Tahoka First Bancorp Inc - Dallasfed.org/media/Documents/banking/nic...2017/12/31 · If you are...

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FR Y-6Page 2 of 2

For Use By Tiered Holding CompaniesTop-tiered holding companies must list the names, mailing address, and physical locations of each of their subsidiary holding companies below.

Legal Title of Subsidiary Holding Company

(Mailing Address of the Subsidiary Holding Company) Street / P.O. Box

City State Zip Code

Physical Location (if different from mailing address)



City State Zip Code




City State Zip Code




City State Zip Code




City State Zip Code




City State Zip Code




City State Zip Code




City State Zip Code


12/2012

None

TAHOKA FIRST BANCORP, INC.FORM Y-6

2017

Report Item #1 The bank holding company prepares an annual report for its shareholdersand is not registered with the SEC. As specified by the appropriate ReserveBank, 1 copy is enclosed.

Report Item #2a:

Organizational Chart

Tahoka First Bancorp, Inc.Tahoka, TX USA

Incorporated: Texas

……………………. 100%

The First National Bank of TahokaTahoka, TX USA

Incorporated: Texas

Report Item #2b: Domestic branch listing provided to the Federal Reserve Bank.

Neither Entity has an LEI

Results: A list of branches for your depository institution: FIRST NATIONAL BANK OF TAHOKA, THE (ID_RSSD: 467265).This depository institution is held by TAHOKA FIRST BANCORP, INC. (1830473) of TAHOKA, TX.The data are as of 12/31/2017. Data reflects information that was received and processed through 01/04/2018.

Reconciliation and Verification Steps1. In the Data Action column of each branch row, enter one or more of the actions specified below2. If required, enter the date in the Effective Date column

ActionsOK: If the branch information is correct, enter 'OK' in the Data Action column.Change: If the branch information is incorrect or incomplete, revise the data, enter 'Change' in the Data Action column and the date when this information first became valid in the Effective Date column.Close: If a branch listed was sold or closed, enter 'Close' in the Data Action column and the sale or closure date in the Effective Date column.Delete: If a branch listed was never owned by this depository institution, enter 'Delete' in the Data Action column.Add: If a reportable branch is missing, insert a row, add the branch data, and enter 'Add' in the Data Action column and the opening or acquisition date in the Effective Date column.

If printing this list, you may need to adjust your page setup in MS Excel. Try using landscape orientation, page scaling, and/or legal sized paper.

Submission ProcedureWhen you are finished, send a saved copy to your FRB contact. See the detailed instructions on this site for more information.If you are e‐mailing this to your FRB contact, put your institution name, city and state in the subject line of the e‐mail.

Note:To satisfy the FR Y‐10 reporting requirements, you must also submit FR Y‐10 Domestic Branch Schedules for each branch with a Data Action of Change, Close, Delete, or Add.The FR Y‐10 report may be submitted in a hardcopy format or via the FR Y‐10 Online application ‐ https://y10online.federalreserve.gov.

* FDIC UNINUM, Office Number, and ID_RSSD columns are for reference only. Verification of these values is not required.

Data Action Effective Date Branch Service Type Branch ID_RSSD* Popular Name Street Address City State Zip Code County Country FDIC UNINUM* Office Number* Head Office Head Office ID_RSSD* CommentsOK Full Service (Head Office) 467265 FIRST NATIONAL BANK OF TAHOKA, THE 1601 SOUTH 1ST STREET TAHOKA TX 79373 LYNN UNITED STATES Not Required Not Required FIRST NATIONAL BANK OF TAHOKA, THE 467265


2017

Report Items #3(1):

Greater than 5% Shareholders

(1)(a) (1)(b)Country of

Name and address citizenship or Number Percentage Classincorporation

Frederick B. Hegi, Jr. USA * 39,400 * 20.14% CommonDallas, TX

Peter Braxton Hegi USA ** 11,050 ** 5.65% CommonDallas, TX

Brian Frederick Hegi USA *** 11,050 *** 5.65% CommonDallas, TX

Jason Winter USA 27,380 13.99% CommonFrisco, TX

Debbie Wright-Thomasson USA 27,380 13.99% CommonRaeford, NC

Mary Louder USA 38,600 19.73% CommonLubbock, TX

T. Natt Park USA 16,200 8.28% CommonTahoka, TX

* Includes 30,900 shares (15.79%) owned by Fredrick B. Hegi, Jr. individually and 8,500shares (4.35%) owned by Valley View Employee Savings Trust for the Benefit of F.B.Hegi, Jr., Fredrick B. Hegi, Jr., Trustee.

** Includes 6,050 shares (3.09%) owned by Peter Braxton Hegi individually and 5,000 shares (2.56%) owned by PBH 1994 Investment Trust, Louise Backa, Trustee.

*** Includes 6,050 shares (3.09%) owned by Brian Frederick Hegi individually and 5,000 shares (2.56%) owned by BFH 1994 Investment Trust, Louise Backa, Trustee.

Report Items #3(2): Not applicable

(1)( c)Shares Owned


2017

Report Items #4:

Directors, Officers, and Principal Shareholders

(1) (2) (3)(a) (3)(b) (3)(c) (4)(a) (4)(b) (4)(c)Principal Holding Company Subsidiary Percentage of

Name and address occupation, if Holding Company Subsidiary Other Business Percentage Ownership ownership in othernot with Bank Title/Position Title/Position Title/Position Owned Percentage businesses

Frederick B. Hegi, Jr. Investments Director Director see attached schedule * 20.14% N/A VariousDallas, TX Chairman Chairman

Principal Shareholder

Peter Braxton Hegi Marketing Principal Shareholder N/A Compass Professional 5.65% N/A N/ADallas, TX Executive Health Services/Chief

Marketing Officer

Brian Frederick Hegi Investment Principal Shareholder N/A Prophet Equity, LLC 5.65% N/A N/ADallas, TX Director Managing Director

T. Natt Park Farmer Director and VP Director None 8.28% N/A N/ATahoka, TX Principal Shareholder

James A. Solomon N/A Director and Secretary Director None 0.61% N/A N/AAlto, NM Vice President

Mary Louder N/A Principal Shareholder N/A None 19.73% N/A N/ALubbock, TX

John Krey N/A Director and Director None 1.07% N/A N/AWoodway, TX President, CEO

Treasurer

Worth Whitworth N/A Director Director None 0.05% N/A N/ATahoka, TX Vice President President

Debbie Wright-Thomasson Physician Principal Shareholder N/A None 13.99% N/A N/ARaeford, NC

Jason Winter Sales Rep Principal Shareholder N/A None 13.99% N/A N/AFrisco, TX

Samuel Louder CPA Director Director Louder & Louder CPAs 0.05% N/A Louder & Louder CPAsLubbock, TX Vice President Public Accouning 100%

Practice Owner

* Includes 15.79% owned by Fredrick B. Hegi, Jr. individually and 4.35% owned by Valley View Employee Savings Trust for the Benefit of F.B. Hegi, Jr., Fredrick B. Hegi, Jr., Trustee.

Frederick B. Hegi, Jr.

Dallas, Texas 75205

Item 4-3(c )

Directorships, Partnerships and Principal Officer Positions:

Limited Partner, Island Development, L.P.President and Sole Owner, Valley View Capital CorporationDirector, LCI Industries, Inc.Director, Hallmark Cards, Inc.Managing Partner, Hegi Family Holdings, Ltd.Managing Partner, Hegi PartnersManaging Partner, Hegi GC PartnersLimited Partner, BanCap Partners, L.P.Limited Partner, Prophet Equity, L.P.Limited Partner, Prophet Equity II, L.P.Limited Partner, Wingate Affiliates IV, LPLimited Partner, Wingate Affiliates V, LP

Frederick B. Hegi, Jr.

Dallas, Texas 75205

Item 4-4(c )Percent

Other Investments Ownership

Island Development, L.P. 33.30%Valley View Capital Corporation 100.00%

Compilation By:

Tahoka First Bancorp, Inc. & Subsidiary Tahoka, Texas

Consolidated Financial Statements

Years Ended:

December 31, 2017 & 2016

Tahoka, Texas -TOC-

Tahoka First Bancorp, Inc. & Subsidiary Consolidated Financial Statements

Table of Contents

Independent Accountants’ Compilation Report .... 1

Basic Consolidated Financial Statements:

Consolidated Balance Sheets .............................. 2

Consolidated Statements of Comprehensive Income ................................. 3

Consolidated Statements of Changes in Stockholders’ Equity .................................. 4

Consolidated Statements of Cash Flows ............. 5

Summary of Significant Accounting Policies ........ 6

Supplemental Schedules:

2017 Consolidating Statements:

Consolidating Balance Sheet ......................... 16

Consolidating Statement of Comprehensive Income .......................... 17

2016 Consolidating Statements:

Consolidating Balance Sheet ......................... 18

Consolidating Statement of Comprehensive Income .......................... 19

LAM & COMPANY PC 7602 UNIVERSITY AVENUE, SUITE 201 LUBBOCK, TEXAS 79423 WWW.CPAAUDITORS.COM

OFFICE: 806.412.4007 FAX: 806.412.4007 -1-

Independent Accountants’ Compilation Report

Directors & Senior Management Tahoka First Bancorp, Inc. & Subsidiary Tahoka, Texas

Tahoka First Bancorp, Inc. & Subsidiary (the “Company”) management is responsible for the accompanying Company consolidated financial statements, which comprise the consolidated balance sheets as of December 31, 2017 & 2016, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related Summary of Significant Accounting Principles (collectively referred to herein as the “CFS”) in accordance with U.S. generally accepted accounting principles (“GAAP”). Lam & Company PC (“LCPC”) has performed compilation engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. LCPC did not audit or review the CFS nor was LCPC required under these standards to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, LCPC does not express an opinion, a conclusion, nor provide any form of assurance on these CFS.

Company management has elected to omit substantially all the disclosures ordinarily included in consolidated financial statements prepared in accordance with GAAP. If the omitted disclosures were included in the CFS, they might influence the user’s conclusions about the Company’s assets, liabilities, equity, revenue, expenses, and cash flows. Accordingly, the CFS are not designed for those who are not informed about such matters.

The consolidating balance sheets as of December 31, 2017 & 2016, and the related consolidating statements of comprehensive income for the years then ended (“Supplemental Schedules”) are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. The Supplemental Schedules were subject to our compilation engagements, however, LCPC has not audited or reviewed the Supplemental Schedules and, accordingly, does not express an opinion, a conclusion, nor provide any assurance on the Supplemental Schedules.

Lam & Company PC

January 16, 2018

Tahoka First Bancorp, Inc. & SubsidiaryConsolidated Balance Sheets

December 31, 2017 & 2016

2017 2016

Cash & due from banks $ 5,408,671 $ 5,263,640

Interest-bearing deposits in banks 7,194,544 4,667,392

Cash & equivalents 12,603,215 9,931,032

Accrued interest receivable 507,533 420,900

Interest-bearing time deposits in banks 6,370,000 8,600,000

Securities available-for-sale, at fair value 16,963,920 14,284,880

Loans, net of allowance for loan losses of $279,999and $254,357, respectively 19,083,986 19,471,329

Foreclosed & repossessed assets, net 8,449 -

Securities held-to-maturity, at amortized cost 1,452,817 3,284,564

Premises & equipment, net 290,150 321,439

Federal Reserve Bank stock, at cost 24,000 24,000

Other assets 44,674 28,247

Assets $ 57,348,744 $ 56,366,391

Noninterest-bearing accounts $ 15,310,357 $ 14,063,214

Savings & interest-bearing accounts 21,562,487 20,497,172

Time deposits $250,000 2,768,735 3,733,920

Other time deposits 11,976,056 12,328,460

Deposits 51,617,635 50,622,766

Accrued interest payable 11,735 11,531

Other liabilities 89,464 65,264

Liabilities 51,718,834 50,699,561

Common stock, $1 par, 1,000,000 shares authorized,195,660 shares issued & outstanding 195,660 195,660

Paid-in-capital 1,770,668 1,770,668

Retained earnings 3,794,468 3,754,405

Accumulated other comprehensive loss (130,886) (53,903)

Stockholders' Equity 5,629,910 5,666,830

Liabilities & Stockholders' Equity $ 57,348,744 $ 56,366,391

See accompanying Independent Accountants' Compilation Report & Summary of Significant Accounting Policies .

Tahoka, Texas -2-

Tahoka First Bancorp, Inc. & SubsidiaryConsolidated Statements of Comprehensive Income

Years Ended December 31, 2017 & 2016

2017 2016

Loans (including fees) $ 1,230,795 $ 1,081,683

Deposits with banks 164,943 142,308

Investment securities 306,317 283,714

Interest income 1,702,055 1,507,705

Savings & interest-bearing demand deposits 19,069 12,173

Time deposits $250,000 18,932 17,916

Other time deposits 63,788 59,977

Other borrowings 34 -

Interest expense 101,823 90,066

Interest Margin 1,600,232 1,417,639

Provision for loan losses 18,000 20,000

Interest Margin, Net of Provision for Loan Losses 1,582,232 1,397,639

Fees & service charges 183,420 192,339

Other non interest income 1,595 (7,339)

Non interest income 185,015 185,000

Salaries & employee benefits 597,157 566,275

Net occupancy 91,036 89,895

Data processing & equipment expense 111,387 118,049

Other non interest expense 436,497 413,398

Non interest expense 1,236,077 1,187,617

Income Before Income Tax 531,170 395,022

Income tax expense - -

Net Income 531,170 395,022

Net unrealized holding losses onsecurities arising during the year (76,983) (93,215)

Other Comprehensive Loss (76,983) (93,215)

Comprehensive Income $ 454,187 $ 301,807


Tahoka, Texas -3-

Tahoka First Bancorp, Inc. & SubsidiaryConsolidated Statements of Changes in Stockholders' Equity


AccumulatedOther

Paid-In Retained ComprehensiveShares Dollars Capital Earnings Income (Loss) Totals

December 31, 2015 195,660 195,660 1,770,668 3,738,963 39,312 5,744,603

Net income - - - 395,022 - 395,022

Other comprehensive loss - - - - (93,215) (93,215)

Comprehensive income 301,807

Stock issued - - -

Dividends declared ($1.94 per share) - - - (379,580) - (379,580)

December 31, 2016 195,660 195,660 1,770,668 3,754,405 (53,903) 5,666,830

Net income - - - 531,170 - 531,170

Other comprehensive loss - - - - (76,983) (76,983)

Comprehensive income 454,187

Stock issued - - - - - -

Dividends declared ($2.51 per share) - - - (491,107) - (491,107)

December 31, 2017 195,660 $ 195,660 $ 1,770,668 $ 3,794,468 $ (130,886) $ 5,629,910


Tahoka, Texas -4-

Common Stock, at Par

$ $$ $ $

Tahoka First Bancorp, Inc. & SubsidiaryConsolidated Statements of Cash Flows


2017 2016

Net income $ 531,170 $ 395,022

Adjustments to reconcile net incometo cash from operating activities:

Provision for loan losses 18,000 20,000 Realized gain on sale of forclosed assets - (7,565)

Investment security amortization,net 71,008 101,229

Premises & equipment depreciation 40,161 46,244

Net change in:

Accrued interest receivable (86,633) 72,055

Other assets (16,427) 10,546

Accrued interest payable 204 1,085

Other liabilities 24,200 (948)

Cash from Operating Activities 581,683 637,668

Net change in interest-bearing deposits with other banks 2,230,000 (985,000)

Available-for-sale security activity:

Purchases (5,467,295) (8,213,687)

Maturities, prepayments & calls 2,647,013 4,524,148

Held-to-maturity security activity:

Purchases - -

Maturities, prepayments & calls 1,824,998 1,448,308

Loan originations & collections, net 360,894 (1,034,178)

Premises & equipment purchases (8,872) (17,420)

Proceeds from sales and activity of foreclosed assets - 104,730

Cash from Investing Activities 1,586,738 (4,173,099)

Change in customer deposits, net 994,869 2,913,339 Dividends paid (491,107) (379,580) Proceeds from stock issued - -

Cash from Financing Activities 503,762 2,533,759

Change in Cash & Equivalents 2,672,183 (1,001,672)

Cash & equivalents:

Beginning of year 9,931,032 10,932,704

End of year $ 12,603,215 $ 9,931,032

Supplemental Cash Flow Information:Interest paid on deposits & borrowed funds $ 101,619 $ 88,981

Loans transferred to foreclosed assets $ 8,449 $ -

Cash paid for income taxes $ - -


Tahoka, Texas -5-

Tahoka First Bancorp, Inc. & Subsidiary

Summary of Significant Accounting Policies Years Ended December 31, 2017 & 2016

See accompanying Independent Accountants’ Compilation Report.

Selected Information—Substantially All Disclosures Required by GAAP are Not Included.

Tahoka, Texas -6-

Nature of Organization. Tahoka First Bancorp, Inc. (“TFBI”) is a Texas corporation and registered bank holding company. The First National Bank (the “Bank”), located in Tahoka, Texas, is a wholly-owned bank subsidiary of TFBI. The consolidated entity is referred to herein as the “Company.”

For Federal income tax purposes, TFBI elected to be taxed as a Subchapter S corporation beginning January 1, 1997. The Bank is a Qualified Subchapter S corporation that is disregarded for Federal income tax purposes. The Company’s consolidated taxable income, income tax credits, and tax preference items are recognized on the TFBI stockholders’ personal income tax returns.

The Bank provides a variety of financial services to individuals and small businesses through its location in Tahoka, Texas. Its primary deposit products are interest and non interest-bearing demand deposit accounts, savings accounts, and term certificates. Its primary lending products are agricultural, residential real estate, consumer, and commercial loans.

Accounting Standards Codification. Since 1973, the Financial Accounting Standards Board (“FASB”) has been the private sector organization designated to establish standards for financial accounting and preparation of financial statements known as U.S. Generally Accepted Accounting Principles (“GAAP”). GAAP are officially recognized as authoritative by the Securities and Exchange Commission (“SEC”), the American Institute of Certified Public Accountants (“AICPA”), and the banking regulators. The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934; although, throughout its history, the SEC’s policy has been to rely on the FASB and its predecessors for this function.

The FASB’s Accounting Standards CodificationTM (“ASC”) consitutes GAAP. All other accounting literature (not included in ASC) is not authoritative. FASB issues Accounting Standards Updates (“ASU”) which update ASC and provide background information about the guidance and the basis for conclusions.

Basis of Presentation and Consolidation. The Company’s consolidated financial statements (“CFS”) are prepared on the accrual basis of accounting in accordance with GAAP, except that substantially all disclosures required by GAAP are omitted.

The accompanying CFS include the accounts of TFBI and the Bank. All significant intercompany balances and transactions have been eliminated in consolidation.

Comprehensive Income. GAAP defines comprehensive income (“CI”) as the change in equity of a business entity during a period from transactions and other events and circumstances from non owner sources. CI includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. CI is comprised of net income or loss (“Earnings”) and other comprehensive income or loss (“OCI”).

GAAP generally requires that recognized revenue, expenses, gains, and losses be included in the determination of Earnings. However, certain changes in assets and liabilities are classified as OCI and are presented in the consolidated statements of comprehensive income after Earnings on a net basis; accumulated OCI is reported as a separate component of the stockholders’ equity section in the consolidated balance sheets. Relevant examples of OCI items follow:

unrealized holding gains and losses on available-for-sale securities,

unrealized holding gains and losses that result from a debt security being transferred into the available-for-sale category from the held-to-maturity category, or

subsequent decreases (if not an other-than-temporary impairment) or increases in the fair value of available-for-sale securities previously written down as impaired.





Tahoka, Texas -7-

Use of Estimates. The preparation of CFS in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and disclosure of contingent assets and liabilities at the balance sheet date. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of: (a) impairments of: (i) loans and the allowance for loan and lease losses (“ALLL”) and provision for loan and lease losses, net (“PLLL”), (ii) investment securities, and (iii) foreclosed and repossessed assets; and (b) fair values. The Bank uses fair values to measure certain assets, determine Earnings and OCI, value underlying collateral to estimate impairments of loans and foreclosed and repossessed assets, and for financial instrument disclosures. Fair value estimates involve uncertainties and other matters requiring management to exercise significant judgments; changes in assumptions, market conditions, or other factors could significantly affect fair value estimates.

Fair Value. Fair value, as defined by GAAP and used herein, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The objective of a fair value measurement is to determine the price that would be received to sell the asset or paid to transfer the liability at the measurement date (an exit price as opposed to a transaction or entry price). A fair value measurement for assets assumes the highest and best use of the asset by market participants. A fair value measurement for liabilities assumes transfer of the liability to a market participant at the measurement date (the liability to the counterparty continues; it is not settled) and that the nonperformance risk for that liability is the same before and after its transfer.

An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction (e.g. it is not a forced liquidation or distress sale).

The principal market is the market in which the Company would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability. The most advantageous market is the market in which the Company would sell the asset or transfer the liability with the price that maximizes the amount that would be received for the asset or minimizes the amount that would be paid to transfer the liability, considering transaction costs in the respective market(s).

Market participants are buyers and sellers in the principal market that are (a) independent, (b) knowledgeable, (c) able to transact, and (d) willing to transact.

The principal (or most advantageous) market and market participants are determined from the Company’s perspective (not the potential party purchasing assets or assuming liabilities). When an asset is acquired or a liability is assumed in an exchange transaction, the transaction price represents the price paid to acquire the asset or received to assume the liability (an entry price). In contrast, the fair value of the asset or liability represents the price that would be received to sell the asset or paid to transfer the liability (an exit price). Conceptually, entry prices and exit prices are different. Assets are not necessarily sold at the prices paid to acquire them; similarly, liabilities are not necessarily transferred at the prices received to assume them. The price in the principal (or most advantageous) market used to measure fair value is not adjusted for transaction costs.

Highest and best use refers to the use of an asset by market participants that would maximize the value of the asset or the group of assets within which the asset would be used and considers the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date.

Nonperformance risk refers to the risk that the obligation will not be fulfilled and affects the value at which the liability is transferred.

Valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach and are consistently applied are required.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.

The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis.

The cost approach uses the amount that currently would be required to replace the service capacity of an asset.





Tahoka, Texas -8-

Fair Value (continued). Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be:

observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or

unobservable, meaning those that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

In that regard, the fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 Inputs: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.), or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs: Unobservable inputs for determining the fair values of assets or liabilities that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Securities available-for-sale are the only items measured and reported at fair value in the accompanying CFS. Fair value is based on models that match quoted prices for similar assets, which are Level 2 inputs. Securities available-for-sale will be measured and reported at fair value on a recurring basis in periods subsequent to initial recognition.

Fair Value Option. The Bank has the option to choose to measure many financial instruments (including financial assets and financial liabilities) and certain other items, that are not required to be measured at fair value, at fair value (the “FVO”) to improve financial reporting by reduced volatility in reported Earnings caused by measuring related assets and liabilities differently. The FVO:

May be applied instrument by instrument at specified election dates without electing the FVO for other identical items, with a few exceptions;

Is irrevocable, unless a new election date occurs; and

Is applied only to entire instruments and not to portions of instruments.

The Bank may elect the FVO for each eligible item on the date (election date) that one of the following occurs:

The eligible item is first recognized by the Bank.

An eligible firm commitment is entered by the Bank.

Financial assets that have been reported at fair value with unrealized gains and losses included in Earnings because of specialized accounting principles cease to qualify for that specialized accounting.

The accounting treatment for an equity investment in another entity changes because:

The investment becomes subject to the equity method of accounting; or

The Bank ceases to consolidate a subsidiary or VIE, but retains an interest.

An event that requires an eligible item to be measured at fair value at the time of the event, but does not require fair value measurement at each subsequent reporting date, excluding events of impairment recognition under lower-of-cost-or-market or other-than-temporary impairment accounting.

Unrealized gain and loss from changes in fair value of items where the FVO has been elected are recognized in Earnings. Upfront costs and fees related to items for which the FVO is elected are recognized in Earnings as incurred. When the FVO is elected, the Bank will report those items in a manner that separates those fair values from reported amounts for similar assets and liabilities measured with another measurement attribute. The Bank has not elected the FVO for any eligible items to date and has no plans to do so for the foreseeable future.





Tahoka, Texas -9-

Cash & Equivalents. The Company includes all cash on hand and balances due from other banks, interest-bearing deposits and term certificates of other banks, federal funds sold and securities purchased under agreements to resell, which have original maturities less than three months, as cash and equivalents in the accompanying CFS. Federal Regulations require banks to set aside specified amounts of cash as reserves against transaction and time deposits, which fluctuate daily. These reserves may be held as vault cash, in a non interest-bearing account with a district Federal Reserve Bank or Federal Home Loan Bank or as deposits with correspondents. Management believes that the Bank complies with these requirements.

Interest-Bearing Deposits in Banks. The Bank invests in interest-bearing deposits and term certificates of other banks that mature within three years and carries them at cost.

Trading Activities. Securities held principally for resale in the near term would be reported as trading assets and carried at fair value with changes in fair value included as a component of Earnings. The Company does not engage in trading activities (and does not invest in derivatives), neither for its own account or on behalf of its customers.

Securities Held-to-Maturity. Debt securities that management has the ability and positive intent to hold to maturity are classified as held-to-maturity (“HTM”) and reported at amortized cost. Unrealized gains and losses on these securities are excluded from CI.

Securities Available-for-Sale. Securities not classified as trading or held-to-maturity are available-for-sale (“AFS”) and are reported at fair value with unrealized gains and losses excluded from Earnings, but included in the determination of OCI.

Other Security Issues. Purchase premiums and discounts on debt securities are recognized as an adjustment to interest income over the term of the related securities in accordance with the interest method. Declines in fair value below cost of AFS and HTM securities, that management deems to be other-than-temporary, are recognized in the determination of Earnings as realized losses and a new “cost basis” is established. Gains and losses on security sales are recorded on the trade date and are determined under the specific identification method. The sale of a HTM security within three months of its maturity date or after the collection of at least 85 percent of the principal outstanding at the time the security was acquired is considered a maturity for purposes of classification and disclosure. The Bank anticipates prepayments on mortgage-backed securities when amortizing premiums and accreting discounts. Management estimates future cash flow streams (prepayment rates) after considering recent prepayment history and the current interest rate environment.

Federal Reserve Bank Stock. As a member of the Federal Reserve System, the Bank is required to subscribe to the capital stock of its District Federal Reserve Bank (“FRB”) in an amount equal to six percent (6%) of the member bank’s paid-up capital and surplus and must pay half of that amount (3%) to the FRB. The other half is subject to call by the Board of Governors. Regulation I also specifies procedures that a member bank must follow to purchase or redeem FRB capital stock; the FRB stock is restricted and can only be liquidated upon withdrawal from membership. Therefore, the Bank (and the Company) carries its FRB stock subscription at the amount paid-in to the FRB, which represents one half of the required subscription and an equal amount, which is unrecorded, is subject to call by the Board of Governors.

Loans Held to Maturity or Pay-Off. The majority of loans are made to customers to finance asset acquisitions, to provide working capital to finance business operations, and other purposes in exchange for interest on outstanding principal balances from origination to maturity or pay-off. Additionally, origination fees are generally charged when warranted by related costs. Decisions about whether to extend credit to customers are based on anticipated sources of repayment, credit history, availability of collateral, and other considerations. At origination, loans that management has the ability and intent to hold for the foreseeable future or until maturity or pay-off (“Retained Loans”) are recorded at the amount of cash advanced.

The fair value of Retained Loans is subject to changes in market interest rates and credit quality. The carrying value of a Retained Loan is not adjusted for changes in market interest rates unless its credit quality is also impaired, but management seeks to manage risks associated with changes in market interest rates on selected loans through adjustable, minimum, and/or maximum rates specified in their loan agreements.





Tahoka, Texas -10-

Loans Held to Maturity or Pay-Off (continued). The ALLL is a recognized credit risk valuation account that, at periodic reporting dates, reduces outstanding loan balances to the estimated amount expected to be collected. Earnings are reduced for estimated credit losses through PLLL that are added to the ALLL. When losses due to credit risks are confirmed, the losses are recognized as reductions of the outstanding principal balance and the ALLL (a “Charge-Off”) which has no effect on Earnings. Subsequent recoveries of amounts previously charged-off against the ALLL (“Recoveries”), if any, are added back to the ALLL and do not directly affect Earnings.

Prior to charge-off, a loan is considered impaired when, based on current information and events, it is probable (interpreted as “likely to occur” which is a higher likelihood than “more likely than not” but does not require virtual certainty) that scheduled payments of principal or interest will not be collected when due according to the contractual terms of the loan agreement. The amount of impairment on a specifically identified impaired loan is the estimated amount of probable loss of the recorded investment based on current information and events at the corresponding reporting date. The recorded investment in a loan includes the outstanding principal, adjusted as applicable for accrued interest, direct partial charge-offs, and deferred fees or costs on originated loans.

Loans are routinely restructured to accommodate changes in borrower needs and circumstances and market terms. However, when a restructure involves a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that would not otherwise be considered, a troubled debt restructuring (“TDR”) has occurred. A concession results when, as a result of the restructure, the Bank does not expect to collect all amounts due, including interest accrued at the original contract rate. A restructuring that results in an insignificant delay in payment is not a TDR. A TDR is indicated by interest rates below market for similar credits, extensions, or other reductions in debt service requirements outside of market terms (e.g., conversion to interest only or no payments for a period of time or an extended amortization period that exceeds market norms) or forgiveness of principal or accrued interest. The Bank enters TDR’s to minimize its losses or to otherwise increase the likelihood of eventual recovery.

A TDR is an impaired loan and is evaluated for impairment if it has not already been done. However, in years after the restructuring, the restructured loan will not be classified as an impaired loan if:

The restructuring agreement specifies an interest rate equal to or greater than a market rate at the time of the restructuring; and

The restructured loan is not impaired at that time based on the restructured terms.

Otherwise, the restructured loan will continue to be reported as an impaired Retained Loan.

The ALLL represents management’s best estimate of impairment in the existing loan portfolio as a whole at periodic reporting dates based on current information and events (consideration of expectations for or projections of economic and environmental factors is precluded by GAAP). Management considers the diversification of the loan portfolio and related experience of the Bank and its personnel, extent of geographic and dollar concentrations, prevailing economic and environmental conditions, and experience from comparable historical periods and the effects of adverse circumstances on borrower and guarantor ability to pay and estimated value of underlying collateral, along with any other factors identified as relevant to the current circumstances.

Management develops its estimate of an appropriate ALLL at periodic reporting dates based upon aggregation of loan impairment for i) specifically identified loans and ii) groups of remaining loans with similar risk characteristics. While management attributes portions of the allowance to specific portfolio segments and individual impaired loans, the entire allowance is available to absorb credit losses inherent in the total loan portfolio.





Tahoka, Texas -11-

Loans Held to Maturity or Pay-Off (continued). Management routinely identifies significant credits (individual loans or relationships that are not part of groups of smaller balance homogenous type loans with similar credit risks) to evaluate collectability based on consideration of the following:

Dollar amounts of individual loans and total loans by borrower, guarantor, or other indicators of relationships;

Payment status and overdrafts of related borrower deposit accounts;

Borrower requests for concessions to alleviate cash constraints;

Other evidence or risks of declining credit quality identified by loan officers, independent internal and external reviews (including outsourced reviews, financial statement audits, and regulatory examinations), members of management and the board, or information from other sources;

Historical, environmental, and economic conditions that indicate increased risks of declining credit quality in certain industries, geographic areas, or types of loans; and

Any other available information deemed relevant to the current circumstances.

When a significant credit has been identified for evaluation, management considers factors specific to that significant credit that include scheduled timing and amounts of principal and interest payments in relation to actual payment status (past due status is based on contractual terms) and demonstrated and projected sources of repayment to determine whether that specific loan or relationship is impaired. Loans that experience insignificant payment delays or shortfalls are not necessarily considered impaired, but loans that have not yet experienced payments delays or shortfalls may be considered impaired if identifiable and expected sources of repayment appear inadequate or otherwise unlikely to comply with the schedule specified by the contractual terms of the loan agreement. The significance of payment delays and shortfalls are considered on a case-by-case basis. All of the circumstances surrounding the loan and the borrower are considered, 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. Probable foreclosure on collateral generally indicates impaired status since it is not repayment in accordance with the schedule in the loan agreement and requires actions and costs that are not incurred in routine receipt of borrower payments.

Significant credits that have been identified as impaired are then individually evaluated to measure the amount of impairment, if any. Impairment for significant credits is measured by either i) the present value of expected future cash flows discounted at the loan’s effective interest rate, ii) the loan’s obtainable market price, or iii) the fair value of the collateral, if foreclosure is probable or the loan is otherwise considered collateral dependent. A loan is collateral dependent when repayment of the loan is expected to be provided solely by the underlying collateral. Regulatory guidance requires use of the collateral method for loans that are collateral dependent, and the collateral method is the predominant method used by management. In general, any portion of the recorded investment in a collateral dependent loan in excess of the fair value of the collateral is recognized as impairment. If repayment of a collateral dependent loan depends on the sale of the collateral, the fair value of the collateral is reduced by estimated selling costs to measure impairment.





Tahoka, Texas -12-

Loans Held to Maturity or Pay-Off (continued). To facilitate timely identification of i) declining credit quality in significant credits to manage credit risk in the loan portfolio and ii) impaired loans to be evaluated for impairment in the periodic estimation of the ALLL, management periodically reviews and classifies significant credits into the credit quality categories that follow:

Acceptable Classifications

Pass/Watch (“P/W”). Loans with financial factors or nature of collateral that are considered reasonable credit risks in the normal course of lending. This includes top rated businesses and individuals with large financial reserves in the Bank’s lending area. These borrowers generally present a financial statement that would support a significant amount of unsecured borrowing availability with collateral taken as an abundance of caution.

Other Assets Especially Mentioned (“OAEM”). Loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the credit position at some future date. Examples of these potential weaknesses, although not all-inclusive, include:

Poor lending practices that result in significant defects in the loan agreement, security agreement, guarantee agreement, or other documentation and the deteriorating condition of or lack of control over collateral. In other words, these are conditions that may jeopardize the Bank’s ability to enforce loan terms or that reduce the protection afforded by secondary repayment sources.

Lack of information about the borrower or guarantors, including stale financial information or lack of current collateral valuations.

Economic or market conditions that in the future may affect the borrower’s ability to meet scheduled repayments. These may be evidenced by adverse profitability, liquidity, or leverage trends in the borrower’s financial statements.

Adverse Classifications – Criticized or Classified

Substandard (“SubStd”). Loan is inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize collection and are characterized by the distinct possibility that some loss will be sustained if the deficiencies are not corrected.

Impaired

Substandard Impaired (“SubImp”). Same as SubStd, except that these loans are impaired because it has become probable that all principal and interest will not be collected as scheduled in the contract terms of the loan agreement; i.e., the likelihood of loss has become probable.

Doubtful. Loans with all the weaknesses inherent in the SubStd classification with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values highly questionable and improbable.

Loss. Considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value; rather, it is not practical or desirable to defer writing off an essentially worthless asset (or portion thereof), even though partial recovery may occur in the future. Loans classified as “loss” should be charged-off.

* The preceding definitions for SubStd, Doubtful, and Loss correspond with the FDIC’s classification system. The definitions of P/W and OAEM are provided by the AICPA in its Accounting and Audit Guide titled Depository & Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies, and Mortgage Companies. Although Federal regulators do not require banks to adopt identical classification definitions, they are instructed to classify their loans using a system that can easily be reconciled with the regulators’ classification system.

As significant credits progress down the above classification scheme, the frequency of review increases and, when adversely classified, they are reviewed at least at each quarterly reporting date. Significant credits evaluated and classified as SubStd or better (i.e., not impaired) are not specifically evaluated for impairment. Significant credits evaluated and classified as impaired, but judged to have no impairment, are excluded from any other impairment calculations in accordance with GAAP.

Aside from significant credits identified as impaired, it is probable that the Bank will not collect all the principal or interest due on all the other loans in the portfolio in accordance with the contractual terms of those loan agreements. Therefore, the portfolio includes impaired loans other than the significant credits individually identified as impaired, even though they are not specifically identified, and additional impairment in the portfolio is probable. Accordingly, impairment on any remaining Retained Loans that are not impaired significant credits is determined in aggregate for groups of loans with similar risk characteristics, including loans classified as SubStd. Impairment determined in aggregate for groups of loans is not specific to individually identifiable loans or relationships.





Tahoka, Texas -13-

Loans Held to Maturity or Pay-Off (continued). Identification and classification of significant credits and determination of impairment is inherently subjective and requires judgments and estimates that are susceptible to significant revision as more information becomes available due to changing circumstances and/or the passage of time. Judgments by knowledgeable professionals are subject to variations, even given the same facts and circumstances. The Bank’s regulators routinely review the adequacy of the Bank’s ALLL and may require the Bank to increase its ALLL based on their policies and/or judgments about individual borrowers, economic conditions, and other factors available to them at the time of their examinations.

The portfolio of Retained Loans is reported at its net carrying amount: outstanding principal balances adjusted for charge-offs, the ALLL, and any deferred fees or costs on originated loans.

Interest income is accrued on outstanding principal balances. Management places loans on nonaccrual status (“NonAccrual”) and discontinues accrual of interest income when collection of principal or interest is considered doubtful, including:

When the financial condition of the borrower has deteriorated to the point the loan is maintained on the cash basis or specific impairment has been identified; or

When principal or interest has been in default for a period of 90 days or more under its contractual terms unless the loan is well-secured1 and in the process of collection2 3 4

1 A loan is well-secured if it is secured by: i) collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or ii) the guarantee of a financially responsible person.

2 A loan is in the process of collection if collection is proceeding in due course either i) through legal action, including judgment enforcement procedures, or ii) in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

3 This criterion is established by regulation and is considered to comply with GAAP in all material respects.

4 Loans placed on NonAccrual are also moved to an impaired classification since management does not expect to collect interest and, therefore, it is probable that all principal and interest will not be collected according to the contractual terms of the loan agreement. Management may not suspend accrual of interest on impaired loans if all principal and interest are expected to be collected, just not according to the contractual terms of the loan agreement. An example of this circumstance and of an impaired loan with no impairment would be a loan where all principal and interest will be collected through foreclosure and liquidation of collateral, net of selling costs. Accordingly, NonAccrual loans are impaired, but impaired loans are not necessarily NonAccrual. However, impaired loans with identified impairment are NonAccrual since management does not expect to collect all principal and, therefore, does not expect to collect interest.

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

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan interest income.

Foreclosed & Repossessed Assets. Assets acquired through, or in lieu of, loan foreclosure or repossession are held for sale and are initially recorded at fair value at the date acquired, establishing a new cost basis. Subsequent to acquisition, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance, if any, are included in other non interest expense. The Company had no foreclosed or repossessed assets at December 31, 2016.

Premises & Equipment. Premises and equipment, acquired from the Company’s predecessor, that remains in service is carried at $-0- book value. Otherwise, land is carried at cost; buildings and equipment are carried at cost, less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets. Gains and losses on disposals are included in Earnings and netted for presentation.





Tahoka, Texas -14-

Transfers of Financial Assets. Transfers of financial assets (e.g., loan participations) are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Concentrations. The Bank’s deposit and lending activities are concentrated in Lynn County, Texas, and in agricultural loans. The ability of the Bank’s debtors to honor their contracts is dependent upon local agricultural production and general economic conditions in this area and industry. The Bank does not have any significant concentrations of credit risk to any one customer or investment security issuer other than the U.S. government. The Bank holds its primary liquid assets in the form of demand deposits in, and Federal funds sold to, other commercial banks. A significant amount exceeds FDIC insurance. Management monitors the safety and soundness of its correspondents and does not believe these institutions present a significant credit risk.

Income Taxes. The State of Texas franchise tax (or margin tax) is an income tax for financial reporting purposes under GAAP, and TFBI and the Bank are subject to the franchise tax as a combined group. There was no margin tax expense for the years ended December 31, 2017 & 2016. Related deferred taxes are insignificant.

Subsequent Events. The Company evaluated subsequent events for potential recognition and/or disclosure through January 16, 2018, the date the CFS were available to be issued.

Tahoka, Texas -15-

Tahoka First Bancorp, Inc. & Subsidiary Tahoka, Texas

Supplemental Schedules

Years Ended: December 31, 2017 & 2016

Tahoka First Bancorp, Inc. & SubsidiaryConsolidating Balance Sheet

December 31, 2017

Tahoka FirstThe First Tahoka First Bancorp, Inc.

National Bank Bancorp, Inc. Ref Dr (Cr) & Subsidiary

Cash & due from banks $ 5,408,671 $ 36,127 [1] $ (36,127) $ 5,408,671

Interest-bearing deposits in banks 7,194,544 5,487 [1] (5,487) 7,194,544

Cash & equivalents 12,603,215 41,614 12,603,215

Accrued interest receivable 507,533 - 507,533

Interest-bearing time deposits in banks 6,370,000 - 6,370,000

Securities available-for-sale 16,963,920 - 16,963,920

Loans, net 19,083,986 - 19,083,986

Foreclosed & repossessed asssets, net 8,449 - 8,449

Securities held-to-maturity 1,452,817 - 1,452,817

Premises & equipment, net 290,150 - 290,150

Federal Reserve Bank stock, at cost 24,000 - 24,000

Other assets 44,674 - 44,674

Investment in subsidiary - 5,588,296 [2] (5,588,296) -

Assets $ 57,348,744 $ 5,629,910 $ 57,348,744

Noninterest-bearing accounts $ 15,346,484 $ - [1] 36,127 $ 15,310,357

Savings & interest-bearing accounts 21,567,974 - [1] 5,487 21,562,487

Time deposits $250,000 2,768,735 - 2,768,735

Other time deposits 11,976,056 - 11,976,056

Deposits 51,659,249 - 51,617,635

Accrued interest payable 11,735 - 11,735

Other liabilities 89,464 - 89,464

Liabilities 51,760,448 - 51,718,834

Common stock 400,000 195,660 [2] 400,000 195,660

Paid-in-capital 400,000 1,770,668 [2] 400,000 1,770,668

Retained earnings 4,919,182 3,794,468 [2] 4,919,182 3,794,468

Accumulated other comprehensive loss (130,886) (130,886) [2] (130,886) (130,886)

Stockholders' Equity 5,588,296 5,629,910 5,629,910

Liabilities & Stockholders' Equity $ 57,348,744 $ 5,629,910 $ - $ 57,348,744

[1] Eliminate intercompany accounts.

[2] Eliminate investment in subsidiary.


Tahoka, Texas -16-

Eliminating Entries

Tahoka First Bancorp, Inc. & SubsidiaryConsolidating Statement of Comprehensive Income

Year Ended December 31, 2017



Loans (including fees) $ 1,230,795 $ - $ $ 1,230,795

Deposits with banks 164,943 9 [1] 9 164,943

Investment securities 306,317 - 306,317

Federal funds sold - - -

Interest income 1,702,055 9 1,702,055

Savings & interest-bearing demand deposits 19,078 - [1] (9) 19,069

Time deposits $250,000 18,932 - 18,932

Other time deposits 63,788 - 63,788

Other borrowings 34 - 34

Interest expense 101,832 - 101,823

Interest Margin 1,600,223 9 1,600,232

Provision for loan losses 18,000 - 18,000

Interest Margin,Net of Provision for Loan Losses 1,582,223 9 1,582,232

Fees & service charges 183,420 - 183,420

Other non interest income 1,595 - 1,595

Equity in subsidiary earnings - 562,026 [2] 562,026 -

Non interest income 185,015 562,026 185,015

Salaries & employee benefits 597,157 - 597,157

Net occupancy 91,036 - 91,036

Data processing & equipment expense 111,387 - 111,387

Other non interest expense 405,632 30,865 436,497

Non interest expense 1,205,212 30,865 1,236,077

Income Before Income Tax 562,026 531,170 531,170

Income tax expense - - [2] - -

Net Income 562,026 531,170 531,170

Net unrealized holding losses onsecurities arising during the year (76,983) (76,983) [2] (76,983) (76,983)

Other Comprehensive Loss (76,983) (76,983) (76,983)

Comprehensive Income $ 485,043 $ 454,187 $ 485,043 $ 454,187

[1] Eliminate intercompany accounts.[2] Eliminate investment in subsidiary.


Tahoka, Texas -17-

Eliminating Entries

Tahoka First Bancorp, Inc. & SubsidiaryConsolidating Balance Sheet

December 31, 2016



Cash & due from banks $ 5,263,640 $ 36,584 [1] $ (36,584) $ 5,263,640

Interest-bearing deposits in banks 4,667,392 1,993 (1,993) 4,667,392

Cash & equivalents 9,931,032 38,577 9,931,032

Accrued interest receivable 420,900 - 420,900

Interest-bearing time deposits in banks 8,600,000 - 8,600,000

Securities available-for-sale 14,284,880 - 14,284,880

Loans, net 19,471,329 - 19,471,329

Foreclosed & repossessed asset, net - - -

Securities held-to-maturity 3,284,564 - 3,284,564

Premises & equipment, net 321,439 - 321,439

Federal Reserve Bank stock, at cost 24,000 - 24,000

Other assets 28,247 - 28,247

Investment in subsidiary - 5,628,253 [2] (5,628,253) -

Assets $ 56,366,391 $ 5,666,830 $ 56,366,391

Noninterest-bearing accounts $ 14,099,798 $ - [1] 36,584 $ 14,063,214

Savings & interest-bearing accounts 20,499,165 - [1] 1,993 20,497,172

Time deposits $250,000 3,733,920 - 3,733,920

Other time deposits 12,328,460 - 12,328,460

Deposits 50,661,343 - 50,622,766

Accrued interest payable 11,531 - 11,531

Other liabilities 65,264 - 65,264

Liabilities 50,738,138 - 50,699,561

Common stock 400,000 195,660 [2] 400,000 195,660

Paid-in-capital 400,000 1,770,668 [2] 400,000 1,770,668

Retained earnings 4,882,156 3,754,405 [2] 4,882,156 3,754,405

Accumulated other comprehensive loss (53,903) (53,903) [2] (53,903) (53,903)

Stockholders' Equity 5,628,253 5,666,830 5,666,830

Liabilities & Stockholders' Equity $ 56,366,391 $ 5,666,830 $ - $ 56,366,391

[1] Eliminate intercompany accounts.

[2] Eliminate investment in subsidiary.


Tahoka, Texas -18-

Eliminating Entries

Tahoka First Bancorp, Inc. & SubsidiaryConsolidating Statement of Comprehensive Income

Year Ended December 31, 2016



Loans (including fees) $ 1,081,683 $ - $ $ 1,081,683

Deposits with banks 142,308 7 [1] 7 142,308

Investment securities 283,714 - 283,714

Federal funds sold - - -

Interest income 1,507,705 7 1,507,705

Savings & interest-bearing demand deposits 12,180 - [1] (7) 12,173

Time deposits $250,000 17,916 - 17,916

Other time deposits 59,977 - 59,977

Other borrowings - - -

Interest expense 90,073 - 90,066

Interest Margin 1,417,632 7 1,417,639

Provision for loan losses 20,000 - 20,000

Interest Margin,Net of Provision for Loan Losses 1,397,632 7 1,397,639

Fees & service charges 192,339 - 192,339

Other non-interest income (7,339) - (7,339)

Equity in subsidiary earnings - 424,755 [2] 424,755 -

Non-interest income 185,000 424,755 185,000

Salaries & employee benefits 566,275 - 566,275

Net occupancy 89,895 - 89,895

Data processing & equipment expense 118,049 - 118,049

Other non-interest expense 383,658 29,740 413,398

Non-interest expense 1,157,877 29,740 1,187,617

Income Before Income Tax 424,755 395,022 395,022

Income tax expense - - [2] - -

Net Income 424,755 395,022 395,022

Net unrealized holding losses onsecurities arising during the year (93,215) (93,215) [2] (93,215) (93,215)

Other Comprehensive Loss (93,215) (93,215) (93,215)

Comprehensive Income $ 331,540 $ 301,807 $ 331,540 $ 301,807

[1] Eliminate intercompany accounts.[2] Eliminate investment in subsidiary.


Tahoka, Texas -19-

Eliminating Entries

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