NOTE

3—LOANS

Major classifications of loans were as follows as of

June

30:

	201 8			201 7
Commercial	$	60,995		$	46,380
Commercial real estate:
Construction		5,394			5,604
Other		183,383			158,225
1 – 4 Family residential real estate:
Owner occupied		47,433			41,411
Non-owner occupied		15,516			14,415
Construction		1,171			1,988
Consumer		4,873			5,138
Subtotal		318,765			273,161
Net Deferred loan fees and costs		(256	)		(294	)
Allowance for loan losses		(3,422	)		(3,086	)
Net loans	$	315,087		$	269,781

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

June 30, 2018:

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

Allowance for loan losses:
Beginning balance	$	518	$	2,038		$	473		$	57		$	3,086
Provision for loan losses		51		202			45			12			310
Loans charged-off		—		(4	)		(33	)		(24	)		(61	)
Recoveries		17		41			14			15			87
Total ending allowance balance	$	586	$	2,277		$	499		$	60		$	3,422

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

June 30, 2017:

							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		18			581			77			(80	)		596
Loans charged-off		(6	)		(1,061	)		(44	)		(37	)		(1,148	)
Recoveries		1			—			38			33			72
Total ending allowance balance	$	518		$	2,038		$	473		$	57		$	3,086

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, 2018.

Included in the recorded investment in loans is

$732

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	$	—	$	29	$	—	$	—	$	29
Collectively evaluated for impairment		586		2,248		499		60		3,393

Total ending allowance balance	$	586	$	2,277	$	499	$	60	$	3,422

Recorded investment in loans:
Loans individually evaluated for impairment	$	100	$	1,562	$	398	$	—	$	2,060
Loans collectively evaluated for impairment		60,979		187,191		64,135		4,876		317,181

Total ending loans balance	$	61,079	$	188,753	$	64,533	$	4,876	$	319,241

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, 2017.

Included in the recorded investment in loans is

$581

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	$	—	$	42	$	2	$	—	$	44
Collectively evaluated for impairment		518		1,996		471		57		3,042

Total ending allowance balance	$	518	$	2,038	$	473	$	57	$	3,086

Recorded investment in loans:
Loans individually evaluated for impairment	$	444	$	1,587	$	203	$	—	$	2,234
Loans collectively evaluated for impairment		45,993		162,176		57,901		5,144		271,214

Total ending loans balance	$	46,437	$	163,763	$	58,104	$	5,144	$	273,448

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended

June 30, 2018:

	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	$	100	$	100	$	—	$	111	$	5	$	5
Commercial real estate:
Other		1,330		1,330		—		1,102		17		17
1-4 Family residential real estate:
Owner occupied		101		101		—		71		—		—
Non-owner occupied		297		297		—		314		—		—
With an allowance recorded:
Commercial real estate:
Other		231		232		29		285		28		28
Total	$	2,059	$	2,060	$	29	$	1,883	$	50	$	50

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the year ended

June 30, 2017:

	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	$	482	$	444	$	—	$	207	$	80	$	80
Commercial real estate:
Construction		—		—		—		87		6		6
Other		1,928		1,039		—		951		105		105
1-4 Family residential real estate:
Owner occupied		104		103		—		119		—		—
Non-owner occupied		—		—		—		183		—		—
With an allowance recorded:
Commercial real estate:
Other		548		548		42		1,884		21		21
1-4 Family residential real estate:
Owner occupied		99		100		2		120		6		6
Total	$	3,161	$	2,234	$	44	$	3,551	$	218	$	218

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

June 30, 2018

and

2017:

	June 30, 2018				June 30, 2017
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
			Still				Still
	Non-accrual		Accruing		Non-accrual		Accruing
Commercial	$	—	$	—	$	368	$	—
Commercial real estate:
Other		702		—		729		—
1 – 4 Family residential:
Owner occupied		90		—		90		—
Non-owner occupied		298		—		—		—
Total	$	1,090	$	—	$	1,187	$	—

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

June 30, 2018

by class of loans:

	Days Past Due
	30 - 59 Days		60 - 89 Days		90 Days or Greater		Total Past Due		Loans Not Past Due		Total
Commercial	$	—	$	—	$	—	$	—	$	61,079	$	61,079
Commercial real estate:
Construction		—		—		—		—		5,386		5,386
Other		238		—		—		238		183,129		183,367
1-4 Family residential:
Owner occupied		11		—		80		91		47,738		47,829
Non-owner occupied		—		—		—		—		15,514		15,514
Construction		—		—		—		—		1,190		1,190
Consumer		7		—		—		7		4,869		4,876
Total	$	256	$	—	$	80	$	336	$	318,905	$	319,241

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

$249

in the

days,

$80

in the

days or greater category and

$761

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, 2017

by class of loans:

	Days Past Due
	30 - 59 Days		60 - 89 Days		90 Days or Greater		Total Past Due		Loans Not Past Due		Total
Commercial	$	—	$	—	$	35	$	35	$	46,402	$	46,437
Commercial real estate:
Construction		—		—		—		—		5,596		5,596
Other		—		—		130		130		158,037		158,167
1-4 Family residential:
Owner occupied		13		—		74		87		41,605		41,692
Non-owner occupied		—		—		—		—		14,416		14,416
Construction		—		—		—		—		1,996		1,996
Consumer		22		—		—		22		5,122		5,144
Total	$	35	$	—	$	239	$	274	$	273,174	$	273,448

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

$239

in the

days or greater category and

$948

in the loans

not

past due category.

Troubled Debt Restructurings

(TDR)

The Corporation has certain loans that have been modified in order to maximize collection of loan balances. A modified loan is classified as a TDR if, for economic reasons, management grants a concession to the original terms and conditions of the loan to a borrower who is experiencing financial difficulties that it would

not

have otherwise considered.

June 30, 2018

and

2017,

the Corporation had

$1,269

and

$1,740,

respectively, of loans classified as TDRs which are included in impaired loans above. At

June 30, 2018

and

2017,

the Corporation had

$29

and

$33,

respectively, of specific reserves allocated to these loans.

There were

loan modifications completed during the

2018

fiscal year that were classified as troubled debt restructurings. As of

June 30, 2018,

the Corporation had committed to lend an additional

$174

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

During the fiscal year ended

June 30, 2017,

the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included a combination of an extension of the maturity date and the extension of additional credit to provide operating funds. The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended

June 30, 2017:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		2	$	518	$	518
Commercial real estate:
Other		1		512		512
Total		3	$	1,030	$	1,030

The troubled debt restructurings described above did

not

increase the allowance for loan losses or result in any charge-offs during the

twelve

months ended

June 30, 2017.

As of

June 30, 2017,

the Corporation had committed to lend an additional

$175

as part of the restructurings described above. There were

loans classified as troubled debt restructurings that were modified within the last

twelve

months for which there was a payment default.

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, and current economic trends, among other factors. 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. This analysis is performed on a monthly 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 was discussed previously.

As of

June 30, 2018,

and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	59,214	$	288	$	1,162	$	—	$	415
Commercial real estate:
Construction		5,386		—		—		—		—
Other		172,471		7,061		1,878		702		1,255
1-4 Family residential real estate:
Owner occupied		2,577		—		27		11		45,214
Non-owner occupied		14,025		195		417		298		579
Construction		8		—		—		—		1,182
Consumer		93		—		—		—		4,783
Total	$	253,774	$	7,544	$	3,484	$	1,011	$	53,428

As of

June 30, 2017,

and based on the most recent analysis performed, the recorded investment by risk category of loans by class of loans is as follows:

			Special						Not
	Pass		Mention		Substandard		Doubtful		Rated
Commercial	$	44,435	$	907	$	642	$	—	$	453
Commercial real estate:
Construction		4,514		1,035		—		4		43
Other		150,460		5,110		1,566		470		561
1-4 Family residential real estate:
Owner occupied		2,668		—		11		30		38,983
Non-owner occupied		13,633		210		261		187		125
Construction		1,223		—		—		—		773
Consumer		145		—		—		—		4,999
Total	$	217,078	$	7,262	$	2,480	$	691	$	45,937