10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

[ X ]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2019
[     ]	Transition report pursuant to Section 13 or 15(d) of the Exchange Act.
	For the transition period from                     to

Commission file number 1-12053

SOUTHWEST GEORGIA FINANCIAL CORPORATION

(Exact Name Of Small Business Issuer as specified in its Charter)

Georgia	58-1392259
(State Or Other Jurisdiction Of	(I.R.S. Employer
Incorporation Or Organization)	Identification No.)

201 FIRST STREET, S.E., MOULTRIE, GEORGIA 31768

Address Of Principal Executive Offices

(229) 985-1120 _

Registrant's Telephone Number, Including Area Code

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 fi les).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 the 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 [   ]	Non-accelerated filer [X]
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 for 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 equity, as of the latest practicable date.

Class	Outstanding At May 4, 2019
Common Stock, $1 Par Value	2,545,776

SOUTHWEST GEORGIA FINANCIAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2019

TABLE OF CONTENTS

				PAGE #
PART I - FINANCIAL INFORMATION
	ITEM 1.		FINANCIAL STATEMENTS
	The following financial statements are provided for Southwest Georgia
	Financial Corporation as required by this Item 1.
		a.	Consolidated balance sheets – March 31, 2019 (unaudited) and
			December 31, 2018 (audited).	2
		b.	Consolidated statements of income (unaudited) – for the three months
			ended March 31, 2019 and 2018.	3
		c.	Consolidated statements of comprehensive income (unaudited) - for the
			three months ended March 31, 2019 and 2018.	4
		d.	Consolidated statements of changes in shareholders’ equity (unaudited) -
			for the three months ended March 31, 2019 and 2018.	5
		d.	Consolidated statements of cash flows (unaudited) for the three months
			ended March 31, 2019 and 2018.	6
		e.	Notes to Consolidated Financial Statements	7
	ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF
			FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
	ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
			MARKET RISK	44
	ITEM 4.		CONTROLS AND PROCEDURES	45
PART II - OTHER INFORMATION
	ITEM 6.		EXHIBITS	46
	SIGNATURE			46

-1- 

SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 2019 and December 31, 2018
	(Unaudited)			(Audited)
	March 31,			December 31,
	2019			2018
ASSETS
Cash and due from banks	$	11,348,240		$	14,050,682
Interest-bearing deposits in other banks		37,666,935			21,448,110
Cash and cash equivalents		49,015,175			35,498,792
Certificates of deposit in other banks		2,732,000			2,732,000
Investment securities available for sale, at fair value		62,962,079			58,313,577
Investment securities held to maturity (fair value
approximates $35,674,367 and $37,010,327)		35,184,883			36,827,073
Federal Home Loan Bank stock, at cost		1,019,900			1,820,300
Total investment securities		99,166,862			96,960,950
Loans		377,711,765			376,767,688
Less: Unearned income		(17,390	)		(17,451	)
Allowance for loan losses		(3,366,927	)		(3,428,869	)
Loans, net		374,327,448			373,321,368
Premises and equipment, net		14,443,696			14,573,974
Foreclosed assets		127,605			127,605
Intangible assets		0			3,907
Bank owned life insurance		6,812,589			6,779,242
Other assets		4,445,793			4,835,329
Total assets	$	551,071,168		$	534,833,167
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Interest bearing business checking	$	33,419,254		$	28,070,871
NOW accounts		40,651,250			35,816,115
Money Market		163,903,769			158,730,044
Savings		33,580,463			31,848,588
Certificates of deposit $250,000 and over		16,831,531			16,264,681
Other time accounts		85,564,731			81,214,376
Total interest-bearing deposits		373,950,998			351,944,675
Noninterest-bearing deposits		114,667,559			103,694,910
Total deposits		488,618,557			455,639,585
Short-term borrowed funds		4,100,000			10,457,143
Long-term debt		9,600,000			21,171,429
Other liabilities		3,492,686			3,946,066
Total liabilities		505,811,243			491,214,223
Stockholders' equity:
Common stock - $1 par value, 5,000,000 shares
authorized, 2,545,776 shares issued		2,545,776			2,545,776
Capital surplus		18,418,995			18,418,995
Retained earnings		25,764,780			24,841,569
Accumulated other comprehensive loss		(1,469,626	)		(2,187,396	)
Total stockholders' equity		45,259,925			43,618,944
Total liabilities and stockholders' equity	$	551,071,168		$	534,833,167

-2- 

SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
	For the Three Months
	Ended March 31,
	(Unaudited)		(Unaudited)
	2019		2018
Interest income:
Interest and fees on loans	$	5,121,187	$	4,293,240
Interest on taxable securities available for sale		334,433		288,646
Interest on taxable securities held to maturity		54,058		28,147
Interest on tax exempt securities		237,772		291,004
Dividends		26,857		31,947
Interest on deposits in other banks		170,893		117,828
Interest on certificates of deposit in other banks		16,846		11,565
Total interest income		5,962,046		5,062,377
Interest expense:
Interest on deposits		1,050,306		372,473
Interest on federal funds purchased		6		6
Interest on other short-term borrowings		35,986		115,668
Interest on long-term debt		109,422		125,833
Total interest expense		1,195,720		613,980
Net interest income		4,766,326		4,448,397
Provision for loan losses		115,908		215,500
Net interest income after provision for loan losses		4,650,418		4,232,897
Noninterest income:
Service charges on deposit accounts		238,149		224,589
Income from trust services		56,606		58,833
Income from retail brokerage services		106,748		88,395
Income from insurance services		436,649		388,239
Income from mortgage banking services		0		620
Net gain (loss) on sale or disposition of assets		898		(7,155	)
Net gain on extinguishment of debt		143,031		0
Other income		254,966		240,883
Total noninterest income		1,237,047		994,404
Noninterest expense:
Salaries and employee benefits		2,496,204		2,341,119
Occupancy expense		314,509		289,426
Equipment expense		308,020		190,269
Data processing expense		403,553		353,790
Amortization of intangible assets		3,907		3,906
Other operating expenses		889,398		817,068
Total noninterest expenses		4,415,591		3,995,578
Income before income taxes		1,471,874		1,231,723
Provision for (benefit from) income taxes		243,168		(643	)
Net income	$	1,228,706	$	1,232,366
Earnings per share of common stock:
Net income, basic	$	0.48	$	0.48
Net income, diluted	$	0.48	$	0.48
Dividends paid per share	$	0.12	$	0.11
Weighted average shares outstanding		2,545,776		2,544,922
Diluted average shares outstanding		2,545,776		2,544,922

-3- 

SOUTHWEST GEORGIA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Three Months
	Ended March 31,
	(Unaudited)		(Unaudited)
	2019		2018
Net income	$	1,228,706	$	1,232,366
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) on  investment securities available for sale		908,569		(973,869	)
Less: Tax effect		190,799		(204,513	)
Total other comprehensive income (loss), net of tax		717,770		(769,356	)
Total comprehensive income	$	1,946,476	$	463,010

-4- 

SOUTHWEST GEORGIA FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

for the three months ended March 31, 2019 and March 31, 2018

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
Balance at Dec. 31, 2017	$	4,293,835		$	31,701,533		$	33,020,030		$	(1,629,619	)	$	(26,242,793	)	$	41,142,986
Net Income		—			—			1,232,366			—			—			1,232,366
Comprehensive income (loss):
Changes in net gain on securities available for sale		—			—			—			(769,356	)		—			(769,356	)
Cash dividend declared $.11 per share		—			—			(280,035	)		—			—			(280,035	)
Retirement of treasury stock		(1,748,059	)		(12,994,133	)		(11,500,601	)		—			26,242,793			—
Balance at Mar. 31, 2018	$	2,545,776		$	18,707,400		$	22,471,760		$	(2,398,975	)	$	0		$	41,325,961
Balance at Dec. 31, 2018	$	2,545,776		$	18,418,995		$	24,841,569		$	(2,187,396	)	$	0		$	43,618,944
Net Income		—			—			1,228,706			—			—			1,228,706
Comprehensive income (loss):
Changes in net gain on securities available for sale		—			—			—			717,770			—			717,770
Cash dividend declared $.12 per share		—			—			(305,495	)		—			—			(305,495	)
Balance at Mar. 31, 2019	$	2,545,776		$	18,418,995		$	25,764,780		$	(1,469,626	)	$	0		$	45,259,925

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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Three Months
	Ended March 31,
	(Unaudited)			(Unaudited)
Cash flows from operating activities:		2019			2018
Net income	$	1,228,706		$	1,232,366
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses		115,908			215,500
Depreciation		303,750			237,452
Net amortization of investment securities		63,560			90,812
Income on cash surrender value of bank owned life insurance		(33,347	)		(41,556	)
Amortization of intangibles		3,907			3,906
(Gain) loss on sale/writedown of foreclosed assets		(898	)		7,521
Net gain on extinguishment of debt		(143,031	)		0
Change in:
Other assets		183,666			267,377
Other liabilities		(453,128	)		(565,517	)
Net cash provided by operating activities		1,269,093			1,447,861
Cash flows from investing activities:
Proceeds from calls, paydowns and maturities of securities HTM		1,628,603			649,921
Proceeds from calls, paydowns and maturities of securities AFS		175,813			125,115
Proceeds from Federal Home Loan Bank stock repurchase		840,900			0
Purchase of securities available for sale		(3,965,719	)		(3,011,243	)
Purchase of Federal Home Loan Bank Stock		(40,500	)		(36,600	)
Net change in loans		(1,121,988	)		(5,477,008	)
Purchase of premises and equipment		(178,472	)		(966,591	)
Proceeds from sales of fixed assets and foreclosed assets		20,717			954,791
Net cash used by investing activities		(2,640,646	)		(7,761,615	)
Cash flows from financing activities:
Net change in deposits		32,978,972			21,442,815
Payment of short-term portion of long-term debt		(7,283,601	)		0
Payment for early retirement of long-term debt		(11,501,940	)		0
Proceeds from issuance of short-term debt		1,000,000			0
Cash dividends paid		(305,495	)		(280,035	)
Net cash provided by financing activities		14,887,936			21,162,780
Increase in cash and cash equivalents		13,516,383			14,849,026
Cash and cash equivalents - beginning of period		35,498,792			34,138,421
Cash and cash equivalents - end of period	$	49,015,175		$	48,987,447
NONCASH ITEMS:
Increase in foreclosed properties and decrease in loans	$	0		$	376,050
Unrealized gain (loss) on securities available for sale	$	908,569		$	(973,869	)
Net reclass between short and long-term debt	$	0		$	1,500,000
Retirement of treasury stock	$	0		$	26,242,793
Receivable from sale of guaranteed foreclosed asset	$	0		$	172,616

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SOUTHWEST GEORGIA FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_________

Basis of Presentation

Southwest Georgia Financial Corporation (the “Corporation”), a bank-holding company organized under the laws of Georgia, provides deposit, lending, and other financial services to businesses and individuals primarily in the Southwest region of Georgia. The Corporation and its subsidiaries are subject to regulation by certain federal and state agencies.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and changes in financial position in conformity with generally accepted accounting principles. The interim financial statements furnished reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. The interim consolidated financial statements should be read in conjunction with the Corporation’s 2018 Annual Report on Form 10K.

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NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Southwest Georgia Financial Corporation (the “Corporation”) and its direct and indirect subsidiaries, including its wholly-owned banking subsidiary, Southwest Georgia Bank (the “Bank”), conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The following is a description of the more significant of those policies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Nature of Operations

The Corporation offers comprehensive financial services to consumer, business, and governmental entity customers through its banking offices in southwest Georgia. Its primary deposit products are money market, NOW, savings and certificates of deposit, and its primary lending products are consumer and commercial mortgage loans. In addition to conventional banking services, the Corporation provides investment planning and management, trust management, and commercial and individual insurance products. Insurance products and advice are provided by the Bank’s Southwest Georgia Insurance Services Division.

The Corporation’s primary business is providing banking services through the Bank to individuals and businesses principally in the counties of Colquitt, Baker, Worth, Lowndes, Tift and the surrounding counties of southwest Georgia. The Bank operates six branch offices in its trade area. Trust and retail brokerage services are offered at an office building located at 25 2nd Avenue SW in Moultrie, and lending services are offered in Valdosta at 3520 North Valdosta Road.

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with these evaluations, management obtains independent appraisals for significant properties.

A substantial portion of the Corporation’s loans are secured by real estate located primarily in Georgia. Accordingly, the ultimate collection of these loans is susceptible to changes in the real estate market conditions of this market area.

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Cash and Cash Equivalents and Statement of Cash Flows

For purposes of reporting cash flows, the Corporation considers cash and cash equivalents to include all cash on hand, deposit amounts due from banks, interest-bearing deposits in other banks, and federal funds sold. The Corporation maintains its cash balances in several financial institutions. Accounts at the financial institutions are secured by the Federal Deposit Insurance Corporation (the “FDIC”) up to $250,000. There were no uninsured deposits at March 31, 2019.

Investment Securities

Investment securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value with unrealized gains and losses (net of tax effect) reported in other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation has been calculated primarily using the straight-line method for buildings and building improvements over the assets estimated useful lives. Equipment and furniture are depreciated using the modified accelerated recovery system method over the assets estimated useful lives for financial reporting and income tax purposes for assets purchased on or before December 31, 2003. For assets acquired after 2003, the Corporation used the straight-line method of depreciation. The following estimated useful lives are used for financial statement purposes:

Land improvements	5 – 31 years
Building and improvements	10 – 40 years
Machinery and equipment	5 – 10 years
Computer equipment	3 – 5 years
Office furniture and fixtures	5 – 10 years

All of the Corporation’s leases are operating leases and are not capitalized as assets for financial reporting purposes. Maintenance and repairs are charged to expense and betterments are capitalized.

Long-lived assets are evaluated regularly for other-than-temporary impairment. If circumstances suggest that their value may be impaired and the write-down would be material, an assessment of recoverability is performed prior to any write-down of the asset. Impairment on intangibles is evaluated at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount should be assessed. Impairment, if any, is recognized through a valuation allowance with a corresponding charge recorded in the income statement.

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 Bank Property Held for Sale

In 2016, the Bank’s former branch in Pavo, Georgia, was transferred from premises to bank property held for sale and depreciation was discontinued. The property was booked at the lower of cost or market value based on the current appraisal of $211,500. On November 30, 2018, the Corporation sold this property and recorded a loss in the amount of $96,750.

Loans and Allowances for Loan Losses

Loans are stated at principal amounts outstanding less unearned income and the allowance for loan losses. Interest income is credited to income based on the principal amount outstanding at the respective rate of interest except for interest on certain installment loans made on a discount basis which is recognized in a manner that results in a level-yield on the principal outstanding.

Accrual of interest income is discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable.

Fees on loans and costs incurred in origination of most loans are recognized at the time the loan is placed on the books. Because loan fees are not significant, the results on operations are not materially different from the results which would be obtained by accounting for loan fees and costs as amortized over the term of the loan as an adjustment of the yield.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes the collection of the principal is unlikely. The allowance is an amount which management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible based on evaluation of the collectability of loans and prior loss experience. This evaluation takes into consideration such factors as changes in the nature and volume of the loan portfolios, current economic conditions that may affect the borrowers’ ability to pay, overall portfolio quality, and review of specific problem loans.

-10- 

 Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based upon changes in economic conditions. Also, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

Foreclosed Assets

In accordance with policy guidelines and regulations, properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair market value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. A valuation allowance is established to record market value changes in foreclosed assets. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. There was no valuation allowance for foreclosed asset losses at March 31, 2019. Foreclosed assets totaled $127,605 at March 31, 2019 and December 31, 2018.

Intangible Assets

Intangible assets are amortized over a determined useful life using the straight-line basis. These assets are evaluated annually as to the recoverability of the carrying value. All intangibles were fully amortized as of March 31, 2019.

Credit Related Financial Instruments

In the ordinary course of business, the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Retirement Plans

The Corporation and its direct and indirect subsidiaries have post-retirement plans covering substantially all employees. The Corporation makes annual contributions to the plans in amounts not exceeding the regulatory requirements.

Bank Owned Life Insurance

The Bank owns life insurance policies on a group of employees. Banking laws and regulations allow the Bank to purchase life insurance policies on certain employees in order to help offset the Bank’s overall employee compensation costs. The beneficial aspects of these life insurance policies are tax-free earnings and a tax-free death benefit, which are realized by the Bank as the owner of the policies. The cash surrender value of these policies is included as an asset on the balance sheet, and any increases in cash surrender value are recorded as noninterest income on the statement of income. At March 31, 2019, and December 31, 2018, the policies had a value of $6,812,589 and $6,779,242, respectively, and were 15.1% and 15.5%, respectively, of shareholders’ equity. These values are within regulatory guidelines.

-11- 

Income Taxes

The Corporation and its direct and indirect subsidiaries file a consolidated income tax return. Each subsidiary computes its income tax expense as if it filed an individual return except that it does not receive any portion of the surtax allocation. Any benefits or disadvantages of the consolidation are absorbed by the parent company.  Each subsidiary pays its allocation of federal income taxes to the parent company or receives payment from the parent company to the extent that tax benefits are realized.

The Corporation reports income under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefit associated with certain temporary differences and tax credits will be realized.

The Corporation will recognize a tax position as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with an examination being presumed to occur. The amount recognized is the largest amount of a tax benefit that is greater than fifty percent likely of being realized on examination. No benefit is recorded for tax positions that do not meet the more than likely than not test.

The Corporation recognizes penalties related to income tax matters in income tax expense.  The Corporation is subject to U.S. federal and Georgia state income tax audit for returns for the tax period ending December 31, 2016 and subsequent years. 

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes all changes in shareholders’ equity during a period, except those resulting from transactions with shareholders. Besides net income, other components of the Corporation’s accumulated other comprehensive income (loss) includes the after tax effect of changes in the net unrealized gain/loss on securities available for sale and the unrealized gain/loss on pension plan benefits.

Trust Department

Trust income is included in the accompanying consolidated financial statements on the cash basis in accordance with established industry practices. Reporting of such fees on the accrual basis would have no material effect on reported income.

Advertising Costs

It is the policy of the Corporation to expense advertising costs as they are incurred. The Corporation does not engage in any direct-response advertising and accordingly has no advertising costs reported as assets on its balance sheet. Costs expensed were $75,750 and $50,901 for the three month periods ended March 31, 2019 and 2018, respectively.

-12- 

Recent Market and Regulatory Developments

The Corporation and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the federal banking agencies about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum Tier 1 leverage, Tier 1 risk-based capital and Total risk-based capital ratios. In July 2013, the Board of Governors of the Federal Reserve System published the Basel III Capital Rules. These rules establish a comprehensive capital framework applicable to all depository institutions, certain bank holding companies with total consolidated assets below a certain threshold and all and savings and loan holding companies except for those that are substantially engaged in insurance underwriting or commercial activities. These rules implement higher minimum capital requirements for banks and certain bank holding companies, include a new common equity Tier 1 capital requirement and establish criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital.

The Basel III Capital Rules became effective for the Bank on January 1, 2015, subject to a phase-in period, but are not applicable to bank holding companies, like the Corporation, with less than $1 billion in total consolidated assets that meet certain criteria.

The minimum capital level requirements applicable to the Bank under the Basel III Capital Rules are: (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a Total risk-based capital ratio of 8% (unchanged from the rules effective for the year ended December 31, 2014); and (iv) a Tier 1 leverage ratio of 4% for all institutions. Common equity Tier 1 capital will consist of retained earnings and common stock instruments, subject to certain adjustments.

The Basel III Capital Rules set forth changes in the methods of calculating certain risk-weighted assets, which in turn affect the calculation of risk-based ratios. The new risk weightings are more punitive for assets held by banks that are deemed to be of higher risk. These changes were also effective beginning January 1, 2015.

The Basel III Capital Rules also introduce a “capital conservation buffer”, which is in addition to each capital ratio and is phased-in over a three-year period beginning in January 2016.

As of December 31, 2018, the Bank is considered to be well-capitalized under the Basel III Capital Rules. There have been no conditions or events since December 31, 2018, that management believes has changed the Bank’s status as “well-capitalized.” The capital ratios of the Corporation and Bank are presented in Note 15 of the Corporation’s Notes to Consolidated Financial Statements.

Adoption of New Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 118. The amendments in this update were effective upon issuance. The adoption of ASU 2018-05 had no material impact on the Corporation’s consolidated financial statements.

-13- 

In March 2018, FASB issued ASU 2018-04, Investment - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 117. The amendments in this update were effective upon issuance. The adoption of ASU 2018-04 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10). This Update clarifies certain aspects of the guidance issued in ASU 2016-01 including (i) an entity measuring an equity security using the measurement alternative may make an irrevocable election to change its measurement approach to a fair value method under Topic 820 for that security and any identical or similar investments of the same issuer, (ii) fair value adjustments under the measurement alternative should be as of the date the observable transaction for a similar security occurred, (iii) requiring the remeasurement of the entire value of forward contracts and purchased options when observable transactions occur on the underlying equity securities, (iv) financial liabilities for which the fair value option is elected should follow the guidance in paragraph 825-10-45-5, (v) changes in the fair value of financial liabilities for which the fair value option is elected relating to the instrument-specific credit risk should first be measured in the currency of denomination and then both components of the change in fair value should be remeasured into the reporting entity's functional currency using end-of-period spot rates, and (vi) the prospective transition approach should only be applied for instances in which the measurement alternative is applied. The guidance was effective for interim periods beginning after June 15, 2018 and may be early adopted provided ASU 2016-01 was adopted. The Company adopted the amendments in this ASU effective January 1, 2018. The adoption of ASU 2018-03 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides guidance on accounting for the effects of the Tax Cuts and Jobs Act, which was enacted in December, 2017. The guidance allows reclassification of the tax effects that were stranded in accumulated other comprehensive income as a result of the tax rate change from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2018. The adoption of ASU 2018-02 had no material impact on the Corporation’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Stock Compensation, Scope of Modification Accounting.” This ASU clarifies when changes to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The new guidance should reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to awards without accounting for them as modifications. It does not change the accounting for modifications. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. The adoption of ASU 2017-09 had no material impact on the Corporation’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonable estimable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This update should be adopted on a modified retrospective basis with a cumulative effect adjustment to retained earnings on the date of adoption. The adoption of ASU 2017-08 had no material impact on the Corporation’s consolidated financial statements.

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In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. This ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-07 had no material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), which provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption will be permitted and should apply it to transactions that have not been reported in financial statements that have been issued or made available for issuance. The adoption of ASU 2017-01 had no material impact on the Corporation’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. The accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018. The adoption of 2016-01 had no material impact on the Corporation’s consolidated financial statements.

In May 2014, the FASB began issuing guidance to change the recognition of revenue from contracts with customers. The last guidance was issued in February 2017. The standards issued during this time are as follows: ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, and ASU 2017-05 Other Income - Gains and losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This new guidance, which does not apply to financial instruments, provides that revenue should be recognized for the transfer of goods and services to customers in an amount equal to the consideration it receives or expects to receive. The guidance also includes expanded disclosure requirements that provide comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018, using the modified retrospective method. Since there was no change to net income upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not necessary. See below for additional information related to revenue generated from contracts with customers.

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In 2016, the FASB issued ASU 2016-02 – Leases (Topic 842). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The adoption of ASU No. 2016-02 had no material impact on the Corporation’s consolidated financial statements.

Revenue Recognition

On January 1, 2018, the Corporation adopted ASC Topic 606, using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after January 1, 2018, are presented under ASC Topic 606 and have not materially changed from the prior year amounts. Noninterest income, within the scope of this guidance, is recognized as services are transferred to customers in an amount that reflects the considerations expected to be entitled to in exchange for those services. The Corporation's revenue streams that were in scope include service charges on deposit accounts, income from insurance services, income from trust services, Automated Teller Machine (“ATM”) surcharge and other noninterest income.

Services Charges on Deposit Accounts - Service charges on deposit accounts primarily consist of monthly maintenance charges, analysis charges and Non-sufficient funds (“NSF”) charges. The NSF charges and certain service charges are fixed and the performance obligation is typically satisfied at the time of the related transaction. The consideration for analysis charges and monthly maintenance charges are variable as the fee can be reduced if the customer meets certain qualifying metrics. The Corporation's performance obligations are satisfied either at the time of the transaction or over the course of a month.

Income from Insurance Services – Income from insurance services consists primarily of property and casualty insurance, life, health, and disability insurance. Property and casualty, life, health, and disability insurance includes the brokerage of both personal and commercial coverages. The placement of the policy is completion of the Corporation's performance obligation and revenue is recognized at that time. The Corporation's commission is primarily a percentage of the premium.

Income from Trust Services – Income from Trust services consists of revenue generated from services provided for corporate, pension, and personal trusts, trustee services, and administrative services for employee benefit plans. The Corporation’s performance obligation and revenue is recognized once the service has been performed.

ATM Surcharge - ATM surcharge represents revenues earned from certain terminal activity. ATM surcharges primarily consist of charges assessed to our customers for using a non-Bank ATM or a non-Bank customer using our ATM. Such surcharges generally are recognized concurrently with the delivery of services on a daily basis.

Other - Other noninterest income primarily consists of transaction based revenue where the performance obligation is satisfied concurrent with the revenue recognition.

-16- 

Recent Accounting Pronouncements

In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. On June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. The amendments in ASU No. 2018-19 align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarify the scope of the guidance in the amendments in Update 2016-13. The amendments also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The adoption of ASU 2018-19 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes the requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. The ASU adds requirements to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and the reasons for significant gains and losses related to changes in the benefit obligation for the period. The update also clarifies the requirements to disclose the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets, and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. This update is effective for fiscal years beginning after December 15, 2020. The adoption of ASU 2018-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the requirements for public entities to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The ASU modifies the disclosure requirement for investments in certain entities that calculate net asset value, and clarifies that the measurement uncertainty disclosure is to communicate measurement uncertainties as of the reporting date. The ASU also requires public entities to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This update is effective for fiscal years beginning after December 15, 2019. The adoption of ASU 2018-13 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Rather, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities may early adopt the standard for goodwill impairment tests with measurement dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Corporation’s consolidated financial statements. 

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In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323), which incorporates into the FASB ASC recent SEC guidance about disclosing, under SEC Staff Accounting Bulletin, Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The effective date varies as each topic addressed in this ASU has its own effective date. The adoption of ASU 2017-03 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses. Among other things, 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. For SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with later effective dates for non-SEC registrant public companies and other organizations. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2016-13 is being reviewed for any material impact on the Corporation’s consolidated financial statements.

NOTE 2

Fair Value Measurements

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available for sale are recorded at fair value on a recurring basis.  From time to time, the Corporation may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and foreclosed real estate. Additionally, the Corporation is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy:

Under ASC Topic 820, the Corporation groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

-18- 

Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and Cash Equivalents:

For disclosure purposes for cash and due from banks, interest bearing deposits in other banks and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Certificates of Deposit in Other Banks:

For disclosure purposes for certificates of deposit in other banks, the carrying amount is a reasonable estimate of fair value.

Investment Securities Available for Sale:

Investment securities available for sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds.  Other securities classified as available for sale are reported at fair value utilizing Level 2 inputs. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Investment Securities Held to Maturity:

Investment securities held to maturity are not recorded at fair value on a recurring basis. For disclosure purposes, fair value measurement is based upon quoted prices, if available.

Federal Home Loan Bank Stock:

For disclosure purposes, the carrying value of other investments approximate fair value.

Loans:

The Corporation does not record loans at fair value on a recurring basis.  However, from time to time, a loan is considered impaired and a specific allocation is established within the allowance for loan losses.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310, Accounting by Creditors for Impairment of a Loan.  The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Corporation records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Corporation records the impaired loan as nonrecurring Level 3.

For disclosure purposes, the fair value of fixed rate loans which are not considered impaired, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes. 

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Foreclosed Assets:

Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate. Subsequently, other real estate assets are carried at the lower of carrying value or fair value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Corporation records the other real estate as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Corporation records the other real estate asset as nonrecurring Level 3.

Bank Owned Life Insurance:

For disclosure purposes, for cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value.

Deposits:

For disclosure purposes, the fair value of demand deposits, savings accounts, NOW accounts and money market deposits is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

FHLB Advances:

For disclosure purposes, the fair value of the FHLB fixed rate borrowing is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements.

Commitments to Extend Credit and Standby Letters of Credit:

Because commitments to extend credit and standby letters of credit are made using variable rates and have short maturities, the carrying value and the fair value are immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis:

The table below presents the recorded amount of assets measured at fair value on a recurring basis as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1		Level 2		Level 3		Total
Investment securities available for sale:
U.S. government treasury securities	$	3,965,670	$	0	$	0	$	3,965,670
U.S. government agency securities		0		46,884,851		0		46,884,851
State and municipal securities		0		7,478,656		0		7,478,656
Residential mortgage-backed securities		0		4,632,902		0		4,632,902
Total	$	3,965,670	$	58,996,409	$	0	$	62,962,079

December 31, 2018	Level 1		Level 2		Level 3		Total
Investment securities available for sale:
U.S. government treasury securities	$	954,570	$	0	$	0	$	954,570
U.S. government agency securities		0		45,207,005		0		45,207,005
State and municipal securities		0		7,377,935		0		7,377,935
Residential mortgage-backed securities		0		4,774,067		0		4,774,067
Total	$	954,570	$	57,359,007	$	0	$	58,313,577

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Assets Recorded at Fair Value on a Nonrecurring Basis:

The Corporation may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1		Level 2		Level 3		Total
Foreclosed assets	$	0	$	0	$	127,605	$	127,605
Impaired loans		0		0		3,504,692		3,504,692
Total assets at fair value	$	0	$	0	$	3,632,297	$	3,632,297

December 31, 2018	Level 1		Level 2		Level 3		Total
Foreclosed assets	$	0	$	0	$	127,605	$	127,605
Impaired loans		0		0		3,838,151		3,838,151
Total assets at fair value	$	0	$	0	$	3,965,756	$	3,965,756

Foreclosed properties that are included above as measured at fair value on a nonrecurring basis are those properties that resulted from a loan that had been foreclosed and charged down or have been written down subsequent to foreclosure. Foreclosed properties are generally recorded at the appraised value less estimated selling costs in the range of 15 – 20%. Loans that are reported above as being measured at fair value on a nonrecurring basis are generally impaired loans that have been either partially charged off or have specific reserves assigned to them. Nonaccrual impaired loans that are collateral dependent are generally written down to a range of 80 – 85% of appraised value which considers the estimated costs to sell. Specific reserves are established for impaired loans based on appraised value of collateral or discounted cash flows.

The carrying amount and estimated fair values of the Corporation’s assets and liabilities which are required to be either disclosed or recorded at fair value at March 31, 2019, and December 31, 2018:

			Estimated Fair Value
March 31, 2019	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	49,015	$	49,015	$	0	$	0	$	49,015
Certificates of deposit in other banks		2,732		2,732		0		0		2,732
Investment securities available for sale		62,962		3,966		58,996		0		62,962
Investment securities held to maturity		35,185		0		35,674		0		35,674
Federal Home Loan Bank stock		1,020		0		1,020		0		1,020
Loans, net		374,327		0		360,840		3,505		364,345
Bank owned life insurance		6,813		0		6,813		0		6,813
Liabilities:
Deposits		488,619		0		457,973		0		457,973
Federal Home Loan Bank advances		13,700		0		13,747		0		13,747

-21- 

			Estimated Fair Value
December 31, 2018	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	35,499	$	35,499	$	0	$	0	$	35,499
Certificates of deposit in other banks		2,732		2,732		0		0		2,732
Investment securities available for sale		58,314		955		57,359		0		58,314
Investment securities held to maturity		36,827		0		37,010		0		37,010
Federal Home Loan Bank stock		1,820		0		1,820		0		1,820
Loans, net		373,321		0		362,373		3,838		366,211
Bank owned life insurance		6,779		0		6,779		0		6,779
Liabilities:
Deposits		455,640		0		456,245		0		456,245
Federal Home Loan Bank advances		31,629		0		31,591		0		31,591

Limitations:

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement element. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

NOTE 3

Investment Securities

Debt securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities as shown in the consolidated balance sheets and their estimated fair values at March 31, 2019, and December 31, 2018, were as follows:

Securities Available For Sale:

March 31, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. government treasury securities	$	3,963,014	$	9,560	$	6,904	$	3,965,670
U.S. government agency securities		46,786,921		563,946		466,017		46,884,850
State and municipal securities		7,371,821		123,149		16,313		7,478,657
Residential mortgage-backed securities		4,587,762		48,726		3,586		4,632,902
Total debt securities AFS	$	62,709,518	$	745,381	$	492,820	$	62,962,079

-22- 

December 31, 2018	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. government treasury securities	$	982,044	$	0	$	27,474	$	954,570
U.S. government agency securities		45,823,595		264,567		881,157		45,207,005
State and municipal securities		7,394,278		30,579		46,922		7,377,935
Residential mortgage-backed securities		4,769,668		21,579		17,180		4,774,067
Total debt securities AFS	$	58,969,585	$	316,725	$	972,733	$	58,313,577

Securities Held to Maturity:

March 31, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
State and municipal securities	$	29,216,837	$	391,743	$	26,272	$	29,582,308
Residential mortgage-backed securities		5,968,046		124,896		883		6,092,059
Total securities HTM	$	35,184,883	$	516,639	$	27,155	$	35,674,367

December 31, 2018	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
State and municipal securities	$	30,582,785	$	208,480	$	67,434	$	30,723,831
Residential mortgage-backed securities		6,244,288		49,490		7,282		6,286,496
Total securities HTM	$	36,827,073	$	257,970	$	74,716	$	37,010,327

The amortized cost and estimated fair value of securities at March 31, 2019, and December 31, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

March 31, 2019
Available for Sale:	Amortized Cost		Estimated Fair Value
Amounts maturing in:
One year or less	$	3,140,872	$	3,125,810
After one through five years		34,952,755		35,257,684
After five through ten years		19,183,448		19,097,610
After ten years		5,432,443		5,480,975
Total debt securities AFS	$	62,709,518	$	62,962,079
Held to Maturity:		Amortized Cost		Estimated Fair Value
Amounts maturing in:
One year or less	$	6,480,829	$	6,489,447
After one through five years		11,885,478		12,001,454
After five through ten years		11,125,453		11,354,541
After ten years		5,693,123		5,828,925
Total securities HTM	$	35,184,883	$	35,674,367

-23- 

December 31, 2018
Available for Sale:	Amortized Cost		Estimated Fair Value
Amounts maturing in:
One year or less	$	2,147,059	$	2,124,645
After one through five years		29,691,474		29,674,236
After five through ten years		21,585,776		20,968,318
After ten years		5,545,276		5,546,378
Total debt securities AFS	$	58,969,585	$	58,313,577
Held to Maturity:		Amortized Cost		Estimated Fair Value
Amounts maturing in:
One year or less	$	6,483,464	$	6,497,910
After one through five years		12,885,021		12,961,209
After five through ten years		11,035,146		11,097,382
After ten years		6,423,442		6,453,826
Total securities HTM	$	36,827,073	$	37,010,327

The following tables summarize the activity of security sales by intention and year for the three months ended March 31, 2019, and 2018.

Securities Available For Sale:                                               

	March 31, 2019		March 31, 2018
Proceeds of sales	$	0	$	0
Gross gains	$	0	$	0
Gross losses		0		0
Net gains (losses) on sales of  available for sale securities	$	0	$	0

Securities Held to Maturity:

	March 31, 2019		March 31, 2018
Amortized cost of securities sold	$	0	$	0
Proceeds from sales		0		0
Net gains on sales of  held to maturity securities	$	0	$	0

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Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in continuous loss position, follows:

March 31, 2019	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	6,904	$	975,660
U.S. government agency securities		0		0		466,017		22,346,327
State and municipal securities		0		0		16,313		1,831,683
Residential mortgage-backed securities		0		0		3,586		122,791
Total debt securities available for sale	$	0	$	0	$	492,820	$	25,276,461
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	0	$	0	$	26,272	$	2,515,563
Residential mortgage-backed securities		0		0		883		304,019
Total securities held to maturity	$	0	$	0	$	27,155	$	2,819,582

December 31, 2018	Less Than Twelve Months				Twelve Months or More
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	27,474	$	954,570
U.S. government agency securities		33,077		6,073,337		848,080		20,015,052
State and municipal securities		3,209		306,792		43,713		1,813,173
Residential mortgage-backed securities		14,199		3,032,237		2,981		129,410
Total debt securities available for sale	$	50,485	$	9,412,366	$	922,248	$	22,912,205
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	20,209	$	7,359,536	$	47,225	$	2,782,627
Residential mortgage-backed securities		5,671		879,487		1,611		89,464
Total securities held to maturity	$	25,880	$	8,239,023	$	48,836	$	2,872,091

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2019, thirty-four debt securities with unrealized losses have depreciated 1.8% from the Corporation’s amortized cost basis. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. Management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale. Also, no declines in debt securities are deemed to be other-than-temporary.

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NOTE 4

Loans and Allowance for Loan Losses

The composition of the Corporation’s loan portfolio and the percentage of loans in each category to total loans at March 31, 2019 and December 31, 2018, were as follows:

	March 31, 2019					December 31, 2018
Commercial, financial and agricultural loans	$	88,999,975		23.6	%	$	88,403,215		23.5	%
Real estate:
Construction loans		26,092,085		6.9	%		24,890,536		6.6	%
Commercial mortgage loans		121,855,453		32.3	%		123,477,369		32.8	%
Residential loans		103,995,725		27.5	%		103,347,898		27.4	%
Agricultural loans		31,505,959		8.3	%		31,561,686		8.4	%
Consumer & other loans		5,262,568		1.4	%		5,086,984		1.3	%
Loans outstanding		377,711,765		100.0	%		376,767,688		100.0	%
Unearned interest and discount		(17,390	)				(17,451	)
Allowance for loan losses		(3,366,927	)				(3,428,869	)
Net loans	$	374,327,448				$	373,321,368

The Corporation’s only significant concentration of credit at March 31, 2019, occurred in real estate loans which totaled $283,449,222 compared with $283,277,489 at December 31, 2018. However, this amount was not concentrated in any specific segment within the market or geographic area.

At March 31, 2019, the lendable collateral value of the 1 – 4 family and multifamily mortgage loans that were pledged to FHLB to secure outstanding advances was $66,722,482. FHLB has a blanket lien on the 1 – 4 family and multifamily portfolios, which totaled $115,773,588.

The following table shows maturities as well as interest sensitivity of the commercial, financial, agricultural, and construction loan portfolio at March 31, 2019.

	Commercial, Financial, Agricultural and Construction
Distribution of loans which are due:
In one year or less	$	35,327,184
After one year but within five years		54,757,452
After five years		25,007,424
Total	$	115,092,060

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The following table shows, for such loans due after one year, the amounts which have predetermined interest rates and the amounts which have floating or adjustable interest rates at March 31, 2019.

	Loans With
	Predetermined	Loans With
	Rates	Floating Rates	Total
Commercial, financial,
agricultural and construction	$ 76,439,177	$ 3,325,699	$ 79,764,876

Appraisal Policy

When a loan is first identified as a problem loan, the appraisal is reviewed to determine if the appraised value is still appropriate for the collateral. For the duration that a loan is considered a problem loan, the appraised value of the collateral is monitored on a quarterly basis. If significant changes occur in market conditions or in the condition of the collateral, a new appraisal will be obtained.

Nonaccrual Policy

The Corporation does not accrue interest on any loan (1) that is maintained on a cash basis due to the deteriorated financial condition of the borrower, (2) for which payment in full of principal or interest is not expected, or (3) upon which principal or interest has been past due for ninety days or more unless the loan is well secured and in the process of collection.

A loan subsequently placed on nonaccrual status may be returned to accrual status if (1) all past due interest and principal is paid with expectations of any remaining contractual principal and interest being repaid or (2) the loan becomes well secured and in the process of collection.

Loans placed on nonaccrual status amounted to $905,068 and $1,204,861 at March 31, 2019, and December 31, 2018, respectively. There were no past due loans over ninety days and still accruing at March 31, 2019, or December 31, 2018. The accrual of interest is discontinued when the loan is placed on nonaccrual. Interest income that would have been recorded on these nonaccrual loans in accordance with their original terms totaled $9,896 for March 31, 2019, and $64,015 for December 31, 2018.

The following tables present an age analysis of past due loans still accruing interest and nonaccrual loans segregated by class of loans.

	Age Analysis of Past Due Loans As of March 31, 2019
	30-89 Days Past Due		90 Days or Greater		Total Past Due Loans		Nonaccrual Loans		Current Loans		Total Loans
Commercial, financial and agricultural loans	$	556,388	$	0	$	556,388	$	0	$	88,443,587	$	88,999,975
Real estate:
Construction loans		536,090		0		536,090		0		25,555,995		26,092,085
Commercial mortgage loans		204,250		0		204,250		839,854		120,811,349		121,855,453
Residential loans		1,638,063		0		1,638,063		65,214		102,292,448		103,995,725
Agricultural loans		193,800		0		193,800		0		31,312,159		31,505,959
Consumer & other loans		31,862		0		31,862		0		5,230,706		5,262,568
Total loans	$	3,160,453	$	0	$	3,160,453	$	905,068	$	373,646,244	$	377,711,765

-27- 

	Age Analysis of Past Due Loans As of December 31, 2018
	30-89 Days Past Due		90 Days or Greater		Total Past Due Loans		Nonaccrual Loans		Current Loans		Total Loans
Commercial, financial and agricultural loans	$	247,397	$	0	$	247,397	$	36,157	$	88,119,661	$	88,403,215
Real estate:
Construction loans		0		0		0		0		24,890,536		24,890,536
Commercial mortgage loans		0		0		0		1,022,550		122,454,819		123,477,369
Residential loans		1,560,913		0		1,560,913		146,154		101,640,831		103,347,898
Agricultural loans		321,319		0		321,319		0		31,240,367		31,561,686
Consumer & other loans		36,654		0		36,654		0		5,050,330		5,086,984
Total loans	$	2,166,283	$	0	$	2,166,283	$	1,204,861	$	373,396,544	$	376,767,688

Impaired Loans

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

At March 31, 2019, and December 31, 2018, impaired loans amounted to $4,332,409 and $4,356,381, respectively. A reserve amount of $827,717 and $518,230 was recorded in the allowance for loan losses for these impaired loans as of March 31, 2019, and December 31, 2018, respectively.

The following tables present impaired loans, segregated by class of loans as of March 31, 2019, and December 31, 2018:

	Unpaid		Recorded Investment								Year-to-date Average		Interest Income Received
March 31, 2019	Principal Balance		With No Allowance		With Allowance		Total		Related Allowance		Recorded Investment		During Impairment
Commercial, financial and agricultural loans	$	1,420,052	$	78,507	$	1,254,891	$	1,333,398	$	562,925	$	461,763	$	8,225
Real estate:
Construction loans		393,898		273,098		0		273,098		0		273,098		5,253
Commercial mortgage loans		1,661,727		346,979		954,250		1,301,229		38,678		1,097,539		9,701
Residential loans		1,432,181		327,454		1,083,815		1,411,269		225,215		1,318,080		28,979
Agricultural loans		0		0		0		0		0		0		0
Consumer & other loans		13,415		0		13,415		13,415		899		13,415		346
Total loans	$	4,921,273	$	1,026,038	$	3,306,371	$	4,332,409	$	827,717	$	3,163,895	$	52,504

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	Unpaid		Recorded Investment								Year-to-date Average		Interest Income Received
December 31, 2018	Principal Balance		With No Allowance		With Allowance		Total		Related Allowance		Recorded Investment		During Impairment
Commercial, financial and agricultural loans	$	184,899	$	87,525	$	568,816	$	656,341	$	276,392	$	370,038	$	52,411
Real estate:
Construction loans		402,234		281,434		0		281,434		0		281,434		25,364
Commercial mortgage loans		1,787,305		1,277,611		333,892		1,611,503		51,854		1,544,299		45,403
Residential loans		1,801,002		1,027,647		752,443		1,780,090		188,368		1,594,390		127,806
Agricultural loans		12,526		12,526		0		12,526		0		12,526		5,530
Consumer & other loans		0		0		14,487		14,487		1,616		14,487		820
Total loans	$	4,187,966	$	2,686,743	$	1,669,638	$	4,356,381	$	518,230	$	3,817,174	$	257,334

At March 31, 2018, the year-to-date average recorded investment of impaired loans was $3,803,413 and the interest income received during impairment was $59,744.

At March 31, 2019, and December 31, 2018, included in impaired loans were $4,275 and $7,458, respectively, of troubled debt restructurings.

Troubled Debt Restructurings (TDR)

Loans are considered to have been modified in a troubled debt restructuring, or TDR, when due to a borrower’s financial difficulty the Corporation makes certain concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of the collateral. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet the borrower’s specific circumstances at a point in time. Not all loan modifications are TDRs. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period.

Loan modifications are reviewed and recommended by the Corporation’s senior credit officer, who determines whether the loan meets the criteria for a TDR. Generally, the types of concessions granted to borrowers that are evaluated in determining whether the loan is classified as a TDR include:

· Interest rate reductions – Occur when the stated interest rate is reduced to a nonmarket rate or a rate the borrower would not be able to obtain elsewhere under similar circumstances.

· Amortization or maturity date changes – Result when the amortization period of the loan is extended beyond what is considered a normal amortization period for loans of similar type with similar collateral.

· Principal reductions – Arise when the Corporation charges off a portion of the principal that is not fully collateralized and collectability is uncertain; however, this portion of principal may be recovered in the future under certain circumstances.

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The following tables present the amount of troubled debt restructuring by loan class, classified separately as accrual and nonaccrual at March 31, 2019, and December 31, 2018, as well as those currently paying under restructured terms and those that have defaulted under restructured terms as of March 31, 2019, and December 31, 2018. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 30 or more days past due.

	March 31, 2019
					Under restructured terms
	Accruing		Non-accruing		#		Current		#		Default
Commercial, financial, and agricultural loans	$	4,275	$	0		1	$	4,275		0	$	0
Real estate:
Construction loans		0		0		0		0		0		0
Commercial mortgage loans		0		0		0		0		0		0
Residential loans		0		0		0		0		0		0
Agricultural loans		0		0		0		0		0		0
Consumer & other loans		0		0		0		0		0		0
Total TDR’s	$	4,275	$	0		1	$	4,275		0	$	0

	December 31, 2018
					Under restructured terms
	Accruing		Non-accruing		#		Current		#		Default
Commercial, financial, and agricultural loans	$	5,570	$	0		1	$	5,570		0	$	0
Real estate:
Construction loans		0		0		0		0		0		0
Commercial mortgage loans		0		0		0		0		0		0
Residential loans		1,888		0		1		1,888		0		0
Agricultural loans		0		0		0		0		0		0
Consumer & other loans		0		0		0		0		0		0
Total TDR’s	$	7,458	$	0		2	$	7,458		0	$	0

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at March 31, 2019, and December 31, 2018.

	March 31, 2019								December 31, 2018
	Accruing				Nonaccruing				Accruing				Nonaccruing
	#		Balance		#		Balance		#		Balance		#		Balance
Type of concession:
Payment modification		0	$	0		0	$	0		0	$	0		0	$	0
Rate reduction		0		0		0		0		0		0		0		0
Rate reduction, payment modification		1		4,275		0		0		1		1,888		0		0
Forbearance of interest		0		0		0		0		1		5,570		0		0
Total		1	$	4,275		0	$	0		2	$	7,458		0	$	0

As of March 31, 2019, and December 31, 2018, the Corporation had a balance of $4,275 and $7,458, respectively, in troubled debt restructurings. The Corporation had no charge-offs on such loans at March 31, 2019, and December 31, 2018. The Corporation had $4,275 in the allowance for loan losses allocated to such troubled debt restructurings at March 31, 2019, and no balance allocated at December 31, 2018. The Corporation had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of March 31, 2019.

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Credit Risk Monitoring and Loan Grading

The Corporation employs several means to monitor the risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loss experience and economic conditions.

Loans are subject to an internal risk-grading system which indicates the risk and acceptability of that loan. The loan grades used by the Corporation are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are as follows:

Grade 1 – Exceptional – Loans graded 1 are characterized as having a very high credit quality, exhibit minimum risk to the Corporation and have low administrative cost. These loans are usually secured by highly liquid and marketable collateral and a strong primary and secondary source of repayment is available.

Grade 2 – Above Average – Loans graded 2 are basically sound credits secured by sound assets and/or backed by the financial strength of borrowers of integrity with a history of satisfactory payments of credit obligations.

Grade 3 – Acceptable – Loans graded 3 are secured by sound assets of sufficient value and/or supported by the sufficient financial strength of the borrower. The borrower will have experience in their business area or employed a reasonable amount of time at their current employment. The borrower will have a sound primary source of repayment, and preferably a secondary source, which will allow repayment in a prompt and reasonable period of time.

Grade 4 – Fair – Loans graded 4 are those which exhibit some weakness or downward trend in financial condition and although the repayment history is satisfactory, it requires supervision by bank personnel. The borrower may have little experience in their business area or employed only a short amount of time at their current employment. The loan may be secured by good collateral; however, it may require close supervision as to value and/or quality and may not have sufficient liquidation value to completely cover the loan.

Grade 5a – Watch – Loans graded 5a contain a discernible weakness; however, the weakness is not sufficiently pronounced so as to cause concern for the possible loss of interest or principal. Loans in this category may exhibit outward signs of stress, such as slowness in financial disclosures or recent payments. However, such signs are not of long duration or of sufficient severity that default appears imminent. Loans in this category are not so deficient as to cause alarm, but do require close monitoring for further deterioration and possible downgrade.

Grade 5b – Other Assets Especially Mentioned (OAEM) – Loans graded 5b may otherwise be classified more severely except that the loan is well secured by properly margined collateral, it is generally performing in accordance with the original contract or modification thereof and such performance has seasoned for a period of 90 days, or the ultimate collection of all principal and interest is reasonably expected. Loans in this grade are unsupported by sufficient evidence of the borrower’s sound net worth or repayment capacity or may be subject to third party action that would cause concern for future prompt repayment.

Grade 6 – Substandard – Loans graded 6 contain clearly pronounced credit weaknesses that are below acceptable credit standards for the Corporation. Such weaknesses may be due to either collateral deficiencies or inherent financial weakness of the borrower, but in either case represents less than acceptable credit risk. Loans in this grade are unsupported by sufficient evidence of the borrower’s sound net worth, repayment capacity or acceptable collateral.

-31- 

Grade 7 – Doubtful – Loans graded 7 have such a pronounced credit weaknesses that the Corporation is clearly exposed to a significant degree of potential loss of principal or interest. Theses loan generally have a defined weakness which jeopardizes the ultimate repayment of the debt.

Grade 8 – Loss – Loans graded 8 are of such deteriorated credit quality that repayment of principal and interest can no longer be considered. These loans are of such little value that their continuance as an active bank asset is not warranted. As of March 31, 2018, all Grade 8 loans have been charged-off.

The following tables present internal loan grading by class of loans as of March 31, 2019, and December 31, 2018:

March 31, 2019	Commercial, Financial, and Agricultural		Construction Real Estate		Commercial Real Estate		Residential Real Estate		Agricultural Real Estate		Consumer and Other		Total
Rating:
Grade 1- Exceptional	$	1,389,477	$	0	$	0	$	22,656	$	0	$	199,257	$	1,611,390
Grade 2- Above Avg.		0		0		0		0		0		43,134		43,134
Grade 3- Acceptable		23,896,901		2,140,022		28,634,023		26,258,915		17,060,292		1,815,446		99,805,599
Grade 4- Fair		62,003,261		23,429,965		88,485,618		73,773,119		14,445,667		3,184,099		265,321,729
Grade 5a- Watch		758,902		273,098		1,908,525		2,006,308		0		14,950		4,961,783
Grade 5b- OAEM		244,637		0		0		0		0		0		244,637
Grade 6- Substandard		702,441		249,000		2,400,340		712,620		0		4,397		4,068,798
Grade 7- Doubtful		4,356		0		426,947		1,222,107		0		1,285		1,654,695
Total loans	$	88,999,975	$	26,092,085	$	121,855,453	$	103,995,725	$	31,505,959	$	5,262,568	$	377,711,765

December 31, 2018	Commercial, Financial, and Agricultural		Construction Real Estate		Commercial Real Estate		Residential Real Estate		Agricultural Real Estate		Consumer and Other		Total
Rating:
Grade 1- Exceptional	$	1,237,602	$	0	$	0	$	22,905	$	0	$	210,045	$	1,470,552
Grade 2- Above Avg.		0		0		0		0		0		43,711		43,711
Grade 3- Acceptable		23,821,846		1,860,003		30,398,565		25,839,646		16,863,356		1,151,239		99,934,655
Grade 4- Fair		58,753,931		22,749,099		88,122,957		73,114,310		14,698,330		3,657,108		261,095,735
Grade 5a- Watch		473,616		0		2,411,710		722,441		0		6,206		3,613,973
Grade 5b- OAEM		3,079,098		0		446,841		1,299,587		0		2,168		4,827,694
Grade 6- Substandard		787,309		281,434		2,097,296		2,349,009		0		16,507		5,531,555
Grade 7- Doubtful		249,813		0		0		0		0		0		249,813
Total loans	$	88,403,215	$	24,890,536	$	123,477,369	$	103,347,898	$	31,561,686	$	5,086,984	$	376,767,688

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Allowance for Loan Losses Methodology

The allowance for loan losses (ALL) is determined by a calculation based on segmenting the loans into the following categories: (1) impaired loans and nonaccrual loans, (2) loans with a credit risk rating of 5b, 6, 7 or 8, (3) other outstanding loans, and (4) other commitments to lend. In addition, unallocated general reserves are estimated based on migration and economic analysis of the loan portfolio.

The ALL is calculated by the addition of the estimated loss derived from each of the above categories. The impaired loans and nonaccrual loans are analyzed on an individual basis to determine if the future collateral value is sufficient to support the outstanding debt of the loan. If an estimated loss is calculated, it is included in the estimated ALL until it is charged to the loan loss reserve. The calculation for loan risk graded 5b, 6, 7 or 8, other outstanding loans and other commitments to lend is based on assigning an estimated loss factor based on a twelve quarter rolling historical weighted average net loss rate. The estimated requirement for unallocated general reserves from migration and economic analysis is determined by considering (1) trends in asset quality, (2) level and trends in charge-off experience, (3) macroeconomic trends and conditions, (4) microeconomic trends and conditions and (5) risk profile of lending activities. Within each of these categories, a risk factor percentage from a rating of excessive, high, moderate or low will be determined by management and applied to the loan portfolio. By adding the estimated value from the migration and economic analysis to the estimated reserve from the loan portfolio, a total estimated loss reserves is obtained. This amount is then compared to the actual amount in the loan loss reserve.

The calculation of ALL is performed on a monthly basis and is presented to the Loan Committee and the Board of Directors.

The following table details activity in the ALL and loans evaluated for impairment by class of loans for the three-month period ended March 31, 2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. The annualized net charge-offs to average loans outstanding ratio was 0.19% for the three months ended March 31, 2019, compared with 0.13% at December 31, 2018.

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Three months ended March 31, 2019:

March 31, 2019	Commercial, Financial, and Agricultural			Construction Real Estate		Commercial Real Estate		Residential Real Estate		Agricultural Real Estate			Consumer and Other			Total
Allowance for loan losses:
Beginning balance, December 31, 2018	$	402,251		$	1,043,027	$	1,210,302	$	458,871	$	108,878		$	205,540		$	3,428,869
Charge-offs		0			0		184,696		0		0			0			184,696
Recoveries		2,696			0		3,368		0		0			782			6,846
Net charge-offs		(2,696	)		0		181,328		0		0			(782	)		177,850
Provisions charged to operations		98,375			0		48,695		0		(31,998	)		836			115,908
Balance at end of period, March 31, 2019	$	503,322		$	1,043,027	$	1,077,669	$	458,871	$	76,880		$	207,158		$	3,366,927
Ending balance -
Individually evaluated for impairment	$	562,925		$	0	$	38,678	$	225,215	$	0		$	899		$	827,717
Collectively evaluated for impairment		(59,603	)		1,043,027		1,038,991		233,656		76,880			206,259			2,539,210
Balance at end of period	$	503,322		$	1,043,027	$	1,077,669	$	458,871	$	76,880		$	207,158		$	3,366,927
Loans :
Ending balance -
Individually evaluated for impairment	$	1,333,398		$	273,098	$	1,301,229	$	1,411,269	$	0		$	13,415		$	4,332,409
Collectively evaluated for impairment		87,666,577			25,818,987		120,554,224		102,584,456		31,505,959			5,249,153			373,379,356
Balance at end of period	$	88,999,975		$	26,092,085	$	121,855,453	$	103,995,725	$	31,505,959		$	5,262,568		$	377,711,765

At March 31, 2019, of the $4,381,133 loans that were individually evaluated for impairment, only $4,332,409 were deemed impaired.

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The following table details activity in the ALL and loans evaluated for impairment by class of loans for the year ended December 31, 2018.

December 31, 2018	Commercial, Financial, and Agricultural		Construction Real Estate		Commercial Real Estate		Residential Real Estate		Agricultural Real Estate			Consumer and Other		Total
Allowance for loan losses:
Beginning balance, December 31, 2017	$	324,260	$	1,043,083	$	1,056,595	$	416,474	$	11,560		$	191,660	$	3,043,632
Charge-offs		548,460		783		43,349		6,909		0			6,844		606,345
Recoveries		12,025		0		590		0		147,252			2,215		162,082
Net charge-offs		536,435		783		42,759		6,909		(147,252	)		4,629		444,263
Provisions charged to operations		614,426		727		196,466		49,306		(49,934	)		18,509		829,500
Balance at end of period, December 31, 2018	$	402,251	$	1,043,027	$	1,210,302	$	458,871	$	108,878		$	205,540	$	3,428,869
Ending balance -
Individually evaluated for impairment	$	276,392	$	0	$	51,854	$	188,368	$	0		$	1,616	$	518,230
Collectively evaluated for impairment		125,859		1,043,027		1,158,448		270,503		108,878			203,924		2,910,639
Balance at end of period	$	402,251	$	1,043,027	$	1,210,302	$	458,871	$	108,878		$	205,540	$	3,428,869
Loans :
Ending balance -
Individually evaluated for impairment	$	656,341	$	281,434	$	1,611,503	$	1,929,214	$	12,526		$	14,487	$	4,505,505
Collectively evaluated for impairment		87,746,874		24,609,102		121,865,866		101,418,684		31,549,160			5,072,497		372,262,183
Balance at end of period	$	88,403,215	$	24,890,536	$	123,477,369	$	103,347,898	$	31,561,686		$	5,086,984	$	376,767,688

At December 31, 2018, of the $4,505,505 loans that were individually evaluated for impairment, only $4,356,381 were deemed impaired.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

In addition to historical information, this Form 10-Q report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”, or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products and services of the Corporation and its subsidiaries. We caution our shareholders and other readers not to place undue reliance on such statements.

The Corporation cautions that there are various factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in any forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include risks related to:

·the conditions in the banking system, financial markets, and general economic conditions;

·the Corporation’s ability to maintain profitability;

·the Corporation’s ability to raise capital;

·the Corporation’s ability to maintain liquidity or access other sources of funding;

·changes in the cost and availability of funding;

·the Corporation’s construction and land development loans;

·asset quality;

·the adequacy of the allowance for loan losses;

·technology difficulties or failures;

·the Corporation’s ability to execute its business strategy;

·the loss of key personnel;

·competition from financial institutions and other financial service providers;

·changes in technology;

·the impact of the Dodd-Frank Act and related regulations and other changes in financial services laws and regulations or failures to comply with such laws and regulations;

·changes in regulatory capital and other requirements;

·changes in monetary policy;

·    losses due to fraudulent and negligent conduct of customers, third party service providers or employees;

·the costs and effects of litigation, examinations, investigations, or similar matters, or adverse facts and developments related thereto;

·possible regulatory or judicial proceedings, board resolutions, informal memorandums of understanding or formal enforcement actions imposed by regulators;

·the Corporation’s reliance on third parties to provide key components of our business infrastructure and services required to operate our business;

·acquisitions or dispositions of assets or internal restructuring that may be pursued by the Corporation;

·deteriorating conditions in the stock market, the public debt market and other capital markets;

·     changes in or application of environmental and other laws and regulations to which the Corporation is subject;

·political, legal and local economic conditions and developments;

·the Corporation’s lack of geographic diversification;

·changes in commodity prices and interest rates;

·the Corporation’s accounting and reporting policies;

·the Corporation’s ability to maintain effective internal controls over financial reporting and disclosure controls and procedure;

·a cybersecurity incident involving the misappropriation, loss or unauthorized disclosure or use of confidential information of our customers; and

·weather, natural disasters and other catastrophic events and other factors discussed in the Corporation’s other filings with the SEC.

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The foregoing list of factors is not exclusive, and readers are cautioned not to place undue reliance on any forward-looking statements. The Corporation undertakes no obligation to update or revise any forward-looking statements. Additional information with respect to factors that may cause results to differ materially from those contemplated by such forward-looking statements is included in the Corporation’s current and subsequent filings with the SEC.

Overview

The Corporation is a full-service community bank holding company headquartered in Moultrie, Georgia. The community of Moultrie has been served by the Bank since 1928. We provide comprehensive financial services to consumer, business and governmental customers, which, in addition to conventional banking products, include a full range of trust, retail brokerage and insurance services. Our primary market area incorporates Colquitt County, where we are headquartered, as well as Baker, Worth, Lowndes, and Tift Counties, each contiguous with Colquitt County, and the surrounding counties of southwest Georgia. We have six full service banking facilities each with a deposit automation teller machine, and nine In-Lobby teller machines throughout the six branches.

Our strategy is to:

·maintain the diversity of our revenue, including both interest and noninterest income through a broad base of business;

·strengthen our sales and marketing efforts while developing our employees to provide the best possible service to our customers;

·expand our market share where opportunity exists; and

·grow outside of our current geographic market either through de-novo branching or acquisitions into areas proximate to our current market area.

We believe that investing in sales and marketing in our markets and geographic expansion will provide us with a competitive advantage. To that end, about seven years ago, we began expanding geographically in Valdosta, Georgia, with two full-service banking centers, and added a commercial banking center in August 2014. Continuing to expand our geographic footprint, a loan production office was opened in the neighboring community of Tifton, Georgia, in January 2016. The loan production office was closed upon completion of a new full-service banking center in Tifton, Georgia, that was opened in August 2018. We focus on our customers and believe that our strategic positioning, strong balance sheet and capital levels position us to sustain our franchise, capture market share and build customer loyalty.

The Corporation’s profitability, like most financial institutions, is dependent to a large extent upon net interest income, which is the difference between the interest received on earning assets and the interest paid on interest-bearing liabilities. The Corporation’s earning assets are primarily loans, securities, and short-term interest-bearing deposits with banks, and the interest-bearing liabilities are principally customer deposits and borrowings. Net interest income is highly sensitive to fluctuations in interest rates. To address interest rate fluctuations, we manage our balance sheet in an effort to diminish the impact should interest rates suddenly change.

Broadening our revenue sources helps to reduce the risk and exposure of our financial results to the impact of changes in interest rates, which are outside of our control. Sources of noninterest income include our insurance agency, fees on customer accounts, and trust and retail brokerage services through our Wealth Strategies division. In the first quarter 2019, noninterest income, at 17.2% of the Corporation’s total revenue, increased as most sources of noninterest income improved when compared with the first quarter 2018.

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Our profitability is also impacted by operating expenses such as salaries, employee benefits, occupancy, and income taxes. Our lending activities are significantly influenced by regional and local factors such as changes in population, competition among lenders, interest rate conditions and prevailing market rates on competing uses of funds and investments, customer preferences and levels of personal income and savings in the Corporation’s primary market area.

The Corporation’s nonperforming assets were $1.03 million at the end of March 31, 2019, down from $1.33 million at December 31, 2018, due to a decrease of $300 thousand in nonaccrual loans and down $473 thousand when compared with the first quarter 2018 due to nonaccrual loans decreasing $601 thousand and foreclosed assets increasing $128 thousand.

Critical Accounting Policies

In the course of the Corporation’s normal business activity, management must select and apply many accounting policies and methodologies that lead to the financial results presented in the consolidated financial statements of the Corporation. Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy because of the uncertainty and subjectivity inherent in estimating the levels of allowance needed to cover probable credit losses within the loan portfolio and the material effect that these estimates have on the Corporation’s results of operations. We believe that the allowance for loan losses as of March 31, 2019, is adequate; however, under adverse conditions or assumptions, future additions to the allowance may be necessary. There have been no significant changes in the methods or assumptions used in our accounting policies that would have resulted in material estimates and assumptions changes. Note 1 to the Consolidated Financial Statements provides a description of our significant accounting policies and contributes to the understanding of how our financial performance is reported.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity management involves the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw their funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. In the ordinary course of business, the Corporation’s cash flows are generated from interest and fee income as well as from loan repayments and the maturity or sale of other earning assets. In addition, liquidity is continuously provided through the acquisition of new deposits and borrowings or the rollover of maturing deposits and borrowings. The Corporation strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-earning liabilities so its short-term investments balance, at any given time, will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks that could provide funds on short notice, if needed.

The liquidity and capital resources of the Corporation are monitored on a periodic basis by state and Federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Bank’s liquidity ratios at March 31, 2019, were considered satisfactory. At that date, the Bank’s short-term investments were adequate to cover any reasonably anticipated immediate need for funds. We are not aware of any known trends, events, or uncertainties that will have or that are reasonably likely to have a material adverse effect on the Corporation’s liquidity or operations. At March 31, 2019, the Corporation’s and the Bank’s risk-based capital ratios were considered adequate based on guidelines established by regulatory authorities. During the three months ended March 31, 2019, total capital increased $1.641 million to $45.3 million and increased $3.93 million from the same period last year. Also, the Corporation continues to maintain a healthy level of capital adequacy as measured by its equity-to-asset ratio of 8.21% as of March 31, 2019, and average equity-to-average asset ratio for the first quarter ending March 31, 2019, of 8.19%. The Corporation is not aware of any events or trends likely to result in a material change in capital resources other than the effects of normal operations on the retention of net earnings. Also, the Corporation’s management is not aware of any current recommendations by the regulatory authorities which, if they were implemented, would have a material effect on the Corporation’s capital resources. 

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RESULTS OF OPERATIONS

The Corporation’s results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Corporation, the ability to generate net interest income is dependent upon the Bank’s ability to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets.

Performance Summary

The Corporation's net income after taxes for the three-month period ending March 31, 2019, was $1.2 million, down $4 thousand from net income of $1.2 million for the first quarter of 2018. Net interest income grew over 7% to $4.8 million due primarily to a $45.3 million growth in average loans and increases in noninterest income and noninterest expense of $243 thousand and $420 thousand, respectively, and a decrease in provision for loan loss of $100 thousand.

On a per share basis, net income for the first quarter remained flat compared to the same quarter in 2018 at $0.48 per diluted share. The weighted average common diluted shares outstanding for the quarter were 2.546 million, up from 2.545 million first quarter last year. In the first quarter of 2018, the Corporation retired its treasury stock. The number of treasury shares retired was 1,748,059.

We measure our performance on selected key ratios, which are provided for the previous five quarterly periods.

	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
	2019			2018			2018			2018			2018
Return on average total assets		0.91	%		0.85	%		0.90	%		0.91	%		0.99	%
Return on average total equity		11.06	%		10.48	%		10.74	%		11.00	%		11.89	%
Average shareholders’ equity to Average total assets		8.19	%		8.09	%		8.36	%		8.28	%		8.33	%
Net interest margin (tax equivalent)		3.82	%		3.94	%		4.08	%		3.96	%		4.05	%

Comparison of Statements of Income for the Quarter

Total interest income increased $900 thousand to $6 million for the three months ended March 31, 2019, compared with the same period in 2018, reflecting an increase in interest income and fees on loans of $828 thousand. Interest on deposits and certificates of deposit in other banks increased $53 thousand and $5 thousand, respectively, when compared with the first quarter of 2018. Also, interest income and dividends from investment securities increased $13 thousand compared with the same period last year.

Total interest expense increased $582 thousand, or 95%, to $1.2 million in the first quarter of 2019 compared with the same period in 2018. Interest paid on deposits increased $678 thousand, or 182%, during the first quarter of 2019 due to a 46 basis point increase in rate paid on interest-bearing deposits as well as an $86.1 million increase in average interest-bearing deposit volume compared with the first quarter of 2018. Total interest on borrowings decreased $96 thousand compared with the same quarter in 2018 due to a $22.4 million lower average volume of Federal Home Loan Bank Advances. 

The primary source of revenue for the Corporation is net interest income, which is the difference between total interest income on earning assets and interest expense on interest-bearing sources of funds. Net interest income improved to $4.8 million for the first quarter of 2019 compared with $4.4 million in net interest income in the 2018 first quarter. Net interest income after provision for loan losses for the first quarter of 2019 was $4.7 million compared with $4.2 million for the same period in 2018 as the first quarter provision for loan losses was down $100 thousand to $116 thousand in 2019. The Corporation’s net interest margin was 3.82% for the first quarter of 2019, down 16 basis points from the same period last year. The lower net interest margin was primarily related to the 46 basis point increase in rates paid on interest bearing deposits mentioned previously.

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Noninterest income, at 17.2% of the Corporation’s total revenue for the quarter, was $1.2 million for the first quarter, up $243 thousand compared with the same period in 2018. The increase in noninterest income was primarily the result of a $143 thousand gain on the extinguishment of debt recognized. Also contributing to the increase was a $14 thousand increase in income from service charges on deposit accounts and a $48 thousand increase in income from insurance services. Income from retail brokerage services, other income, and net gain or loss on the sale or disposition of assets increased by $18 thousand, $14 thousand, and $8 thousand, respectively, compared with the first quarter last year. Partially offsetting these increases was a $2 thousand decrease in income from trust services compared with the first quarter last year.

Noninterest expense was $4.4 million for the first quarter of 2019, an increase of $420 thousand when compared with the first quarter of 2018. The largest component of noninterest expense, salaries and employee benefits, increased $155 thousand to $2.5 million for the first quarter of 2019 as hourly wages increased and management made a number strategic hires to support the Corporation.  Equipment, data processing, and other expenses increased $118 thousand, $50 thousand, and $72 thousand, respectively. The increase in equipment are due to an increase in depreciation expense and maintenance on new equipment purchased to support technological advances. Also contributing to the increase is occupancy expense which increased $25 thousand when compared to first quarter 2018.

Comparison of Financial Condition Statements

At March 31, 2019, total assets were $551.1 million, a $16.2 million increase from December 31, 2018. Interest-bearing deposits in other banks grew $16.2 million and total loans increased $1.0 million which was primarily funded by an increase in total deposits of $33 million at March 31, 2019, mostly in money market and noninterest-bearing deposit accounts.

Total loans increased $1.0 million to $377.7 million at March 31, 2019, compared with $376.8 million at December 31, 2018. The Corporation continues to be conservative in its lending practices in order to maintain a quality loan portfolio. Loans, a major use of funds, represented 68.5% of total assets at March 31, 2019.

Investment securities, interest-bearing deposits in other banks, and certificates of deposit in other banks represented 25.3% of total assets at March 31, 2019. Compared with December 31, 2018, interest-bearing deposits in other banks increased $16.2 million and investment securities increased $2.2 million while certificates of deposit in other banks remained flat. This resulted in an overall increase in investments of $18.4 million since December 31, 2018.

Deposits increased to $488.6 million at the end of the first quarter of 2019, up $33 million from the end of 2018. The increase was primarily in interest bearing business checking accounts of $5.3 million, money market deposit accounts of $5.2 million, and noninterest-bearing deposits of $11 million. NOW accounts, savings accounts and total certificates of deposit accounts also increased $4.8 million, $1.7 million, and $4.9 million, respectively, compared with December 31, 2018. At March 31, 2019, total deposits represented 88.7% of total assets.

Total debt decreased $17.9 million when compared with the year-end 2018. Short-term borrowed funds consist of Federal Home Loan Bank advances of $3.1 million and $1 million in borrowings from First National Bankers Bank as of March 31, 2019, compared with $10.5 million at December 31, 2018. $1.6 million of short-term borrowings are short-term portions of long-term principal reducing Federal Home Loan Bank advances. The Corporation will repay the Federal Home Loan Bank long-term advances as scheduled. The following table shows the major contractual obligations for the Corporation. 

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Long-term debt consists of the following:

	March 31,		December 31,		March 31,
	2019		2018		2018
Advance from FHLB with a 1.259% fixed rate of interest maturing September 30, 2020  (principal reducing hybrid advance with principal reductions of $1.6 million).	$	1,600,000	$	1,600,000	$	3,200,000
Advance from FHLB with a 1.9425% fixed rate of interest maturing December 16, 2022  (principal reducing hybrid advance with principal reductions of $857 thousand annually).		0		2,571,429		3,428,571
Advance from FHLB with a 1.419% fixed rate of interest maturing August 30, 2023  (principal reducing hybrid advance with principal reductions of $857 thousand annually).		0		0		4,285,715
Advance from FHLB with a 1.60% fixed rate of interest maturing July 10, 2019.		0		0		1,500,000
Advance from FHLB with a 1.80% fixed rate of interest maturing July 10, 2020.		2,000,000		2,000,000		2,000,000
Advance from FHLB with a 1.925% fixed rate of interest maturing September 28, 2022  (principal reducing hybrid advance with principal reductions of $2.0 million annually).		0		6,000,000		8,000,000
Advance from FHLB with a 2.337% fixed rate of interest maturing December 5, 2024  (principal reducing hybrid advance with principal reductions of $857 thousand annually).		0		0		5,142,857
Advance from FHLB with a 3.018% fixed rate of interest maturing September 17, 2021.		0		3,000,000		0
Advance from FHLB with a 3.192% fixed rate of interest maturing September 20, 2023.		3,000,000		3,000,000		0
Advance from FHLB with a 3.4% fixed rate of interest maturing September 20, 2025.		3,000,000		3,000,000		0
Total long-term debt	$	9,600,000	$	21,171,429	$	27,557,143

Due to an increase in liquidity, the Corporation elected to retire a portion of its long-term debt prior to maturity. During the three months ended March 31, 2019, $11,571,429 was retired early, and the Corporation recognized a net gain of $143,031 on the early retirement. There were no early retirements of long-term debt during the three months ended March 31, 2018.

The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated monthly based on a review of all significant loans, with a particular emphasis on nonaccruing, past due, and other loans that management believes require attention.

Other factors used in determining the adequacy of the reserve are management’s judgment about factors affecting loan quality and their assumptions about the local and national economy. The allowance for loan losses was 0.89% of total loans outstanding at March 31, 2019, compared with 0.91% at December 31, 2018, and 0.95% at March 31, 2018. In the 2019 first quarter, net charge-offs were $178 thousand compared with net charge-offs of $89 thousand in the first quarter of 2018. Management considers the allowance for loan losses as of March 31, 2019, adequate to cover potential losses in the loan portfolio. For more information about loans, see Part I, Item 1, “Note 4 – Loans and Allowance for Loan Losses.”

Nonperforming assets were $1.0 million, or 0.19% of total assets, in the first quarter of 2019, down from $1.3 million, or 0.25% of total assets, at the end of 2018, and down from $1.5 million, or 0.30% of total assets in the same period last year. Nonaccrual loans were $905 thousand in the first quarter of 2019 mostly concentrated in two commercial customer relationships totaling $840 thousand.

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Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial instruments with off-balance-sheet risk to meet the financing needs of our customers and reduce risk exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit in the form of loans or through letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the financial statements. Since many of the commitments to extend credit and standby letters of credit are expected to expire without being drawn upon, the contractual or notional amounts do not represent future cash requirements.

Financial instruments whose contract amounts represent credit risk (dollars in thousands):	March 31, 2019		December 31, 2018
Commitments to extend credit	$	37,544	$	39,418
Standby letters of credit and financial guarantees	$	4,280	$	4,343

The Corporation does not have any special purpose entities or off-balance sheet financing arrangements.

Capital Resources and Dividends

The Corporation considers a solid capital foundation as essential to continued strength and growth as well as return to our shareholders. Risk-based capital requirements and rules became effective January 1, 2015, with some conditions that phase in through January 2019. These requirements and rules increase the minimum capital ratios, add a new ratio (CET1), and designate a standardized approach for risk-weighting assets.

As of March 31, 2019, the Corporation met the definition under Basel III of a small bank holding company and, therefore, was exempt from the new consolidated risk-based and leverage capital adequacy guidelines for bank holding companies.

Total risk-based capital for the Corporation and the Bank are composed of CET1, additional Tier 1 capital, and Tier 2 capital. CET 1 capital includes common stock plus related surplus and retained earnings less intangible assets. Additional Tier 1 capital is currently the same as the CET1. Tier 2 capital consists of allowances for possible loan and lease losses, subject to limitations. The Tier 1 leverage ratio is based on average assets. Our total risk-based capital ratio now stands at 13.14%, which is 3.1 percent in excess of the regulatory standard for “well-capitalized”. See Footnote 1, Summary of Significant Accounting Policies, Recent Market and Regulatory Developments section, elsewhere in this report for further discussion on Basel III and capital requirements. The Corporation’s and the Bank’s risk-based capital ratios as of March 31, 2019, are shown in the following table.

Risk Based Capital Ratios
										Basel III Regulatory Guidelines
	Southwest
	Georgia			Southwest						Required Minimum
	Financial			Georgia			For Well			Capital
Risk-Based Capital Ratios	Corporation(1)			Bank			Capitalized			Plus Buffer
Common Equity Tier 1 capital		12.26	%		11.70	%		6.50	%		7.00	%
Tier 1 capital		12.26	%		11.70	%		8.00	%		8.50	%
Total risk-based capital		13.14	%		12.58	%		10.00	%		10.50	%
Tier 1 leverage ratio		8.61	%		8.24	%		5.00	%		4.00	%

(1) Corporation meets the requirements of the exemption as a small bank holding company.

-42- 

In March 2019, the Corporation paid a quarterly cash dividend of $0.12 per common share. A cash dividend of $0.12 per common share was also paid in December, September, June 2018 and $0.11 cash dividend per common share was paid in March 2018. The Board of Directors will continue to assess conditions for future dividend payments.

Interest Rate Sensitivity

The Corporation’s most important element of asset/liability management is the monitoring of its sensitivity and exposure to interest rate movements which is the Corporation’s primary market risk. We have no foreign currency exchange rate risk, commodity price risk, or any other material market risk. The Corporation has no trading investment portfolio, nor do we have any interest rate swaps or other derivative instruments.

Our primary source of earnings, net interest income, can fluctuate with significant interest rate movements. To lessen the impact of these movements, we seek to maximize net interest income while remaining within prudent ranges of risk by practicing sound interest rate sensitivity management. We attempt to accomplish this objective by structuring the balance sheet so that the differences in repricing opportunities between assets and liabilities are minimized. Interest rate sensitivity refers to the responsiveness of earning assets and interest-bearing liabilities to changes in market interest rates. The Corporation’s interest rate risk management is carried out by the Asset/Liability Management Committee which operates under policies and guidelines established by the Bank’s Board of Directors. The principal objective of asset/liability management is to manage the levels of interest-sensitive assets and liabilities to minimize net interest income fluctuations in times of fluctuating market interest rates. To effectively measure and manage interest rate risk, the Corporation uses computer simulations that determine the impact on net interest income of numerous interest rate scenarios, balance sheet trends and strategies. These simulations cover the following financial instruments: short-term financial instruments, investment securities, loans, deposits, and borrowings. These simulations incorporate assumptions about balance sheet dynamics, such as loan and deposit growth and pricing, changes in funding mix, and asset and liability repricing and maturity characteristics. Simulations are run under various interest rate scenarios to determine the impact on net income and capital. From these computer simulations, interest rate risk is quantified and appropriate strategies are developed and implemented. The Corporation also maintains an investment portfolio which receives monthly cash flows from mortgage-backed securities principal payments, and staggered maturities and provides flexibility over time in managing exposure to changes in interest rates. Any imbalances in the repricing opportunities at any point in time constitute a financial institution’s interest rate sensitivity. 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

-43- 

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Corporation’s management, including the Chief Executive Officer and Principal Financial Officer, supervised and participated in an evaluation of the effectiveness of the Corporation’s disclosure controls and procedures (as defined in federal securities rules) as of the end of the period covered by this report. Based on, and as of the date of, that evaluation, the Corporation’s Chief Executive Officer and Principal Financial Officer have concluded that the Corporation’s disclosure controls and procedures were effective in accumulating and communicating information to management, including the Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosures of that information under the SEC’s rules and forms and that the Corporation’s disclosure controls and procedures are designed to ensure that the information required to be disclosed in reports that are filed or submitted by the Corporation under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Annual Report on Internal Control over Financial Reporting

The Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Management’s assessment of the effectiveness of the Corporation’s internal control over financial reporting as of March 31, 2019, was included in Item 8 of the form 10K , dated December 31, 2018, under the heading “Management’s Report on Internal Control Over Financial Reporting”.

The annual report form 10K, dated December 31, 2018, does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits the Corporation to provide only management’s report in the annual report.

Changes in Internal Control over Financial Reporting

No changes were made to the Corporation’s internal control over financial reporting during this quarter that materially affected or could reasonably likely to materially affect the Corporation’s internal controls over financial reporting.

-44- 

PART II. - OTHER INFORMATION

 ITEM 6. EXHIBITS

Exhibit 31.1	Section 302 Certification of Periodic Financial Report by
	Chief Executive Officer.
Exhibit 31.2	Section 302 Certification of Periodic Financial Report by
	Principal Financial Officer.
Exhibit 32.1	Section 906 Certification of Periodic Financial Report by
	Chief Executive Officer.
Exhibit 32.2	Section 906 Certification of Periodic Financial Report by
	Principal Financial Officer.
Exhibit 101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2019, is formatted in XBRL interactive data files: (i) Consolidated Balance Sheets at March 31, 2019, and December 31, 2018; (ii) Consolidated Statements of Income for the three months ended March 31, 2019, and 2018; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019, and 2018;  (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018; and (v) Notes to Consolidated Financial Statements.

* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

-45- 

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.

	SOUTHWEST GEORGIA FINANCIAL CORPORATION
	/s/Karen T. Boyd
BY:	KAREN T. BOYD
	SENIOR VICE PRESIDENT AND TREASURER

Date: May 14, 2019

-46- 

EX-31.1

EXHIBIT 31.1

I, DeWitt Drew, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Southwest Georgia Financial Corporation;
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 Corporation as of, and for, the periods presented in this report;
4.	The Corporation's other certifying officers and I have been 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 Corporation 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 Corporation, 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; and
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
	c)	evaluated 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 Corporation's internal control over financial reporting that occurred during the Corporation's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting;
5.	The Corporation's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation's auditors and the audit committee of the Corporation's board of directors:
	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 Corporation'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 Corporation's internal control over financial reporting.

Date: May 14, 2019

/s/DeWitt Drew

DeWitt Drew

President and Chief Executive Officer

Southwest Georgia Financial Corporation

EX-31.2

EXHIBIT 31.2

I, Karen T. Boyd, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Southwest Georgia Financial Corporation;
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 Corporation as of, and for, the periods presented in this report;
4.	The Corporation's other certifying officers and I have been 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 Corporation 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 Corporation, 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; and
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
	c)	evaluated 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 Corporation's internal control over financial reporting that occurred during the Corporation's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting;
5.	The Corporation's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation's auditors and the audit committee of the Corporation's board of directors:
	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 Corporation'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 Corporation's internal control over financial reporting.

Date: May 14, 2019

/s/Karen T. Boyd

Karen T. Boyd

Senior Vice President and Treasurer (Principal Financial Officer)

Southwest Georgia Financial Corporation

EX-32.1

EXHIBIT 32.1

Certification of Periodic Financial Report by

Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, DeWitt Drew, President and Chief Executive Officer of Southwest Georgia Financial Corporation certify that:

(1)	The Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 (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 present, in all material respects, the financial condition and results of operations of the Corporation.

By:	/s/DeWitt Drew
	DeWitt Drew
	President and Chief Executive Officer
	Southwest Georgia Financial Corporation
	May 14, 2019

EX-32.2

EXHIBIT 32.2

Certification of Periodic Financial Report by

Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Karen T. Boyd, Senior Vice President and Treasurer of Southwest Georgia Financial Corporation certify that:

(1)	The Corporation's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 (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 present, in all material respects, the financial condition and results of operations of the Corporation.

By:	/s/Karen T. Boyd
	Karen T. Boyd
	Senior Vice President and Treasurer (Principal Financial Officer)
	Southwest Georgia Financial Corporation
	May 14, 2019

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 04, 2019
Document And Entity Information
Entity Registrant Name	SOUTHWEST GEORGIA FINANCIAL CORP
Entity Central Index Key	0000315849
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		2,545,776
Trading Symbol	SGB
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 11,348,240	$ 14,050,682
Interest-bearing deposits in other banks	37,666,935	21,448,110
Cash and cash equivalents	49,015,175	35,498,792
Certificates of deposit in other banks	2,732,000	2,732,000
Investment securities available for sale, at fair value	62,962,079	58,313,577
Investment securities held to maturity (fair value approximates $35,674,367 and $37,010,327)	35,184,883	36,827,073
Federal Home Loan Bank stock, at cost	1,019,900	1,820,300
Total investment securities	99,166,862	96,960,950
Loans	377,711,765	376,767,688
Less: Unearned income	(17,390)	(17,451)
Allowance for loan losses	(3,366,927)	(3,428,869)
Loans, net	374,327,448	373,321,368
Premises and equipment, net	14,443,696	14,573,974
Foreclosed assets	127,605	127,605
Intangible assets	0	3,907
Bank owned life insurance	6,812,589	6,779,242
Other assets	4,445,793	4,835,329
Total assets	551,071,168	534,833,167
Deposits:
Interest bearing business checking	33,419,254	28,070,871
NOW accounts	40,651,250	35,816,115
Money Market	163,903,769	158,730,044
Savings	33,580,463	31,848,588
Certificates of deposit $250,000 and over	16,831,531	16,264,681
Other time accounts	85,564,731	81,214,376
Total interest-bearing deposits	373,950,998	351,944,675
Noninterest-bearing deposits	114,667,559	103,694,910
Total deposits	488,618,557	455,639,585
Short-term borrowed funds	4,100,000	10,457,143
Long-term debt	9,600,000	21,171,429
Other liabilities	3,492,686	3,946,066
Total liabilities	505,811,243	491,214,223
Stockholders' equity:
Common stock - $1 par value, 5,000,000 shares authorized, 2,545,776 shares issued	2,545,776	2,545,776
Capital surplus	18,418,995	18,418,995
Retained earnings	25,764,780	24,841,569
Accumulated other comprehensive loss	(1,469,626)	(2,187,396)
Total stockholders' equity	45,259,925	43,618,944
Total liabilities and stockholders' equity	$ 551,071,168	$ 534,833,167

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Investment securities held to maturity	$ 35,674,367	$ 37,010,327
Certificates of deposit	$ 250,000	$ 250,000
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	5,000,000	5,000,000
Common stock, shares issued	2,545,776	2,545,776

XML

Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest income:
Interest and fees on loans	$ 5,121,187	$ 4,293,240
Interest on taxable securities available for sale	334,433	288,646
Interest on taxable securities held to maturity	54,058	28,147
Interest on tax exempt securities	237,772	291,004
Dividends	26,857	31,947
Interest on deposits in other banks	170,893	117,828
Interest on certificates of deposit in other banks	16,846	11,565
Total interest income	5,962,046	5,062,377
Interest expense:
Interest on deposits	1,050,306	372,473
Interest on federal funds purchased	6	6
Interest on other short-term borrowings	35,986	115,668
Interest on long-term debt	109,422	125,833
Total interest expense	1,195,720	613,980
Net interest income	4,766,326	4,448,397
Provision for loan losses	115,908	215,500
Net interest income after provision for loan losses	4,650,418	4,232,897
Noninterest income:
Service charges on deposit accounts	238,149	224,589
Income from trust services	56,606	58,833
Income from retail brokerage services	106,748	88,395
Income from insurance services	436,649	388,239
Income from mortgage banking services	0	620
Net gain (loss) on sale or disposition of assets	898	(7,155)
Net gain on extinguishment of debt	143,031	0
Other income	254,966	240,883
Total noninterest income	1,237,047	994,404
Noninterest expense:
Salaries and employee benefits	2,496,204	2,341,119
Occupancy expense	314,509	289,426
Equipment expense	308,020	190,269
Data processing expense	403,553	353,790
Amortization of intangible assets	3,907	3,906
Other operating expenses	889,398	817,068
Total noninterest expenses	4,415,591	3,995,578
Income before income taxes	1,471,874	1,231,723
Provision for (benefit from) income taxes	243,168	(643)
Net income	$ 1,228,706	$ 1,232,366
Earnings per share of common stock:
Net income, basic	$ 0.48	$ 0.48
Net income, diluted	0.48	0.48
Dividends paid per share	$ 0.12	$ 0.11
Weighted average shares outstanding	2,545,776	2,544,922
Diluted average shares outstanding	2,545,776	2,544,922

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 1,228,706	$ 1,232,366
Other comprehensive income (loss), net of tax:
Unrealized holding gain (loss) on investment securities available for sale	908,569	(973,869)
Reclassification adjustment for (gain) loss realized in income on securities available for sale	0	0
Less: Tax effect	190,799	(204,513)
Total other comprehensive income (loss), net of tax	717,770	(769,356)
Total comprehensive income	$ 1,946,476	$ 463,010

XML

Consolidated Statement of Changes in Shareholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Total
Balance at Dec. 31, 2017	$ 4,293,835	$ 31,701,533	$ 33,020,030	$ (1,629,619)	$ (26,242,793)	$ 41,142,986
Net Income			1,232,366			1,232,366
Comprehensive income (loss):
Changes in net gain on securities available for sale				(769,356)		(769,356)
Cash dividend declared $11 and $12 per share			(280,035)			(280,035)
Retirement of treasury stock	(1,748,059)	(12,994,133)	(11,500,601)		26,242,793
Balance at Mar. 31, 2018	2,545,776	18,707,400	22,471,760	(2,398,975)	0	41,325,961
Balance at Dec. 31, 2018	2,545,776	18,418,995	24,841,569	(2,187,396)	0	43,618,944
Net Income			1,228,706			1,228,706
Comprehensive income (loss):
Changes in net gain on securities available for sale				717,770		717,770
Cash dividend declared $11 and $12 per share			(305,495)			(305,495)
Balance at Mar. 31, 2019	$ 2,545,776	$ 18,418,995	$ 25,764,780	$ (1,469,626)	$ 0	$ 45,259,925

XML

Consolidated Statement of Changes in Shareholders' Equity (Parenthetical) - $ / shares	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends per share	$ 0.12	$ .11

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities:
Net income	$ 1,228,706	$ 1,232,366
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	115,908	215,500
Depreciation	303,750	237,452
Net amortization of investment securities	63,560	90,812
Income on cash surrender value of bank owned life insurance	(33,347)	(41,556)
Amortization of intangibles	3,907	3,906
(Gain) loss on sale/writedown of foreclosed assets	(898)	7,521
Net gain on extinguishment of debt	(143,031)	0
Change in:
Other assets	183,666	267,377
Other liabilities	(453,128)	(565,517)
Net cash provided by operating activities	1,269,093	1,447,861
Cash flows from investing activities:
Proceeds from calls, paydowns and maturities of securities HTM	1,628,603	649,921
Proceeds from calls, paydowns and maturities of securities AFS	175,813	125,115
Proceeds from Federal Home Loan Bank stock repurchase	840,900	0
Purchase of securities available for sale	(3,965,719)	(3,011,243)
Purchase of Federal Home Loan Bank Stock	(40,500)	(36,600)
Net change in loans	(1,121,988)	(5,477,008)
Purchase of premises and equipment	(178,472)	(966,591)
Proceeds from sales of fixed assets and foreclosed assets	20,717	954,791
Net cash used by investing activities	(2,640,646)	(7,761,615)
Cash flows from financing activities:
Net change in deposits	32,978,972	21,442,815
Payment of short-term portion of long-term debt	(7,283,601)	0
Payment for early retirement of long-term debt	(11,501,940)	0
Proceeds from issuance of short-term debt	1,000,000	0
Cash dividends paid	(305,495)	(280,035)
Net cash provided by financing activities	14,887,936	21,162,780
Increase in cash and cash equivalents	13,516,383	14,849,026
Cash and cash equivalents - beginning of period	35,498,792	34,138,421
Cash and cash equivalents - end of period	49,015,175	48,987,447
NONCASH ITEMS:
Increase in foreclosed properties and decrease in loans	0	376,050
Unrealized gain (loss) on securities available for sale	908,569	(973,869)
Net reclass between short and long-term debt	0	1,500,000
Retirement of treasury stock	0	26,242,793
Receivable from sale of guaranteed foreclosed asset	$ 0	$ 172,616

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Southwest Georgia Financial Corporation (the “Corporation”) and its direct and indirect subsidiaries, including its wholly-owned banking subsidiary, Southwest Georgia Bank (the “Bank”), conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The following is a description of the more significant of those policies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Nature of Operations

The Corporation offers comprehensive financial services to consumer, business, and governmental entity customers through its banking offices in southwest Georgia. Its primary deposit products are money market, NOW, savings and certificates of deposit, and its primary lending products are consumer and commercial mortgage loans. In addition to conventional banking services, the Corporation provides investment planning and management, trust management, and commercial and individual insurance products. Insurance products and advice are provided by the Bank’s Southwest Georgia Insurance Services Division.

The Corporation’s primary business is providing banking services through the Bank to individuals and businesses principally in the counties of Colquitt, Baker, Worth, Lowndes, Tift and the surrounding counties of southwest Georgia. The Bank operates six branch offices in its trade area. Trust and retail brokerage services are offered at an office building located at 25 2nd Avenue SW in Moultrie, and lending services are offered in Valdosta at 3520 North Valdosta Road.

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with these evaluations, management obtains independent appraisals for significant properties.

A substantial portion of the Corporation’s loans are secured by real estate located primarily in Georgia. Accordingly, the ultimate collection of these loans is susceptible to changes in the real estate market conditions of this market area.

Cash and Cash Equivalents and Statement of Cash Flows

For purposes of reporting cash flows, the Corporation considers cash and cash equivalents to include all cash on hand, deposit amounts due from banks, interest-bearing deposits in other banks, and federal funds sold. The Corporation maintains its cash balances in several financial institutions. Accounts at the financial institutions are secured by the Federal Deposit Insurance Corporation (the “FDIC”) up to $250,000. There were no uninsured deposits at March 31, 2019.

Investment Securities

Investment securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value with unrealized gains and losses (net of tax effect) reported in other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation has been calculated primarily using the straight-line method for buildings and building improvements over the assets estimated useful lives. Equipment and furniture are depreciated using the modified accelerated recovery system method over the assets estimated useful lives for financial reporting and income tax purposes for assets purchased on or before December 31, 2003. For assets acquired after 2003, the Corporation used the straight-line method of depreciation. The following estimated useful lives are used for financial statement purposes:

Land improvements	5 – 31 years
Building and improvements	10 – 40 years
Machinery and equipment	5 – 10 years
Computer equipment	3 – 5 years
Office furniture and fixtures	5 – 10 years

All of the Corporation’s leases are operating leases and are not capitalized as assets for financial reporting purposes. Maintenance and repairs are charged to expense and betterments are capitalized.

Long-lived assets are evaluated regularly for other-than-temporary impairment. If circumstances suggest that their value may be impaired and the write-down would be material, an assessment of recoverability is performed prior to any write-down of the asset. Impairment on intangibles is evaluated at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount should be assessed. Impairment, if any, is recognized through a valuation allowance with a corresponding charge recorded in the income statement.

Bank Property Held for Sale

In 2016, the Bank’s former branch in Pavo, Georgia, was transferred from premises to bank property held for sale and depreciation was discontinued. The property was booked at the lower of cost or market value based on the current appraisal of $211,500. On November 30, 2018, the Corporation sold this property and recorded a loss in the amount of $96,750.

Loans and Allowances for Loan Losses

Loans are stated at principal amounts outstanding less unearned income and the allowance for loan losses. Interest income is credited to income based on the principal amount outstanding at the respective rate of interest except for interest on certain installment loans made on a discount basis which is recognized in a manner that results in a level-yield on the principal outstanding.

Accrual of interest income is discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable.

Fees on loans and costs incurred in origination of most loans are recognized at the time the loan is placed on the books. Because loan fees are not significant, the results on operations are not materially different from the results which would be obtained by accounting for loan fees and costs as amortized over the term of the loan as an adjustment of the yield.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes the collection of the principal is unlikely. The allowance is an amount which management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible based on evaluation of the collectability of loans and prior loss experience. This evaluation takes into consideration such factors as changes in the nature and volume of the loan portfolios, current economic conditions that may affect the borrowers’ ability to pay, overall portfolio quality, and review of specific problem loans.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based upon changes in economic conditions. Also, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

Foreclosed Assets

In accordance with policy guidelines and regulations, properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair market value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. A valuation allowance is established to record market value changes in foreclosed assets. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. There was no valuation allowance for foreclosed asset losses at March 31, 2019. Foreclosed assets totaled $127,605 at March 31, 2019 and December 31, 2018.

Intangible Assets

Intangible assets are amortized over a determined useful life using the straight-line basis. These assets are evaluated annually as to the recoverability of the carrying value. All intangibles were fully amortized as of March 31, 2019.

Credit Related Financial Instruments

In the ordinary course of business, the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Retirement Plans

The Corporation and its direct and indirect subsidiaries have post-retirement plans covering substantially all employees. The Corporation makes annual contributions to the plans in amounts not exceeding the regulatory requirements.

Bank Owned Life Insurance

The Bank owns life insurance policies on a group of employees. Banking laws and regulations allow the Bank to purchase life insurance policies on certain employees in order to help offset the Bank’s overall employee compensation costs. The beneficial aspects of these life insurance policies are tax-free earnings and a tax-free death benefit, which are realized by the Bank as the owner of the policies. The cash surrender value of these policies is included as an asset on the balance sheet, and any increases in cash surrender value are recorded as noninterest income on the statement of income. At March 31, 2019, and December 31, 2018, the policies had a value of $6,812,589 and $6,779,242, respectively, and were 15.1% and 15.5%, respectively, of shareholders’ equity. These values are within regulatory guidelines.

Income Taxes

The Corporation and its direct and indirect subsidiaries file a consolidated income tax return. Each subsidiary computes its income tax expense as if it filed an individual return except that it does not receive any portion of the surtax allocation. Any benefits or disadvantages of the consolidation are absorbed by the parent company.  Each subsidiary pays its allocation of federal income taxes to the parent company or receives payment from the parent company to the extent that tax benefits are realized.

The Corporation reports income under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefit associated with certain temporary differences and tax credits will be realized.

The Corporation will recognize a tax position as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with an examination being presumed to occur. The amount recognized is the largest amount of a tax benefit that is greater than fifty percent likely of being realized on examination. No benefit is recorded for tax positions that do not meet the more than likely than not test.

The Corporation recognizes penalties related to income tax matters in income tax expense.  The Corporation is subject to U.S. federal and Georgia state income tax audit for returns for the tax period ending December 31, 2016 and subsequent years. 

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes all changes in shareholders’ equity during a period, except those resulting from transactions with shareholders. Besides net income, other components of the Corporation’s accumulated other comprehensive income (loss) includes the after tax effect of changes in the net unrealized gain/loss on securities available for sale and the unrealized gain/loss on pension plan benefits.

Trust Department

Trust income is included in the accompanying consolidated financial statements on the cash basis in accordance with established industry practices. Reporting of such fees on the accrual basis would have no material effect on reported income.

Advertising Costs

It is the policy of the Corporation to expense advertising costs as they are incurred. The Corporation does not engage in any direct-response advertising and accordingly has no advertising costs reported as assets on its balance sheet. Costs expensed were $75,750 and $50,901 for the three month periods ended March 31, 2019 and 2018, respectively.

Recent Market and Regulatory Developments

The Corporation and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the federal banking agencies about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum Tier 1 leverage, Tier 1 risk-based capital and Total risk-based capital ratios. In July 2013, the Board of Governors of the Federal Reserve System published the Basel III Capital Rules. These rules establish a comprehensive capital framework applicable to all depository institutions, certain bank holding companies with total consolidated assets below a certain threshold and all and savings and loan holding companies except for those that are substantially engaged in insurance underwriting or commercial activities. These rules implement higher minimum capital requirements for banks and certain bank holding companies, include a new common equity Tier 1 capital requirement and establish criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital.

The Basel III Capital Rules became effective for the Bank on January 1, 2015, subject to a phase-in period, but are not applicable to bank holding companies, like the Corporation, with less than $1 billion in total consolidated assets that meet certain criteria.

The minimum capital level requirements applicable to the Bank under the Basel III Capital Rules are: (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a Total risk-based capital ratio of 8% (unchanged from the rules effective for the year ended December 31, 2014); and (iv) a Tier 1 leverage ratio of 4% for all institutions. Common equity Tier 1 capital will consist of retained earnings and common stock instruments, subject to certain adjustments.

The Basel III Capital Rules set forth changes in the methods of calculating certain risk-weighted assets, which in turn affect the calculation of risk-based ratios. The new risk weightings are more punitive for assets held by banks that are deemed to be of higher risk. These changes were also effective beginning January 1, 2015.

The Basel III Capital Rules also introduce a “capital conservation buffer”, which is in addition to each capital ratio and is phased-in over a three-year period beginning in January 2016.

As of December 31, 2018, the Bank is considered to be well-capitalized under the Basel III Capital Rules. There have been no conditions or events since December 31, 2018, that management believes has changed the Bank’s status as “well-capitalized.” The capital ratios of the Corporation and Bank are presented in Note 15 of the Corporation’s Notes to Consolidated Financial Statements.

Adoption of New Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 118. The amendments in this update were effective upon issuance. The adoption of ASU 2018-05 had no material impact on the Corporation’s consolidated financial statements.

In March 2018, FASB issued ASU 2018-04, Investment - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 117. The amendments in this update were effective upon issuance. The adoption of ASU 2018-04 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10). This Update clarifies certain aspects of the guidance issued in ASU 2016-01 including (i) an entity measuring an equity security using the measurement alternative may make an irrevocable election to change its measurement approach to a fair value method under Topic 820 for that security and any identical or similar investments of the same issuer, (ii) fair value adjustments under the measurement alternative should be as of the date the observable transaction for a similar security occurred, (iii) requiring the remeasurement of the entire value of forward contracts and purchased options when observable transactions occur on the underlying equity securities, (iv) financial liabilities for which the fair value option is elected should follow the guidance in paragraph 825-10-45-5, (v) changes in the fair value of financial liabilities for which the fair value option is elected relating to the instrument-specific credit risk should first be measured in the currency of denomination and then both components of the change in fair value should be remeasured into the reporting entity's functional currency using end-of-period spot rates, and (vi) the prospective transition approach should only be applied for instances in which the measurement alternative is applied. The guidance was effective for interim periods beginning after June 15, 2018 and may be early adopted provided ASU 2016-01 was adopted. The Company adopted the amendments in this ASU effective January 1, 2018. The adoption of ASU 2018-03 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides guidance on accounting for the effects of the Tax Cuts and Jobs Act, which was enacted in December, 2017. The guidance allows reclassification of the tax effects that were stranded in accumulated other comprehensive income as a result of the tax rate change from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2018. The adoption of ASU 2018-02 had no material impact on the Corporation’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Stock Compensation, Scope of Modification Accounting.” This ASU clarifies when changes to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The new guidance should reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to awards without accounting for them as modifications. It does not change the accounting for modifications. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. The adoption of ASU 2017-09 had no material impact on the Corporation’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonable estimable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This update should be adopted on a modified retrospective basis with a cumulative effect adjustment to retained earnings on the date of adoption. The adoption of ASU 2017-08 had no material impact on the Corporation’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. This ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-07 had no material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), which provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption will be permitted and should apply it to transactions that have not been reported in financial statements that have been issued or made available for issuance. The adoption of ASU 2017-01 had no material impact on the Corporation’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. The accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018. The adoption of 2016-01 had no material impact on the Corporation’s consolidated financial statements.

In May 2014, the FASB began issuing guidance to change the recognition of revenue from contracts with customers. The last guidance was issued in February 2017. The standards issued during this time are as follows: ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, and ASU 2017-05 Other Income - Gains and losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This new guidance, which does not apply to financial instruments, provides that revenue should be recognized for the transfer of goods and services to customers in an amount equal to the consideration it receives or expects to receive. The guidance also includes expanded disclosure requirements that provide comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018, using the modified retrospective method. Since there was no change to net income upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not necessary. See below for additional information related to revenue generated from contracts with customers.

In 2016, the FASB issued ASU 2016-02 – Leases (Topic 842). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The adoption of ASU No. 2016-02 had no material impact on the Corporation’s consolidated financial statements.

Revenue Recognition

On January 1, 2018, the Corporation adopted ASC Topic 606, using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after January 1, 2018, are presented under ASC Topic 606 and have not materially changed from the prior year amounts. Noninterest income, within the scope of this guidance, is recognized as services are transferred to customers in an amount that reflects the considerations expected to be entitled to in exchange for those services. The Corporation's revenue streams that were in scope include service charges on deposit accounts, income from insurance services, income from trust services, Automated Teller Machine (“ATM”) surcharge and other noninterest income.

Services Charges on Deposit Accounts - Service charges on deposit accounts primarily consist of monthly maintenance charges, analysis charges and Non-sufficient funds (“NSF”) charges. The NSF charges and certain service charges are fixed and the performance obligation is typically satisfied at the time of the related transaction. The consideration for analysis charges and monthly maintenance charges are variable as the fee can be reduced if the customer meets certain qualifying metrics. The Corporation's performance obligations are satisfied either at the time of the transaction or over the course of a month.

Income from Insurance Services – Income from insurance services consists primarily of property and casualty insurance, life, health, and disability insurance. Property and casualty, life, health, and disability insurance includes the brokerage of both personal and commercial coverages. The placement of the policy is completion of the Corporation's performance obligation and revenue is recognized at that time. The Corporation's commission is primarily a percentage of the premium.

Income from Trust Services – Income from Trust services consists of revenue generated from services provided for corporate, pension, and personal trusts, trustee services, and administrative services for employee benefit plans. The Corporation’s performance obligation and revenue is recognized once the service has been performed.

ATM Surcharge - ATM surcharge represents revenues earned from certain terminal activity. ATM surcharges primarily consist of charges assessed to our customers for using a non-Bank ATM or a non-Bank customer using our ATM. Such surcharges generally are recognized concurrently with the delivery of services on a daily basis.

Other - Other noninterest income primarily consists of transaction based revenue where the performance obligation is satisfied concurrent with the revenue recognition.

Recent Accounting Pronouncements

In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. On June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. The amendments in ASU No. 2018-19 align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarify the scope of the guidance in the amendments in Update 2016-13. The amendments also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The adoption of ASU 2018-19 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes the requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. The ASU adds requirements to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and the reasons for significant gains and losses related to changes in the benefit obligation for the period. The update also clarifies the requirements to disclose the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets, and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. This update is effective for fiscal years beginning after December 15, 2020. The adoption of ASU 2018-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the requirements for public entities to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The ASU modifies the disclosure requirement for investments in certain entities that calculate net asset value, and clarifies that the measurement uncertainty disclosure is to communicate measurement uncertainties as of the reporting date. The ASU also requires public entities to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This update is effective for fiscal years beginning after December 15, 2019. The adoption of ASU 2018-13 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Rather, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities may early adopt the standard for goodwill impairment tests with measurement dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323), which incorporates into the FASB ASC recent SEC guidance about disclosing, under SEC Staff Accounting Bulletin, Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The effective date varies as each topic addressed in this ASU has its own effective date. The adoption of ASU 2017-03 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses. Among other things, 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. For SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with later effective dates for non-SEC registrant public companies and other organizations. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2016-13 is being reviewed for any material impact on the Corporation’s consolidated financial statements.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

NOTE 2

Fair Value Measurements

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  Securities available for sale are recorded at fair value on a recurring basis.  From time to time, the Corporation may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and foreclosed real estate. Additionally, the Corporation is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy:

Under ASC Topic 820, the Corporation groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.

Cash and Cash Equivalents:

For disclosure purposes for cash and due from banks, interest bearing deposits in other banks and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Certificates of Deposit in Other Banks:

For disclosure purposes for certificates of deposit in other banks, the carrying amount is a reasonable estimate of fair value.

Investment Securities Available for Sale:

Investment securities available for sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds.  Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds.  Other securities classified as available for sale are reported at fair value utilizing Level 2 inputs. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Investment Securities Held to Maturity:

Investment securities held to maturity are not recorded at fair value on a recurring basis. For disclosure purposes, fair value measurement is based upon quoted prices, if available.

Federal Home Loan Bank Stock:

For disclosure purposes, the carrying value of other investments approximate fair value.

Loans:

The Corporation does not record loans at fair value on a recurring basis.  However, from time to time, a loan is considered impaired and a specific allocation is established within the allowance for loan losses.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired.  Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310, Accounting by Creditors for Impairment of a Loan.  The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flows.  Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.  In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Corporation records the impaired loan as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Corporation records the impaired loan as nonrecurring Level 3.

For disclosure purposes, the fair value of fixed rate loans which are not considered impaired, is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes.

Foreclosed Assets:

Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate. Subsequently, other real estate assets are carried at the lower of carrying value or fair value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Corporation records the other real estate as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Corporation records the other real estate asset as nonrecurring Level 3.

Bank Owned Life Insurance:

For disclosure purposes, for cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value.

Deposits:

For disclosure purposes, the fair value of demand deposits, savings accounts, NOW accounts and money market deposits is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

FHLB Advances:

For disclosure purposes, the fair value of the FHLB fixed rate borrowing is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements.

Commitments to Extend Credit and Standby Letters of Credit:

Because commitments to extend credit and standby letters of credit are made using variable rates and have short maturities, the carrying value and the fair value are immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis:

The table below presents the recorded amount of assets measured at fair value on a recurring basis as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1	Level 2	Level 3	Total
Investment securities available for sale:
U.S. government treasury securities	$3,965,670	$                0	$        0	$   3,965,670
U.S. government agency securities	0	46,884,851	0	46,884,851
State and municipal securities	0	7,478,656	0	7,478,656
Residential mortgage-backed securities	0	4,632,902	0	4,632,902
Total	$3,965,670	$ 58,996,409	$        0	$ 62,962,079

December 31, 2018	Level 1	Level 2	Level 3	Total
Investment securities available for sale:
U.S. government treasury securities	$ 954,570	$                0	$         0	$      954,570
U.S. government agency securities	0	45,207,005	0	45,207,005
State and municipal securities	0	7,377,935	0	7,377,935
Residential mortgage-backed securities	0	4,774,067	0	4,774,067
Total	$  954,570	$ 57,359,007	$         0	$ 58,313,577

Assets Recorded at Fair Value on a Nonrecurring Basis:

The Corporation may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1	Level 2	Level 3	Total
Foreclosed assets	$             0	$             0	$    127,605	$    127,605
Impaired loans	0	0	3,504,692	3,504,692
Total assets at fair value	$             0	$             0	$ 3,632,297	$ 3,632,297

December 31, 2018	Level 1	Level 2	Level 3	Total
Foreclosed assets	$             0	$             0	$    127,605	$     127,605
Impaired loans	0	0	3,838,151	3,838,151
Total assets at fair value	$             0	$             0	$ 3,965,756	$ 3,965,756

Foreclosed properties that are included above as measured at fair value on a nonrecurring basis are those properties that resulted from a loan that had been foreclosed and charged down or have been written down subsequent to foreclosure. Foreclosed properties are generally recorded at the appraised value less estimated selling costs in the range of 15 – 20%. Loans that are reported above as being measured at fair value on a nonrecurring basis are generally impaired loans that have been either partially charged off or have specific reserves assigned to them. Nonaccrual impaired loans that are collateral dependent are generally written down to a range of 80 – 85% of appraised value which considers the estimated costs to sell. Specific reserves are established for impaired loans based on appraised value of collateral or discounted cash flows.

The carrying amount and estimated fair values of the Corporation’s assets and liabilities which are required to be either disclosed or recorded at fair value at March 31, 2019, and December 31, 2018:

		Estimated Fair Value
March 31, 2019	Carrying Amount	Level 1	Level 2	Level 3	Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$   49,015	$   49,015	$            0	$          0	$   49,015
Certificates of deposit in other banks	2,732	2,732	0	0	2,732
Investment securities available for sale	62,962	3,966	58,996	0	62,962
Investment securities held to maturity	35,185	0	35,674	0	35,674
Federal Home Loan Bank stock	1,020	0	1,020	0	1,020
Loans, net	374,327	0	360,840	3,505	364,345
Bank owned life insurance	6,813	0	6,813	0	6,813
Liabilities:
Deposits	488,619	0	457,973	0	457,973
Federal Home Loan Bank advances	13,700	0	13,747	0	13,747

		Estimated Fair Value
December 31, 2018	Carrying Amount	Level 1	Level 2	Level 3	Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$   35,499	$   35,499	$            0	$          0	$   35,499
Certificates of deposit in other banks	2,732	2,732	0	0	2,732
Investment securities available for sale	58,314	955	57,359	0	58,314
Investment securities held to maturity	36,827	0	37,010	0	37,010
Federal Home Loan Bank stock	1,820	0	1,820	0	1,820
Loans, net	373,321	0	362,373	3,838	366,211
Bank owned life insurance	6,779	0	6,779	0	6,779
Liabilities:
Deposits	455,640	0	456,245	0	456,245
Federal Home Loan Bank advances	31,629	0	31,591	0	31,591

Limitations:

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement element. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Investment Securities

3 Months Ended

Mar. 31, 2019

Schedule of Investments [Abstract]

Investment Securities

NOTE 3

Investment Securities

Debt securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities as shown in the consolidated balance sheets and their estimated fair values at March 31, 2019, and December 31, 2018, were as follows:

Securities Available For Sale:

March 31, 2019	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
U.S. government treasury securities	$  3,963,014	$       9,560	$       6,904	$  3,965,670
U.S. government agency securities	46,786,921	563,946	466,017	46,884,850
State and municipal securities	7,371,821	123,149	16,313	7,478,657
Residential mortgage-backed securities	4,587,762	48,726	3,586	4,632,902
Total debt securities AFS	$62,709,518	$   745,381	$   492,820	$62,962,079

December 31, 2018	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
U.S. government treasury securities	$      982,044	$              0	$      27,474	$      954,570
U.S. government agency securities	45,823,595	264,567	881,157	45,207,005
State and municipal securities	7,394,278	30,579	46,922	7,377,935
Residential mortgage-backed securities	4,769,668	21,579	17,180	4,774,067
Total debt securities AFS	$ 58,969,585	$   316,725	$    972,733	$ 58,313,577

Securities Held to Maturity:

March 31, 2019	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
State and municipal securities	$29,216,837	$ 391,743	$   26,272	$29,582,308
Residential mortgage-backed securities	5,968,046	124,896	883	6,092,059
Total securities HTM	$35,184,883	$ 516,639	$   27,155	$35,674,367

December 31, 2018	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
State and municipal securities	$ 30,582,785	$ 208,480	$   67,434	$ 30,723,831
Residential mortgage-backed securities	6,244,288	49,490	7,282	6,286,496
Total securities HTM	$ 36,827,073	$ 257,970	$   74,716	$ 37,010,327

The amortized cost and estimated fair value of securities at March 31, 2019, and December 31, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

March 31, 2019
Available for Sale:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$  3,140,872	$  3,125,810
After one through five years	34,952,755	35,257,684
After five through ten years	19,183,448	19,097,610
After ten years	5,432,443	5,480,975
Total debt securities AFS	$62,709,518	$62,962,079
Held to Maturity:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$ 6,480,829	$ 6,489,447
After one through five years	11,885,478	12,001,454
After five through ten years	11,125,453	11,354,541
After ten years	5,693,123	5,828,925
Total securities HTM	$35,184,883	$35,674,367

December 31, 2018
Available for Sale:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$   2,147,059	$   2,124,645
After one through five years	29,691,474	29,674,236
After five through ten years	21,585,776	20,968,318
After ten years	5,545,276	5,546,378
	5
Total debt securities AFS	$ 58,969,585	$ 58,313,577
Held to Maturity:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$   6,483,464	$   6,497,910
After one through five years	12,885,021	12,961,209
After five through ten years	11,035,146	11,097,382
After ten years	6,423,442	6,453,826
Total securities HTM	$ 36,827,073	$ 37,010,327

The following tables summarize the activity of security sales by intention and year for the three months ended March 31, 2019, and 2018.

Securities Available For Sale:

	March 31, 2019	March 31, 2018
Proceeds of sales	$               0	$               0
Gross gains	$               0	$               0
Gross losses	0	0
Net gains (losses) on sales of  available for sale securities	$               0	$               0

Securities Held to Maturity:

	March 31, 2019	March 31, 2018
Amortized cost of securities sold	$               0	$                0
Proceeds from sales	0	0
Net gains on sales of  held to maturity securities	$               0	$                0

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in continuous loss position, follows:

March 31, 2019		Less Than Twelve Months				Twelve Months or More
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	6,904	$	975,660
U.S. government agency securities		0		0		466,017		22,346,327
State and municipal securities		0		0		16,313		1,831,683
Residential mortgage-backed securities		0		0		3,586		122,791
Total debt securities available for sale	$	0	$	0	$	492,820	$	25,276,461
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	0	$	0	$	26,272	$	2,515,563
Residential mortgage-backed securities		0		0		883		304,019
Total securities held to maturity	$	0	$	0	$	27,155	$	2,819,582

December 31, 2018		Less Than Twelve Months				Twelve Months or More
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	27,474	$	954,570
U.S. government agency securities		33,077		6,073,337		848,080		20,015,052
State and municipal securities		3,209		306,792		43,713		1,813,173
Residential mortgage-backed securities		14,199		3,032,237		2,981		129,410
Total debt securities available for sale	$	50,485	$	9,412,366	$	922,248	$	22,912,205
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	20,209	$	7,359,536	$	47,225	$	2,782,627
Residential mortgage-backed securities		5,671		879,487		1,611		89,464
Total securities held to maturity	$	25,880	$	8,239,023	$	48,836	$	2,872,091

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2019, thirty-four debt securities with unrealized losses have depreciated 1.8% from the Corporation’s amortized cost basis. These unrealized losses relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. Management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale. Also, no declines in debt securities are deemed to be other-than-temporary.

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Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Loans and Allowance for Loan Losses

NOTE 4

Loans and Allowance for Loan Losses

The composition of the Corporation’s loan portfolio and the percentage of loans in each category to total loans at March 31, 2019 and December 31, 2018, were as follows:

	March 31, 2019		December 31, 2018
Commercial, financial and agricultural loans	$   88,999,975	23.6%	$  88,403,215	23.5%
Real estate:
Construction loans	26,092,085	6.9%	24,890,536	6.6%
Commercial mortgage loans	121,855,453	32.3%	123,477,369	32.8%
Residential loans	103,995,725	27.5%	103,347,898	27.4%
Agricultural loans	31,505,959	8.3%	31,561,686	8.4%
Consumer & other loans	5,262,568	1.4%	5,086,984	1.3%
Loans outstanding	377,711,765	100.0%	376,767,688	100.0%
Unearned interest and discount	(         17,390)		(        17,451)
Allowance for loan losses	(    3,366,927)		(   3,428,869)
Net loans	$ 374,327,448		$ 373,321,368

The Corporation’s only significant concentration of credit at March 31, 2019, occurred in real estate loans which totaled $283,449,222 compared with $283,277,489 at December 31, 2018. However, this amount was not concentrated in any specific segment within the market or geographic area.

At March 31, 2019, the lendable collateral value of the 1 – 4 family and multifamily mortgage loans that were pledged to FHLB to secure outstanding advances was $66,722,482. FHLB has a blanket lien on the 1 – 4 family and multifamily portfolios, which totaled $115,773,588.

The following table shows maturities as well as interest sensitivity of the commercial, financial, agricultural, and construction loan portfolio at March 31, 2019.

		Commercial, Financial, Agricultural and Construction
Distribution of loans which are due:
In one year or less	$	35,327,184
After one year but within five years		54,757,452
After five years		25,007,424
Total	$	115,092,060

The following table shows, for such loans due after one year, the amounts which have predetermined interest rates and the amounts which have floating or adjustable interest rates at March 31, 2019.

	Loans With
	Predetermined	Loans With
	Rates	Floating Rates	Total
Commercial, financial,
agricultural and construction	$ 76,439,177	$ 3,325,699	$ 79,764,876

Appraisal Policy

When a loan is first identified as a problem loan, the appraisal is reviewed to determine if the appraised value is still appropriate for the collateral. For the duration that a loan is considered a problem loan, the appraised value of the collateral is monitored on a quarterly basis. If significant changes occur in market conditions or in the condition of the collateral, a new appraisal will be obtained.

Nonaccrual Policy

The Corporation does not accrue interest on any loan (1) that is maintained on a cash basis due to the deteriorated financial condition of the borrower, (2) for which payment in full of principal or interest is not expected, or (3) upon which principal or interest has been past due for ninety days or more unless the loan is well secured and in the process of collection.

A loan subsequently placed on nonaccrual status may be returned to accrual status if (1) all past due interest and principal is paid with expectations of any remaining contractual principal and interest being repaid or (2) the loan becomes well secured and in the process of collection.

Loans placed on nonaccrual status amounted to $905,068 and $1,204,861 at March 31, 2019, and December 31, 2018, respectively. There were no past due loans over ninety days and still accruing at March 31, 2019, or December 31, 2018. The accrual of interest is discontinued when the loan is placed on nonaccrual. Interest income that would have been recorded on these nonaccrual loans in accordance with their original terms totaled $9,896 for March 31, 2019, and $64,015 for December 31, 2018.

The following tables present an age analysis of past due loans still accruing interest and nonaccrual loans segregated by class of loans.

	Age Analysis of Past Due Loans As of March 31, 2019
	30-89 Days Past Due	90 Days or Greater	Total Past Due Loans	Nonaccrual Loans	Current Loans	Total Loans
Commercial, financial and agricultural loans	$   556,388	$     0	$   556,388	$              0	$ 88,443,587	$ 88,999,975
Real estate:
Construction loans	536,090	0	536,090	0	25,555,995	26,092,085
Commercial mortgage loans	204,250	0	204,250	839,854	120,811,349	121,855,453
Residential loans	1,638,063	0	1,638,063	65,214	102,292,448	103,995,725
Agricultural loans	193,800	0	193,800	0	31,312,159	31,505,959
Consumer & other loans	31,862	0	31,862	0	5,230,706	5,262,568
Total loans	$3,160,453	$     0	$3,160,453	$   905,068	$373,646,244	$377,711,765

	Age Analysis of Past Due Loans As of December 31, 2018
	30-89 Days Past Due	90 Days or Greater	Total Past Due Loans	Nonaccrual Loans	Current Loans	Total Loans
Commercial, financial and agricultural loans	$    247,397	$        0	$    247,397	$     36,157	$   88,119,661	$  88,403,215
Real estate:
Construction loans	0	0	0	0	24,890,536	24,890,536
Commercial mortgage loans	0	0	0	1,022,550	122,454,819	123,477,369
Residential loans	1,560,913	0	1,560,913	146,154	101,640,831	103,347,898
Agricultural loans	321,319	0	321,319	0	31,240,367	31,561,686
Consumer & other loans	36,654	0	36,654	0	5,050,330	5,086,984
Total loans	$ 2,166,283	$         0	$ 2,166,283	$ 1,204,861	$ 373,396,544	$ 376,767,688

Impaired Loans

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

At March 31, 2019, and December 31, 2018, impaired loans amounted to $4,332,409 and $4,356,381, respectively. A reserve amount of $827,717 and $518,230 was recorded in the allowance for loan losses for these impaired loans as of March 31, 2019, and December 31, 2018, respectively.

The following tables present impaired loans, segregated by class of loans as of March 31, 2019, and December 31, 2018:

	Unpaid	Recorded Investment				Year-to-date Average	Interest Income Received
March 31, 2019	Principal Balance	With No Allowance	With Allowance	Total	Related Allowance	Recorded Investment	During Impairment
Commercial, financial and agricultural loans	$1,420,052	$     78,507	$1,254,891	$1,333,398	$  562,925	$    461,763	$ 8,225
Real estate:
Construction loans	393,898	273,098	0	273,098	0	273,098	5,253
Commercial mortgage loans	1,661,727	346,979	954,250	1,301,229	38,678	1,097,539	9,701
Residential loans	1,432,181	327,454	1,083,815	1,411,269	225,215	1,318,080	28,979
Agricultural loans	0	0	0	0	0	0	0
Consumer & other loans	13,415	0	13,415	13,415	899	13,415	346
Total loans	$4,921,273	$1,026,038	$3,306,371	$4,332,409	$827,717	$ 3,163,895	$52,504
	Unpaid	Recorded Investment				Year-to-date Average	Interest Income Received
December 31, 2018	Principal Balance	With No Allowance	With Allowance	Total	Related Allowance	Recorded Investment	During Impairment
Commercial, financial and agricultural loans	$   184,899	$   87,525	$   568,816	$   656,341	$ 276,392	$   370,038	$ 52,411
Real estate:
Construction loans	402,234	281,434	0	281,434	0	281,434	25,364
Commercial mortgage loans	1,787,305	1,277,611	333,892	1,611,503	51,854	1,544,299	45,403
Residential loans	1,801,002	1,027,647	752,443	1,780,090	188,368	1,594,390	127,806
Agricultural loans	12,526	12,526	0	12,526	0	12,526	5,530
Consumer & other loans	0	0	14,487	14,487	1,616	14,487	820
Total loans	$4,187,966	$2,686,743	$1,669,638	$4,356,381	$518,230	$3,817,174	$257,334

At March 31, 2018, the year-to-date average recorded investment of impaired loans was $3,803,413 and the interest income received during impairment was $59,744.

At March 31, 2019, and December 31, 2018, included in impaired loans were $4,275 and $7,458, respectively, of troubled debt restructurings.

Troubled Debt Restructurings (TDR)

Loans are considered to have been modified in a troubled debt restructuring, or TDR, when due to a borrower’s financial difficulty the Corporation makes certain concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of the collateral. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet the borrower’s specific circumstances at a point in time. Not all loan modifications are TDRs. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period.

Loan modifications are reviewed and recommended by the Corporation’s senior credit officer, who determines whether the loan meets the criteria for a TDR. Generally, the types of concessions granted to borrowers that are evaluated in determining whether the loan is classified as a TDR include:

· Interest rate reductions – Occur when the stated interest rate is reduced to a nonmarket rate or a rate the borrower would not be able to obtain elsewhere under similar circumstances.

· Amortization or maturity date changes – Result when the amortization period of the loan is extended beyond what is considered a normal amortization period for loans of similar type with similar collateral.

· Principal reductions – Arise when the Corporation charges off a portion of the principal that is not fully collateralized and collectability is uncertain; however, this portion of principal may be recovered in the future under certain circumstances.

The following tables present the amount of troubled debt restructuring by loan class, classified separately as accrual and nonaccrual at March 31, 2019, and December 31, 2018, as well as those currently paying under restructured terms and those that have defaulted under restructured terms as of March 31, 2019, and December 31, 2018. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 30 or more days past due.

	March 31, 2019
					Under restructured terms
		Accruing		Non-accruing	#		Current	#		Default
Commercial, financial, and agricultural loans	$	4,275	$	0	1	$	4,275	0	$	0
Real estate:
Construction loans		0		0	0		0	0		0
Commercial mortgage loans		0		0	0		0	0		0
Residential loans		0		0	0		0	0		0
Agricultural loans		0		0	0		0	0		0
Consumer & other loans		0		0	0		0	0		0
Total TDR’s	$	4,275	$	0	1	$	4,275	0	$	0

	December 31, 2018
					Under restructured terms
		Accruing		Non-accruing	#		Current	#		Default
Commercial, financial, and agricultural loans	$	5,570	$	0	1	$	5,570	0	$	0
Real estate:
Construction loans		0		0	0		0	0		0
Commercial mortgage loans		0		0	0		0	0		0
Residential loans		1,888		0	1		1,888	0		0
Agricultural loans		0		0	0		0	0		0
Consumer & other loans		0		0	0		0	0		0
Total TDR’s	$	7,458	$	0	2	$	7,458	0	$	0

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at March 31, 2019, and December 31, 2018.

	March 31, 2019						December 31, 2018
	Accruing			Nonaccruing			Accruing			Nonaccruing
	#		Balance	#		Balance	#		Balance	#		Balance
Type of concession:
Payment modification	0	$	0	0	$	0	0	$	0	0	$	0
Rate reduction	0		0	0		0	0		0	0		0
Rate reduction, payment modification	1		4,275	0		0	1		1,888	0		0
Forbearance of interest	0		0	0		0	1		5,570	0		0
Total	1	$	4,275	0	$	0	2	$	7,458	0	$	0

As of March 31, 2019, and December 31, 2018, the Corporation had a balance of $4,275 and $7,458, respectively, in troubled debt restructurings. The Corporation had no charge-offs on such loans at March 31, 2019, and December 31, 2018. The Corporation had $4,275 in the allowance for loan losses allocated to such troubled debt restructurings at March 31, 2019, and no balance allocated at December 31, 2018. The Corporation had no unfunded commitments to lend to a customer that has a troubled debt restructured loan as of March 31, 2019.

Credit Risk Monitoring and Loan Grading

The Corporation employs several means to monitor the risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal grading of loans, historical loss experience and economic conditions.

Loans are subject to an internal risk-grading system which indicates the risk and acceptability of that loan. The loan grades used by the Corporation are for internal risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.

The general characteristics of the risk grades are as follows:

Grade 1 – Exceptional – Loans graded 1 are characterized as having a very high credit quality, exhibit minimum risk to the Corporation and have low administrative cost. These loans are usually secured by highly liquid and marketable collateral and a strong primary and secondary source of repayment is available.

Grade 2 – Above Average – Loans graded 2 are basically sound credits secured by sound assets and/or backed by the financial strength of borrowers of integrity with a history of satisfactory payments of credit obligations.

Grade 3 – Acceptable – Loans graded 3 are secured by sound assets of sufficient value and/or supported by the sufficient financial strength of the borrower. The borrower will have experience in their business area or employed a reasonable amount of time at their current employment. The borrower will have a sound primary source of repayment, and preferably a secondary source, which will allow repayment in a prompt and reasonable period of time.

Grade 4 – Fair – Loans graded 4 are those which exhibit some weakness or downward trend in financial condition and although the repayment history is satisfactory, it requires supervision by bank personnel. The borrower may have little experience in their business area or employed only a short amount of time at their current employment. The loan may be secured by good collateral; however, it may require close supervision as to value and/or quality and may not have sufficient liquidation value to completely cover the loan.

Grade 5a – Watch – Loans graded 5a contain a discernible weakness; however, the weakness is not sufficiently pronounced so as to cause concern for the possible loss of interest or principal. Loans in this category may exhibit outward signs of stress, such as slowness in financial disclosures or recent payments. However, such signs are not of long duration or of sufficient severity that default appears imminent. Loans in this category are not so deficient as to cause alarm, but do require close monitoring for further deterioration and possible downgrade.

Grade 5b – Other Assets Especially Mentioned (OAEM) – Loans graded 5b may otherwise be classified more severely except that the loan is well secured by properly margined collateral, it is generally performing in accordance with the original contract or modification thereof and such performance has seasoned for a period of 90 days, or the ultimate collection of all principal and interest is reasonably expected. Loans in this grade are unsupported by sufficient evidence of the borrower’s sound net worth or repayment capacity or may be subject to third party action that would cause concern for future prompt repayment.

Grade 6 – Substandard – Loans graded 6 contain clearly pronounced credit weaknesses that are below acceptable credit standards for the Corporation. Such weaknesses may be due to either collateral deficiencies or inherent financial weakness of the borrower, but in either case represents less than acceptable credit risk. Loans in this grade are unsupported by sufficient evidence of the borrower’s sound net worth, repayment capacity or acceptable collateral.

Grade 7 – Doubtful – Loans graded 7 have such a pronounced credit weaknesses that the Corporation is clearly exposed to a significant degree of potential loss of principal or interest. Theses loan generally have a defined weakness which jeopardizes the ultimate repayment of the debt.

Grade 8 – Loss – Loans graded 8 are of such deteriorated credit quality that repayment of principal and interest can no longer be considered. These loans are of such little value that their continuance as an active bank asset is not warranted. As of March 31, 2018, all Grade 8 loans have been charged-off.

The following tables present internal loan grading by class of loans as of March 31, 2019, and December 31, 2018:

March 31, 2019	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Rating:
Grade 1- Exceptional	$  1,389,477	$                0	$                  0	$         22,656	$                0	$    199,257	$    1,611,390
Grade 2- Above Avg.	0	0	0	0	0	43,134	43,134
Grade 3- Acceptable	23,896,901	2,140,022	28,634,023	26,258,915	17,060,292	1,815,446	99,805,599
Grade 4- Fair	62,003,261	23,429,965	88,485,618	73,773,119	14,445,667	3,184,099	265,321,729
Grade 5a- Watch	758,902	273,098	1,908,525	2,006,308	0	14,950	4,961,783
Grade 5b- OAEM	244,637	0	0	0	0	0	244,637
Grade 6- Substandard	702,441	249,000	2,400,340	712,620	0	4,397	4,068,798
Grade 7- Doubtful	4,356	0	426,947	1,222,107	0	1,285	1,654,695
Total loans	$88,999,975	$26,092,085	$121,855,453	$103,995,725	$31,505,959	$5,262,568	$377,711,765

December 31, 2018	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Rating:
Grade 1- Exceptional	$  1,237,602	$                0	$                  0	$       22,905	$                0	$    210,045	$    1,470,552
Grade 2- Above Avg.	0	0	0	0	0	43,711	43,711
Grade 3- Acceptable	23,821,846	1,860,003	30,398,565	25,839,646	16,863,356	1,151,239	99,934,655
Grade 4- Fair	58,753,931	22,749,099	88,122,957	73,114,310	14,698,330	3,657,108	261,095,735
Grade 5a- Watch	473,616	0	2,411,710	722,441	0	6,206	3,613,973
Grade 5b- OAEM	3,079,098	0	446,841	1,299,587	0	2,168	4,827,694
Grade 6- Substandard	787,309	281,434	2,097,296	2,349,009	0	16,507	5,531,555
Grade 7- Doubtful	249,813	0	0	0	0	0	249,813
Total loans	$88,403,215	$24,890,536	$123,477,369	$103,347,898	$31,561,686	$5,086,984	$376,767,688

Allowance for Loan Losses Methodology

The allowance for loan losses (ALL) is determined by a calculation based on segmenting the loans into the following categories: (1) impaired loans and nonaccrual loans, (2) loans with a credit risk rating of 5b, 6, 7 or 8, (3) other outstanding loans, and (4) other commitments to lend. In addition, unallocated general reserves are estimated based on migration and economic analysis of the loan portfolio.

The ALL is calculated by the addition of the estimated loss derived from each of the above categories. The impaired loans and nonaccrual loans are analyzed on an individual basis to determine if the future collateral value is sufficient to support the outstanding debt of the loan. If an estimated loss is calculated, it is included in the estimated ALL until it is charged to the loan loss reserve. The calculation for loan risk graded 5b, 6, 7 or 8, other outstanding loans and other commitments to lend is based on assigning an estimated loss factor based on a twelve quarter rolling historical weighted average net loss rate. The estimated requirement for unallocated general reserves from migration and economic analysis is determined by considering (1) trends in asset quality, (2) level and trends in charge-off experience, (3) macroeconomic trends and conditions, (4) microeconomic trends and conditions and (5) risk profile of lending activities. Within each of these categories, a risk factor percentage from a rating of excessive, high, moderate or low will be determined by management and applied to the loan portfolio. By adding the estimated value from the migration and economic analysis to the estimated reserve from the loan portfolio, a total estimated loss reserves is obtained. This amount is then compared to the actual amount in the loan loss reserve.

The calculation of ALL is performed on a monthly basis and is presented to the Loan Committee and the Board of Directors.

The following table details activity in the ALL and loans evaluated for impairment by class of loans for the three-month period ended March 31, 2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. The annualized net charge-offs to average loans outstanding ratio was 0.19% for the three months ended March 31, 2019, compared with 0.13% at December 31, 2018.

Three months ended March 31, 2019:

March 31, 2019	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Allowance for loan losses:
Beginning balance, December 31, 2018	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Charge-offs	0	0	184,696	0	0	0	184,696
Recoveries	2,696	0	3,368	0	0	782	6,846
Net charge-offs	(2,696)	0	181,328	0	0	(782)	177,850
Provisions charged to operations	98,375	0	48,695	0	(31,998)	836	115,908
Balance at end of period, March 31, 2019	$     503,322	$  1,043,027	$  1,077,669	$       458,871	$      76,880	$   207,158	$    3,366,927
Ending balance -
Individually evaluated for impairment	$     562,925	$                0	$       38,678	$    225,215	$               0	$          899	$       827,717
Collectively evaluated for impairment	(59,603)	1,043,027	1,038,991	233,656	76,880	206,259	2,539,210
Balance at end of period	$     503,322	$  1,043,027	$  1,077,669	$       458,871	$      76,880	$   207,158	$    3,366,927
Loans :
Ending balance -
Individually evaluated for impairment	$  1,333,398	$     273,098	$    1,301,229	$  1,411,269	$                0	$     13,415	$    4,332,409
Collectively evaluated for impairment	87,666,577	25,818,987	120,554,224	102,584,456	31,505,959	5,249,153	373,379,356
Balance at end of period	$88,999,975	$26,092,085	$121,855,453	$103,995,725	$31,505,959	$5,262,568	$377,711,765

At March 31, 2019, of the $4,381,133 loans that were individually evaluated for impairment, only $4,332,409 were deemed impaired.

The following table details activity in the ALL and loans evaluated for impairment by class of loans for the year ended December 31, 2018.

December 31, 2018	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Allowance for loan losses:
Beginning balance, December 31, 2017	$     324,260	$  1,043,083	$  1,056,595	$     416,474	$       11,560	$   191,660	$    3,043,632
Charge-offs	548,460	783	43,349	6,909	0	6,844	606,345
Recoveries	12,025	0	590	0	147,252	2,215	162,082
Net charge-offs	536,435	783	42,759	6,909	(147,252)	4,629	444,263
Provisions charged to operations	614,426	727	196,466	49,306	(49,934)	18,509	829,500
Balance at end of period, December 31, 2018	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Ending balance -
Individually evaluated for impairment	$     276,392	$                0	$       51,854	$    188,368	$              0	$       1,616	$       518,230
Collectively evaluated for impairment	125,859	1,043,027	1,158,448	270,503	108,878	203,924	2,910,639
Balance at end of period	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Loans :
Ending balance -
Individually evaluated for impairment	$    656,341	$    281,434	$   1,611,503	$   1,929,214	$      12,526	$     14,487	$    4,505,505
Collectively evaluated for impairment	87,746,874	24,609,102	121,865,866	101,418,684	31,549,160	5,072,497	372,262,183
Balance at end of period	$88,403,215	$24,890,536	$123,477,369	$103,347,898	$31,561,686	$5,086,984	$376,767,688

At December 31, 2018, of the $4,505,505 loans that were individually evaluated for impairment, only $4,356,381 were deemed impaired.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Nature of Operations

Nature of Operations

The Corporation offers comprehensive financial services to consumer, business, and governmental entity customers through its banking offices in southwest Georgia. Its primary deposit products are money market, NOW, savings and certificates of deposit, and its primary lending products are consumer and commercial mortgage loans. In addition to conventional banking services, the Corporation provides investment planning and management, trust management, and commercial and individual insurance products. Insurance products and advice are provided by the Bank’s Southwest Georgia Insurance Services Division.

The Corporation’s primary business is providing banking services through the Bank to individuals and businesses principally in the counties of Colquitt, Baker, Worth, Lowndes, Tift and the surrounding counties of southwest Georgia. The Bank operates six branch offices in its trade area. Trust and retail brokerage services are offered at an office building located at 25 2nd Avenue SW in Moultrie, and lending services are offered in Valdosta at 3520 North Valdosta Road.

Use of Estimates

Use of Estimates

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

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with these evaluations, management obtains independent appraisals for significant properties.

A substantial portion of the Corporation’s loans are secured by real estate located primarily in Georgia. Accordingly, the ultimate collection of these loans is susceptible to changes in the real estate market conditions of this market area.

Cash and Cash Equivalents and Statement of Cash Flows

Cash and Cash Equivalents and Statement of Cash Flows

For purposes of reporting cash flows, the Corporation considers cash and cash equivalents to include all cash on hand, deposit amounts due from banks, interest-bearing deposits in other banks, and federal funds sold. The Corporation maintains its cash balances in several financial institutions. Accounts at the financial institutions are secured by the Federal Deposit Insurance Corporation (the “FDIC”) up to $250,000. There were no uninsured deposits at March 31, 2019.

Investment Securities

Investment Securities

Investment securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value with unrealized gains and losses (net of tax effect) reported in other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other-than-temporarily impaired are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Premises and Equipment

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation has been calculated primarily using the straight-line method for buildings and building improvements over the assets estimated useful lives. Equipment and furniture are depreciated using the modified accelerated recovery system method over the assets estimated useful lives for financial reporting and income tax purposes for assets purchased on or before December 31, 2003. For assets acquired after 2003, the Corporation used the straight-line method of depreciation. The following estimated useful lives are used for financial statement purposes:

Land improvements	5 – 31 years
Building and improvements	10 – 40 years
Machinery and equipment	5 – 10 years
Computer equipment	3 – 5 years
Office furniture and fixtures	5 – 10 years

All of the Corporation’s leases are operating leases and are not capitalized as assets for financial reporting purposes. Maintenance and repairs are charged to expense and betterments are capitalized.

Long-lived assets are evaluated regularly for other-than-temporary impairment. If circumstances suggest that their value may be impaired and the write-down would be material, an assessment of recoverability is performed prior to any write-down of the asset. Impairment on intangibles is evaluated at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount should be assessed. Impairment, if any, is recognized through a valuation allowance with a corresponding charge recorded in the income statement.

Bank Property Held for Sale

Bank Property Held for Sale

In 2016, the Bank’s former branch in Pavo, Georgia, was transferred from premises to bank property held for sale and depreciation was discontinued. The property was booked at the lower of cost or market value based on the current appraisal of $211,500. On November 30, 2018, the Corporation sold this property and recorded a loss in the amount of $96,750.

Loans and Allowances for Loan Losses

Loans and Allowances for Loan Losses

Loans are stated at principal amounts outstanding less unearned income and the allowance for loan losses. Interest income is credited to income based on the principal amount outstanding at the respective rate of interest except for interest on certain installment loans made on a discount basis which is recognized in a manner that results in a level-yield on the principal outstanding.

Accrual of interest income is discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable.

Fees on loans and costs incurred in origination of most loans are recognized at the time the loan is placed on the books. Because loan fees are not significant, the results on operations are not materially different from the results which would be obtained by accounting for loan fees and costs as amortized over the term of the loan as an adjustment of the yield.

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

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes the collection of the principal is unlikely. The allowance is an amount which management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible based on evaluation of the collectability of loans and prior loss experience. This evaluation takes into consideration such factors as changes in the nature and volume of the loan portfolios, current economic conditions that may affect the borrowers’ ability to pay, overall portfolio quality, and review of specific problem loans.

Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based upon changes in economic conditions. Also, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

Foreclosed Assets

Foreclosed Assets

In accordance with policy guidelines and regulations, properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair market value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. A valuation allowance is established to record market value changes in foreclosed assets. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. There was no valuation allowance for foreclosed asset losses at March 31, 2019. Foreclosed assets totaled $127,605 at March 31, 2019 and December 31, 2018.

Intangible Assets

Intangible Assets

Intangible assets are amortized over a determined useful life using the straight-line basis. These assets are evaluated annually as to the recoverability of the carrying value. All intangibles were fully amortized as of March 31, 2019.

Credit Related Financial Instruments

Credit Related Financial Instruments

In the ordinary course of business, the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Retirement Plans

Retirement Plans

The Corporation and its direct and indirect subsidiaries have post-retirement plans covering substantially all employees. The Corporation makes annual contributions to the plans in amounts not exceeding the regulatory requirements.

Bank Owned Life Insurance

Bank Owned Life Insurance

The Bank owns life insurance policies on a group of employees. Banking laws and regulations allow the Bank to purchase life insurance policies on certain employees in order to help offset the Bank’s overall employee compensation costs. The beneficial aspects of these life insurance policies are tax-free earnings and a tax-free death benefit, which are realized by the Bank as the owner of the policies. The cash surrender value of these policies is included as an asset on the balance sheet, and any increases in cash surrender value are recorded as noninterest income on the statement of income. At March 31, 2019, and December 31, 2018, the policies had a value of $6,812,589 and $6,779,242, respectively, and were 15.1% and 15.5%, respectively, of shareholders’ equity. These values are within regulatory guidelines.

Income Taxes

Income Taxes

The Corporation and its direct and indirect subsidiaries file a consolidated income tax return. Each subsidiary computes its income tax expense as if it filed an individual return except that it does not receive any portion of the surtax allocation. Any benefits or disadvantages of the consolidation are absorbed by the parent company.  Each subsidiary pays its allocation of federal income taxes to the parent company or receives payment from the parent company to the extent that tax benefits are realized.

The Corporation reports income under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefit associated with certain temporary differences and tax credits will be realized.

The Corporation will recognize a tax position as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with an examination being presumed to occur. The amount recognized is the largest amount of a tax benefit that is greater than fifty percent likely of being realized on examination. No benefit is recorded for tax positions that do not meet the more than likely than not test.

The Corporation recognizes penalties related to income tax matters in income tax expense.  The Corporation is subject to U.S. federal and Georgia state income tax audit for returns for the tax period ending December 31, 2016 and subsequent years.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes all changes in shareholders’ equity during a period, except those resulting from transactions with shareholders. Besides net income, other components of the Corporation’s accumulated other comprehensive income (loss) includes the after tax effect of changes in the net unrealized gain/loss on securities available for sale and the unrealized gain/loss on pension plan benefits.

Trust Department

Trust Department

Trust income is included in the accompanying consolidated financial statements on the cash basis in accordance with established industry practices. Reporting of such fees on the accrual basis would have no material effect on reported income.

Advertising Costs

Advertising Costs

It is the policy of the Corporation to expense advertising costs as they are incurred. The Corporation does not engage in any direct-response advertising and accordingly has no advertising costs reported as assets on its balance sheet. Costs expensed were $75,750 and $50,901 for the three month periods ended March 31, 2019 and 2018, respectively.

Recent Market and Regulatory Developments

Recent Market and Regulatory Developments

The Corporation and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the federal banking agencies about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum Tier 1 leverage, Tier 1 risk-based capital and Total risk-based capital ratios. In July 2013, the Board of Governors of the Federal Reserve System published the Basel III Capital Rules. These rules establish a comprehensive capital framework applicable to all depository institutions, certain bank holding companies with total consolidated assets below a certain threshold and all and savings and loan holding companies except for those that are substantially engaged in insurance underwriting or commercial activities. These rules implement higher minimum capital requirements for banks and certain bank holding companies, include a new common equity Tier 1 capital requirement and establish criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital.

The Basel III Capital Rules became effective for the Bank on January 1, 2015, subject to a phase-in period, but are not applicable to bank holding companies, like the Corporation, with less than $1 billion in total consolidated assets that meet certain criteria.

The minimum capital level requirements applicable to the Bank under the Basel III Capital Rules are: (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a Total risk-based capital ratio of 8% (unchanged from the rules effective for the year ended December 31, 2014); and (iv) a Tier 1 leverage ratio of 4% for all institutions. Common equity Tier 1 capital will consist of retained earnings and common stock instruments, subject to certain adjustments.

The Basel III Capital Rules set forth changes in the methods of calculating certain risk-weighted assets, which in turn affect the calculation of risk-based ratios. The new risk weightings are more punitive for assets held by banks that are deemed to be of higher risk. These changes were also effective beginning January 1, 2015.

The Basel III Capital Rules also introduce a “capital conservation buffer”, which is in addition to each capital ratio and is phased-in over a three-year period beginning in January 2016.

As of December 31, 2018, the Bank is considered to be well-capitalized under the Basel III Capital Rules. There have been no conditions or events since December 31, 2018, that management believes has changed the Bank’s status as “well-capitalized.” The capital ratios of the Corporation and Bank are presented in Note 15 of the Corporation’s Notes to Consolidated Financial Statements.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In March 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 118. The amendments in this update were effective upon issuance. The adoption of ASU 2018-05 had no material impact on the Corporation’s consolidated financial statements.

In March 2018, FASB issued ASU 2018-04, Investment - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273. The purpose of this ASU is to codify the SEC's guidance issued in Staff Accounting Bulletin 117. The amendments in this update were effective upon issuance. The adoption of ASU 2018-04 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10). This Update clarifies certain aspects of the guidance issued in ASU 2016-01 including (i) an entity measuring an equity security using the measurement alternative may make an irrevocable election to change its measurement approach to a fair value method under Topic 820 for that security and any identical or similar investments of the same issuer, (ii) fair value adjustments under the measurement alternative should be as of the date the observable transaction for a similar security occurred, (iii) requiring the remeasurement of the entire value of forward contracts and purchased options when observable transactions occur on the underlying equity securities, (iv) financial liabilities for which the fair value option is elected should follow the guidance in paragraph 825-10-45-5, (v) changes in the fair value of financial liabilities for which the fair value option is elected relating to the instrument-specific credit risk should first be measured in the currency of denomination and then both components of the change in fair value should be remeasured into the reporting entity's functional currency using end-of-period spot rates, and (vi) the prospective transition approach should only be applied for instances in which the measurement alternative is applied. The guidance was effective for interim periods beginning after June 15, 2018 and may be early adopted provided ASU 2016-01 was adopted. The Company adopted the amendments in this ASU effective January 1, 2018. The adoption of ASU 2018-03 had no material impact on the Corporation’s consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides guidance on accounting for the effects of the Tax Cuts and Jobs Act, which was enacted in December, 2017. The guidance allows reclassification of the tax effects that were stranded in accumulated other comprehensive income as a result of the tax rate change from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2018. The adoption of ASU 2018-02 had no material impact on the Corporation’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Stock Compensation, Scope of Modification Accounting.” This ASU clarifies when changes to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The new guidance should reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to awards without accounting for them as modifications. It does not change the accounting for modifications. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. The adoption of ASU 2017-09 had no material impact on the Corporation’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonable estimable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This update should be adopted on a modified retrospective basis with a cumulative effect adjustment to retained earnings on the date of adoption. The adoption of ASU 2017-08 had no material impact on the Corporation’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. This ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-07 had no material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), which provides a new framework for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption will be permitted and should apply it to transactions that have not been reported in financial statements that have been issued or made available for issuance. The adoption of ASU 2017-01 had no material impact on the Corporation’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. The accounting guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018. The adoption of 2016-01 had no material impact on the Corporation’s consolidated financial statements.

In May 2014, the FASB began issuing guidance to change the recognition of revenue from contracts with customers. The last guidance was issued in February 2017. The standards issued during this time are as follows: ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, ASU 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, and ASU 2017-05 Other Income - Gains and losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This new guidance, which does not apply to financial instruments, provides that revenue should be recognized for the transfer of goods and services to customers in an amount equal to the consideration it receives or expects to receive. The guidance also includes expanded disclosure requirements that provide comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Corporation adopted the amendments in this ASU effective January 1, 2018, using the modified retrospective method. Since there was no change to net income upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not necessary. See below for additional information related to revenue generated from contracts with customers.

In 2016, the FASB issued ASU 2016-02 – Leases (Topic 842). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The adoption of ASU No. 2016-02 had no material impact on the Corporation’s consolidated financial statements.

Revenue Recognition

Revenue Recognition

On January 1, 2018, the Corporation adopted ASC Topic 606, using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after January 1, 2018, are presented under ASC Topic 606 and have not materially changed from the prior year amounts. Noninterest income, within the scope of this guidance, is recognized as services are transferred to customers in an amount that reflects the considerations expected to be entitled to in exchange for those services. The Corporation's revenue streams that were in scope include service charges on deposit accounts, income from insurance services, income from trust services, Automated Teller Machine (“ATM”) surcharge and other noninterest income.

Services Charges on Deposit Accounts - Service charges on deposit accounts primarily consist of monthly maintenance charges, analysis charges and Non-sufficient funds (“NSF”) charges. The NSF charges and certain service charges are fixed and the performance obligation is typically satisfied at the time of the related transaction. The consideration for analysis charges and monthly maintenance charges are variable as the fee can be reduced if the customer meets certain qualifying metrics. The Corporation's performance obligations are satisfied either at the time of the transaction or over the course of a month.

Income from Insurance Services – Income from insurance services consists primarily of property and casualty insurance, life, health, and disability insurance. Property and casualty, life, health, and disability insurance includes the brokerage of both personal and commercial coverages. The placement of the policy is completion of the Corporation's performance obligation and revenue is recognized at that time. The Corporation's commission is primarily a percentage of the premium.

Income from Trust Services – Income from Trust services consists of revenue generated from services provided for corporate, pension, and personal trusts, trustee services, and administrative services for employee benefit plans. The Corporation’s performance obligation and revenue is recognized once the service has been performed.

ATM Surcharge - ATM surcharge represents revenues earned from certain terminal activity. ATM surcharges primarily consist of charges assessed to our customers for using a non-Bank ATM or a non-Bank customer using our ATM. Such surcharges generally are recognized concurrently with the delivery of services on a daily basis.

Other - Other noninterest income primarily consists of transaction based revenue where the performance obligation is satisfied concurrent with the revenue recognition.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. On June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. That methodology replaces the probable, incurred loss model for those assets. The amendments in ASU No. 2018-19 align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarify the scope of the guidance in the amendments in Update 2016-13. The amendments also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The adoption of ASU 2018-19 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes the requirements to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. The ASU adds requirements to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and the reasons for significant gains and losses related to changes in the benefit obligation for the period. The update also clarifies the requirements to disclose the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets, and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. This update is effective for fiscal years beginning after December 15, 2020. The adoption of ASU 2018-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the requirements for public entities to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The ASU modifies the disclosure requirement for investments in certain entities that calculate net asset value, and clarifies that the measurement uncertainty disclosure is to communicate measurement uncertainties as of the reporting date. The ASU also requires public entities to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This update is effective for fiscal years beginning after December 15, 2019. The adoption of ASU 2018-13 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Rather, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities may early adopt the standard for goodwill impairment tests with measurement dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323), which incorporates into the FASB ASC recent SEC guidance about disclosing, under SEC Staff Accounting Bulletin, Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The effective date varies as each topic addressed in this ASU has its own effective date. The adoption of ASU 2017-03 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses. Among other things, 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. For SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with later effective dates for non-SEC registrant public companies and other organizations. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU No. 2016-13 is being reviewed for any material impact on the Corporation’s consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Schedule of Estimated Useful Lives of Premises and Equipment

The following estimated useful lives are used for financial statement purposes:

Land improvements	5 – 31 years
Building and improvements	10 – 40 years
Machinery and equipment	5 – 10 years
Computer equipment	3 – 5 years
Office furniture and fixtures	5 – 10 years

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of Assets Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets measured at fair value on a recurring basis as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1	Level 2	Level 3	Total
Investment securities available for sale:
U.S. government treasury securities	$3,965,670	$                0	$        0	$   3,965,670
U.S. government agency securities	0	46,884,851	0	46,884,851
State and municipal securities	0	7,478,656	0	7,478,656
Residential mortgage-backed securities	0	4,632,902	0	4,632,902
Total	$3,965,670	$ 58,996,409	$        0	$ 62,962,079

December 31, 2018	Level 1	Level 2	Level 3	Total
Investment securities available for sale:
U.S. government treasury securities	$ 954,570	$                0	$         0	$      954,570
U.S. government agency securities	0	45,207,005	0	45,207,005
State and municipal securities	0	7,377,935	0	7,377,935
Residential mortgage-backed securities	0	4,774,067	0	4,774,067
Total	$  954,570	$ 57,359,007	$         0	$ 58,313,577

Schedule of Fair Value of Assets Recorded on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2019, and December 31, 2018.

March 31, 2019	Level 1	Level 2	Level 3	Total
Foreclosed assets	$             0	$             0	$    127,605	$    127,605
Impaired loans	0	0	3,504,692	3,504,692
Total assets at fair value	$             0	$             0	$ 3,632,297	$ 3,632,297

December 31, 2018	Level 1	Level 2	Level 3	Total
Foreclosed assets	$             0	$             0	$    127,605	$     127,605
Impaired loans	0	0	3,838,151	3,838,151
Total assets at fair value	$             0	$             0	$ 3,965,756	$ 3,965,756

Schedule of Carrying and Estimated Fair Value of Assets and Liabilities Recorded at Fair Value

The carrying amount and estimated fair values of the Corporation’s assets and liabilities which are required to be either disclosed or recorded at fair value at March 31, 2019, and December 31, 2018:

		Estimated Fair Value
March 31, 2019	Carrying Amount	Level 1	Level 2	Level 3	Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$   49,015	$   49,015	$            0	$          0	$   49,015
Certificates of deposit in other banks	2,732	2,732	0	0	2,732
Investment securities available for sale	62,962	3,966	58,996	0	62,962
Investment securities held to maturity	35,185	0	35,674	0	35,674
Federal Home Loan Bank stock	1,020	0	1,020	0	1,020
Loans, net	374,327	0	360,840	3,505	364,345
Bank owned life insurance	6,813	0	6,813	0	6,813
Liabilities:
Deposits	488,619	0	457,973	0	457,973
Federal Home Loan Bank advances	13,700	0	13,747	0	13,747

		Estimated Fair Value
December 31, 2018	Carrying Amount	Level 1	Level 2	Level 3	Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$   35,499	$   35,499	$            0	$          0	$   35,499
Certificates of deposit in other banks	2,732	2,732	0	0	2,732
Investment securities available for sale	58,314	955	57,359	0	58,314
Investment securities held to maturity	36,827	0	37,010	0	37,010
Federal Home Loan Bank stock	1,820	0	1,820	0	1,820
Loans, net	373,321	0	362,373	3,838	366,211
Bank owned life insurance	6,779	0	6,779	0	6,779
Liabilities:
Deposits	455,640	0	456,245	0	456,245
Federal Home Loan Bank advances	31,629	0	31,591	0	31,591

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Investments [Abstract]

Schedule of Securities Available for Sale

The amortized cost of securities as shown in the consolidated balance sheets and their estimated fair values at March 31, 2019, and December 31, 2018, were as follows:

Securities Available For Sale:

March 31, 2019	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
U.S. government treasury securities	$  3,963,014	$       9,560	$       6,904	$  3,965,670
U.S. government agency securities	46,786,921	563,946	466,017	46,884,850
State and municipal securities	7,371,821	123,149	16,313	7,478,657
Residential mortgage-backed securities	4,587,762	48,726	3,586	4,632,902
Total debt securities AFS	$62,709,518	$   745,381	$   492,820	$62,962,079

December 31, 2018	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
U.S. government treasury securities	$      982,044	$              0	$      27,474	$      954,570
U.S. government agency securities	45,823,595	264,567	881,157	45,207,005
State and municipal securities	7,394,278	30,579	46,922	7,377,935
Residential mortgage-backed securities	4,769,668	21,579	17,180	4,774,067
Total debt securities AFS	$ 58,969,585	$   316,725	$    972,733	$ 58,313,577

Schedule of Securities Held to Maturity

Securities Held to Maturity:

March 31, 2019	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
State and municipal securities	$29,216,837	$ 391,743	$   26,272	$29,582,308
Residential mortgage-backed securities	5,968,046	124,896	883	6,092,059
Total securities HTM	$35,184,883	$ 516,639	$   27,155	$35,674,367

December 31, 2018	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
State and municipal securities	$ 30,582,785	$ 208,480	$   67,434	$ 30,723,831
Residential mortgage-backed securities	6,244,288	49,490	7,282	6,286,496
Total securities HTM	$ 36,827,073	$ 257,970	$   74,716	$ 37,010,327

Summary of Amortized Cost and Estimated Fair Value of Debt Securities

The amortized cost and estimated fair value of securities at March 31, 2019, and December 31, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

March 31, 2019
Available for Sale:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$  3,140,872	$  3,125,810
After one through five years	34,952,755	35,257,684
After five through ten years	19,183,448	19,097,610
After ten years	5,432,443	5,480,975
Total debt securities AFS	$62,709,518	$62,962,079
Held to Maturity:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$ 6,480,829	$ 6,489,447
After one through five years	11,885,478	12,001,454
After five through ten years	11,125,453	11,354,541
After ten years	5,693,123	5,828,925
Total securities HTM	$35,184,883	$35,674,367

December 31, 2018
Available for Sale:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$   2,147,059	$   2,124,645
After one through five years	29,691,474	29,674,236
After five through ten years	21,585,776	20,968,318
After ten years	5,545,276	5,546,378
	5
Total debt securities AFS	$ 58,969,585	$ 58,313,577
Held to Maturity:	Amortized Cost	Estimated Fair Value
Amounts maturing in:
One year or less	$   6,483,464	$   6,497,910
After one through five years	12,885,021	12,961,209
After five through ten years	11,035,146	11,097,382
After ten years	6,423,442	6,453,826
Total securities HTM	$ 36,827,073	$ 37,010,327

Schedule of Activity of Security Sales by Intention

The following tables summarize the activity of security sales by intention and year for the three months ended March 31, 2019, and 2018.

Securities Available For Sale:

	March 31, 2019	March 31, 2018
Proceeds of sales	$               0	$               0
Gross gains	$               0	$               0
Gross losses	0	0
Net gains (losses) on sales of  available for sale securities	$               0	$               0

Securities Held to Maturity:

	March 31, 2019	March 31, 2018
Amortized cost of securities sold	$               0	$                0
Proceeds from sales	0	0
Net gains on sales of  held to maturity securities	$               0	$                0

Schedule of Information Pertaining to Securities Gross Unrealized Losses by Investments

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in continuous loss position, follows:

March 31, 2019		Less Than Twelve Months				Twelve Months or More
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	6,904	$	975,660
U.S. government agency securities		0		0		466,017		22,346,327
State and municipal securities		0		0		16,313		1,831,683
Residential mortgage-backed securities		0		0		3,586		122,791
Total debt securities available for sale	$	0	$	0	$	492,820	$	25,276,461
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	0	$	0	$	26,272	$	2,515,563
Residential mortgage-backed securities		0		0		883		304,019
Total securities held to maturity	$	0	$	0	$	27,155	$	2,819,582

December 31, 2018		Less Than Twelve Months				Twelve Months or More
		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Securities Available for Sale
Temporarily impaired debt securities:
U.S. government treasury securities	$	0	$	0	$	27,474	$	954,570
U.S. government agency securities		33,077		6,073,337		848,080		20,015,052
State and municipal securities		3,209		306,792		43,713		1,813,173
Residential mortgage-backed securities		14,199		3,032,237		2,981		129,410
Total debt securities available for sale	$	50,485	$	9,412,366	$	922,248	$	22,912,205
Securities Held to Maturity
Temporarily impaired debt securities:
State and municipal securities	$	20,209	$	7,359,536	$	47,225	$	2,782,627
Residential mortgage-backed securities		5,671		879,487		1,611		89,464
Total securities held to maturity	$	25,880	$	8,239,023	$	48,836	$	2,872,091

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Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Schedule of Loan Portfolio and Percentage of Loans in Each Category to Total Loans

The composition of the Corporation’s loan portfolio and the percentage of loans in each category to total loans at March 31, 2019 and December 31, 2018, were as follows:

	March 31, 2019		December 31, 2018
Commercial, financial and agricultural loans	$   88,999,975	23.6%	$  88,403,215	23.5%
Real estate:
Construction loans	26,092,085	6.9%	24,890,536	6.6%
Commercial mortgage loans	121,855,453	32.3%	123,477,369	32.8%
Residential loans	103,995,725	27.5%	103,347,898	27.4%
Agricultural loans	31,505,959	8.3%	31,561,686	8.4%
Consumer & other loans	5,262,568	1.4%	5,086,984	1.3%
Loans outstanding	377,711,765	100.0%	376,767,688	100.0%
Unearned interest and discount	(         17,390)		(        17,451)
Allowance for loan losses	(    3,366,927)		(   3,428,869)
Net loans	$ 374,327,448		$ 373,321,368

Summary of Maturities of Loan Portfolio

The following table shows maturities as well as interest sensitivity of the commercial, financial, agricultural, and construction loan portfolio at March 31, 2019.

		Commercial, Financial, Agricultural and Construction
Distribution of loans which are due:
In one year or less	$	35,327,184
After one year but within five years		54,757,452
After five years		25,007,424
Total	$	115,092,060

Summary of Loans Due After One Year

The following table shows, for such loans due after one year, the amounts which have predetermined interest rates and the amounts which have floating or adjustable interest rates at March 31, 2019.

	Loans With
	Predetermined	Loans With
	Rates	Floating Rates	Total
Commercial, financial,
agricultural and construction	$ 76,439,177	$ 3,325,699	$ 79,764,876

Schedule of Past Due Loans and Nonaccrual Loans

The following tables present an age analysis of past due loans still accruing interest and nonaccrual loans segregated by class of loans.

	Age Analysis of Past Due Loans As of March 31, 2019
	30-89 Days Past Due	90 Days or Greater	Total Past Due Loans	Nonaccrual Loans	Current Loans	Total Loans
Commercial, financial and agricultural loans	$   556,388	$     0	$   556,388	$              0	$ 88,443,587	$ 88,999,975
Real estate:
Construction loans	536,090	0	536,090	0	25,555,995	26,092,085
Commercial mortgage loans	204,250	0	204,250	839,854	120,811,349	121,855,453
Residential loans	1,638,063	0	1,638,063	65,214	102,292,448	103,995,725
Agricultural loans	193,800	0	193,800	0	31,312,159	31,505,959
Consumer & other loans	31,862	0	31,862	0	5,230,706	5,262,568
Total loans	$3,160,453	$     0	$3,160,453	$   905,068	$373,646,244	$377,711,765

	Age Analysis of Past Due Loans As of December 31, 2018
	30-89 Days Past Due	90 Days or Greater	Total Past Due Loans	Nonaccrual Loans	Current Loans	Total Loans
Commercial, financial and agricultural loans	$    247,397	$        0	$    247,397	$     36,157	$   88,119,661	$  88,403,215
Real estate:
Construction loans	0	0	0	0	24,890,536	24,890,536
Commercial mortgage loans	0	0	0	1,022,550	122,454,819	123,477,369
Residential loans	1,560,913	0	1,560,913	146,154	101,640,831	103,347,898
Agricultural loans	321,319	0	321,319	0	31,240,367	31,561,686
Consumer & other loans	36,654	0	36,654	0	5,050,330	5,086,984
Total loans	$ 2,166,283	$         0	$ 2,166,283	$ 1,204,861	$ 373,396,544	$ 376,767,688

Schedule of Impaired Loans Segregated by Class of Loans

The following tables present impaired loans, segregated by class of loans as of March 31, 2019, and December 31, 2018:

	Unpaid	Recorded Investment				Year-to-date Average	Interest Income Received
March 31, 2019	Principal Balance	With No Allowance	With Allowance	Total	Related Allowance	Recorded Investment	During Impairment
Commercial, financial and agricultural loans	$1,420,052	$     78,507	$1,254,891	$1,333,398	$  562,925	$    461,763	$ 8,225
Real estate:
Construction loans	393,898	273,098	0	273,098	0	273,098	5,253
Commercial mortgage loans	1,661,727	346,979	954,250	1,301,229	38,678	1,097,539	9,701
Residential loans	1,432,181	327,454	1,083,815	1,411,269	225,215	1,318,080	28,979
Agricultural loans	0	0	0	0	0	0	0
Consumer & other loans	13,415	0	13,415	13,415	899	13,415	346
Total loans	$4,921,273	$1,026,038	$3,306,371	$4,332,409	$827,717	$ 3,163,895	$52,504
	Unpaid	Recorded Investment				Year-to-date Average	Interest Income Received
December 31, 2018	Principal Balance	With No Allowance	With Allowance	Total	Related Allowance	Recorded Investment	During Impairment
Commercial, financial and agricultural loans	$   184,899	$   87,525	$   568,816	$   656,341	$ 276,392	$   370,038	$ 52,411
Real estate:
Construction loans	402,234	281,434	0	281,434	0	281,434	25,364
Commercial mortgage loans	1,787,305	1,277,611	333,892	1,611,503	51,854	1,544,299	45,403
Residential loans	1,801,002	1,027,647	752,443	1,780,090	188,368	1,594,390	127,806
Agricultural loans	12,526	12,526	0	12,526	0	12,526	5,530
Consumer & other loans	0	0	14,487	14,487	1,616	14,487	820
Total loans	$4,187,966	$2,686,743	$1,669,638	$4,356,381	$518,230	$3,817,174	$257,334

Schedule of Troubled Debt Restructuring by Loan Class

Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 30 or more days past due.

	March 31, 2019
					Under restructured terms
		Accruing		Non-accruing	#		Current	#		Default
Commercial, financial, and agricultural loans	$	4,275	$	0	1	$	4,275	0	$	0
Real estate:
Construction loans		0		0	0		0	0		0
Commercial mortgage loans		0		0	0		0	0		0
Residential loans		0		0	0		0	0		0
Agricultural loans		0		0	0		0	0		0
Consumer & other loans		0		0	0		0	0		0
Total TDR’s	$	4,275	$	0	1	$	4,275	0	$	0

	December 31, 2018
					Under restructured terms
		Accruing		Non-accruing	#		Current	#		Default
Commercial, financial, and agricultural loans	$	5,570	$	0	1	$	5,570	0	$	0
Real estate:
Construction loans		0		0	0		0	0		0
Commercial mortgage loans		0		0	0		0	0		0
Residential loans		1,888		0	1		1,888	0		0
Agricultural loans		0		0	0		0	0		0
Consumer & other loans		0		0	0		0	0		0
Total TDR’s	$	7,458	$	0	2	$	7,458	0	$	0

Schedule of Troubled Debt Restructurings by Types of Concessions Made

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at March 31, 2019, and December 31, 2018.

	March 31, 2019						December 31, 2018
	Accruing			Nonaccruing			Accruing			Nonaccruing
	#		Balance	#		Balance	#		Balance	#		Balance
Type of concession:
Payment modification	0	$	0	0	$	0	0	$	0	0	$	0
Rate reduction	0		0	0		0	0		0	0		0
Rate reduction, payment modification	1		4,275	0		0	1		1,888	0		0
Forbearance of interest	0		0	0		0	1		5,570	0		0
Total	1	$	4,275	0	$	0	2	$	7,458	0	$	0

Schedule of Internal Loan Grading by Class of Loans

The following tables present internal loan grading by class of loans as of March 31, 2019, and December 31, 2018:

March 31, 2019	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Rating:
Grade 1- Exceptional	$  1,389,477	$                0	$                  0	$         22,656	$                0	$    199,257	$    1,611,390
Grade 2- Above Avg.	0	0	0	0	0	43,134	43,134
Grade 3- Acceptable	23,896,901	2,140,022	28,634,023	26,258,915	17,060,292	1,815,446	99,805,599
Grade 4- Fair	62,003,261	23,429,965	88,485,618	73,773,119	14,445,667	3,184,099	265,321,729
Grade 5a- Watch	758,902	273,098	1,908,525	2,006,308	0	14,950	4,961,783
Grade 5b- OAEM	244,637	0	0	0	0	0	244,637
Grade 6- Substandard	702,441	249,000	2,400,340	712,620	0	4,397	4,068,798
Grade 7- Doubtful	4,356	0	426,947	1,222,107	0	1,285	1,654,695
Total loans	$88,999,975	$26,092,085	$121,855,453	$103,995,725	$31,505,959	$5,262,568	$377,711,765

December 31, 2018	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Rating:
Grade 1- Exceptional	$  1,237,602	$                0	$                  0	$       22,905	$                0	$    210,045	$    1,470,552
Grade 2- Above Avg.	0	0	0	0	0	43,711	43,711
Grade 3- Acceptable	23,821,846	1,860,003	30,398,565	25,839,646	16,863,356	1,151,239	99,934,655
Grade 4- Fair	58,753,931	22,749,099	88,122,957	73,114,310	14,698,330	3,657,108	261,095,735
Grade 5a- Watch	473,616	0	2,411,710	722,441	0	6,206	3,613,973
Grade 5b- OAEM	3,079,098	0	446,841	1,299,587	0	2,168	4,827,694
Grade 6- Substandard	787,309	281,434	2,097,296	2,349,009	0	16,507	5,531,555
Grade 7- Doubtful	249,813	0	0	0	0	0	249,813
Total loans	$88,403,215	$24,890,536	$123,477,369	$103,347,898	$31,561,686	$5,086,984	$376,767,688

Schedule of Allowance for Loan Losses Methodology

The annualized net charge-offs to average loans outstanding ratio was 0.19% for the three months ended March 31, 2019, compared with 0.13% at December 31, 2018.

 Three months ended March 31, 2019:

March 31, 2019	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Allowance for loan losses:
Beginning balance, December 31, 2018	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Charge-offs	0	0	184,696	0	0	0	184,696
Recoveries	2,696	0	3,368	0	0	782	6,846
Net charge-offs	(2,696)	0	181,328	0	0	(782)	177,850
Provisions charged to operations	98,375	0	48,695	0	(31,998)	836	115,908
Balance at end of period, March 31, 2019	$     503,322	$  1,043,027	$  1,077,669	$       458,871	$      76,880	$   207,158	$    3,366,927
Ending balance -
Individually evaluated for impairment	$     562,925	$                0	$       38,678	$    225,215	$               0	$          899	$       827,717
Collectively evaluated for impairment	(59,603)	1,043,027	1,038,991	233,656	76,880	206,259	2,539,210
Balance at end of period	$     503,322	$  1,043,027	$  1,077,669	$       458,871	$      76,880	$   207,158	$    3,366,927
Loans :
Ending balance -
Individually evaluated for impairment	$  1,333,398	$     273,098	$    1,301,229	$  1,411,269	$                0	$     13,415	$    4,332,409
Collectively evaluated for impairment	87,666,577	25,818,987	120,554,224	102,584,456	31,505,959	5,249,153	373,379,356
Balance at end of period	$88,999,975	$26,092,085	$121,855,453	$103,995,725	$31,505,959	$5,262,568	$377,711,765

The following table details activity in the ALL and loans evaluated for impairment by class of loans for the year ended December 31, 2018.

December 31, 2018	Commercial, Financial, and Agricultural	Construction Real Estate	Commercial Real Estate	Residential Real Estate	Agricultural Real Estate	Consumer and Other	Total
Allowance for loan losses:
Beginning balance, December 31, 2017	$     324,260	$  1,043,083	$  1,056,595	$     416,474	$       11,560	$   191,660	$    3,043,632
Charge-offs	548,460	783	43,349	6,909	0	6,844	606,345
Recoveries	12,025	0	590	0	147,252	2,215	162,082
Net charge-offs	536,435	783	42,759	6,909	(147,252)	4,629	444,263
Provisions charged to operations	614,426	727	196,466	49,306	(49,934)	18,509	829,500
Balance at end of period, December 31, 2018	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Ending balance -
Individually evaluated for impairment	$     276,392	$                0	$       51,854	$    188,368	$              0	$       1,616	$       518,230
Collectively evaluated for impairment	125,859	1,043,027	1,158,448	270,503	108,878	203,924	2,910,639
Balance at end of period	$     402,251	$  1,043,027	$  1,210,302	$     458,871	$    108,878	$   205,540	$    3,428,869
Loans :
Ending balance -
Individually evaluated for impairment	$    656,341	$    281,434	$   1,611,503	$   1,929,214	$      12,526	$     14,487	$    4,505,505
Collectively evaluated for impairment	87,746,874	24,609,102	121,865,866	101,418,684	31,549,160	5,072,497	372,262,183
Balance at end of period	$88,403,215	$24,890,536	$123,477,369	$103,347,898	$31,561,686	$5,086,984	$376,767,688

XML

Summary of Significant Accounting Policies (Details Narrative) - USD ($)		3 Months Ended
	Nov. 30, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2016
Maximum FDIC insured amount		$ 250,000
Uninsured deposits		0
Bank property held for sale					$ 211,500
Net loss on disposal of bank property held for sale	$ 96,750
Allowance for foreclosed asset losses		0
Foreclosed assets		127,605		$ 127,605
Bank owned life insurance policies		$ 6,812,589		$ 6,779,242
Bank owned life insurance policies, stockholders equity, percentage		15.10%		15.50%
Advertising expense		$ 75,750	$ 50,901
Minimum requirement of common equity Tier 1 risk-based capital ratio		4.50%
Tier 1 risk-based capital ratio		6.00%
Previous minimum requirement of Tier 1 risk-based capital ratio		4.00%
Risk-based capital ratio		8.00%
Tier 1 leverage ratio		4.00%
Maximum [Member]
Total consolidated assets		$ 1,000,000,000

XML

Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives of Premises and Equipment (Details)	3 Months Ended
	Mar. 31, 2019
Land Improvements [Member] | Minimum [Member]
Estimated useful lives	5 years
Land Improvements [Member] | Maximum [Member]
Estimated useful lives	31 years
Building and Improvements [Member] | Minimum [Member]
Estimated useful lives	10 years
Building and Improvements [Member] | Maximum [Member]
Estimated useful lives	40 years
Machinery and Equipment [Member] | Minimum [Member]
Estimated useful lives	5 years
Machinery and Equipment [Member] | Maximum [Member]
Estimated useful lives	10 years
Computer Equipment [Member] | Minimum [Member]
Estimated useful lives	3 years
Computer Equipment [Member] | Maximum [Member]
Estimated useful lives	5 years
Office Furniture and Fixtures [ Member] | Minimum [Member]
Estimated useful lives	5 years
Office Furniture and Fixtures [ Member] | Maximum [Member]
Estimated useful lives	10 years

XML

Fair Value Measurements (Details Narrative)	Mar. 31, 2019
Minimum [Member]
Percentage of estimated selling cost range	15.00%
Percentage of nonaccrual impaired loan write down range	80.00%
Maximum [Member]
Percentage of estimated selling cost range	20.00%
Percentage of nonaccrual impaired loan write down range	85.00%

XML

Fair Value Measurements - Schedule of Assets Recorded at Fair Value on a Recurring Basis (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
U.S. government treasury securities	$ 3,965,670	$ 954,570
U.S. government agency securities	46,884,851	45,207,005
State and municipal securities	7,478,656	7,377,935
Residential mortgage-backed securities	4,632,902	4,774,067
Total	62,962,079	58,313,577
Level 1 [Member]
U.S. government treasury securities	3,965,670	954,570
U.S. government agency securities	0	0
State and municipal securities	0	0
Residential mortgage-backed securities	0	0
Total	3,965,670	954,570
Level 2 [Member]
U.S. government treasury securities	0	0
U.S. government agency securities	46,884,851	45,207,005
State and municipal securities	7,478,656	7,377,935
Residential mortgage-backed securities	4,632,902	4,774,067
Total	58,996,409	57,359,007
Level 3 [Member]
U.S. government treasury securities	0	0
U.S. government agency securities	0	0
State and municipal securities	0	0
Residential mortgage-backed securities	0	0
Total	$ 0	$ 0

XML

Fair Value Measurements - Schedule of Fair Value of Assets Recorded on a Nonrecurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Foreclosed assets	$ 127,605	$ 127,605
Impaired loans	3,504,692	3,838,151
Total assets at fair value	3,632,297	3,965,756
Level 1 [Member]
Foreclosed assets	0	0
Impaired loans	0	0
Total assets at fair value	0	0
Level 2 [Member]
Foreclosed assets	0	0
Impaired loans	0	0
Total assets at fair value	0	0
Level 3 [Member]
Foreclosed assets	127,605	127,605
Impaired loans	3,504,692	3,838,151
Total assets at fair value	$ 3,632,297	$ 3,965,756

XML

Fair Value Measurements - Schedule of Carrying and Estimated Fair Value of Assets and Liabilities Recorded at Fair Value (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Cash and cash equivalents	$ 49,015,175	$ 35,498,792	$ 48,987,447	$ 34,138,421
Certificates of deposit in other banks	2,732,000	2,732,000
Investment securities available for sale	62,962,079	58,313,577
Investment securities held to maturity	35,674,367	37,010,327
Federal Home Loan Bank stock	1,019,900	1,820,300
Loans, net	364,345,000	366,211,000
Bank owned life insurance	6,812,589	6,779,242
Deposits	457,973,000	456,245,000
Federal Home Loan Bank advances	13,747,000	31,591,000
Level 1 [Member]
Cash and cash equivalents	49,015,000	35,499,000
Certificates of deposit in other banks	2,732,000	2,732,000
Investment securities available for sale	3,966,000	955,000
Investment securities held to maturity	0	0
Federal Home Loan Bank stock	0	0
Loans, net	0	0
Bank owned life insurance	0	0
Deposits	0	0
Federal Home Loan Bank advances	0	0
Level 2 [Member]
Cash and cash equivalents	0	0
Certificates of deposit in other banks	0	0
Investment securities available for sale	58,996,000	57,359,000
Investment securities held to maturity	35,674,000	37,010,000
Federal Home Loan Bank stock	1,020,000	1,820,000
Loans, net	360,840,000	362,373,000
Bank owned life insurance	6,813,000	6,779,000
Deposits	457,973,000	456,245,000
Federal Home Loan Bank advances	13,747,000	31,591,000
Level 3 [Member]
Cash and cash equivalents	0	0
Certificates of deposit in other banks	0	0
Investment securities available for sale	0	0
Investment securities held to maturity	0	0
Federal Home Loan Bank stock	0	0
Loans, net	3,505,000	3,838,000
Bank owned life insurance	0	0
Deposits	0	0
Federal Home Loan Bank advances	0	0
Carrying Amount [Member]
Cash and cash equivalents	49,015,000	35,499,000
Certificates of deposit in other banks	2,732,000	2,732,000
Investment securities available for sale	62,962,000	58,314,000
Investment securities held to maturity	35,185,000	36,827,000
Federal Home Loan Bank stock	1,020,000	1,820,000
Loans, net	374,327,000	373,321,000
Bank owned life insurance	6,813,000	6,779,000
Deposits	488,619,000	455,640,000
Federal Home Loan Bank advances	$ 13,700,000	$ 31,629,000

XML

Investment Securities (Details Narrative)	Mar. 31, 2019 Integer
Schedule of Investments [Abstract]
Available-for-sale securities, number of debt securities	34
Percentage of debt securities unrealized losses depreciated on amortized cost basis	1.80%

XML

Investment Securities - Schedule of Securities Available for Sale (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Amortized Cost	$ 62,709,518	$ 58,969,585
Unrealized Gains	745,381	316,725
Unrealized Losses	492,820	972,733
Total Estimated Fair Value	62,962,079	58,313,577
U.S. Government Treasury Securities [Member]
Amortized Cost	3,963,014	982,044
Unrealized Gains	9,560	0
Unrealized Losses	6,904	27,474
Total Estimated Fair Value	3,965,670	954,570
U.S. Government Agency Securities [Member]
Amortized Cost	46,786,921	45,823,595
Unrealized Gains	563,946	264,567
Unrealized Losses	466,017	881,157
Total Estimated Fair Value	46,884,850	45,207,005
State and Municipal Securities [Member]
Amortized Cost	7,371,821	7,394,278
Unrealized Gains	123,149	30,579
Unrealized Losses	16,313	46,922
Total Estimated Fair Value	7,478,657	7,377,935
Residential Mortgage-Backed Securities [Member]
Amortized Cost	4,587,762	4,769,668
Unrealized Gains	48,726	21,579
Unrealized Losses	3,586	17,180
Total Estimated Fair Value	$ 4,632,902	$ 4,774,067

XML

Investment Securities - Schedule of Securities Held to Maturity (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Amortized Cost	$ 35,184,883	$ 36,827,073
Unrealized Gains	516,639	257,970
Unrealized Losses	27,155	74,716
Estimated Fair Value	35,674,367	37,010,327
State and Municipal Securities [Member]
Amortized Cost	29,216,837	30,582,785
Unrealized Gains	391,743	208,480
Unrealized Losses	26,272	67,434
Estimated Fair Value	29,582,308	30,723,831
Residential Mortgage-Backed Securities [Member]
Amortized Cost	5,968,046	6,244,288
Unrealized Gains	124,896	49,490
Unrealized Losses	883	7,282
Estimated Fair Value	$ 6,092,059	$ 6,286,496

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Investment Securities - Summary of Amortized Cost and Estimated Fair Value of Debt Securities (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Schedule of Investments [Abstract]
Available for Sale Amounts maturing in One year or less, Amortized Cost	$ 3,140,872	$ 2,147,059
Available for Sale Amounts maturing in After one through five years, Amortized Cost	34,952,755	29,691,474
Available for Sale Amounts maturing in After five through ten years, Amortized Cost	19,183,448	21,585,776
Available for Sale Amounts maturing in After ten years, Amortized Cost	5,432,443	5,545,276
Total debt securities AFS, Amortized Cost	62,709,518	58,969,585
Available for Sale Amounts maturing in One year or less, Estimated Fair Value	3,125,810	2,124,645
Available for Sale Amounts maturing in After one through five years, Estimated Fair Value	35,257,684	29,674,236
Available for Sale Amounts maturing in After five through ten years, Estimated Fair Value	19,097,610	20,968,318
Available for Sale Amounts maturing in After ten years, Estimated Fair Value	5,480,975	5,546,378
Total debt securities AFS, Estimated Fair Value	62,962,079	58,313,577
Held to Maturity Amounts maturing in One year or less, Amortized Cost	6,480,829	6,483,464
Held to Maturity Amounts maturing in After one through five years, Amortized Cost	11,885,478	12,885,021
Held to Maturity Amounts maturing in After five through ten years, Amortized Cost	11,125,453	11,035,146
Held to Maturity Amounts maturing in After ten years, Amortized Cost	5,693,123	6,423,442
Total securities HTM, Amortized Cost	35,184,883	36,827,073
Held to Maturity Amounts maturing in One year or less, Estimated Fair Value	6,489,447	6,497,910
Held to Maturity Amounts maturing in After one through five years, Estimated Fair Value	12,001,454	12,961,209
Held to Maturity Amounts maturing in After five through ten years, Estimated Fair Value	11,354,541	11,097,382
Held to Maturity Amounts maturing in After ten years, Estimated Fair Value	5,828,925	6,453,826
Total securities HTM, Estimated Fair Value	$ 35,674,367	$ 37,010,327

XML

Investment Securities - Schedule of Activity of Security Sales by Intention (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Schedule of Investments [Abstract]
Proceeds from sale of available-for-sale securities	$ 0	$ 0
Gross gains on sale of available-for-sale securities	0	0
Gross losses on sale of available-for-sale securities	0	0
Net gains (losses) on sales of available for sale securities	0	0
Amortized cost of securities sold securities held to maturity	0	0
Proceeds from sale of securities held to maturity	0	0
Net gains on sales of held to maturity securities	$ 0	$ 0

XML

Investment Securities - Schedule of Information Pertaining to Securities Gross Unrealized Losses by Investments (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Less Than Twelve Months, Gross Unrealized Losses	$ 0	$ 50,485
Less Than Twelve Months, Fair Value	0	9,412,366
Twelve Months or More, Gross Unrealized Losses	492,820	922,248
Twelve Months or More, Fair Value	25,276,461	22,912,205
Less Than Twelve Months, Gross Unrealized Losses	0	25,880
Less Than Twelve Months, Fair Value	0	8,239,023
Twelve Months or More, Gross Unrealized Losses	27,155	48,836
Twelve Months or More, Fair Value	2,819,582	2,872,091
U.S. Government Treasury Securities [Member]
Less Than Twelve Months, Gross Unrealized Losses	0	0
Less Than Twelve Months, Fair Value	0	0
Twelve Months or More, Gross Unrealized Losses	6,904	27,474
Twelve Months or More, Fair Value	975,660	954,570
U.S. Government Agency Securities [Member]
Less Than Twelve Months, Gross Unrealized Losses	0	33,077
Less Than Twelve Months, Fair Value	0	6,073,337
Twelve Months or More, Gross Unrealized Losses	466,017	848,080
Twelve Months or More, Fair Value	22,346,327	20,015,052
State and Municipal Securities [Member]
Less Than Twelve Months, Gross Unrealized Losses	0	3,209
Less Than Twelve Months, Fair Value	0	306,792
Twelve Months or More, Gross Unrealized Losses	16,313	43,713
Twelve Months or More, Fair Value	1,831,683	1,813,173
Less Than Twelve Months, Gross Unrealized Losses	0	20,209
Less Than Twelve Months, Fair Value	0	7,359,536
Twelve Months or More, Gross Unrealized Losses	26,272	47,225
Twelve Months or More, Fair Value	2,515,563	2,782,627
Residential Mortgage-Backed Securities [Member]
Less Than Twelve Months, Gross Unrealized Losses	0	14,199
Less Than Twelve Months, Fair Value	0	3,032,237
Twelve Months or More, Gross Unrealized Losses	3,586	2,981
Twelve Months or More, Fair Value	122,791	129,410
Less Than Twelve Months, Gross Unrealized Losses	0	5,671
Less Than Twelve Months, Fair Value	0	879,487
Twelve Months or More, Gross Unrealized Losses	883	1,611
Twelve Months or More, Fair Value	$ 304,019	$ 89,464

XML

Loans and Allowance for Loan Losses (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Receivables [Abstract]
Real estate loans	$ 283,449,222		$ 283,277,489
Loans pledged	66,722,482
FHLB Blanket lien and multifamily portfolios total	115,773,588
Loans placed on nonaccrual status amount	905,068		1,204,861
Past due loan over ninety days and still accruing	0		0
Interest income on nonaccrual	9,896		64,015
Impaired loans	4,332,409		4,356,381
Allowance for loan losses	827,717		518,230
Average impaired loans		$ 3,803,413
Interest income received during impairment		$ 59,744
Troubled debt restructuring	4,275		7,458
Troubled debt restructuring, charge -off	0		0
Allowance for loan losses allocated to TDRs	4,275		$ 0
Unfunded commitments troubled debt restructured loan to lend to customer	$ 0
Annualized net charge-offs to average loans outstanding ratio	0.19%		0.13%
Individually evaluated for impairment	$ 4,332,409		$ 4,505,505
Deemed impaired loans	$ 4,332,409		$ 4,356,381

XML

Loans and Allowance for Loan Losses - Schedule of Loan Portfolio and Percentage of Loans in Each Category to Total Loans (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Loans outstanding	$ 377,711,765	$ 376,767,688
Unearned interest and discount	(17,390)	(17,451)
Allowance for loan losses	(3,366,927)	(3,428,869)
Net loans	$ 374,327,448	$ 373,321,368
Percentage of loan and allowance for loan losses	100.00%	100.00%
Commercial, Financial and Agricultural Loans [Member]
Loans outstanding	$ 88,999,975	$ 88,403,215
Percentage of loan and allowance for loan losses	23.60%	23.50%
Construction Loans [Member]
Loans outstanding	$ 26,092,085	$ 24,890,536
Percentage of loan and allowance for loan losses	6.90%	6.60%
Commercial Mortgage Loans [Member]
Loans outstanding	$ 121,855,453	$ 123,477,369
Percentage of loan and allowance for loan losses	32.30%	32.80%
Residential Loans [Member]
Loans outstanding	$ 103,995,725	$ 103,347,898
Percentage of loan and allowance for loan losses	27.50%	27.40%
Agricultural Loans [Member]
Loans outstanding	$ 31,505,959	$ 31,561,686
Percentage of loan and allowance for loan losses	8.30%	8.40%
Consumer and Other Loans [Member]
Loans outstanding	$ 5,262,568	$ 5,086,984
Percentage of loan and allowance for loan losses	1.40%	1.30%

XML

Loans and Allowance for Loan Losses - Summary of Maturities of Loan Portfolio (Details) - Commercial Financial, Agricultural and Construction [Member]	Mar. 31, 2019 USD ($)
In one year or less	$ 35,327,184
After one year but within five years	54,757,452
After five years	25,007,424
Total	$ 115,092,060

XML

Loans and Allowance for Loan Losses - Summary of Loans Due After One Year (Details) - Commercial Financial, Agricultural and Construction [Member]	Mar. 31, 2019 USD ($)
Loans With Predetermined Rates	$ 76,439,177
Loans With Floating Rates	3,325,699
Total	$ 79,764,876

XML

Loans and Allowance for Loan Losses - Schedule of Past Due Loans and Nonaccrual Loans (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total Past Due Loans	$ 3,160,453	$ 2,166,283
Nonaccrual Loans	905,068	1,204,861
Current Loans	373,646,244	373,396,544
Total Loans	377,711,765	376,767,688
Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	3,160,453	2,166,283
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Commercial, Financial and Agricultural Loans [Member]
Total Past Due Loans	556,388	247,397
Nonaccrual Loans	0	36,157
Current Loans	88,443,587	88,119,661
Total Loans	88,999,975	88,403,215
Commercial, Financial and Agricultural Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	556,388	247,397
Commercial, Financial and Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Construction Loans [Member]
Total Past Due Loans	536,090	0
Nonaccrual Loans	0	0
Current Loans	25,555,995	24,890,536
Total Loans	26,092,085	24,890,536
Construction Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	536,090	0
Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Commercial Mortgage Loans [Member]
Total Past Due Loans	204,250	0
Nonaccrual Loans	839,854	1,022,550
Current Loans	120,811,349	122,454,819
Total Loans	121,855,453	123,477,369
Commercial Mortgage Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	204,250	0
Commercial Mortgage Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Residential Loans [Member]
Total Past Due Loans	1,638,063	1,560,913
Nonaccrual Loans	65,214	146,154
Current Loans	102,292,448	101,640,831
Total Loans	103,995,725	103,347,898
Residential Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	1,638,063	1,560,913
Residential Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Agricultural Loans [Member]
Total Past Due Loans	193,800	321,319
Nonaccrual Loans	0	0
Current Loans	31,312,159	31,240,367
Total Loans	31,505,959	31,561,686
Agricultural Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	193,800	321,319
Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	0	0
Consumer and Other Loans [Member]
Total Past Due Loans	31,862	36,654
Nonaccrual Loans	0	0
Current Loans	5,230,706	5,050,330
Total Loans	5,262,568	5,086,984
Consumer and Other Loans [Member] | Financing Receivables, 30 to 89 Days Past Due [Member]
Total Past Due Loans	31,862	36,654
Consumer and Other Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Total Past Due Loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Schedule of Impaired Loans Segregated by Class of Loans (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Unpaid Principal Balance	$ 4,921,273	$ 4,187,966
Recorded Investment With No Allowance	1,026,038	2,686,743
Recorded Investment With Allowance	3,306,371	1,669,638
Total Recorded Investment	4,332,409	4,356,381
Related Allowance	827,717	518,230
Year-to-date Average Recorded Investment	3,163,895	3,817,174
Interest Income Received During Impairment	52,504	257,334
Commercial, Financial and Agricultural Loans [Member]
Unpaid Principal Balance	1,420,052	184,899
Recorded Investment With No Allowance	78,507	87,525
Recorded Investment With Allowance	1,254,891	568,816
Total Recorded Investment	1,333,398	656,341
Related Allowance	562,925	276,392
Year-to-date Average Recorded Investment	461,763	370,038
Interest Income Received During Impairment	8,225	52,411
Construction Loans [Member]
Unpaid Principal Balance	393,898	402,234
Recorded Investment With No Allowance	273,098	281,434
Recorded Investment With Allowance	0	0
Total Recorded Investment	273,098	281,434
Related Allowance	0	0
Year-to-date Average Recorded Investment	273,098	281,434
Interest Income Received During Impairment	5,253	25,364
Commercial Mortgage Loans [Member]
Unpaid Principal Balance	1,661,727	1,787,305
Recorded Investment With No Allowance	346,979	1,277,611
Recorded Investment With Allowance	954,250	333,892
Total Recorded Investment	1,301,229	1,611,503
Related Allowance	38,678	51,854
Year-to-date Average Recorded Investment	1,097,539	1,544,299
Interest Income Received During Impairment	9,701	45,403
Residential Loans [Member]
Unpaid Principal Balance	1,432,181	1,801,002
Recorded Investment With No Allowance	327,454	1,027,647
Recorded Investment With Allowance	1,083,815	752,443
Total Recorded Investment	1,411,269	1,780,090
Related Allowance	225,215	188,368
Year-to-date Average Recorded Investment	1,318,080	1,594,390
Interest Income Received During Impairment	28,979	127,806
Agricultural Loans [Member]
Unpaid Principal Balance	0	12,526
Recorded Investment With No Allowance	0	12,526
Recorded Investment With Allowance	0	0
Total Recorded Investment	0	12,526
Related Allowance	0	0
Year-to-date Average Recorded Investment	0	12,526
Interest Income Received During Impairment	0	5,530
Consumer and Other Loans [Member]
Unpaid Principal Balance	13,415	0
Recorded Investment With No Allowance	0	0
Recorded Investment With Allowance	13,415	14,487
Total Recorded Investment	13,415	14,487
Related Allowance	899	1,616
Year-to-date Average Recorded Investment	13,415	14,487
Interest Income Received During Impairment	$ 346	$ 820

XML

Loans and Allowance for Loan Losses - Schedule of Troubled Debt Restructuring by Loan Class (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Troubled Debt Restructuring	$ 4,275	$ 7,458
Current [Member]
Troubled Debt Restructuring	4,275	7,458
Default [Member]
Troubled Debt Restructuring	0	0
Accruing [Member]
Troubled Debt Restructuring	4,275	7,458
Non-accruing [Member]
Troubled Debt Restructuring	0	0
Commercial, Financial and Agricultural Loans [Member] | Current [Member]
Troubled Debt Restructuring	4,275	5,570
Commercial, Financial and Agricultural Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Commercial, Financial and Agricultural Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	4,275	5,570
Commercial, Financial and Agricultural Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	0	0
Construction Loans [Member] | Current [Member]
Troubled Debt Restructuring	0	0
Construction Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Construction Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	0	0
Construction Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	0	0
Commercial Mortgage Loans [Member] | Current [Member]
Troubled Debt Restructuring	0	0
Commercial Mortgage Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Commercial Mortgage Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	0	0
Commercial Mortgage Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	0	0
Residential Loans [Member] | Current [Member]
Troubled Debt Restructuring	0	1,888
Residential Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Residential Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	0	1,888
Residential Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	0	0
Agricultural Loans [Member] | Current [Member]
Troubled Debt Restructuring	0	0
Agricultural Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Agricultural Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	0	0
Agricultural Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	0	0
Consumer and Other Loans [Member] | Current [Member]
Troubled Debt Restructuring	0	0
Consumer and Other Loans [Member] | Default [Member]
Troubled Debt Restructuring	0	0
Consumer and Other Loans [Member] | Accruing [Member]
Troubled Debt Restructuring	0	0
Consumer and Other Loans [Member] | Non-accruing [Member]
Troubled Debt Restructuring	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Schedule of Troubled Debt Restructurings by Types of Concessions Made (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Accruing [Member]
Payment modification	$ 0	$ 0
Rate reduction	0	0
Rate reduction, payment modification	4,275	1,888
Forbearance of interest	0	5,570
Total	4,275	7,458
Non-accruing [Member]
Payment modification	0	0
Rate reduction	0	0
Rate reduction, payment modification	0	0
Forbearance of interest	0	0
Total	$ 0	$ 0

XML

Loans and Allowance for Loan Losses - Schedule of Internal Loan Grading by Class of Loans (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total Loans	$ 377,711,765	$ 376,767,688
Commercial, Financial and Agricultural Loans [Member]
Total Loans	88,999,975	88,403,215
Construction Loans [Member]
Total Loans	26,092,085	24,890,536
Commercial Mortgage Loans [Member]
Total Loans	121,855,453	123,477,369
Residential Loans [Member]
Total Loans	103,995,725	103,347,898
Agricultural Loans [Member]
Total Loans	31,505,959	31,561,686
Consumer and Other Loans [Member]
Total Loans	5,262,568	5,086,984
Rating, Grade 1- Exceptional [Member]
Total Loans	1,611,390	1,470,552
Rating, Grade 1- Exceptional [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	1,389,477	1,237,602
Rating, Grade 1- Exceptional [Member] | Construction Loans [Member]
Total Loans	0	0
Rating, Grade 1- Exceptional [Member] | Commercial Mortgage Loans [Member]
Total Loans	0	0
Rating, Grade 1- Exceptional [Member] | Residential Loans [Member]
Total Loans	22,656	22,905
Rating, Grade 1- Exceptional [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 1- Exceptional [Member] | Consumer and Other Loans [Member]
Total Loans	199,257	210,045
Rating, Grade 2- Above Avg. [Member]
Total Loans	43,134	43,711
Rating, Grade 2- Above Avg. [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 2- Above Avg. [Member] | Construction Loans [Member]
Total Loans	0	0
Rating, Grade 2- Above Avg. [Member] | Commercial Mortgage Loans [Member]
Total Loans	0	0
Rating, Grade 2- Above Avg. [Member] | Residential Loans [Member]
Total Loans	0	0
Rating, Grade 2- Above Avg. [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 2- Above Avg. [Member] | Consumer and Other Loans [Member]
Total Loans	43,134	43,711
Rating, Grade 3- Acceptable [Member]
Total Loans	99,805,599	99,934,655
Rating, Grade 3- Acceptable [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	23,896,901	23,821,846
Rating, Grade 3- Acceptable [Member] | Construction Loans [Member]
Total Loans	2,140,022	1,860,003
Rating, Grade 3- Acceptable [Member] | Commercial Mortgage Loans [Member]
Total Loans	28,634,023	30,398,565
Rating, Grade 3- Acceptable [Member] | Residential Loans [Member]
Total Loans	26,258,915	25,839,646
Rating, Grade 3- Acceptable [Member] | Agricultural Loans [Member]
Total Loans	17,060,292	16,863,356
Rating, Grade 3- Acceptable [Member] | Consumer and Other Loans [Member]
Total Loans	1,815,446	1,151,239
Rating, Grade 4- Fair [Member]
Total Loans	265,321,729	261,095,735
Rating, Grade 4- Fair [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	62,003,261	58,753,931
Rating, Grade 4- Fair [Member] | Construction Loans [Member]
Total Loans	23,429,965	22,749,099
Rating, Grade 4- Fair [Member] | Commercial Mortgage Loans [Member]
Total Loans	88,485,618	88,122,957
Rating, Grade 4- Fair [Member] | Residential Loans [Member]
Total Loans	73,773,119	73,114,310
Rating, Grade 4- Fair [Member] | Agricultural Loans [Member]
Total Loans	14,445,667	14,698,330
Rating, Grade 4- Fair [Member] | Consumer and Other Loans [Member]
Total Loans	3,184,099	3,657,108
Rating, Grade 5a- Watch [Member]
Total Loans	4,961,783	3,613,973
Rating, Grade 5a- Watch [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	758,902	473,616
Rating, Grade 5a- Watch [Member] | Construction Loans [Member]
Total Loans	273,098	0
Rating, Grade 5a- Watch [Member] | Commercial Mortgage Loans [Member]
Total Loans	1,908,525	2,411,710
Rating, Grade 5a- Watch [Member] | Residential Loans [Member]
Total Loans	2,006,308	722,441
Rating, Grade 5a- Watch [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 5a- Watch [Member] | Consumer and Other Loans [Member]
Total Loans	14,950	6,206
Rating, Grade 5b- OAEM [Member]
Total Loans	244,637	4,827,694
Rating, Grade 5b- OAEM [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	244,637	3,079,098
Rating, Grade 5b- OAEM [Member] | Construction Loans [Member]
Total Loans	0	0
Rating, Grade 5b- OAEM [Member] | Commercial Mortgage Loans [Member]
Total Loans	0	446,841
Rating, Grade 5b- OAEM [Member] | Residential Loans [Member]
Total Loans	0	1,299,587
Rating, Grade 5b- OAEM [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 5b- OAEM [Member] | Consumer and Other Loans [Member]
Total Loans	0	2,168
Rating, Grade 6- Substandard [Member]
Total Loans	4,068,798	5,531,555
Rating, Grade 6- Substandard [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	702,441	787,309
Rating, Grade 6- Substandard [Member] | Construction Loans [Member]
Total Loans	249,000	281,434
Rating, Grade 6- Substandard [Member] | Commercial Mortgage Loans [Member]
Total Loans	2,400,340	2,097,296
Rating, Grade 6- Substandard [Member] | Residential Loans [Member]
Total Loans	712,620	2,349,009
Rating, Grade 6- Substandard [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 6- Substandard [Member] | Consumer and Other Loans [Member]
Total Loans	4,397	16,507
Rating, Grade 7- Doubtful [Member]
Total Loans	1,654,695	249,813
Rating, Grade 7- Doubtful [Member] | Commercial, Financial and Agricultural Loans [Member]
Total Loans	4,356	249,813
Rating, Grade 7- Doubtful [Member] | Construction Loans [Member]
Total Loans	0	0
Rating, Grade 7- Doubtful [Member] | Commercial Mortgage Loans [Member]
Total Loans	426,947	0
Rating, Grade 7- Doubtful [Member] | Residential Loans [Member]
Total Loans	1,222,107	0
Rating, Grade 7- Doubtful [Member] | Agricultural Loans [Member]
Total Loans	0	0
Rating, Grade 7- Doubtful [Member] | Consumer and Other Loans [Member]
Total Loans	$ 1,285	$ 0

XML

Loans and Allowance for Loan Losses - Schedule of Allowance for Loan Losses Methodology (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Beginning balance	$ 3,428,869	$ 3,043,632
Charge-offs	184,696	606,345
Recoveries	6,846	162,082
Net charge-offs	177,850	444,263
Provisions charged to operations	115,908	829,500
Individually evaluated for impairment	827,717	518,230
Collectively evaluated for impairment	2,539,210	2,910,639
Balance at end of period	3,366,927	3,428,869
Individually evaluated for impairment	4,332,409	4,505,505
Collectively evaluated for impairment	373,379,356	372,262,183
Balance at end of period	377,711,765	376,767,688
Commercial, Financial and Agricultural [Member]
Beginning balance	402,251	324,260
Charge-offs	0	548,460
Recoveries	2,696	12,025
Net charge-offs	(2,696)	536,435
Provisions charged to operations	98,375	614,426
Individually evaluated for impairment	562,925	276,392
Collectively evaluated for impairment	(59,603)	125,859
Balance at end of period	503,322	402,251
Individually evaluated for impairment	1,333,398	656,341
Collectively evaluated for impairment	87,666,577	87,746,874
Balance at end of period	88,999,975	88,403,215
Construction Real Estate [Member]
Beginning balance	1,043,027	1,043,083
Charge-offs	0	783
Recoveries	0	0
Net charge-offs	0	783
Provisions charged to operations	0	727
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	1,043,027	1,043,027
Balance at end of period	1,043,027	1,043,027
Individually evaluated for impairment	273,098	281,434
Collectively evaluated for impairment	25,818,987	24,609,102
Balance at end of period	26,092,085	24,890,536
Commercial Real Estate [Member]
Beginning balance	1,210,302	1,056,595
Charge-offs	184,696	43,349
Recoveries	3,368	590
Net charge-offs	181,328	42,759
Provisions charged to operations	48,695	196,466
Individually evaluated for impairment	38,678	51,854
Collectively evaluated for impairment	1,038,991	1,158,448
Balance at end of period	1,077,669	1,210,302
Individually evaluated for impairment	1,301,229	1,611,503
Collectively evaluated for impairment	120,554,224	121,865,866
Balance at end of period	121,855,453	123,477,369
Residential Real Estate [Member]
Beginning balance	458,871	416,474
Charge-offs	0	6,909
Recoveries	0	0
Net charge-offs	0	6,909
Provisions charged to operations	0	49,306
Individually evaluated for impairment	225,215	188,368
Collectively evaluated for impairment	233,656	270,503
Balance at end of period	458,871	458,871
Individually evaluated for impairment	1,411,269	1,929,214
Collectively evaluated for impairment	102,584,456	101,418,684
Balance at end of period	103,995,725	103,347,898
Agricultural Real Estate [Member]
Beginning balance	108,878	11,560
Charge-offs	0	0
Recoveries	0	147,252
Net charge-offs	0	(147,252)
Provisions charged to operations	(31,998)	(49,934)
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	76,880	108,878
Balance at end of period	76,880	108,878
Individually evaluated for impairment	0	12,526
Collectively evaluated for impairment	31,505,959	31,549,160
Balance at end of period	31,505,959	31,561,686
Consumer and Other [Member]
Beginning balance	205,540	191,660
Charge-offs	0	6,844
Recoveries	782	2,215
Net charge-offs	(782)	4,629
Provisions charged to operations	836	18,509
Individually evaluated for impairment	899	1,616
Collectively evaluated for impairment	206,259	203,924
Balance at end of period	207,158	205,540
Individually evaluated for impairment	13,415	14,487
Collectively evaluated for impairment	5,249,153	5,072,497
Balance at end of period	$ 5,262,568	$ 5,086,984