income
Fiduciary activities		328,917		289,153
Commission income		1,223,860		1,414,840
Service charges on deposit accounts		747,942		680,022
Mortgage banking operations, net		259,008		180,872
Net realized gains on sales of available-for-sale securities		399,599		320,585
Loan servicing fees		333,441		344,019
Increase in cash surrender value of life insurance		172,504		175,428
ATM and bank card interchange income		674,065		628,882
Other		122,109		153,089
Total noninterest income		4,261,445		4,186,890

See Notes to Consolidated Financial Statements

23

Jacksonville Bancorp, Inc.

Consolidated Statements of Income

Years Ended December 31, 2016 and 2015

	2016		2015
Noninterest Expense
Salaries and employee benefits	$	6,763,951	$	6,724,334
Occupancy and equipment		1,047,048		996,460
Data processing and telecommunications		588,053		609,835
Professional		193,937		191,969
Marketing		156,826		116,568
Postage and office supplies		228,445		229,438
Deposit insurance premium		122,246		149,366
ATM and bank card expense		384,602		408,148
Other		907,428		915,115
Total noninterest expense		10,392,536		10,341,233
Income Before Income Taxes		4,135,567		4,093,148
Provision for Income Taxes		1,087,658		1,067,025
Net Income	$	3,047,909	$	3,026,123
Basic Earnings Per Share	$	1.72	$	1.71
Diluted Earnings Per Share	$	1.70	$	1.70
Cash Dividends Per Share	$	0.40	$	1.32

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2016 and 2015

	2016			2015
Net Income	$	3,047,909		$	3,026,123
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $(877,251) and $149,623 for 2016 and  2015, respectively		(1,702,900	)		290,444
Less:  reclassification adjustment for realized gains included in net income, net of taxes of $135,864 and $108,999 for 2016 and 2015, respectively		263,735			211,586
		(1,966,635	)		78,858
Comprehensive Income	$	1,081,274		$	3,104,981

See Notes to Consolidated Financial Statements

24

Jacksonville Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2016 and 2015

							Additional
	Issued Common Stock						Paid-in			Retained
	Shares			Amount			Capital			Earnings
Balance, January 1, 2015		1,799,483		$	17,995		$	13,900,743		$	30,635,787
Net income		—			—			—			3,026,123
Other comprehensive income		—			—			—			—
Stock repurchases		(32,685	)		(327	)		(764,984	)		—
Exercise of stock options		24,715			247			382,374			—
Tax benefit of nonqualified options		—			—			4,169			—
Stock-based compensation expense		—			—			90,163			—
Common shares held by ESOP, committed to be released		—			—			52,449			—
Dividends on common stock, $1.32 per share		—			—			—			(2,356,870	)
Balance, December 31, 2015		1,791,513			17,915			13,664,914			31,305,040
Net income		—			—			—			3,047,909
Other comprehensive income (loss)		—			—			—			—
Stock repurchases		(4,801	)		(48	)		(127,070	)		—
Exercise of stock options		13,532			135			201,441			—
Tax benefit of nonqualified options		—			—			10,199			—
Stock-based compensation expense		—			—			90,163			—
Common shares held by ESOP, committed to be released		—			—			69,081			—
Dividends on common stock, $0.40 per share		—			—			—			(685,450	)
Balance, December 31, 2016		1,800,244		$	18,002		$	13,908,728		$	33,667,499

See Notes to Consolidated Financial Statements

25

Jacksonville Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2016 and 2015

	Accumulated
	Other
	Comprehensive			Unallocated
	Income (Loss)			ESOP			Total
Balance, January 1, 2015	$	711,483		$	(249,910	)	$	45,016,098
Net income		—			—			3,026,123
Other comprehensive income		78,858			—			78,858
Stock repurchases		—			—			(765,311	)
Exercise of stock options		—			—			382,621
Tax benefit of nonqualified options		—			—			4,169
Stock-based compensation expense		—			—			90,163
Common shares held by ESOP, committed to be released		—			38,200			90,649
Dividends on common stock, $1.32 per share		—			—			(2,356,870	)
Balance, December 31, 2015		790,341			(211,710	)		45,566,500
Net income		—			—			3,047,909
Other comprehensive income (loss)		(1,966,635	)		—			(1,966,635	)
Stock repurchases		—			—			(127,118	)
Exercise of stock options		—			—			201,576
Tax benefit of nonqualified options		—			—			10,199
Stock-based compensation expense		—			—			90,163
Common shares held by ESOP, committed to be released		—			39,340			108,421
Dividends on common stock, $0.40 per share		—			—			(685,450	)
Balance, December 31, 2016	$	(1,176,294	)	$	(172,370	)	$	46,245,565

See Notes to Consolidated Financial Statements

26

Jacksonville Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2016 and 2015

	2016			2015
Operating Activities
Net income	$	3,047,909		$	3,026,123
Items not requiring (providing) cash
Depreciation and amortization		394,935			386,063
Provision for loan losses		120,000			140,000
Amortization of premiums and discounts on securities and loans		722,191			652,730
Deferred income taxes		(142,607	)		(137,484	)
Net realized gains on available-for-sale securities		(399,599	)		(320,585	)
Amortization of mortgage servicing rights		120,980			127,800
Impairment of mortgage servicing rights asset		38,967			—
Increase in cash surrender value of life insurance, net		(177,798	)		(180,723	)
Gains on sales of foreclosed assets		(33,970	)		(49,975	)
Shares held by ESOP committed to be released		108,421			90,649
Stock-based compensation expense		90,163			90,163
Changes in
Interest receivable		127,131			(2,433	)
Other assets		(265,939	)		(216,149	)
Interest payable		(11,580	)		(47,717	)
Other liabilities		207,498			(254,242	)
Origination of loans held for sale		(20,376,281	)		(16,942,428	)
Proceeds from sales of loans held for sale		20,675,254			16,845,646
Net cash provided by operating activities		4,245,675			3,207,438
Investing Activities
Net change in interest-earning time deposits		1,974,000			(2,724,000	)
Proceeds from redemption of Federal Home Loan Bank stock		750,000			—
Purchases of available-for-sale securities		(66,685,397	)		(29,989,452	)
Proceeds from maturities and payments  of available-for-sale securities		11,400,048			8,303,432
Proceeds from the sales of available-for-sale investments and other investments		39,301,125			30,695,946
Net change in loans		8,564,794			(8,749,699	)
Purchase of premises and equipment		(165,431	)		(168,237	)
Proceeds from the sale of foreclosed assets		266,613			182,378
Net cash used in investing activities		(4,594,248	)		(2,449,632	)

See Notes to Consolidated Financial Statements

27

Jacksonville Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31, 2016 and 2015

	2016			2015
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	$	18,264,018		$	8,885,407
Net increase (decrease) in certificates of deposit		1,132,012			(15,545,039	)
Net increase (decrease) in short-term borrowings		(7,996,529	)		1,309,981
Net increase in advances from borrowers for taxes and insurance		111,287			28,155
Stock repurchase		(127,118	)		(765,311	)
Proceeds from stock options exercised		211,775			386,790
Dividends paid		(2,440,380	)		(565,995	)
Net cash provided by (used in) financing activities		9,155,065			(6,266,012	)
Increase (Decrease) in Cash and Cash Equivalents		8,806,492			(5,508,206	)
Cash and Cash Equivalents, Beginning of Year		4,103,432			9,611,638
Cash and Cash Equivalents, End of Year	$	12,909,924		$	4,103,432
Supplemental Cash Flows Information
Interest paid	$	1,059,906		$	1,175,090
Income taxes paid	$	1,325,000		$	1,356,000
Sale and financing of foreclosed assets	$	204,850		$	81,700
Real estate acquired in settlement of loans	$	114,400		$	379,825
Dividends declared not paid	$	179,904		$	1,934,834
Exercise and retirement of shares in stock option plan	$	74,458		$	153,271

See Notes to Consolidated Financial Statements

28

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

Nature of Operations

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

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

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

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

Principles of Consolidation and Financial Statement Presentation

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

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

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Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Use of Estimates

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

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

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2016 and 2015, cash equivalents consisted primarily of federal funds sold and interest-earning time and demand deposits in banks.

At December 31, 2016, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

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

Securities

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

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

30

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Other Investments

Other investments at December 31, 2016 and 2015 include local municipal bonds and equity investments in local community development organizations. The municipal bonds mature ratably through the year 2020. These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

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

Loans

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

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

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

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

Allowance for Loan Losses

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

31

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the 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 collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

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

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

Premises and Equipment

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

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

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

32

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Federal Home Loan Bank Stock

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

Foreclosed Assets Held for Sale

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

Bank-owned Life Insurance

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

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. The goodwill was not deemed impaired as of December 31, 2016 or 2015.

Mortgage Servicing Rights

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

33

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

Stock Options

At December 31, 2016 and 2015, the Company recognizes the fair value (calculated value) of stock-based awards to employees as compensation cost over the requisite service period. The stock-based employee compensation plan is described more fully in Note 15.

Transfers of Financial Assets

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

34

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Income Taxes

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

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

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2013.

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

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

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

35

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Comprehensive Income

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

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company. Fees from trust activities are recorded as revenue over the period in which the service is provided. Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes. Generally, the actual trust fee is charged to each account on a monthly basis. Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred. The Company managed or administered approximately 131 and 124 trust accounts with assets totaling approximately $99.3 million and $90.7 million at December 31, 2016 and 2015, respectively.

Reclassifications

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

Recent and Future Accounting Requirements

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 in the preliminary stage of evaluating the impact of 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 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.  The Company is currently reviewing its processes but adoption by the Company is not expected to have a material impact on the consolidated financial statements and related disclosures.

36

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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 been receiving training and gathering historical data in order to determine the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation – Stock Compensation (topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The new guidance will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is currently implementing the new processes and does not anticipate a significant impact on the Company’s financial statements.

In January 2017, FASB amended FASB ASC Topic 250, Simplifying the Test for Goodwill. The amendments in the update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has goodwill from a prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. During the current year, the Company performed its impairment assessment and determined that the Company’s goodwill was not impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

37

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 2: Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2016 and 2015, was $2,449,000 and $1,524,000, respectively.

Note 3: Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale Securities
December 31, 2016:
U.S. Government and federal agencies	$	13,985,863	$	9,641	$	(661,964	)	$	13,333,540
Mortgage-backed securities (Government-sponsored enterprises - residential)		45,457,262		70,512		(1,114,597	)		44,413,177
Municipal bonds		42,500,579		558,776		(644,632	)		42,414,723
	$	101,943,704	$	638,929	$	(2,421,193	)	$	100,161,440
December 31, 2015:
U.S. Government and federal 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

38

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The amortized cost and fair value of available-for-sale securities at December 31, 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.

	Available-for-sale
	Amortized Cost		Fair Value
Within one year	$	1,036,978	$	1,043,616
One to five years		9,201,183		9,315,610
Five to ten years		27,297,515		27,081,945
After ten years		18,950,766		18,307,092
		56,486,442		55,748,263
Mortgage-backed securities		45,457,262		44,413,177
Totals	$	101,943,704	$	100,161,440

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $42,463,127 at December 31, 2016 and $25,681,115 at December 31, 2015.

The carrying value of securities sold under agreement to repurchase amounted to $9,709,793 at December 31, 2016 and $7,591,475 at December 31, 2015.

Gross gains of $402,981 and $352,983 and gross losses of $(3,382) and $(32,398) resulting from sales of available-for-sale securities were realized for 2016 and 2015, respectively. The tax provision applicable to these net realized gains amounted to $135,864 and $108,999, respectively.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2016 and 2015, was $71,583,259 and $30,676,768, which is approximately 71% and 35%, respectively, of the Company’s available-for-sale investment portfolio. The declines primarily resulted from recent changes in market interest rates.

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

39

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The following table shows the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2016 and 2015:

	December 31, 2016
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	12,333,924	$	(661,964	)	$	—	$	—		$	12,333,924	$	(661,964	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		37,144,915		(1,114,597	)		—		—			37,144,915		(1,114,597	)
Municipal bonds		22,104,420		(644,632	)		—		—			22,104,420		(644,632	)
Total temporarily impaired securities	$	71,583,259	$	(2,421,193	)	$	—	$	—		$	71,583,259	$	(2,421,193	)
	December 31, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	8,591,014	$	(49,205	)	$	1,809,745	$	(36,545	)	$	10,400,759	$	(85,750	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		5,843,754		(45,886	)		2,257,674		(54,906	)		8,101,428		(100,792	)
Municipal bonds		5,440,291		(48,383	)		6,734,290		(130,876	)		12,174,581		(179,259	)
Total temporarily impaired securities	$	19,875,059	$	(143,474	)	$	10,801,709	$	(222,327	)	$	30,676,768	$	(365,801	)

U.S. Government Agencies

The unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

40

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Residential Mortgage-backed Securities

The unrealized losses on the Company’s investment in residential mortgage-backed securities were caused by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

Municipal Bonds

The unrealized losses on the Company’s investments in securities of municipal bonds were caused by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

Note 4: Loans and Allowance for Loan Losses

Classes of loans at December 31, include:

	2016		2015
Mortgage loans on real estate
Residential 1-4 family	$	45,311,103	$	47,395,344
Commercial		41,477,480		40,381,680
Agricultural		38,271,758		41,223,190
Home equity		11,606,002		11,691,545
Total mortgage loans on real estate		136,666,343		140,691,759
Commercial loans		21,617,744		25,453,058
Agricultural		14,649,622		16,102,856
Consumer		14,543,356		13,741,093
		187,477,065		195,988,766
Less
Net deferred loan fees		21,667		29,293
Allowance for loan losses		3,007,395		2,919,594
Net loans	$	184,448,003	$	193,039,879

41

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The Company’s loan portfolio includes loan participations purchased from other institutions. The outstanding balance of these purchased loans totaled $11,960,699 and $11,696,320 as of December 31, 2016 and 2015, respectively. Participations purchased during the years ended December 31, 2016 and 2015 totaled $2,157,442 and $2,609,280, respectively.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment.  Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords.  The Company maintains lending policies and procedures 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, Cass, Macoupin and Montgomery and the surrounding counties.  Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

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

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

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

42

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

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

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  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, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of increasing the interest rate on the mortgage portfolio during periods of rising interest rates.

43

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

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

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

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

44

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

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

45

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

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

47

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2016 and 2015:

	December 31, 2016
	1-4 Family			Commercial Real Estate		Agricultural Real Estate			Commercial			Agricultural		Home Equity		Consumer			Unallocated		Total
Allowance for loan losses:
Balance, beginning of year	$	829,604		$	917,526	$	201,918		$	386,620		$	163,346	$	149,253	$	169,381		$	101,946	$	2,919,594
Provision charged to expense		14,683			112,411		(10,559	)		(85,258	)		4,123		22,273		50,016			12,311		120,000
Losses charged off		(38,171	)		—		—			—			—		—		(43,777	)		—		(81,948	)
Recoveries		25,884			14,616		—			116			—		2,100		7,033			—		49,749
Balance, end of year	$	832,000		$	1,044,553	$	191,359		$	301,478		$	167,469	$	173,626	$	182,653		$	114,257	$	3,007,395
Ending balance:  individually evaluated for impairment	$	304,922		$	723,481	$	—		$	56,409		$	—	$	—	$	—		$	—	$	1,084,812
Ending balance:  collectively evaluated for impairment	$	527,078		$	321,072	$	191,359		$	245,069		$	167,469	$	173,626	$	182,653		$	114,257	$	1,922,583
Loans:
Ending balance	$	45,311,103		$	41,477,480	$	38,271,758		$	21,617,744		$	14,649,622	$	11,606,002	$	14,543,356		$	—	$	187,477,065
Ending balance:  individually evaluated for impairment	$	713,151		$	1,658,323	$	—		$	155,067		$	—	$	54,011	$	—		$	—	$	2,580,552
Ending balance:  collectively evaluated for impairment	$	44,597,952		$	39,819,157	$	38,271,758		$	21,462,677		$	14,649,622	$	11,551,991	$	14,543,356		$	—	$	184,896,513

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

48

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $750,000 and watch list credits over $250,000 are reviewed annually by our independent loan review in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

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

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

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

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

49

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2016		2015		2016		2015		2016		2015		2016		2015
Pass	$	42,327,337	$	44,120,334	$	39,078,740	$	37,628,385	$	38,271,758	$	40,383,644	$	21,141,466	$	25,117,982
Special Mention		1,016,025		1,323,266		429,877		454,194		—		839,546		100,234		51,196
Substandard		1,967,741		1,951,744		1,968,863		2,299,101		—		—		376,044		283,880
Total	$	45,311,103	$	47,395,344	$	41,477,480	$	40,381,680	$	38,271,758	$	41,223,190	$	21,617,744	$	25,453,058

	Agricultural Business				Home Equity				Consumer
	2016		2015		2016		2015		2016		2015
Pass	$	13,845,865	$	15,110,606	$	10,790,377	$	11,324,889	$	14,361,125	$	13,501,477
Special Mention		803,757		992,250		70,983		68,044		10,575		52,656
Substandard		—		—		744,642		298,612		171,656		186,960
Total	$	14,649,622	$	16,102,856	$	11,606,002	$	11,691,545	$	14,543,356	$	13,741,093

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

	December 31, 2016
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
1-4 Family	$	237,783	$	136,340	$	544,425	$	918,548	$	44,392,555	$	45,311,103	$	—
Commercial real estate		—		16,273		—		16,273		41,461.207		41,477,480		—
Agricultural real estate		—		—		—		—		38,271,758		38,271,758		—
Commercial		—		41,474		13,309		54,783		21,562,961		21,617,744		—
Agricultural business		—		—		—		—		14,649,622		14,649,622		—
Home equity		151,482		—		—		151,482		11,454,520		11,606,002		—
Consumer		68,077		17,757		72,150		157,984		14,385,372		14,543,356		—
Total	$	457,342	$	211,844	$	629,884	$	1,299,070	$	186,177,995	$	187,477,065	$	—

	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
1-4 Family	$	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		—
Commercial		—		—		—		—		25,453,058		25,453,058		—
Agricultural business		—		—		—		—		16,102,856		16,102,856		—
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		—
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	$	—

50

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

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

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

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

51

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The following tables present impaired loans for the years ended December 31, 2016 and 2015:

	December 31, 2016
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	39,598	$	39,598	$	—	$	41,880	$	2,653	$	2,888
Commercial real estate		120,172		120,172		—		272,557		13,499		14,061
Commercial		61,483		61,483		—		87,359		4,332		4,419
Home equity		54,011		54,011		—		54,067		3,670		3,871
Loans with a specific valuation allowance
1-4 Family		673,553		673,553		304,922		719,834		41,323		34,208
Commercial real estate		1,538,151		1,538,151		723,481		1,572,203		68,918		64,878
Commercial		93,584		93,584		56,409		165,473		7,580		7,814
Total:
1-4 family		713,151		713,151		304,922		761,714		43,976		37,096
Commercial real estate		1,658,323		1,658,323		723,481		1,844,760		82,417		78,939
Commercial		155,067		155,067		56,409		252,832		11,912		12,233
Home equity		54,011		54,011		—		54,067		3,670		3,871
Total	$	2,580,552	$	2,580,552	$	1,084,812	$	2,913,373	$	141,975	$	132,139

52

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

	December 31, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	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 valuation allowance
1-4 Family		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:
1-4 family		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

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

	2016		2015
1-4 family	$	590,514	$	911,283
Commercial real estate		708,922		840,449
Agricultural real estate		—		—
Commercial		16,561		9,314
Agricultural business		—		—
Home equity		49,542		118,502
Consumer		164,472		141,605
Total	$	1,530,011	$	2,021,153

53

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

At December 31, 2016 and 2015, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of December 31, 2016 and 2015.

	2016		2015
1-4 family	$	836,867	$	723,421
Commercial real estate		1,362,088		1,708,013
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		81,880		109,340
Total	$	2,532,554	$	2,609,454

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

	2016		2015
1-4 family	$	666,744	$	526,004
Commercial real estate		1,362,088		941,173
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		57,540		86,255
Total	$	2,338,091	$	1,622,112

54

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The following table presents loans modified as troubled debt restructurings during the years ended December 31, 2016 and 2015.

	Year Ended December 31, 2016				Year Ended December 31, 2015
	Number of Modifications		Recorded Investment		Number of Modifications		Recorded Investment
1-4 family		1	$	40,395		1	$	98,246
Commercial real estate		1		708,922		2		524,432
Agricultural real estate		—		—		—		—
Commercial		1		217,725		—		—
Agricultural business		—		—		—		—
Home equity		—		—		1		1,431
Consumer		—		—		5		76,691
Total		3	$	967,042		9	$	700,800

2016 Modifications

The Company modified a one-to-four family residential real estate loan, with a recorded investment of $40,395, which was deemed a TDR. The loan was restructured to combine three loans and capitalize delinquent real estate taxes. The Company modified one commercial real estate loan with a total recorded balance of $708,922, which was deemed a TDR. The loan was restructured after bankruptcy to extend the term, lower the rate, and capitalize the interest to a second note. The Company modified one commercial loan with a total recorded balance of $217,725, which was deemed a TDR. The loan was modified to allow for interest only payments for four months. The modifications did not result in a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post modification balance.

2015 Modifications

The Company modified one one-to-four family residential real estate loan, with a recorded investment of $98,246, which was deemed a TDR. The loan was a restructure of delinquent loans into a workout. The Company modified two commercial real estate loans with a total recorded balance of $524,432, which were deemed TDRs. One loan was restructured to capitalize force placed insurance. The other loan was restructured to increase the amortization period of the loan. The Company modified one home equity loan with a recorded investment of $1,431, which was deemed a TDR. The modification was made to extend the term and lower the payment amount. The Company modified five consumer loans with a recorded investment of $76,691, which were deemed TDRs. The modifications were made to extend the payment schedules between two and four months. The modifications did not result in a reduced interest rate or a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post modification balance.

55

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

TDRs with Defaults

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses. During the year ended December 31, 2016, three residential real estate loans of $170,123 were considered TDRs in default as they were more than 90 days past due at December 31, 2016. In addition, one commercial real estate loan of $708,922, one commercial loan of $3,252, and two consumer loans of $76,106 were considered TDRs in default as they were in a nonaccrual status but are performing in accordance with their modified terms.

During the year ended December 31, 2015, three residential real estate loans of $197,417 and one commercial real estate loan of $766,840 were considered TDRs defaulted as they were more than 90 days past due at December 31, 2015. In addition, three residential real estate loans of $211,262, one commercial real estate loan of $30,021, two commercial loans of $9,314, one home equity loan of $1,431, and one consumer loan of $63,183 were considered TDRs defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

At December 31, 2016 and 2015, the balance of real estate owned was $0 and $217,101, respectively, with foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2016 and 2015, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $143,634 and $188,438, respectively.

56

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 5: Premises and Equipment

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

	2016			2015
Land	$	773,186		$	773,186
Buildings and improvements		6,752,503			6,697,278
Equipment		3,492,693			3,384,516
		11,018,382			10,854,980
Less accumulated depreciation		(6,519,729	)		(6,126,823	)
Net premises and equipment	$	4,498,653		$	4,728,157

Note 6: Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The unpaid principal balance of mortgage loans serviced for others was $130,505,264 and $131,443,738 at December 31, 2016 and 2015, respectively.

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

	2016			2015
Mortgage servicing rights
Balance, beginning of year	$	645,067		$	689,603
Additions		87,579			73,650
Write-downs		(72,580	)		—
Amortization		(107,239	)		(118,186	)
Balance at end of year		552,827			645,067
Valuation allowances
Balance at beginning of year		47,354			56,969
Additions due to decreases in market value		38,967			—
Reduction due to write-downs		(72,580	)		—
Reduction due to payoff of loans		(13,741	)		(9,615	)
Balances at end of year		0			47,354
Mortgage servicing assets, net	$	552,827		$	597,713
Fair value disclosures
Fair value as of the beginning of the period	$	870,619		$	979,699
Fair value as of the end of the period	$	898,625		$	870,619

57

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

The valuation allowance was adjusted during 2016 and 2015 due to payments received on the related loans as well as changes in the estimated market value on the mortgage servicing rights asset.

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

Note 7: Interest-bearing Deposits

Interest-bearing deposits in denominations of $100,000 or more totaled $110,971,051 at December 31, 2016 and $90,889,042 at December 31, 2015.

The following table represents deposit interest expense by deposit type:

	December 31,
	2016		2015
Savings, NOW and Money Market	$	366,123	$	249,077
Certificates of deposit		659,109		852,185
Total deposit interest expense	$	1,025,232	$	1,101,262

At December 31, 2016, the scheduled maturities of time deposits are as follows:

2017	$	47,319,320
2018		14,869,536
2019		7,572,666
2020		5,387,756
2021		5,037,258
	$	80,186,536

58

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 8: Short-term Borrowings

Short-term borrowings include securities sold under agreements to repurchase totaling $7,135,182 and $6,631,710 at December 31, 2016 and 2015, respectively.

Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The maximum amount of outstanding agreements at any month end during 2016 and 2015 totaled $7,342,844 and $9,548,789, respectively, and the monthly average of such agreements totaled $5,254,122 and $6,024,224 for 2016 and 2015, respectively. The agreements at December 31, 2016, are all for overnight borrowings.

At December 31, 2016, we had $4,617,608 of repurchase agreements secured by mortgage backed securities and $2,517,574 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.

Also included in short-term borrowings at December 31, 2015 were advances with the Federal Home Loan Bank (FHLB) of $8,500,000. The advances matured during 2016.

59

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 9: Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal and state of Illinois jurisdictions. During the years ended December 31, 2016 and 2015, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:

	2016			2015
Taxes currently payable
Federal	$	916,248		$	883,916
State		314,017			320,593
Deferred income taxes		(142,607	)		(137,484	)
Income tax expense	$	1,087,658		$	1,067,025

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

	2016			2015
Computed at the statutory rate (34%)	$	1,406,093		$	1,391,670
Increase (decrease) resulting from
Tax exempt interest		(445,584	)		(454,067	)
State income taxes, net		184,535			188,690
Increase in cash surrender value		(58,651	)		(59,646	)
Other		1,265			378
Actual tax expense	$	1,087,658		$	1,067,025
Tax expense as a percentage of pre-tax income		26.30	%		26.07	%

60

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

	2016			2015
Deferred tax assets
Allowance for loan losses	$	1,050,004		$	1,015,661
Deferred compensation		1,830,687			1,817,124
Net unrealized loss on available for sale securities		605,970			—
Other		—			29,497
		3,486,661			2,862,282
Deferred tax liabilities
Net unrealized gain on available-for-sale securities		—			(407,145	)
Depreciation		(390,787	)		(434,043	)
Federal Home Loan Bank stock dividends		(48,291	)		(147,858	)
Prepaid expenses		(65,504	)		(56,374	)
Mortgage servicing rights		(216,238	)		(233,795	)
Other		(27,052	)		—
		(747,872	)		(1,279,215	)
Net deferred tax asset	$	2,738,789		$	1,583,067

At December 31, 2016 and 2015, the Company had no Illinois net operating loss carryforwards.

Retained earnings at December 31, 2016 and 2015, include approximately $2,600,000, for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $1,000,000 at December 31, 2016 and 2015.

61

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 10: Accumulated Other Comprehensive Income (Loss)

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

	2016			2015
Net unrealized gain (loss) on securities available-for-sale	$	(1,782,264	)	$	1,197,486
Tax effect		605,970			(407,145	)
Net-of-tax amount	$	(1,176,294	)	$	790,341

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

Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2016 and 2015, were as follows:

	Amounts Reclassified from AOCI						Affected Line Item in the
	2016			2015			Statements of Income
Realized gains on available-for-sale securities	$	399,599		$	320,585		Realized gain on sale of securities
							Total reclassified amount before tax
		(135,864	)		(108,999	)	Tax expense
	$	263,735		$	211,586		Net reclassified amount

Note 12: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. GAAP, regulatory reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these consolidated financial statements.

62

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier 1 capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2016 and 2015, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2016, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I risk-based capital, common equity Tier 1 risk-based capital, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

63

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2016
Total risk-based capital (to risk-weighted assets)	$	42,543		19.52	%	$	17,434		8.0	%	$	21,793		10.0	%
Tier I capital (to risk-weighted assets)		39,816		18.27			13,076		6.0			17,434		8.0
Common equity Tier I (to risk-weighted assets)		39,816		18.27			9,807		4.5			14,165		6.5
Tier I capital (to average assets)		39,816		12.58			12,662		4.0			15,828		5.0
Tangible capital (to adjusted tangible assets)		39,816		12.58			4,748		1.5			—		N/A
As of December 31, 2015
Total risk-based capital (to risk-weighted assets)	$	41,631		19.15	%	$	17,387		8.0	%	$	21,734		10.0	%
Tier I capital (to risk-weighted assets)		38,912		17.90			13,040		6.0			17,387		8.0
Common equity Tier I (to risk-weighted assets)		38,912		17.90			9,780		4.5			14,127		6.5
Tier I capital (to average assets)		38,912		12.82			12,139		4.0			15,174		5.0
Tangible capital (to adjusted tangible assets)		38,912		12.82			4,552		1.5			—		N/A

64

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Basel III Capital Rules

In 2013, the Board of Governors of the Federal Reserve System approved a final rule implementing changes intended to strengthen the regulatory capital framework for all banking organizations (Basel III) which became effective January 1, 2015, subject to a phase-in period for certain provisions.  Basel III establishes and defines quantitative measures to ensure capital adequacy which require First Financial to maintain minimum amounts and ratios of Common Equity tier 1 capital, total and tier 1 capital to risk-weighted assets and tier 1 capital to average assets (leverage ratio).  

The rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a new capital conservation buffer of 2.5% of risk-weighted assets that will begin on January 1, 2016 at 0.625% and be phased-in over a four-year period, increasing by the same amount on each subsequent January 1, until fully phased-in on January 1, 2019.  The capital conservation buffer is required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.

Further, the minimum ratio of tier 1 capital to risk-weighted assets increased from 4.0% to 6.0% and all banks are now subject to a 4.0% minimum leverage ratio.  The required total risk-based capital ratio was unchanged. Failure to maintain the required common equity Tier 1 capital conservation buffer will result in potential restrictions on a bank’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.  The revised capital requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans, requiring higher capital allocations. The net unrealized gain or loss on available securities is not included in computing regulatory capital.

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

	2016			2015
Bank equity	$	41,367		$	42,429
Less net unrealized gain (loss)		(1,176	)		790
Less disallowed goodwill		2,727			2,727
Tier 1 and common equity Tier 1 capital		39,816			38,912
Plus allowance for loan losses		2,727			2,719
Total risked-based capital	$	42,543		$	41,631

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. As of December 31, 2016, the Bank has $762,295 available for the payment of dividends without prior regulatory approval.

On January 19, 2010, the Boards of Directors of the Company, Jacksonville Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion and Reorganization of Jacksonville Bancorp, MHC (the “Plan”) pursuant to which Jacksonville Bancorp, MHC undertook a “second-step” conversion and ceased to exist. Jacksonville Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July14, 2010.

65

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

Note 13: Related Party Transactions

At December 31, 2016 and 2015, the Company had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties) in the amount of $3,111,976 and $3,193,470, respectively.

Annual activity consisted of the following:

	2016			2015
Balance beginning of year	$	3,193,470		$	3,523,047
Additions		1,178,281			1,138,338
Repayments		(1,259,775	)		(1,467,915	)
Balance, end of year	$	3,111,976		$	3,193,470

Deposits from related parties held by the Company at December 31, 2016 and 2015 totaled approximately $3,264,000 and $2,581,000, respectively.

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

Note 14: Employee Benefits

401(k) Plan — The Company maintains a 401(k) savings plan for eligible employees. The Company’s contributions to this plan were $223,615 and $216,508 for the years ended December 31, 2016 and 2015, respectively. The plan invests some of its assets in deposit accounts at the Company which earned interest at a rate of 1.85% for the years ended December 31, 2016 and 2015.

66

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Deferred Compensation Plan — The Company maintains a deferred compensation plan for certain key officers and employees. Contributions are determined annually by the Company’s Board of Directors. Effective in 2005, the Company froze this plan and no contributions to this plan were made for the years ended December 31, 2016 or 2015. The plan accrues interest at a variable rate which fluctuates based on Moody’s Corporate Bond Average Index. The amount recorded on the consolidated balance sheets as deferred compensation was $2,591,531 and $2,521,997 as of December 31, 2016 and 2015, respectively. Compensation expense related to the plan was $133,988 and $137,731 for the years ended December 31, 2016 and 2015, respectively.

The Company has also entered into deferred compensation agreements with certain key officers and employees. The agreements provide for monthly payments at retirement or death. The charge to expense for this plan reflects the accrual using the principal and interest method over the vesting period of the present value of benefits due each participant on the full eligibility date using a 4.75% discount rate. The amount recorded on the consolidated balance sheets as deferred compensation was $2,088,737 and $1,970,597 as of December 31, 2016 and 2015, respectively. Compensation expense related to the plans was $182,796 and $233,731 for the years ended December 31, 2016 and 2015, respectively.

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

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

ESOP expense for the years ended December 31, 2016 and 2015 was $108,421 and $90,649, respectively.

	2016		2015
Allocated shares	$	59,838	$	57,420
Shares committed for allocation		3,934		3,820
Unearned shares		17,237		21,171
Total ESOP shares		81,009		82,411
Fair value of unearned shares at December 31	$	517,110	$	556,374

67

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 15: Stock Option Plans

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

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

68

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

A summary of option activity under the Plans as of December 31, 2016 and 2015, and changes during the years then ended, is presented below:

	2016
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		61,120		$	15.65
Granted		—			—
Exercised		(13,532	)		15.65
Forfeited or expired		(100	)		15.65
Outstanding, end of year		47,488		$	15.65		5.25	$	681,453
Exercisable, end of year		25,653		$	15.65		5.25	$	368,121

	2015
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		85,835		$	15.65
Granted		—			—
Exercised		(24,715	)		15.65
Forfeited or expired		—			—
Outstanding, end of year		61,120		$	15.65		6.25	$	649,706
Exercisable, end of year		19,035		$	15.65		6.25	$	202,342

The total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was $161,572 and $200,192, respectively.

69

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

As of December 31, 2016, there was $22,232 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2012 Plan. That cost is expected to be recognized over a weighted-average period of one year. The total fair value of shares vested during the years ended December 31, 2016 and 2015 was $90,163. The recognized tax benefit related thereto was $35,267 for the years ended December 31, 2016 and 2015.

A summary of the status of the Company’s nonvested shares as of December 31, 2016 and 2015, and changes during the year then ended, is presented below:

	December 31, 2016
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		42,085		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		(100	)		4.34
Nonvested, end of year		21,835		$	4.34

	December 31, 2015
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		62,235		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		—			—
Nonvested, end of year		42,085		$	4.34

70

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 16: Earnings Per Share

Earnings per share (EPS) were computed as follows:

	Year Ended December 31, 2016
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,047,909
Basic earnings per share
Income available to common stockholders				1,776,342	$	1.72
Effect of dilutive securities
Stock options				17,539
Diluted earnings per share
Income available to common stockholders	$	3,047,909		1,793,881	$	1.70

	Year Ended December 31, 2015
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,026,123
Basic earnings per share
Income available to common stockholders				1,770,546	$	1.71
Effect of dilutive securities
Stock options				13,469
Diluted earnings per share
Income available to common stockholders	$	3,026,123		1,784,015	$	1.70

71

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 17: Disclosures about Fair Value of Assets

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

Level 1	Quoted prices in active markets for identical assets
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	13,333,540	$	—	$	13,333,540	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		44,413,177		—		44,413,177		—
Municipal bonds		42,414,723		—		42,414,723		—

72

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	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 consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the year ended December 31, 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. 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. 

73

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,157,329	$	—	$	—	$	1,157,329
Mortgage servicing rights		552,827		—		—		552,827

74

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	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 consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

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

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $391,745 and $(156,069) at December 31, 2016 and 2015.

Mortgage Servicing Rights

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

Mortgage servicing rights are tested for impairment on at least an annual basis.  The Company uses a third-party to measure mortgage servicing rights through the completion of a proprietary model.  Inputs to the model are reviewed by the Company.  Fair value adjustments on mortgage servicing rights were $(38,967) and $0 at December 31, 2016 and 2015.

75

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Unobservable (Level 3) Inputs

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

	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,157,329	Market comparable properties	Marketability discount	20% – 30% (25%)
Mortgage servicing rights	$	552,827	Discounted cash flow	Discount rate	9% - 13.5% (10.25%)
				PSA standard prepayment model rate	104 – 300 (153)

	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	899,981	Market comparable properties	Marketability discount	20% – 30% (25%)

76

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Fair Value of Other Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	12,909,924	$	12,909,924	$	—	$	—
Interest-earning time deposits		750,000		750,000		—		—
Other investments		55,481		—		55,481		—
Loans held for sale		503,003		—		503,003		—
Loans, net of allowance for loan losses		184,448,003		—		—		183,941,877
Federal Home Loan Bank stock		363,800		—		363,800		—
Interest receivable		1,588,545		—		1,588,545		—
Financial liabilities
Deposits		258,677,960		—		178,491,424		81,241,011
Short-term borrowings		7,135,182		—		7,135,182
Advances from borrowers for taxes and insurance		1,102,204		—		1,102,204		—
Interest payable		106,755		—		106,755		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

77

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

			December 31, 2015
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	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		—		—		—		—

78

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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, 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.

79

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 18: Significant Estimates and Concentrations

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

General Litigation

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

Goodwill

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

Note 19: Commitments and Credit Risk

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

Commitments to Originate Loans

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

80

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

At December 31, 2016 and 2015, the Company had outstanding commitments to originate loans aggregating approximately $5,238,175 and $4,457,514, respectively. The commitments extended over varying periods of time with the majority being disbursed within a one-year period. Loan commitments at fixed rates of interest amounted to $2,028,000 and $3,744,574 at December 31, 2016 and 2015, respectively, with the remainder at floating market rates. The range of fixed rates was 3.00% to 7.75% as of December 31, 2016.

Standby Letters of Credit

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

The Company had total outstanding standby letters of credit amounting to $110,000 at December 31, 2016 and 2015, with terms of one year or less. At December 31, 2016 and 2015, the Company’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Credit

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

At December 31, 2016, the Company had unused lines of credit to borrowers aggregating approximately $26,836,352 and $15,869,821 for commercial lines and open-ended consumer lines, respectively. At December 31, 2015, unused lines of credit to borrowers aggregated approximately $21,753,180 for commercial lines and $10,785,989 for open-ended consumer lines.

81

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 20: Quarterly Results of Operations (Unaudited)

	Year Ended December 31, 2016
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,817,513	$	2,858,551	$	2,849,785	$	2,909,135
Interest expense		274,630		277,603		247,184		248,909
Net interest income		2,542,883		2,580,948		2,602,601		2,660,226
Provision for loan losses		30,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,512,883		2,550,948		2,572,601		2,630,226
Noninterest income		1,099,642		1,088,058		1,034,670		1,039,075
Noninterest expense		2,681,987		2,613,954		2,564,033		2,532,562
Income before income taxes		930,538		1,025,052		1,043,238		1,136,739
Income tax expense		233,278		267,287		277,732		309,361
Net income	$	697,260	$	757,765	$	765,506	$	827,378
Basic earnings per share	$	0.39	$	0.43	$	0.43	$	0.47
Diluted earnings per share	$	0.39	$	0.42	$	0.43	$	0.46

82

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

	Year Ended December 31, 2015
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,923,681	$	2,830,112	$	2,859,579	$	2,901,492
Interest expense		252,749		267,433		293,141		314,050
Net interest income		2,670,932		2,562,679		2,566,438		2,587,442
Provision for loan losses		30,000		45,000		35,000		30,000
Net interest income after provision for loan losses		2,640,932		2,517,679		2,531,438		2,557,442
Noninterest income		1,096,519		991,626		1,063,287		1,035,458
Noninterest expense		2,814,601		2,579,660		2,431,183		2,515,789
Income before income taxes		922,850		929,645		1,163,542		1,077,111
Income tax expense		218,785		230,247		327,139		290,854
Net income	$	704,065	$	699,398	$	836,403	$	786,257
Basic earnings per share	$	0.40	$	0.40	$	0.47	$	0.44
Diluted earnings per share	$	0.39	$	0.39	$	0.47	$	0.44

83

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 21: Condensed Financial Information (Parent Company Only)

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

Condensed Balance Sheets

	December 31,
	2016		2015
Assets
Cash and due from banks	$	4,806,252	$	4,800,526
Investment in common stock of subsidiary		41,366,024		42,428,601
Loan receivable from subsidiary		177,347		216,506
Other assets		118,460		106,960
Total assets	$	46,468,083	$	47,552,593
Liabilities
Other liabilities	$	222,518	$	1,986,093
Stockholders' Equity		46,245,565		45,566,500
Total liabilities and stockholders' equity	$	46,468,083	$	47,552,593

84

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Condensed Statements of Income and Comprehensive Income

	Year Ending December 31,
	2016			2015
Income
Dividends from subsidiary	$	2,500,000		$	2,000,000
Other income		10,544			11,712
Total income		2,510,544			2,011,712
Expenses
Other expenses		360,950			361,694
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		2,149,594			1,650,018
Income Tax Benefit		(136,020	)		(137,420	)
Income Before Equity in Undistributed Income of Subsidiary		2,285,614			1,787,438
Equity in Undistributed Income of Subsidiary		762,295			1,238,685
Net Income	$	3,047,909		$	3,026,123
Comprehensive Income	$	1,081,274		$	3,104,981

85

Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Condensed Statements of Cash Flows

	Year Ending December 31,
	2016			2015
Operating Activities
Net income	$	3,047,909		$	3,026,123
Items not providing cash, net		(762,295	)		(1,238,685	)
Stock-based compensation expense		90,163			90,163
Change in other assets and liabilities, net		(53,487	)		(17,617	)
Net cash provided by operating activities		2,322,290			1,859,984
Investing Activity
Loan payment from subsidiary		39,159			37,879
Net cash provided by investing activities		39,159			37,879
Financing Activities
Dividends paid		(2,440,380	)		(565,995	)
Stock repurchase		(127,118	)		(765,311	)
Exercise of stock options		211,775			386,790
Net cash used in financing activities		(2,355,723	)		(944,516	)
Net Change in Cash and Cash Equivalents		5,726			953,347
Cash and Cash Equivalents at Beginning of Year		4,800,526			3,847,179
Cash and Cash Equivalents at End of Year	$	4,806,252		$	4,800,526

86

Common Stock Information

Our common stock is traded on the Nasdaq Capital Market under the symbol “JXSB”. As of December 31, 2016, we had approximately 668 stockholders of record, including brokers, who held 1,800,244 shares of our outstanding common stock.

The following table sets forth market price and dividend information for our common stock for the two years ended December 31, 2016.

	Price Per Share				Cash
	High		Low		Dividend Declared
2016
Fourth quarter	$	30.00	$	29.25	$	0.100
Third quarter		30.00		27.24		0.100
Second quarter		27.24		25.75		0.100
First quarter		26.28		23.79		0.100
2015
Fourth quarter	$	27.84	$	23.77	$	1.080
Third quarter		24.30		23.14		0.080
Second quarter		24.58		21.97		0.080
First quarter		24.00		21.86		0.080

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

87

Directors and Executive Officers

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

88

Corporate Information

Corporate Headquarters	Transfer Agent
1211 West Morton	Hickory Point Bank & Trust, fsb
Jacksonville, Illinois  62650	P.O. Box 2557
(217) 245-4111	Decatur, Illinois  62525-2557
Website:  www.jacksonvillesavings.com	(217) 872-6373
E-mail:  info@jacksonvillesavings.com
Special Counsel	Independent Registered Public Accounting Firm
Luse Gorman, P.C.	BKD, LLP
5335 Wisconsin Ave., N.W., Suite 780	225 North Water Street, Suite 400
Washington, D.C.  20015	Decatur, Illinois  62523-2326
(202) 274-2000	(217) 429-2411

Annual Meeting

The Annual Meeting of the Stockholders will be held April 25, 2017 at 1:30 p.m., central time, at our main office at 1211 West Morton, Jacksonville, Illinois.

General Inquiries

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

FDIC Disclaimer

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

89

EX-21

Exhibit 21

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

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-168355) and the Registration Statement on Form S-8 (No. 333-186754) of our report dated March 9, 2017, included in the Annual Report on Form 10-K of Jacksonville Bancorp, Inc. for the year ended December 31, 2016.

/s/ BKD, LLP

Decatur, Illinois

March 9, 2017

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

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

I, Richard A. Foss, certify that:

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

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

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

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

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

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

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

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 9, 2017	/s/ Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

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

I, Diana S. Tone, certify that:

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

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

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

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

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

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

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

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 9, 2017	/s/ Diana S. Tone
Date	Diana S. Tone
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacksonville Bancorp, Inc. (“Company”) on Form 10-K for the period ending December 31, 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, Executive Vice President and Chief Financial Officer of the Company certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002:

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

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

March 9, 2017	/s/ Richard A. Foss
Date	Richard A. Foss
	President and Chief Executive Officer
March 9, 2017	/s/ Diana S. Tone
Date	Diana S. Tone
	Executive Vice President and Chief Financial Officer

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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Mar. 01, 2017	Jun. 30, 2016
Document And Entity Information Abstract
Entity Registrant Name	Jacksonville Bancorp, Inc.
Entity Central Index Key	0001484949
Trading Symbol	jxsb
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Well Known Seasoned Issuer	No
Entity Common Stock Shares Outstanding		1,801,701
Entity Public Float			$ 49.0
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY

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Consolidated Balance Sheets - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash and due from banks	$ 5,984,640	$ 2,385,846
Interest-earning demand deposits in banks	6,925,284	1,717,586
Cash and cash equivalents	12,909,924	4,103,432
Interest-earning time deposits in banks	750,000	2,724,000
Available-for-sale securities:
Investment securities	55,748,263	64,294,937
Mortgage-backed securities	44,413,177	23,178,395
Other investments	55,481	62,223
Loans held for sale	503,003	539,000
Loans, net of allowance for loan losses of $3,007,395 and $2,919,594 at December 31, 2016 and 2015	184,448,003	193,039,879
Premises and equipment, net of accumulated depreciation of $6,519,729 and $6,126,823 at December 31, 2016 and 2015	4,498,653	4,728,157
Federal Home Loan Bank stock	363,800	1,113,800
Foreclosed assets held for sale, net		330,981
Cash surrender value of life insurance	7,271,438	7,093,640
Interest receivable	1,588,545	1,715,676
Deferred income taxes	2,738,789	1,583,067
Income taxes receivable	45,444
Mortgage servicing rights, net of valuation allowance of $0 and $47,354 as of December 31, 2016 and 2015	552,827	597,713
Goodwill	2,726,567	2,726,567
Other assets	704,845	811,007
Total assets	319,318,759	308,642,474
Deposits
Demand	33,633,972	31,426,710
Savings, NOW and money market	144,857,452	128,800,696
Time	80,186,536	79,054,524
Total deposits	258,677,960	239,281,930
Short-term borrowings	7,135,182	15,131,710
Deferred compensation	4,680,268	4,492,594
Advances from borrowers for taxes and insurance	1,102,204	990,917
Interest payable	106,755	118,335
Income taxes payable		49,291
Dividends payable	179,904	1,934,834
Other liabilities	1,190,921	1,076,363
Total liabilities	273,073,194	263,075,974
Stockholders' Equity
Preferred stock, $.01 par value, authorized 10,000,000 shares; none issued and outstanding
Common stock, $.01 par value; authorized 25,000,000 shares; issued 1,800,244 - December 31, 2016 and 1,791,513 - December 31, 2015	18,002	17,915
Additional paid-in capital	13,908,728	13,664,914
Retained earnings	33,667,499	31,305,040
Accumulated other comprehensive income (loss)	(1,176,294)	790,341
Unallocated ESOP shares	(172,370)	(211,710)
Total stockholders' equity	46,245,565	45,566,500
Total liabilities and stockholders' equity	$ 319,318,759	$ 308,642,474

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Consolidated Balance Sheets (Parentheticals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Allowance for loan losses of loans receivable (in dollars)	$ 3,007,395	$ 2,919,594
Accumulated depreciation on premises and equipment (in dollars)	6,519,729	6,126,823
Valuation allowance on mortgage servicing rights (in dollars)	$ 0	$ 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	1,800,244	1,791,513

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Consolidated Statements of Income - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Interest and Fee Income
Loans, including fees	$ 9,179,752	$ 9,294,256
Debt securities
Taxable	410,510	287,066
Tax-exempt	1,298,051	1,356,056
Mortgage-backed securities	484,264	542,453
Other	62,407	35,033
Total interest income	11,434,984	11,514,864
Interest Expense
Deposits	1,025,232	1,101,262
Short-term borrowings	19,064	7,130
Federal Home Loan Bank advances	4,030	18,981
Total interest expense	1,048,326	1,127,373
Net Interest Income	10,386,658	10,387,491
Provision for Loan Losses	120,000	140,000
Net Interest Income After Provision for Loan Losses	10,266,658	10,247,491
Noninterest Income
Fiduciary activities	328,917	289,153
Commission income	1,223,860	1,414,840
Service charges on deposit accounts	747,942	680,022
Mortgage banking operations, net	259,008	180,872
Net realized gains on sales of available-for-sale securities	399,599	320,585
Loan servicing fees	333,441	344,019
Increase in cash surrender value of life insurance	172,504	175,428
ATM and bank card interchange income	674,065	628,882
Other	122,109	153,089
Total noninterest income	4,261,445	4,186,890
Noninterest Expense
Salaries and employee benefits	6,763,951	6,724,334
Occupancy and equipment	1,047,048	996,460
Data processing and telecommunications	588,053	609,835
Professional	193,937	191,969
Marketing	156,826	116,568
Postage and office supplies	228,445	229,438
Deposit insurance premium	122,246	149,366
ATM and bank card expense	384,602	408,148
Other	907,428	915,115
Total noninterest expense	10,392,536	10,341,233
Income Before Income Taxes	4,135,567	4,093,148
Provision for Income Taxes	1,087,658	1,067,025
Net Income	$ 3,047,909	$ 3,026,123
Basic Earnings Per Share (in dollars per share)	$ 1.72	$ 1.71
Diluted Earnings Per Share (in dollars per share)	1.70	1.70
Cash Dividends Per Share (in dollars per share)	$ 0.40	$ 1.32

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Consolidated Statements of Comprehensive Income (Loss) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net Income	$ 3,047,909	$ 3,026,123
Other Comprehensive Income (Loss)
Unrealized appreciation (depreciation) on available-for-sale securities, net of taxes of $(877,251) and $149,623 for 2016 and 2015, respectively	(1,702,900)	290,444
Less: reclassification adjustment for realized gains included in net income, net of taxes of $135,864 and $108,999 for 2016 and 2015, respectively	263,735	211,586
Total other comprehensive income (loss)	(1,966,635)	78,858
Comprehensive Income	$ 1,081,274	$ 3,104,981

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Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
Taxes on unrealized appreciation (depreciation) on available-for-sale securities	$ (877,251)	$ 149,623
Taxes on reclassification adjustment for realized gains included in net income	$ 135,864	$ 108,999

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Consolidated Statements of Stockholders' Equity - USD ($)	Issued Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Unallocated ESOP	Total
Balance at Dec. 31, 2014	$ 17,995	$ 13,900,743	$ 30,635,787	$ 711,483	$ (249,910)	$ 45,016,098
Balance (in shares) at Dec. 31, 2014	1,799,483
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			3,026,123			3,026,123
Other comprehensive income (loss)				78,858		78,858
Stock repurchases	$ (327)	(764,984)				(765,311)
Stock repurchases (in shares)	(32,685)
Exercise of stock options	$ 247	382,374				382,621
Exercise of stock options (in shares)	24,715
Tax benefit of nonqualified options		4,169				4,169
Stock-based compensation expense		90,163				90,163
Common shares held by ESOP, committed to be released		52,449			38,200	90,649
Dividends on common stock, $1.32 per share and $0.40 per share in 2015 and 2016, respectively			(2,356,870)			(2,356,870)
Balance at Dec. 31, 2015	$ 17,915	13,664,914	31,305,040	790,341	(211,710)	45,566,500
Balance (in shares) at Dec. 31, 2015	1,791,513
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			3,047,909			3,047,909
Other comprehensive income (loss)				(1,966,635)		(1,966,635)
Stock repurchases	$ (48)	(127,070)				(127,118)
Stock repurchases (in shares)	(4,801)
Exercise of stock options	$ 135	201,441				201,576
Exercise of stock options (in shares)	13,532
Tax benefit of nonqualified options		10,199				10,199
Stock-based compensation expense		90,163				90,163
Common shares held by ESOP, committed to be released		69,081			39,340	108,421
Dividends on common stock, $1.32 per share and $0.40 per share in 2015 and 2016, respectively			(685,450)			(685,450)
Balance at Dec. 31, 2016	$ 18,002	$ 13,908,728	$ 33,667,499	$ (1,176,294)	$ (172,370)	$ 46,245,565
Balance (in shares) at Dec. 31, 2016	1,800,244

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Consolidated Statements of Stockholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Statement Of Stockholders Equity [Abstract]
Dividends on common stock (in dollars per share)	$ 0.40	$ 1.32

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Operating Activities
Net income	$ 3,047,909	$ 3,026,123
Items not requiring (providing) cash
Depreciation and amortization	394,935	386,063
Provision for loan losses	120,000	140,000
Amortization of premiums and discounts on securities and loans	722,191	652,730
Deferred income taxes	(142,607)	(137,484)
Net realized gains on available-for-sale securities	(399,599)	(320,585)
Amortization of mortgage servicing rights	120,980	127,800
Impairment of mortgage servicing rights asset	38,967
Increase in cash surrender value of life insurance, net	(177,798)	(180,723)
Gains on sales of foreclosed assets	(33,970)	(49,975)
Shares held by ESOP committed to be released	108,421	90,649
Stock-based compensation expense	90,163	90,163
Changes in
Interest receivable	127,131	(2,433)
Other assets	(265,939)	(216,149)
Interest payable	(11,580)	(47,717)
Other liabilities	207,498	(254,242)
Origination of loans held for sale	(20,376,281)	(16,942,428)
Proceeds from sales of loans held for sale	20,675,254	16,845,646
Net cash provided by operating activities	4,245,675	3,207,438
Investing Activities
Net change in interest-earning time deposits	1,974,000	(2,724,000)
Proceeds from redemption of Federal Home Loan Bank stock	750,000
Purchases of available-for-sale securities	(66,685,397)	(29,989,452)
Proceeds from maturities and payments of available-for-sale securities	11,400,048	8,303,432
Proceeds from the sales of available-for-sale investments and other investments	39,301,125	30,695,946
Net change in loans	8,564,794	(8,749,699)
Purchase of premises and equipment	(165,431)	(168,237)
Proceeds from the sale of foreclosed assets	266,613	182,378
Net cash used in investing activities	(4,594,248)	(2,449,632)
Financing Activities
Net increase in demand deposits, money market, NOW and savings accounts	18,264,018	8,885,407
Net increase (decrease) in certificates of deposit	1,132,012	(15,545,039)
Net increase (decrease) in short-term borrowings	(7,996,529)	1,309,981
Net increase in advances from borrowers for taxes and insurance	111,287	28,155
Stock repurchase	(127,118)	(765,311)
Proceeds from stock options exercised	211,775	386,790
Dividends paid	(2,440,380)	(565,995)
Net cash provided by (used in) financing activities	9,155,065	(6,266,012)
Increase (Decrease) in Cash and Cash Equivalents	8,806,492	(5,508,206)
Cash and Cash Equivalents, Beginning of Year	4,103,432	9,611,638
Cash and Cash Equivalents, End of Year	12,909,924	4,103,432
Supplemental Cash Flows Information
Interest paid	1,059,906	1,175,090
Income taxes paid	1,325,000	1,356,000
Sale and financing of foreclosed assets	204,850	81,700
Real estate acquired in settlement of loans	114,400	379,825
Dividends declared not paid	179,904	1,934,834
Exercise and retirement of shares in stock option plan	$ 74,458	$ 153,271

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Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

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

Nature of Operations

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

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

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

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

Principles of Consolidation and Financial Statement Presentation

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

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

Use of Estimates

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

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

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2016 and 2015, cash equivalents consisted primarily of federal funds sold and interest-earning time and demand deposits in banks.

At December 31, 2016, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

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

Securities

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

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

Other Investments

Other investments at December 31, 2016 and 2015 include local municipal bonds and equity investments in local community development organizations. The municipal bonds mature ratably through the year 2020. These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

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

Loans

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

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

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

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

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the 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 collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

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

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

Premises and Equipment

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

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

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

Federal Home Loan Bank Stock

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

Foreclosed Assets Held for Sale

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

Bank-owned Life Insurance

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

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. The goodwill was not deemed impaired as of December 31, 2016 or 2015.

Mortgage Servicing Rights

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

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

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

Stock Options

At December 31, 2016 and 2015, the Company recognizes the fair value (calculated value) of stock-based awards to employees as compensation cost over the requisite service period. The stock-based employee compensation plan is described more fully in Note 15.

Transfers of Financial Assets

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

Income Taxes

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

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

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2013.

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

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

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

Comprehensive Income

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

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company. Fees from trust activities are recorded as revenue over the period in which the service is provided. Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes. Generally, the actual trust fee is charged to each account on a monthly basis. Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred. The Company managed or administered approximately 131 and 124 trust accounts with assets totaling approximately $99.3 million and $90.7 million at December 31, 2016 and 2015, respectively.

Reclassifications

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

Recent and Future Accounting Requirements

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 in the preliminary stage of evaluating the impact of 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 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.  The Company is currently reviewing its processes but 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 been receiving training and gathering historical data in order to determine the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation – Stock Compensation (topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The new guidance will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is currently implementing the new processes and does not anticipate a significant impact on the Company’s financial statements.

In January 2017, FASB amended FASB ASC Topic 250, Simplifying the Test for Goodwill. The amendments in the update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has goodwill from a prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. During the current year, the Company performed its impairment assessment and determined that the Company’s goodwill was not impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

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Restriction on Cash and Due From Banks

12 Months Ended

Dec. 31, 2016

Restricted Cash and Investments [Abstract]

Restriction on Cash and Due From Banks

Note 2: Restriction on Cash and Due From Banks

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2016 and 2015, was $2,449,000 and $1,524,000, respectively.

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Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Securities

Note 3: Securities

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale Securities
December 31, 2016:
U.S. Government and federal agencies	$	13,985,863	$	9,641	$	(661,964	)	$	13,333,540
Mortgage-backed securities (Government-sponsored enterprises - residential)		45,457,262		70,512		(1,114,597	)		44,413,177
Municipal bonds		42,500,579		558,776		(644,632	)		42,414,723
	$	101,943,704	$	638,929	$	(2,421,193	)	$	100,161,440
December 31, 2015:
U.S. Government and federal 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 December 31, 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.

	Available-for-sale
	Amortized Cost		Fair  Value
Within one year	$	1,036,978	$	1,043,616
One to five years		9,201,183		9,315,610
Five to ten years		27,297,515		27,081,945
After ten years		18,950,766		18,307,092
		56,486,442		55,748,263
Mortgage-backed securities		45,457,262		44,413,177
Totals	$	101,943,704	$	100,161,440

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $42,463,127 at December 31, 2016 and $25,681,115 at December 31, 2015.

The carrying value of securities sold under agreement to repurchase amounted to $9,709,793 at December 31, 2016 and $7,591,475 at December 31, 2015.

Gross gains of $402,981 and $352,983 and gross losses of $(3,382) and $(32,398) resulting from sales of available-for-sale securities were realized for 2016 and 2015, respectively. The tax provision applicable to these net realized gains amounted to $135,864 and $108,999, respectively.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2016 and 2015, was $71,583,259 and $30,676,768, which is approximately 71% and 35%, respectively, of the Company’s available-for-sale investment portfolio. The declines primarily resulted from recent changes in market interest rates.

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

The following table shows the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2016 and 2015:

	December 31, 2016
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	12,333,924	$	(661,964	)	$	—	$	—		$	12,333,924	$	(661,964	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		37,144,915		(1,114,597	)		—		—			37,144,915		(1,114,597	)
Municipal bonds		22,104,420		(644,632	)		—		—			22,104,420		(644,632	)
Total temporarily impaired securities	$	71,583,259	$	(2,421,193	)	$	—	$	—		$	71,583,259	$	(2,421,193	)
	December 31, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	8,591,014	$	(49,205	)	$	1,809,745	$	(36,545	)	$	10,400,759	$	(85,750	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		5,843,754		(45,886	)		2,257,674		(54,906	)		8,101,428		(100,792	)
Municipal bonds		5,440,291		(48,383	)		6,734,290		(130,876	)		12,174,581		(179,259	)
Total temporarily impaired securities	$	19,875,059	$	(143,474	)	$	10,801,709	$	(222,327	)	$	30,676,768	$	(365,801	)

U.S. Government Agencies

The unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

Residential Mortgage-backed Securities

The unrealized losses on the Company’s investment in residential mortgage-backed securities were caused by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

Municipal Bonds

The unrealized losses on the Company’s investments in securities of municipal bonds were caused by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

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Loans and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Loans and Allowance for Loan Losses

Note 4: Loans and Allowance for Loan Losses

Classes of loans at December 31, include:

	2016		2015
Mortgage loans on real estate
Residential 1-4 family	$	45,311,103	$	47,395,344
Commercial		41,477,480		40,381,680
Agricultural		38,271,758		41,223,190
Home equity		11,606,002		11,691,545
Total mortgage loans on real estate		136,666,343		140,691,759
Commercial loans		21,617,744		25,453,058
Agricultural		14,649,622		16,102,856
Consumer		14,543,356		13,741,093
		187,477,065		195,988,766
Less
Net deferred loan fees		21,667		29,293
Allowance for loan losses		3,007,395		2,919,594
Net loans	$	184,448,003	$	193,039,879

The Company’s loan portfolio includes loan participations purchased from other institutions. The outstanding balance of these purchased loans totaled $11,960,699 and $11,696,320 as of December 31, 2016 and 2015, respectively. Participations purchased during the years ended December 31, 2016 and 2015 totaled $2,157,442 and $2,609,280, respectively.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment.  Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords.  The Company maintains lending policies and procedures 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, Cass, Macoupin and Montgomery and the surrounding counties.  Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals.  The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

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

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

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

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

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

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

Adjustable-rate mortgage loans make the loan portfolio more interest rate sensitive and provides an alternative for those borrowers who meet the underwriting criteria, but are unable to qualify for a fixed-rate mortgage.  However, as the interest income earned on adjustable-rate mortgage loans varies with prevailing interest rates, such loans do not offer predictable cash flows in the same manner as long-term, fixed-rate loans.  Adjustable-rate mortgage loans carry increased credit risk associated with potentially higher monthly payments by borrowers as general market interest rates increase.  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, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.  Due-on-sale clauses are a means of 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 30% of the applicant’s total monthly income.  In addition, total monthly obligations of the applicant, including mortgage payments, should not generally exceed 43% of total monthly income.  Written appraisals are generally required on real estate property offered to secure an applicant’s loan.  For one-to-four family real estate loans with loan to value ratios of over 80%, private mortgage insurance is generally required. Fire and casualty insurance is also required on all properties securing real estate loans.  Title insurance may be required, as circumstances warrant.

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

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

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

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

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

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

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

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

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

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

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2016 and 2015:

	December 31, 2016
	1-4 Family			Commercial  Real Estate		Agricultural  Real Estate			Commercial			Agricultural		Home Equity		Consumer			Unallocated		Total
Allowance for loan losses:
Balance, beginning of year	$	829,604		$	917,526	$	201,918		$	386,620		$	163,346	$	149,253	$	169,381		$	101,946	$	2,919,594
Provision charged to expense		14,683			112,411		(10,559	)		(85,258	)		4,123		22,273		50,016			12,311		120,000
Losses charged off		(38,171	)		—		—			—			—		—		(43,777	)		—		(81,948	)
Recoveries		25,884			14,616		—			116			—		2,100		7,033			—		49,749
Balance, end of year	$	832,000		$	1,044,553	$	191,359		$	301,478		$	167,469	$	173,626	$	182,653		$	114,257	$	3,007,395
Ending balance:  individually evaluated for impairment	$	304,922		$	723,481	$	—		$	56,409		$	—	$	—	$	—		$	—	$	1,084,812
Ending balance:  collectively evaluated for impairment	$	527,078		$	321,072	$	191,359		$	245,069		$	167,469	$	173,626	$	182,653		$	114,257	$	1,922,583
Loans:
Ending balance	$	45,311,103		$	41,477,480	$	38,271,758		$	21,617,744		$	14,649,622	$	11,606,002	$	14,543,356		$	—	$	187,477,065
Ending balance:  individually evaluated for impairment	$	713,151		$	1,658,323	$	—		$	155,067		$	—	$	54,011	$	—		$	—	$	2,580,552
Ending balance:  collectively evaluated for impairment	$	44,597,952		$	39,819,157	$	38,271,758		$	21,462,677		$	14,649,622	$	11,551,991	$	14,543,356		$	—	$	184,896,513

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

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

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on all loans at origination.  In addition, lending relationships over $750,000 and watch list credits over $250,000 are reviewed annually by our independent loan review in order to verify risk ratings.  The Company uses the following definitions for risk ratings:

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

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

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

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

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

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2016		2015		2016		2015		2016		2015		2016		2015
Pass	$	42,327,337	$	44,120,334	$	39,078,740	$	37,628,385	$	38,271,758	$	40,383,644	$	21,141,466	$	25,117,982
Special Mention		1,016,025		1,323,266		429,877		454,194		—		839,546		100,234		51,196
Substandard		1,967,741		1,951,744		1,968,863		2,299,101		—		—		376,044		283,880
Total	$	45,311,103	$	47,395,344	$	41,477,480	$	40,381,680	$	38,271,758	$	41,223,190	$	21,617,744	$	25,453,058

	Agricultural Business				Home Equity				Consumer
	2016		2015		2016		2015		2016		2015
Pass	$	13,845,865	$	15,110,606	$	10,790,377	$	11,324,889	$	14,361,125	$	13,501,477
Special Mention		803,757		992,250		70,983		68,044		10,575		52,656
Substandard		—		—		744,642		298,612		171,656		186,960
Total	$	14,649,622	$	16,102,856	$	11,606,002	$	11,691,545	$	14,543,356	$	13,741,093

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

	December 31, 2016
	30-59 Days  Past Due		60-89 Days  Past Due		Greater Than  90 Days		Total Past  Due		Current		Total Loans  Receivable		Total Loans >  90 Days & Accruing
1-4 Family	$	237,783	$	136,340	$	544,425	$	918,548	$	44,392,555	$	45,311,103	$	—
Commercial real estate		—		16,273		—		16,273		41,461.207		41,477,480		—
Agricultural real estate		—		—		—		—		38,271,758		38,271,758		—
Commercial		—		41,474		13,309		54,783		21,562,961		21,617,744		—
Agricultural business		—		—		—		—		14,649,622		14,649,622		—
Home equity		151,482		—		—		151,482		11,454,520		11,606,002		—
Consumer		68,077		17,757		72,150		157,984		14,385,372		14,543,356		—
Total	$	457,342	$	211,844	$	629,884	$	1,299,070	$	186,177,995	$	187,477,065	$	—

	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days &  Accruing
1-4 Family	$	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		—
Commercial		—		—		—		—		25,453,058		25,453,058		—
Agricultural business		—		—		—		—		16,102,856		16,102,856		—
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		—
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	$	—

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

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

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

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

The following tables present impaired loans for the years ended December 31, 2016 and 2015:

	December 31, 2016
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	39,598	$	39,598	$	—	$	41,880	$	2,653	$	2,888
Commercial real estate		120,172		120,172		—		272,557		13,499		14,061
Commercial		61,483		61,483		—		87,359		4,332		4,419
Home equity		54,011		54,011		—		54,067		3,670		3,871
Loans with a specific valuation allowance
1-4 Family		673,553		673,553		304,922		719,834		41,323		34,208
Commercial real estate		1,538,151		1,538,151		723,481		1,572,203		68,918		64,878
Commercial		93,584		93,584		56,409		165,473		7,580		7,814
Total:
1-4 family		713,151		713,151		304,922		761,714		43,976		37,096
Commercial real estate		1,658,323		1,658,323		723,481		1,844,760		82,417		78,939
Commercial		155,067		155,067		56,409		252,832		11,912		12,233
Home equity		54,011		54,011		—		54,067		3,670		3,871
Total	$	2,580,552	$	2,580,552	$	1,084,812	$	2,913,373	$	141,975	$	132,139

	December 31, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	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 valuation allowance
1-4 Family		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:
1-4 family		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

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

	2016		2015
1-4 family	$	590,514	$	911,283
Commercial real estate		708,922		840,449
Agricultural real estate		—		—
Commercial		16,561		9,314
Agricultural business		—		—
Home equity		49,542		118,502
Consumer		164,472		141,605
Total	$	1,530,011	$	2,021,153

At December 31, 2016 and 2015, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of December 31, 2016 and 2015.

	2016		2015
1-4 family	$	836,867	$	723,421
Commercial real estate		1,362,088		1,708,013
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		81,880		109,340
Total	$	2,532,554	$	2,609,454

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

	2016		2015
1-4 family	$	666,744	$	526,004
Commercial real estate		1,362,088		941,173
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		57,540		86,255
Total	$	2,338,091	$	1,622,112

The following table presents loans modified as troubled debt restructurings during the years ended December 31, 2016 and 2015.

	Year Ended December 31, 2016				Year Ended December 31, 2015
	Number of Modifications		Recorded Investment		Number of Modifications		Recorded Investment
1-4 family		1	$	40,395		1	$	98,246
Commercial real estate		1		708,922		2		524,432
Agricultural real estate		—		—		—		—
Commercial		1		217,725		—		—
Agricultural business		—		—		—		—
Home equity		—		—		1		1,431
Consumer		—		—		5		76,691
Total		3	$	967,042		9	$	700,800

2016 Modifications

The Company modified a one-to-four family residential real estate loan, with a recorded investment of $40,395, which was deemed a TDR. The loan was restructured to combine three loans and capitalize delinquent real estate taxes. The Company modified one commercial real estate loan with a total recorded balance of $708,922, which was deemed a TDR. The loan was restructured after bankruptcy to extend the term, lower the rate, and capitalize the interest to a second note. The Company modified one commercial loan with a total recorded balance of $217,725, which was deemed a TDR. The loan was modified to allow for interest only payments for four months. The modifications did not result in a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post modification balance.

2015 Modifications

The Company modified one one-to-four family residential real estate loan, with a recorded investment of $98,246, which was deemed a TDR. The loan was a restructure of delinquent loans into a workout. The Company modified two commercial real estate loans with a total recorded balance of $524,432, which were deemed TDRs. One loan was restructured to capitalize force placed insurance. The other loan was restructured to increase the amortization period of the loan. The Company modified one home equity loan with a recorded investment of $1,431, which was deemed a TDR. The modification was made to extend the term and lower the payment amount. The Company modified five consumer loans with a recorded investment of $76,691, which were deemed TDRs. The modifications were made to extend the payment schedules between two and four months. The modifications did not result in a reduced interest rate or a write-off of the principal balance nor was there a significant difference between the pre modification balance and the post modification balance.

TDRs with Defaults

Management considers the level of defaults within the various portfolios when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses. During the year ended December 31, 2016, three residential real estate loans of $170,123 were considered TDRs in default as they were more than 90 days past due at December 31, 2016. In addition, one commercial real estate loan of $708,922, one commercial loan of $3,252, and two consumer loans of $76,106 were considered TDRs in default as they were in a nonaccrual status but are performing in accordance with their modified terms.

During the year ended December 31, 2015, three residential real estate loans of $197,417 and one commercial real estate loan of $766,840 were considered TDRs defaulted as they were more than 90 days past due at December 31, 2015. In addition, three residential real estate loans of $211,262, one commercial real estate loan of $30,021, two commercial loans of $9,314, one home equity loan of $1,431, and one consumer loan of $63,183 were considered TDRs defaulted as they were in a nonaccrual status but are performing in accordance with their modified terms.

At December 31, 2016 and 2015, the balance of real estate owned was $0 and $217,101, respectively, with foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2016 and 2015, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process is $143,634 and $188,438, respectively.

XML

Premises and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 5: Premises and Equipment

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

	2016			2015
Land	$	773,186		$	773,186
Buildings and improvements		6,752,503			6,697,278
Equipment		3,492,693			3,384,516
		11,018,382			10,854,980
Less accumulated depreciation		(6,519,729	)		(6,126,823	)
Net premises and equipment	$	4,498,653		$	4,728,157

XML

Loan Servicing

12 Months Ended

Dec. 31, 2016

Transfers and Servicing [Abstract]

Loan Servicing

Note 6: Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The unpaid principal balance of mortgage loans serviced for others was $130,505,264 and $131,443,738 at December 31, 2016 and 2015, respectively.

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

	2016			2015
Mortgage servicing rights
Balance, beginning of year	$	645,067		$	689,603
Additions		87,579			73,650
Write-downs		(72,580	)		—
Amortization		(107,239	)		(118,186	)
Balance at end of year		552,827			645,067
Valuation allowances
Balance at beginning of year		47,354			56,969
Additions due to decreases in market value		38,967			—
Reduction due to write-downs		(72,580	)		—
Reduction due to payoff of loans		(13,741	)		(9,615	)
Balances at end of year		0			47,354
Mortgage servicing assets, net	$	552,827		$	597,713
Fair value disclosures
Fair value as of the beginning of the period	$	870,619		$	979,699
Fair value as of the end of the period	$	898,625		$	870,619

The valuation allowance was adjusted during 2016 and 2015 due to payments received on the related loans as well as changes in the estimated market value on the mortgage servicing rights asset.

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

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Interest-bearing Deposits

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Interest-bearing Deposits

Note 7: Interest-bearing Deposits

Interest-bearing deposits in denominations of $100,000 or more totaled $110,971,051 at December 31, 2016 and $90,889,042 at December 31, 2015.

The following table represents deposit interest expense by deposit type:

	December 31,
	2016		2015
Savings, NOW and Money Market	$	366,123	$	249,077
Certificates of deposit		659,109		852,185
Total deposit interest expense	$	1,025,232	$	1,101,262

At December 31, 2016, the scheduled maturities of time deposits are as follows:

2017	$	47,319,320
2018		14,869,536
2019		7,572,666
2020		5,387,756
2021		5,037,258
	$	80,186,536

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Short-term Borrowings

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Short-term Borrowings

Note 8: Short-term Borrowings

Short-term borrowings include securities sold under agreements to repurchase totaling $7,135,182 and $6,631,710 at December 31, 2016 and 2015, respectively.

Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The maximum amount of outstanding agreements at any month end during 2016 and 2015 totaled $7,342,844 and $9,548,789, respectively, and the monthly average of such agreements totaled $5,254,122 and $6,024,224 for 2016 and 2015, respectively. The agreements at December 31, 2016, are all for overnight borrowings.

At December 31, 2016, we had $4,617,608 of repurchase agreements secured by mortgage backed securities and $2,517,574 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.

Also included in short-term borrowings at December 31, 2015 were advances with the Federal Home Loan Bank (FHLB) of $8,500,000. The advances matured during 2016.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 9: Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal and state of Illinois jurisdictions. During the years ended December 31, 2016 and 2015, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:

	2016			2015
Taxes currently payable
Federal	$	916,248		$	883,916
State		314,017			320,593
Deferred income taxes		(142,607	)		(137,484	)
Income tax expense	$	1,087,658		$	1,067,025

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

	2016			2015
Computed at the statutory rate (34%)	$	1,406,093		$	1,391,670
Increase (decrease) resulting from
Tax exempt interest		(445,584	)		(454,067	)
State income taxes, net		184,535			188,690
Increase in cash surrender value		(58,651	)		(59,646	)
Other		1,265			378
Actual tax expense	$	1,087,658		$	1,067,025
Tax expense as a percentage of pre-tax income		26.30	%		26.07	%

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Jacksonville Bancorp, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

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

	2016			2015
Deferred tax assets
Allowance for loan losses	$	1,050,004		$	1,015,661
Deferred compensation		1,830,687			1,817,124
Net unrealized loss on available for sale securities		605,970			—
Other		—			29,497
		3,486,661			2,862,282
Deferred tax liabilities
Net unrealized gain on available-for-sale securities		—			(407,145	)
Depreciation		(390,787	)		(434,043	)
Federal Home Loan Bank stock dividends		(48,291	)		(147,858	)
Prepaid expenses		(65,504	)		(56,374	)
Mortgage servicing rights		(216,238	)		(233,795	)
Other		(27,052	)		—
		(747,872	)		(1,279,215	)
Net deferred tax asset	$	2,738,789		$	1,583,067

At December 31, 2016 and 2015, the Company had no Illinois net operating loss carryforwards.

Retained earnings at December 31, 2016 and 2015, include approximately $2,600,000, for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $1,000,000 at December 31, 2016 and 2015.

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Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 10: Accumulated Other Comprehensive Income (Loss)

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

	2016			2015
Net unrealized gain (loss) on securities available-for-sale	$	(1,782,264	)	$	1,197,486
Tax effect		605,970			(407,145	)
Net-of-tax amount	$	(1,176,294	)	$	790,341

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Changes in Accumulated Other Comprehensive Income (AOCI) by Component

12 Months Ended

Dec. 31, 2016

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

Changes in Accumulated Other Comprehensive Income (AOCI) by Component

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

Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended December 31, 2016 and 2015, were as follows:

	Amounts Reclassified from AOCI						Affected Line Item in the
	2016			2015			Statements of Income
Realized gains on available-for-sale securities	$	399,599		$	320,585		Realized gain on sale of securities
							Total reclassified amount before tax
		(135,864	)		(108,999	)	Tax expense
	$	263,735		$	211,586		Net reclassified amount

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Regulatory Matters

12 Months Ended

Dec. 31, 2016

Regulatory Matters [Abstract]

Regulatory Matters

Note 12: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. GAAP, regulatory reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these consolidated financial statements.

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier 1 capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2016 and 2015, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2016, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I risk-based capital, common equity Tier 1 risk-based capital, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

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

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2016
Total risk-based capital (to risk-weighted assets)	$	42,543		19.52	%	$	17,434		8.0	%	$	21,793		10.0	%
Tier I capital (to risk-weighted assets)		39,816		18.27			13,076		6.0			17,434		8.0
Common equity Tier I (to risk-weighted assets)		39,816		18.27			9,807		4.5			14,165		6.5
Tier I capital (to average assets)		39,816		12.58			12,662		4.0			15,828		5.0
Tangible capital (to adjusted tangible assets)		39,816		12.58			4,748		1.5			—		N/A
As of December 31, 2015
Total risk-based capital (to risk-weighted assets)	$	41,631		19.15	%	$	17,387		8.0	%	$	21,734		10.0	%
Tier I capital (to risk-weighted assets)		38,912		17.90			13,040		6.0			17,387		8.0
Common equity Tier I (to risk-weighted assets)		38,912		17.90			9,780		4.5			14,127		6.5
Tier I capital (to average assets)		38,912		12.82			12,139		4.0			15,174		5.0
Tangible capital (to adjusted tangible assets)		38,912		12.82			4,552		1.5			—		N/A

Basel III Capital Rules

In 2013, the Board of Governors of the Federal Reserve System approved a final rule implementing changes intended to strengthen the regulatory capital framework for all banking organizations (Basel III) which became effective January 1, 2015, subject to a phase-in period for certain provisions.  Basel III establishes and defines quantitative measures to ensure capital adequacy which require First Financial to maintain minimum amounts and ratios of Common Equity tier 1 capital, total and tier 1 capital to risk-weighted assets and tier 1 capital to average assets (leverage ratio).  

The rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a new capital conservation buffer of 2.5% of risk-weighted assets that will begin on January 1, 2016 at 0.625% and be phased-in over a four-year period, increasing by the same amount on each subsequent January 1, until fully phased-in on January 1, 2019.  The capital conservation buffer is required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.

Further, the minimum ratio of tier 1 capital to risk-weighted assets increased from 4.0% to 6.0% and all banks are now subject to a 4.0% minimum leverage ratio.  The required total risk-based capital ratio was unchanged. Failure to maintain the required common equity Tier 1 capital conservation buffer will result in potential restrictions on a bank’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.  The revised capital requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans, requiring higher capital allocations. The net unrealized gain or loss on available securities is not included in computing regulatory capital.

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

	2016			2015
Bank equity	$	41,367		$	42,429
Less net unrealized gain (loss)		(1,176	)		790
Less disallowed goodwill		2,727			2,727
Tier 1 and common equity Tier 1 capital		39,816			38,912
Plus allowance for loan losses		2,727			2,719
Total risked-based capital	$	42,543		$	41,631

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. As of December 31, 2016, the Bank has $762,295 available for the payment of dividends without prior regulatory approval.

On January 19, 2010, the Boards of Directors of the Company, Jacksonville Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion and Reorganization of Jacksonville Bancorp, MHC (the “Plan”) pursuant to which Jacksonville Bancorp, MHC undertook a “second-step” conversion and ceased to exist. Jacksonville Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July14, 2010.

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

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Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note 13: Related Party Transactions

At December 31, 2016 and 2015, the Company had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties) in the amount of $3,111,976 and $3,193,470, respectively.

Annual activity consisted of the following:

	2016			2015
Balance beginning of year	$	3,193,470		$	3,523,047
Additions		1,178,281			1,138,338
Repayments		(1,259,775	)		(1,467,915	)
Balance, end of year	$	3,111,976		$	3,193,470

Deposits from related parties held by the Company at December 31, 2016 and 2015 totaled approximately $3,264,000 and $2,581,000, respectively.

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

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Employee Benefits

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Employee Benefits

Note 14: Employee Benefits

401(k) Plan — The Company maintains a 401(k) savings plan for eligible employees. The Company’s contributions to this plan were $223,615 and $216,508 for the years ended December 31, 2016 and 2015, respectively. The plan invests some of its assets in deposit accounts at the Company which earned interest at a rate of 1.85% for the years ended December 31, 2016 and 2015.

Deferred Compensation Plan — The Company maintains a deferred compensation plan for certain key officers and employees. Contributions are determined annually by the Company’s Board of Directors. Effective in 2005, the Company froze this plan and no contributions to this plan were made for the years ended December 31, 2016 or 2015. The plan accrues interest at a variable rate which fluctuates based on Moody’s Corporate Bond Average Index. The amount recorded on the consolidated balance sheets as deferred compensation was $2,591,531 and $2,521,997 as of December 31, 2016 and 2015, respectively. Compensation expense related to the plan was $133,988 and $137,731 for the years ended December 31, 2016 and 2015, respectively.

The Company has also entered into deferred compensation agreements with certain key officers and employees. The agreements provide for monthly payments at retirement or death. The charge to expense for this plan reflects the accrual using the principal and interest method over the vesting period of the present value of benefits due each participant on the full eligibility date using a 4.75% discount rate. The amount recorded on the consolidated balance sheets as deferred compensation was $2,088,737 and $1,970,597 as of December 31, 2016 and 2015, respectively. Compensation expense related to the plans was $182,796 and $233,731 for the years ended December 31, 2016 and 2015, respectively.

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

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

ESOP expense for the years ended December 31, 2016 and 2015 was $108,421 and $90,649, respectively.

	2016		2015
Allocated shares	$	59,838	$	57,420
Shares committed for allocation		3,934		3,820
Unearned shares		17,237		21,171
Total ESOP shares		81,009		82,411
Fair value of unearned shares at December 31	$	517,110	$	556,374

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Stock Option Plans

12 Months Ended

Dec. 31, 2016

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

Stock Option Plans

Note 15: Stock Option Plans

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

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

A summary of option activity under the Plans as of December 31, 2016 and 2015, and changes during the years then ended, is presented below:

	2016
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		61,120		$	15.65
Granted		—			—
Exercised		(13,532	)		15.65
Forfeited or expired		(100	)		15.65
Outstanding, end of year		47,488		$	15.65		5.25	$	681,453
Exercisable, end of year		25,653		$	15.65		5.25	$	368,121

	2015
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		85,835		$	15.65
Granted		—			—
Exercised		(24,715	)		15.65
Forfeited or expired		—			—
Outstanding, end of year		61,120		$	15.65		6.25	$	649,706
Exercisable, end of year		19,035		$	15.65		6.25	$	202,342

The total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was $161,572 and $200,192, respectively.

As of December 31, 2016, there was $22,232 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2012 Plan. That cost is expected to be recognized over a weighted-average period of one year. The total fair value of shares vested during the years ended December 31, 2016 and 2015 was $90,163. The recognized tax benefit related thereto was $35,267 for the years ended December 31, 2016 and 2015.

A summary of the status of the Company’s nonvested shares as of December 31, 2016 and 2015, and changes during the year then ended, is presented below:

	December 31, 2016
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		42,085		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		(100	)		4.34
Nonvested, end of year		21,835		$	4.34

	December 31, 2015
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		62,235		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		—			—
Nonvested, end of year		42,085		$	4.34

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Note 16: Earnings Per Share

Earnings per share (EPS) were computed as follows:

	Year Ended December 31, 2016
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,047,909
Basic earnings per share
Income available to common stockholders				1,776,342	$	1.72
Effect of dilutive securities
Stock options				17,539
Diluted earnings per share
Income available to common stockholders	$	3,047,909		1,793,881	$	1.70

	Year Ended December 31, 2015
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,026,123
Basic earnings per share
Income available to common stockholders				1,770,546	$	1.71
Effect of dilutive securities
Stock options				13,469
Diluted earnings per share
Income available to common stockholders	$	3,026,123		1,784,015	$	1.70

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Disclosures about Fair Value of Assets

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Disclosures about Fair Value of Assets

Note 17: Disclosures about Fair Value of Assets

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

Level 1	Quoted prices in active markets for identical assets
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

Recurring Measurements

The following table presents the fair value measurements of assets  recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	13,333,540	$	—	$	13,333,540	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		44,413,177		—		44,413,177		—
Municipal bonds		42,414,723		—		42,414,723		—

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	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 consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the year ended December 31, 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. 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 December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,157,329	$	—	$	—	$	1,157,329
Mortgage servicing rights		552,827		—		—		552,827

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	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 consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

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

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary.  Appraisals are reviewed for accuracy and consistency.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  Fair value adjustments on impaired loans were $391,745 and $(156,069) at December 31, 2016 and 2015.

Mortgage Servicing Rights

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

Mortgage servicing rights are tested for impairment on at least an annual basis.  The Company uses a third-party to measure mortgage servicing rights through the completion of a proprietary model.  Inputs to the model are reviewed by the Company.  Fair value adjustments on mortgage servicing rights were $(38,967) and $0 at December 31, 2016 and 2015.

Unobservable (Level 3) Inputs

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

	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,157,329	Market comparable properties	Marketability discount	20% – 30% (25%)
Mortgage servicing rights	$	552,827	Discounted cash flow	Discount rate	9% - 13.5% (10.25%)
				PSA standard prepayment model rate	104 – 300 (153)

	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	899,981	Market comparable properties	Marketability discount	20% – 30% (25%)

Fair Value of Other Financial Instruments

The following table presents estimated fair values of the Company’s other financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015:

			December 31, 2016
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other  Observable  Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	12,909,924	$	12,909,924	$	—	$	—
Interest-earning time deposits		750,000		750,000		—		—
Other investments		55,481		—		55,481		—
Loans held for sale		503,003		—		503,003		—
Loans, net of allowance for loan losses		184,448,003		—		—		183,941,877
Federal Home Loan Bank stock		363,800		—		363,800		—
Interest receivable		1,588,545		—		1,588,545		—
Financial liabilities
Deposits		258,677,960		—		178,491,424		81,241,011
Short-term borrowings		7,135,182		—		7,135,182
Advances from borrowers for taxes and insurance		1,102,204		—		1,102,204		—
Interest payable		106,755		—		106,755		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

			December 31, 2015
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	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, 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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Significant Estimates and Concentrations

12 Months Ended

Dec. 31, 2016

Risks and Uncertainties [Abstract]

Significant Estimates and Concentrations

Note 18: Significant Estimates and Concentrations

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

General Litigation

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

Goodwill

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

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Commitments and Credit Risk

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Credit Risk

Note 19: Commitments and Credit Risk

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

Commitments to Originate Loans

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

At December 31, 2016 and 2015, the Company had outstanding commitments to originate loans aggregating approximately $5,238,175 and $4,457,514, respectively. The commitments extended over varying periods of time with the majority being disbursed within a one-year period. Loan commitments at fixed rates of interest amounted to $2,028,000 and $3,744,574 at December 31, 2016 and 2015, respectively, with the remainder at floating market rates. The range of fixed rates was 3.00% to 7.75% as of December 31, 2016.

Standby Letters of Credit

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

The Company had total outstanding standby letters of credit amounting to $110,000 at December 31, 2016 and 2015, with terms of one year or less. At December 31, 2016 and 2015, the Company’s deferred revenue under standby letters of credit agreements was nominal.

Lines of Credit

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

At December 31, 2016, the Company had unused lines of credit to borrowers aggregating approximately $26,836,352 and $15,869,821 for commercial lines and open-ended consumer lines, respectively. At December 31, 2015, unused lines of credit to borrowers aggregated approximately $21,753,180 for commercial lines and $10,785,989 for open-ended consumer lines.

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Quarterly Results of Operations (Unaudited)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operations (Unaudited)

Note 20: Quarterly Results of Operations (Unaudited)

	Year Ended December 31, 2016
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,817,513	$	2,858,551	$	2,849,785	$	2,909,135
Interest expense		274,630		277,603		247,184		248,909
Net interest income		2,542,883		2,580,948		2,602,601		2,660,226
Provision for loan losses		30,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,512,883		2,550,948		2,572,601		2,630,226
Noninterest income		1,099,642		1,088,058		1,034,670		1,039,075
Noninterest expense		2,681,987		2,613,954		2,564,033		2,532,562
Income before income taxes		930,538		1,025,052		1,043,238		1,136,739
Income tax expense		233,278		267,287		277,732		309,361
Net income	$	697,260	$	757,765	$	765,506	$	827,378
Basic earnings per share	$	0.39	$	0.43	$	0.43	$	0.47
Diluted earnings per share	$	0.39	$	0.42	$	0.43	$	0.46

	Year Ended December 31, 2015
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,923,681	$	2,830,112	$	2,859,579	$	2,901,492
Interest expense		252,749		267,433		293,141		314,050
Net interest income		2,670,932		2,562,679		2,566,438		2,587,442
Provision for loan losses		30,000		45,000		35,000		30,000
Net interest income after provision for loan losses		2,640,932		2,517,679		2,531,438		2,557,442
Noninterest income		1,096,519		991,626		1,063,287		1,035,458
Noninterest expense		2,814,601		2,579,660		2,431,183		2,515,789
Income before income taxes		922,850		929,645		1,163,542		1,077,111
Income tax expense		218,785		230,247		327,139		290,854
Net income	$	704,065	$	699,398	$	836,403	$	786,257
Basic earnings per share	$	0.40	$	0.40	$	0.47	$	0.44
Diluted earnings per share	$	0.39	$	0.39	$	0.47	$	0.44

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Condensed Financial Information (Parent Company Only)

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information (Parent Company Only)

Note 21: Condensed Financial Information (Parent Company Only)

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

Condensed Balance Sheets

	December 31,
	2016		2015
Assets
Cash and due from banks	$	4,806,252	$	4,800,526
Investment in common stock of subsidiary		41,366,024		42,428,601
Loan receivable from subsidiary		177,347		216,506
Other assets		118,460		106,960
Total assets	$	46,468,083	$	47,552,593
Liabilities
Other liabilities	$	222,518	$	1,986,093
Stockholders' Equity		46,245,565		45,566,500
Total liabilities and stockholders' equity	$	46,468,083	$	47,552,593

Condensed Statements of Income and Comprehensive Income

	Year Ending December 31,
	2016			2015
Income
Dividends from subsidiary	$	2,500,000		$	2,000,000
Other income		10,544			11,712
Total income		2,510,544			2,011,712
Expenses
Other expenses		360,950			361,694
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		2,149,594			1,650,018
Income Tax Benefit		(136,020	)		(137,420	)
Income Before Equity in Undistributed Income of Subsidiary		2,285,614			1,787,438
Equity in Undistributed Income of Subsidiary		762,295			1,238,685
Net Income	$	3,047,909		$	3,026,123
Comprehensive Income	$	1,081,274		$	3,104,981

Condensed Statements of Cash Flows

	Year Ending December 31,
	2016			2015
Operating Activities
Net income	$	3,047,909		$	3,026,123
Items not providing cash, net		(762,295	)		(1,238,685	)
Stock-based compensation expense		90,163			90,163
Change in other assets and liabilities, net		(53,487	)		(17,617	)
Net cash provided by operating activities		2,322,290			1,859,984
Investing Activity
Loan payment from subsidiary		39,159			37,879
Net cash provided by investing activities		39,159			37,879
Financing Activities
Dividends paid		(2,440,380	)		(565,995	)
Stock repurchase		(127,118	)		(765,311	)
Exercise of stock options		211,775			386,790
Net cash used in financing activities		(2,355,723	)		(944,516	)
Net Change in Cash and Cash Equivalents		5,726			953,347
Cash and Cash Equivalents at Beginning of Year		4,800,526			3,847,179
Cash and Cash Equivalents at End of Year	$	4,806,252		$	4,800,526

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

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Principles of Consolidation and Financial Statement Presentation

Principles of Consolidation and Financial Statement Presentation

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

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

Use of Estimates

Use of Estimates

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

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

Cash Equivalents

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2016 and 2015, cash equivalents consisted primarily of federal funds sold and interest-earning time and demand deposits in banks.

At December 31, 2016, the Company’s cash accounts did not exceed federally insured limits.

Interest-earning Time Deposits in Banks

Interest-earning Time Deposits in Banks

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

Securities

Securities

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

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

Other Investments

Other Investments

Other investments at December 31, 2016 and 2015 include local municipal bonds and equity investments in local community development organizations. The municipal bonds mature ratably through the year 2020. These securities have no readily ascertainable market value and are carried at cost.

Loans Held for Sale

Loans Held for Sale

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

Loans

Loans

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

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

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

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

Allowance for Loan Losses

Allowance for Loan Losses

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the 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 collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

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

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

Premises and Equipment

Premises and Equipment

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

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

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

Federal Home Loan Bank Stock

Federal Home Loan Bank Stock

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

Foreclosed Assets Held for Sale

Foreclosed Assets Held for Sale

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

Bank-owned Life Insurance

Bank-owned Life Insurance

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

Goodwill

Goodwill

Goodwill is evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. The goodwill was not deemed impaired as of December 31, 2016 or 2015.

Mortgage Servicing Rights

Mortgage Servicing Rights

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

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

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

Stock Options

Stock Options

At December 31, 2016 and 2015, the Company recognizes the fair value (calculated value) of stock-based awards to employees as compensation cost over the requisite service period. The stock-based employee compensation plan is described more fully in Note 15.

Transfers of Financial Assets

Transfers of Financial Assets

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

Income Taxes

Income Taxes

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

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

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2013.

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

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

Earnings Per Share

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

Comprehensive Income

Comprehensive Income

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

Trust Assets

Trust Assets

Assets held in fiduciary or agency capacities are not included in the consolidated balance sheets since such items are not assets of the Company. Fees from trust activities are recorded as revenue over the period in which the service is provided. Fees are a function of the market value of assets managed and administered, the volume of transactions, and fees for other services rendered, as set forth in the underlying client agreement with the Trust Department. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes. Generally, the actual trust fee is charged to each account on a monthly basis. Any out of pocket expenses or services not typically covered by the fee schedule for trust activities are charged directly to the trust account on a gross basis as trust revenue is incurred. The Company managed or administered approximately 131 and 124 trust accounts with assets totaling approximately $99.3 million and $90.7 million at December 31, 2016 and 2015, respectively.

Reclassifications

Reclassifications

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

Recent and Future Accounting Requirements

Recent and Future Accounting Requirements

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 in the preliminary stage of evaluating the impact of 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 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.  The Company is currently reviewing its processes but 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 been receiving training and gathering historical data in order to determine the impact the adoption of ASU 2016-13 will have on the consolidated financial statements.

In March 2016, FASB issued ASU 2016-09, Compensation – Stock Compensation (topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The new guidance will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is currently implementing the new processes and does not anticipate a significant impact on the Company’s financial statements.

In January 2017, FASB amended FASB ASC Topic 250, Simplifying the Test for Goodwill. The amendments in the update simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has goodwill from a prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. During the current year, the Company performed its impairment assessment and determined that the Company’s goodwill was not impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

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

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Schedule of estimated useful lives of premises and equipment

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

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Securities (Tables)

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale Securities
December 31, 2016:
U.S. Government and federal agencies	$	13,985,863	$	9,641	$	(661,964	)	$	13,333,540
Mortgage-backed securities (Government-sponsored enterprises - residential)		45,457,262		70,512		(1,114,597	)		44,413,177
Municipal bonds		42,500,579		558,776		(644,632	)		42,414,723
	$	101,943,704	$	638,929	$	(2,421,193	)	$	100,161,440
December 31, 2015:
U.S. Government and federal 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 maturity

	Available-for-sale
	Amortized Cost		Fair  Value
Within one year	$	1,036,978	$	1,043,616
One to five years		9,201,183		9,315,610
Five to ten years		27,297,515		27,081,945
After ten years		18,950,766		18,307,092
		56,486,442		55,748,263
Mortgage-backed securities		45,457,262		44,413,177
Totals	$	101,943,704	$	100,161,440

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

	December 31, 2016
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	12,333,924	$	(661,964	)	$	—	$	—		$	12,333,924	$	(661,964	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		37,144,915		(1,114,597	)		—		—			37,144,915		(1,114,597	)
Municipal bonds		22,104,420		(644,632	)		—		—			22,104,420		(644,632	)
Total temporarily impaired securities	$	71,583,259	$	(2,421,193	)	$	—	$	—		$	71,583,259	$	(2,421,193	)
	December 31, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale Securities
U.S. Government agencies	$	8,591,014	$	(49,205	)	$	1,809,745	$	(36,545	)	$	10,400,759	$	(85,750	)
Mortgage-backed securities (Government-sponsored enterprises - residential)		5,843,754		(45,886	)		2,257,674		(54,906	)		8,101,428		(100,792	)
Municipal bonds		5,440,291		(48,383	)		6,734,290		(130,876	)		12,174,581		(179,259	)
Total temporarily impaired securities	$	19,875,059	$	(143,474	)	$	10,801,709	$	(222,327	)	$	30,676,768	$	(365,801	)

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Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Schedule of classes of loans

	2016		2015
Mortgage loans on real estate
Residential 1-4 family	$	45,311,103	$	47,395,344
Commercial		41,477,480		40,381,680
Agricultural		38,271,758		41,223,190
Home equity		11,606,002		11,691,545
Total mortgage loans on real estate		136,666,343		140,691,759
Commercial loans		21,617,744		25,453,058
Agricultural		14,649,622		16,102,856
Consumer		14,543,356		13,741,093
		187,477,065		195,988,766
Less
Net deferred loan fees		21,667		29,293
Allowance for loan losses		3,007,395		2,919,594
Net loans	$	184,448,003	$	193,039,879

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

	December 31, 2016
	1-4 Family			Commercial  Real Estate		Agricultural  Real Estate			Commercial			Agricultural		Home Equity		Consumer			Unallocated		Total
Allowance for loan losses:
Balance, beginning of year	$	829,604		$	917,526	$	201,918		$	386,620		$	163,346	$	149,253	$	169,381		$	101,946	$	2,919,594
Provision charged to expense		14,683			112,411		(10,559	)		(85,258	)		4,123		22,273		50,016			12,311		120,000
Losses charged off		(38,171	)		—		—			—			—		—		(43,777	)		—		(81,948	)
Recoveries		25,884			14,616		—			116			—		2,100		7,033			—		49,749
Balance, end of year	$	832,000		$	1,044,553	$	191,359		$	301,478		$	167,469	$	173,626	$	182,653		$	114,257	$	3,007,395
Ending balance:  individually evaluated for impairment	$	304,922		$	723,481	$	—		$	56,409		$	—	$	—	$	—		$	—	$	1,084,812
Ending balance:  collectively evaluated for impairment	$	527,078		$	321,072	$	191,359		$	245,069		$	167,469	$	173,626	$	182,653		$	114,257	$	1,922,583
Loans:
Ending balance	$	45,311,103		$	41,477,480	$	38,271,758		$	21,617,744		$	14,649,622	$	11,606,002	$	14,543,356		$	—	$	187,477,065
Ending balance:  individually evaluated for impairment	$	713,151		$	1,658,323	$	—		$	155,067		$	—	$	54,011	$	—		$	—	$	2,580,552
Ending balance:  collectively evaluated for impairment	$	44,597,952		$	39,819,157	$	38,271,758		$	21,462,677		$	14,649,622	$	11,551,991	$	14,543,356		$	—	$	184,896,513

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

Schedule of credit risk profile of the Company's loan portfolio based on rating category and payment activity

	1-4 Family				Commercial Real Estate				Agricultural Real Estate				Commercial
	2016		2015		2016		2015		2016		2015		2016		2015
Pass	$	42,327,337	$	44,120,334	$	39,078,740	$	37,628,385	$	38,271,758	$	40,383,644	$	21,141,466	$	25,117,982
Special Mention		1,016,025		1,323,266		429,877		454,194		—		839,546		100,234		51,196
Substandard		1,967,741		1,951,744		1,968,863		2,299,101		—		—		376,044		283,880
Total	$	45,311,103	$	47,395,344	$	41,477,480	$	40,381,680	$	38,271,758	$	41,223,190	$	21,617,744	$	25,453,058

	Agricultural Business				Home Equity				Consumer
	2016		2015		2016		2015		2016		2015
Pass	$	13,845,865	$	15,110,606	$	10,790,377	$	11,324,889	$	14,361,125	$	13,501,477
Special Mention		803,757		992,250		70,983		68,044		10,575		52,656
Substandard		—		—		744,642		298,612		171,656		186,960
Total	$	14,649,622	$	16,102,856	$	11,606,002	$	11,691,545	$	14,543,356	$	13,741,093

Schedule of loan portfolio aging analysis

	December 31, 2016
	30-59 Days  Past Due		60-89 Days  Past Due		Greater Than  90 Days		Total Past  Due		Current		Total Loans  Receivable		Total Loans >  90 Days & Accruing
1-4 Family	$	237,783	$	136,340	$	544,425	$	918,548	$	44,392,555	$	45,311,103	$	—
Commercial real estate		—		16,273		—		16,273		41,461.207		41,477,480		—
Agricultural real estate		—		—		—		—		38,271,758		38,271,758		—
Commercial		—		41,474		13,309		54,783		21,562,961		21,617,744		—
Agricultural business		—		—		—		—		14,649,622		14,649,622		—
Home equity		151,482		—		—		151,482		11,454,520		11,606,002		—
Consumer		68,077		17,757		72,150		157,984		14,385,372		14,543,356		—
Total	$	457,342	$	211,844	$	629,884	$	1,299,070	$	186,177,995	$	187,477,065	$	—

	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days &  Accruing
1-4 Family	$	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		—
Commercial		—		—		—		—		25,453,058		25,453,058		—
Agricultural business		—		—		—		—		16,102,856		16,102,856		—
Home equity		22,122		66,305		69,515		157,942		11,533,603		11,691,545		—
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 loans

	December 31, 2016
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	39,598	$	39,598	$	—	$	41,880	$	2,653	$	2,888
Commercial real estate		120,172		120,172		—		272,557		13,499		14,061
Commercial		61,483		61,483		—		87,359		4,332		4,419
Home equity		54,011		54,011		—		54,067		3,670		3,871
Loans with a specific valuation allowance
1-4 Family		673,553		673,553		304,922		719,834		41,323		34,208
Commercial real estate		1,538,151		1,538,151		723,481		1,572,203		68,918		64,878
Commercial		93,584		93,584		56,409		165,473		7,580		7,814
Total:
1-4 family		713,151		713,151		304,922		761,714		43,976		37,096
Commercial real estate		1,658,323		1,658,323		723,481		1,844,760		82,417		78,939
Commercial		155,067		155,067		56,409		252,832		11,912		12,233
Home equity		54,011		54,011		—		54,067		3,670		3,871
Total	$	2,580,552	$	2,580,552	$	1,084,812	$	2,913,373	$	141,975	$	132,139

	December 31, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest  Income Recognized		Interest Income Recognized Cash Basis
Loans without a specific valuation allowance
1-4 Family	$	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 valuation allowance
1-4 Family		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:
1-4 family		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 nonaccrual loans

	2016		2015
1-4 family	$	590,514	$	911,283
Commercial real estate		708,922		840,449
Agricultural real estate		—		—
Commercial		16,561		9,314
Agricultural business		—		—
Home equity		49,542		118,502
Consumer		164,472		141,605
Total	$	1,530,011	$	2,021,153

Schedule of recorded balance, at original cost, of troubled debt restructurings

	2016		2015
1-4 family	$	836,867	$	723,421
Commercial real estate		1,362,088		1,708,013
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		81,880		109,340
Total	$	2,532,554	$	2,609,454

Schedule of recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring

	2016		2015
1-4 family	$	666,744	$	526,004
Commercial real estate		1,362,088		941,173
Agricultural real estate		—		—
Commercial		245,710		57,783
Agricultural business		—		—
Home equity		6,009		10,897
Consumer		57,540		86,255
Total	$	2,338,091	$	1,622,112

Schedule of loans modified as troubled debt restructurings

	Year Ended December 31, 2016				Year Ended December 31, 2015
	Number of Modifications		Recorded Investment		Number of Modifications		Recorded Investment
1-4 family		1	$	40,395		1	$	98,246
Commercial real estate		1		708,922		2		524,432
Agricultural real estate		—		—		—		—
Commercial		1		217,725		—		—
Agricultural business		—		—		—		—
Home equity		—		—		1		1,431
Consumer		—		—		5		76,691
Total		3	$	967,042		9	$	700,800

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Schedule of premises and equipment

	2016			2015
Land	$	773,186		$	773,186
Buildings and improvements		6,752,503			6,697,278
Equipment		3,492,693			3,384,516
		11,018,382			10,854,980
Less accumulated depreciation		(6,519,729	)		(6,126,823	)
Net premises and equipment	$	4,498,653		$	4,728,157

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2016

Transfers and Servicing [Abstract]

Schedule of mortgage servicing rights measured using amortization method with aggregate activity in related valuation allowances

	2016			2015
Mortgage servicing rights
Balance, beginning of year	$	645,067		$	689,603
Additions		87,579			73,650
Write-downs		(72,580	)		—
Amortization		(107,239	)		(118,186	)
Balance at end of year		552,827			645,067
Valuation allowances
Balance at beginning of year		47,354			56,969
Additions due to decreases in market value		38,967			—
Reduction due to write-downs		(72,580	)		—
Reduction due to payoff of loans		(13,741	)		(9,615	)
Balances at end of year		0			47,354
Mortgage servicing assets, net	$	552,827		$	597,713
Fair value disclosures
Fair value as of the beginning of the period	$	870,619		$	979,699
Fair value as of the end of the period	$	898,625		$	870,619

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Interest-bearing Deposits (Tables)

12 Months Ended

Dec. 31, 2016

Banking and Thrift [Abstract]

Schedule of deposit interest expense by deposit type

	December 31,
	2016		2015
Savings, NOW and Money Market	$	366,123	$	249,077
Certificates of deposit		659,109		852,185
Total deposit interest expense	$	1,025,232	$	1,101,262

Schedule of scheduled maturities of time deposits

2017	$	47,319,320
2018		14,869,536
2019		7,572,666
2020		5,387,756
2021		5,037,258
	$	80,186,536

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of components of provision for income taxes

	2016			2015
Taxes currently payable
Federal	$	916,248		$	883,916
State		314,017			320,593
Deferred income taxes		(142,607	)		(137,484	)
Income tax expense	$	1,087,658		$	1,067,025

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

	2016			2015
Computed at the statutory rate (34%)	$	1,406,093		$	1,391,670
Increase (decrease) resulting from
Tax exempt interest		(445,584	)		(454,067	)
State income taxes, net		184,535			188,690
Increase in cash surrender value		(58,651	)		(59,646	)
Other		1,265			378
Actual tax expense	$	1,087,658		$	1,067,025
Tax expense as a percentage of pre-tax income		26.30	%		26.07	%

Schedule of tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets

	2016			2015
Deferred tax assets
Allowance for loan losses	$	1,050,004		$	1,015,661
Deferred compensation		1,830,687			1,817,124
Net unrealized loss on available for sale securities		605,970			—
Other		—			29,497
		3,486,661			2,862,282
Deferred tax liabilities
Net unrealized gain on available-for-sale securities		—			(407,145	)
Depreciation		(390,787	)		(434,043	)
Federal Home Loan Bank stock dividends		(48,291	)		(147,858	)
Prepaid expenses		(65,504	)		(56,374	)
Mortgage servicing rights		(216,238	)		(233,795	)
Other		(27,052	)		—
		(747,872	)		(1,279,215	)
Net deferred tax asset	$	2,738,789		$	1,583,067

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Accumulated Other Comprehensive Income (Loss)(Tables)

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

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

	2016			2015
Net unrealized gain (loss) on securities available-for-sale	$	(1,782,264	)	$	1,197,486
Tax effect		605,970			(407,145	)
Net-of-tax amount	$	(1,176,294	)	$	790,341

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Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Tables)

12 Months Ended

Dec. 31, 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						Affected Line Item in the
	2016			2015			Statements of Income
Realized gains on available-for-sale securities	$	399,599		$	320,585		Realized gain on sale of securities
							Total reclassified amount before tax
		(135,864	)		(108,999	)	Tax expense
	$	263,735		$	211,586		Net reclassified amount

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Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2016

Regulatory Matters [Abstract]

Schedule of bank's actual capital amounts and ratios

	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2016
Total risk-based capital (to risk-weighted assets)	$	42,543		19.52	%	$	17,434		8.0	%	$	21,793		10.0	%
Tier I capital (to risk-weighted assets)		39,816		18.27			13,076		6.0			17,434		8.0
Common equity Tier I (to risk-weighted assets)		39,816		18.27			9,807		4.5			14,165		6.5
Tier I capital (to average assets)		39,816		12.58			12,662		4.0			15,828		5.0
Tangible capital (to adjusted tangible assets)		39,816		12.58			4,748		1.5			—		N/A
As of December 31, 2015
Total risk-based capital (to risk-weighted assets)	$	41,631		19.15	%	$	17,387		8.0	%	$	21,734		10.0	%
Tier I capital (to risk-weighted assets)		38,912		17.90			13,040		6.0			17,387		8.0
Common equity Tier I (to risk-weighted assets)		38,912		17.90			9,780		4.5			14,127		6.5
Tier I capital (to average assets)		38,912		12.82			12,139		4.0			15,174		5.0
Tangible capital (to adjusted tangible assets)		38,912		12.82			4,552		1.5			—		N/A

Schedule of reconciliation of bank equity amount for regulatory capital purposes

	2016			2015
Bank equity	$	41,367		$	42,429
Less net unrealized gain (loss)		(1,176	)		790
Less disallowed goodwill		2,727			2,727
Tier 1 and common equity Tier 1 capital		39,816			38,912
Plus allowance for loan losses		2,727			2,719
Total risked-based capital	$	42,543		$	41,631

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Schedule of annual activity of loans outstanding to related parties

	2016			2015
Balance beginning of year	$	3,193,470		$	3,523,047
Additions		1,178,281			1,138,338
Repayments		(1,259,775	)		(1,467,915	)
Balance, end of year	$	3,111,976		$	3,193,470

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Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of summary of ESOP expense

	2016		2015
Allocated shares	$	59,838	$	57,420
Shares committed for allocation		3,934		3,820
Unearned shares		17,237		21,171
Total ESOP shares		81,009		82,411
Fair value of unearned shares at December 31	$	517,110	$	556,374

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Stock Option Plans (Tables)

12 Months Ended

Dec. 31, 2016

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

Schedule of summary of option activity

	2016
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		61,120		$	15.65
Granted		—			—
Exercised		(13,532	)		15.65
Forfeited or expired		(100	)		15.65
Outstanding, end of year		47,488		$	15.65		5.25	$	681,453
Exercisable, end of year		25,653		$	15.65		5.25	$	368,121

	2015
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, beginning of year		85,835		$	15.65
Granted		—			—
Exercised		(24,715	)		15.65
Forfeited or expired		—			—
Outstanding, end of year		61,120		$	15.65		6.25	$	649,706
Exercisable, end of year		19,035		$	15.65		6.25	$	202,342

Schedule of summary of the status of nonvested shares

	December 31, 2016
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		42,085		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		(100	)		4.34
Nonvested, end of year		21,835		$	4.34

	December 31, 2015
	Shares			Weighted- Average Grant- Date Fair Value
Nonvested, beginning of year		62,235		$	4.34
Granted		—			—
Vested		(20,150	)		4.34
Forfeited		—			—
Nonvested, end of year		42,085		$	4.34

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Schedule of computation of earnings per share

	Year Ended December 31, 2016
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,047,909
Basic earnings per share
Income available to common stockholders				1,776,342	$	1.72
Effect of dilutive securities
Stock options				17,539
Diluted earnings per share
Income available to common stockholders	$	3,047,909		1,793,881	$	1.70

	Year Ended December 31, 2015
	Income		Weighted- Average Shares		Per Share Amount
Net income	$	3,026,123
Basic earnings per share
Income available to common stockholders				1,770,546	$	1.71
Effect of dilutive securities
Stock options				13,469
Diluted earnings per share
Income available to common stockholders	$	3,026,123		1,784,015	$	1.70

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Disclosures about Fair Value of Assets (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

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

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	13,333,540	$	—	$	13,333,540	$	—
Mortgage-backed securities (Government-sponsored enterprises - residential)		44,413,177		—		44,413,177		—
Municipal bonds		42,414,723		—		42,414,723		—

			December 31, 2015
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government agencies	$	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

			December 31, 2016
			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans (collateral dependent)	$	1,157,329	$	—	$	—	$	1,157,329
Mortgage servicing rights		552,827		—		—		552,827

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

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

	Fair Value at December 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Collateral-dependent impaired loans	$	1,157,329	Market comparable properties	Marketability discount	20% – 30% (25%)
Mortgage servicing rights	$	552,827	Discounted cash flow	Discount rate	9% - 13.5% (10.25%)
				PSA standard prepayment model rate	104 – 300 (153)

	Fair Value at December 31, 2015		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 instruments

			December 31, 2016
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other  Observable  Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	12,909,924	$	12,909,924	$	—	$	—
Interest-earning time deposits		750,000		750,000		—		—
Other investments		55,481		—		55,481		—
Loans held for sale		503,003		—		503,003		—
Loans, net of allowance for loan losses		184,448,003		—		—		183,941,877
Federal Home Loan Bank stock		363,800		—		363,800		—
Interest receivable		1,588,545		—		1,588,545		—
Financial liabilities
Deposits		258,677,960		—		178,491,424		81,241,011
Short-term borrowings		7,135,182		—		7,135,182
Advances from borrowers for taxes and insurance		1,102,204		—		1,102,204		—
Interest payable		106,755		—		106,755		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—
Letters of credit		—		—		—		—
Lines of credit		—		—		—		—

			December 31, 2015
			Fair Value Measurements Using
	Carrying  Amount		Quoted Prices  in Active  Markets for  Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents	$	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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Quarterly Results of Operations (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Schedule of quarterly results of operations

	Year Ended December 31, 2016
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,817,513	$	2,858,551	$	2,849,785	$	2,909,135
Interest expense		274,630		277,603		247,184		248,909
Net interest income		2,542,883		2,580,948		2,602,601		2,660,226
Provision for loan losses		30,000		30,000		30,000		30,000
Net interest income after provision for loan losses		2,512,883		2,550,948		2,572,601		2,630,226
Noninterest income		1,099,642		1,088,058		1,034,670		1,039,075
Noninterest expense		2,681,987		2,613,954		2,564,033		2,532,562
Income before income taxes		930,538		1,025,052		1,043,238		1,136,739
Income tax expense		233,278		267,287		277,732		309,361
Net income	$	697,260	$	757,765	$	765,506	$	827,378
Basic earnings per share	$	0.39	$	0.43	$	0.43	$	0.47
Diluted earnings per share	$	0.39	$	0.42	$	0.43	$	0.46

	Year Ended December 31, 2015
	Three Months Ended
	December 31		September 30		June 30		March 31
Interest income	$	2,923,681	$	2,830,112	$	2,859,579	$	2,901,492
Interest expense		252,749		267,433		293,141		314,050
Net interest income		2,670,932		2,562,679		2,566,438		2,587,442
Provision for loan losses		30,000		45,000		35,000		30,000
Net interest income after provision for loan losses		2,640,932		2,517,679		2,531,438		2,557,442
Noninterest income		1,096,519		991,626		1,063,287		1,035,458
Noninterest expense		2,814,601		2,579,660		2,431,183		2,515,789
Income before income taxes		922,850		929,645		1,163,542		1,077,111
Income tax expense		218,785		230,247		327,139		290,854
Net income	$	704,065	$	699,398	$	836,403	$	786,257
Basic earnings per share	$	0.40	$	0.40	$	0.47	$	0.44
Diluted earnings per share	$	0.39	$	0.39	$	0.47	$	0.44

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Condensed Financial Information (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule of Condensed Balance Sheets

Condensed Balance Sheets

	December 31,
	2016		2015
Assets
Cash and due from banks	$	4,806,252	$	4,800,526
Investment in common stock of subsidiary		41,366,024		42,428,601
Loan receivable from subsidiary		177,347		216,506
Other assets		118,460		106,960
Total assets	$	46,468,083	$	47,552,593
Liabilities
Other liabilities	$	222,518	$	1,986,093
Stockholders' Equity		46,245,565		45,566,500
Total liabilities and stockholders' equity	$	46,468,083	$	47,552,593

Schedule of Condensed Statements of Income and Comprehensive Income

Condensed Statements of Income and Comprehensive Income

	Year Ending December 31,
	2016			2015
Income
Dividends from subsidiary	$	2,500,000		$	2,000,000
Other income		10,544			11,712
Total income		2,510,544			2,011,712
Expenses
Other expenses		360,950			361,694
Income Before Income Tax and Equity in Undistributed Income of Subsidiary		2,149,594			1,650,018
Income Tax Benefit		(136,020	)		(137,420	)
Income Before Equity in Undistributed Income of Subsidiary		2,285,614			1,787,438
Equity in Undistributed Income of Subsidiary		762,295			1,238,685
Net Income	$	3,047,909		$	3,026,123
Comprehensive Income	$	1,081,274		$	3,104,981

Schedule of Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

	Year Ending December 31,
	2016			2015
Operating Activities
Net income	$	3,047,909		$	3,026,123
Items not providing cash, net		(762,295	)		(1,238,685	)
Stock-based compensation expense		90,163			90,163
Change in other assets and liabilities, net		(53,487	)		(17,617	)
Net cash provided by operating activities		2,322,290			1,859,984
Investing Activity
Loan payment from subsidiary		39,159			37,879
Net cash provided by investing activities		39,159			37,879
Financing Activities
Dividends paid		(2,440,380	)		(565,995	)
Stock repurchase		(127,118	)		(765,311	)
Exercise of stock options		211,775			386,790
Net cash used in financing activities		(2,355,723	)		(944,516	)
Net Change in Cash and Cash Equivalents		5,726			953,347
Cash and Cash Equivalents at Beginning of Year		4,800,526			3,847,179
Cash and Cash Equivalents at End of Year	$	4,806,252		$	4,800,526

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Nature of Operations and Summary of Significant Accounting Policies - Estimated useful lives for each major depreciable classification of premises and equipment (Details)	12 Months Ended
	Dec. 31, 2016
Buildings and improvements
Nature Of Operations And Significant Accounting Policies [Line Items]
Premises and equipment estimated useful life	35-40 years
Equipment
Nature Of Operations And Significant Accounting Policies [Line Items]
Premises and equipment estimated useful life	3-5 years

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Nature of Operations and Summary of Significant Accounting Policies (Detail Textuals) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($) Branche Trust	Dec. 31, 2015 USD ($) Trust
Nature Of Operations And Significant Accounting Policies [Line Items]
Percentage of ownership interests in Jacksonville Savings Bank	100.00%
Number of branches | Branche	5
Loan past due period	90 days
Number of trust accounts managed or administered | Trust	131	124
Assets held in fiduciary or agency capacities | $	$ 99.3	$ 90.7
Mortgages | Minimum
Nature Of Operations And Significant Accounting Policies [Line Items]
Fixed-rate balloon loans term	3 years
Mortgages | Maximum
Nature Of Operations And Significant Accounting Policies [Line Items]
Fixed-rate balloon loans term	5 years

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Restriction on Cash and Due from Banks (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Restricted Cash and Investments [Abstract]
Reserve funds in cash and/or on deposit with Federal Reserve Bank	$ 2,449,000	$ 1,524,000

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Securities - Amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	$ 101,943,704	$ 86,275,846
Available-for-sale securities, gross unrealized gains	638,929	1,563,287
Available-for-sale securities, gross unrealized losses	(2,421,193)	(365,801)
Available-for-sale securities, fair value	100,161,440	87,473,332
U.S. Government and federal agencies
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	13,985,863	15,979,475
Available-for-sale securities, gross unrealized gains	9,641	44,972
Available-for-sale securities, gross unrealized losses	(661,964)	(85,750)
Available-for-sale securities, fair value	13,333,540	15,938,697
Mortgage-backed securities (Government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	45,457,262	23,067,200
Available-for-sale securities, gross unrealized gains	70,512	211,987
Available-for-sale securities, gross unrealized losses	(1,114,597)	(100,792)
Available-for-sale securities, fair value	44,413,177	23,178,395
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, amortized cost	42,500,579	47,229,171
Available-for-sale securities, gross unrealized gains	558,776	1,306,328
Available-for-sale securities, gross unrealized losses	(644,632)	(179,259)
Available-for-sale securities, fair value	$ 42,414,723	$ 48,356,240

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Securities - Amortized cost and fair value of available-for-sale securities by contractual maturity (Details 1) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Available-for-sale, amortized cost
Within one year	$ 1,036,978
One to five years	9,201,183
Five to ten years	27,297,515
After ten years	18,950,766
Available-for-sale securities, amortized cost, subtotal	56,486,442
Mortgage-backed securities, amortized cost	45,457,262
Available-for-sale securities, amortized cost	101,943,704	$ 86,275,846
Available-for-sale securities, fair value
Within one year	1,043,616
One to five years	9,315,610
Five to ten years	27,081,945
After ten years	18,307,092
Available-for-sale Securities, fair value	55,748,263	64,294,937
Mortgage-backed securities, fair value	44,413,177	23,178,395
Available-for-sale securities, fair value	$ 100,161,440	$ 87,473,332

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Securities - Gross unrealized losses and fair value in a continuous unrealized loss position (Details 2) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 71,583,259	$ 19,875,059
Less than 12 Months, Unrealized Losses	(2,421,193)	(143,474)
12 Months or More, Fair Value		10,801,709
12 Months or More, Unrealized Losses		(222,327)
Fair Value	71,583,259	30,676,768
Unrealized Losses	(2,421,193)	(365,801)
U.S. Government agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	12,333,924	8,591,014
Less than 12 Months, Unrealized Losses	(661,964)	(49,205)
12 Months or More, Fair Value		1,809,745
12 Months or More, Unrealized Losses		(36,545)
Fair Value	12,333,924	10,400,759
Unrealized Losses	(661,964)	(85,750)
Mortgage-backed securities (Government-sponsored enterprises - residential)
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	37,144,915	5,843,754
Less than 12 Months, Unrealized Losses	(1,114,597)	(45,886)
12 Months or More, Fair Value		2,257,674
12 Months or More, Unrealized Losses		(54,906)
Fair Value	37,144,915	8,101,428
Unrealized Losses	(1,114,597)	(100,792)
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	22,104,420	5,440,291
Less than 12 Months, Unrealized Losses	(644,632)	(48,383)
12 Months or More, Fair Value		6,734,290
12 Months or More, Unrealized Losses		(130,876)
Fair Value	22,104,420	12,174,581
Unrealized Losses	$ (644,632)	$ (179,259)

XML

Securities (Detail Textuals) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Securities pledged as collateral	$ 42,463,127	$ 25,681,115
Securities sold under agreements to repurchase	9,709,793	7,591,475
Gross realized gains on sales of available-for-sale securities	402,981	352,983
Gross realized losses on sales of available-for-sale securities	(3,382)	(32,398)
Taxes on reclassification adjustment for realized gains included in net income	135,864	108,999
Debt securities, fair value	$ 71,583,259	$ 30,676,768
Percentage of available-for-sale investment portfolio	71.00%	35.00%

XML

Loans and Allowance for Loan Losses - Classes of loans (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 187,477,065	$ 195,988,766
Less Net deferred loan fees	21,667	29,293
Less Allowance for loan losses	3,007,395	2,919,594
Net loans	184,448,003	193,039,879
Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	136,666,343	140,691,759
Real estate loans | Residential 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	45,311,103	47,395,344
Real estate loans | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	41,477,480	40,381,680
Real estate loans | Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	38,271,758	41,223,190
Real estate loans | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,606,002	11,691,545
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	21,617,744	25,453,058
Agricultural
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	14,649,622	16,102,856
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 14,543,356	$ 13,741,093

XML

Loans and Allowance for Loan Losses - Balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses:
Balance, beginning of year	$ 2,919,594	$ 2,956,264
Provision charged to expense	120,000	140,000
Losses charged off	(81,948)	(293,829)
Recoveries	49,749	117,159
Balance, end of year	3,007,395	2,919,594
Ending balance: individually evaluated for impairment	1,084,812	800,664
Ending balance: collectively evaluated for impairment	1,922,583	2,118,930
Loans:
Ending balance	187,477,065	195,988,766
Ending balance: individually evaluated for impairment	2,580,552	3,840,156
Ending balance: collectively evaluated for impairment	184,896,513	192,148,610
Real estate loans
Loans:
Ending balance	136,666,343	140,691,759
Real estate loans | 1-4 family
Allowance for loan losses:
Balance, beginning of year	829,604	999,260
Provision charged to expense	14,683	(10,386)
Losses charged off	(38,171)	(199,392)
Recoveries	25,884	40,122
Balance, end of year	832,000	829,604
Ending balance: individually evaluated for impairment	304,922	176,079
Ending balance: collectively evaluated for impairment	527,078	653,525
Loans:
Ending balance	45,311,103	47,395,344
Ending balance: individually evaluated for impairment	713,151	658,734
Ending balance: collectively evaluated for impairment	44,597,952	46,736,610
Real estate loans | Commercial Real Estate
Allowance for loan losses:
Balance, beginning of year	917,526	855,463
Provision charged to expense	112,411	29,238
Losses charged off		(27,464)
Recoveries	14,616	60,289
Balance, end of year	1,044,553	917,526
Ending balance: individually evaluated for impairment	723,481	487,205
Ending balance: collectively evaluated for impairment	321,072	430,321
Loans:
Ending balance	41,477,480	40,381,680
Ending balance: individually evaluated for impairment	1,658,323	1,598,530
Ending balance: collectively evaluated for impairment	39,819,157	38,783,150
Real estate loans | Agricultural Real Estate
Allowance for loan losses:
Balance, beginning of year	201,918	195,546
Provision charged to expense	(10,559)	6,372
Losses charged off
Recoveries
Balance, end of year	191,359	201,918
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	191,359	201,918
Loans:
Ending balance	38,271,758	41,223,190
Ending balance: individually evaluated for impairment		839,546
Ending balance: collectively evaluated for impairment	38,271,758	40,383,644
Commercial loans
Allowance for loan losses:
Balance, beginning of year	386,620	421,809
Provision charged to expense	(85,258)	(35,327)
Losses charged off
Recoveries	116	138
Balance, end of year	301,478	386,620
Ending balance: individually evaluated for impairment	56,409	127,458
Ending balance: collectively evaluated for impairment	245,069	259,162
Loans:
Ending balance	21,617,744	25,453,058
Ending balance: individually evaluated for impairment	155,067	277,628
Ending balance: collectively evaluated for impairment	21,462,677	25,175,430
Agricultural loans
Allowance for loan losses:
Balance, beginning of year	163,346	57,934
Provision charged to expense	4,123	105,412
Losses charged off
Recoveries
Balance, end of year	167,469	163,346
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	167,469	163,346
Loans:
Ending balance	14,649,622	16,102,856
Ending balance: individually evaluated for impairment		406,950
Ending balance: collectively evaluated for impairment	14,649,622	15,695,906
Home Equity
Allowance for loan losses:
Balance, beginning of year	149,253	205,577
Provision charged to expense	22,273	(53,188)
Losses charged off		(13,724)
Recoveries	2,100	10,588
Balance, end of year	173,626	149,253
Ending balance: individually evaluated for impairment		9,922
Ending balance: collectively evaluated for impairment	173,626	139,331
Loans:
Ending balance	11,606,002	11,691,545
Ending balance: individually evaluated for impairment	54,011	58,340
Ending balance: collectively evaluated for impairment	11,551,991	11,633,205
Consumer loans
Allowance for loan losses:
Balance, beginning of year	169,381	167,319
Provision charged to expense	50,016	49,289
Losses charged off	(43,777)	(53,249)
Recoveries	7,033	6,022
Balance, end of year	182,653	169,381
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	182,653	169,381
Loans:
Ending balance	14,543,356	13,741,093
Ending balance: individually evaluated for impairment		428
Ending balance: collectively evaluated for impairment	14,543,356	13,740,665
Unallocated
Allowance for loan losses:
Balance, beginning of year	101,946	53,356
Provision charged to expense	12,311	48,590
Losses charged off
Recoveries
Balance, end of year	114,257	101,946
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	114,257	101,946
Loans:
Ending balance
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment

XML

Loans and Allowance for Loan Losses - Credit risk profile of the company's loan portfolio based on rating category and payment activity (Details 2) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 187,477,065	$ 195,988,766
Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	136,666,343	140,691,759
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	45,311,103	47,395,344
Real estate loans | 1-4 family | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	42,327,337	44,120,334
Real estate loans | 1-4 family | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	1,016,025	1,323,266
Real estate loans | 1-4 family | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	1,967,741	1,951,744
Real estate loans | Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	41,477,480	40,381,680
Real estate loans | Commercial Real Estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	39,078,740	37,628,385
Real estate loans | Commercial Real Estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	429,877	454,194
Real estate loans | Commercial Real Estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	1,968,863	2,299,101
Real estate loans | Agricultural Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	38,271,758	41,223,190
Real estate loans | Agricultural Real Estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	38,271,758	40,383,644
Real estate loans | Agricultural Real Estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross		839,546
Real estate loans | Agricultural Real Estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	21,617,744	25,453,058
Commercial | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	21,141,466	25,117,982
Commercial | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	100,234	51,196
Commercial | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	376,044	283,880
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	14,649,622	16,102,856
Agricultural business | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	13,845,865	15,110,606
Agricultural business | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	803,757	992,250
Agricultural business | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross
Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	11,606,002	11,691,545
Home Equity | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	10,790,377	11,324,889
Home Equity | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	70,983	68,044
Home Equity | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	744,642	298,612
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	14,543,356	13,741,093
Consumer | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	14,361,125	13,501,477
Consumer | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	10,575	52,656
Consumer | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable gross	$ 171,656	$ 186,960

XML

Loans and Allowance for Loan Losses - Loan portfolio aging analysis (Details 3) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 1,299,070	$ 2,166,123
Current	186,177,995	193,822,643
Total Loans Receivable	187,477,065	195,988,766
Total Loans > 90 Days & Accruing
30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	457,342	550,817
60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	211,844	149,865
Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	629,884	1,465,441
Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	136,666,343	140,691,759
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	918,548	1,045,812
Current	44,392,555	46,349,532
Total Loans Receivable	45,311,103	47,395,344
Total Loans > 90 Days & Accruing
Real estate loans | 1-4 family | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	237,783	345,169
Real estate loans | 1-4 family | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	136,340	77,588
Real estate loans | 1-4 family | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	544,425	623,055
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	16,273	766,840
Current	41,461,207	39,614,840
Total Loans Receivable	41,477,480	40,381,680
Total Loans > 90 Days & Accruing
Real estate loans | Commercial real estate | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Real estate loans | Commercial real estate | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	16,273
Real estate loans | Commercial real estate | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		766,840
Real estate loans | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Current	38,271,758	41,223,190
Total Loans Receivable	38,271,758	41,223,190
Total Loans > 90 Days & Accruing
Real estate loans | Agricultural real estate | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Real estate loans | Agricultural real estate | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Real estate loans | Agricultural real estate | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	54,783
Current	21,562,961	25,453,058
Total Loans Receivable	21,617,744	25,453,058
Total Loans > 90 Days & Accruing
Commercial | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Commercial | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	41,474
Commercial | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	13,309
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Current	14,649,622	16,102,856
Total Loans Receivable	14,649,622	16,102,856
Total Loans > 90 Days & Accruing
Agricultural business | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Agricultural business | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Agricultural business | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	151,482	157,942
Current	11,454,520	11,533,603
Total Loans Receivable	11,606,002	11,691,545
Total Loans > 90 Days & Accruing
Home equity | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	151,482	22,122
Home equity | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		66,305
Home equity | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		69,515
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	157,984	195,529
Current	14,385,372	13,545,564
Total Loans Receivable	14,543,356	13,741,093
Total Loans > 90 Days & Accruing
Consumer loans | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	68,077	183,526
Consumer loans | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	17,757	5,972
Consumer loans | Greater Than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 72,150	$ 6,031

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Loans and Allowance for Loan Losses - Impaired loans (Details 4) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Balance, Total	$ 2,580,552	$ 3,840,156
Unpaid Principal Balance, Total	2,580,552	3,840,156
Specific Allowance, Total	1,084,812	800,664
Average Investment in Impaired Loans, Total	2,913,373	4,141,743
Interest Income Recognized, Total	141,975	217,926
Interest Income Recognized Cash Basis, Total	132,139	180,961
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	39,598	111,166
Loans without a specific valuation allowance, Unpaid Principal Balance	39,598	111,166
Loans without a specific valuation allowance, Average Investment in Impaired Loans	41,880	211,346
Loans without a specific valuation allowance, Interest Income Recognized	2,653	12,248
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	2,888	12,042
Loans with a specific valuation allowance, Recorded Balance	673,553	547,568
Loans with a specific valuation allowance, Unpaid Principal Balance	673,553	547,568
Loans with a specific valuation allowance, Specific Allowance	304,922	176,079
Loans with a specific valuation allowance, Average Investment in Impaired Loans	719,834	568,790
Loans with a specific valuation allowance, Interest Income Recognized	41,323	32,908
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	34,208	25,352
Recorded Balance, Total	713,151	658,734
Unpaid Principal Balance, Total	713,151	658,734
Specific Allowance, Total	304,922	176,079
Average Investment in Impaired Loans, Total	761,714	780,136
Interest Income Recognized, Total	43,976	45,156
Interest Income Recognized Cash Basis, Total	37,096	37,394
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	120,172	516,560
Loans without a specific valuation allowance, Unpaid Principal Balance	120,172	516,560
Loans without a specific valuation allowance, Average Investment in Impaired Loans	272,557	663,640
Loans without a specific valuation allowance, Interest Income Recognized	13,499	34,155
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	14,061	34,586
Loans with a specific valuation allowance, Recorded Balance	1,538,151	1,081,970
Loans with a specific valuation allowance, Unpaid Principal Balance	1,538,151	1,081,970
Loans with a specific valuation allowance, Specific Allowance	723,481	487,205
Loans with a specific valuation allowance, Average Investment in Impaired Loans	1,572,203	1,118,044
Loans with a specific valuation allowance, Interest Income Recognized	68,918	67,505
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	64,878	47,864
Recorded Balance, Total	1,658,323	1,598,530
Unpaid Principal Balance, Total	1,658,323	1,598,530
Specific Allowance, Total	723,481	487,205
Average Investment in Impaired Loans, Total	1,844,760	1,781,684
Interest Income Recognized, Total	82,417	101,660
Interest Income Recognized Cash Basis, Total	78,939	82,450
Real estate loans | Agricultural Real Estate
Accounts, Notes, Loans and Financing Receivable [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 Investment 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 Investment in Impaired Loans, Total		864,705
Interest Income Recognized, Total		43,335
Interest Income Recognized Cash Basis, Total		44,885
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	61,483	80,172
Loans without a specific valuation allowance, Unpaid Principal Balance	61,483	80,172
Loans without a specific valuation allowance, Average Investment in Impaired Loans	87,359	83,509
Loans without a specific valuation allowance, Interest Income Recognized	4,332	634
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	4,419	150
Loans with a specific valuation allowance, Recorded Balance	93,584	197,456
Loans with a specific valuation allowance, Unpaid Principal Balance	93,584	197,456
Loans with a specific valuation allowance, Specific Allowance	56,409	127,458
Loans with a specific valuation allowance, Average Investment in Impaired Loans	165,473	269,496
Loans with a specific valuation allowance, Interest Income Recognized	7,580	11,517
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis	7,814	11,139
Recorded Balance, Total	155,067	277,628
Unpaid Principal Balance, Total	155,067	277,628
Specific Allowance, Total	56,409	127,458
Average Investment in Impaired Loans, Total	252,832	353,005
Interest Income Recognized, Total	11,912	12,151
Interest Income Recognized Cash Basis, Total	12,233	11,289
Agricultural business
Accounts, Notes, Loans and Financing Receivable [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 Investment 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 Investment in Impaired Loans, Total		307,729
Interest Income Recognized, Total		11,403
Interest Income Recognized Cash Basis, Total		808
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance, Recorded Balance	54,011	48,418
Loans without a specific valuation allowance, Unpaid Principal Balance	54,011	48,418
Loans without a specific valuation allowance, Average Investment in Impaired Loans	54,067	43,342
Loans without a specific valuation allowance, Interest Income Recognized	3,670	3,333
Loans without a specific valuation allowance, Interest Income Recognized Cash Basis	3,871	3,331
Loans with a specific valuation allowance, Recorded Balance		9,922
Loans with a specific valuation allowance, Unpaid Principal Balance		9,922
Loans with a specific valuation allowance, Specific Allowance		9,922
Loans with a specific valuation allowance, Average Investment in Impaired Loans		9,982
Loans with a specific valuation allowance, Interest Income Recognized		810
Loans with a specific valuation allowance, Interest Income Recognized Cash Basis		722
Recorded Balance, Total	54,011	58,340
Unpaid Principal Balance, Total	54,011	58,340
Specific Allowance, Total		9,922
Average Investment in Impaired Loans, Total	54,067	53,324
Interest Income Recognized, Total	3,670	4,143
Interest Income Recognized Cash Basis, Total	$ 3,871	4,053
Consumer
Accounts, Notes, Loans and Financing Receivable [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 Investment 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 Investment in Impaired Loans, Total		1,160
Interest Income Recognized, Total		78
Interest Income Recognized Cash Basis, Total		$ 82

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Loans and Allowance for Loan Losses - Nonaccrual loans (Details 5) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 1,530,011	$ 2,021,153
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	590,514	911,283
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	708,922	840,449
Real estate loans | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	16,561	9,314
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	49,542	118,502
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans excludes performing troubled debt restructurings	$ 164,472	$ 141,605

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Loans and Allowance for Loan Losses - Recorded balance, at original cost, of troubled debt restructurings (Details 6) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	$ 2,532,554	$ 2,609,454
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	836,867	723,421
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	1,362,088	1,708,013
Real estate loans | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	245,710	57,783
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	6,009	10,897
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost	$ 81,880	$ 109,340

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Loans and Allowance for Loan Losses - Recorded balance, at original cost, of troubled debt restructurings, which were performing according to the terms of the restructuring (Details 7) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 2,338,091	$ 1,622,112
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	666,744	526,004
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	1,362,088	941,173
Real estate loans | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	245,710	57,783
Agricultural business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	6,009	10,897
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, original cost, performing	$ 57,540	$ 86,255

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Loans and Allowance for Loan Losses - Loans modified as troubled debt restructurings (Details 8)	12 Months Ended
	Dec. 31, 2016 USD ($) Loan	Dec. 31, 2015 USD ($) Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan	3	9
Troubled debt restructurings, recorded investment | $	$ 967,042	$ 700,800
Real estate loans | 1-4 family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan	1	1
Troubled debt restructurings, recorded investment | $	$ 40,395	$ 98,246
Real estate loans | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan	1	2
Troubled debt restructurings, recorded investment | $	$ 708,922	$ 524,432
Real estate loans | Agricultural real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan
Troubled debt restructurings, recorded investment | $
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan	1
Troubled debt restructurings, recorded investment | $	$ 217,725
Agricultural loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan
Troubled debt restructurings, recorded investment | $
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan		1
Troubled debt restructurings, recorded investment | $		$ 1,431
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of modifications | Loan		5
Troubled debt restructurings, recorded investment | $		$ 76,691

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Loans and Allowance for Loan Losses (Detail Textuals)	12 Months Ended
	Dec. 31, 2016 USD ($) Loan	Dec. 31, 2015 USD ($) Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan participations outstanding balance	$ 11,960,699	$ 11,696,320
Loan participations purchased during period	$ 2,157,442	2,609,280
Loan commitments funded Period	45 days
Troubled debt restructurings, recorded investment	$ 967,042	$ 700,800
Troubled debt restructurings, number of modifications | Loan	3	9
Foreclosed residential real estate properties	$ 0	$ 217,101
Mortgage loans in process of foreclosure, amount	143,634	$ 188,438
Amount reviewed for lending relationships to verify risk ratings	750,000
Amount reviewed for watch list credits to verify risk ratings	$ 250,000
Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, number of real estate loans | Loan	3	3
TDR's defaulted as they were more than 90 days past due	$ 170,123	$ 197,417
Troubled debt restructurings, number of contracts, nonaccrual status | Loan		3
Troubled debt restructurings, recorded investment, nonaccrual status		$ 211,262
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	$ 217,725
Troubled debt restructurings, number of modifications | Loan	1
Troubled debt restructurings, number of contracts, nonaccrual status | Loan	1	2
Troubled debt restructurings, recorded investment, nonaccrual status	$ 3,252	$ 9,314
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment		$ 76,691
Troubled debt restructurings, number of modifications | Loan		5
Troubled debt restructurings, number of contracts, nonaccrual status | Loan	2	1
Troubled debt restructurings, recorded investment, nonaccrual status	$ 76,106	$ 63,183
Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment		$ 1,431
Troubled debt restructurings, number of modifications | Loan		1
Troubled debt restructurings, number of contracts, nonaccrual status | Loan		1
Troubled debt restructurings, recorded investment, nonaccrual status		$ 1,431
Purchase price | Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios	80.00%
Nada Book Value | Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios	100.00%
Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of total applicant's monthly mortgage payment total monthly income	30.00%
Percentage of applicant's total monthly obligations to total monthly income	43.00%
Maximum | Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	60 months
Maximum | Home Equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	10 years
Loan to value ratios	95.00%
One-to-four family residential | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	$ 40,395	$ 98,246
Troubled debt restructurings, number of modifications | Loan	1	1
One-to-four family residential | Maximum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	30 years
One-to-four family residential | Minimum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Origination of loan for resale to secondary market fixed rate period	15 years
Loan to value ratios	80.00%
One-to-four family residential | Adjustable rate loans | Maximum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans maturity term	30 years
Mortgage loans adjustment term	5 years
One-to-four family residential | Adjustable rate loans | Minimum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term	1 year
Commercial and Agricultural Real Estate Loans | Minimum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan to value ratios	75.00%
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
Commercial and Agricultural Real Estate Loans | Adjustable rate loans | Maximum | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage loans adjustment term	5 years
Commercial | Real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, recorded investment	$ 708,922	$ 524,432
Troubled debt restructurings, number of modifications | Loan	1	2
Troubled debt restructurings, number of real estate loans | Loan		1
TDR's defaulted as they were more than 90 days past due		$ 766,840
Troubled debt restructurings, number of contracts, nonaccrual status | Loan	1	1
Troubled debt restructurings, recorded investment, nonaccrual status	$ 708,922	$ 30,021
Officers' loan committee | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	750,000
Directors' loan committee | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	1,000,000
Board of Directors | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Lending authority amount	$ 1,000,000

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Premises and Equipment - Major classifications of premises and equipment, stated at cost (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 11,018,382	$ 10,854,980
Less accumulated depreciation	(6,519,729)	(6,126,823)
Net premises and equipment	4,498,653	4,728,157
Land
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	773,186	773,186
Buildings and improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	6,752,503	6,697,278
Equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 3,492,693	$ 3,384,516

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Loan Servicing - Mortgage servicing rights measured using Amortization Method with Aggregate activity in related valuation allowances (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Valuation allowances
Balance at beginning of year	$ 47,354
Balances at end of year	0	$ 47,354
Mortgage servicing assets, net	552,827	597,713
Mortgage servicing rights
Mortgage servicing rights
Balance, beginning of year	645,067	689,603
Additions	87,579	73,650
Write-downs	(72,580)
Amortization	(107,239)	(118,186)
Balance at end of year	552,827	645,067
Valuation allowances
Balance at beginning of year	47,354	56,969
Additions due to decreases in market value	38,967
Reduction due to write-downs	(72,580)
Reduction due to payoff of loans	(13,741)	(9,615)
Balances at end of year	0	47,354
Mortgage servicing assets, net	552,827	597,713
Fair value disclosures
Fair value as of the beginning of the period	870,619	979,699
Fair value as of the end of the period	$ 898,625	$ 870,619

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Loan Servicing (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Transfers and Servicing [Abstract]
Unpaid principal balance of mortgage loans serviced for others	$ 130,505,264	$ 131,443,738

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Interest-bearing Deposits - Deposit interest expense by deposit type (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Banking and Thrift [Abstract]
Savings, NOW and Money Market	$ 366,123	$ 249,077
Certificates of deposit	659,109	852,185
Total deposit interest expense	$ 1,025,232	$ 1,101,262

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Interest-bearing Deposits - Scheduled maturities of time deposits (Details 1) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Banking and Thrift [Abstract]
2017	$ 47,319,320
2018	14,869,536
2019	7,572,666
2020	5,387,756
2021	5,037,258
Time deposits	$ 80,186,536	$ 79,054,524

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Interest-bearing Deposits (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Banking and Thrift [Abstract]
Interest-bearing deposits in denominations of $100,000 or more	$ 110,971,051	$ 90,889,042

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Short-term Borrowings (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	$ 9,709,793	$ 7,591,475
Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	7,135,182	6,631,710
Maximum | Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	7,342,844	9,548,789
Monthly Average | Short-term Debt
Short-term Debt [Line Items]
Securities sold under agreements to repurchase	5,254,122	6,024,224
Overnight Advance | Mortgage backed securities
Short-term Debt [Line Items]
Repurchase agreements secured borrowing	4,617,608
Overnight Advance | U.S. government agency bonds
Short-term Debt [Line Items]
Repurchase agreements secured borrowing	$ 2,517,574
Overnight Advance | Short-term Debt
Short-term Debt [Line Items]
Advances from Federal Home Loan Banks		$ 8,500,000

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Income Taxes - Components of provision for income taxes (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Taxes currently payable
Federal									$ 916,248	$ 883,916
State									314,017	320,593
Deferred income taxes									(142,607)	(137,484)
Income tax expense	$ 233,278	$ 267,287	$ 277,732	$ 309,361	$ 218,785	$ 230,247	$ 327,139	$ 290,854	$ 1,087,658	$ 1,067,025

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Income Taxes - Reconciliation of income tax expense at the statutory rate to actual income tax expense (Details 1) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Computed at the statutory rate (34%)									$ 1,406,093	$ 1,391,670
Increase (decrease) resulting from
Tax exempt interest									(445,584)	(454,067)
State income taxes, net									184,535	188,690
Increase in cash surrender value									(58,651)	(59,646)
Other									1,265	378
Actual tax expense	$ 233,278	$ 267,287	$ 277,732	$ 309,361	$ 218,785	$ 230,247	$ 327,139	$ 290,854	$ 1,087,658	$ 1,067,025
Tax expense as a percentage of pre-tax income									26.30%	26.07%

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Income Taxes - Reconciliation of income tax expense at the statutory rate to actual income tax expense (Parentheticals) (Details 1)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Statutory rate	34.00%	34.00%

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Income Taxes - Tax effects of temporary differences related to deferred taxes shown on balance sheets (Details 2) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets
Allowance for loan losses	$ 1,050,004	$ 1,015,661
Deferred compensation	1,830,687	1,817,124
Net unrealized loss on available for sale securities	605,970
Other		29,497
Deferred tax assets, gross, total	3,486,661	2,862,282
Deferred tax liabilities
Net unrealized gain on available-for-sale securities		(407,145)
Depreciation	(390,787)	(434,043)
Federal Home Loan Bank stock dividends	(48,291)	(147,858)
Prepaid expenses	(65,504)	(56,374)
Mortgage servicing rights	(216,238)	(233,795)
Other	(27,052)
Deferred tax liabilities, gross, total	(747,872)	(1,279,215)
Net deferred tax asset	$ 2,738,789	$ 1,583,067

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Income Taxes (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Line Items]
Retained earnings for which no deferred federal income tax liability has been recognized	$ 2,600,000	$ 2,600,000
Deferred income tax liabilities that would have been recorded if they were expected to reverse into taxable income in the foreseeable future	1,000,000	1,000,000
Illinois
Income Taxes [Line Items]
Operating loss carry forwards	$ 0	$ 0

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Accumulated Other Comprehensive Income (Loss) - Components of accumulated other comprehensive income included in stockholders' equity (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net-of-tax amount	$ (1,176,294)	$ 790,341
Net unrealized gain (loss) on securities available-for-sale
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net unrealized gain (loss) on securities available-for-sale	(1,782,264)	1,197,486
Tax effect	605,970	(407,145)
Net-of-tax amount	$ (1,176,294)	$ 790,341

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Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax expense	$ (135,864)	$ (108,999)
Net reclassified amount	263,735	211,586
Amounts Reclassified from AOCI | Net unrealized gain (loss) on securities available-for-sale
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Realized gain on sale of securities, Total reclassified amount before tax	399,599	320,585
Tax expense	(135,864)	(108,999)
Net reclassified amount	$ 263,735	$ 211,586

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Regulatory Matters - Bank's actual capital amounts and ratios (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Regulatory Matters [Abstract]
Total risk-based capital (to risk-weighted assets), Actual Amount	$ 42,543	$ 41,631
Total risk-based capital (to risk-weighted assets), Actual Ratio	19.52%	19.15%
Total risk-based capital (to risk-weighted assets), Minimum Capital Requirement Amount	$ 17,434	$ 17,387
Total risk-based capital (to risk-weighted assets), Minimum Capital Requirement Ratio	8.00%	8.00%
Total risk-based capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	$ 21,793	$ 21,734
Total risk-based capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier I capital (to risk-weighted assets), Actual Amount	$ 39,816	$ 38,912
Tier I capital (to risk-weighted assets), Actual Ratio	18.27%	17.90%
Tier I capital (to risk-weighted assets), Minimum Capital Requirement Amount	$ 13,076	$ 13,040
Tier I capital (to risk-weighted assets), Minimum Capital Requirement Ratio	6.00%	6.00%
Tier I capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	$ 17,434	$ 17,387
Tier I capital (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	8.00%	8.00%
Common equity Tier I (to risk-weighted assets), Actual Amount	$ 39,816	$ 38,912
Common equity Tier I (to risk-weighted assets), Actual Ratio	18.27%	17.90%
Common equity Tier I (to risk-weighted assets), Minimum Capital Requirement Amount	$ 9,807	$ 9,780
Common equity Tier I (to risk-weighted assets), Minimum Capital Requirement Ratio	4.50%	4.50%
Common equity Tier I (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	$ 14,165	$ 14,127
Common equity Tier I (to risk-weighted assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	6.50%	6.50%
Tier I capital (to average assets) Actual Amount	$ 39,816	$ 38,912
Tier I capital (to average assets), Actual Ratio	12.58%	12.82%
Tier I capital (to average assets), Minimum Capital Requirement Amount	$ 12,662	$ 12,139
Tier I capital (to average assets), Minimum Capital Requirement Ratio	4.00%	4.00%
Tier I capital (to average assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Amount	$ 15,828	$ 15,174
Tier I capital (to average assets), Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions Ratio	5.00%	5.00%
Tangible capital (to adjusted tangible assets), Actual Amount	$ 39,816	$ 38,912
Tangible capital (to adjusted tangible assets), Actual Ratio	12.58%	12.82%
Tangible capital (to adjusted tangible assets), Minimum Capital Requirement Amount	$ 4,748	$ 4,552
Tangible capital (to adjusted tangible assets), Minimum Capital Requirement Ratio	1.50%	1.50%

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Regulatory Matters - Reconciliation of bank equity amount for regulatory capital purposes (Details 1) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Regulatory Matters [Abstract]
Bank equity	$ 41,367	$ 42,429
Less net unrealized gain (loss)	(1,176)	790
Less disallowed goodwill	2,727	2,727
Tier 1 and common equity Tier 1 capital	39,816	38,912
Plus allowance for loan losses	2,727	2,719
Total risked-based capital	$ 42,543	$ 41,631

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Regulatory Matters (Detail Textuals)	Dec. 31, 2016 USD ($)
Regulatory Matters [Abstract]
Dividend payment without prior regulatory approval	$ 762,295

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Related Party Transactions - Annual activity of loans outstanding to related parties (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Loans and Leases Receivable, Related Parties [Roll Forward]
Balance beginning of year	$ 3,193,470	$ 3,523,047
Additions	1,178,281	1,138,338
Repayments	(1,259,775)	(1,467,915)
Balance, end of year	$ 3,111,976	$ 3,193,470

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Related Party Transactions (Detail Textuals) - USD ($)	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Related Party Transactions [Abstract]
Loans outstanding to related parties	$ 3,111,976	$ 3,193,470	$ 3,523,047
Deposits from related parties	$ 3,264,000	$ 2,581,000

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Employee Benefits - Summary of ESOP shares (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Allocated shares	59,838	57,420
Shares committed for allocation	3,934	3,820
Unearned shares	17,237	21,171
Total ESOP shares	81,009	82,411
Fair value of unearned shares at December 31	$ 517,110	$ 556,374

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Employee Benefits (Detail Textuals) - USD ($)	1 Months Ended	12 Months Ended
	Jul. 31, 2010	Dec. 31, 2016	Dec. 31, 2015
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		$ 4,680,268	$ 4,492,594
Purchase of shares for ESOP	41,614
Price paid per share	$ 10
Common stock acquired by the ESOP	$ 416,140
ESOP compensation expense		108,421	90,649
Deferred Compensation Plan
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		2,591,531	2,521,997
Compensation expense		133,988	137,731
Deferred compensation agreements
Employee Benefits Disclosure [Line Items]
Deferred compensation amount		2,088,737	1,970,597
Compensation expense		$ 182,796	233,731
Deferred compensation discount rate		4.75%
401(k) Plan
Employee Benefits Disclosure [Line Items]
Contribution by employer		$ 223,615	$ 216,508
Annual interest rate		1.85%	1.85%

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Stock Option Plans - Summary of option activity (Details) - Stock Options - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding, beginning of year	61,120	85,835
Granted
Exercised	(13,532)	(24,715)
Forfeited or expired	(100)
Outstanding, end of year	47,488	61,120
Exercisable, end of year	25,653	19,035
Weighted Average Exercise price
Outstanding, beginning of year	$ 15.65	$ 15.65
Granted
Exercised	15.65	15.65
Forfeited or expired	15.65
Outstanding, end of year	15.65	15.65
Exercisable, end of year	$ 15.65	$ 15.65
Weighted Average Remaining Contractual Term
Outstanding, end of year	5 years 3 months	6 years 3 months
Exercisable, end of year	5 years 3 months	6 years 3 months
Aggregate Intrinsic Value
Outstanding, end of year	$ 681,453	$ 649,706
Exercisable, end of year	$ 368,121	$ 202,342

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Stock Option Plans - Summary of status of nonvested shares (Details 1) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Shares
Nonvested, beginning of year	42,085	62,235
Granted
Vested	(20,150)	(20,150)
Forfeited	(100)
Nonvested, end of year	21,835	42,085
Weighted-Average Grant-Date Fair Value
Nonvested, beginning of year	$ 4.34	$ 4.34
Granted
Vested	4.34	4.34
Forfeited	4.34
Nonvested, end of year	$ 4.34	$ 4.34

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Stock Option Plans (Detail Textuals) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Intrinsic value of option exercised	$ 161,572	$ 200,192
Weighted-average period to recognize compensation cost	1 year
Fair value of share vested	$ 90,163	90,163
Recognized tax benefit	$ 35,267	$ 35,267
2012 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved and awarded	104,035
Award expiration period	10 years
Exercise price per share	$ 15.65
Total unrecognized compensation costs	$ 22,232

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Earnings Per Share - Computation of earnings per share (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Abstract]
Income available to common stockholders, basic									$ 3,047,909	$ 3,026,123
Income available to common stockholders, diluted									$ 3,047,909	$ 3,026,123
Weighted average shares, basic									1,776,342	1,770,546
Effect of dilutive securities, stock options									17,539	13,469
Weighted average shares, diluted									1,793,881	1,784,015
Basic earnings per share	$ 0.39	$ 0.43	$ 0.43	$ 0.47	$ 0.40	$ 0.40	$ 0.47	$ 0.44	$ 1.72	$ 1.71
Diluted earnings per share	$ 0.39	$ 0.42	$ 0.43	$ 0.46	$ 0.39	$ 0.39	$ 0.47	$ 0.44	$ 1.70	$ 1.70

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Disclosures about Fair Value of Assets - Fair value measurements of assets recognized in balance sheets on recurring basis (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	$ 100,161,440	$ 87,473,332
Fair Value, Measurements, Recurring | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	13,333,540	15,938,697
Fair Value, Measurements, Recurring | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	44,413,177	23,178,395
Fair Value, Measurements, Recurring | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	42,414,723	48,356,240
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	13,333,540	15,938,697
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	44,413,177	23,178,395
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale	42,414,723	48,356,240
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | U.S. Government agencies
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Mortgage-backed securities (Government-sponsored enterprises - residential)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Municipal bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Available for sale

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Disclosures about Fair Value of Assets - Fair value measurement of assets measured at fair value on nonrecurring basis (Details 1) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Significant Unobservable Inputs (Level 3) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 1,157,329	$ 899,981
Significant Unobservable Inputs (Level 3) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	552,827
Nonrecurring | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	1,157,329	899,981
Nonrecurring | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	552,827
Nonrecurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Significant Other Observable Inputs (Level 2) | Impaired loans (collateral dependent)
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Significant Other Observable Inputs (Level 2) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis
Nonrecurring | Significant Unobservable Inputs (Level 3) | Mortgage servicing rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 552,827

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Disclosures about Fair Value of Assets - Quantitative information about unobservable inputs used in nonrecurring level 3 fair value measurements (Details 2) - Significant Unobservable Inputs (Level 3) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Collateral-dependent impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 1,157,329	$ 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	20.00%	20.00%
Collateral-dependent impaired loans | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	30.00%	30.00%
Collateral-dependent impaired loans | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability discount	25.00%	25.00%
Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on nonrecurring basis	$ 552,827
Valuation Technique	Discounted cash flow
Mortgage servicing rights | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate	9.00%
PSA standard prepayment model rate	104.00%
Mortgage servicing rights | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate	13.50%
PSA standard prepayment model rate	300.00%
Mortgage servicing rights | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate	10.25%
PSA standard prepayment model rate	153.00%

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Disclosures about Fair Value of Assets - Estimated fair values of other financial instruments (Details 3) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Carrying Amount
Financial assets
Cash and cash equivalents	$ 12,909,924	$ 4,103,432
Interest-earning time deposits in banks	750,000	2,724,000
Other investments	55,481	62,223
Loans held for sale	503,003	539,000
Loans, net of allowance for loan losses	184,448,003	193,039,879
Federal Home Loan Bank stock	363,800	1,113,800
Interest receivable	1,588,545	1,715,676
Financial liabilities
Deposits	258,677,960	239,281,930
Short-term borrowings	7,135,182	15,131,710
Advances from borrowers for taxes and insurance	1,102,204	990,917
Interest payable	106,755	118,335
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	12,909,924	4,103,432
Interest-earning time deposits in banks	750,000	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 | Significant Other Observable Inputs (Level 2)
Financial assets
Cash and cash equivalents
Interest-earning time deposits in banks
Other investments	55,481	62,223
Loans held for sale	503,003	539,000
Loans, net of allowance for loan losses
Federal Home Loan Bank stock	363,800	1,113,800
Interest receivable	1,588,545	1,715,676
Financial liabilities
Deposits	178,491,424	160,227,406
Short-term borrowings	7,135,182	6,631,710
Advances from borrowers for taxes and insurance	1,102,204	990,917
Interest payable	106,755	118,335
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans
Letters of credit
Lines of credit
Fair Value | Significant Unobservable Inputs (Level 3)
Financial assets
Cash and cash equivalents
Interest-earning time deposits in banks
Other investments
Loans held for sale
Loans, net of allowance for loan losses	183,941,877	193,006,301
Federal Home Loan Bank stock
Interest receivable
Financial liabilities
Deposits	81,241,011	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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Disclosures about Fair Value of Assets (Detail Textuals) - Significant Unobservable Inputs (Level 3) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ 391,745	$ (156,069)
Mortgage servicing rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value adjustments	$ (38,967)	$ 0

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Commitments and Credit Risk (Detail Textuals) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Outstanding commitments to originate loans
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	$ 5,238,175	$ 4,457,514
Outstanding commitments to originate loans | Fixed Income Interest Rate
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	$ 2,028,000	3,744,574
Outstanding commitments to originate loans | Fixed Income Interest Rate | Minimum
Commitments and Contingencies Disclosure [Line Items]
Loan commitments, fixed rate of interest	3.00%
Outstanding commitments to originate loans | Fixed Income Interest Rate | Maximum
Commitments and Contingencies Disclosure [Line Items]
Loan commitments, fixed rate of interest	7.75%
Standby Letters of Credit
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	$ 110,000	110,000
Unused lines of Credit | Commercial lines
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	26,836,352	21,753,180
Unused lines of Credit | Open-ended consumer lines
Commitments and Contingencies Disclosure [Line Items]
Commitments and credit risk	$ 15,869,821	$ 10,785,989

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Quarterly Results of Operations (Unaudited) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]
Interest income	$ 2,817,513	$ 2,858,551	$ 2,849,785	$ 2,909,135	$ 2,923,681	$ 2,830,112	$ 2,859,579	$ 2,901,492	$ 11,434,984	$ 11,514,864
Interest expense	274,630	277,603	247,184	248,909	252,749	267,433	293,141	314,050	1,048,326	1,127,373
Net interest income	2,542,883	2,580,948	2,602,601	2,660,226	2,670,932	2,562,679	2,566,438	2,587,442	10,386,658	10,387,491
Provision for loan losses	30,000	30,000	30,000	30,000	30,000	45,000	35,000	30,000	120,000	140,000
Net interest income after provision for loan losses	2,512,883	2,550,948	2,572,601	2,630,226	2,640,932	2,517,679	2,531,438	2,557,442	10,266,658	10,247,491
Noninterest income	1,099,642	1,088,058	1,034,670	1,039,075	1,096,519	991,626	1,063,287	1,035,458	4,261,445	4,186,890
Noninterest expense	2,681,987	2,613,954	2,564,033	2,532,562	2,814,601	2,579,660	2,431,183	2,515,789	10,392,536	10,341,233
Income before income taxes	930,538	1,025,052	1,043,238	1,136,739	922,850	929,645	1,163,542	1,077,111	4,135,567	4,093,148
Income tax expense	233,278	267,287	277,732	309,361	218,785	230,247	327,139	290,854	1,087,658	1,067,025
Net income	$ 697,260	$ 757,765	$ 765,506	$ 827,378	$ 704,065	$ 699,398	$ 836,403	$ 786,257	$ 3,047,909	$ 3,026,123
Basic earnings per share (in dollars per share)	$ 0.39	$ 0.43	$ 0.43	$ 0.47	$ 0.40	$ 0.40	$ 0.47	$ 0.44	$ 1.72	$ 1.71
Diluted earnings per share (in dollars per share)	$ 0.39	$ 0.42	$ 0.43	$ 0.46	$ 0.39	$ 0.39	$ 0.47	$ 0.44	$ 1.70	$ 1.70

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Condensed Financial Information (Parent Company Only) - Condensed Balance Sheets (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 5,984,640	$ 2,385,846
Other assets	704,845	811,007
Total assets	319,318,759	308,642,474
Liabilities
Other liabilities	1,190,921	1,076,363
Stockholders' Equity	46,245,565	45,566,500	$ 45,016,098
Total liabilities and stockholders' equity	319,318,759	308,642,474
Parent Company
Assets
Cash and due from banks	4,806,252	4,800,526
Investment in common stock of subsidiary	41,366,024	42,428,601
Loan receivable from subsidiary	177,347	216,506
Other assets	118,460	106,960
Total assets	46,468,083	47,552,593
Liabilities
Other liabilities	222,518	1,986,093
Stockholders' Equity	46,245,565	45,566,500
Total liabilities and stockholders' equity	$ 46,468,083	$ 47,552,593

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Condensed Financial Information (Parent Company Only) - Condensed Statements of Income and Comprehensive Income (Loss) (Details 1) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Income
Total income	$ 2,817,513	$ 2,858,551	$ 2,849,785	$ 2,909,135	$ 2,923,681	$ 2,830,112	$ 2,859,579	$ 2,901,492	$ 11,434,984	$ 11,514,864
Expenses
Income Tax Benefit	233,278	267,287	277,732	309,361	218,785	230,247	327,139	290,854	1,087,658	1,067,025
Net Income	$ 697,260	$ 757,765	$ 765,506	$ 827,378	$ 704,065	$ 699,398	$ 836,403	$ 786,257	3,047,909	3,026,123
Comprehensive Income									1,081,274	3,104,981
Parent Company
Income
Dividends from subsidiary									2,500,000	2,000,000
Other income									10,544	11,712
Total income									2,510,544	2,011,712
Expenses
Other expenses									360,950	361,694
Income Before Income Tax and Equity in Undistributed Income of Subsidiary									2,149,594	1,650,018
Income Tax Benefit									(136,020)	(137,420)
Income Before Equity in Undistributed Income of Subsidiary									2,285,614	1,787,438
Equity in Undistributed Income of Subsidiary									762,295	1,238,685
Net Income									3,047,909	3,026,123
Comprehensive Income									$ 1,081,274	$ 3,104,981

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Condensed Financial Information (Parent Company Only) - Condensed Statements of Cash Flows (Details 2) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Operating Activities
Net income	$ 697,260	$ 757,765	$ 765,506	$ 827,378	$ 704,065	$ 699,398	$ 836,403	$ 786,257	$ 3,047,909	$ 3,026,123
Stock-based compensation expense									90,163	90,163
Net cash provided by operating activities									4,245,675	3,207,438
Investing Activity
Net cash provided by investing activities									(4,594,248)	(2,449,632)
Financing Activities
Dividends paid									(2,440,380)	(565,995)
Stock repurchase									(127,118)	(765,311)
Exercise of stock options									211,775	386,790
Net cash used in financing activities									9,155,065	(6,266,012)
Net Change in Cash and Cash Equivalents									8,806,492	(5,508,206)
Cash and Cash Equivalents, Beginning of Year				4,103,432				9,611,638	4,103,432	9,611,638
Cash and Cash Equivalents, End of Year	12,909,924				4,103,432				12,909,924	4,103,432
Parent Company
Operating Activities
Net income									3,047,909	3,026,123
Items not providing cash, net									(762,295)	(1,238,685)
Stock-based compensation expense									90,163	90,163
Change in other assets and liabilities, net									(53,487)	(17,617)
Net cash provided by operating activities									2,322,290	1,859,984
Investing Activity
Loan payment from subsidiary									39,159	37,879
Net cash provided by investing activities									39,159	37,879
Financing Activities
Dividends paid									(2,440,380)	(565,995)
Stock repurchase									(127,118)	(765,311)
Exercise of stock options									211,775	386,790
Net cash used in financing activities									(2,355,723)	(944,516)
Net Change in Cash and Cash Equivalents									5,726	953,347
Cash and Cash Equivalents, Beginning of Year				$ 4,800,526				$ 3,847,179	4,800,526	3,847,179
Cash and Cash Equivalents, End of Year	$ 4,806,252				$ 4,800,526				$ 4,806,252	$ 4,800,526