Note

– Loans

Major classifications of loans were as follows:

	December 31, 2016			June 30, 2016
Commercial	$	41,938		$	43,156
Commercial real estate:
Construction		8,831			7,755
Other		153,563			152,766
1 – 4 Family residential real estate:
Owner occupied		37,652			31,091
Non-owner occupied		14,489			14,438
Construction		2,981			1,269
Consumer		5,350			5,803
Subtotal		264,804			256,278
Allowance for loan losses		(3,123	)		(3,566	)
Net Loans	$	261,681		$	252,712

Loans presented above are net of deferred loan fees and costs of

$310

and

$360

for

December

31,

2016

and

June

30,

2016,

respectively.

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

December

31,

2016:

							1-4 Family
				Commercial			Residential
				Real			Real
	Commercial			Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	510		$	2,643		$	411		$	120		$	3,684
Provision for loan losses		(14	)		157			51			(54	)		140
Loans charged-off		—			(700	)		(23	)		(8	)		(731	)
Recoveries		1			—			26			3			30
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123

The following table presents the activity in the allowance for loan losses by portfolio segment for the

six

months ended

December

31,

2016:

							1-4 Family
				Commercial			Residential
				Real			Real
	Commercial			Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	505		$	2,518		$	402		$	141		$	3,566
Provision for loan losses		(9	)		282			78			(75	)		276
Loans charged-off		—			(700	)		(44	)		(12	)		(756	)
Recoveries		1			—			29			7			37
Total ending allowance balance	$	497		$	2,100		$	465		$	61		$	3,123

The following table presents the activity in the allowance for loan losses by portfolio segment for the

three

months ended

December

31,

2015:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	387	$	1,727		$	278		$	122		$	2,514
Provision for loan losses		10		3			149			30			192
Loans charged-off		—		(2	)		(120	)		(33	)		(155	)
Recoveries		—		—			—			4			4
Total ending allowance balance	$	397	$	1,728		$	307		$	123		$	2,555

The following table presents the activity in the allowance for loan losses by portfolio segment for the

six

months ended

December

31,

2015:

						1-4 Family
			Commercial			Residential
			Real			Real
	Commercial		Estate			Estate			Consumer			Total

Allowance for loan losses:
Beginning balance	$	316	$	1,660		$	289		$	167		$	2,432
Provision for loan losses		81		73			138			(8	)		284
Loans charged-off		—		(5	)		(120	)		(51	)		(176	)
Recoveries		—		—			—			15			15
Total ending allowance balance	$	397	$	1,728		$	307		$	123		$	2,555

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of

December

31,

2016.

Included in the recorded investment in loans is

$614

of accrued interest receivable.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	4	$	56	$	2	$	—	$	62
Collectively evaluated for impairment		493		2,044		463		61		3,061
Total ending allowance balance	$	497	$	2,100	$	465	$	61	$	3,123

Recorded investment in loans:
Loans individually evaluated for impairment	$	41	$	1,482	$	427	$	—	$	1,950
Loans collectively evaluated for impairment		41,992		161,271		54,843		5,362		263,468
Total ending loans balance	$	42,033	$	162,753	$	55,270	$	5,362	$	265,418

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of

June

30,

2016.

Included in the recorded investment in loans is

$549

of accrued interest receivable net of deferred loans fees and cost of

$360.

					1-4 Family
			Commercial		Residential
			Real		Real
	Commercial		Estate		Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	868	$	6	$	—	$	874
Collectively evaluated for impairment		505		1,650		396		141		2,692
Total ending allowance balance	$	505	$	2,518	$	402	$	141	$	3,566

Recorded investment in loans:
Loans individually evaluated for impairment	$	1,029	$	5,105	$	758	$	—	$	6,892
Loans collectively evaluated for impairment		42,219		155,734		46,166		5,816		249,935
Total ending loans balance	$	43,248	$	160,839	$	46,924	$	5,816	$	256,827

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of

December

31,

2016

and for the

six

months ended

December

31,

2016:

	As of December 31, 2016						Six Months ended December 31, 2016
	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	330	$	80	$	80
Commercial real estate:
Construction		7		7		—		170		6		6
Other		1,779		891		—		1,081		105		105
1-4 Family residential real estate:
Owner occupied		127		127		—		127		—		—
Non-owner occupied		200		199		—		205		—		—
With an allowance recorded:
Commercial		41		41		4		7		—		—
Commercial real estate:
Other		583		584		56		2,030		15		15
1-4 Family residential real estate:
Owner occupied		101		101		2		139		3		3
Total	$	2,838	$	1,950	$	62	$	4,089	$	209	$	209

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the

three

months ended

December

31,

2016:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Construction	$	10	$	—	$	—
Other		607		—		—
1-4 Family residential real estate:
Owner occupied		127		—		—
Non-owner occupied		202		—		—
With an allowance recorded:
Commercial		14		—		—
Commercial real estate:
Other		1,612		7		7
1-4 Family residential real estate:
Owner occupied		101		1		1
Total	$	2,673	$	8	$	8

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans as of

June

30,

2016

and for the

six

months ended

December

31,

2015:

	As of June 30, 2016						Six Months ended December 31, 2015
	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Commercial	$	1,033	$	1,029	$	—	$	—	$	—	$	—
Commercial real estate:
Construction		386		384		—		17		—		—
Other		2,121		2,106		—		2,177		—		—
1-4 Family residential real estate:
Owner occupied		175		174		—		282		—		—
Non-owner occupied		722		407		—		341		—		—
With an allowance recorded:
Commercial real estate:
Other		2,802		2,615		868		984		18		18
1-4 Family residential real estate:
Owner occupied		177		177		6		188		4		4
Non-owner occupied		—		—		—		229		4		4
Total	$	7,416	$	6,892	$	874	$	4,218	$	26	$	26

The following table presents information related to average recorded investment and interest income associated with loans individually evaluated for impairment by class of loans for the

three

months ended

December

31,

2015:

	Average		Interest		Cash Basis
	Recorded		Income		Interest
	Investment		Recognized		Recognized
With no related allowance recorded:
Commercial real estate:
Construction	$	22	$	—	$	—
Other		2,202		—		—
1-4 Family residential real estate:
Owner occupied		280		—		—
Non-owner occupied		604		—		—
With an allowance recorded:
Commercial real estate:
Other		1,122		9		9
1-4 Family residential real estate:
Owner occupied		187		2		2
Total	$	4,417	$	11	$	11

The following table presents the recorded investment in non-accrual and loans past due over

days still on accrual by class of loans as of

December

31,

2016

and

June

30,

2016:

	December 31, 2016				June 30, 2016
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	41	$	—	$	1,009	$	—
Commercial real estate:
Construction		7		—		384		—
Other		1,229		—		4,000		—
1 – 4 Family residential:
Owner occupied		112		—		234		—
Non-owner occupied		200		—		407		—
Consumer		—		—		—		—
Total	$	1,589	$	—	$	6,034	$	—

Non-accrual loans and loans past due

days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of

December

31,

2016

by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	97	$	72	$	—	$	169	$	41,864	$	42,033
Commercial real estate:
Construction		—		—		—		—		8,845		8,845
Other		—		—		879		879		153,029		153,908
1-4 Family residential:
Owner occupied		—		14		112		126		37,628		37,754
Non-owner occupied		—		—		—		—		14,531		14,531
Construction		—		—		—		—		2,985		2,985
Consumer		16		16		—		32		5,330		5,362
Total	$	113	$	102	$	991	$	1,206	$	264,212	$	265,418

The above table of past due loans includes the recorded investment in non-accrual loans of

$41

in the

days category,

$991

in the

days or greater category and

$557

in the loans not past due category.

The following table presents the aging of the recorded investment in past due loans as of

June

30,

2016

by class of loans:

	Days Past Due
	30 - 59		60 - 89		90 Days or		Total		Loans Not
	Days		Days		Greater		Past Due		Past Due		Total
Commercial	$	123	$	—	$	—	$	123	$	43,125	$	43,248
Commercial real estate:
Construction		—		—		—		—		7,764		7,764
Other		59		—		2,110		2,169		150,906		153,075
1-4 Family residential:
Owner occupied		15		—		218		233		30,947		31,180
Non-owner occupied		—		—		196		196		14,278		14,474
Construction		—		—		—		—		1,270		1,270
Consumer		7		—		—		7		5,809		5,816
Total	$	204	$	—	$	2,524	$	2,728	$	254,099	$	256,827

The above table of past due loans includes the recorded investment in non-accrual loans of

$2,524

in the

days or greater category and

$3,510

in the loans not past due category.

Troubled Debt Restructurings:

As of

December

31,

2016,

the recorded investment of loans classified as troubled debt restructurings was

$362

with

$34

of specific reserves allocated to these loans. As of

December

31,

2016,

the Corporation had

not

committed to lend any additional amounts to customers with outstanding loans that are classified as troubled debt restructurings. As of

June

30,

2016,

the recorded investment of loans classified as troubled debt restructurings was

$3,529

with

$43

of specific reserves allocated to these loans. As of

June

30,

2016,

the Corporation had committed to lend an additional

$207

to customers with outstanding loans that were classified as troubled debt restructurings.

During the

three

and

six

months ended

December

31,

2016

and

2015

there were

loan modifications completed that were classified as troubled debt restructurings. There were

charge offs from troubled debt restructurings that were completed during the

three

and

six

month periods ended

December

31,

2016

and

2015.

There were

loans classified as troubled debt restructurings for which there was a payment default within

months following the modification during the

three

and

six

month periods ended

December

31,

2016

and

2015.

A loan is considered to be in payment default once it is

days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, current economic trends and other relevant information. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with a total outstanding loan relationship greater than

$100

and non-homogeneous loans, such as commercial and commercial real estate loans. Management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt and affirm the risk ratings for the loans and leases in their respective portfolio on an annual basis. The Corporation uses the following definitions for risk ratings:

Special Mention.

Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard.

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, 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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than

$100

or are included in groups of homogeneous loans. These loans are evaluated based on delinquency status, which are disclosed in the previous table within this footnote. Based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans was as follows:

	As of December 31, 2016
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	40,230	$	1,115	$	116	$	4	$	568
Commercial real estate:
Construction		8,792		—		—		7		46
Other		145,302		5,017		1,118		1,229		1,242
1-4 Family residential real estate:
Owner occupied		3,050		—		12		47		34,645
Non-owner occupied		13,713		178		268		200		172
Construction		601		—		—		—		2,384
Consumer		145		—		—		—		5,217
Total	$	211,833	$	6,310	$	1,514	$	1,487	$	44,274

	As of June 30, 2016
			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	35,243	$	6,190	$	1,162	$	—	$	653
Commercial real estate:
Construction		7,305		—		384		—		75
Other		144,101		2,482		4,026		2,150		316
1-4 Family residential real estate:
Owner occupied		3,506		72		349		47		27,206
Non-owner occupied		12,999		406		486		196		387
Construction		235		—		—		—		1,035
Consumer		210		—		6		—		5,600
Total	$	203,599	$	9,150	$	6,413	$	2,393	$	35,272