b'An analysis of the loans by segment as of December 31 is as follows:2018 2017Real estate loans:Secured by construction, land and land development $25,821,298 $28,619,807Secured by residential properties 185,596,584 165,124,232Secured by nonfarm nonresidential71,738,044 59,912,254Commercial and industrial loans 14,234,852 13,277,321Loans to individuals for household, family, or otherpersonal expenditures 5,449,741 6,273,681$302,840,519 $ 273,207,295Leases38,25256,108Total loans, gross $302,878,771 $273,263,403Net deferred loan fees, costs, premiums and discounts1,676,894 1,500,637Less:Allowance for possible loan losses(3,666,386)(3,690,200)Net loans$300,889,279$ 271,073,840 Loans are generally carried at the amount of unpaid principal, less the allowance for loan losses and adjusted fordeferred loan fees, which are amortized over the term of the loan using the interest method.Interest on loans is accrued based on the principal amounts outstanding.Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.The allowance for loan losses is established through a provision for loan losses.The Bank maintains the allowance at a level believed by management to cover all known and inherent losses in the loan portfolio that are both probable and reasonable to estimate at each reporting date.Management reviews the allowance for loan losses on no less than a quarterly basis in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio.The evaluation process by portfolio segment includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the loans, the value of collateral securing the loan, the borrowers ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience.The establishment of the allowance for loan losses is significantly affected by uncertainties and by managements judgment, and there is a likelihood that different amounts would be reported under different conditions or assumptions.The Federal Deposit Insurance Corporation, as an integral part of its examination process, periodically reviews the allowance for loan losses and may require the Bank to make additional provisions for estimated loan losses based upon judgments different from those of management.The Bank will continue to monitor and modify its allowance for loan losses as conditions dictate.No assurances can be given that the level of allowance for loan losses will cover all of the inherent losses on the loans or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the anticipated future economic and other conditions used by management to determine the current level of the allowance for loan losses. 19'