Note 2 - Discontinued Operations

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

NOTE

2

– DISCONTINUED OPERATIONS

On

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. Sales and assumption agreements with different financial institutions were consummated in

2019.

All related transactions were completed by

December 31, 2019.

The Company

no

longer has continuing involvement with mortgage banking operations. The Company discontinued issuing mortgage interest rate lock commitments (IRLCs) 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

and adjusted on

December 31, 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		305,915
Net Loss on Disposal	$	844,899

The following table presents results of discontinued operations for the years ended

December 31, 2019,

and

2018:

	Year Ended December 31,
	2019			2018
Net interest income	$	170,782		$	326,446
Gain on sale of loans		4,813,660			14,292,592
Other		190			-
Total noninterest income		4,813,850			14,292,592
Salaries and benefits		4,480,025			12,067,023
Occupancy		232,360			674,977
Data processing fees		584,369			1,394,464
Professional fees		107,972			178,906
Advertising		118,801			356,419
Net loss on disposal		844,899			-
Other		299,761			1,008,003
Total noninterest expense		6,668,187			15,679,792
Loss from discontinued operations		(1,683,555	)		(1,060,754	)
Benefit for income taxes		(427,627	)		(259,013	)
Net loss from discontinued operations	$	(1,255,928	)	$	(801,741	)

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

December 31, 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:

	December 31, 2019			December 31, 2018
Loans held for sale - discontinued operations	$	-		$	26,884,014
Premises and equipment, net - discontinued operations		-			56,683
Accrued interest receivable - discontinued operations		-			11,527
Prepaid and other assets - discontinued operations		-			241,415
Total assets	$	-		$	27,193,639
Escrows - discontinued operations		-			149,776
Accrued interest and other liabilities - discontinued operations		233,427			717,407
Total liabilities	$	233,427		$	867,183
Net (liabilities) assets	$	(233,427	)	$	26,326,456