NOTE

– DISCONTINUED OPERATIONS

May 9, 2019,

the Company entered into a purchase and assumption agreement to transfer its mortgage banking operations to another financial institution. Under the agreement, the other financial institution would offer employment to a majority of the Company’s mortgage operations employees. Assuming a majority of key employees at those locations agreed to transfer, the other financial institution would assume certain leases and fixed assets at those locations. Subsequent to that transaction, a majority of the mortgage operation employees made arrangements to transfer to different financial institutions, which similarly agreed to assume certain leases and fixed assets at those respective locations. Some sales and assumption agreements with these different financial institutions were consummated in the

second

quarter of

2019

and the remainder are expected to be consummated in the

second

half of

2019.

Subject to customary closing conditions, all related transactions are expected to be completed by

December 31, 2019.

The Company will

not

have continuing involvement with the mortgage banking operations once those transactions are complete. The Company discontinued issuing mortgage interest rate lock commitments (IRLC's) in its name in

May 2019

and originating mortgage loans held for sale in its name in

June 2019.

Income and expense related to mortgage banking operations are included in discontinued operations and prior period financial information has been retrospectively adjusted for the impact of discontinued operations.

Liabilities for costs associated with discontinued operations were recognized and measured initially at their fair values during the quarter ended

June 30, 2019.

Those costs include, but are

not

limited to, involuntary employee termination benefits, cost to terminate contracts, and other associated costs. The liability itself consists of future cash flows expected to be incurred in the exit and disposal activity, which are discounted at a credit-adjusted risk-free interest rate.

The following table summarizes the

one

-time charge on net loss on disposal of discontinued operations:

Severance benefits	$	147,948
Leases, software & other contractual obligations		360,613
Fixed asset losses		30,423
Other costs		212,998
Net Loss on Disposal		751,982

The following table presents results of discontinued operations for the

three

and

nine

months ended

September 30, 2019,

and

2018:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018


Net interest income	$	-	$	84,524		$	170,782		$	246,400

Gain on sale of loans		-		3,409,098			4,813,660			10,699,250
Other		-		-			190			-
Total noninterest income		-		3,409,098			4,813,850			10,699,250

Salaries and benefits		-		3,024,779			4,480,025			9,085,069
Occupancy		-		183,547			232,360			516,203
Data processing fees		-		373,774			584,369			1,063,651
Professional fees		-		57,930			107,972			133,602
Advertising		-		101,857			118,801			297,567
Net loss on disposal		-		-			751,982			-
Other		-		288,815			299,761			773,159
Total noninterest expense		-		4,030,702			6,575,270			11,869,251

Loss from discontinued operations		-		(537,080	)		(1,590,638	)		(923,601	)
Benefit for income taxes		-		(135,380	)		(392,193	)		(230,766	)

Net loss from discontinued operations	$	-	$	(401,700	)	$	(1,198,445	)	$	(692,835	)

Net interest income from discontinued operations includes interest income on mortgage loans held for sale less interest expense allocated to mortgage banking operations equal to the average mortgage loans held for sale times the average rate on FHLB short-term borrowings.

Material assets and liabilities of mortgage banking operations are classified as Discontinued Operations in the consolidated balance sheet as of

September 30, 2019,

and prior year balances have been adjusted to conform with the current period presentation.

The following table summarizes the major categories of assets and liabilities classified as held for sale related to discontinued operations in the consolidated balance sheet as of:

	September 30, 2019			December 31, 2018

Loans held for sale - discontinued operations	$	190,675		$	26,884,014
Premises and equipment, net - discontinued operations		-			56,683
Accrued interest receivable - discontinued operations		894			11,527
Prepaid and other assets - discontinued operations		-			241,415

Total assets	$	191,569		$	27,193,639

Escrows - discontinued operations		665			149,776
Accrued interest and other liabilities - discontinued operations		452,424			717,407

Total liabilities	$	453,089		$	867,183

Net (liabilities) assets	$	(261,520	)	$	26,326,456