10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q 

(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended September 30, 2019

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 0-23325

Guaranty Federal Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Delaware	43-1792717
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2144 E Republic Rd, Suite F200
Springfield, Missouri	65804
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number: 1-833-875-2492

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.10 per share	GFED	NASDAQ Global Market

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [  ] Accelerated filer [X] Non-accelerated filer [  ] Smaller reporting company [X] Emerging growth company [  ]

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of October 31, 2019
Common Stock, Par Value $0.10 per share	4,381,312 Shares

GUARANTY FEDERAL BANCSHARES, INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 3. Quantitative and Qualitative Disclosures about Market Risk		42
Item 4. Controls and Procedures		43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		44
Item 1A. Risk factors		44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 3. Defaults Upon Senior Securities		44
Item 4. Mine Safety Disclosures		44
Item 5. Other Information		44
Item 6. Exhibits		44
Signatures		45

2

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

GUARANTY FEDERAL BANCSHARES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

	9/30/2019			12/31/2018
ASSETS
Cash and due from banks	$	3,974,694		$	5,818,955
Interest-bearing deposits in other financial institutions		82,446,686			28,302,687
Cash and cash equivalents		86,421,380			34,121,642
Interest-bearing time deposits at other financial institutions		250,000			250,000
Available-for-sale securities		106,353,702			86,266,197
Stock in Federal Home Loan Bank, at cost		3,157,500			5,387,200
Mortgage loans held for sale		944,969			1,516,849
Loans receivable, net of allowance for loan losses of September 30, 2019 - $7,557,311 - December 31, 2018 - $7,995,569		744,022,856			778,298,606
Accrued interest receivable		3,475,749			3,390,944
Prepaid expenses and other assets		9,054,815			6,261,159
Goodwill		1,434,982			1,434,982
Core deposit intangible		2,623,160			2,980,910
Foreclosed assets held for sale		1,490,960			1,126,963
Premises and equipment, net		19,560,814			20,095,161
Operating lease right-of-use asset		9,194,850			-
Bank owned life insurance		24,543,725			20,198,074
Income taxes receivable		-			158,631
Deferred income taxes		3,800,037			3,650,552
	$	1,016,329,499		$	965,137,870
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits	$	839,988,502		$	749,618,822
Federal Home Loan Bank advances		50,000,000			105,300,000
Subordinated debentures		15,465,000			21,760,829
Note payable to bank		11,200,000			5,000,000
Advances from borrowers for taxes and insurance		698,438			289,808
Accrued expenses and other liabilities		4,834,402			1,868,008
Operating lease liability		9,236,695			-
Income taxes payable		348,818			-
Accrued interest payable		832,494			821,811
		932,604,349			884,659,278
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS' EQUITY
Capital Stock:
Common stock, $0.10 par value; authorized 10,000,000 shares; issued September 30, 2019 and December 31, 2018 - 6,916,003 and 6,902,003 shares; respectively		691,600			690,200
Additional paid-in capital		51,782,472			51,382,585
Retained earnings, substantially restricted		71,195,470			65,829,687
Accumulated other comprehensive loss		(700,936	)		(452,756	)
		122,968,606			117,449,716
Treasury stock, at cost; September 30, 2019 and December 31, 2018 - 2,534,691 and 2,443,522 shares, respectively		(39,243,456	)		(36,971,124	)
		83,725,150			80,478,592
	$	1,016,329,499		$	965,137,870

See Notes to Condensed Consolidated Financial Statements

3

GUARANTY FEDERAL BANCSHARES, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

 THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED) 

	Three months ended						Nine months ended
	9/30/2019			9/30/2018			9/30/2019			9/30/2018
Interest Income
Loans	$	10,429,973		$	12,773,881		$	31,128,087		$	29,971,163
Investment securities		735,044			523,736			2,013,548			1,466,036
Other		416,604			80,258			835,929			276,117
		11,581,621			13,377,875			33,977,564			31,713,316
Interest Expense
Deposits		2,880,067			1,825,559			8,285,507			4,967,743
FHLB advances		282,845			481,968			928,131			1,221,312
Subordinated debentures		185,202			282,393			773,325			728,954
Other		111,364			58,949			243,385			62,782
		3,459,478			2,648,869			10,230,348			6,980,791
Net Interest Income		8,122,143			10,729,006			23,747,216			24,732,525
Provision for Loan Losses		100,000			200,000			200,000			925,000
Net Interest Income After Provision for Loan Losses		8,022,143			10,529,006			23,547,216			23,807,525
Noninterest Income
Service charges		442,051			475,484			1,262,821			1,344,661
Net gain (loss) on sale of investment securities		31,493			(885	)		79,756			(8,090	)
Gain on sale of mortgage loans held for sale		722,909			595,384			1,710,839			1,591,869
Gain on sale of Small Business Administration loans		301,187			263,755			798,763			659,996
Net loss on foreclosed assets		(134,145	)		(459,308	)		(113,279	)		(338,496	)
Other income		573,635			587,328			1,695,903			1,484,669
		1,937,130			1,461,758			5,434,803			4,734,609
Noninterest Expense
Salaries and employee benefits		4,144,402			3,887,582			12,056,592			11,162,747
Occupancy		1,149,242			1,112,702			3,389,417			2,920,774
FDIC deposit insurance premiums		40,000			101,762			257,628			296,897
Data processing		368,374			328,692			1,177,515			1,095,584
Advertising		102,500			131,250			402,500			397,150
Merger costs		-			150,877			34,011			3,570,927
Amortization of core deposit intangible		119,250			94,286			357,750			314,286
Other expense		1,029,688			858,698			2,948,085			2,605,976
		6,953,456			6,665,849			20,623,498			22,364,341
Income Before Income Taxes		3,005,817			5,324,915			8,358,521			6,177,793
Provision for Income Taxes		455,275			1,390,673			1,259,116			1,230,790
Net Income Available to Common Shareholders	$	2,550,542		$	3,934,242		$	7,099,405		$	4,947,003
Basic Income Per Common Share	$	0.58		$	0.89		$	1.60		$	1.12
Diluted Income Per Common Share	$	0.57		$	0.88		$	1.58		$	1.10

See Notes to Condensed Consolidated Financial Statements 

4

GUARANTY FEDERAL BANCSHARES, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED) 

	Three months ended						Nine months ended
	9/30/2019			9/30/2018			9/30/2019			9/30/2018
NET INCOME	$	2,550,542		$	3,934,242		$	7,099,405		$	4,947,003
OTHER ITEMS OF COMPREHENSIVE INCOME:
Change in unrealized gain (loss) on investment securities available-for-sale, before income taxes		721,464			(766,021	)		3,441,561			(2,455,951	)
Change in unrealized gain (loss) on interest rate swaps, before income taxes		(852,090	)		430,248			(3,694,933	)		2,198,977
Less: Reclassification adjustment for realized (gains) losses on investment securities included in net income, before income taxes		(31,493	)		885			(79,756	)		8,090
Total other items of comprehensive loss		(162,119	)		(334,888	)		(333,128	)		(248,884	)
Income tax (benefit) related to other items of comprehensive income		(137,408	)		(85,397	)		(84,948	)		(63,467	)
Other comprehensive (loss)		(24,711	)		(249,491	)		(248,180	)		(185,417	)
TOTAL COMPREHENSIVE INCOME	$	2,525,831		$	3,684,751		$	6,851,225		$	4,761,586

See Notes to Condensed Consolidated Financial Statements 

5

GUARANTY FEDERAL BANCSHARES, INC. 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 

QUARTERLY AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (UNAUDITED) 

	Common Stock		Additional Paid- In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2019	$	690,200	$	51,382,585		$	(36,971,124	)	$	65,829,687		$	(452,756	)	$	80,478,592
Net income		-		-			-			2,120,364			-			2,120,364
Other comprehensive income		-		-			-			-			380,791			380,791
Dividends on common stock ($0.13 per share)		-		-			-			(582,817	)		-			(582,817	)
Stock award plans		-		(53,689	)		222,789			-			-			169,100
Stock options exercised		1,000		50,900			-			-			-			51,900
Balance, March 31, 2019		691,200		51,379,796			(36,748,335	)		67,367,234			(71,965	)		82,617,930
Net income		-		-			-			2,428,499			-			2,428,499
Other comprehensive loss		-		-			-			-			(604,260	)		(604,260	)
Dividends on common stock ($0.13 per share)		-		-			-			(581,021	)		-			(581,021	)
Treasury stock purchased		-		-			(312,892	)		-			-			(312,892	)
Stock award plans		-		195,599			(5,583	)		-			-			190,016
Balance, June 30, 2019		691,200		51,575,395			(37,066,810	)		69,214,712			(676,225	)		83,738,272
Net income		-		-			-			2,550,542			-			2,550,542
Other comprehensive loss		-		-			-			-			(24,711	)		(24,711	)
Dividends on common stock ($0.13 per share)		-		-			-			(569,784	)		-			(569,784	)
Treasury stock purchased		-		-			(2,151,696	)		-			-			(2,151,696	)
Stock award plans		-		187,157			(24,950	)		-			-			162,207
Stock options exercised		400		19,920			-			-			-			20,320
Balance, September 30, 2019	$	691,600	$	51,782,472		$	(39,243,456	)	$	71,195,470		$	(700,936	)	$	83,725,150

See Notes to Condensed Consolidated Financial Statements 

6

GUARANTY FEDERAL BANCSHARES, INC. 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 

QUARTERLY AND TWELVE MONTHS ENDED DECEMBER 31, 2018 

	Common Stock		Additional Paid- In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2018	$	687,850	$	50,856,069		$	(37,125,541	)	$	60,679,308		$	(206,193	)	$	74,891,493
Net income		-		-			-			1,355,745			-			1,355,745
Other comprehensive loss		-		-			-			-			(26,942	)		(26,942	)
Dividends on common stock ($0.12 per share)		-		-			-			(532,771	)		-			(532,771	)
Stock award plans		-		(35,357	)		158,592			-			-			123,235
Stock options exercised		450		23,330			-			-			-			23,780
Balance, March 31, 2018		688,300		50,844,042			(36,966,949	)		61,502,282			(233,135	)		75,834,540
Net income		-		-			-			(342,984	)		-			(342,984	)
Other comprehensive income		-		-			-			-			91,016			91,016
Dividends on common stock ($0.12 per share)		-		-			-			(534,272	)		-			(534,272	)
Stock award plans		-		161,235			-			-			-			161,235
Stock options exercised		750		37,900			-			-			-			38,650
Balance, June 30, 2018		689,050		51,043,177			(36,966,949	)		60,625,026			(142,119	)		75,248,185
Net income		-		-			-			3,934,242			-			3,934,242
Other comprehensive loss		-		-			-			-			(249,491	)		(249,491	)
Dividends on common stock ($0.12 per share)		-		-			-			(534,207	)		-			(534,207	)
Stock award plans		-		154,137			(8,079	)		-			-			146,058
Stock options exercised		500		69,400			-			-			-			69,900
Balance, September 30, 2018		689,550		51,266,714			(36,975,028	)		64,025,061			(391,610	)		78,614,687
Net income		-		-			-			2,384,876			-			2,384,876
Other comprehensive loss		-		-			-			-			(61,146	)		(61,146	)
Dividends on common stock ($0.13 per share)		-		-			-			(580,250	)		-			(580,250	)
Stock award plans		-		82,621			3,904			-			-			86,525
Stock options exercised		650		33,250			-			-			-			33,900
Balance, December 31, 2018	$	690,200	$	51,382,585		$	(36,971,124	)	$	65,829,687		$	(452,756	)	$	80,478,592

See Notes to Condensed Consolidated Financial Statements 

7

GUARANTY FEDERAL BANCSHARES, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED) 

	9/30/2019			9/30/2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,099,405		$	4,947,003
Items not requiring (providing) cash:
Deferred income taxes		(64,536	)		706,286
Depreciation		1,427,906			1,096,490
Lease amortization		41,845			-
Provision for loan losses		200,000			925,000
Gain on sale of Small Business Administration loans		(798,763	)		(659,996	)
Gain on sale of mortgage loans held for sale and investment securities		(1,790,595	)		(1,583,779	)
Loss on sale of foreclosed assets		44,159			308,811
Gain on sale of premises and equipment		(6,069	)		-
Amortization of deferred income, premiums and discounts		313,686			453,575
Amortization of intangible assets		357,750			314,286
Stock award plan expense		521,323			276,391
Accretion of purchase accounting adjustments		(1,281,313	)		(3,282,074	)
Origination of loans held for sale		(24,039,578	)		(52,789,116	)
Proceeds from sale of loans held for sale		26,322,296			55,341,150
Increase in cash surrender value of bank owned life insurance		(345,651	)		(342,416	)
Changes in:
Accrued interest receivable		(84,805	)		(953,963	)
Prepaid expenses and other assets		(2,183,001	)		6,203,190
Accounts payable and accrued expenses		1,850,394			(1,441,136	)
Income taxes receivable/payable		507,448			(8,972	)
Net cash provided by operating activities		8,091,901			9,510,730
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of loans		6,445,267			9,489,176
Net change in loans		28,608,984			(13,591,488	)
Principal payments on available-for-sale securities		4,947,415			12,202,207
Principal payments on held-to-maturity securities		11,728			3,735
Purchase of premises and equipment		(887,490	)		(2,581,491	)
Net cash received for acquisition		-			2,455,964
Purchase of available-for-sale securities		(56,910,103	)		(25,151,079	)
Proceeds from sale of available-for-sale securities		35,035,814			13,602,508
Purchase of bank owned life insurance		(4,000,000	)		-
Redemption (purchase) of FHLB stock		2,229,700			(445,700	)
Purchase of tax credit investments		(3,168,435	)		(3,617,366	)
Proceeds from sale of foreclosed assets held for sale		507,969			187,468
Net cash provided by (used in) investing activities		12,820,849			(7,446,066	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid		(1,744,091	)		(1,598,016	)
Net increase in demand deposits, NOW accounts and savings accounts		104,780,937			69,132,414
Net decrease in certificates of deposit		(14,380,120	)		(76,871,838	)
Net decrease of securities sold under agreements to repurchase		-			(2,159,000	)
Proceeds from FHLB advances		93,965,000			470,835,000
Repayments of FHLB advances		(149,265,000	)		(470,435,000	)
Proceeds from issuance of notes payable		7,200,000			5,000,000
Repayments of notes payable		(1,000,000	)		(3,000,000	)
Repayment of Hometown Bancshares subordinated debentures		(6,186,000	)		-
Advances from borrowers for taxes and insurance		408,630			550,169
Stock options exercised		72,220			286,467
Treasury stock purchased		(2,464,588	)		-
Net cash provided by (used in) financing activities		31,386,988			(8,259,804	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		52,299,738			(6,195,140	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		34,121,642			37,406,930
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	86,421,380		$	31,211,790

See Notes to Condensed Consolidated Financial Statements 

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Guaranty Federal Bancshares, Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report”) filed with the Securities and Exchange Commission (the “SEC”). The results of operations for the periods are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet of the Company as of December 31, 2018, has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted.

Note 2: Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Guaranty Bank (the “Bank”). All significant intercompany transactions and balances have been eliminated in consolidation.

Note 3: Acquisition

On April 2, 2018, the Company completed the acquisition of Carthage, Missouri-based Hometown Bancshares, Inc. (“Hometown”), including its wholly owned bank subsidiary, Hometown Bank, National Association. Under the terms of the Agreement and Plan of Merger, each share of Hometown common stock was exchanged for $20.00 in cash and the transaction was valued at approximately $4.6 million. Hometown’s subsidiary bank, Hometown Bank, National Association, was merged into Guaranty Bank on June 8, 2018.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $180.0 million in assets, including approximately $143.9 million in loans (inclusive of loan discounts) and approximately $161.2 million in deposits. Goodwill of $1.4 million was recorded as a result of the transaction. The goodwill will not be deductible for tax purposes.

9

A summary, at fair value, of the assets acquired and liabilities assumed in the Hometown transaction, as of acquisition date, is as follows:

Guaranty Federal Bancshares, Inc. 

Net Assets Acquired from Hometown 

April 2, 2018

(In Thousands) 

	Acquired from			Fair Value			Fair
	Hometown			Adjustments			Value
Assets Acquired
Cash and Due From Banks	$	7,083		$	-		$	7,083
Investment Securities		7,521			-			7,521
Loans		150,390			(6,471	)		143,919
Allowance for Loan Losses		(2,348	)		2,348			-
Net Loans		148,042			(4,123	)		143,919
Fixed Assets		9,268			798			10,066
Foreclosed Assets held for sale		1,647			(400	)		1,247
Core Deposit Intangible		-			3,520			3,520
Other Assets		4,146			2,463			6,609
Total Assets Acquired	$	177,707		$	2,258		$	179,965
Liabilities Assumed
Deposits		161,001			247			161,248
Federal Home Loan Bank advances		2,000			-			2,000
Securities Sold Under Agreements to Repurchase		2,159			-			2,159
Other borrowings		3,000			-			3,000
Subordinated debentures		6,186			176			6,362
Other Liabilities		2,003			-			2,003
Total Liabilities Assumed		176,349		$	423			176,772
Stockholders' Equity
Common Stock		231			(231	)		-
Capital Surplus		18,936			(18,936	)		-
Retained Earnings		(17,587	)		17,587			-
Accumulated Other Comprehensive Loss		(222	)		222			-
Treasury Stock		-			-			-
Total Stockholders' Equity Assumed		1,358		$	(1,358	)		-
Total Liabilities and Stockholders' Equity Assumed	$	177,707		$	(935	)	$	176,772
Net Assets Acquired							$	3,193
Purchase Price								4,628
Goodwill							$	1,435

10

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above. The purchase price allocation and certain fair value measurements have been finalized.

Cash and due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

Fixed assets – Fixed assets were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired.

Foreclosed assets held for sale – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

Core deposit intangible – This intangible asset represents the value of the relationships that Hometown had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Other assets – The fair value adjustment results from recording additional deferred tax assets related to the transaction. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference when material.

Federal Home Loan Bank advances and Other borrowings – The fair value of Federal Home Loan Bank advances and other borrowings are estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Securities sold under agreement to repurchase – The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities.

Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Other liabilities – The carrying amount of these other liabilities was deemed to be reasonable estimate of fair value.

11

Note 4: Securities

The amortized cost and approximate fair values of securities classified as available-for-sale were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of September 30, 2019
Debt Securities:
U. S. government agencies	$	1,499,752	$	-	$	(9,071	)	$	1,490,681
Municipals		30,172,564		805,092		(22,646	)		30,955,010
Corporates		13,487,865		164,686		(13,115	)		13,639,436
Mortgage-backed securities - private label		10,963,720		9,367		(184	)		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools		48,704,459		734,188		(142,975	)		49,295,672
	$	104,828,360	$	1,713,333		(187,991	)		106,353,702

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of December 31, 2018
Debt Securities:
Municipals	$	34,470,648	$	10,581	$	(710,709	)	$	33,770,520
Corporates		3,000,000		18,927		-			3,018,927
Government sponsored mortgage-backed securities and SBA loan pools		50,632,011		81,999		(1,237,260	)		49,476,750
	$	88,102,659	$	111,507	$	(1,947,969	)	$	86,266,197

Maturities of available-for-sale debt securities as of September 30, 2019:

	Amortized Cost		Approximate Fair Value
1-5 years	$	386,057	$	391,105
6-10 years		15,321,979		15,495,164
After 10 years		29,452,145		30,198,857
Mortgage-backed securities - private label not due on a single maturity date		10,963,720		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools not due on a single maturity date		48,704,459		49,295,673
	$	104,828,360	$	106,353,702

The book value of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $5,572,723 and $24,943,176 as of September 30, 2019 and December 31, 2018, respectively. The approximate fair value of pledged securities amounted to $5,673,630 and $24,374,187 as of September 30, 2019 and December 31, 2018, respectively.

12

Realized gains and losses are recorded as net securities gains. Gains and losses on sales of securities are determined on the specific identification method. Gross gains of $214,125 and $26,061 and gross losses of $134,369 and $34,151 for the nine months ended September 30, 2019 and September 30, 2018, respectively, were realized from the sale of available-for-sale securities. The tax effect of these net gains and losses was $16,749 and ($2,063) for the nine months ended September 30, 2019 and September 30, 2018, respectively.

The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. Certain investment securities are valued at less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. It is management’s intent to hold the debt securities to maturity or until recovery of the unrealized loss. Should the impairment of any of these debt securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified, to the extent the loss is related to credit issues, and to other comprehensive income to the extent the decline on debt securities is related to other factors and the Company does not intend to sell the security prior to recovery of the unrealized loss.

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2019 and December 31, 2018, was $20,627,201 and $70,434,596, respectively, which is approximately 19% and 82% of the Company’s investment portfolio.

The following table shows gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2019 and December 31, 2018.

As of September 30, 2019
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U. S. government agencies	$	1,490,680	$	(9,071	)	$	-	$	-		$	1,490,680	$	(9,071	)
Municipals		1,124,104		(22,646	)		-		-			1,124,104		(22,646	)
Corporates		2,540,521		(13,115	)		-		-			2,540,521		(13,115	)
Mortgage-backed securities - private label		2,063,242		(184	)		-		-			2,063,242		(184	)
Government sponsored mortgage-backed securities and SBA loan pools		8,979,065		(46,080	)		4,429,589		(96,895	)		13,408,654		(142,975	)
	$	16,197,612	$	(91,096	)	$	4,429,589	$	(96,895	)	$	20,627,201	$	(187,991	)

As of December 31, 2018
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Municipals	$	6,324,750	$	(67,774	)	$	23,223,221	$	(642,935	)	$	29,547,971	$	(710,709	)
Government sponsored mortgage-backed securities and SBA loan pools		7,127,597		(112,282	)		33,759,028		(1,124,978	)		40,886,625		(1,237,260	)
	$	13,452,347	$	(180,056	)	$	56,982,249	$	(1,767,913	)	$	70,434,596	$	(1,947,969	)

13

Note 5: Loans and Allowance for Loan Losses

Categories of loans at September 30, 2019 and December 31, 2018 include:

	September 30,			December 31,
	2019			2018
Real estate - residential mortgage:
One to four family units	$	121,690,131		$	132,410,810
Multi-family		93,628,789			90,548,265
Real estate - construction		88,175,253			88,553,995
Real estate - commercial		308,270,953			322,921,323
Commercial loans		108,738,413			119,369,484
Consumer and other loans		31,721,831			33,091,017
Total loans		752,225,370			786,894,894
Less:
Allowance for loan losses		(7,557,311	)		(7,995,569	)
Deferred loan fees/costs, net		(645,203	)		(600,719	)
Net loans	$	744,022,856		$	778,298,606

Classes of loans by aging at September 30, 2019 and December 31, 2018 were as follows:

As of September 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	290	$	246	$	157	$	693	$	120,997	$	121,690	$	-
Multi-family		5,930		-		-		5,930		87,699		93,629		-
Real estate - construction		581		-		-		581		87,594		88,175		-
Real estate - commercial		853		-		-		853		307,418		308,271		-
Commercial loans		186		5		-		191		108,547		108,738		-
Consumer and other loans		-		18		-		18		31,704		31,722		-
Total	$	7,840	$	269	$	157	$	8,266	$	743,959	$	752,225	$	-

As of December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	177	$	329	$	2,164	$	2,670	$	129,741	$	132,411	$	-
Multi-family		5,952		-		-		5,952		84,596		90,548		-
Real estate - construction		-		-		-		-		88,554		88,554		-
Real estate - commercial		1,000		81		-		1,081		321,840		322,921		-
Commercial loans		228		433		71		732		118,638		119,370		-
Consumer and other loans		107		12		-		119		32,972		33,091		-
Total	$	7,464	$	855	$	2,235	$	10,554	$	776,341	$	786,895	$	-

14

Nonaccruing loans are summarized as follows:

	September 30,		December 31,
	2019		2018
Real estate - residential mortgage:
One to four family units	$	2,166,284	$	4,136,342
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		2,956,289		3,592,476
Commercial loans		768,846		1,262,910
Consumer and other loans		73,189		1,542
Total	$	9,780,017	$	13,081,679

The following tables present the activity in the allowance for loan losses based on portfolio segment for the three and nine months ended September 30, 2019 and 2018:

Three months ended September 30, 2019	Construction			Commercial Real Estate			One to four family		Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,169		$	2,188		$	948	$	673	$	1,236		$	397		$	60	$	7,671
Provision charged to expense		(245	)		242			42		50		(125	)		99			37	$	100
Losses charged off		-			(122	)		-		-		(106	)		(85	)		-	$	(313	)
Recoveries		28			1			1		-		55			14			-	$	99
Balance, end of period	$	1,952		$	2,309		$	991	$	723	$	1,060		$	425		$	97	$	7,557

Nine months ended September 30, 2019	Construction			Commercial Real Estate			One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,306		$	2,093		$	1,297		$	641	$	1,160		$	373		$	126		$	7,996
Provision charged to expense		(523	)		317			(41	)		82		175			219			(29	)	$	200
Losses charged off		-			(122	)		(271	)		-		(381	)		(199	)		-		$	(973	)
Recoveries		169			21			6			-		106			32			-		$	334
Balance, end of period	$	1,952		$	2,309		$	991		$	723	$	1,060		$	425		$	97		$	7,557

15

Three months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,484		$	1,787	$	1,237		$	553	$	1,085		$	367		$	60	$	7,573
Provision charged to expense		(219	)		158		96			97		(44	)		65			47	$	200
Losses charged off		-			-		(3	)		-		(14	)		(74	)		-	$	(91	)
Recoveries		36			-		1			-		4			9			-	$	50
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107	$	7,732

Nine months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,244		$	1,789	$	946		$	464	$	1,031		$	454		$	179		$	7,107
Provision charged to expense		(13	)		155		386			186		98			185			(72	)	$	925
Losses charged off		-			-		(3	)		-		(110	)		(301	)		-		$	(414	)
Recoveries		70			1		2			-		12			29			-		$	114
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107		$	7,732

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2019 and December 31, 2018:

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	554	$	24	$	202	$	-	$	214	$	20	$	-	$	1,014
Ending balance: collectively evaluated for impairment	$	1,398	$	2,285	$	789	$	723	$	846	$	402	$	97	$	6,540
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	3	$	-	$	3
Loans:
Ending balance: individually evaluated for impairment	$	3,816	$	412	$	2,166	$	5,930	$	599	$	185	$	-	$	13,108
Ending balance: collectively evaluated for impairment	$	84,359	$	305,188	$	119,524	$	87,699	$	108,072	$	31,247	$	-	$	736,089
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,671	$	-	$	-	$	67	$	290	$	-	$	3,028

16

December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	552	$	106	$	573	$	-	$	363	$	18	$	-	$	1,612
Ending balance: collectively evaluated for impairment	$	1,754	$	1,987	$	724	$	641	$	797	$	355	$	126	$	6,384
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Loans:
Ending balance: individually evaluated for impairment	$	4,088	$	1,588	$	4,520	$	5,952	$	1,062	$	169	$	-	$	17,379
Ending balance: collectively evaluated for impairment	$	84,507	$	317,488	$	128,258	$	84,663	$	118,459	$	32,968	$	-	$	766,343
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,782	$	-	$	-	$	216	$	175	$	-	$	3,173

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 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 of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’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.

Included in the Company’s loan portfolio are certain loans acquired in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans were written down at acquisition to an amount estimated to be collectible. As a result, certain ratios regarding the Company’s loan portfolio and credit quality cannot be used to compare the Company to peer companies or to compare the Company’s current credit quality to prior periods. The ratios particularly affected by accounting under ASC 310-30 include the allowance for loan losses as a percentage of loans, nonaccrual loans, and performing assets, and nonaccrual loans and nonperforming loans as a percentage of total loans.

A loan is considered impaired when, based on current information and events, it is probable that the Bank 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 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.

17

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.    

The following table summarizes the recorded investment in impaired loans at September 30, 2019 and December 31, 2018:

	September 30, 2019						December 31, 2018
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	943	$	943	$	-	$	2	$	2	$	-
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		-		-		-		-		-		-
Real estate - commercial		2,921		2,921		-		3,138		3,138		-
Commercial loans		25		25		-		216		216		-
Consumer and other loans		363		363		-		225		225		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,224	$	1,224	$	202	$	4,518	$	4,518	$	573
Multi-family		-		-		-		-		-		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		162		162		24		1,232		1,317		106
Commercial loans		641		641		214		1,062		1,062		363
Consumer and other loans		112		112		23		119		119		18
Total
Real estate - residential mortgage:
One to four family units	$	2,167	$	2,167	$	202	$	4,520	$	4,520	$	573
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		3,083		3,083		24		4,370		4,455		106
Commercial loans		666		666		214		1,278		1,278		363
Consumer and other loans		475		475		23		344		344		18
Total	$	16,136	$	17,369	$	1,017	$	20,552	$	21,870	$	1,612

18

The following table summarizes average impaired loans and related interest recognized on impaired loans for the nine months ended September 30, 2019 and 2018:

	For the Nine Months Ended				For the Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,046	$	1	$	1,649	$	-
Multi-family		5,933		-		1,006		25
Real estate - construction		-		-		1,525		-
Real estate - commercial		3,353		4		2,383		46
Commercial loans		161		-		658		-
Consumer and other loans		268		-		37		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,970	$	-	$	2,671	$	-
Multi-family		-		-		666		-
Real estate - construction		3,866		-		2,774		-
Real estate - commercial		657		-		81		-
Commercial loans		702		-		457		-
Consumer and other loans		119		-		116		-
Total
Real estate - residential mortgage:
One to four family units	$	3,016	$	1	$	4,320	$	-
Multi-family		5,933		-		1,672		25
Real estate - construction		3,866		-		4,299		-
Real estate - commercial		4,010		4		2,464		46
Commercial loans		863		-		1,115		-
Consumer and other loans		387		-		153		-
Total	$	18,075	$	5	$	14,023	$	71

At September 30, 2019, the Bank’s impaired loans shown in the table above included loans that were classified as troubled debt restructurings (“TDR”). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

In assessing whether or not a borrower is experiencing financial difficulties, the Bank considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy and (iv) the debtor’s projected cash flow is sufficient to satisfy the contractual payments due under the original terms of the loan without a modification.

The Bank considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Bank include the debtor’s ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by the Bank generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (iii) a reduction on the face amount or maturity amount of the debt as stated in the original loan, (iv) a temporary period of interest-only payments, (v) a reduction in accrued interest, and (vi) an extension of amortization.

19

The following table presents the carrying balance of TDRs as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Real estate - residential mortgage:
One to four family units	$	1,175,382	$	1,208,596
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		5,358,591		5,508,444
Commercial loans		599,030		504,481
Consumer and other loans		-		-
Total	$	10,948,412	$	11,309,930

The Bank has allocated $939,647 and $901,086 of specific reserves to customers whose loan terms have been modified in TDR as of September 30, 2019 and December 31, 2018, respectively.

There were no TDRs for which there was a payment default within twelve months following the modification during the three months ending September 30, 2019 and 2018. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

As part of the on-going monitoring of the credit quality of the Bank’s loan portfolio, management tracks loans by an internal rating system. All loans are assigned an internal credit quality rating based on an analysis of the borrower’s financial condition. The criteria used to assign quality ratings to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Bank’s safety and soundness. The following are the internally assigned ratings:

Pass: This rating represents loans that have strong asset quality and liquidity along with a multi-year track record of profitability.

Special mention: This rating represents loans that are currently protected but are potentially weak. The credit risk may be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.

Substandard: This rating represents loans that show signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Doubtful: This rating represents loans that have all the weaknesses of substandard classified loans with the additional characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Real estate-Residential 1-4 family: The residential 1-4 family real estate loans are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

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Real estate-Construction: Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Bank until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Bank’s market areas.

Real estate-Commercial: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Bank’s market areas.

Commercial: The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer: The consumer loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Bank’s market area) and the creditworthiness of a borrower.

The following tables provide information about the credit quality of the loan portfolio using the Bank’s internal rating system as of September 30, 2019 and December 31, 2018:

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,275	$	297,358	$	118,700	$	87,699	$	103,864	$	30,560	$	722,456
Special Mention		-		6,699		553		-		2,427		-		9,679
Substandard		3,900		4,214		2,437		5,930		2,447		1,162		20,090
Doubtful		-		-		-		-		-		-		-
Total	$	88,175	$	308,271	$	121,690	$	93,629	$	108,738	$	31,722	$	752,225

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December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,375	$	310,486	$	126,586	$	84,596	$	114,525	$	32,686	$	753,254
Special Mention		-		5,524		372		-		3,031		-		8,927
Substandard		4,179		6,911		5,453		5,952		1,814		405		24,714
Doubtful		-		-		-		-		-		-		-
Total	$	88,554	$	322,921	$	132,411	$	90,548	$	119,370	$	33,091	$	786,895

The above amounts include purchased credit impaired loans. At September 30, 2019, purchased credit impaired loans comprised of $3.0 million were rated “Substandard”.

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

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 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 is 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.

Note 6: Accounting for Certain Loans Acquired

The Company acquired loans during the quarter ended June 30, 2018. At acquisition, certain acquired loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.  

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The carrying amount of purchased credit impaired loans are included in the balance sheet amounts of loans receivable at September 30, 2019 and December 31, 2018. The amount of these loans is shown below:

	September 30,		December 31,
	2019		2018
	(In Thousands)		(In Thousands)
Real estate - commercial	$	3,165	$	3,358
Commercial loans		253		296
Consumer and other loans		290		329
Outstanding balance	$	3,708	$	3,983
Carrying amount, net of fair value adjustment of $680 at September 30, 2019 and $810 at December 31, 2018	$	3,028	$	3,173

Changes in the carrying amount of the accretable yield for all purchased credit impaired loans were as follows for the three months and nine months ended September 30, 2019:

	Three months ended			Nine months ended
	September 30,			September 30,
	2019			2019
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	183		$	265
Additions		-			-
Accretion		(48	)		(130	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Balance at end of period	$	135		$	135

During the three months ended September 30, 2019, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.

Note 7: Goodwill and Other Intangible Assets

The Company recorded $1.4 million of goodwill as a result of its 2018 Hometown acquisition and the goodwill is not deductible for tax purposes. Goodwill impairment was neither indicated nor recorded during the three and nine months ended September 30, 2019.

Goodwill is tested annually, or more often if circumstances warrant, for impairment. If the implied fair value of goodwill is lower than its carrying amount, 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.

Core deposit premiums are amortized over a seven year period and are periodically evaluated, at least annually, as to the recoverability of their carrying value. Core deposit premiums of $3.5 million were recorded during the second quarter of 2018 as part of the Hometown acquisition. As of September 30, 2019, $2.6 million of core deposit intangible amounts are still to be amortized.

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The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) at September 30, 2019 and December 31, 2018 were as follows:     

	September 30,			December 31,
	2019			2018
	(in Thousands)			(in Thousands)
Goodwill	$	1,435		$	1,435
Core deposit intangible
Gross carrying amount		3,520			3,520
Accumulated amortization		(897	)		(539	)
Core deposit intangible, net		2,623			2,981
Remaining balance	$	4,058		$	4,416

The Company’s estimated remaining amortization expense on intangibles as of September 30, 2019 is as follows:

	Amortization Expense
	(in Thousands)
Remainder of:	2019	$	119
	2020		477
	2021		477
	2022		477
	2023		477
	Therafter		596
	Total	$	2,623

Note 8: Leases

As discussed in Note 11, on January 1, 2019, the Company adopted ASU 2016-02, “Leases”. The Company recorded initial balances during the quarter ending March 31, 2019 for operating Right of Use (“ROU”) assets of $9,473,587 and corresponding operating ROU liabilities of $9,490,385. Additionally, the Company recorded initial balances for financing ROU assets and liabilities of $453,485. As of September 30, 2019, operating lease liability balances are $9,236,695 and financing lease liability amounts are $399,046. We maintain operating leases on land and buildings for certain branch facilities and our headquarters. Financing leases are primarily for equipment used at banking facilities. Most leases include options to renew, with renewal terms extending between one to twenty years. The exercise of renewal options is based on judgement of management as to whether or not the renewal option is reasonably certain to be exercised.   Factors in determining whether or not the renewal option is reasonably certain to be exercised include, but are not limited to, the value of the leasehold improvements, the value of the renewal rate compared to market rates and the presence of factors that would cause significant economic penalty to the Company if the option is not exercised.

Expenses for finance leases are included in other interest expense and occupancy expense line items, whereas, operating leases are expensed entirely in the occupancy expense line item. Leases with a term of less than twelve months are not recorded on the balance sheet and are expensed on a straight-line basis over the lease term. Discount rates used for the purpose of valuing the leases were based on rates available to the Company on fixed rate borrowings for similar lease terms.

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The components of lease expense and their impact on the statement of income for the three and nine months ended September 30, 2019 and 2018 are as follows:

	Nine months ended						Three months ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Finance lease cost:
Amortization of right-of-use assets	$	82,084		$	-		$	27,226		$	-
Interest on lease liabilities		6,010			-			2,138			-
Operating lease cost		810,124			674,137			270,042			277,037
Sublease income		(32,900	)		-			(10,300	)		-
Total lease costs	$	865,318		$	674,137		$	289,106		$	277,037
Additional lease information:
Operating cash flows from financing leases				$	-
Operating cash flows from operating leases					41,845
Financing cash flows from financing leases					-
Weighted-average remaining lease term - financing leases (in years)					3.7
Weighted-average remaining lease term - operating leases (in years)					15.4
Weighted-average discount rate - financing leases					2.05	%
Weighted-average discount rate - operating leases					5.50	%

The following table sets forth, as of September 30, 2019, the future minimum lease cash payments and a reconciliation of the undiscounted cash flows to the lease liability:

		Financing			Operating			Total
					(In Thousands)
Remainder of:	2019	$	30		$	263		$	293
	2020		117			862			979
	2021		118			838			956
	2022		112			827			939
	2023		38			834			872
	Thereafter		-			9,923			9,923
Total undiscounted future minimum lease cash payments		$	415		$	13,547		$	13,962
	Present value discount		(16	)		(4,310	)		(4,326	)
	Lease liability	$	399		$	9,237		$	9,636

Future minimum lease cash payments under non-cancelable operating leases as of December 31, 2018, prior to adoption of ASU 2016-02, were as follows:

	December 31, 2018
	(In Thousands)
2019	$	1,032
2020		993
2021		964
2022		962
2023		956
Thereafter		3,573
	$	8,480

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Note 9: Benefit Plans

The Company has stock-based employee compensation plans, which are described in the Company’s 2018 Annual Report. The following tables below summarize transactions under the Company’s equity plans for the nine months ended September 30, 2019:

Stock Options	Number of shares
	Incentive Stock Option			Non- Incentive Stock Option			Weighted Average Exercise Price
Balance outstanding as of January 1, 2019		12,500			5,000		$	5.14
Granted		-			-			-
Exercised		(9,000	)		(5,000	)		5.16
Forfeited		-			-			-
Balance outstanding as of September 30, 2019		3,500			-		$	5.08
Options exercisable as of September 30, 2019		3,500			-		$	5.08

The total intrinsic value of stock options exercised for the nine months ended September 30, 2019 and 2018 was $243,769 and $267,366, respectively. The total intrinsic value of outstanding stock options (including exercisable) was $67,270 and $452,100 at September 30, 2019 and 2018, respectively.

Restricted Stock	Number of Shares			Weighted Average Grant- Date Fair Value
Balance of shares non-vested as of January 1, 2019		32,349		$	18.93
Granted		15,434			23.85
Vested		(20,771	)		17.67
Forfeited		(1,649	)		22.27
Balance of shares non-vested as of September 30, 2019		25,363		$	22.74

In March 2019, the Company granted 5,502 shares of restricted stock to directors pursuant to the 2015 Equity Plan that have a cliff vesting at the end of one year and thus, expensed over that same period. These shares had a grant date market price of $23.85 per share. The total amount of expense for restricted stock grants to directors (including all grants in previous years) during the nine months ended September 30, 2019 and 2018 was $97,241 and $103,926, respectively.

For the nine months ended September 30, 2019 and 2018, the Company granted 9,932 and 6,986 shares, respectively, of restricted stock to officers that have a cliff vesting at the end of three years. The expense is being recognized over the applicable vesting period. The total amount of expense for restricted stock grants to officers (including all grants in previous years) during the nine months ended September 30, 2019 and 2018 was $151,437 and $135,810, respectively.

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Performance Stock Units	Performance Stock Units		Weighted Average Grant-Date Fair Value
Balance of shares non-vested as of January 1, 2019		47,322	$	20.48
Granted		-		-
Vested		-		-
Forfeited		-		-
Balance of shares non-vested as of September 30, 2019		47,322	$	20.48

On March 29, 2017, the Company granted restricted stock units representing 55,823 hypothetical shares of common stock to officers. There are three possible levels of incentive awards: threshold (25%); target (50%); and maximum (100%). The restricted stock units vest based on two financial performance factors over the period from March 29, 2017 to December 31, 2019 (the “Performance Period”). The two performance measurements of the Company (and the weight given to each measurement) applicable to each award level are as follows: (i) Total Assets (50%) and (ii) Return on Average Assets (50%). In determining compensation expense, the fair value of the restricted stock unit awards was determined based on the closing price of the Company’s common stock on the date of grant, which was $20.48 per share. The expense is being recognized over the applicable vesting period. Due to the fact that the measurements cannot be determined at the time of the grant, the Company currently estimates that the most likely outcome is the achievement between the target and maximum levels. If during the Performance Period, additional information becomes available to lead the Company to believe a different level will be achieved for the Performance Period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis. The total amount of expense for restricted stock units during the nine months ended September 30, 2019 and 2018 was $290,568 and $253,513, respectively.

Total stock-based compensation expense recognized for the nine months ended September 30, 2019 and 2018 was $535,731 and $493,249, respectively. As of September 30, 2019, there was $407,314 of unrecognized compensation expense related to non-vested restricted stock awards, which will be recognized over the remaining vesting period.

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Note 10: Income Per Common Share

	For three months ended September 30, 2019						For nine months ended September 30, 2019
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	2,550,542		4,396,241	$	0.58	$	7,099,405		4,429,066	$	1.60
Effect of Dilutive Securities				58,091						56,532
Diluted Income Per Common Share	$	2,550,542		4,454,332	$	0.57	$	7,099,405		4,485,598	$	1.58

	For three months ended September 30, 2018						For nine months ended September 30, 2018
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	3,934,242		4,418,196	$	0.89	$	4,947,003		4,406,830	$	1.12
Effect of Dilutive Securities				72,389						72,058
Diluted Income Per Common Share	$	3,934,242		4,490,585	$	0.88	$	4,947,003		4,478,888	$	1.10

Note 11: New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  ASU 2016-02 was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. FASB has issued updated guidance in ASU 2018-11, “Leases (Topic 842) Targeted Improvements” and ASU 2019-01 “Leases (Topic 842) Codification Improvements” which provides additional transition options including allowing entities to not apply the lease standard to the comparative periods presented in their financial statements in the year of adoption. ASC Topic 842 provided a package of practical expedients in applying the lease standard to be chosen at the date of adoption. The Company chose to elect the package of practical expedients provided under ASU 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We have also chosen not to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We will account for lease and non-lease components separately because such amounts are readily determinable under lease contracts. Additionally, we have chosen to elect the use of hindsight, when applicable, in determining the lease term, in assessing the likelihood that a lessee purchase option will be exercised; and in assessing the impairment of ROU assets. The Company determined that it has both operating and finance leases under Topic 842. For operating and finance leases, lease liabilities are initially measured at commencement date based on the present value of lease payments not yet paid, discounted using the discount rate for the lease at the lease commencement date over the lease term. For operating and finance leases, ROU assets are measured at the commencement date as the amount of initial liability, adjusted for lease payments made to the lessor at or before commencement date, minus incentives; and for any initial direct costs incurred by the lessee. Based on the transition method that the Company has chosen to follow, the initial application date of the standard for all existing leases was January 1, 2019. The lease term used for the initial operating ROU asset and lease liability includes the initial lease term in addition to any renewal options the Company thinks it is reasonably certain to exercise. ASC Topic 842 requires that the implicit rate within the lease agreement be used if available. If not available, the Company should use its incremental borrowing rate in effect at the time of lease commencement date. For operating leases with a term of less than 60 months, the Company utilized a 5-year LIBOR rate of approximately 3%. For operating leases with a term of greater than 60 months, the Company utilized a method of analogizing a current variable rate product to a fixed rate product based on LIBOR curve which results in a discount rate of approximately 6%. The discount rate used for finance leases is 2.05% which is the rate specified in the lease agreements at the present value rate. During the first quarter of 2019, the implementation of this standard resulted in the recording of $10.1 million of ROU assets and lease liabilities on the Company’s balance sheet with no significant impact to the income statement as a result of this standard. Additionally, the Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. See Note 8 of the Condensed Consolidated Financial Statements for additional information and balances as of September 30, 2019.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Improvement updates to the proposed standard have been issued in November 2018 (Update 2018-19), April 2019 (Update 2019-04) and May 2019 (Update 2019-05) that provided additional guidance on this Topic. During the third quarter of 2019, the implementation for this standard was delayed for institutions deemed as “smaller reporting companies” based on criteria that measured the size of public float and revenue tests until 2023. Implementation for those exceeding the revenue and public float thresholds will still be required to adopt this standard for filings occurring after December 15, 2019. Currently, the amendments in this ASU require the measurement of 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. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company formed a committee in 2018 to assess our data, evaluate the impacts of adopting ASU 2016-13 and to select a third-party vendor to assist in generating loan level cash flows and disclosures. Work by the committee will continue despite the delayed implementation to monitor the status of this standard and to refine assumptions and systems to properly integrate requirements once the standard applies to our Company. The financial impact of adopting this standard is still being evaluated.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment.  To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test.  The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.  The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test.  An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  The amendments should be applied on a prospective basis.  The nature of and reason for the change in accounting principle should be disclosed upon transition.  The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted on testing dates after January 1, 2017.  The Company continues to evaluate the impact of adopting the new guidance on the consolidated financial statements, but it is not expected to have a material impact.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) are recorded. This standard is effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company elected to early adopt ASU 2018-02 and, as a result, reclassified $31,818 from accumulated other comprehensive income to retained earnings as of December 31, 2017. The reclassification impacted the Consolidated Balance Sheet and the Consolidated Statement of Stockholder’s Equity as of and for the year ended December 31, 2017.

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In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. Disclosures removed by this ASU are the amount and reasons for transfers between Level 1 and Level 2, the policy for timing of transfers between levels and the valuation process for Level 3 measurements. This ASU modifies disclosures relating to investments in certain entities that calculate net asset value. Additional disclosures require by the ASU include: 1) change in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and 2) range and weighted average of significant observable inputs used to develop Level 3 measurements. The prospective method of transition is required for the new disclosure requirements. The other amendments should be applied retrospectively. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years or January 1, 2020 for the Company. Early adoption is permitted. The Company continues to evaluate the impact of the new standard on our consolidated financial statements, but at this time do not believe the standard will have a significant impact on the financial statements.     

Note 12: Derivative Financial Instruments

The Company records all derivative financial instruments at fair value in the financial statements. Derivatives are used as a risk management tool to hedge the exposure to changes in interest rates or other identified market risks.

When a derivative is intended to be a qualifying hedged instrument, the Company prepares written hedge documentation that designates the derivative as 1) a hedge of fair value of a recognized asset or liability (fair value hedge) or 2) a hedge of a forecasted transaction, such as, the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item, and methodologies for assessing and measuring hedge effectiveness and ineffectiveness, along with support for management’s assertion that the hedge will be highly effective.

In June 2017, the Company entered into a forward start interest rate swap agreement totaling $50 million notional amount to hedge against interest rate risk on FHLB advances. The swap rate paid is 2.12% and is hedged against three-month floating LIBOR with a termination date of February 2025. As a cash flow hedge, the portion of the change in the fair value of the derivative that has been deemed highly effective is recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings. At September 30, 2019, the Company reported a $1,255,540 unrealized loss, net of a $429,749 tax effect, in other comprehensive income related to this cash flow hedge.

In March 2019, the Company entered into an interest rate swap agreement totaling $10.3 million notional amount to hedge against interest rate risk on variable rate subordinated debentures. The swap rate paid is 4.09% and is hedged against three-month floating LIBOR plus 145 basis points with a termination date of February 2026. As a cash flow hedge, the portion of the change in the fair value of the derivative that has been deemed highly effective is recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings. At September 30, 2019, the Company reported a $549,889 unrealized loss, net of a $188,217 tax effect, in other comprehensive income related to this cash flow hedge.

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The Company documents, both at inception and periodically over the life of the hedges, its analysis of actual and expected hedge effectiveness. 

As of September 30, 2019, based on current fair values, the Company pledged cash collateral of $2.5 million to its counterparty for the swaps. As of December 31, 2018, based on current fair values, the counterparty had pledged cash collateral of $1.5 million to the Company.

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments on the consolidated balance sheets at September 30, 2019 and December 31, 2018:

				September 30, 2019				December 31, 2018
				Fair Value				Fair Value
	Balance Sheet	Notional		Derivative		Derivative		Derivative		Derivative
Derivatives designated as	Classification	Amount		Assets		Liablities		Assets		Liablities
hedging instruments:
Interest rate swap - FHLB Advances	Other liabilites	$	50,000,000	$	-	$	1,685,289	$	1,271,538	$	-
Interest rate swap - Subordinated Debentures	Other liabilites	$	10,310,000	$	-	$	738,106	$	-	$	-

The following table presents amounts included in the consolidated statements of income for derivatives designated as hedging instruments for the periods indicated:

		Nine Months Ended						Three Months Ended
	Income Statement	September, 30						September, 30
Derivatives designated as	Classification	2019			2018			2019			2018
hedging instruments:
Interest rate swap - FHLB Advances	Interest Expense	$	(162,517	)	$	(17,261	)	$	(33,424	)	$	(9,423	)
Interest rate swap - Subordinated Debentures	Interest Expense	$	8,569		$	-		$	7,268		$	-

Note 13: Disclosures about Fair Value of Assets and Liabilities

ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities

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

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

The following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

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Available-for-sale securities: Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one or a combination of observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bid offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. Level 2 securities include U.S. government agencies, municipal securities and government sponsored mortgage-backed securities. The Company has no Level 3 securities.   

Derivative financial instruments (Cash flow hedge): The Company’s open derivative positions are interest rate swap agreements. Those classified as Level 2 open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a third party and validated by management. The Company has considered counterparty credit risk in the valuation of its interest rate swap assets.

The following table presents the fair value measurements of assets recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements are classified at September 30, 2019 and December 31, 2018 (dollar amounts in thousands):

9/30/2019
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Government agencies	$	-	$	1,491	$	-	$	1,491
Municipals		-		30,955		-		30,955
Corporates		-		13,639		-		13,639
Mortgage-backed securities - private label		-		10,973		-		10,973
Government sponsored mortgage-backed securities and SBA loan pools		-		49,296		-		49,296
Available-for-sale securities	$	-	$	106,354	$	-	$	106,354
Financial liabilities:
Interest rate swaps	$	-	$	2,423	$	-	$	2,423

12/31/2018
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Municipals	$	-	$	33,770	$	-	$	33,770
Corporates		-		3,019		-		3,019
Government sponsored mortgage-backed securities and SBA loan pools		-		49,477		-		49,477
Available-for-sale securities	$	-	$	86,266	$	-	$	86,266
Interest rate swaps	$	-	$	1,272	$	-	$	1,272

The following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy.

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Foreclosed Assets Held for Sale: Fair value is estimated using recent appraisals, comparable sales and other estimates of value obtained principally from independent sources, adjusted for selling costs and discounts based on management’s assessment of the condition and marketability of the collateral. Foreclosed assets held for sale are classified within Level 3 of the valuation hierarchy.

Impaired loans (Collateral Dependent):   Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

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 are classified at September 30, 2019 and December 31, 2018 (dollar amounts in thousands):

Impaired loans:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	1,005	$	1,005
December 31, 2018	$	-	$	-	$	10,428	$	10,428

Foreclosed assets held for sale:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	72	$	72
December 31, 2018	$	-	$	-	$	909	$	909

There were no transfers between valuation levels for any asset during the three months ended September 30, 2019 or 2018. If valuation techniques are deemed necessary, the Company considers those transfers to occur at the end of the period when the assets are valued.

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurement (dollar amounts in thousands):

	Fair Value September 30, 2019		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans (collateral dependent)	$	1,005	Market Comparable	Discount to reflect realizable value	0%	-	59%	(23%)
Foreclosed assets held for sale	$	72	Market Comparable	Discount to reflect realizable value	58%	-	66%	(62%)

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The following tables present estimated fair values of the Company’s financial instruments at September 30, 2019 and December 31, 2018.

	September 30, 2019							December 31, 2018
	Carrying Amount		Fair Value		Hierarchy Level			Carrying Amount		Fair Value		Hierarchy Level
Financial assets:							Financial assets:
Cash and cash equivalents	$	86,421,380	$	86,421,380		1	Cash and cash equivalents	$	34,121,642	$	34,121,642		1
Interest-bearing time deposits at other financial institutions		250,000		250,265		2	Interest-bearing time deposits at other financial institutions		250,000		250,116		2
Federal Home Loan Bank stock		3,157,500		3,157,500		2	Federal Home Loan Bank stock		5,387,200		5,387,200		2
Mortgage loans held for sale		944,969		944,969		2	Mortgage loans held for sale		1,516,849		1,516,849		2
Loans, net		744,022,856		752,524,071		3	Loans, net		778,298,606		783,910,789		3
Interest receivable		3,475,749		3,475,749		2	Interest receivable		3,390,944		3,390,944		2
Financial liabilities:							Financial liabilities:
Deposits		839,988,502		840,446,988		2	Deposits		749,618,822		747,903,071		2
Federal Home Loan Bank advances		50,000,000		50,011,559		2	Federal Home Loan Bank advances		105,300,000		105,325,386		2
Subordinated debentures		15,465,000		15,465,000		3	Subordinated debentures		21,760,829		21,760,829		3
Note payable to Bank		11,200,000		11,200,000		3	Note payable to Bank		5,000,000		5,000,000		3
Interest payable		832,494		832,494		2	Interest payable		821,811		821,811		2
Unrecognized financial instruments (net of contractual value):							Unrecognized financial instruments (net of contractual value):
Commitments to extend credit		-		-		-	Commitments to extend credit		-		-		-
Unused lines of credit		-		-		-	Unused lines of credit		-		-		-

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

General

The primary function of the Company is to monitor and oversee its investment in the Bank. The Company engages in few other activities, and the Company has no significant assets other than its investment in the Bank. As a result, the results of operations of the Company are derived primarily from operations of the Bank. The Bank’s results of operations are primarily dependent on net interest margin, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. The Bank’s income is also affected by the level of its noninterest expenses, such as employee salaries and benefits, occupancy expenses and other expenses. The following discussion reviews material changes in the Company’s financial condition as of September 30, 2019, and the results of operations for the three and nine months ended September 30, 2019 and 2018.

The discussion set forth below, as well as other portions of this Form 10-Q, may contain forward-looking comments. Such comments are based upon the information currently available to management of the Company and management’s perception thereof as of the date of this Form 10-Q. When used in this Form 10-Q, words such as “anticipates,” “estimates,” “believes,” “expects,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Such statements are subject to risks and uncertainties. Actual results of the Company’s operations could materially differ from those forward-looking comments. The differences could be caused by a number of factors or combination of factors including, but not limited to: changes in demand for banking services; changes in portfolio composition; changes in management strategy; increased competition from both bank and non-bank companies; changes in the general level of interest rates; changes in general or local economic conditions; changes in federal or state regulations and legislation governing the operations of the Company or the Bank; and other factors set forth in reports and other documents filed by the Company with the SEC from time to time, including the risk factors described under Item 1A. of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

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Financial Condition

The Company’s total assets increased $51,191,629 (5%) from $965,137,870 as of December 31, 2018, to $1,016,329,499 as of September 30, 2019.

Available-for-sale securities increased $20,087,505 (23%) from $86,266,197 as of December 31, 2018, to $106,353,702 as of September 30, 2019. The Company had purchases of $56,910,103 and an increase in unrealized gains of $3,361,805 offset by sales and principal payments of $39,983,229 when compared to December 31, 2018.

Net loans receivable decreased by $34,275,750 (4%) from $778,298,606 as of December 31, 2018 to $744,022,856  as of September 30, 2019. Year-to-date, multi-family loans increased $3,080,524  (3%), commercial loans decreased $10,631,071 (9%), one-to-four family mortgage loans decreased $10,720,679 (8%) and commercial real estate loans decreased $14,650,370 (5%). Overall, loan balances have decreased due to larger than anticipated loan pay-downs and payoffs. The Company continues to focus its lending efforts in the commercial, owner occupied real estate and small business lending categories, however, during the quarter loan principal paydowns and significant unexpected payoffs outpaced loan originations.

Allowance for loan losses decreased $438,258 (5%) from $7,995,569 as of December 31, 2018 to $7,557,311 as of September 30, 2019. In addition to the provision for loan losses of $200,000 recorded by the Company for the nine months ended September 30, 2019, charge-offs of specific loans (classified as nonperforming at December 31, 2018) exceeded loan recoveries by $639,486. The allowance for loan losses, as a percentage of gross loans outstanding (excluding mortgage loans held for sale), as of September 30, 2019 and December 31, 2018 was 1.00% and 1.02%, respectively. The allowance for loan losses, as a percentage of nonperforming loans outstanding, as of September 30, 2019 and December 31, 2018 was 67.1% and 61.1%, respectively. Management believes the allowance for loan losses is at a level to be sufficient in providing for potential loan losses in the Bank’s existing loan portfolio.

In accordance with GAAP for acquisition accounting, the loans acquired through the Hometown acquisition were recorded at fair value; therefore, there was no allowance associated with these loans. Management continues to evaluate the allowance needed on the acquired loans factoring in the net remaining discount of approximately $1.3 million at September 30, 2019.

Prepaid expenses and other assets increased $2,793,656 (45%) from $6,261,159 as of December 31, 2018 to $9,054,815 as of September 30, 2019. This increase is primarily due an increase of $2,350,906 in partnership interests purchased by the Company for the purpose of gaining low income housing tax credits.

Operating lease right-of-use assets (ROU) of $9,194,850 were recorded during 2019 compared to no amounts recorded as of December 31, 2018. These amounts were recognized due to the Company’s implementation of new lease accounting standards for operating leases further described in Note 8 and Note 11 of the Condensed Consolidated Financial Statements. The recorded assets and liabilities will be amortized over the life of the lease term.

Bank-owned life insurance (BOLI) increased $4,345,651 (22%) from $20,198,074 as of December 31, 2018 to $24,543,725 as of September 30, 2019 primarily due to $4,000,000 in new or additional policies purchased on certain key members of management during the third quarter of 2019.

Deposits increased $90,369,680 (12%) from $749,618,822 as of December 31, 2018, to $839,988,502 as of September 30, 2019. For the nine months ended September 30, 2019, checking and savings accounts increased by $104,780,937 offset by reductions in certificates of deposit amounts of $14,380,120. The increase in checking and savings accounts was due to the Bank’s continued focus to increase core transaction deposits, including retail, commercial and public funds. See also the discussion under Item 3 - “Quantitative and Qualitative Disclosure about Market Risk – Asset/Liability Management.”

35

Federal Home Loan Bank advances decreased $55,300,000 (53%) from $105,300,000 as of December 31, 2018 to $50,000,000 as of September 30, 2019 due to principal reductions from excess funds generated from core deposit growth noted above.

Subordinated debenture balances decreased $6,295,829 (29%) from $21,760,829 as of December 31, 2018 to $15,465,000 as of September 30, 2019 due to redemption of the Hometown Bancshares Capital Trust I debentures during the third quarter of 2019. These debentures became obligations of the Company pursuant to its acquisition of Hometown Bancshares, Inc in 2018. Funds utilized to redeem the debentures were obtained from increasing a note payable with another financial institution by $6,200,000 (124%) from $5,000,000 at December 31, 2018 to $11,200,000 as of September 30, 2019.

Accrued expenses and other liabilities increased $2,966,394 (159%) from $1,868,008 as of December 31, 2018 to $4,834,402 as of September 30, 2019. The majority of this amount is due to mark-to-market adjustments on interest rate swaps, net of tax, reversing gains during the year by $2,752,725 as interest rates have fallen during the majority of 2019 running counter to our hedged position.

Stockholders’ equity (including net unrealized gains and losses on available-for-sale securities and interest rate swaps) increased $3,246,558 from $80,478,592 as of December 31, 2018, to $83,725,150 as of September 30, 2019. The Company’s net income during this period exceeded dividends paid or declared by $5,355,315. Starting in the second quarter of 2019, the Company began repurchasing shares of its common stock under an existing repurchase plan. During the third quarter of 2019, the Company repurchased 90,268 shares of common stock at an average price of $23.85. Additional information on the repurchases during the third quarter can be found below in Part II, Item 2. For the entirity of 2019, the Company has repurchased 103,876 shares of common stock at an average price of $23.73. On a per common share basis, stockholders’ equity increased from $18.18 as of December 31, 2018 to $19.22 as of September 30, 2019.

Average Balances, Interest and Average Yields

The Company’s profitability is primarily dependent upon net interest income, which represents the difference between interest and fees earned on loans and debt and equity securities, and the cost of deposits and borrowings. Net interest income is dependent on the difference between the average balances and rates earned on interest-earning assets and the average balances and rates paid on interest-bearing liabilities. Non-interest income, non-interest expense, and income taxes also impact net income.

36

The following table sets forth certain information relating to the Company’s average consolidated statements of financial condition and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense annualized by the average balance of assets or liabilities, respectively, for the periods shown. Average balances were derived from average daily balances. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yields and costs include fees which are considered adjustments to yields. All dollar amounts are in thousands.

	Three months ended 9/30/2019								Three months ended 9/30/2018
	Average Balance		Interest			Yield / Cost			Average Balance		Interest			Yield / Cost
ASSETS
Interest-earning:
Loans	$	759,961	$	10,430			5.45	%	$	787,638	$	12,774			6.43	%
Investment securities		100,142		735			2.91	%		87,182		524			2.38	%
Other assets		71,773		417			2.31	%		18,257		80			1.74	%
Total interest-earning		931,876		11,582			4.93	%		893,077		13,378			5.94	%
Noninterest-earning		69,711								59,509
	$	1,001,587							$	952,586
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing:
Savings accounts	$	40,310		30			0.30	%	$	42,412		29			0.27	%
Transaction accounts		451,237		1,624			1.43	%		405,230		1,175			1.15	%
Certificates of deposit		227,996		1,226			2.13	%		208,534		622			1.18	%
FHLB advances		50,225		283			2.24	%		88,750		482			2.15	%
Other borrowed funds		9,089		111			4.85	%		5,000		59			4.68	%
Subordinated debentures		17,979		185			4.08	%		21,797		282			5.13	%
Total interest-bearing		796,836		3,459			1.72	%		771,723		2,649			1.36	%
Noninterest-bearing		121,039								103,817
Total liabilities		917,875								875,540
Stockholders’ equity		83,712								77,046
	$	1,001,587							$	952,586
Net earning balance	$	135,040							$	121,354
Earning yield less costing rate							3.21	%							4.58	%
Net interest income, and net yield spread on interest earning assets			$	8,123			3.46	%			$	10,729			4.77	%
Ratio of interest-earning assets to interest-bearing liabilities				117	%							116	%

37

	Nine months ended 9/30/2019								Nine months ended 9/30/2018
	Average Balance		Interest			Yield / Cost			Average Balance		Interest			Yield / Cost
ASSETS
Interest-earning:
Loans	$	769,420	$	31,128			5.41	%	$	759,354	$	29,971			5.28	%
Investment securities		95,578		2,014			2.82	%		86,457		1,466			2.27	%
Other assets		47,004		836			2.38	%		19,358		276			1.91	%
Total interest-earning		912,002		33,978			4.99	%		865,169		31,713			4.90	%
Noninterest-earning		65,362								58,903
	$	977,364							$	924,072
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing:
Savings accounts	$	40,270		92			0.31	%	$	40,325		76			0.25	%
Transaction accounts		426,841		4,651			1.46	%		407,895		3,231			1.06	%
Certificates of deposit		233,878		3,543			2.03	%		198,879		1,661			1.12	%
FHLB advances		53,998		928			2.30	%		77,436		1,221			2.11	%
Other borrowed funds		6,378		243			5.09	%		3,671		63			2.29	%
Subordinated debentures		20,474		773			5.05	%		20,705		729			4.71	%
Total interest-bearing		781,839		10,230			1.75	%		748,911		6,981			1.25	%
Noninterest-bearing		112,282								97,388
Total liabilities		894,121								846,299
Stockholders’ equity		83,243								77,773
	$	977,364							$	924,072
Net earning balance	$	130,163							$	116,258
Earning yield less costing rate							3.24	%							3.65	%
Net interest income, and net yield spread on interest earning assets			$	23,748			3.48	%			$	24,732			3.82	%
Ratio of interest-earning assets to interest-bearing liabilities				117	%							116	%

Results of Operations - Comparison of Three and Nine Month Periods Ended September 30, 2019 and 2018

Net income for the three and nine months ended September 30, 2019 was $2,550,542 and $7,099,405, respectively, compared to $3,934,242 and $4,947,003 for the three and nine months ended September 30, 2018, respectively, which represents a decrease in earnings of $1,383,700 (35%) for the three month period and an increase of $2,152,402 (44%) for the nine month period, respectively. Third quarter comparisons should note that one-time loan accretion income of $2,651,000 due to acquired loans unexpectedly paying off in 2018 was not present in 2019 third quarter income. For year-to-date comparisons, earnings have been positively impacted by higher interest earning balances and the absence of one-time merger costs incurred in 2018 due to the Hometown acquisition.

Net Interest Income

Net interest income for the three and nine months ended September 30, 2019 decreased $2,606,863 (24%) and $985,309 (4%), respectively, when compared to the same periods in 2018. For the three and nine month periods ended September 30, 2019, the average balance of net interest earning assets increased by approximately $13,686,000 and $13,905,000, respectively, more than the average balance of interest-bearing liabilities increased during the same periods in 2018. For the three and nine month periods ended September 30, 2019, the net interest margin decreased 131 basis points to 3.46% and decreased 34 basis points to 3.48%, respectively, when compared to the same periods in 2018.

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Interest Income

Total interest income for the three and nine months ended September 30, 2019 decreased $1,796,254 (13%) and increased $2,264,248 (7%), respectively, when compared to the same periods in 2018. For the three and nine month periods ended September 30, 2019 compared to the same periods in 2018, the average yield on interest earning assets decreased 101 basis points to 4.93% and increased nine basis points to 4.99%. The decrease compared to the prior year quarter is primarily due to $2,651,000 in loan accretion being recognized on loans acquired from Hometown in 2018 compared to $315,000 in the same period of 2019. Average balances of interest earning assets increased approximately $38,799,000 for the three-month period and approximately $46,833,000 for the nine-month period, respectively. The increase in each period is primarily due to cash and investment balances being funded by increased core deposit base growth and higher yields in each asset class compared to the same periods in 2018. For the three-month periods, the yield on loans decreased 98 basis points to 5.45% mostly due to the absence of the beforementioned loan accretion income in 2019 versus 2018.

Interest Expense

Total interest expense for the three and nine months ended September 30, 2019 increased $810,609 (31%) and $3,249,557 (47%), respectively, when compared to the three and nine months ended September 30, 2018. For the three and nine month periods ended September 30, 2019 compared to the same periods in 2018, the average cost of interest bearing liabilities increased 36 basis points to 1.72% and increased 50 basis points to 1.75%, while the average balance of interest bearing liabilities increased approximately $25,113,000 for the three month period and approximately $32,928,000 for the nine month period. The increases are primarily due to the planned growth in core deposits and higher offering rates on nearly all deposit products as many institutions in our market areas are facing liquidity challenges which has significantly increased competition for deposits. Partially offsetting the increases noted above is reduced interest expense on FHLB borrowings due to a reduction in balances carried throughout 2019. The Company intends to continue to utilize a cost-effective mix of retail and commercial deposits along with non-core, wholesale funding.

Provision for Loan Losses

Provisions for loan losses are charged or credited to earnings to bring the total allowance for loan losses to a level considered adequate by the Company to provide for potential loan losses in the existing loan portfolio. When making its assessment, the Company considers prior loss experience, volume and type of lending, local banking trends and impaired and past due loans in the Company’s loan portfolio. In addition, the Company considers general economic conditions and other factors related to collectability of the Company’s loan portfolio.

Based on its internal analysis and methodology, management recorded a provision for loan loss expense of $100,000 for the three-month period and $200,000 for the nine-month period ended September 30, 2019, respectively, compared to $200,000 and $925,000 for the same periods in 2018. The Bank will continue to monitor its allowance for loan losses and make future additions based on economic and regulatory conditions. Management may need to increase the allowance for loan losses through charges to the provision for loan losses if anticipated growth in the Bank’s loan portfolio increases or other circumstances warrant.

In accordance with GAAP for acquisition accounting, the loans acquired through the acquisition of Hometown were recorded at fair value; therefore, there was no allowance associated with Hometown’s loans at acquisition. Management continues to evaluate the allowance needed on the acquired Hometown loans factoring in the net remaining discount of $1.3 million at September 30, 2019.

Although the Bank maintains its allowance for loan losses at a level which it considers to be sufficient to provide for potential loan losses in its existing loan portfolio, there can be no assurance that future loan losses will not exceed internal estimates.  In addition, the amount of the allowance for loan losses is subject to review by regulatory agencies which can order the establishment of additional loan loss provisions.

39

Non-Interest Income

Non-interest income increased $475,372 (33%) and $700,194 (15%) for the three and nine months ended September 30, 2019 when compared to the same time periods ended September 30, 2018. For the periods, the Company increased income recognized from the sale of mortgage loans of $127,525 (21%) and $118,970 (7%), increased income from sales of Small Business Administration (“SBA”) loans of $37,432 (14%) and $138,767 (21%), reduced losses on the sale of foreclosed assets of $325,163 (71%) and $225,217 (67%), realized gains on the sale of investment securities increased by $32,378 (3,659%) and 87,846 (1,086%) and debit card and interchange related income increased by $5,424 (2%) and $175,102 (22%) when compared to the same three and nine month periods in 2018. Offsetting the increases, were decreased service charge revenue of $33,433 (7%) and $81,840 (6%), respectively, when compared to the same three and nine month periods in 2018.

Non-Interest Expense

Non-interest expenses increased $287,607 (4%) and decreased $1,740,843 (8%) for the three and nine months ended September 30, 2019 when compared to the same periods in 2018. One-time merger costs of $150,877 and $3,570,927 were incurred during the three and nine months ended September 30, 2018, which is the primary reason for the increased expenses for the periods in 2018. Additionally, many of the year-to-date comparisons noted below show significant variances due to the merger occurring on April 2, 2018. Thus, 2019 has nine months of recurring expenses whereas 2018 only has six months of such expenses. Significant categories of non-interest expense are as follows:

Salaries and employee benefits increased $256,820 (7%) and $893,845 (8%) when compared to the same three and nine month periods in 2018, which is primarily due to a greater number of personnel following the Hometown acquisition coupled with increased staffing to fill open positions.

Occupancy expenses increased $36,540 (3%) and $468,643 (16%), respectively, when compared to the prior year periods. This is primarily due to the expenses related to additional leasehold improvement expenses and facility upgrades incurred after the Hometown acquisition.

Professional fees increased $102,502 (59%) and $236,769 (49%) when compared to the same three and nine month periods in 2018 primarily in connection with additional services provided due the redemption of a trust preferred issuance, new financial reporting standard implementation and increased attestation work due to the Company recently exceeding thresholds to qualify as an “accelerated filer” with the U.S. Securities and Exchange Commission.

Provision for Income Taxes

The provision for income taxes decreased by $935,398 (67%) and increased $28,326 (2%) for the three and nine months ended September 30, 2019 when compared to the same periods of 2018. The decrease in the provision for income taxes for the quarter is primarily due to the increased income in the prior year quarter due to loan accretion income causing an increase in taxable income.     

Nonperforming Assets

The allowance for loan losses is calculated based upon an evaluation of pertinent factors underlying the various types and quality of the Bank’s existing loan portfolio. When making such evaluation, management considers such factors as the repayment status of its loans, the estimated net realizable value of the underlying collateral, borrowers’ intent (to the extent known by the Bank) and ability to repay the loan, local economic conditions and the Bank’s historical loss ratios. The allowance for loan losses, as a percentage of nonperforming loans outstanding, as of September 30, 2019 and December 31, 2018 was 67.1% and 61.1%, respectively. Total loans classified as substandard, doubtful or loss as of September 30, 2019, were $20,090,000 or 1.98% of total assets as compared to $24,714,000 or 2.56% of total assets at December 31, 2018. Management considered nonperforming and total classified loans in evaluating the adequacy of the Bank’s allowance for loan losses.

40

The ratio of nonperforming assets to total assets is another useful tool in evaluating exposure to credit risk. Nonperforming assets of the Bank are comprised of nonperforming loans (including troubled debt restructurings) and assets which have been acquired as a result of foreclosure or deed-in-lieu of foreclosure. All dollar amounts are in thousands.

	9/30/2019			12/31/2018			12/31/2017
Nonperforming loans	$	9,780		$	13,082		$	9,961
Real estate acquired in settlement of loans		1,491			1,127			283
Total nonperforming assets	$	11,271		$	14,209		$	10,244
Total nonperforming assets as a percentage of total assets		1.11	%		1.47	%		1.29	%
Allowance for loan losses	$	7,557		$	7,996		$	7,107
Allowance for loan losses as a percentage of gross loans		1.00	%		1.02	%		1.12	%

Liquidity and Capital Resources

Liquidity refers to the ability to manage future cash flows to meet the needs of depositors and borrowers and fund operations. Maintaining appropriate levels of liquidity allows the Company to have sufficient funds available for customer demand for loans, withdrawal of deposit balances and maturities of deposits and other liabilities. The Company’s primary sources of liquidity include cash and cash equivalents, customer deposits and FHLB borrowings. The Company also has established secured borrowing lines available from the Federal Reserve Bank which is considered a secondary source of funds.

The Company’s most liquid assets are cash and cash equivalents, which are cash on hand, amounts due from financial institutions, and certificates of deposit with other financial institutions that have an original maturity of three months or less. The levels of such assets are dependent on the Bank’s operating, financing, and investment activities at any given time. The Company’s cash and cash equivalents totaled $86,421,380 as of September 30, 2019 and $34,121,642 as of December 31, 2018, representing an increase of $52,299,738. The variations in levels of cash and cash equivalents are influenced by many factors but primarily loan originations and payments and deposit fluctuations.

In July 2013, the Federal Reserve issued a final rule that revised its risk-based and leverage capital requirements for banking organizations to align them with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act (“Basel III Rule”). The Basel III Rule implemented a revised definition of regulatory capital, a new common equity tier 1 (“CET1”) minimum capital requirement, and a higher minimum tier1 capital requirement. The final rules also made changes to the prompt corrective action framework for depository institutions by incorporating the new minimum capital ratios into the framework, introducing the CET1 capital measure, and aligning the definition of tangible equity for purposes of the critically undercapitalized prompt corrective action category with the definition of tier 1 capital. Under the Basel III Rule, the following three components comprise a banking organization’s “regulatory capital”: (i) “CET1 capital,” which is predominantly comprised of retained earnings and common stock instruments that meet certain criteria and related surplus (net of any treasury stock), AOCI (for organizations that do not make opt-out elections), and CET1 minority interest, which are subject to certain restrictions; (ii) “Additional Tier 1 Capital,” which consists of non-cumulative perpetual preferred stock and similar instruments meeting specified eligibility criteria and related surplus, Tier 1 minority interests not included in CET1 capital, and “TARP” preferred stock and other instruments issued under the Emergency Economic Stabilization Act of 2008; and (iii) “Tier 2 Capital,” which includes instruments such as subordinated debt that has a minimum original maturity of at least five years and is subordinated to the claims of depositors and general creditors, total capital minority interest not included in Tier 1 capital and limited amounts of a banking organization’s allowance for loan and lease losses (ALLL), less applicable regulatory adjustments and deductions.

41

As of January 1, 2019, the Basel III Rule is fully phased-in and requires the  Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% "capital conservation buffer" effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0% upon full implementation); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation); (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer effectively resulting in a minimum total capital ratio of 10.5% upon full implementation); and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.

Beginning January 1, 2016, the capital conservation buffer requirement was phased in at 0.625% of risk-weighted assets, increasing by the same amount each year until fully implemented at 2.5% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

The Bank is classified as “well capitalized” under current regulatory guidelines. As of September 30, 2019, the Bank’s common equity Tier 1 ratio was 12.09%, the Bank’s Tier 1 leverage ratio was 10.16%, its Tier 1 risk-based capital ratio was 12.09% and the Bank’s total risk-based capital ratio was 12.99% - all exceeding the minimums of 7.0%, 6.0%, 8.5% and 10.5%, respectively, as of September 30, 2019.

On October 29, 2019, federal banking regulators issued a final ruling that simplifies the capital requirements for community banks which greatly reduces the regulatory burden on financial institutions with less than $10 billion in total consolidated assets, leverage ratios greater than nine percent and limited off-balance sheet trading assets, liabilities and other off-balance sheet exposures. The combined agencies of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and the Comptroller of the Currency, approved the community bank leverage framework (CBLR) to simplify and clarify a number of complex aspects of current regulatory capital rules. The capital rule provisions may be adopted by institutions meeting the framework criteria during the first quarter of 2020.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management

The goal of the Bank’s asset/liability policy is to manage interest rate risk so as to maximize net interest income over time in changing interest rate environments. Management monitors the Bank’s net interest spreads (the difference between yields received on assets and paid on liabilities) and, although constrained by market conditions, economic conditions, and prudent underwriting standards, the Bank offers deposit rates and loan rates designed to maximize net interest income. Management also attempts to fund the Bank’s assets with liabilities of a comparable duration to minimize the impact of changing interest rates on the Bank’s net interest income. Since the relative spread between financial assets and liabilities is constantly changing, the Bank’s current net interest income may not be an indication of future net interest income.

As a part of its asset and liability management strategy and throughout the past several years, the Bank has continued to emphasize the origination of short-term commercial real estate, commercial business and consumer loans, while originating fixed-rate, one- to four-family residential loans primarily for immediate resale in the secondary market.

The Bank constantly monitors its deposits in an effort to decrease their interest rate sensitivity. Rates of interest paid on deposits at the Bank are priced competitively in order to meet the Bank’s asset/liability management objectives and spread requirements. The Bank believes, based on historical experience, that a substantial portion of such accounts represents non-interest rate sensitive core deposits.

42

Interest Rate Sensitivity Analysis

The following table sets forth as of September 30, 2019 management’s estimates of the projected changes in net portfolio value (“NPV”) in the event of 100 and 200 basis point (“BP”) instantaneous and permanent increases and decreases in market interest rates. Dollar amounts are expressed in thousands.

BP Change	Estimated Net Portfolio Value								NPV as % of PV of Assets
in Rates	$ Amount		$ Change			% Change			NPV Ratio			Change
+200	$	124,970	$	20,573			20	%		12.60	%		2.24	%
+100		116,499		12,102			12	%		11.65	%		1.28	%
NC		104,397		-			0	%		10.36	%		0.00	%
-100		85,041		(19,356	)		-19	%		8.41	%		-1.96	%
-200		79,597		(24,800	)		-24	%		7.85	%		-2.51	%

Computations of prospective effects of hypothetical interest rate changes are based on an internally generated model using actual maturity and repricing schedules for the Bank’s loans and deposits, and are based on numerous assumptions, including relative levels of market interest rates, loan repayments and deposit run-offs, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Bank may undertake in response to changes in interest rates. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity Analysis section of Quantitative and Qualitative Disclosures About Market Risk included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Management cannot predict future interest rates or their effect on the Bank’s NPV in the future. Certain shortcomings are inherent in the method of analysis presented in the computation of NPV. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in differing degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have an initial fixed rate period typically from one to five years, and over the remaining life of the asset changes in the interest rate are restricted. In addition, the proportion of adjustable-rate loans in the Bank’s portfolio could decrease in future periods due to refinancing activity if market interest rates remain steady in the future. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in the table. Finally, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an interest rate increase.

The Bank’s Board of Directors (the “Board”) is responsible for reviewing the Bank’s asset and liability management policies. The Board meets quarterly to review interest rate risk and trends, as well as liquidity and capital ratios and requirements. The Bank’s management is responsible for administering the policies and determinations of the Board with respect to the Bank’s asset and liability goals and strategies.

Item 4. Controls and Procedures 

(a) The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

During the quarter ended September 30, 2019, the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2019.

43

(b) There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1.     Legal Proceedings

None.

Item 1A. Risk Factors

Not applicable.

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

ISSUER PURCHASES OF EQUITY SECURITIES

The Company has a repurchase plan which was announced on August 20, 2007. This plan authorizes the purchase by the Company of up to 350,000 shares of the Company’s common stock. There is no expiration date for this plan. There are no other repurchase plans in effect at this time. The Company repurchased 90,268 shares at an average price of $23.85 during the quarter ended September 30, 2019. As of September 30, 2019, the repurchase plan has 48,672 shares remaining.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2019 - July 31, 2019		28,878		23.62		28,878		110,062
August 1, 2019 - August 31, 2019		36,733		23.82		36,733		73,329
September 1, 2019 - September 30, 2019		24,657		24.12		24,657		48,672

Item 3.     Defaults Upon Senior Securities

Not applicable.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

None

Item 6.     Exhibits

11.	Statement re: computation of per share earnings (set forth in “Note 10: Income Per Common Share” of the Notes to Condensed Consolidated Financial Statement (unaudited))
31(i).1	Certification of the Principal Executive Officer pursuant to Rule 13a -14(a) of the Exchange Act
31(i).2	Certification of the Principal Financial Officer pursuant to Rule 13a - 14(a) of the Exchange Act
32	Officer certifications pursuant to 18 U.S.C. Section 1350
101	The following materials from Guaranty Federal Bancshares, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Income (unaudited), (iii) Condensed Consolidated Statements of Comprehensive Income (unaudited), (iv) Condensed Consolidated Statement of Stockholders’ Equity (unaudited), (v) the Condensed Consolidated Statements of Cash Flows (unaudited), and (vi) related notes.*

*Pursuant to Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

44

SIGNATURES

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

Guaranty Federal Bancshares, Inc.
Signature and Title	Date
/s/ Shaun A. Burke	November 8, 2019
Shaun A. Burke
President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
/s/ Carter M. Peters	November 8, 2019
Carter M. Peters
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

45

EX-31.1

Exhibit 31(i).1

Certification of the Principal Executive Officer

Rule 13a – 14(a) of the Securities Exchange Act of 1934

I, Shaun A. Burke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Guaranty Federal Bancshares, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: November 8, 2019	/s/ Shaun A. Burke
	Shaun A. Burke
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31(i).2

Certification of the Principal Financial Officer

Rule 13a – 14(a) of the Securities Exchange Act of 1934

I, Carter Peters, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Guaranty Federal Bancshares, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: November 8, 2019	/s/ Carter M. Peters
	Carter M. Peters
	Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

OFFICER CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350*

In connection with the Quarterly Report of Guaranty Federal Bancshares, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Shaun A. Burke, President and Chief Executive Officer and Carter Peters, Executive Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Shaun A. Burke	/s/ Carter M. Peters
Shaun A. Burke	Carter M. Peters
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)
November 8, 2019	November 8, 2019

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Note 10 - Income Per Common Share

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

10:

Income Per Common Share

	For three months ended September 30, 2019						For nine months ended September 30, 2019
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	2,550,542		4,396,241	$	0.58	$	7,099,405		4,429,066	$	1.60
Effect of Dilutive Securities				58,091						56,532
Diluted Income Per Common Share	$	2,550,542		4,454,332	$	0.57	$	7,099,405		4,485,598	$	1.58

	For three months ended September 30, 2018						For nine months ended September 30, 2018
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	3,934,242		4,418,196	$	0.89	$	4,947,003		4,406,830	$	1.12
Effect of Dilutive Securities				72,389						72,058
Diluted Income Per Common Share	$	3,934,242		4,490,585	$	0.88	$	4,947,003		4,478,888	$	1.10

XML

Note 6 - Accounting for Certain Loans Acquired

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Accounting for Certain Loans and Debt Securities Acquired in Transfer Disclosure [Text Block]

Note

6:

Accounting for Certain Loans Acquired

The Company acquired loans during the quarter ended

June 30, 2018.

At acquisition, certain acquired loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would

not

be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will

not

be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date

may

include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC

310

-

30

) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is

not

carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.  

The carrying amount of purchased credit impaired loans are included in the balance sheet amounts of loans receivable at

September 30, 2019

and

December 31, 2018.

The amount of these loans is shown below:

	September 30,		December 31,
	2019		2018
	(In Thousands)		(In Thousands)
Real estate - commercial	$	3,165	$	3,358
Commercial loans		253		296
Consumer and other loans		290		329
Outstanding balance	$	3,708	$	3,983
Carrying amount, net of fair value adjustment of $680 at September 30, 2019 and $810 at December 31, 2018	$	3,028	$	3,173

Changes in the carrying amount of the accretable yield for all purchased credit impaired loans were as follows for the

three

months and

nine

months ended

September 30, 2019:

	Three months ended			Nine months ended
	September 30,			September 30,
	2019			2019
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	183		$	265
Additions		-			-
Accretion		(48	)		(130	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Balance at end of period	$	135		$	135

During the

three

months ended

September 30, 2019,

the Company did

not

increase or reverse the allowance for loan losses related to these purchased credit impaired loans.

XML

Note 2 - Principles of Consolidation

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

2:

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Guaranty Bank (the “Bank”). All significant intercompany transactions and balances have been eliminated in consolidation.

XML

Note 3 - Acquisition - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($)	Apr. 02, 2018	Sep. 30, 2019	Dec. 31, 2018
Goodwill		$ 1,434,982	$ 1,434,982
Hometown Bancshares, Inc. [Member]
Cash and Due From Banks	$ 7,083,000
Investment Securities	7,521,000
Loans	143,919,000
Allowance for Loan Losses
Net Loans	143,919,000
Fixed Assets	10,066,000
Foreclosed Assets held for sale	1,247,000
Core Deposit Intangible	3,520,000
Other Assets	6,609,000
Total Assets Acquired	179,965,000
Deposits	161,248,000
Federal Home Loan Bank advances	2,000,000
Securities Sold Under Agreements to Repurchase	2,159,000
Other borrowings	3,000,000
Subordinated debentures	6,362,000
Other Liabilities	2,003,000
Total Liabilities Assumed	176,772,000
Total Liabilities and Stockholders' Equity Assumed	176,772,000
Net Assets Acquired	3,193,000
Purchase Price	4,628,000
Goodwill	1,435,000		$ 1,400,000
Hometown Bancshares, Inc. [Member] | Acquiree Reported Value [Member]
Cash and Due From Banks	7,083,000
Investment Securities	7,521,000
Loans	150,390,000
Allowance for Loan Losses	(2,348,000)
Net Loans	148,042,000
Fixed Assets	9,268,000
Foreclosed Assets held for sale	1,647,000
Core Deposit Intangible
Other Assets	4,146,000
Total Assets Acquired	177,707,000
Deposits	161,001,000
Federal Home Loan Bank advances	2,000,000
Securities Sold Under Agreements to Repurchase	2,159,000
Other borrowings	3,000,000
Subordinated debentures	6,186,000
Other Liabilities	2,003,000
Total Liabilities Assumed	176,349,000
Common Stock	231,000
Capital Surplus	18,936,000
Retained Earnings	(17,587,000)
Accumulated Other Comprehensive Loss	(222,000)
Treasury Stock
Total Stockholders' Equity Assumed	1,358,000
Total Liabilities and Stockholders' Equity Assumed	177,707,000
Hometown Bancshares, Inc. [Member] | Acquisition, Fair Value Adjustments [Member]
Cash and Due From Banks
Investment Securities
Loans	(6,471,000)
Allowance for Loan Losses	2,348,000
Net Loans	(4,123,000)
Fixed Assets	798,000
Foreclosed Assets held for sale	(400,000)
Core Deposit Intangible	3,520,000
Other Assets	2,463,000
Total Assets Acquired	2,258,000
Deposits	247,000
Federal Home Loan Bank advances
Securities Sold Under Agreements to Repurchase
Other borrowings
Subordinated debentures	176,000
Other Liabilities
Total Liabilities Assumed	423,000
Common Stock	(231,000)
Capital Surplus	(18,936,000)
Retained Earnings	17,587,000
Accumulated Other Comprehensive Loss	222,000
Treasury Stock
Total Stockholders' Equity Assumed	(1,358,000)
Total Liabilities and Stockholders' Equity Assumed	$ (935,000)

XML

Note 4 - Securities - Securities in a Continuous Unrealized Loss Position (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Securities, continuous unrealized loss position, less than 12 months, fair value	$ 16,197,612	$ 13,452,347
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(91,096)	(180,056)
Securities, continuous unrealized loss position, 12 months or more, fair value	4,429,589	56,982,249
Securities, continuous unrealized loss position, 12 months or more, unrealized losses	(96,895)	(1,767,913)
Securities, continuous unrealized loss position, fair value	20,627,201	70,434,596
Securities, continuous unrealized loss position, unrealized losses	(187,991)	(1,947,969)
US Government Agencies Debt Securities [Member]
Securities, continuous unrealized loss position, less than 12 months, fair value	1,490,680
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(9,071)
Securities, continuous unrealized loss position, 12 months or more, fair value
Securities, continuous unrealized loss position, 12 months or more, unrealized losses
Securities, continuous unrealized loss position, fair value	1,490,680
Securities, continuous unrealized loss position, unrealized losses	(9,071)
US States and Political Subdivisions Debt Securities [Member]
Securities, continuous unrealized loss position, less than 12 months, fair value	1,124,104	6,324,750
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(22,646)	(67,774)
Securities, continuous unrealized loss position, 12 months or more, fair value		23,223,221
Securities, continuous unrealized loss position, 12 months or more, unrealized losses		(642,935)
Securities, continuous unrealized loss position, fair value	1,124,104	29,547,971
Securities, continuous unrealized loss position, unrealized losses	(22,646)	(710,709)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities, continuous unrealized loss position, less than 12 months, fair value	8,979,065	7,127,597
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(46,080)	(112,282)
Securities, continuous unrealized loss position, 12 months or more, fair value	4,429,589	33,759,028
Securities, continuous unrealized loss position, 12 months or more, unrealized losses	(96,895)	(1,124,978)
Securities, continuous unrealized loss position, fair value	13,408,654	40,886,625
Securities, continuous unrealized loss position, unrealized losses	(142,975)	$ (1,237,260)
Corporate Debt Securities [Member]
Securities, continuous unrealized loss position, less than 12 months, fair value	2,540,521
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(13,115)
Securities, continuous unrealized loss position, 12 months or more, fair value
Securities, continuous unrealized loss position, 12 months or more, unrealized losses
Securities, continuous unrealized loss position, fair value	2,540,521
Securities, continuous unrealized loss position, unrealized losses	(13,115)
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Securities, continuous unrealized loss position, less than 12 months, fair value	2,063,242
Securities, continuous unrealized loss position, less than 12 months, unrealized losses	(184)
Securities, continuous unrealized loss position, 12 months or more, fair value
Securities, continuous unrealized loss position, 12 months or more, unrealized losses
Securities, continuous unrealized loss position, fair value	2,063,242
Securities, continuous unrealized loss position, unrealized losses	$ (184)

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Note 9 - Benefit Plans (Details Textual) - USD ($)		1 Months Ended	9 Months Ended
	Mar. 29, 2017	Mar. 31, 2019	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value			$ 243,769	$ 267,366
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value			67,270	452,100
Share Price	$ 20.48	$ 23.85
Share-based Payment Arrangement, Expense			$ 535,731	493,249
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			15,434
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total			$ 407,314
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		5,502
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Restricted Stock or Unit Expense			$ 97,241	$ 103,926
Restricted Stock [Member] | Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			9,932	6,986
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years	3 years
Restricted Stock or Unit Expense			$ 151,437	$ 135,810
Restricted Stock Units (RSUs) [Member] | Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	55,823
Restricted Stock or Unit Expense			$ 290,568	$ 253,513
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Incentive Award Level, Threshold, Percentage	25.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Incentive Award Level, Target, Percentage	50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Maximum Incentive Award Level, Percentage	100.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Incentive Award Level, Weight, Total Assets, Percentage	50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Incentive Award Level, Weight, Return on Average Assets, Percentage	50.00%

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Note 8 - Leases (Details Textual) - USD ($)	Sep. 30, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating Lease, Right-of-Use Asset	$ 9,194,850	$ 9,473,587	$ 10,100,000
Operating Lease, Liability, Total	9,236,695	9,490,385	$ 10,100,000
Finance Lease, Right-of-Use Asset		453,485
Finance Lease, Liability, Total	$ 399,046	$ 453,485
Minimum [Member]
Lessee, Operating Lease, Renewal Term	1 year
Lessee, Finance Lease, Renewal Term	1 year
Maximum [Member]
Lessee, Operating Lease, Renewal Term	20 years
Lessee, Finance Lease, Renewal Term	20 years

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 7,099,405	$ 4,947,003
Items not requiring (providing) cash:
Deferred income taxes	(64,536)	706,286
Depreciation	1,427,906	1,096,490
Lease amortization	41,845
Provision for loan losses	200,000	925,000
Gain on sale of Small Business Administration loans	(798,763)	(659,996)
Gain on sale of mortgage loans held for sale and investment securities	(1,790,595)	(1,583,779)
Loss on sale of foreclosed assets	44,159	308,811
Gain on sale of premises and equipment	(6,069)
Amortization of deferred income, premiums and discounts	313,686	453,575
Amortization of intangible assets	357,750	314,286
Stock award plan expense	521,323	276,391
Accretion of purchase accounting adjustments	(1,281,313)	(3,282,074)
Origination of loans held for sale	(24,039,578)	(52,789,116)
Proceeds from sale of loans held for sale	26,322,296	55,341,150
Increase in cash surrender value of bank owned life insurance	(345,651)	(342,416)
Changes in:
Accrued interest receivable	(84,805)	(953,963)
Prepaid expenses and other assets	(2,183,001)	6,203,190
Accounts payable and accrued expenses	1,850,394	(1,441,136)
Income taxes receivable/payable	507,448	(8,972)
Net cash provided by operating activities	8,091,901	9,510,730
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of loans	6,445,267	9,489,176
Net change in loans	28,608,984	(13,591,488)
Principal payments on available-for-sale securities	4,947,415	12,202,207
Principal payments on held-to-maturity securities	11,728	3,735
Purchase of premises and equipment	(887,490)	(2,581,491)
Net cash received for acquisition		2,455,964
Purchase of available-for-sale securities	(56,910,103)	(25,151,079)
Proceeds from sale of available-for-sale securities	35,035,814	13,602,508
Purchase of bank owned life insurance	(4,000,000)
Redemption (purchase) of FHLB stock	2,229,700	(445,700)
Purchase of tax credit investments	(3,168,435)	(3,617,366)
Proceeds from sale of foreclosed assets held for sale	507,969	187,468
Net cash provided by (used in) investing activities	12,820,849	(7,446,066)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid	(1,744,091)	(1,598,016)
Net increase in demand deposits, NOW accounts and savings accounts	104,780,937	69,132,414
Net decrease in certificates of deposit	(14,380,120)	(76,871,838)
Net decrease of securities sold under agreements to repurchase		(2,159,000)
Proceeds from FHLB advances	93,965,000	470,835,000
Repayments of FHLB advances	(149,265,000)	(470,435,000)
Proceeds from issuance of notes payable	7,200,000	5,000,000
Repayments of notes payable	(1,000,000)	(3,000,000)
Repayment of Hometown Bancshares subordinated debentures	(6,186,000)
Advances from borrowers for taxes and insurance	408,630	550,169
Stock options exercised	72,220	286,467
Treasury stock purchased	(2,464,588)
Net cash provided by (used in) financing activities	31,386,988	(8,259,804)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	52,299,738	(6,195,140)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	34,121,642	37,406,930
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 86,421,380	$ 31,211,790

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Note 5 - Loans and Allowance for Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Valuation allowance	$ 1,017		$ 1,612
Loans recorded balance	16,136		20,552
Loans unpaid principal	17,369		21,870
Loans average investment in impaired loans	18,075	$ 14,023
Loans interest income recognized	5	71
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans without a specific valuation allowance, recorded balance	943		2
Loans without a specific valuation allowance, unpaid principal	943		2
Loans with a specific valuation allowance, recorded balance	1,224		4,518
Loans with a specific valuation allowance, unpaid principal	1,224		4,518
Valuation allowance	202		573
Loans recorded balance	2,167		4,520
Loans unpaid principal	2,167		4,520
Loans without a specific valuation allowance, average investment in impaired loans	1,046	1,649
Loans without a specific valuation allowance, interest income recognized	1
Loans with a specific valuation allowance, average investment in impaired loans	1,970	2,671
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	3,016	4,320
Loans interest income recognized	1
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans without a specific valuation allowance, recorded balance	5,930		5,952
Loans without a specific valuation allowance, unpaid principal	5,930		5,952
Loans with a specific valuation allowance, recorded balance
Loans with a specific valuation allowance, unpaid principal
Valuation allowance
Loans recorded balance	5,930		5,952
Loans unpaid principal	5,930		5,952
Loans without a specific valuation allowance, average investment in impaired loans	5,933	1,006
Loans without a specific valuation allowance, interest income recognized		25
Loans with a specific valuation allowance, average investment in impaired loans		666
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	5,933	1,672
Loans interest income recognized		25
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans without a specific valuation allowance, average investment in impaired loans		1,525
Loans without a specific valuation allowance, interest income recognized
Loans with a specific valuation allowance, average investment in impaired loans	3,866	2,774
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	3,866	4,299
Loans interest income recognized
Real Estate, Construction [Member]
Loans without a specific valuation allowance, recorded balance
Loans without a specific valuation allowance, unpaid principal
Loans with a specific valuation allowance, recorded balance	3,815		4,088
Loans with a specific valuation allowance, unpaid principal	5,048		5,321
Valuation allowance	554		552
Loans recorded balance	3,815		4,088
Loans unpaid principal	5,048		5,321
Commercial Real Estate Portfolio Segment [Member]
Loans without a specific valuation allowance, recorded balance	2,921		3,138
Loans without a specific valuation allowance, unpaid principal	2,921		3,138
Loans with a specific valuation allowance, recorded balance	162		1,232
Loans with a specific valuation allowance, unpaid principal	162		1,317
Valuation allowance	24		106
Loans recorded balance	3,083		4,370
Loans unpaid principal	3,083		4,455
Loans without a specific valuation allowance, average investment in impaired loans	3,353	2,383
Loans without a specific valuation allowance, interest income recognized	4	46
Loans with a specific valuation allowance, average investment in impaired loans	657	81
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	4,010	2,464
Loans interest income recognized	4	46
Commercial Portfolio Segment [Member]
Loans without a specific valuation allowance, recorded balance	25		216
Loans without a specific valuation allowance, unpaid principal	25		216
Loans with a specific valuation allowance, recorded balance	641		1,062
Loans with a specific valuation allowance, unpaid principal	641		1,062
Valuation allowance	214		363
Loans recorded balance	666		1,278
Loans unpaid principal	666		1,278
Loans without a specific valuation allowance, average investment in impaired loans	161	658
Loans without a specific valuation allowance, interest income recognized
Loans with a specific valuation allowance, average investment in impaired loans	702	457
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	863	1,115
Loans interest income recognized
Consumer and Other Loans [Member]
Loans without a specific valuation allowance, recorded balance	363		225
Loans without a specific valuation allowance, unpaid principal	363		225
Loans with a specific valuation allowance, recorded balance	112		119
Loans with a specific valuation allowance, unpaid principal	112		119
Valuation allowance	23		18
Loans recorded balance	475		344
Loans unpaid principal	475		$ 344
Consumer Portfolio Segment [Member]
Loans without a specific valuation allowance, average investment in impaired loans	268	37
Loans without a specific valuation allowance, interest income recognized
Loans with a specific valuation allowance, average investment in impaired loans	119	116
Loans with a specific valuation allowance, interest income recognized
Loans average investment in impaired loans	387	153
Loans interest income recognized

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Condensed Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Interest Income
Loans	$ 10,429,973	$ 12,773,881	$ 31,128,087	$ 29,971,163
Investment securities	735,044	523,736	2,013,548	1,466,036
Other	416,604	80,258	835,929	276,117
	11,581,621	13,377,875	33,977,564	31,713,316
Interest Expense
Deposits	2,880,067	1,825,559	8,285,507	4,967,743
FHLB advances	282,845	481,968	928,131	1,221,312
Subordinated debentures	185,202	282,393	773,325	728,954
Other	111,364	58,949	243,385	62,782
	3,459,478	2,648,869	10,230,348	6,980,791
Net Interest Income	8,122,143	10,729,006	23,747,216	24,732,525
Provision for loan losses	100,000	200,000	200,000	925,000
Net Interest Income After Provision for Loan Losses	8,022,143	10,529,006	23,547,216	23,807,525
Noninterest Income
Service charges	442,051	475,484	1,262,821	1,344,661
Net gain (loss) on sale of investment securities	31,493	(885)	79,756	(8,090)
Gain on sale of mortgage loans held for sale	722,909	595,384	1,710,839	1,591,869
Gain on sale of Small Business Administration loans	301,187	263,755	798,763	659,996
Net loss on foreclosed assets	(134,145)	(459,308)	(113,279)	(338,496)
Other income	573,635	587,328	1,695,903	1,484,669
	1,937,130	1,461,758	5,434,803	4,734,609
Noninterest Expense
Salaries and employee benefits	4,144,402	3,887,582	12,056,592	11,162,747
Occupancy	1,149,242	1,112,702	3,389,417	2,920,774
FDIC deposit insurance premiums	40,000	101,762	257,628	296,897
Data processing	368,374	328,692	1,177,515	1,095,584
Advertising	102,500	131,250	402,500	397,150
Merger costs		150,877	34,011	3,570,927
Amortization of core deposit intangible	119,250	94,286	357,750	314,286
Other expense	1,029,688	858,698	2,948,085	2,605,976
	6,953,456	6,665,849	20,623,498	22,364,341
Income Before Income Taxes	3,005,817	5,324,915	8,358,521	6,177,793
Provision for Income Taxes	455,275	1,390,673	1,259,116	1,230,790
Net Income Available to Common Shareholders	$ 2,550,542	$ 3,934,242	$ 7,099,405	$ 4,947,003
Basic Income Per Common Share (in dollars per share)	$ 0.58	$ 0.89	$ 1.60	$ 1.12
Diluted Income Per Common Share (in dollars per share)	$ 0.57	$ 0.88	$ 1.58	$ 1.10

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Note 6 - Accounting for Certain Loans Acquired - Carrying Amount of Certain Loans Acquired in Transfer (Details) (Parentheticals) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Fair value adjustment	$ 680	$ 810

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Note 13 - Disclosures about Fair Value of Assets and Liabilities - Fair Value Quantitative Information (Details) - Fair Value, Inputs, Level 3 [Member] - Valuation, Market Approach [Member] $ in Thousands	Sep. 30, 2019 USD ($)
Impaired loans, fair value	$ 1,005
Foreclosed assets held for sale, fair value	$ 72
Minimum [Member]
Impaired loans (collateral dependent)	0
Foreclosed assets held for sale	0.58
Maximum [Member]
Impaired loans (collateral dependent)	0.59
Foreclosed assets held for sale	0.66
Weighted Average [Member]
Impaired loans (collateral dependent)	(0.23)
Foreclosed assets held for sale	(0.62)

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Note 12 - Derivative Financial Instruments - Derivative Instruments (Details) - Interest Expense [Member] - Designated as Hedging Instrument [Member] - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Interest Rate Swap [Member]
Derivative gain (loss)	$ (33,424)	$ (9,423)	$ (162,517)	$ (17,261)
Interest Rate Swap - Subordinated Debentures [Member]
Derivative gain (loss)	$ 7,268		$ 8,569

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Note 10 - Income Per Common Share - Income Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic Income Per Common Share	$ 2,550,542	$ 3,934,242	$ 7,099,405	$ 4,947,003
Weighted average common shares outstanding, basic (in shares)	4,396,241	4,418,196	4,429,066	4,406,830
Basic Income Per Common Share (in dollars per share)	$ 0.58	$ 0.89	$ 1.60	$ 1.12
Effect of Dilutive Securities, Average Common Shares Outstanding (in shares)	58,091	72,389	56,532	72,058
Diluted Income Per Common Share	$ 2,550,542	$ 3,934,242	$ 7,099,405	$ 4,947,003
Weighted average common shares outstanding, diluted (in shares)	4,454,332	4,490,585	4,485,598	4,478,888
Diluted Income Per Common Share (in dollars per share)	$ 0.57	$ 0.88	$ 1.58	$ 1.10

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Note 7 - Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Intangible Assets and Goodwill [Table Text Block]

	September 30,			December 31,
	2019			2018
	(in Thousands)			(in Thousands)
Goodwill	$	1,435		$	1,435
Core deposit intangible
Gross carrying amount		3,520			3,520
Accumulated amortization		(897	)		(539	)
Core deposit intangible, net		2,623			2,981
Remaining balance	$	4,058		$	4,416

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Amortization Expense
	(in Thousands)
Remainder of:	2019	$	119
	2020		477
	2021		477
	2022		477
	2023		477
	Therafter		596
	Total	$	2,623

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Note 3 - Acquisition (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	Acquired from			Fair Value			Fair
	Hometown			Adjustments			Value
Assets Acquired
Cash and Due From Banks	$	7,083		$	-		$	7,083
Investment Securities		7,521			-			7,521
Loans		150,390			(6,471	)		143,919
Allowance for Loan Losses		(2,348	)		2,348			-
Net Loans		148,042			(4,123	)		143,919
Fixed Assets		9,268			798			10,066
Foreclosed Assets held for sale		1,647			(400	)		1,247
Core Deposit Intangible		-			3,520			3,520
Other Assets		4,146			2,463			6,609
Total Assets Acquired	$	177,707		$	2,258		$	179,965
Liabilities Assumed
Deposits		161,001			247			161,248
Federal Home Loan Bank advances		2,000			-			2,000
Securities Sold Under Agreements to Repurchase		2,159			-			2,159
Other borrowings		3,000			-			3,000
Subordinated debentures		6,186			176			6,362
Other Liabilities		2,003			-			2,003
Total Liabilities Assumed		176,349		$	423			176,772
Stockholders' Equity
Common Stock		231			(231	)		-
Capital Surplus		18,936			(18,936	)		-
Retained Earnings		(17,587	)		17,587			-
Accumulated Other Comprehensive Loss		(222	)		222			-
Treasury Stock		-			-			-
Total Stockholders' Equity Assumed		1,358		$	(1,358	)		-
Total Liabilities and Stockholders' Equity Assumed	$	177,707		$	(935	)	$	176,772
Net Assets Acquired							$	3,193
Purchase Price								4,628
Goodwill							$	1,435

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Note 5 - Loans and Allowance for Loan Losses - Allowance for Loan Losses (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Balance, beginning of period	$ 7,671,000	$ 7,573,000	$ 7,995,569	$ 7,107,000
Provision for loan losses	100,000	200,000	200,000	925,000
Losses charged off	(313,000)	(91,000)	(973,000)	(414,000)
Recoveries	99,000	50,000	334,000	114,000
Balance, end of period	7,557,311	7,732,000	7,557,311	7,732,000
Ending balance: individually evaluated for impairment	1,014,000		1,014,000		$ 1,612,000
Ending balance: collectively evaluated for impairment	6,540,000		6,540,000		6,384,000
Ending balance: loans acquired with deteriorated credit quality	3,000		3,000
Ending balance: individually evaluated for impairment	13,108,000		13,108,000		17,379,000
Ending balance: collectively evaluated for impairment	736,089,000		736,089,000		766,343,000
Ending balance: loans acquired with deteriorated credit quality	3,028,000		3,028,000		3,173,000
Real Estate, Construction [Member]
Balance, beginning of period	2,169,000	2,484,000	2,306,000	2,244,000
Provision for loan losses	(245,000)	(219,000)	(523,000)	(13,000)
Losses charged off
Recoveries	28,000	36,000	169,000	70,000
Balance, end of period	1,952,000	2,301,000	1,952,000	2,301,000
Ending balance: individually evaluated for impairment	554,000		554,000		552,000
Ending balance: collectively evaluated for impairment	1,398,000		1,398,000		1,754,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment	3,816,000		3,816,000		4,088,000
Ending balance: collectively evaluated for impairment	84,359,000		84,359,000		84,507,000
Ending balance: loans acquired with deteriorated credit quality
Commercial Real Estate Portfolio Segment [Member]
Balance, beginning of period	2,188,000	1,787,000
Provision for loan losses	242,000	158,000
Losses charged off	(122,000)
Recoveries	1,000
Balance, end of period	2,309,000	1,945,000	2,309,000	1,945,000
Ending balance: individually evaluated for impairment	24,000		24,000		106,000
Ending balance: collectively evaluated for impairment	2,285,000		2,285,000		1,987,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment	412,000		412,000		1,588,000
Ending balance: collectively evaluated for impairment	305,188,000		305,188,000		317,488,000
Ending balance: loans acquired with deteriorated credit quality	2,671,000		2,671,000		2,782,000
Commercial Real Estate Portfolio Segment [Member] | Real Estate Loan [Member]
Balance, beginning of period			2,093,000	1,789,000
Provision for loan losses			317,000	155,000
Losses charged off			(122,000)
Recoveries			21,000	1,000
Balance, end of period	2,309,000	1,945,000	2,309,000	1,945,000
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Balance, beginning of period	948,000	1,237,000	1,297,000	946,000
Provision for loan losses	42,000	96,000	(41,000)	386,000
Losses charged off		(3,000)	(271,000)	(3,000)
Recoveries	1,000	1,000	6,000	2,000
Balance, end of period	991,000	1,331,000	991,000	1,331,000
Ending balance: individually evaluated for impairment	202,000		202,000		573,000
Ending balance: collectively evaluated for impairment	789,000		789,000		724,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment	2,166,000		2,166,000		4,520,000
Ending balance: collectively evaluated for impairment	119,524,000		119,524,000		128,258,000
Ending balance: loans acquired with deteriorated credit quality
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Balance, beginning of period	673,000	553,000	641,000	464,000
Provision for loan losses	50,000	97,000	82,000	186,000
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	723,000	650,000	723,000	650,000
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	723,000		723,000		641,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment	5,930,000		5,930,000		5,952,000
Ending balance: collectively evaluated for impairment	87,699,000		87,699,000		84,663,000
Ending balance: loans acquired with deteriorated credit quality
Commercial Portfolio Segment [Member]
Balance, beginning of period	1,236,000	1,085,000	1,160,000	1,031,000
Provision for loan losses	(125,000)	(44,000)	175,000	98,000
Losses charged off	(106,000)	(14,000)	(381,000)	(110,000)
Recoveries	55,000	4,000	106,000	12,000
Balance, end of period	1,060,000	1,031,000	1,060,000	1,031,000
Ending balance: individually evaluated for impairment	214,000		214,000		363,000
Ending balance: collectively evaluated for impairment	846,000		846,000		797,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment	599,000		599,000		1,062,000
Ending balance: collectively evaluated for impairment	108,072,000		108,072,000		118,459,000
Ending balance: loans acquired with deteriorated credit quality	67,000		67,000		216,000
Consumer Portfolio Segment [Member]
Balance, beginning of period	397,000	367,000	373,000	454,000
Provision for loan losses	99,000	65,000	219,000	185,000
Losses charged off	(85,000)	(74,000)	(199,000)	(301,000)
Recoveries	14,000	9,000	32,000	29,000
Balance, end of period	425,000	367,000	425,000	367,000
Consumer and Other Loans [Member]
Ending balance: individually evaluated for impairment	20,000		20,000		18,000
Ending balance: collectively evaluated for impairment	402,000		402,000		355,000
Ending balance: loans acquired with deteriorated credit quality	3,000		3,000
Ending balance: individually evaluated for impairment	185,000		185,000		169,000
Ending balance: collectively evaluated for impairment	31,247,000		31,247,000		32,968,000
Ending balance: loans acquired with deteriorated credit quality	290,000		290,000		175,000
Unallocated Financing Receivables [Member]
Balance, beginning of period	60,000	60,000	126,000	179,000
Provision for loan losses	37,000	47,000	(29,000)	(72,000)
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	97,000	$ 107,000	97,000	$ 107,000
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment	97,000		97,000		126,000
Ending balance: loans acquired with deteriorated credit quality
Ending balance: individually evaluated for impairment
Ending balance: collectively evaluated for impairment
Ending balance: loans acquired with deteriorated credit quality

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
NET INCOME	$ 2,550,542	$ 3,934,242	$ 7,099,405	$ 4,947,003
OTHER ITEMS OF COMPREHENSIVE INCOME:
Change in unrealized gain (loss) on investment securities available-for-sale, before income taxes	721,464	(766,021)	3,441,561	(2,455,951)
Change in unrealized gain (loss) on interest rate swaps, before income taxes	(852,090)	430,248	(3,694,933)	2,198,977
Less: Reclassification adjustment for realized (gains) losses on investment securities included in net income, before income taxes	(31,493)	885	(79,756)	8,090
Total other items of comprehensive loss	(162,119)	(334,888)	(333,128)	(248,884)
Income tax (benefit) related to other items of comprehensive income	(137,408)	(85,397)	(84,948)	(63,467)
Other comprehensive (loss)	(24,711)	(249,491)	(248,180)	(185,417)
TOTAL COMPREHENSIVE INCOME	$ 2,525,831	$ 3,684,751	$ 6,851,225	$ 4,761,586

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Document Information [Line Items]
Entity Registrant Name	Guaranty Federal Bancshares Inc
Entity Central Index Key	0001046203
Trading Symbol	gfed
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		4,381,312
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock, Par Value $0.10 per share

XML

Note 6 - Accounting for Certain Loans Acquired - Carrying Amount of Certain Loans Acquired in Transfer (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Certain loans acquired in transfer	$ 3,708	$ 3,983
Ending balance: loans acquired with deteriorated credit quality	3,028	3,173
Commercial Real Estate Portfolio Segment [Member]
Certain loans acquired in transfer	3,165	3,358
Ending balance: loans acquired with deteriorated credit quality	2,671	2,782
Commercial Portfolio Segment [Member]
Certain loans acquired in transfer	253	296
Ending balance: loans acquired with deteriorated credit quality	67	216
Consumer and Other Loans [Member]
Certain loans acquired in transfer	290	329
Ending balance: loans acquired with deteriorated credit quality	$ 290	$ 175

XML

Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note

1:

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form

10

-Q and Rule

8

-

03

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Guaranty Federal Bancshares, Inc.’s (the “Company”) Annual Report on Form

10

-K for the year ended

December 31, 2018 (

“2018

Annual Report”) filed with the Securities and Exchange Commission (the “SEC”). The results of operations for the periods are

not

necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet of the Company as of

December 31, 2018,

has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted.

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities (Details Textual) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale, Total	$ 106,353,702	$ 86,266,197
Fair Value, Inputs, Level 3 [Member]
Debt Securities, Available-for-sale, Total	$ 0

XML

Note 11 - New Accounting Pronouncements (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating Leases of Lessee, LIBOR Rate				3.00%
Lessee, Operating Lease, Discount Rate				6.00%
Lessee, Finance Lease, Discount Rate				2.05%
Operating Lease, Right-of-Use Asset		$ 9,194,850	$ 9,473,587	$ 10,100,000
Operating Lease, Liability, Total		$ 9,236,695	$ 9,490,385	$ 10,100,000
New Accounting Pronouncement, Early Adoption, Effect [Member] | Accounting Standards Update 2018-02 [Member]
Reclassifications of Amounts Within AOCI to Retained Earnings Due to Tax Reform	$ 31,818

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities - Fair Value of Financial Instruments (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Interest-bearing time deposits at other financial institutions	$ 250,000	$ 250,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	86,421,380	34,121,642
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Interest-bearing time deposits at other financial institutions	250,000	250,000
Federal Home Loan Bank stock	3,157,500	5,387,200
Mortgage loans held for sale	944,969	1,516,849
Interest receivable	3,475,749	3,390,944
Deposits	839,988,502	749,618,822
Federal Home Loan Bank advances	50,000,000	105,300,000
Interest payable	832,494	821,811
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	744,022,856	778,298,606
Subordinated debentures	15,465,000	21,760,829
Note payable to Bank	11,200,000	5,000,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	86,421,380	34,121,642
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Interest-bearing time deposits at other financial institutions	250,265	250,116
Federal Home Loan Bank stock	3,157,500	5,387,200
Mortgage loans held for sale	944,969	1,516,849
Interest receivable	3,475,749	3,390,944
Deposits	840,446,988	747,903,071
Federal Home Loan Bank advances	50,011,559	105,325,386
Interest payable	832,494	821,811
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	752,524,071	783,910,789
Subordinated debentures	15,465,000	21,760,829
Note payable to Bank	$ 11,200,000	$ 5,000,000

XML

Note 8 - Leases (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Lease, Cost [Table Text Block]

	Nine months ended						Three months ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Finance lease cost:
Amortization of right-of-use assets	$	82,084		$	-		$	27,226		$	-
Interest on lease liabilities		6,010			-			2,138			-
Operating lease cost		810,124			674,137			270,042			277,037
Sublease income		(32,900	)		-			(10,300	)		-
Total lease costs	$	865,318		$	674,137		$	289,106		$	277,037
Additional lease information:
Operating cash flows from financing leases				$	-
Operating cash flows from operating leases					41,845
Financing cash flows from financing leases					-
Weighted-average remaining lease term - financing leases (in years)					3.7
Weighted-average remaining lease term - operating leases (in years)					15.4
Weighted-average discount rate - financing leases					2.05	%
Weighted-average discount rate - operating leases					5.50	%

Lessee, Finance and Operating Lease, Liability, Maturity [Table Text Block]

		Financing			Operating			Total
					(In Thousands)
Remainder of:	2019	$	30		$	263		$	293
	2020		117			862			979
	2021		118			838			956
	2022		112			827			939
	2023		38			834			872
	Thereafter		-			9,923			9,923
Total undiscounted future minimum lease cash payments		$	415		$	13,547		$	13,962
	Present value discount		(16	)		(4,310	)		(4,326	)
	Lease liability	$	399		$	9,237		$	9,636

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

	December 31, 2018
	(In Thousands)
2019	$	1,032
2020		993
2021		964
2022		962
2023		956
Thereafter		3,573
	$	8,480

XML

Note 4 - Securities (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Debt Securities, Available-for-sale [Table Text Block]

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of September 30, 2019
Debt Securities:
U. S. government agencies	$	1,499,752	$	-	$	(9,071	)	$	1,490,681
Municipals		30,172,564		805,092		(22,646	)		30,955,010
Corporates		13,487,865		164,686		(13,115	)		13,639,436
Mortgage-backed securities - private label		10,963,720		9,367		(184	)		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools		48,704,459		734,188		(142,975	)		49,295,672
	$	104,828,360	$	1,713,333		(187,991	)		106,353,702

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of December 31, 2018
Debt Securities:
Municipals	$	34,470,648	$	10,581	$	(710,709	)	$	33,770,520
Corporates		3,000,000		18,927		-			3,018,927
Government sponsored mortgage-backed securities and SBA loan pools		50,632,011		81,999		(1,237,260	)		49,476,750
	$	88,102,659	$	111,507	$	(1,947,969	)	$	86,266,197

Available-for-sale Securities [Table Text Block]

	Amortized Cost		Approximate Fair Value
1-5 years	$	386,057	$	391,105
6-10 years		15,321,979		15,495,164
After 10 years		29,452,145		30,198,857
Mortgage-backed securities - private label not due on a single maturity date		10,963,720		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools not due on a single maturity date		48,704,459		49,295,673
	$	104,828,360	$	106,353,702

Schedule of Unrealized Loss on Investments [Table Text Block]

As of September 30, 2019
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U. S. government agencies	$	1,490,680	$	(9,071	)	$	-	$	-		$	1,490,680	$	(9,071	)
Municipals		1,124,104		(22,646	)		-		-			1,124,104		(22,646	)
Corporates		2,540,521		(13,115	)		-		-			2,540,521		(13,115	)
Mortgage-backed securities - private label		2,063,242		(184	)		-		-			2,063,242		(184	)
Government sponsored mortgage-backed securities and SBA loan pools		8,979,065		(46,080	)		4,429,589		(96,895	)		13,408,654		(142,975	)
	$	16,197,612	$	(91,096	)	$	4,429,589	$	(96,895	)	$	20,627,201	$	(187,991	)

As of December 31, 2018
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Municipals	$	6,324,750	$	(67,774	)	$	23,223,221	$	(642,935	)	$	29,547,971	$	(710,709	)
Government sponsored mortgage-backed securities and SBA loan pools		7,127,597		(112,282	)		33,759,028		(1,124,978	)		40,886,625		(1,237,260	)
	$	13,452,347	$	(180,056	)	$	56,982,249	$	(1,767,913	)	$	70,434,596	$	(1,947,969	)

XML

Note 7 - Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

7:

Goodwill and Other Intangible Assets

The Company recorded

$1.4

million of goodwill as a result of its

2018

Hometown acquisition and the goodwill is

not

deductible for tax purposes. Goodwill impairment was neither indicated nor recorded during the

three

and

nine

months ended

September 30, 2019.

Goodwill is tested annually, or more often if circumstances warrant, for impairment. If the implied fair value of goodwill is lower than its carrying amount, 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.

Core deposit premiums are amortized over a

seven

year period and are periodically evaluated, at least annually, as to the recoverability of their carrying value. Core deposit premiums of

$3.5

million were recorded during the

second

quarter of

2018

as part of the Hometown acquisition. As of

September 30, 2019,

$2.6

million of core deposit intangible amounts are still to be amortized.

The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) at

September 30, 2019

and

December 31, 2018

were as follows:     

	September 30,			December 31,
	2019			2018
	(in Thousands)			(in Thousands)
Goodwill	$	1,435		$	1,435
Core deposit intangible
Gross carrying amount		3,520			3,520
Accumulated amortization		(897	)		(539	)
Core deposit intangible, net		2,623			2,981
Remaining balance	$	4,058		$	4,416

The Company’s estimated remaining amortization expense on intangibles as of

September 30, 2019

is as follows:

	Amortization Expense
	(in Thousands)
Remainder of:	2019	$	119
	2020		477
	2021		477
	2022		477
	2023		477
	Therafter		596
	Total	$	2,623

XML

Note 3 - Acquisition

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note

3:

Acquisition

On

April 2, 2018,

the Company completed the acquisition of Carthage, Missouri-based Hometown Bancshares, Inc. (“Hometown”), including its wholly owned bank subsidiary, Hometown Bank, National Association. Under the terms of the Agreement and Plan of Merger, each share of Hometown common stock was exchanged for

$20.00

in cash and the transaction was valued at approximately

$4.6

million. Hometown’s subsidiary bank, Hometown Bank, National Association, was merged into Guaranty Bank on

June 8, 2018.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately

$180.0

million in assets, including approximately

$143.9

million in loans (inclusive of loan discounts) and approximately

$161.2

million in deposits. Goodwill of

$1.4

million was recorded as a result of the transaction. The goodwill will

not

be deductible for tax purposes.

A summary, at fair value, of the assets acquired and liabilities assumed in the Hometown transaction, as of acquisition date, is as follows:

Guaranty Federal Bancshares, Inc. 

Net Assets Acquired from Hometown 

April 2, 2018

(In Thousands) 

	Acquired from			Fair Value			Fair
	Hometown			Adjustments			Value
Assets Acquired
Cash and Due From Banks	$	7,083		$	-		$	7,083
Investment Securities		7,521			-			7,521
Loans		150,390			(6,471	)		143,919
Allowance for Loan Losses		(2,348	)		2,348			-
Net Loans		148,042			(4,123	)		143,919
Fixed Assets		9,268			798			10,066
Foreclosed Assets held for sale		1,647			(400	)		1,247
Core Deposit Intangible		-			3,520			3,520
Other Assets		4,146			2,463			6,609
Total Assets Acquired	$	177,707		$	2,258		$	179,965
Liabilities Assumed
Deposits		161,001			247			161,248
Federal Home Loan Bank advances		2,000			-			2,000
Securities Sold Under Agreements to Repurchase		2,159			-			2,159
Other borrowings		3,000			-			3,000
Subordinated debentures		6,186			176			6,362
Other Liabilities		2,003			-			2,003
Total Liabilities Assumed		176,349		$	423			176,772
Stockholders' Equity
Common Stock		231			(231	)		-
Capital Surplus		18,936			(18,936	)		-
Retained Earnings		(17,587	)		17,587			-
Accumulated Other Comprehensive Loss		(222	)		222			-
Treasury Stock		-			-			-
Total Stockholders' Equity Assumed		1,358		$	(1,358	)		-
Total Liabilities and Stockholders' Equity Assumed	$	177,707		$	(935	)	$	176,772
Net Assets Acquired							$	3,193
Purchase Price								4,628
Goodwill							$	1,435

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above. The purchase price allocation and certain fair value measurements have been finalized.

Cash and due from banks

– The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities

– Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Loans acquired

– Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or

not

the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does

not

include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

Fixed assets

– Fixed assets were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired.

Foreclosed assets held for sale

– These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

Core deposit intangible

– This intangible asset represents the value of the relationships that Hometown had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Other assets

– The fair value adjustment results from recording additional deferred tax assets related to the transaction. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Deposits

– The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference when material.

F

ederal

H

ome

L

oan

B

ank

advances and Other borrowings

– The fair value of Federal Home Loan Bank advances and other borrowings are estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Securities sold under agreement to repurchase

– The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities.

Subordinated debentures

– The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Other

liabilities

– The carrying amount of these other liabilities was deemed to be reasonable estimate of fair value.

XML

Note 11 - New Accounting Pronouncements

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note

11:

New Accounting Pronouncements

In

February 2016,

the FASB issued ASU

2016

-

02,

“Leases (Topic

842

).” ASU

2016

-

02

establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

12

months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  ASU

2016

-

02

was effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. FASB has issued updated guidance in ASU

2018

-

11,

“Leases (Topic

842

) Targeted Improvements” and ASU

2019

-

01

“Leases (Topic

842

) Codification Improvements” which provides additional transition options including allowing entities to

not

apply the lease standard to the comparative periods presented in their financial statements in the year of adoption. ASC Topic

842

provided a package of practical expedients in applying the lease standard to be chosen at the date of adoption. The Company chose to elect the package of practical expedients provided under ASU

2016

-

02

whereby we will

not

reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We have also chosen

not

to apply the recognition requirements of ASU

2016

-

02

to any short-term leases (as defined by related accounting guidance). We will account for lease and non-lease components separately because such amounts are readily determinable under lease contracts. Additionally, we have chosen to elect the use of hindsight, when applicable, in determining the lease term, in assessing the likelihood that a lessee purchase option will be exercised; and in assessing the impairment of ROU assets. The Company determined that it has both operating and finance leases under Topic

842.

For operating and finance leases, lease liabilities are initially measured at commencement date based on the present value of lease payments

not

yet paid, discounted using the discount rate for the lease at the lease commencement date over the lease term. For operating and finance leases, ROU assets are measured at the commencement date as the amount of initial liability, adjusted for lease payments made to the lessor at or before commencement date, minus incentives; and for any initial direct costs incurred by the lessee. Based on the transition method that the Company has chosen to follow, the initial application date of the standard for all existing leases was

January 1, 2019.

The lease term used for the initial operating ROU asset and lease liability includes the initial lease term in addition to any renewal options the Company thinks it is reasonably certain to exercise. ASC Topic

842

requires that the implicit rate within the lease agreement be used if available. If

not

available, the Company should use its incremental borrowing rate in effect at the time of lease commencement date. For operating leases with a term of less than

60

months, the Company utilized a

5

-year LIBOR rate of approximately

3%.

For operating leases with a term of greater than

60

months, the Company utilized a method of analogizing a current variable rate product to a fixed rate product based on LIBOR curve which results in a discount rate of approximately

6%.

The discount rate used for finance leases is

2.05%

which is the rate specified in the lease agreements at the present value rate. During the

first

quarter of

2019,

the implementation of this standard resulted in the recording of

$10.1

million of ROU assets and lease liabilities on the Company’s balance sheet with

no

significant impact to the income statement as a result of this standard. Additionally, the Company did

not

have a cumulative-effect adjustment to the opening balance of retained earnings. See Note

8

of the Condensed Consolidated Financial Statements for additional information and balances as of

September 30, 2019.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. Improvement updates to the proposed standard have been issued in

November 2018 (

Update

2018

-

19

),

April 2019 (

Update

2019

-

04

) and

May 2019 (

Update

2019

-

05

) that provided additional guidance on this Topic. During the

third

quarter of

2019,

the implementation for this standard was delayed for institutions deemed as “smaller reporting companies” based on criteria that measured the size of public float and revenue tests until

2023.

Implementation for those exceeding the revenue and public float thresholds will still be required to adopt this standard for filings occurring after

December 15, 2019.

Currently, the amendments in this ASU require the measurement of 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. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company formed a committee in

2018

to assess our data, evaluate the impacts of adopting ASU

2016

-

13

and to select a

third

-party vendor to assist in generating loan level cash flows and disclosures. Work by the committee will continue despite the delayed implementation to monitor the status of this standard and to refine assumptions and systems to properly integrate requirements once the standard applies to our Company. The financial impact of adopting this standard is still being evaluated.

In

January 2017,

the FASB issued ASU

No.

2017

-

04,

Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment.  To simplify the subsequent measurement of goodwill, the amendments eliminate Step

2

from the goodwill impairment test.  The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.  An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit.  In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.  The amendments also eliminate the requirements for any reporting unit with a

zero

or negative carrying amount to perform Step

2

of the goodwill impairment test.  An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  The amendments should be applied on a prospective basis.  The nature of and reason for the change in accounting principle should be disclosed upon transition.  The amendments in this update should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.  

Early adoption is permitted on testing dates after

January 1, 2017.  

The Company continues to evaluate the impact of adopting the new guidance on the consolidated financial statements, but it is

not

expected to have a material impact.

In

February 2018,

the FASB issued ASU

2018

-

02,

Income Statement-Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) are recorded. This standard is effective for all organizations for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company elected to early adopt ASU

2018

-

02

and, as a result, reclassified

$31,818

from accumulated other comprehensive income to retained earnings as of

December 31, 2017.

The reclassification impacted the Consolidated Balance Sheet and the Consolidated Statement of Stockholder’s Equity as of and for the year ended

December 31, 2017.

In

August 2018,

the FASB issued ASU

2018

-

13,

Fair Value Measurement (Topic

820

): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. Disclosures removed by this ASU are the amount and reasons for transfers between Level

1

and Level

2,

the policy for timing of transfers between levels and the valuation process for Level

3

measurements. This ASU modifies disclosures relating to investments in certain entities that calculate net asset value. Additional disclosures require by the ASU include:

1

) change in unrealized gains and losses included in other comprehensive income for recurring Level

3

fair value measurements held at the end of the reporting period and

2

) range and weighted average of significant observable inputs used to develop Level

3

measurements. The prospective method of transition is required for the new disclosure requirements. The other amendments should be applied retrospectively. This ASU is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years or

January 1, 2020

for the Company. Early adoption is permitted. The Company continues to evaluate the impact of the new standard on our consolidated financial statements, but at this time do

not

believe the standard will have a significant impact on the financial statements.     

XML

Note 3 - Acquisition (Details Textual) - USD ($)	Apr. 02, 2018	Sep. 30, 2019	Dec. 31, 2018
Goodwill, Ending Balance		$ 1,434,982	$ 1,434,982
Hometown Bancshares, Inc. [Member]
Business Acquisition, Share Price	$ 20
Business Combination, Consideration Transferred, Total	$ 4,628,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Total	179,965,000
Business Combination Recognized Identifiable Assets Acquired and Liabilities Assumed, Loans, Net	143,919,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deposits	161,248,000
Goodwill, Ending Balance	$ 1,435,000		$ 1,400,000

XML

Note 4 - Securities - Available-for-sale Securities by Maturity (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
1-5 years, amortized cost	$ 386,057
1-5 years, fair value	391,105
5-10 years, amortized cost	15,321,979
5-10 years, fair value	15,495,164
After 10 years, amortized cost	29,452,145
After 10 years, fair value	30,198,857
Available-for-sale securities, amortized cost	104,828,360	$ 88,102,659
Available-for-sale securities	106,353,702	86,266,197
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Not due on a single maturity date, amortized cost	10,963,720
Not due on a single maturity date, fair value	10,972,903
Available-for-sale securities, amortized cost	10,963,720
Available-for-sale securities	10,972,903
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Not due on a single maturity date, amortized cost	48,704,459
Not due on a single maturity date, fair value	49,295,673
Available-for-sale securities, amortized cost	48,704,459	50,632,011
Available-for-sale securities	$ 49,295,672	$ 49,476,750

XML

Note 9 - Benefit Plans - Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Balance outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 5.14
Granted, weighted average exercise price (in dollars per share) | $ / shares
Exercised, weighted average exercise price (in dollars per share) | $ / shares	5.16
Forfeited, weighted average exercise price (in dollars per share) | $ / shares
Balance outstanding, weighted average exercise price (in dollars per share) | $ / shares	5.08
Options exercisable, weighted average exercise price (in dollars per share) | $ / shares	$ 5.08
Incentive Stock Options [Member]
Balance outstanding (in shares)	12,500
Granted (in shares)
Exercised (in shares)	(9,000)
Forfeited (in shares)
Balance outstanding (in shares)	3,500
Options exercisable (in shares)	3,500
Non-Incentive Stock Options [Member]
Balance outstanding (in shares)	5,000
Granted (in shares)
Exercised (in shares)	(5,000)
Forfeited (in shares)
Balance outstanding (in shares)
Options exercisable (in shares)

XML

Note 8 - Leases - Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Amortization of right-of-use assets	$ 27,226		$ 82,084
Interest on lease liabilities	2,138		6,010
Operating lease cost	270,042	277,037	810,124	674,137
Sublease income	(10,300)		(32,900)
Total lease costs	$ 289,106	$ 277,037	$ 865,318	674,137
Operating cash flows from financing leases
Operating cash flows from operating leases				41,845
Financing cash flows from financing leases
Weighted-average remaining lease term - financing leases (in years) (Year)		3 years 255 days		3 years 255 days
Weighted-average remaining lease term - operating leases (in years) (Year)		15 years 146 days		15 years 146 days
Weighted-average discount rate - financing leases		2.05%		2.05%
Weighted-average discount rate - operating leases		5.50%		5.50%

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities - Fair Value of Assets Measured on Non-recurring Basis (Details) - Fair Value, Nonrecurring [Member] - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Impaired loans, fair value	$ 1,005	$ 10,428
Foreclosed assets held for sale, fair value	72	909
Fair Value, Inputs, Level 1 [Member]
Impaired loans, fair value
Foreclosed assets held for sale, fair value
Fair Value, Inputs, Level 2 [Member]
Impaired loans, fair value
Foreclosed assets held for sale, fair value
Fair Value, Inputs, Level 3 [Member]
Impaired loans, fair value	1,005	10,428
Foreclosed assets held for sale, fair value	$ 72	$ 909

XML

Note 12 - Derivative Financial Instruments - Notional Amount and Fair Value of Derivatives (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Interest Rate Swap [Member]
Derivative asset notional amount	$ 50,000,000
Derivative asset		$ 1,271,538
Derivative liabilities	1,685,289
Interest Rate Swap - Subordinated Debentures [Member]
Derivative asset notional amount	10,310,000
Derivative asset
Derivative liabilities	$ 738,106

XML

Note 5 - Loans and Allowance for Loan Losses - Loans by Aging (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans receivable, past due	$ 8,266,000	$ 10,554,000
Loans receivable, current	743,959,000	776,341,000
Loans receivable	752,225,370	786,894,894
Loans receivable, past due and accruing
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable, past due	693,000	2,670,000
Loans receivable, current	120,997,000	129,741,000
Loans receivable	121,690,131	132,410,810
Loans receivable, past due and accruing
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable, past due	5,930,000	5,952,000
Loans receivable, current	87,699,000	84,596,000
Loans receivable	93,628,789	90,548,265
Loans receivable, past due and accruing
Real Estate, Construction [Member]
Loans receivable, past due	581,000
Loans receivable, current	87,594,000	88,554,000
Loans receivable	88,175,253	88,553,995
Loans receivable, past due and accruing
Commercial Real Estate Portfolio Segment [Member]
Loans receivable, past due	853,000	1,081,000
Loans receivable, current	307,418,000	321,840,000
Loans receivable	308,270,953	322,921,323
Loans receivable, past due and accruing
Commercial Portfolio Segment [Member]
Loans receivable, past due	191,000	732,000
Loans receivable, current	108,547,000	118,638,000
Loans receivable	108,738,413	119,369,484
Loans receivable, past due and accruing
Consumer and Other Loans [Member]
Loans receivable, past due	18,000	119,000
Loans receivable, current	31,704,000	32,972,000
Loans receivable	31,721,831	33,091,017
Loans receivable, past due and accruing
Financial Asset, 30 to 59 Days Past Due [Member]
Loans receivable, past due	7,840,000	7,464,000
Financial Asset, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable, past due	290,000	177,000
Financial Asset, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable, past due	5,930,000	5,952,000
Financial Asset, 30 to 59 Days Past Due [Member] | Real Estate, Construction [Member]
Loans receivable, past due	581,000
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable, past due	853,000	1,000,000
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Loans receivable, past due	186,000	228,000
Financial Asset, 30 to 59 Days Past Due [Member] | Consumer and Other Loans [Member]
Loans receivable, past due		107,000
Financial Asset, 60 to 89 Days Past Due [Member]
Loans receivable, past due	269,000	855,000
Financial Asset, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable, past due	246,000	329,000
Financial Asset, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable, past due
Financial Asset, 60 to 89 Days Past Due [Member] | Real Estate, Construction [Member]
Loans receivable, past due
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable, past due		81,000
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Loans receivable, past due	5,000	433,000
Financial Asset, 60 to 89 Days Past Due [Member] | Consumer and Other Loans [Member]
Loans receivable, past due	18,000	12,000
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans receivable, past due	157,000	2,235,000
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable, past due	157,000	2,164,000
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable, past due
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Real Estate, Construction [Member]
Loans receivable, past due
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable, past due
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Loans receivable, past due		71,000
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Consumer and Other Loans [Member]
Loans receivable, past due

XML

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Retained Earnings [Member]
Dividends on common stock, per share (in dollars per share)	$ 0.13	$ 0.13	$ 0.13	$ 0.13	$ 0.12	$ 0.12	$ 0.12

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans receivable, allowance for loan losses	$ 7,557,311	$ 7,995,569
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	10,000,000	10,000,000
Common stock, issued (in shares)	6,916,003	6,902,003
Treasury stock, shares (in shares)	2,534,691	2,443,522

XML

Note 5 - Loans and Allowance for Loan Losses - Troubled Debt Restructurings (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Carrying balance of TDR	$ 10,948,412	$ 11,309,930
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Carrying balance of TDR	1,175,382	1,208,596
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Carrying balance of TDR
Real Estate, Construction [Member]
Carrying balance of TDR	3,815,409	4,088,409
Commercial Real Estate Portfolio Segment [Member]
Carrying balance of TDR	5,358,591	5,508,444
Commercial Portfolio Segment [Member]
Carrying balance of TDR	599,030	504,481
Consumer and Other Loans [Member]
Carrying balance of TDR

XML

Note 6 - Accounting for Certain Loans Acquired - Accretable Yield (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Balance at beginning of period	$ 183	$ 265
Additions
Accretion	(48)	(130)
Reclassification from nonaccretable difference
Disposals	0
Balance at end of period	$ 135	$ 135

XML

Note 10 - Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For three months ended September 30, 2019						For nine months ended September 30, 2019
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	2,550,542		4,396,241	$	0.58	$	7,099,405		4,429,066	$	1.60
Effect of Dilutive Securities				58,091						56,532
Diluted Income Per Common Share	$	2,550,542		4,454,332	$	0.57	$	7,099,405		4,485,598	$	1.58

	For three months ended September 30, 2018						For nine months ended September 30, 2018
	Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share		Income Available to Common Shareholders		Average Common Shares Outstanding		Per Common Share
Basic Income Per Common Share	$	3,934,242		4,418,196	$	0.89	$	4,947,003		4,406,830	$	1.12
Effect of Dilutive Securities				72,389						72,058
Diluted Income Per Common Share	$	3,934,242		4,490,585	$	0.88	$	4,947,003		4,478,888	$	1.10

XML

Note 6 - Accounting for Certain Loans Acquired (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Certain Loans Acquired in Transfer [Table Text Block]

	September 30,		December 31,
	2019		2018
	(In Thousands)		(In Thousands)
Real estate - commercial	$	3,165	$	3,358
Commercial loans		253		296
Consumer and other loans		290		329
Outstanding balance	$	3,708	$	3,983
Carrying amount, net of fair value adjustment of $680 at September 30, 2019 and $810 at December 31, 2018	$	3,028	$	3,173

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Table Text Block]

	Three months ended			Nine months ended
	September 30,			September 30,
	2019			2019
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	183		$	265
Additions		-			-
Accretion		(48	)		(130	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Balance at end of period	$	135		$	135

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

13:

Disclosures about Fair Value of Assets and Liabilities

ASC Topic

820,

Fair Value Measurements

, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic

820

also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes

three

levels of inputs that

may

be used to measure fair value:

Level

1

: Quoted prices in active markets for identical assets or liabilities

Level

2

: Observable inputs other than Level

1

prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level

3

: Unobservable inputs that are supported by little or

no

market activity and that are significant to the fair value of the assets or liabilities

The following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale securities:

Where quoted market prices are available in an active market, securities are classified within Level

1

of the valuation hierarchy. Level

1

securities include equity securities. If quoted market prices are

not

available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value

may

include

one

or a combination of observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two

-sided markets, benchmark securities, bid offers and reference data market research publications and are classified within Level

2

of the valuation hierarchy. Level

2

securities include U.S. government agencies, municipal securities and government sponsored mortgage-backed securities. The Company has

no

Level

3

securities.   

Derivative financial instruments (Cash flow hedge)

:

The Company’s open derivative positions are interest rate swap agreements. Those classified as Level

2

open derivative positions are valued using externally developed pricing models based on observable market inputs provided by a

third

party and validated by management. The Company has considered counterparty credit risk in the valuation of its interest rate swap assets.

The following table presents the fair value measurements of assets recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements are classified at

September 30, 2019

and

December 31, 2018 (

dollar amounts in thousands):

9/30/2019
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Government agencies	$	-	$	1,491	$	-	$	1,491
Municipals		-		30,955		-		30,955
Corporates		-		13,639		-		13,639
Mortgage-backed securities - private label		-		10,973		-		10,973
Government sponsored mortgage-backed securities and SBA loan pools		-		49,296		-		49,296
Available-for-sale securities	$	-	$	106,354	$	-	$	106,354
Financial liabilities:
Interest rate swaps	$	-	$	2,423	$	-	$	2,423

12/31/2018
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Municipals	$	-	$	33,770	$	-	$	33,770
Corporates		-		3,019		-		3,019
Government sponsored mortgage-backed securities and SBA loan pools		-		49,477		-		49,477
Available-for-sale securities	$	-	$	86,266	$	-	$	86,266
Interest rate swaps	$	-	$	1,272	$	-	$	1,272

The following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying statements of financial condition, as well as the general classification of such assets pursuant to the valuation hierarchy.

Foreclosed Assets Held for Sale:

Fair value is estimated using recent appraisals, comparable sales and other estimates of value obtained principally from independent sources, adjusted for selling costs and discounts based on management’s assessment of the condition and marketability of the collateral. Foreclosed assets held for sale are classified within Level

3

of the valuation hierarchy.

Impaired loans (Collateral Dependent):

   Loans for which it is probable that the Company will

not

collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. Impaired loans that are collateral dependent are classified within Level

3

of the fair value hierarchy when impairment is determined using the fair value method.

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 are classified at

September 30, 2019

and

December 31, 2018 (

dollar amounts in thousands):

Impaired loans:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	1,005	$	1,005
December 31, 2018	$	-	$	-	$	10,428	$	10,428

Foreclosed assets held for sale:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	72	$	72
December 31, 2018	$	-	$	-	$	909	$	909

There were

no

transfers between valuation levels for any asset during the

three

months ended

September 30, 2019

or

2018.

If valuation techniques are deemed necessary, the Company considers those transfers to occur at the end of the period when the assets are valued.

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level

3

fair value measurement (dollar amounts in thousands):

	Fair Value September 30, 2019		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans (collateral dependent)	$	1,005	Market Comparable	Discount to reflect realizable value	0%	-	59%	(23%)
Foreclosed assets held for sale	$	72	Market Comparable	Discount to reflect realizable value	58%	-	66%	(62%)

The following tables present estimated fair values of the Company’s financial instruments at

September 30, 2019

and

December 31, 2018.

	September 30, 2019							December 31, 2018
	Carrying Amount		Fair Value		Hierarchy Level			Carrying Amount		Fair Value		Hierarchy Level
Financial assets:							Financial assets:
Cash and cash equivalents	$	86,421,380	$	86,421,380		1	Cash and cash equivalents	$	34,121,642	$	34,121,642		1
Interest-bearing time deposits at other financial institutions		250,000		250,265		2	Interest-bearing time deposits at other financial institutions		250,000		250,116		2
Federal Home Loan Bank stock		3,157,500		3,157,500		2	Federal Home Loan Bank stock		5,387,200		5,387,200		2
Mortgage loans held for sale		944,969		944,969		2	Mortgage loans held for sale		1,516,849		1,516,849		2
Loans, net		744,022,856		752,524,071		3	Loans, net		778,298,606		783,910,789		3
Interest receivable		3,475,749		3,475,749		2	Interest receivable		3,390,944		3,390,944		2
Financial liabilities:							Financial liabilities:
Deposits		839,988,502		840,446,988		2	Deposits		749,618,822		747,903,071		2
Federal Home Loan Bank advances		50,000,000		50,011,559		2	Federal Home Loan Bank advances		105,300,000		105,325,386		2
Subordinated debentures		15,465,000		15,465,000		3	Subordinated debentures		21,760,829		21,760,829		3
Note payable to Bank		11,200,000		11,200,000		3	Note payable to Bank		5,000,000		5,000,000		3
Interest payable		832,494		832,494		2	Interest payable		821,811		821,811		2
Unrecognized financial instruments (net of contractual value):							Unrecognized financial instruments (net of contractual value):
Commitments to extend credit		-		-		-	Commitments to extend credit		-		-		-
Unused lines of credit		-		-		-	Unused lines of credit		-		-		-

XML

Note 12 - Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

				September 30, 2019				December 31, 2018
				Fair Value				Fair Value
	Balance Sheet	Notional		Derivative		Derivative		Derivative		Derivative
Derivatives designated as	Classification	Amount		Assets		Liablities		Assets		Liablities
hedging instruments:
Interest rate swap - FHLB Advances	Other liabilites	$	50,000,000	$	-	$	1,685,289	$	1,271,538	$	-
Interest rate swap - Subordinated Debentures	Other liabilites	$	10,310,000	$	-	$	738,106	$	-	$	-

Derivative Instruments, Gain (Loss) [Table Text Block]

		Nine Months Ended						Three Months Ended
	Income Statement	September, 30						September, 30
Derivatives designated as	Classification	2019			2018			2019			2018
hedging instruments:
Interest rate swap - FHLB Advances	Interest Expense	$	(162,517	)	$	(17,261	)	$	(33,424	)	$	(9,423	)
Interest rate swap - Subordinated Debentures	Interest Expense	$	8,569		$	-		$	7,268		$	-

XML

Note 4 - Securities (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Security Owned and Pledged as Collateral, Carrying Value	$ 5,572,723		$ 24,943,176
Security Owned and Pledged as Collateral, Fair Value, Total	5,673,630		24,374,187
Debt Securities, Available-for-sale, Realized Gain	214,125	$ 26,061
Debt Securities, Available-for-sale, Realized Loss	134,369	34,151
Available-for-sale Debt Securities, Gross Realized Gain (Loss), Tax Effect	16,749	$ (2,063)
Debt Securities, Available-for-sale, Unrealized Loss Position, Total	$ 20,627,201		$ 70,434,596
Percentage of Available-for-sale Debt Securities in Continuous Unrealized Loss Position to Total Investment Portfolio	19.00%		82.00%

XML

Note 5 - Loans and Allowance for Loan Losses (Details Textual) xbrli-pure in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018	Dec. 31, 2018 USD ($)
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net	$ 3,028,000		$ 3,173,000
Substandard [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net	3,000,000
Troubled Debt Restructuring [Member]
Financing Receivable, Allowance for Credit Loss, Ending Balance	$ 939,647		$ 901,086

XML

Note 9 - Benefit Plans

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

9:

Benefit Plans

The Company has stock-based employee compensation plans, which are described in the Company’s

2018

Annual Report. The following tables below summarize transactions under the Company’s equity plans for the

nine

months ended

September 30, 2019:

Stock Options	Number of shares
	Incentive Stock Option			Non- Incentive Stock Option			Weighted Average Exercise Price
Balance outstanding as of January 1, 2019		12,500			5,000		$	5.14
Granted		-			-			-
Exercised		(9,000	)		(5,000	)		5.16
Forfeited		-			-			-
Balance outstanding as of September 30, 2019		3,500			-		$	5.08
Options exercisable as of September 30, 2019		3,500			-		$	5.08

The total intrinsic value of stock options exercised for the

nine

months ended

September 30, 2019

and

2018

was

$243,769

and

$267,366,

respectively. The total intrinsic value of outstanding stock options (including exercisable) was

$67,270

and

$452,100

at

September 30, 2019

and

2018,

respectively.

Restricted Stock	Number of Shares			Weighted Average Grant- Date Fair Value
Balance of shares non-vested as of January 1, 2019		32,349		$	18.93
Granted		15,434			23.85
Vested		(20,771	)		17.67
Forfeited		(1,649	)		22.27
Balance of shares non-vested as of September 30, 2019		25,363		$	22.74

In

March 2019,

the Company granted

5,502

shares of restricted stock to directors pursuant to the

2015

Equity Plan that have a cliff vesting at the end of

one

year and thus, expensed over that same period. These shares had a grant date market price of

$23.85

per share. The total amount of expense for restricted stock grants to directors (including all grants in previous years) during the

nine

months ended

September 30, 2019

and

2018

was

$97,241

and

$103,926,

respectively.

For the

nine

months ended

September 30, 2019

and

2018,

the Company granted

9,932

and

6,986

shares, respectively, of restricted stock to officers that have a cliff vesting at the end of

three

years. The expense is being recognized over the applicable vesting period. The total amount of expense for restricted stock grants to officers (including all grants in previous years) during the

nine

months ended

September 30, 2019

and

2018

was

$151,437

and

$135,810,

respectively.

Performance Stock Units	Performance Stock Units		Weighted Average Grant-Date Fair Value
Balance of shares non-vested as of January 1, 2019		47,322	$	20.48
Granted		-		-
Vested		-		-
Forfeited		-		-
Balance of shares non-vested as of September 30, 2019		47,322	$	20.48

On

March 29, 2017,

the Company granted restricted stock units representing

55,823

hypothetical shares of common stock to officers. There are

three

possible levels of incentive awards: threshold (

25%

); target (

50%

); and maximum (

100%

). The restricted stock units vest based on

two

financial performance factors over the period from

March 29, 2017

to

December 31, 2019 (

the “Performance Period”). The

two

performance measurements of the Company (and the weight given to each measurement) applicable to each award level are as follows: (i) Total Assets (

50%

) and (ii) Return on Average Assets (

50%

). In determining compensation expense, the fair value of the restricted stock unit awards was determined based on the closing price of the Company’s common stock on the date of grant, which was

$20.48

per share. The expense is being recognized over the applicable vesting period. Due to the fact that the measurements cannot be determined at the time of the grant, the Company currently estimates that the most likely outcome is the achievement between the target and maximum levels. If during the Performance Period, additional information becomes available to lead the Company to believe a different level will be achieved for the Performance Period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis. The total amount of expense for restricted stock units during the

nine

months ended

September 30, 2019

and

2018

was

$290,568

and

$253,513,

respectively.

Total stock-based compensation expense recognized for the

nine

months ended

September 30, 2019

and

2018

was

$535,731

and

$493,249,

respectively. As of

September 30, 2019,

there was

$407,314

of unrecognized compensation expense related to non-vested restricted stock awards, which will be recognized over the remaining vesting period.

XML

Note 5 - Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

5:

Loans and Allowance for Loan Losses

Categories of loans at

September 30, 2019

and

December 31, 2018

include:

	September 30,			December 31,
	2019			2018
Real estate - residential mortgage:
One to four family units	$	121,690,131		$	132,410,810
Multi-family		93,628,789			90,548,265
Real estate - construction		88,175,253			88,553,995
Real estate - commercial		308,270,953			322,921,323
Commercial loans		108,738,413			119,369,484
Consumer and other loans		31,721,831			33,091,017
Total loans		752,225,370			786,894,894
Less:
Allowance for loan losses		(7,557,311	)		(7,995,569	)
Deferred loan fees/costs, net		(645,203	)		(600,719	)
Net loans	$	744,022,856		$	778,298,606

Classes of loans by aging at

September 30, 2019

and

December 31, 2018

were as follows:

As of September 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	290	$	246	$	157	$	693	$	120,997	$	121,690	$	-
Multi-family		5,930		-		-		5,930		87,699		93,629		-
Real estate - construction		581		-		-		581		87,594		88,175		-
Real estate - commercial		853		-		-		853		307,418		308,271		-
Commercial loans		186		5		-		191		108,547		108,738		-
Consumer and other loans		-		18		-		18		31,704		31,722		-
Total	$	7,840	$	269	$	157	$	8,266	$	743,959	$	752,225	$	-

As of December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	177	$	329	$	2,164	$	2,670	$	129,741	$	132,411	$	-
Multi-family		5,952		-		-		5,952		84,596		90,548		-
Real estate - construction		-		-		-		-		88,554		88,554		-
Real estate - commercial		1,000		81		-		1,081		321,840		322,921		-
Commercial loans		228		433		71		732		118,638		119,370		-
Consumer and other loans		107		12		-		119		32,972		33,091		-
Total	$	7,464	$	855	$	2,235	$	10,554	$	776,341	$	786,895	$	-

Nonaccruing loans are summarized as follows:

	September 30,		December 31,
	2019		2018
Real estate - residential mortgage:
One to four family units	$	2,166,284	$	4,136,342
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		2,956,289		3,592,476
Commercial loans		768,846		1,262,910
Consumer and other loans		73,189		1,542
Total	$	9,780,017	$	13,081,679

The following tables present the activity in the allowance for loan losses based on portfolio segment for the

three

and

nine

months ended

September 30, 2019

and

2018:

Three months ended September 30, 2019	Construction			Commercial Real Estate			One to four family		Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,169		$	2,188		$	948	$	673	$	1,236		$	397		$	60	$	7,671
Provision charged to expense		(245	)		242			42		50		(125	)		99			37	$	100
Losses charged off		-			(122	)		-		-		(106	)		(85	)		-	$	(313	)
Recoveries		28			1			1		-		55			14			-	$	99
Balance, end of period	$	1,952		$	2,309		$	991	$	723	$	1,060		$	425		$	97	$	7,557

Nine months ended September 30, 2019	Construction			Commercial Real Estate			One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,306		$	2,093		$	1,297		$	641	$	1,160		$	373		$	126		$	7,996
Provision charged to expense		(523	)		317			(41	)		82		175			219			(29	)	$	200
Losses charged off		-			(122	)		(271	)		-		(381	)		(199	)		-		$	(973	)
Recoveries		169			21			6			-		106			32			-		$	334
Balance, end of period	$	1,952		$	2,309		$	991		$	723	$	1,060		$	425		$	97		$	7,557

Three months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,484		$	1,787	$	1,237		$	553	$	1,085		$	367		$	60	$	7,573
Provision charged to expense		(219	)		158		96			97		(44	)		65			47	$	200
Losses charged off		-			-		(3	)		-		(14	)		(74	)		-	$	(91	)
Recoveries		36			-		1			-		4			9			-	$	50
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107	$	7,732

Nine months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,244		$	1,789	$	946		$	464	$	1,031		$	454		$	179		$	7,107
Provision charged to expense		(13	)		155		386			186		98			185			(72	)	$	925
Losses charged off		-			-		(3	)		-		(110	)		(301	)		-		$	(414	)
Recoveries		70			1		2			-		12			29			-		$	114
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107		$	7,732

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of

September 30, 2019

and

December 31, 2018:

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	554	$	24	$	202	$	-	$	214	$	20	$	-	$	1,014
Ending balance: collectively evaluated for impairment	$	1,398	$	2,285	$	789	$	723	$	846	$	402	$	97	$	6,540
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	3	$	-	$	3
Loans:
Ending balance: individually evaluated for impairment	$	3,816	$	412	$	2,166	$	5,930	$	599	$	185	$	-	$	13,108
Ending balance: collectively evaluated for impairment	$	84,359	$	305,188	$	119,524	$	87,699	$	108,072	$	31,247	$	-	$	736,089
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,671	$	-	$	-	$	67	$	290	$	-	$	3,028

December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	552	$	106	$	573	$	-	$	363	$	18	$	-	$	1,612
Ending balance: collectively evaluated for impairment	$	1,754	$	1,987	$	724	$	641	$	797	$	355	$	126	$	6,384
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Loans:
Ending balance: individually evaluated for impairment	$	4,088	$	1,588	$	4,520	$	5,952	$	1,062	$	169	$	-	$	17,379
Ending balance: collectively evaluated for impairment	$	84,507	$	317,488	$	128,258	$	84,663	$	118,459	$	32,968	$	-	$	766,343
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,782	$	-	$	-	$	216	$	175	$	-	$	3,173

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 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 of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’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.

Included in the Company’s loan portfolio are certain loans acquired in accordance with ASC

310

-

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans were written down at acquisition to an amount estimated to be collectible. As a result, certain ratios regarding the Company’s loan portfolio and credit quality cannot be used to compare the Company to peer companies or to compare the Company’s current credit quality to prior periods. The ratios particularly affected by accounting under ASC

310

-

30

include the allowance for loan losses as a percentage of loans, nonaccrual loans, and performing assets, and nonaccrual loans and nonperforming loans as a percentage of total loans.

A loan is considered impaired when, based on current information and events, it is probable that the Bank 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 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.    

The following table summarizes the recorded investment in impaired loans at

September 30, 2019

and

December 31, 2018:

	September 30, 2019						December 31, 2018
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	943	$	943	$	-	$	2	$	2	$	-
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		-		-		-		-		-		-
Real estate - commercial		2,921		2,921		-		3,138		3,138		-
Commercial loans		25		25		-		216		216		-
Consumer and other loans		363		363		-		225		225		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,224	$	1,224	$	202	$	4,518	$	4,518	$	573
Multi-family		-		-		-		-		-		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		162		162		24		1,232		1,317		106
Commercial loans		641		641		214		1,062		1,062		363
Consumer and other loans		112		112		23		119		119		18
Total
Real estate - residential mortgage:
One to four family units	$	2,167	$	2,167	$	202	$	4,520	$	4,520	$	573
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		3,083		3,083		24		4,370		4,455		106
Commercial loans		666		666		214		1,278		1,278		363
Consumer and other loans		475		475		23		344		344		18
Total	$	16,136	$	17,369	$	1,017	$	20,552	$	21,870	$	1,612

The following table summarizes average impaired loans and related interest recognized on impaired loans for the

nine

months ended

September 30, 2019

and

2018:

	For the Nine Months Ended				For the Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,046	$	1	$	1,649	$	-
Multi-family		5,933		-		1,006		25
Real estate - construction		-		-		1,525		-
Real estate - commercial		3,353		4		2,383		46
Commercial loans		161		-		658		-
Consumer and other loans		268		-		37		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,970	$	-	$	2,671	$	-
Multi-family		-		-		666		-
Real estate - construction		3,866		-		2,774		-
Real estate - commercial		657		-		81		-
Commercial loans		702		-		457		-
Consumer and other loans		119		-		116		-
Total
Real estate - residential mortgage:
One to four family units	$	3,016	$	1	$	4,320	$	-
Multi-family		5,933		-		1,672		25
Real estate - construction		3,866		-		4,299		-
Real estate - commercial		4,010		4		2,464		46
Commercial loans		863		-		1,115		-
Consumer and other loans		387		-		153		-
Total	$	18,075	$	5	$	14,023	$	71

At

September 30, 2019,

the Bank’s impaired loans shown in the table above included loans that were classified as troubled debt restructurings (“TDR”). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

In assessing whether or

not

a borrower is experiencing financial difficulties, the Bank considers information currently available regarding the financial condition of the borrower. This information includes, but is

not

limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy and (iv) the debtor’s projected cash flow is sufficient to satisfy the contractual payments due under the original terms of the loan without a modification.

The Bank considers all aspects of the modification to loan terms to determine whether or

not

a concession has been granted to the borrower. Key factors considered by the Bank include the debtor’s ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by the Bank generally include

one

or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (iii) a reduction on the face amount or maturity amount of the debt as stated in the original loan, (iv) a temporary period of interest-only payments, (v) a reduction in accrued interest, and (vi) an extension of amortization.

The following table presents the carrying balance of TDRs as of

September 30, 2019

and

December 31, 2018:

	September 30, 2019		December 31, 2018
Real estate - residential mortgage:
One to four family units	$	1,175,382	$	1,208,596
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		5,358,591		5,508,444
Commercial loans		599,030		504,481
Consumer and other loans		-		-
Total	$	10,948,412	$	11,309,930

The Bank has allocated

$939,647

and

$901,086

of specific reserves to customers whose loan terms have been modified in TDR as of

September 30, 2019

and

December 31, 2018,

respectively.

There were

no

TDRs for which there was a payment default within

twelve

months following the modification during the

three

months ending

September 30, 2019

and

2018.

A loan is considered to be in payment default once it is

90

days contractually past due under the modified terms.

As part of the on-going monitoring of the credit quality of the Bank’s loan portfolio, management tracks loans by an internal rating system. All loans are assigned an internal credit quality rating based on an analysis of the borrower’s financial condition. The criteria used to assign quality ratings to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Bank’s safety and soundness. The following are the internally assigned ratings:

Pass: This rating represents loans that have strong asset quality and liquidity along with a multi-year track record of profitability.

Special mention: This rating represents loans that are currently protected but are potentially weak. The credit risk

may

be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.

Substandard: This rating represents loans that show signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Doubtful: This rating represents loans that have all the weaknesses of substandard classified loans with the additional characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Real estate-Residential

1

-

4

family: The residential

1

-

4

family real estate loans are generally secured by owner-occupied

1

-

4

family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Bank’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Real estate-Construction: Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans

may

include permanent loans, sales of developed property or an interim loan commitment from the Bank until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans

may

be impacted by the creditworthiness of a borrower, property values and the local economies in the Bank’s market areas.

Real estate-Commercial: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans

may

be impacted by the creditworthiness of a borrower, property values and the local economies in the Bank’s market areas.

Commercial: The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer: The consumer loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Bank’s market area) and the creditworthiness of a borrower.

The following tables provide information about the credit quality of the loan portfolio using the Bank’s internal rating system as of

September 30, 2019

and

December 31, 2018:

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,275	$	297,358	$	118,700	$	87,699	$	103,864	$	30,560	$	722,456
Special Mention		-		6,699		553		-		2,427		-		9,679
Substandard		3,900		4,214		2,437		5,930		2,447		1,162		20,090
Doubtful		-		-		-		-		-		-		-
Total	$	88,175	$	308,271	$	121,690	$	93,629	$	108,738	$	31,722	$	752,225

December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,375	$	310,486	$	126,586	$	84,596	$	114,525	$	32,686	$	753,254
Special Mention		-		5,524		372		-		3,031		-		8,927
Substandard		4,179		6,911		5,453		5,952		1,814		405		24,714
Doubtful		-		-		-		-		-		-		-
Total	$	88,554	$	322,921	$	132,411	$	90,548	$	119,370	$	33,091	$	786,895

The above amounts include purchased credit impaired loans. At

September 30, 2019,

purchased credit impaired loans comprised of

$3.0

million were rated “Substandard”.

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

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 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 is 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.

XML

Note 9 - Benefit Plans - Performance Stock Units (Details) - Performance Shares [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Balance of shares non-vested (in shares) | shares	47,322
Balance of shares non-vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 20.48
Granted (in shares) | shares
Granted (in dollars per share) | $ / shares
Vested (in shares) | shares	0
Vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 0
Forfeited (in shares) | shares	0
Forfeited, weighted average grant-date price (in dollars per share) | $ / shares	$ 0
Balance of shares non-vested (in shares) | shares	47,322
Balance of shares non-vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 20.48

XML

Note 8 - Leases - Non-cancelable Leases (Details) $ in Thousands	Dec. 31, 2018 USD ($)
2019	$ 1,032
2020	993
2021	964
2022	962
2023	956
Thereafter	3,573
	$ 8,480

XML

Note 7 - Goodwill and Other Intangible Assets - Estimated Remaining Amortization Expense on Intangibles (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
2019	$ 119,000
2020	477,000
2021	477,000
2022	477,000
2023	477,000
Therafter	596,000
Core deposit intangible, net	$ 2,623,160	$ 2,980,910

XML

Note 5 - Loans and Allowance for Loan Losses - Loans by Category (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Loans receivable	$ 752,225,370		$ 786,894,894
Allowance for loan losses	(7,557,311)	$ (7,671,000)	(7,995,569)	$ (7,732,000)	$ (7,573,000)	$ (7,107,000)
Deferred loan fees/costs, net	(645,203)		(600,719)
Net loans	744,022,856		778,298,606
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	121,690,131		132,410,810
Allowance for loan losses	(991,000)	(948,000)	(1,297,000)	(1,331,000)	(1,237,000)	(946,000)
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	93,628,789		90,548,265
Allowance for loan losses	(723,000)	(673,000)	(641,000)	(650,000)	(553,000)	(464,000)
Real Estate, Construction [Member]
Loans receivable	88,175,253		88,553,995
Allowance for loan losses	(1,952,000)	(2,169,000)	(2,306,000)	(2,301,000)	(2,484,000)	(2,244,000)
Commercial Real Estate Portfolio Segment [Member]
Loans receivable	308,270,953		322,921,323
Allowance for loan losses	(2,309,000)	(2,188,000)		(1,945,000)	(1,787,000)
Commercial Portfolio Segment [Member]
Loans receivable	108,738,413		119,369,484
Allowance for loan losses	(1,060,000)	$ (1,236,000)	(1,160,000)	$ (1,031,000)	$ (1,085,000)	$ (1,031,000)
Consumer and Other Loans [Member]
Loans receivable	$ 31,721,831		$ 33,091,017

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

9/30/2019
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Government agencies	$	-	$	1,491	$	-	$	1,491
Municipals		-		30,955		-		30,955
Corporates		-		13,639		-		13,639
Mortgage-backed securities - private label		-		10,973		-		10,973
Government sponsored mortgage-backed securities and SBA loan pools		-		49,296		-		49,296
Available-for-sale securities	$	-	$	106,354	$	-	$	106,354
Financial liabilities:
Interest rate swaps	$	-	$	2,423	$	-	$	2,423

12/31/2018
Financial assets:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
Debt securities:
Municipals	$	-	$	33,770	$	-	$	33,770
Corporates		-		3,019		-		3,019
Government sponsored mortgage-backed securities and SBA loan pools		-		49,477		-		49,477
Available-for-sale securities	$	-	$	86,266	$	-	$	86,266
Interest rate swaps	$	-	$	1,272	$	-	$	1,272

Fair Value Measurements, Nonrecurring [Table Text Block]

Impaired loans:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	1,005	$	1,005
December 31, 2018	$	-	$	-	$	10,428	$	10,428

Foreclosed assets held for sale:
	Level 1 inputs		Level 2 inputs		Level 3 inputs		Total fair value
September 30, 2019	$	-	$	-	$	72	$	72
December 31, 2018	$	-	$	-	$	909	$	909

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

	Fair Value September 30, 2019		Valuation Technique	Unobservable Input	Range (Weighted Average)
Impaired loans (collateral dependent)	$	1,005	Market Comparable	Discount to reflect realizable value	0%	-	59%	(23%)
Foreclosed assets held for sale	$	72	Market Comparable	Discount to reflect realizable value	58%	-	66%	(62%)

Fair Value, by Balance Sheet Grouping [Table Text Block]

	September 30, 2019							December 31, 2018
	Carrying Amount		Fair Value		Hierarchy Level			Carrying Amount		Fair Value		Hierarchy Level
Financial assets:							Financial assets:
Cash and cash equivalents	$	86,421,380	$	86,421,380		1	Cash and cash equivalents	$	34,121,642	$	34,121,642		1
Interest-bearing time deposits at other financial institutions		250,000		250,265		2	Interest-bearing time deposits at other financial institutions		250,000		250,116		2
Federal Home Loan Bank stock		3,157,500		3,157,500		2	Federal Home Loan Bank stock		5,387,200		5,387,200		2
Mortgage loans held for sale		944,969		944,969		2	Mortgage loans held for sale		1,516,849		1,516,849		2
Loans, net		744,022,856		752,524,071		3	Loans, net		778,298,606		783,910,789		3
Interest receivable		3,475,749		3,475,749		2	Interest receivable		3,390,944		3,390,944		2
Financial liabilities:							Financial liabilities:
Deposits		839,988,502		840,446,988		2	Deposits		749,618,822		747,903,071		2
Federal Home Loan Bank advances		50,000,000		50,011,559		2	Federal Home Loan Bank advances		105,300,000		105,325,386		2
Subordinated debentures		15,465,000		15,465,000		3	Subordinated debentures		21,760,829		21,760,829		3
Note payable to Bank		11,200,000		11,200,000		3	Note payable to Bank		5,000,000		5,000,000		3
Interest payable		832,494		832,494		2	Interest payable		821,811		821,811		2
Unrecognized financial instruments (net of contractual value):							Unrecognized financial instruments (net of contractual value):
Commitments to extend credit		-		-		-	Commitments to extend credit		-		-		-
Unused lines of credit		-		-		-	Unused lines of credit		-		-		-

XML

Note 4 - Securities - Available-for-sale Debt Securities (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Available-for-sale securities, amortized cost	$ 104,828,360	$ 88,102,659
Available-for-sale securities, gross unrealized gains	1,713,333	111,507
Available-for-sale securities, gross unrealized (losses)	(187,991)	(1,947,969)
Available-for-sale securities	106,353,702	86,266,197
US Government Agencies Debt Securities [Member]
Available-for-sale securities, amortized cost	1,499,752
Available-for-sale securities, gross unrealized gains
Available-for-sale securities, gross unrealized (losses)	(9,071)
Available-for-sale securities	1,490,681
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities, amortized cost	30,172,564	34,470,648
Available-for-sale securities, gross unrealized gains	805,092	10,581
Available-for-sale securities, gross unrealized (losses)	(22,646)	(710,709)
Available-for-sale securities	30,955,010	33,770,520
Corporate Debt Securities [Member]
Available-for-sale securities, amortized cost	13,487,865	3,000,000
Available-for-sale securities, gross unrealized gains	164,686	18,927
Available-for-sale securities, gross unrealized (losses)	(13,115)
Available-for-sale securities	13,639,436	3,018,927
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities, amortized cost	48,704,459	50,632,011
Available-for-sale securities, gross unrealized gains	734,188	81,999
Available-for-sale securities, gross unrealized (losses)	(142,975)	(1,237,260)
Available-for-sale securities	49,295,672	$ 49,476,750
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities, amortized cost	10,963,720
Available-for-sale securities, gross unrealized gains	9,367
Available-for-sale securities, gross unrealized (losses)	(184)
Available-for-sale securities	$ 10,972,903

XML

Note 8 - Leases

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Lessee, Leases [Text Block]

Note

8:

Leases

As discussed in Note

11,

on

January 1, 2019,

the Company adopted ASU

2016

-

02,

“Leases”. The Company recorded initial balances during the quarter ending

March 31, 2019

for operating Right of Use (“ROU”) assets of

$9,473,587

and corresponding operating ROU liabilities of

$9,490,385.

Additionally, the Company recorded initial balances for financing ROU assets and liabilities of

$453,485

.

As of

September 30, 2019,

operating lease liability balances are

$9,236,695

and financing lease liability amounts are

$399,046.

We maintain operating leases on land and buildings for certain branch facilities and our headquarters. Financing leases are primarily for equipment used at banking facilities. Most leases include options to renew, with renewal terms extending between

one

to

twenty

years. The exercise of renewal options is based on judgement of management as to whether or

not

the renewal option is reasonably certain to be exercised.   Factors in determining whether or

not

the renewal option is reasonably certain to be exercised include, but are

not

limited to, the value of the leasehold improvements, the value of the renewal rate compared to market rates and the presence of factors that would cause significant economic penalty to the Company if the option is

not

exercised.

Expenses for finance leases are included in other interest expense and occupancy expense line items, whereas, operating leases are expensed entirely in the occupancy expense line item. Leases with a term of less than

twelve

months are

not

recorded on the balance sheet and are expensed on a straight-line basis over the lease term. Discount rates used for the purpose of valuing the leases were based on rates available to the Company on fixed rate borrowings for similar lease terms.

The components of lease expense and their impact on the statement of income for the

three

and

nine

months ended

September 30, 2019

and

2018

are as follows:

	Nine months ended						Three months ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Finance lease cost:
Amortization of right-of-use assets	$	82,084		$	-		$	27,226		$	-
Interest on lease liabilities		6,010			-			2,138			-
Operating lease cost		810,124			674,137			270,042			277,037
Sublease income		(32,900	)		-			(10,300	)		-
Total lease costs	$	865,318		$	674,137		$	289,106		$	277,037
Additional lease information:
Operating cash flows from financing leases				$	-
Operating cash flows from operating leases					41,845
Financing cash flows from financing leases					-
Weighted-average remaining lease term - financing leases (in years)					3.7
Weighted-average remaining lease term - operating leases (in years)					15.4
Weighted-average discount rate - financing leases					2.05	%
Weighted-average discount rate - operating leases					5.50	%

The following table sets forth, as of

September 30, 2019,

the future minimum lease cash payments and a reconciliation of the undiscounted cash flows to the lease liability:

		Financing			Operating			Total
					(In Thousands)
Remainder of:	2019	$	30		$	263		$	293
	2020		117			862			979
	2021		118			838			956
	2022		112			827			939
	2023		38			834			872
	Thereafter		-			9,923			9,923
Total undiscounted future minimum lease cash payments		$	415		$	13,547		$	13,962
	Present value discount		(16	)		(4,310	)		(4,326	)
	Lease liability	$	399		$	9,237		$	9,636

Future minimum lease cash payments under non-cancelable operating leases as of

December 31, 2018,

prior to adoption of ASU

2016

-

02,

were as follows:

	December 31, 2018
	(In Thousands)
2019	$	1,032
2020		993
2021		964
2022		962
2023		956
Thereafter		3,573
	$	8,480

XML

Note 4 - Securities

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

4:

Securities

The amortized cost and approximate fair values of securities classified as available-for-sale were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of September 30, 2019
Debt Securities:
U. S. government agencies	$	1,499,752	$	-	$	(9,071	)	$	1,490,681
Municipals		30,172,564		805,092		(22,646	)		30,955,010
Corporates		13,487,865		164,686		(13,115	)		13,639,436
Mortgage-backed securities - private label		10,963,720		9,367		(184	)		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools		48,704,459		734,188		(142,975	)		49,295,672
	$	104,828,360	$	1,713,333		(187,991	)		106,353,702

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Approximate Fair Value
As of December 31, 2018
Debt Securities:
Municipals	$	34,470,648	$	10,581	$	(710,709	)	$	33,770,520
Corporates		3,000,000		18,927		-			3,018,927
Government sponsored mortgage-backed securities and SBA loan pools		50,632,011		81,999		(1,237,260	)		49,476,750
	$	88,102,659	$	111,507	$	(1,947,969	)	$	86,266,197

Maturities of available-for-sale debt securities as of

September 30, 2019:

	Amortized Cost		Approximate Fair Value
1-5 years	$	386,057	$	391,105
6-10 years		15,321,979		15,495,164
After 10 years		29,452,145		30,198,857
Mortgage-backed securities - private label not due on a single maturity date		10,963,720		10,972,903
Government sponsored mortgage-backed securities and SBA loan pools not due on a single maturity date		48,704,459		49,295,673
	$	104,828,360	$	106,353,702

The book value of securities pledged as collateral, to secure public deposits and for other purposes, amounted to

$5,572,723

and

$24,943,176

as of

September 30, 2019

and

December 31, 2018,

respectively. The approximate fair value of pledged securities amounted to

$5,673,630

and

$24,374,187

as of

September 30, 2019

and

December 31, 2018,

respectively.

Realized gains and losses are recorded as net securities gains. Gains and losses on sales of securities are determined on the specific identification method. Gross gains of

$214,125

and

$26,061

and gross losses of

$134,369

and

$34,151

for the

nine

months ended

September 30, 2019

and

September 30, 2018,

respectively, were realized from the sale of available-for-sale securities. The tax effect of these net gains and losses was

$16,749

and (

$2,063

) for the

nine

months ended

September 30, 2019

and

September 30, 2018,

respectively.

The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. Certain investment securities are valued at less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. It is management’s intent to hold the debt securities to maturity or until recovery of the unrealized loss. Should the impairment of any of these debt securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified, to the extent the loss is related to credit issues, and to other comprehensive income to the extent the decline on debt securities is related to other factors and the Company does

not

intend to sell the security prior to recovery of the unrealized loss.

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at

September 30, 2019

and

December 31, 2018,

was

$20,627,201

and

$70,434,596,

respectively, which is approximately

19%

and

82%

of the Company’s investment portfolio.

The following table shows gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at

September 30, 2019

and

December 31, 2018.

As of September 30, 2019
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U. S. government agencies	$	1,490,680	$	(9,071	)	$	-	$	-		$	1,490,680	$	(9,071	)
Municipals		1,124,104		(22,646	)		-		-			1,124,104		(22,646	)
Corporates		2,540,521		(13,115	)		-		-			2,540,521		(13,115	)
Mortgage-backed securities - private label		2,063,242		(184	)		-		-			2,063,242		(184	)
Government sponsored mortgage-backed securities and SBA loan pools		8,979,065		(46,080	)		4,429,589		(96,895	)		13,408,654		(142,975	)
	$	16,197,612	$	(91,096	)	$	4,429,589	$	(96,895	)	$	20,627,201	$	(187,991	)

As of December 31, 2018
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Municipals	$	6,324,750	$	(67,774	)	$	23,223,221	$	(642,935	)	$	29,547,971	$	(710,709	)
Government sponsored mortgage-backed securities and SBA loan pools		7,127,597		(112,282	)		33,759,028		(1,124,978	)		40,886,625		(1,237,260	)
	$	13,452,347	$	(180,056	)	$	56,982,249	$	(1,767,913	)	$	70,434,596	$	(1,947,969	)

XML

Note 8 - Leases - Maturities of Lease Liabilities (Details) - USD ($)	Sep. 30, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Remainder of 2019, financing	$ 30,000
Remainder of 2019, operating	263,000
Remainder of 2019, total	293,000
2020, financing	117,000
2020, operating	862,000
2020, total	979,000
2021, financing	118,000
2021, operating	838,000
2021, total	956,000
2022, financing	112,000
2022, operating	827,000
2022, total	939,000
2023, financing	38,000
2023, operating	834,000
2023, total	872,000
2024, financing
2024, operating	9,923,000
2024, total	9,923,000
Total undiscounted future minimum lease cash payments, financing	415,000
Total undiscounted future minimum lease cash payments, operating	13,547,000
Total undiscounted future minimum lease cash payments, total	13,962,000
Present value discount, financing	(16,000)
Present value discount, operating	(4,310,000)
Present value discount, total	(4,326,000)
Lease liability, financing	399,046	$ 453,485
Operating lease liability	9,236,695	$ 9,490,385	$ 10,100,000
Lease liability, total	$ 9,636,000

XML

Note 7 - Goodwill and Other Intangible Assets - Goodwill and Other Intangibles (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Goodwill	$ 1,434,982	$ 1,434,982
Gross carrying amount	3,520,000	3,520,000
Accumulated amortization	(897,000)	(539,000)
Core deposit intangible, net	2,623,160	2,980,910
Remaining balance	$ 4,058,000	$ 4,416,000

XML

Note 9 - Benefit Plans - Restricted Stock (Details) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Balance of shares non-vested (in shares) | shares	32,349
Balance of shares non-vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 18.93
Granted (in shares) | shares	15,434
Granted, weighted average grant-date price (in dollars per share) | $ / shares	$ 23.85
Vested (in shares) | shares	(20,771)
Vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 17.67
Forfeited (in shares) | shares	(1,649)
Forfeited, weighted average grant-date price (in dollars per share) | $ / shares	$ 22.27
Balance of shares non-vested (in shares) | shares	25,363
Balance of shares non-vested, weighted average grant-date price (in dollars per share) | $ / shares	$ 22.74

XML

Note 13 - Disclosures About Fair Value of Assets and Liabilities - Fair Value of Assets Measured on Recurring Basis (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Available-for-sale securities	$ 106,353,702	$ 86,266,197
US Government Agencies Debt Securities [Member]
Available-for-sale securities	1,490,681
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	30,955,010	33,770,520
Corporate Debt Securities [Member]
Available-for-sale securities	13,639,436	3,018,927
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities	49,295,672	49,476,750
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities	10,972,903
Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities	0
Fair Value, Recurring [Member]
Available-for-sale securities	106,354,000	86,266,000
Interest rate swaps	2,423,000	1,272,000
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	1,491,000
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	30,955,000	33,770,000
Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Available-for-sale securities	13,639,000	3,019,000
Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities	49,296,000	49,477,000
Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities	10,973,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities
Interest rate swaps
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	106,354,000	86,266,000
Interest rate swaps	2,423,000	1,272,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	1,491,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	30,955,000	33,770,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities	13,639,000	3,019,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities	49,296,000	49,477,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities	10,973,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities
Interest rate swaps
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities

XML

Note 12 - Derivative Financial Instruments (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2017
First Interest Rate Swap [Member]
Derivative, Notional Amount				$ 50,000,000
Derivative, Fixed Interest Rate				2.12%
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax, Parent, Total	$ 1,255,540
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax, Parent, Total	429,749
Second Interest Rate Swap [Member]
Derivative, Notional Amount		$ 10,300,000
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax, Parent, Total	549,889
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax, Parent, Total	188,217
Derivative, Variable Interest Rate		4.09%
Second Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) [Member]
Derivative, Basis Spread on Variable Rate		1.45%
Interest Rate Swap [Member]
Derivative, Notional Amount	50,000,000
Derivative, Collateral, Obligation to Return Cash	$ 2,500,000		$ 1,500,000

XML

Note 7 - Goodwill and Other Intangible Assets (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Apr. 02, 2018
Goodwill, Ending Balance	$ 1,434,982	$ 1,434,982
Business Acquisition, Goodwill, Expected Tax Deductible Amount	0
Finite-Lived Intangible Assets, Gross, Total	$ 3,520,000	3,520,000
Hometown Bancshares, Inc. [Member]
Goodwill, Ending Balance		$ 1,400,000		$ 1,435,000
Hometown Bancshares, Inc. [Member] | Core Deposits [Member]
Finite-Lived Intangible Asset, Useful Life	7 years
Finite-Lived Intangible Assets, Gross, Total	$ 2,600,000		$ 3,500,000

XML

Note 5 - Loans and Allowance for Loan Losses - Nonaccruing Loans (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Nonaccruing loans	$ 9,780,017	$ 13,081,679
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Nonaccruing loans	2,166,284	4,136,342
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Nonaccruing loans
Real Estate, Construction [Member]
Nonaccruing loans	3,815,409	4,088,409
Commercial Real Estate Portfolio Segment [Member]
Nonaccruing loans	2,956,289	3,592,476
Commercial Portfolio Segment [Member]
Nonaccruing loans	768,846	1,262,910
Consumer and Other Loans [Member]
Nonaccruing loans	$ 73,189	$ 1,542

XML

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance at Dec. 31, 2017	$ 687,850	$ 50,856,069	$ (37,125,541)	$ 60,679,308	$ (206,193)	$ 74,891,493
Net income				1,355,745		1,355,745
Other comprehensive income					(26,942)	(26,942)
Dividends on common stock				(532,771)		(532,771)
Stock award plans		(35,357)	158,592			123,235
Stock options exercised	450	23,330				23,780
Balance at Mar. 31, 2018	688,300	50,844,042	(36,966,949)	61,502,282	(233,135)	75,834,540
Balance at Dec. 31, 2017	687,850	50,856,069	(37,125,541)	60,679,308	(206,193)	74,891,493
Net income						4,947,003
Other comprehensive income						(185,417)
Balance at Sep. 30, 2018	689,550	51,266,714	(36,975,028)	64,025,061	(391,610)	78,614,687
Balance at Mar. 31, 2018	688,300	50,844,042	(36,966,949)	61,502,282	(233,135)	75,834,540
Net income				(342,984)		(342,984)
Other comprehensive income					91,016	91,016
Dividends on common stock				(534,272)		(534,272)
Stock award plans		161,235				161,235
Stock options exercised	750	37,900				38,650
Balance at Jun. 30, 2018	689,050	51,043,177	(36,966,949)	60,625,026	(142,119)	75,248,185
Net income				3,934,242		3,934,242
Other comprehensive income					(249,491)	(249,491)
Dividends on common stock				(534,207)		(534,207)
Stock award plans		154,137	(8,079)			146,058
Stock options exercised	500	69,400				69,900
Balance at Sep. 30, 2018	689,550	51,266,714	(36,975,028)	64,025,061	(391,610)	78,614,687
Net income				2,384,876		2,384,876
Other comprehensive income					(61,146)	(61,146)
Dividends on common stock				(580,250)		(580,250)
Stock award plans		82,621	3,904			86,525
Stock options exercised	650	33,250				33,900
Balance at Dec. 31, 2018	690,200	51,382,585	(36,971,124)	65,829,687	(452,756)	80,478,592
Net income				2,120,364		2,120,364
Other comprehensive income					380,791	380,791
Dividends on common stock				(582,817)		(582,817)
Stock award plans		(53,689)	222,789			169,100
Stock options exercised	1,000	50,900				51,900
Balance at Mar. 31, 2019	691,200	51,379,796	(36,748,335)	67,367,234	(71,965)	82,617,930
Balance at Dec. 31, 2018	690,200	51,382,585	(36,971,124)	65,829,687	(452,756)	80,478,592
Net income						7,099,405
Other comprehensive income						(248,180)
Balance at Sep. 30, 2019	691,600	51,782,472	(39,243,456)	71,195,470	(700,936)	83,725,150
Balance at Mar. 31, 2019	691,200	51,379,796	(36,748,335)	67,367,234	(71,965)	82,617,930
Net income				2,428,499		2,428,499
Other comprehensive income					(604,260)	(604,260)
Dividends on common stock				(581,021)		(581,021)
Stock award plans		195,599	(5,583)			190,016
Treasury stock purchased			(312,892)			(312,892)
Balance at Jun. 30, 2019	691,200	51,575,395	(37,066,810)	69,214,712	(676,225)	83,738,272
Net income				2,550,542		2,550,542
Other comprehensive income					(24,711)	(24,711)
Dividends on common stock				(569,784)		(569,784)
Stock award plans		187,157	(24,950)			162,207
Stock options exercised	400	19,920				20,320
Treasury stock purchased			(2,151,696)			(2,151,696)
Balance at Sep. 30, 2019	$ 691,600	$ 51,782,472	$ (39,243,456)	$ 71,195,470	$ (700,936)	$ 83,725,150

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 3,974,694	$ 5,818,955
Interest-bearing deposits in other financial institutions	82,446,686	28,302,687
Cash and cash equivalents	86,421,380	34,121,642
Interest-bearing time deposits at other financial institutions	250,000	250,000
Available-for-sale securities	106,353,702	86,266,197
Stock in Federal Home Loan Bank, at cost	3,157,500	5,387,200
Loans receivable, net of allowance for loan losses of September 30, 2019 - $7,557,311 - December 31, 2018 - $7,995,569	744,022,856	778,298,606
Accrued interest receivable	3,475,749	3,390,944
Prepaid expenses and other assets	9,054,815	6,261,159
Goodwill	1,434,982	1,434,982
Core deposit intangible	2,623,160	2,980,910
Foreclosed assets held for sale	1,490,960	1,126,963
Premises and equipment, net	19,560,814	20,095,161
Operating lease right-of-use asset	9,194,850
Bank owned life insurance	24,543,725	20,198,074
Income taxes receivable		158,631
Deferred income taxes	3,800,037	3,650,552
	1,016,329,499	965,137,870
LIABILITIES
Deposits	839,988,502	749,618,822
Federal Home Loan Bank advances	50,000,000	105,300,000
Subordinated debentures	15,465,000	21,760,829
Note payable to bank	11,200,000	5,000,000
Advances from borrowers for taxes and insurance	698,438	289,808
Accrued expenses and other liabilities	4,834,402	1,868,008
Operating lease liability	9,236,695
Income taxes payable	348,818
Accrued interest payable	832,494	821,811
	932,604,349	884,659,278
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.10 par value; authorized 10,000,000 shares; issued September 30, 2019 and December 31, 2018 - 6,916,003 and 6,902,003 shares; respectively	691,600	690,200
Additional paid-in capital	51,782,472	51,382,585
Retained earnings, substantially restricted	71,195,470	65,829,687
Accumulated other comprehensive loss	(700,936)	(452,756)
	122,968,606	117,449,716
Treasury stock, at cost; September 30, 2019 and December 31, 2018 - 2,534,691 and 2,443,522 shares, respectively	(39,243,456)	(36,971,124)
	83,725,150	80,478,592
	1,016,329,499	965,137,870
Residential Mortgage [Member]
ASSETS
Mortgage loans held for sale	$ 944,969	$ 1,516,849

XML

Note 5 - Loans and Allowance for Loan Losses - Loans by Credit Quality (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Loans receivable	$ 752,225,370	$ 786,894,894
Real Estate, Construction [Member]
Loans receivable	88,175,253	88,553,995
Commercial Real Estate Portfolio Segment [Member]
Loans receivable	308,270,953	322,921,323
Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	121,690,131	132,410,810
Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	93,628,789	90,548,265
Commercial Portfolio Segment [Member]
Loans receivable	108,738,413	119,369,484
Consumer and Other Loans [Member]
Loans receivable	31,721,831	33,091,017
Pass [Member]
Loans receivable	722,456,000	753,254,000
Pass [Member] | Real Estate, Construction [Member]
Loans receivable	84,275,000	84,375,000
Pass [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable	297,358,000	310,486,000
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	118,700,000	126,586,000
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	87,699,000	84,596,000
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	103,864,000	114,525,000
Pass [Member] | Consumer and Other Loans [Member]
Loans receivable	30,560,000	32,686,000
Special Mention [Member]
Loans receivable	9,679,000	8,927,000
Special Mention [Member] | Real Estate, Construction [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable	6,699,000	5,524,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	553,000	372,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans receivable	2,427,000	3,031,000
Special Mention [Member] | Consumer and Other Loans [Member]
Loans receivable		0
Substandard [Member]
Loans receivable	20,090,000	24,714,000
Substandard [Member] | Real Estate, Construction [Member]
Loans receivable	3,900,000	4,179,000
Substandard [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable	4,214,000	6,911,000
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	2,437,000	5,453,000
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	5,930,000	5,952,000
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans receivable	2,447,000	1,814,000
Substandard [Member] | Consumer and Other Loans [Member]
Loans receivable	1,162,000	405,000
Doubtful [Member]
Loans receivable
Doubtful [Member] | Real Estate, Construction [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, One To Four Family Units [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Residential, Multi Family Units [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans receivable
Doubtful [Member] | Consumer and Other Loans [Member]
Loans receivable	$ 0	$ 0

XML

Note 5 - Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	September 30,			December 31,
	2019			2018
Real estate - residential mortgage:
One to four family units	$	121,690,131		$	132,410,810
Multi-family		93,628,789			90,548,265
Real estate - construction		88,175,253			88,553,995
Real estate - commercial		308,270,953			322,921,323
Commercial loans		108,738,413			119,369,484
Consumer and other loans		31,721,831			33,091,017
Total loans		752,225,370			786,894,894
Less:
Allowance for loan losses		(7,557,311	)		(7,995,569	)
Deferred loan fees/costs, net		(645,203	)		(600,719	)
Net loans	$	744,022,856		$	778,298,606

Financing Receivable, Past Due [Table Text Block]

As of September 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	290	$	246	$	157	$	693	$	120,997	$	121,690	$	-
Multi-family		5,930		-		-		5,930		87,699		93,629		-
Real estate - construction		581		-		-		581		87,594		88,175		-
Real estate - commercial		853		-		-		853		307,418		308,271		-
Commercial loans		186		5		-		191		108,547		108,738		-
Consumer and other loans		-		18		-		18		31,704		31,722		-
Total	$	7,840	$	269	$	157	$	8,266	$	743,959	$	752,225	$	-

As of December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days and more Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days and Accruing
	(In Thousands)
Real estate - residential mortgage:
One to four family units	$	177	$	329	$	2,164	$	2,670	$	129,741	$	132,411	$	-
Multi-family		5,952		-		-		5,952		84,596		90,548		-
Real estate - construction		-		-		-		-		88,554		88,554		-
Real estate - commercial		1,000		81		-		1,081		321,840		322,921		-
Commercial loans		228		433		71		732		118,638		119,370		-
Consumer and other loans		107		12		-		119		32,972		33,091		-
Total	$	7,464	$	855	$	2,235	$	10,554	$	776,341	$	786,895	$	-

Financing Receivable, Nonaccrual [Table Text Block]

	September 30,		December 31,
	2019		2018
Real estate - residential mortgage:
One to four family units	$	2,166,284	$	4,136,342
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		2,956,289		3,592,476
Commercial loans		768,846		1,262,910
Consumer and other loans		73,189		1,542
Total	$	9,780,017	$	13,081,679

Financing Receivable, Allowance for Credit Loss [Table Text Block]

Three months ended September 30, 2019	Construction			Commercial Real Estate			One to four family		Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,169		$	2,188		$	948	$	673	$	1,236		$	397		$	60	$	7,671
Provision charged to expense		(245	)		242			42		50		(125	)		99			37	$	100
Losses charged off		-			(122	)		-		-		(106	)		(85	)		-	$	(313	)
Recoveries		28			1			1		-		55			14			-	$	99
Balance, end of period	$	1,952		$	2,309		$	991	$	723	$	1,060		$	425		$	97	$	7,557

Nine months ended September 30, 2019	Construction			Commercial Real Estate			One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,306		$	2,093		$	1,297		$	641	$	1,160		$	373		$	126		$	7,996
Provision charged to expense		(523	)		317			(41	)		82		175			219			(29	)	$	200
Losses charged off		-			(122	)		(271	)		-		(381	)		(199	)		-		$	(973	)
Recoveries		169			21			6			-		106			32			-		$	334
Balance, end of period	$	1,952		$	2,309		$	991		$	723	$	1,060		$	425		$	97		$	7,557

Three months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,484		$	1,787	$	1,237		$	553	$	1,085		$	367		$	60	$	7,573
Provision charged to expense		(219	)		158		96			97		(44	)		65			47	$	200
Losses charged off		-			-		(3	)		-		(14	)		(74	)		-	$	(91	)
Recoveries		36			-		1			-		4			9			-	$	50
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107	$	7,732

Nine months ended September 30, 2018	Construction			Commercial Real Estate		One to four family			Multi-family		Commercial			Consumer and Other			Unallocated			Total
	(In Thousands)
Allowance for loan losses:
Balance, beginning of period	$	2,244		$	1,789	$	946		$	464	$	1,031		$	454		$	179		$	7,107
Provision charged to expense		(13	)		155		386			186		98			185			(72	)	$	925
Losses charged off		-			-		(3	)		-		(110	)		(301	)		-		$	(414	)
Recoveries		70			1		2			-		12			29			-		$	114
Balance, end of period	$	2,301		$	1,945	$	1,331		$	650	$	1,031		$	367		$	107		$	7,732

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	554	$	24	$	202	$	-	$	214	$	20	$	-	$	1,014
Ending balance: collectively evaluated for impairment	$	1,398	$	2,285	$	789	$	723	$	846	$	402	$	97	$	6,540
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	3	$	-	$	3
Loans:
Ending balance: individually evaluated for impairment	$	3,816	$	412	$	2,166	$	5,930	$	599	$	185	$	-	$	13,108
Ending balance: collectively evaluated for impairment	$	84,359	$	305,188	$	119,524	$	87,699	$	108,072	$	31,247	$	-	$	736,089
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,671	$	-	$	-	$	67	$	290	$	-	$	3,028

December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Unallocated		Total
	(In Thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	552	$	106	$	573	$	-	$	363	$	18	$	-	$	1,612
Ending balance: collectively evaluated for impairment	$	1,754	$	1,987	$	724	$	641	$	797	$	355	$	126	$	6,384
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Loans:
Ending balance: individually evaluated for impairment	$	4,088	$	1,588	$	4,520	$	5,952	$	1,062	$	169	$	-	$	17,379
Ending balance: collectively evaluated for impairment	$	84,507	$	317,488	$	128,258	$	84,663	$	118,459	$	32,968	$	-	$	766,343
Ending balance: loans acquired with deteriorated credit quality	$	-	$	2,782	$	-	$	-	$	216	$	175	$	-	$	3,173

Impaired Financing Receivables [Table Text Block]

	September 30, 2019						December 31, 2018
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	943	$	943	$	-	$	2	$	2	$	-
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		-		-		-		-		-		-
Real estate - commercial		2,921		2,921		-		3,138		3,138		-
Commercial loans		25		25		-		216		216		-
Consumer and other loans		363		363		-		225		225		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,224	$	1,224	$	202	$	4,518	$	4,518	$	573
Multi-family		-		-		-		-		-		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		162		162		24		1,232		1,317		106
Commercial loans		641		641		214		1,062		1,062		363
Consumer and other loans		112		112		23		119		119		18
Total
Real estate - residential mortgage:
One to four family units	$	2,167	$	2,167	$	202	$	4,520	$	4,520	$	573
Multi-family		5,930		5,930		-		5,952		5,952		-
Real estate - construction		3,815		5,048		554		4,088		5,321		552
Real estate - commercial		3,083		3,083		24		4,370		4,455		106
Commercial loans		666		666		214		1,278		1,278		363
Consumer and other loans		475		475		23		344		344		18
Total	$	16,136	$	17,369	$	1,017	$	20,552	$	21,870	$	1,612

	For the Nine Months Ended				For the Nine Months Ended
	September 30, 2019				September 30, 2018
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
	(In Thousands)
Loans without a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,046	$	1	$	1,649	$	-
Multi-family		5,933		-		1,006		25
Real estate - construction		-		-		1,525		-
Real estate - commercial		3,353		4		2,383		46
Commercial loans		161		-		658		-
Consumer and other loans		268		-		37		-
Loans with a specific valuation allowance
Real estate - residential mortgage:
One to four family units	$	1,970	$	-	$	2,671	$	-
Multi-family		-		-		666		-
Real estate - construction		3,866		-		2,774		-
Real estate - commercial		657		-		81		-
Commercial loans		702		-		457		-
Consumer and other loans		119		-		116		-
Total
Real estate - residential mortgage:
One to four family units	$	3,016	$	1	$	4,320	$	-
Multi-family		5,933		-		1,672		25
Real estate - construction		3,866		-		4,299		-
Real estate - commercial		4,010		4		2,464		46
Commercial loans		863		-		1,115		-
Consumer and other loans		387		-		153		-
Total	$	18,075	$	5	$	14,023	$	71

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	September 30, 2019		December 31, 2018
Real estate - residential mortgage:
One to four family units	$	1,175,382	$	1,208,596
Multi-family		-		-
Real estate - construction		3,815,409		4,088,409
Real estate - commercial		5,358,591		5,508,444
Commercial loans		599,030		504,481
Consumer and other loans		-		-
Total	$	10,948,412	$	11,309,930

Financing Receivable Credit Quality Indicators [Table Text Block]

September 30, 2019	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,275	$	297,358	$	118,700	$	87,699	$	103,864	$	30,560	$	722,456
Special Mention		-		6,699		553		-		2,427		-		9,679
Substandard		3,900		4,214		2,437		5,930		2,447		1,162		20,090
Doubtful		-		-		-		-		-		-		-
Total	$	88,175	$	308,271	$	121,690	$	93,629	$	108,738	$	31,722	$	752,225

December 31, 2018	Construction		Commercial Real Estate		One to four family		Multi-family		Commercial		Consumer and Other		Total
	(In Thousands)
Rating:
Pass	$	84,375	$	310,486	$	126,586	$	84,596	$	114,525	$	32,686	$	753,254
Special Mention		-		5,524		372		-		3,031		-		8,927
Substandard		4,179		6,911		5,453		5,952		1,814		405		24,714
Doubtful		-		-		-		-		-		-		-
Total	$	88,554	$	322,921	$	132,411	$	90,548	$	119,370	$	33,091	$	786,895

XML

Note 12 - Derivative Financial Instruments

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note

12:

Derivative Financial Instruments

The Company records all derivative financial instruments at fair value in the financial statements. Derivatives are used as a risk management tool to hedge the exposure to changes in interest rates or other identified market risks.

When a derivative is intended to be a qualifying hedged instrument, the Company prepares written hedge documentation that designates the derivative as

1

) a hedge of fair value of a recognized asset or liability (fair value hedge) or

2

) a hedge of a forecasted transaction, such as, the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item, and methodologies for assessing and measuring hedge effectiveness and ineffectiveness, along with support for management’s assertion that the hedge will be highly effective.

In

June 2017,

the Company entered into a forward start interest rate swap agreement totaling

$50

million notional amount to hedge against interest rate risk on FHLB advances. The swap rate paid is

2.12%

and is hedged against

three

-month floating LIBOR with a termination date of

February 2025.

As a cash flow hedge, the portion of the change in the fair value of the derivative that has been deemed highly effective is recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings. At

September 30, 2019,

the Company reported a

$1,255,540

unrealized loss, net of a

$429,749

tax effect, in other comprehensive income related to this cash flow hedge.

In

March 2019,

the Company entered into an interest rate swap agreement totaling

$10.3

million notional amount to hedge against interest rate risk on variable rate subordinated debentures. The swap rate paid is

4.09%

and is hedged against

three

-month floating LIBOR plus

145

basis points with a termination date of

February 2026.

As a cash flow hedge, the portion of the change in the fair value of the derivative that has been deemed highly effective is recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings. At

September 30, 2019,

the Company reported a

$549,889

unrealized loss, net of a

$188,217

tax effect, in other comprehensive income related to this cash flow hedge.

The Company documents, both at inception and periodically over the life of the hedges, its analysis of actual and expected hedge effectiveness. 

As of

September 30, 2019,

based on current fair values, the Company pledged cash collateral of

$2.5

million to its counterparty for the swaps. As of

December 31, 2018,

based on current fair values, the counterparty had pledged cash collateral of

$1.5

million to the Company.

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments on the consolidated balance sheets at

September 30, 2019

and

December 31, 2018:

				September 30, 2019				December 31, 2018
				Fair Value				Fair Value
	Balance Sheet	Notional		Derivative		Derivative		Derivative		Derivative
Derivatives designated as	Classification	Amount		Assets		Liablities		Assets		Liablities
hedging instruments:
Interest rate swap - FHLB Advances	Other liabilites	$	50,000,000	$	-	$	1,685,289	$	1,271,538	$	-
Interest rate swap - Subordinated Debentures	Other liabilites	$	10,310,000	$	-	$	738,106	$	-	$	-

The following table presents amounts included in the consolidated statements of income for derivatives designated as hedging instruments for the periods indicated:

		Nine Months Ended						Three Months Ended
	Income Statement	September, 30						September, 30
Derivatives designated as	Classification	2019			2018			2019			2018
hedging instruments:
Interest rate swap - FHLB Advances	Interest Expense	$	(162,517	)	$	(17,261	)	$	(33,424	)	$	(9,423	)
Interest rate swap - Subordinated Debentures	Interest Expense	$	8,569		$	-		$	7,268		$	-

XML

Note 9 - Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

Stock Options	Number of shares
	Incentive Stock Option			Non- Incentive Stock Option			Weighted Average Exercise Price
Balance outstanding as of January 1, 2019		12,500			5,000		$	5.14
Granted		-			-			-
Exercised		(9,000	)		(5,000	)		5.16
Forfeited		-			-			-
Balance outstanding as of September 30, 2019		3,500			-		$	5.08
Options exercisable as of September 30, 2019		3,500			-		$	5.08

Nonvested Restricted Stock Shares Activity [Table Text Block]

Restricted Stock	Number of Shares			Weighted Average Grant- Date Fair Value
Balance of shares non-vested as of January 1, 2019		32,349		$	18.93
Granted		15,434			23.85
Vested		(20,771	)		17.67
Forfeited		(1,649	)		22.27
Balance of shares non-vested as of September 30, 2019		25,363		$	22.74

Schedule of Nonvested Performance-based Units Activity [Table Text Block]

Performance Stock Units	Performance Stock Units		Weighted Average Grant-Date Fair Value
Balance of shares non-vested as of January 1, 2019		47,322	$	20.48
Granted		-		-
Vested		-		-
Forfeited		-		-
Balance of shares non-vested as of September 30, 2019		47,322	$	20.48