10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended September 30, 2018

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from ______________________ to___________________

Commission File Number 001-35295

Poage Bankshares, Inc.

(Exact Name of Registrant as Specified in Charter)

Maryland	45-3204393
(State of Other Jurisdiction	(I.R.S Employer
of Incorporation)	Identification Number)

1500 Carter Avenue, Ashland, KY	41101
(Address of Principal Executive Officer)	(Zip Code)

606-324-7196

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 14, 2018, the number of shares of the Registrant’s common stock, par value $.01 per share, was 3,497,243.

POAGE BANKSHARES, INC.

Form 10-Q Quarterly Report

Table of Contents

	PART I. FINANCIAL INFORMATION
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS – POAGE BANKSHARES, INC.	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4.	CONTROLS AND PROCEDURES	45
	PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	46
ITEM 1A.	RISK FACTORS	46
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	46
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	47
ITEM 4.	MINE SAFETY DISCLOSURES	47
ITEM 5.	OTHER INFORMATION	47
ITEM 6.	EXHIBITS	47
SIGNATURES		48

2

PART I

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands except per share data)

	September 30,			December 31,
	2018			2017
ASSETS
Cash and due from financial institutions	$	22,852		$	20,499
Interest-bearing deposits in other financial institutions		3,735			2,988
Securities available for sale		69,341			64,130
Loans held for sale		508			256
Loans, net of allowance of $3,124 and $4,681		315,290			328,554
Restricted stock, at cost		3,276			3,276
Other real estate owned, net		793			1,462
Premises and equipment, net		10,278			10,500
Company owned life insurance		7,413			7,292
Accrued interest receivable		1,398			1,413
Goodwill		1,894			1,894
Other intangible assets, net		413			667
Deferred tax asset, net		1,843			2,128
Other assets		1,694			1,821
Total assets	$	440,728		$	446,880
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing	$	56,135		$	52,577
Interest bearing		309,492			317,473
Total deposits		365,627			370,050
Federal Home Loan Bank advances		6,219			7,419
Subordinated debenture		2,938			2,890
Accrued interest payable		34			24
Other liabilities		4,692			4,782
Total liabilities		379,510			385,165
Commitments and contingent liabilities		-			-
Shareholders' equity
Common stock, $.01 par value, 30,000,000 shares authorized, 3,497,243 and 3,514,171 issued and outstanding at September 30, 2018 and December 31, 2017, respectively		35			35
Additional paid-in-capital		32,260			32,371
Retained earnings		32,017			31,423
Unearned Employee Stock Ownership Plan (ESOP) shares		(1,753	)		(1,854	)
Accumulated other comprehensive income (loss)		(1,341	)		(260	)
Total shareholders' equity		61,218			61,715
Total liabilities and shareholders' equity	$	440,728		$	446,880

See notes to unaudited consolidated financial statements.

3

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands except per share data) 

	Three months ended						Nine months ended
	September 30,						September 30,
	2018			2017			2018			2017
Interest and dividend income
Loans, including fees	$	4,099		$	4,297		$	12,342		$	12,877
Taxable securities		301			255			833			729
Tax-exempt securities		116			116			350			345
Federal funds sold and other		159			113			415			302
		4,675			4,781			13,940			14,253
Interest expense
Deposits		713			629			2,051			1,808
Federal Home Loan Bank advances and other borrowings		98			114			284			283
		811			743			2,335			2,091
Net interest income		3,864			4,038			11,605			12,162
Provision for loan losses		169			947			1,335			1,646
Net interest income after provision for loan losses		3,695			3,091			10,270			10,516
Non-interest income
Service charges on deposits		541			496			1,558			1,495
Other service charges		13			13			38			39
Net gain (loss) on disposal of land and equipment		-			-			(3	)		16
Loan servicing fees		131			55			259			219
Gains on mortgage loans sold, net		15			91			74			165
Income from company owned life insurance		39			43			121			128
Insurance recovery on fictitious loans		-			-			875			-
Other		43			6			48			13
		782			704			2,970			2,075
Non-interest expense
Salaries and employee benefits		1,621			1,599			5,057			5,156
Occupancy and equipment		470			458			1,360			1,403
Data processing		712			698			2,101			1,965
Federal deposit insurance		27			32			91			99
Loan processing and collection		125			82			369			272
Foreclosed assets, net		-			67			17			214
Advertising		87			75			243			290
Professional fees		820			303			1,000			464
Other taxes		111			116			341			352
Director fees and expenses		85			51			176			130
Amortization of intangible assets		84			85			254			256
Early contract termination subsequent measurement		(470	)		-			(470	)		-
Conversion costs		14			-			169			-
Other		239			298			868			840
		3,925			3,864			11,576			11,441
Income (loss) before income taxes		552			(69	)		1,664			1,150
Income tax expense (benefit)		260			(51	)		439			338
Net income (loss)	$	292		$	(18	)	$	1,225		$	812
Earnings (loss) per common share:
Basic	$	0.09		$	(0.01	)	$	0.37		$	0.23
Dilutive		0.09			(0.01	)	$	0.36		$	0.23
Dividend per share	$	0.06		$	0.06		$	0.18		$	0.18

See notes to unaudited consolidated financial statements.

4

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollar amounts in thousands except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2018			2017			2018			2017
Net income (loss)	$	292		$	(18	)	$	1,225		$	812
Other comprehensive income (loss):
Unrealized holding gains (loss) on available for sale securities		(379	)		(103	)		(1,370	)		608
Tax effect		80			35			289			(207	)
Other comprehensive income (loss)		(299	)		(68	)		(1,081	)		401
Comprehensive income (loss)	$	(7	)	$	(86	)	$	144		$	1,213

See notes to unaudited consolidated financial statements.

5

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Dollar amounts in thousands except per share data)

												Accumulated
			Additional						Unearned			Other			Total
	Common		Paid-In			Retained			ESOP			Comprehensive			Shareholders'
	Stock		Capital			Earnings			Shares			Loss			Equity
Balances, January 1, 2018	$	35	$	32,371		$	31,423		$	(1,854	)	$	(260	)	$	61,715
Net income		-		-			1,225			-			-			1,225
Stock repurchases, 16,928 shares repurchased		-		(326	)		-			-			-			(326	)
Dividends paid ($0.18/share)		-		-			(631	)		-			-			(631	)
ESOP compensation earned		-		114			-			101			-			215
Stock based compensation expense		-		101			-			-			-			101
Other comprehensive loss		-		-			-			-			(1,081	)		(1,081	)
Balances, September 30, 2018	$	35	$	32,260		$	32,017		$	(1,753	)	$	(1,341	)	$	61,218

See notes to unaudited consolidated financial statements.

6

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands except per share data)

	Nine months ended
	September 30,
	2018			2017
Operating activities:
Net income	$	1,225		$	812
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		511			569
Provision for loan losses		1,335			1,646
ESOP compensation expense		215			195
Stock based compensation expense		101			228
(Gain) Loss on sale of premises and equipment, net		3			(16	)
(Gain) Loss on sale and write-downs of other real estate owned, net		(58	)		126
Loss on sale of repossessed assets, net		1			6
Loss on fictitious loans		-			25
Amortization of core deposit intangible		254			256
Accretion of fair value adjustments related to loans		(135	)		(303	)
Accretion of fair value adjustments related to deposits		(49	)		(49	)
Amortization of fair value related to subordinated debenture		48			48
Net amortization on securities		207			97
Deferred income tax (benefit) expense		573			(72	)
Net gain on mortgage banking activities		(74	)		(165	)
Origination of loans held for sale		(3,178	)		(5,475	)
Proceeds from loans held for sale		3,000			6,251
Increase in cash value of life insurance		(121	)		(128	)
Change in assets and liabilities, net assets and liabilities acquired:
Accrued interest receivable		15			90
Other assets		126			58
Accrued interest payable		10			28
Other liabilities		(90	)		1,148
Net cash provided by operating activities		3,919			5,375
Investing activities:
Net increase in interest-bearing deposits with other institutions		(747	)		(498	)
Securities available for sale:
Proceeds from calls		-			65
Proceeds from maturities		939			435
Purchases		(17,038	)		(11,762	)
Principal payments received		9,312			5,374
Loan originations and principal payments on loans, net		11,101			2,738
Proceeds from the sale of other real estate owned		1,649			856
Proceeds from the sale of repossessed assets		41			44
Proceeds from the sale of premises and equipment		-			54
Purchase of premises and equipment		(292	)		(173	)
Net cash provided by (used in) investing activities		4,965			(2,867	)
Financing activities:
Net change in deposits		(4,374	)		254
Proceeds from other borrowings		-			1,500
Proceeds from Federal Home Loan Bank borrowings		5,000			13,000
Payments on Federal Home Loan Bank borrowings		(6,200	)		(11,527	)
Cash dividend paid		(631	)		(654	)
Stock repurchases		(326	)		(3,648	)
Net cash (used in) financing activities		(6,531	)		(1,075	)
Net increase in cash and cash equivalents		2,353			1,433
Cash and cash equivalents at beginning of period		20,499			24,389
Cash and cash equivalents at the end of the period	$	22,852		$	25,822
Additional cash flows and supplementary information:
Cash paid during the year for:
Interest on deposits and debt	$	2,325		$	2,064
Income taxes payment		16			250
Other real estate owned and other repossessed assets acquired in settlement of loans	$	963		$	2,124

See notes to unaudited consolidated financial statements

7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Poage Bankshares, Inc. (the “Company” or “Poage”) and its wholly owned subsidiary Town Square Bank (which was formerly operated under the name “Home Federal Savings and Loan Association”) (the “Bank”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.  Actual results could differ from those estimates used in the preparation of the financial statements.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2018 and December 31, 2017 and the results of operations and cash flows for the interim periods ended September 30, 2018 and 2017. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year or any other period. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto filed as part of the Company’s 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

NOTE 2 – REVENUE RECOGNITION

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. We finalized our assessment and identified the revenue line items within the scope of this new guidance. Neither the new standard, nor any of the amendments detailed below, resulted in a material change from our current accounting for revenue because the majority of Poage’s financial instruments are not within the scope of Topic 606, and those that are require no change in the accounting.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services are distinct. Topic 606 includes two criteria for assessing whether promises to transfer goods or services are distinct. One of those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion. Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property, which is satisfied at a point in time, or a right to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to improve the operability and understandability of the licensing implementation guidance. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

8

In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements. The FASB board decided to issue a separate update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued in ASU No. 2014-09.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “Topic 606”). We elected to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and securities are both excluded from this topic, a significant majority of our revenues are not subject to the new guidance. Our services that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our obligation to the customer. A description of the Company’s revenue that falls within the scope of Topic 606 as well as an explanation of why they are not impacted are as follows:

Service charges on deposit accounts: We earn fees from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation. Service charges on deposit accounts includes approximately $257,000, $723,000, $239,000 and $709,000 of revenue for the three and nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

Debit card and ATM fees: Debit card and ATM fees include ATM usage fees and debit card interchange income. As with the transaction-based fees on deposit accounts, the ATM fees are recognized at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Debit card and ATM fees includes approximately $262,000, $766,000, $235,000 and $728,000 of revenue for the three and nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

Gains/Losses on Sales of OREO - The Company records a gain or loss from the sale of other real estate owned (“OREO”) when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  ASC 606 does not significantly change the pattern of revenue recognition unless the Company finances the sale. There are no instances of the Company financing the sale of one of its OREO properties during the three and nine months ended September 30, 2018. Sales of OREO includes approximately $25,000 and $12,000 in net gains for the three months ended September 30, 2018 and 2017 and $60,000 in net gains and $26,000 in net losses for the nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

The adoption of Topic 606 did not have a material impact on our consolidated financial position, results of operations, equity, or cash flows as of the adoption date or for the three and nine months ended September 30, 2018.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early adoption of the other provisions mentioned above is not permitted. Starting with the first quarter of 2018, the Company began using an exit price notion when measuring the fair value of its loan portfolio for disclosure purposes. The adoption of ASU No. 2016-01 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

9

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provided guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation-Stock Compensation. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The adoption of ASU No. 2017-09 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

Newly Issued Accounting Standards Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update 2016-02 Leases guidance requiring the recognition in the statement of financial position of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires that a lessee should recognize lease assets and lease liabilities as compared to previous GAAP that did not require lease assets and lease liabilities to be recognized for most leases. The guidance becomes effective for us on January 1, 2019. Poage is currently evaluating the impact on its leases to determine the impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (the ASU), which introduces the current expected credit losses methodology. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured as fair value through net income. Among other things, the ASU requires the measurement of all expected credit losses for financial assets, including loans and available-for-sale debt securities, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The new model, referred to as the current expected credit loss (“CECL”) model, will require institutions to calculate all probable and estimable losses that are expected to be incurred through the loan's entire life. ASU 2016-13 also requires the allowance for credit losses for purchased financial assets with credit deterioration since origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial allowance will be added to the purchase price rather than recorded as credit loss expense. The disclosure of credit quality indicators related to the amortized cost of financing receivables will be further disaggregated by year of origination (or vintage). Institutions are to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the standard is effective. The amendments are effective for fiscal years beginning after December 15, 2019. Early application will be permitted for fiscal years beginning after December 15, 2018. Management has formed a CECL committee that is evaluating the data gathering requirements, available economic forecasting and loss estimation models and potential software that would be employed by the Company to facilitate the adoption of this guidance and its required disclosures on the Company’s consolidated financial statements. Upon adoption, management anticipates an initial one-time increase in the allowance for loan losses along with a corresponding decrease in capital as permitted by the standard.

In January 2017, FASB issued ASU 2017-4, Intangible-Goodwill and Other (Topic 350), to simplify accounting for goodwill impairment. The new guidance will simplify financial reporting because it eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The revised guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. Poage is currently evaluating the impact of the new guidance on its consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fee and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer. The amendments require the premium for certain callable debt securities to be amortized to the earliest call date. The amendments are effective for public companies for annual periods beginning after December 15, 2019. The adoption of ASU No. 2017-08 is not expected to have a material effect on the Company’s consolidated operating results or financial condition. 

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—the ASU improves the disclosure requirements on fair value measurements in ASC 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. Poage is currently evaluating the impact of adopting the new guidance on its consolidated financial statements, but it is not expected to have a material impact.

10

NOTE 4 - SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale at September 30, 2018 and December 31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
September 30, 2018
States and political subdivisions	$	18,185	$	55	$	(258	)	$	17,982
U.S. Government agencies and sponsored entities		5,000		-		(85	)		4,915
Mortgage-backed securities: residential		27,664		-		(811	)		26,853
Collateralized mortgage obligations		9,256		-		(199	)		9,057
SBA loan pools		10,934		-		(400	)		10,534
Total securities	$	71,039	$	55	$	(1,753	)	$	69,341

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2017
States and political subdivisions	$	19,082	$	190	$	(108	)	$	19,164
U.S. Government agencies and sponsored entities		3,500		-		(50	)		3,450
Mortgage-backed securities: residential		27,449		44		(226	)		27,267
Collateralized mortgage obligations		5,048		-		(93	)		4,955
SBA loan pools		9,379		-		(85	)		9,294
Total securities	$	64,458	$	234	$	(562	)	$	64,130

There were no sales of securities for the three and nine months ended September 30, 2018 and 2017.

The amortized cost and fair value of the securities portfolio at September 30, 2018 are shown in the following table by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):

	September 30,
	2018
	Amortized		Fair
	Cost		Value
Within one year	$	2,521	$	2,521
One to five years		7,972		7,882
Five to ten years		9,168		9,086
Beyond ten years		3,524		3,408
Mortgage-backed securities and collateralized mortgage obligations		36,920		35,910
SBA loan pools		10,934		10,534
Total	$	71,039	$	69,341

11

The following table summarizes the securities with unrealized losses at September 30, 2018 and December 31, 2017, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
September 30, 2018
States and political subdivisions	$	4,850	$	(89	)	$	2,920	$	(169	)	$	7,770	$	(258	)
U.S. Government agencies and sponsored entities		1,486		(14	)		3,429		(71	)		4,915		(85	)
Mortgage-backed securities: residential		14,878		(327	)		11,975		(484	)		26,853		(811	)
Collateralized mortgage obligations		5,161		(57	)		3,896		(142	)		9,057		(199	)
SBA loan Pools		3,612		(76	)		6,922		(324	)		10,534		(400	)
Total available-for-sale securities	$	29,987	$	(563	)	$	29,142	$	(1,190	)	$	59,129	$	(1,753	)
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
December 31, 2017
States and political subdivisions	$	5,080	$	(56	)	$	1,024	$	(52	)	$	6,104	$	(108	)
U.S. Government agencies and sponsored entities		992		(8	)		2,458		(42	)		3,450		(50	)
Mortgage-backed securities: residential		19,256		(181	)		2,394		(45	)		21,650		(226	)
Collateralized mortgage obligations		1,954		(15	)		3,001		(78	)		4,955		(93	)
SBA loan Pools		6,565		(66	)		1,343		(19	)		7,908		(85	)
Total available-for-sale securities	$	33,847	$	(326	)	$	10,220	$	(236	)	$	44,067	$	(562	)

Unrealized losses on bonds have not been recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell, and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

12

NOTE 5 – LOANS

Loans at September 30, 2018 and December 31, 2017 were as follows (in thousands):

	September 30,		December 31,
	2018		2017
Real estate:
One to four family	$	155,357	$	170,754
Multi-family		7,777		6,505
Commercial real estate		82,225		84,312
Construction and land		9,253		10,004
		254,612		271,575
Commercial and industrial		34,930		33,664
Consumer
Home equity loans and lines of credit		10,974		10,707
Motor vehicle		11,049		10,368
Other		7,354		7,420
		29,377		28,495
Total		318,919		333,734
Less: Net deferred loan fees		505		499
Allowance for loan losses		3,124		4,681
	$	315,290	$	328,554

13

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2018 and December 31, 2017. Accrued interest receivable and net deferred loan fees are not considered significant and therefore are not included in the loan balances presented in the table below (in thousands):

September 30, 2018
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	321	$	-	$	2,085	$	2,406	$	5,039	$	1,075	$	248,498	$	254,612
Commercial and industrial		93		-		407		500		3,849		-		31,081		34,930
Consumer		4		-		214		218		54		-		29,323		29,377
Total	$	418	$	-	$	2,706	$	3,124	$	8,942	$	1,075	$	308,902	$	318,919
December 31, 2017
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	624	$	-	$	2,232	$	2,856	$	5,523	$	1,305	$	264,747	$	271,575
Commercial and industrial		1,290		-		275		1,565		2,612		-		31,052		33,664
Consumer		5		-		255		260		60		-		28,435		28,495
Total	$	1,919	$	-	$	2,762	$	4,681	$	8,195	$	1,305	$	324,234	$	333,734

14

The following table presents information related to impaired loans by class of loans as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018						December 31, 2017
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
With no related allowance recorded:
Real Estate:
One to four family	$	743	$	699	$	-	$	699	$	655	$	-
Multi-family		-		-		-		-		-		-
Commercial real estate		2,556		2,416		-		2,593		2,452		-
Construction and land		170		170		-		179		179		-
Commercial and industrial		3,616		2,849		-		136		136		-
Consumer:
Home equity and lines of credit		25		25		-		31		31		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal	$	7,110	$	6,159	$	-	$	3,638	$	3,453	$	-
With a related allowance recorded:
Real Estate:
One to four family	$	389	$	389	$	42	$	1,091	$	988	$	367
Multi-family		-		-		-		-		-		-
Commercial real estate		1,365		1,365		279		1,249		1,249		257
Construction and land		-		-		-		-		-		-
Commercial and industrial		1,000		1,000		93		2,476		2,476		1,290
Consumer:
Home equity and lines of credit		29		29		4		29		29		5
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal		2,783		2,783		418		4,845		4,742		1,919
Total	$	9,893	$	8,942	$	418	$	8,483	$	8,195	$	1,919

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial charge-offs.

15

The following tables present the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three months ended September 30, 2018						Three months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	2,660	$	4	$	4	$	2,345	$	1	$	1
Multi-family		-		-		-		-		-		-
Commercial real estate		3,787		19		19		3,358		29		29
Construction and land		172		2		2		169		2		2
Commercial and industrial		4,339		12		3		96		1		1
Consumer:
Home equity and lines of credit		55		-		-		33		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,013	$	37	$	28	$	6,001	$	33	$	33

	Nine months ended September 30, 2018						Nine months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	3,144	$	75	$	67	$	1,710	$	16	$	16
Multi-family		-		-		-		-		-		-
Commercial real estate		3,740		80		73		2,991		99		94
Construction and land		175		6		6		122		6		5
Commercial and industrial		4,037		27		18		196		1		1
Consumer:
Home equity and lines of credit		57		-		-		32		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,153	$	188	$	164	$	5,051	$	122	$	116

16

The following tables set forth an analysis of our allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 (in thousands):

Three months ended				Commercial
September 30, 2018	Real Estate			and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	2,941		$	1,411		$	210		$	4,562
Provision for loan losses		79			57			33			169
Loans charged-off		(616	)		(974	)		(36	)		(1,626	)
Recoveries		2			6			11			19
Total ending allowance balance	$	2,406		$	500		$	218		$	3,124

Three months ended				Commercial
September 30, 2017	Real Estate			and Industrial		Consumer			Total
Allowance for loan losses:
Beginning balance	$	2,244		$	233	$	210		$	2,687
Provision for loan losses		811			123		13			947
Loans charged-off		(449	)		-		(27	)		(476	)
Recoveries		4			9		15			28
Total ending allowance balance	$	2,610		$	365	$	211		$	3,186

Nine months ended				Commercial
September 30, 2018	Real Estate			and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	2,856		$	1,565		$	260		$	4,681
Provision for loan losses		714			636			(15	)		1,335
Loans charged-off		(1,180	)		(1,741	)		(88	)		(3,009	)
Recoveries		16			40			61			117
Total ending allowance balance	$	2,406		$	500		$	218		$	3,124

Nine months ended				Commercial
September 30, 2017	Real Estate			and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,946		$	218		$	185		$	2,349
Provision for loan losses		1,397			134			115			1,646
Loans charged-off		(742	)		(23	)		(137	)		(902	)
Recoveries		9			36			48			93
Total ending allowance balance	$	2,610		$	365		$	211		$	3,186

Nonaccrual loans, and loans past due 90 days still on accrual status, consist of smaller balance homogeneous loans that are collectively evaluated for impairment.

17

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual status, by class of loans, as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018				December 31, 2017
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
	Nonaccrual		Still Accruing		Nonaccrual		Still Accruing
Real estate:
One to four family	$	1,481	$	-	$	2,911	$	-
Multi-family		-		-		-		-
Commercial real estate		1,586		-		1,677		-
Construction and land		29		-		34		-
Commercial and industrial		3,333		-		1,638		-
Consumer:
Home equity loans and lines of credit		54		-		66		-
Motor vehicle		23		-		26		-
Other		7		-		6		-
Total	$	6,513	$	-	$	6,358	$	-

18

The following tables present the aging of the recorded investment in past due loans as of September 30, 2018 and December 31, 2017 by class of loans (in thousands). Non-accrual loans of $6.5 million as of September 30, 2018 and $6.3 million at December 31, 2017 are included in the tables below and have been categorized based on their payment status (in thousands):

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
September 30, 2018
Real estate:
One to four family	$	1,119	$	228	$	409	$	1,756	$	549	$	153,052	$	155,357
Multi-family		-		-		-		-		-		7,777		7,777
Commercial real estate		-		-		1,480		1,480		526		80,219		82,225
Construction and land		32		-		-		32		-		9,221		9,253
Commercial and industrial		23		-		3,333		3,356		-		31,574		34,930
Consumer:
Home equity loans and lines of credit		-		-		29		29		-		10,945		10,974
Motor vehicle		53		-		20		73		-		10,976		11,049
Other		8		7		7		22		-		7,332		7,354
Total	$	1,235	$	235	$	5,278	$	6,748	$	1,075	$	311,096	$	318,919
	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
December 31, 2017
Real estate:
One to four family	$	1,615	$	628	$	1,199	$	3,442	$	590	$	166,722	$	170,754
Multi-family		-		-		-		-		-		6,505		6,505
Commercial real estate		249		315		1,367		1,931		715		81,666		84,312
Construction and land		-		-		-		-		-		10,004		10,004
Commercial and industrial		1,133		4		1,631		2,768		-		30,896		33,664
Consumer:
Home equity loans and lines of credit		-		-		60		60		-		10,647		10,707
Motor vehicle		40		-		21		61		-		10,307		10,368
Other		3		6		-		9		-		7,411		7,420
Total	$	3,040	$	953	$	4,278	$	8,271	$	1,305	$	324,158	$	333,734

19

Troubled Debt Restructurings (“TDRs”)

As of September 30, 2018, the Company had a recorded investment in seven TDRs which totaled $4.1 million. There were five TDRs which totaled $3.2 million at December 31, 2017. A less-than-market interest rate and an extended term were granted as concessions for TDRs. No additional charge-off has been made for the loan relationships. No additional commitments to lend have been made to the borrower. The Company allocated $176,000 and $153,000 of specific allowance for the loan relationships at September 30, 2018 and December 31, 2017.

September 30, 2018	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	23	$	15	$	38
Multi-family		-		-		-
Commercial real estate		906		2,195		3,101
Construction and land		-		-		-
Commercial and industrial		-		998		998
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	929	$	3,208	$	4,137

December 31, 2017	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	30	$	16	$	46
Multi-family		-		-		-
Commercial real estate		933		2,195		3,128
Construction and land		-		-		-
Commercial and industrial		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	963	$	2,211	$	3,174

20

There was one TDR in the amount of $831,000 considered to be in default within twelve months of modification as of September 30, 2018. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The following table presents TDRs that occurred during the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):

	Three months ended September 30, 2018						Three months ended September 30, 2017
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real Estate:
One to four family		-	$	-	$	-		-	$	-	$	-
Multi-family		-		-		-		-		-		-
Commercial real estate		-		-		-		-		-		-
Construction and land		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-		-		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total		-	$	-	$	-		-	$	-	$	-
	Nine months ended September 30, 2018						Nine months ended September 30, 2017
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real Estate:
One to four family		-	$	-	$	-		2	$	148	$	148
Multi-family		-		-		-		-		-		-
Commercial real estate		-		-		-		1		117		117
Construction and land		-		-		-		-		-		-
Commercial and industrial		2		1,002		1,002		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-		-		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total		2	$	1,002	$	1,002		3	$	265	$	265

21

CREDIT QUALITY INDICATORS:

The Company 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 Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans. The analysis for residential real estate and consumer loans primarily includes review of past due status. This analysis is performed on a quarterly basis. The Company 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.

Loss. Loans classified as loss are considered uncollectable and of such little value that continuing to carry them as an asset is not feasible.  Loans will be classified as a loss when it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

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

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
September 30, 2018	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	150,092	$	1,702	$	3,563	$	-	$	-	$	155,357
Multi-family		7,777		-		-		-		-		7,777
Commercial real estate		70,168		5,420		6,637		-		-		82,225
Construction and land		8,754		329		170		-		-		9,253
Commercial and industrial		27,529		770		5,767		864		-		34,930
Home equity loans and lines of credit		10,828		-		146		-		-		10,974
Motor vehicle		11,005		8		36		-		-		11,049
Other		7,351		-		3		-		-		7,354
Total	$	293,504	$	8,229	$	16,322	$	864	$	-	$	318,919
			Special
December 31, 2017	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	163,709	$	1,673	$	5,372	$	-	$	-	$	170,754
Multi-family		6,505		-		-		-		-		6,505
Commercial real estate		76,226		2,957		5,129		-		-		84,312
Construction and land		9,825		-		179		-		-		10,004
Commercial and industrial		25,891		2,602		5,171		-		-		33,664
Home equity loans and lines of credit		10,549		0		158		-		-		10,707
Motor vehicle		10,291		9		68		-		-		10,368
Other		7,413		-		7		-		-		7,420
Total	$	310,409	$	7,241	$	16,084	$	-	$	-	$	333,734

There were $888,000 and $1.1 million of purchased credit impaired (“PCI”) loans included in substandard loans at September 30, 2018 and December 31, 2017, respectively.

22

The Company holds purchased loans without evidence of credit quality deterioration. In addition, the Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable that all contractually required payments would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount of those loans is as follows at September 30, 2018 and December 31, 2017 (in thousands):

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of September 30, 2018	Loans		Loans
Real estate:
One to four family	$	22,587	$	549
Multi-family		1,389		-
Commercial real estate		13,002		526
Construction and land		400		-
Commercial and industrial		683		-
Consumer loans:
Home equity loans and lines of credit		981		-
Motor vehicle		16		-
Other		450		-
Total loans	$	39,508	$	1,075

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of December 31, 2017	Loans		Loans
Real estate:
One to four family	$	25,437	$	590
Multi-family		1,829		-
Commercial real estate		15,157		715
Construction and land		510		-
Commercial and industrial		1,359		-
Consumer loans:
Home equity loans and lines of credit		959		-
Motor vehicle		43		-
Other		521		-
Total loans	$	45,815	$	1,305

For the purchased loans disclosed above, the Company did not increase the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017.

23

The following table presents the composition of the acquired loans at September 30, 2018 and December 31, 2017:

As of September 30, 2018
	Contractual		Remaining			Carrying
(in thousands)	Amount		Discount			Amount
Real estate:
One to four family	$	23,362	$	(226	)	$	23,136
Multi-family		1,389		-			1,389
Commercial real estate		13,608		(80	)		13,528
Construction and land		400		-			400
Commercial and industrial		683		-			683
Consumer loans:
Home equity loans and lines of credit		982		(1	)		981
Motor vehicle		16		-			16
Other		450		-			450
Total loans	$	40,890	$	(307	)	$	40,583

As of December 31, 2017
	Contractual		Remaining			Carrying
(in thousands)	Amount		Discount			Amount
Real estate:
One to four family	$	26,335	$	(308	)	$	26,027
Multi-family		1,832		(3	)		1,829
Commercial real estate		16,050		(178	)		15,872
Construction and land		511		(1	)		510
Commercial and industrial		1,360		(1	)		1,359
Consumer loans:
Home equity loans and lines of credit		962		(3	)		959
Motor vehicle		44		(1	)		43
Other		522		(1	)		521
Total loans	$	47,616	$	(496	)	$	47,120

The following tables presents the purchased loans that are included within the scope of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, as of September 30, 2018 and December 31, 2017.

(in thousands)	September 30, 2018		December 31, 2017
Carrying amount	$	1,075	$	1,305
Non-accretable difference		167		214
Accretable yield		67		100
Contractually-required principal and interest payments	$	1,309	$	1,619

The Company adjusted interest income to recognize $5,000, $16,000, $9,000 and $33,000 of accretable yield on credit-impaired purchased loans for the three and nine months ended September 30, 2018 and 2017, respectively.

24

Accretable yield, or income expected to be collected, is as follows for the nine months ended September 30, 2018 and 2017 (in thousands):

	2018			2017
Balance at January 1	$	100		$	146
New Loans Purchased		-			-
Accretion of income		(16	)		(33	)
Reclassifications from nonaccretable difference		-			-
Disposals		(17	)		-
Balance at September 30	$	67		$	113

25

NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Advances from the FHLB at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30, 2018		December 31, 2017
Maturities December 2018 through January 2029, fixed rate at rates from 2.16% to 3.35%, weighted average rate of 2.39% at September 30, 2018 and 1.97% at December 31, 2017	$	6,219	$	7,419

Payments contractually required over the next five years are as follows as of September 30, 2018 (in thousands): 

remainder for year ending 2018	$	5,298
2019		442
2020		93
2021		78
2022		66
Thereafter		242
Total	$	6,219

There were no other borrowings at September 30, 2018 and December 31, 2017.

NOTE 7 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities: The fair values for securities are determined by quoted market prices, if available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of similar securities (Level 2). This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3).

26

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less estimated costs to sell. Fair values are generally based on third party appraisals of the property resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less estimated costs to sell, an impairment loss is recognized.

Assets and liabilities measured at fair value on a recurring basis, at September 30, 2018 and December 31, 2017, are as follows (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	17,982	$	-	$	17,982	$	-
U.S. Government agencies and sponsored entities		4,915		-		4,915		-
Mortgage backed securities: residential		26,853		-		26,853		-
Collateralized mortgage obligations		9,057		-		9,057		-
SBA loan pools		10,534		-		10,534		-
Total securities	$	69,341	$	-	$	69,341	$	-
	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	19,164	$	-	$	19,164	$	-
U.S. Government agencies and sponsored entities		3,450		-		3,450		-
Mortgage backed securities: residential		27,267		-		27,267		-
Collateralized mortgage obligations		4,955		-		4,955		-
SBA loan pools		9,294		-		9,294		-
Total securities	$	64,130	$	-	$	64,130	$	-

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2018.

27

Assets measured at fair value on a non-recurring basis at September 30, 2018 and December 31, 2017 are summarized below (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	369	$	-	$	-	$	369
Commercial real estate, net		1,161		-		-		1,161
Commercial and industrial, net		1,638		-		-		1,638
Consumer loan HELOC, net		25		-		-		25
Other real estate owned
Residential real estate, net	$	65	$	-	$	-	$	65
	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	621	$	-	$	-	$	621
Commercial real estate, net		992		-		-		992
Commercial and industrial, net		1,186		-		-		1,186
Consumer loan HELOC, net		24		-		-		24
Other real estate owned
Residential real estate, net	$	610	$	-	$	-	$	610

Commercial and residential real estate properties classified as OREO are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for real estate properties classified as other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank’s management. The appraisal values are discounted to allow for estimated selling expenses and fees, and the discounts range from 5% to 10%.

At September 30, 2018, impaired loans recorded at fair value had a net carrying value of $3.2 million, which was equal to the outstanding balance of $3.6 million, net of a valuation allowance of $418,000. At December 31, 2017, impaired loans recorded at fair value had a net carrying value of $2.8 million, which was equal to the outstanding balance of $4.7 million, net of a valuation allowance of $1.9 million. There were charge-offs of $1.5 million, $2.2 million, $353,000 and $391,000 for the three and nine months ended September 30, 2018 and 2017, respectively. The change in specific reserve on impaired loans resulted in a provision for loan losses of $93,000 and $744,000 for the three and nine months ended September 30, 2018. The change in specific reserve on impaired loans resulted in an increase of $294,000 and $488,000 for the three and nine months ended September 30, 2017.

At September 30, 2018, OREO recorded at fair value had a net carrying value of $65,000, which was equal to the outstanding balance of $126,000, net of a valuation allowance of $61,000. There were no write-downs for the three months ended September 30, 2018 and $3,000 in write-downs for the nine months ended September 30, 2018. There were $42,000 in write-downs for the three months ended September 30, 2017 and $100,000 in write-downs for the nine months ended September 30, 2017. At December 31, 2017, other real estate owned recorded at fair value had a net carrying value of $610,000, which was equal to the outstanding balance of $1.03 million, net of a valuation allowance of $420,000.

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The carrying amounts and estimated fair values of financial instruments at September 30, 2018 and December 31, 2017 are as follows (in thousands):

	Carrying		Fair Value Measurements
September 30, 2018	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	22,852	$	22,852	$	-	$	-	$	22,852
Interest bearing deposits		3,735		-		3,735		-		3,735
Securities		69,341		-		69,341		-		69,341
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		508		-		508		-		508
Loans, net		315,290		-		-		314,342		314,342
Accrued interest receivable		1,398		-		362		1,036		1,398
Financial liabilities
Deposits	$	365,627	$	210,147	$	151,904	$	-	$	362,051
Federal Home Loan Bank advances		6,219		4,999		1,212		-		6,211
Subordinated debenture		2,938		-		2,921		-		2,921
Accrued interest payable		34		-		34		-		34

	Carrying		Fair Value Measurements
December 31, 2017	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	20,499	$	20,499	$	-	$	-	$	20,499
Interest bearing deposits		2,988		-		2,988		-		2,988
Securities		64,130		-		64,130		-		64,130
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		256		-		256		-		256
Loans, net		328,554		-		-		328,236		328,236
Accrued interest receivable		1,413		-		333		1,080		1,413
Financial liabilities
Deposits	$	370,050	$	212,625	$	154,859	$	-	$	367,484
Federal Home Loan Bank advances		7,419		4,999		2,404		-		7,403
Subordinated debenture		2,890		-		2,873		-		2,873
Accrued interest payable		24		-		24		-		24

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents:

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

Restricted Stock:

It is not practical to determine the fair value of FHLB and Bankers Bank of Kentucky stock due to restrictions placed on their transferability. 

29

Loans:

Fair values of loans, excluding loans held for sale, are estimated as follows: ASU 2016-1, "Recognition and Measurement of Financial Assets and Financial Liabilities," requires the Company to use the exit price notion when measuring fair value of financial instruments for disclosure purposes effective January 1, 2018, therefore the fair value presented in the following table may not be comparable to prior period.  For performing loans, the fair value is determined based on a discounted cash flow analysis (income approach).  The discounted cash flow was based on contractual maturity of the loan and market indications of rates, prepayment speeds, defaults and credit risk resulting in Level 3 classification.  For non-performing loans, the fair value is determined based on the estimated values of the underlying collateral or individual analysis of receipts (asset approach) resulting in Level 3 classification.  At September 30, 2018, the fair values of loans, excluding loans held for sale, were estimated as follows: for variable rate loans that reprice frequently and with no significant change in credit risk, fair values were based on carrying values resulting in a Level 3 classification. Fair values for other loans were estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans were valued as described previously.

The fair value of loans held for sale is based upon estimated values received from independent third-party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans resulting in a Level 2 classification.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are by definition equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Other borrowings, Federal Home Loan Bank advances and Subordinate debenture:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable/Payable:

The carrying amounts of accrued interest approximate fair value and are classified by level consistent with the level of the related assets or liabilities.

NOTE 8 - ESOP

Employees participate in an Employee Stock Ownership Plan (“ESOP”). The ESOP borrowed from the Company to purchase 269,790 shares of the Company’s common stock at $10 per share in the Company’s initial public offering. The Company makes discretionary contributions to the ESOP, and pays dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants receive the shares at the end of employment.

There were no contributions to the ESOP for the three and nine months ended September 30, 2018 and 2017.

Shares held by the ESOP at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30,		December 31,
	2018		2017
Allocated to participants		73,168		64,148
Committed to be released		10,115		13,538
Unearned		175,305		185,420
Total ESOP shares		258,588		263,106
Fair value of unearned shares	$	4,444	$	3,894

30

NOTE 9 – EARNINGS PER SHARE

The factors used in the earnings per share computation for the three and nine months ended September 30, 2018 and 2017, were as follows (dollar amounts in thousands, except per share data):

	Three months ended					Nine months ended
	September 30,					September 30,
	2018		2017			2018		2017
Basic
Net income (loss)	$	292	$	(18	)	$	1,225	$	812
Less: Earnings (loss) allocated to participating securities		-		-			2		5
Net income (loss) available to common shareholders	$	292	$	(18	)		1,223		807
Weighted average common shares outstanding		3,497,243		3,522,121			3,501,638		3,627,092
Less: Average unallocated ESOP shares		177,525		191,037			180,862		194,388
Average participating shares		134		15,357			5,937		21,170
Average shares		3,319,584		3,315,727			3,314,839		3,411,534
Basic earnings (loss) per common share	$	0.09	$	(0.01	)	$	0.37	$	0.23
Diluted
Net income (loss) available to common shareholders	$	292	$	(18	)	$	1,223	$	807
Weighted average common shares outstanding for basic earnings per common share		3,319,584		3,315,727			3,314,839		3,411,534
Add: Dilutive effects of assumed exercises of stock options		58,336		-			42,510		29,765
Average shares and dilutive potential common shares		3,377,920		3,315,727			3,357,349		3,441,299
Diluted earnings (loss) per common share	$	0.09	$	(0.01	)	$	0.36	$	0.23

There were no stock options considered anti-dilutive for the three and nine months ended September 30, 2018 and the nine months ended September 30, 2017. All stock options were considered anti-dilutive for the three months ended September 30, 2017.

NOTE 10 – STOCK BASED COMPENSATION

On January 8, 2013, the Company’s shareholders approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Plan”) for employees and directors of the Company. The Plan authorizes the issuance of up to 472,132 shares of the Company’s common stock, with no more than 134,895 of shares as restricted stock awards and 337,237 as stock options, either incentive stock options or non-qualified stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to whom equity incentive awards are granted.

The following table summarizes stock option activity for the nine months ended September 30, 2018:

			Weighted Average
	Options		Exercise Price
Outstanding -December 31, 2017		141,850	$	14.88
Granted		-		-
Exercised and settled		-		-
Forfeited		-		-
Outstanding -September 30, 2018		141,850	$	14.88
Fully vested and exercisable at September 30, 2018		135,850	$	14.90
Fully vested and exercisable at December 31, 2017		99,600	$	14.90
Expected to vest in future periods		6,000

31

Stock options are assumed to be earned ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the number of options assumed to be earned. At September 30, 2018, 141,850 options were outstanding, and 135,850 options were fully vested and exercisable with intrinsic value of $1.5 million and $1.4 million, respectively. At December 31, 2017, 141,850 options were outstanding, and 99,600 options were fully vested and exercisable with intrinsic value of $868,000 and $610,000, respectively.

During the nine months ended September 30, 2018, 36,250 options vested. Stock-based compensation expense for stock options included in salaries and benefits for the three and nine months ended September 30, 2018 and 2017 was $3,000, $32,000, $18,000 and $54,000, respectively. Total unrecognized compensation cost related to non-vested stock options was $7,000 at September 30, 2018 and is expected to be recognized over a period of 1.5 years.

The following table summarizes non-vested restricted stock activity for the nine months ended September 30, 2018:

Balance -December 31, 2017	15,222
Granted	-
Forfeited	-
Vested	(15,088	)
Balance -September 30, 2018	134

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of the Company’s common stock at the date of the grant multiplied by the number of shares granted that are expected to vest. The fair value of the restricted stock awards vested during the nine months ended September 30, 2018 was $287,000. Stock-based compensation expense for the restricted stock included in salaries and benefits for the three and nine months ended September 30, 2018 and 2017 was $700, $69,000, $58,000 and $173,000, respectively. Unrecognized compensation expense for non-vested restricted stock awards was $300 at September 30, 2018 and is expected to be recognized over a weighted-average period of 2 months.

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NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax, for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities
	Three months ended						Nine months ended
	September 30,						September 30,
	2018			2017			2018			2017
Beginning balance	$	(1,042	)	$	316		$	(260	)	$	(153	)
Other comprehensive income (loss), net of tax before reclassification		(299	)		(68	)		(1,081	)		401
Amounts reclassified from accumulated other comprehensive income for loss on call of securities, net of tax expense of $0, $0, $0 and $0 respectively		-			-			-			-
Net current period other comprehensive income (loss)		(299	)		(68	)		(1,081	)		401
Ending Balance	$	(1,341	)	$	248		$	(1,341	)	$	248

NOTE 12 – AGREEMENT AND PLAN OF MERGER

On July 11, 2018, City Holding Company (“City”) and Poage entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which City will acquire Poage.

Under the terms of the Merger Agreement, each outstanding share of Poage common stock will be converted into the right to receive 0.335 shares of City common stock. In addition, each outstanding option to acquire shares of Poage common stock will convert into the right to receive a cash payment equal to the product of (i) the number of shares of Poage common stock subject to the stock option and (ii) the amount by which the per-share merger consideration exceeds the exercise price.

City and City National will increase the size of their respective Board of Directors by one member and will appoint Thomas L. Burnette, current Chairman of the Poage Board of Directors, to the Board of Directors of each of City and City National.

Following the acquisition of Poage by City, Town Square Bank, the wholly-owned subsidiary of Poage (“Town Square”), will merge with and into, City National Bank of West Virginia (“City National”), the wholly-owned subsidiary of City, with City National being the surviving institution.

The Merger Agreement contains customary representations and warranties from Poage and City, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of Poage’s businesses during the interim period between the execution of the Merger Agreement and the closing of the merger, (2) Poage’s obligations to facilitate its shareholders’ consideration of, and voting upon, the merger, (3) the recommendation by the Board of Directors of Poage in favor of approval of the merger by its shareholders, and (4) Poage’s non-solicitation obligations relating to alternative business combination transactions.

The merger was unanimously approved by the Board of Directors of each of City and Poage and is expected to close in the fourth quarter of 2018.

Consummation of the merger is subject to certain customary conditions, including, among others, approval of the merger by Poage’s shareholders, the receipt of all required regulatory approvals and expiration of applicable waiting periods, the accuracy of specified representations and warranties of each party, the performance in all material respects by each party of its obligations under the Merger Agreement and the absence of any injunctions or other legal restraints.

The Merger Agreement provides certain termination rights for both City and Poage and further provides that, upon termination of the Merger Agreement under certain circumstances, Poage is obligated to pay City a termination fee of $4.0 million.

In connection with the execution of the Merger Agreement, all Poage directors entered into a voting agreement with City and Poage pursuant to which such individuals, in their capacities as shareholders, have agreed, among other things, to vote their respective shares of Poage common stock in favor of the approval of the merger.

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ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for Poage Bankshares, Inc. for the year ended December 31, 2017, as filed with the Securities and Exchange Commission.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements, which can be identified by the use of such words as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may,” and similar expressions. These forward-looking statements include, but are not limited to:

>	statements of our goals, intentions and expectations;
>	statements regarding our business plans and prospects and growth and operating strategies;
>	statements regarding the credit quality of our loan and investment portfolios;
>	estimates of our risks and future costs and benefits;
>	non-historical statements about our financial condition, results of operations and business of Poage Bankshares.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Except as may be required by law, we do not take any obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q. You should not place undue reliance on such forward-looking statements.

The following factors, among others, could cause the actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

> our ability to manage our operations under adverse economic conditions (including real estate values, loan demand, inflation, commodity prices and unemployment levels) nationally and in our market area;

> adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values);

> significant increases in our loan losses, including as a result of our inability to resolve classified assets, and management’s assumptions in determining the adequacy of the allowance for loan losses;

> credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

> our ability to successfully enhance and maintain internal controls;

> competition among depository and other financial institutions;

> our success in increasing our commercial business and commercial real estate loans;

> our ability to improve our asset quality even as we increase our commercial business, commercial real estate and multi-family lending;

> our success in introducing new financial products;

> our ability to attract and maintain deposits;

34

> decreases in our asset quality;

> changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

> fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

> changes in consumer spending, borrowing and savings habits;

> declines in the yield on our assets resulting from the current interest rate environment;

> increases in the cost of funds resulting from the general economic conditions;

> risks related to a high concentration of loans secured by real estate located in our market area;

> the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

> changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements (particularly the new capital regulations), regulatory fees and compliance costs and the resources we have available to address such changes;

> changes in the level of government support of housing finance;

> our ability to enter new markets successfully and capitalize on growth opportunities

> changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

> changes in our organization, compensation and benefit plans and our ability to retain key members of our senior management team;

> loan delinquencies and changes in the underlying cash flows of our borrowers;

> the failure or security breaches of computer systems on which we depend;

> the ability of key third-party providers to perform their obligations to us;

> changes in the financial condition or future prospects of issuers of securities that we own;

> actual results of the pending merger with City Holding Company could vary materially as a result of a number of factors, including, without limitations, the possibility that various closing conditions may not be satisfied or waived and the merger agreement could be terminated under certain circumstances;

> potential impact of the pending merger on relationships with third parties, including customers, employees and competitors; and

> delays in closing the pending merger, or failure to close the merger.

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Comparison of Financial Condition at September 30, 2018 and December 31, 2017

Total assets at September 30, 2018 decreased $6.2 million, or 1.4%, to $440.7 million from $446.9 million at December 31, 2017. The decrease was attributed to a decrease of $4.4 million in deposits and a decrease of $1.2 million in FHLB advances.

Cash and Cash equivalents increased by $2.4 million, or 11.5%, to $22.9 million at September 30, 2018 from $20.5 million at December 31, 2017. The increase in cash was primarily attributable to a decrease of $13.3 million in loans, net, outstanding, offset by cash used to purchase $5.2 million in securities available for sale.

Interest-bearing deposits in other financial institutions increased $747,000, or 25.0%, to $3.7 million at September 30, 2018 from $3.0 million at December 31, 2017 due to the purchase of three certificate of deposits.

Securities available for sale increased by $5.2 million, or 8.1%, to $69.3 million at September 30, 2018 from $64.1 million at December 31, 2017. This increase is primarily due to $17.0 million in purchases, offset by a decrease of $1.4 million in fair value on securities available for sale and by maturities, calls, principal payments and amortization of $10.4 million.

Loans held for sale increased $252,000, or 98.4%, to $508,000 at September 30, 2018 from $256,000 at December 31, 2017. The increase is attributable to the timing of the loans closing after origination.

Loans, net, decreased $13.3 million, or 4.0%, to $315.3 million at September 30, 2018 from $328.6 million at December 31, 2017. The decrease was primarily attributable to a decrease in one to four family loans, construction and land loans, and commercial real estate loans, offset by an increase in multi-family loans and commercial and industrial loans. Non-performing loans increased $155,000, or 2.4%, to $6.5 million at September 30, 2018 from $6.4 million at December 31, 2017.

Deposits decreased $4.4 million or 1.2%, to $365.6 million at September 30, 2018 from $370.1 million at December 31, 2017. The decrease was attributable to a decrease of $6.5 million in NOW accounts, a decrease of $2.9 million money market accounts and a decrease of $1.9 million in certificates of deposits, offset by an increase of $3.6 million in non-interest bearing demand deposits and an increase of $3.3 million in savings accounts

Federal Home Loan Bank advances decreased $1.2 million, or 16.2%, to $6.2 million at September 30, 2018 from $7.4 million at December 31, 2017 attributable to $6.2 million in maturities and principal payments, offset by $5.0 million in advances.

Subordinated debenture increased by $48,000, or 1.7%, and remained unchanged at $2.9 million at September 30, 2018 and December 31, 2017 due to the amortization of the fair value related to the subordinated debenture assumed in conjunction with acquisition of Town Square Financial Corporation. In December 2006, Town Square Statutory Trust I, a trust formed by Town Square Financial Corporation, closed a pooled private offering of 4,124 trust preferred securities with a liquidation amount of $1,000 per security. The subordinated debt of $2.9 million is shown as a liability because the Company is not considered the primary beneficiary of the Trust. The investment in common stock of the trust is $124,000 and is included in other assets. The subordinated debt has a variable rate of interest equal to the three month London Interbank Offered Rate (LIBOR) plus 1.83%, which was 4.16% at September 30, 2018.

Total shareholders’ equity decreased by $497,000, or 0.8%, to $61.2 million at September 30, 2018 from $61.7 million at December 31, 2017. The decrease resulted from the repurchase of common stock totaling $326,000, the payment of cash dividends totaling $631,000 and a decrease in accumulated other comprehensive income of $1.1 million, offset by net income of $1.2 million and the expense related to the stock based compensation plans of $316,000.

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Average Balances and Yields

The following table sets forth average balances, average yields and costs, and certain other information at the dates and for the periods indicated. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances but are reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income. Interest income and rates exclude the effects of a tax equivalent adjustment to adjust tax exempt investment income on tax exempt investment securities to a fully taxable basis due to immateriality (dollars in thousands).

	For the Three Months Ended September 30,
	2018							2017
	Average		Interest and					Average		Interest and
	Balance		Dividends		Yield/ Cost			Balance		Dividends		Yield/ Cost
Assets:
Interest earning assets:
Loans	$	322,163	$	4,099		5.05	%	$	339,956	$	4,297		5.01	%
Investment securities		68,849		417		2.40	%		63,809		371		2.31	%
Restricted Stock		3,276		45		5.45	%		3,276		40		4.84	%
Other interest earning assets		25,923		114		1.74	%		27,280		73		1.06	%
Total interest earning assets		420,211		4,675		4.41	%		434,321		4,781		4.37	%
Non-interest earning assets		24,446							25,096
Total assets		444,657							459,417
Liabilities and equity:
Interest bearing liabilities:
Interest bearing deposits:
NOW, savings, money market, and other		159,554		132		0.33	%		155,047		114		0.29	%
Certificates of deposit		155,047		581		1.49	%		165,065		515		1.24	%
Total interest bearing deposits		314,601		713		0.90	%		320,112		629		0.78	%
FHLB advances		6,319		38		2.39	%		10,932		47		1.71	%
Subordinated debenture		2,928		60		8.13	%		2,865		49		6.79	%
Other borrowings		-		-		-			1,500		18		4.76	%
Total borrowings		9,247		98		4.20	%		15,297		114		2.96	%
Total interest bearing liabilities		323,848		811		0.99	%		335,409		743		0.88	%
Non-interest bearing liabilities:
Non-interest bearing deposits		54,451							53,710
Accrued interest payable		103							148
Other liabilities		4,816							3,688
Total non-interest bearing liabilities		59,370							57,546
Total liabilities		383,218							392,955
Total equity		61,439							66,462
Total liabilities and equity		444,657							459,417
Net interest income				3,864							4,038
Interest rate spread						3.42	%						3.49	%
Net interest margin						3.65	%						3.69	%
Average interest-earning assets to average interest-bearing liabilities						129.76	%						129.49	%

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	For the Nine Months Ended September 30,
	2018							2017
	Average		Interest and					Average		Interest and
	Balance		Dividends		Yield/ Cost			Balance		Dividends		Yield/ Cost
Assets:
Interest earning assets:
Loans	$	328,153	$	12,342		5.03	%	$	340,625	$	12,877		5.05	%
Investment securities		66,959		1,183		2.36	%		61,414		1,074		2.34	%
Restricted Stock		3,276		132		5.39	%		3,276		110		4.49	%
Other interest earning assets		24,450		283		1.55	%		27,773		192		0.92	%
Total interest earning assets		422,838		13,940		4.41	%		433,088		14,253		4.40	%
Non-interest earning assets		22,071							25,480
Total assets		444,909							458,568
Liabilities and equity:
Interest bearing liabilities:
Interest bearing deposits:
NOW, savings, money market, and other		160,758		386		0.32	%		151,661		308		0.27	%
Certificates of deposit		156,343		1,665		1.42	%		169,648		1,500		1.18	%
Total interest bearing deposits		317,101		2,051		0.86	%		321,309		1,808		0.75	%
FHLB advances		6,716		114		2.27	%		9,430		122		1.73	%
Subordinated debenture		2,912		170		7.81	%		2,849		141		6.62	%
Other borrowings		-		-		-			566		20		4.72	%
Total borrowings		9,628		284		3.94	%		12,845		283		2.95	%
Total interest bearing liabilities		326,729		2,335		0.96	%		334,154		2,091		0.84	%
Non-interest bearing liabilities:
Non-interest bearing deposits		53,932							52,784
Accrued interest payable		104							137
Other liabilities		2,721							3,319
Total non-interest bearing liabilities		56,757							56,240
Total liabilities		383,486							390,394
Total equity		61,423							68,174
Total liabilities and equity		444,909							458,568
Net interest income				11,605							12,162
Interest rate spread						3.45	%						3.56	%
Net interest margin						3.67	%						3.75	%
Average interest-earning assets to average interest-bearing liabilities						129.42	%						129.61	%

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Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and investment securities. We also utilize Federal Home Loan Bank advances. While maturities and scheduled amortization of loans and securities are predicable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally manage the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and investment securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, and short and intermediate-term investment securities. If we require funds beyond our ability to generate them internally we have additional borrowing capacity with the Federal Home Loan Bank of Cincinnati. At September 30, 2018, we had $6.2 million in advances from the Federal Home Loan Bank of Cincinnati and an additional borrowing capacity of $77.7 million.

Poage Bankshares, Inc. is a separate legal entity from Town Square Bank and must provide its own liquidity to pay dividends, repurchase stock and to fund other general corporate activities. Poage Bankshares, Inc.’s primary source of liquidity is dividend payments from Town Square Bank. The ability of Town Square Bank to pay dividends is subject to regulatory requirements. At September 30, 2018, Poage Bankshares, Inc. (on an unconsolidated basis) had liquid assets of $2.1 million.

Federal regulations require FDIC-insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8%, and a 4% Tier 1 capital to total assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.

For purposes of the regulatory capital requirements, common equity Tier 1 capital is generally defined as common shareholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that made such an election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). We have exercised the AOCI opt-out. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. 

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019. When fully implemented, the capital conservation buffer will be 2.50% of risk weighted assets over and above the regulatory minimum capital ratios for Common Equity Tier 1 Capital (CET1) to risk weighted assets, Tier 1 Capital to risk weighted assets, and Total Capital to risk weighted assets.  The consequences of not meeting the capital conservation buffer thresholds include restrictions on the payment of dividends, restrictions on the payment of discretionary bonuses, and restrictions on the repurchasing of common shares by the Company. At September 30, 2018, the actual capital conservation buffer for Town Square Bank was 12.06% compared to the capital conservation buffer requirement of 1.875%.

In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions when deemed necessary. 

Management believes that as of September 30, 2018, the Bank met all capital adequacy requirements to which it was subject at that date.

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The following table reflects the Bank’s current regulatory capital levels in more detail, including comparisons to the regulatory minimums at September 30, 2018 and December 31, 2017 (dollars in thousands).

											To Be Well
											Capitalized Under
						For Capital Adequacy					Prompt Corrective
	Actual					Purposes					Action Regulations
As of September 30, 2018	Amount		Percent			Amount		Percent			Amount		Percent
Total Risk-Based Capital
(to Risk-weighted Assets)	$	59,940		20.06	%	$	23,903		8.00	%	$	29,879		10.00	%
Tier I Capital
(to Risk-weighted Assets)		56,657		18.96			17,928		6.00			23,903		8.00
Common Equity
(to Risk-weighted Assets)		56,657		18.96			13,446		4.50			19,421		6.50
Tier I Capital
(to Adjusted Total Assets)		56,657		12.81			17,689		4.00			22,112		5.00

											To Be Well
											Capitalized Under
						For Capital Adequacy					Prompt Corrective
	Actual					Purposes					Action Regulations
As of December 31, 2017	Amount		Percent			Amount		Percent			Amount		Percent
Total Risk-Based Capital
(to Risk-weighted Assets)	$	57,678		19.10	%	$	24,159		8.00	%	$	30,198		10.00	%
Tier I Capital
(to Risk-weighted Assets)		53,891		17.85			18,119		6.00			24,159		8.00
Common Equity
(to Risk-weighted Assets)		53,891		17.85			13,589		4.50			19,629		6.50
Tier I Capital
(to Adjusted Total Assets)		53,891		11.80			18,272		4.00			22,840		5.00

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. These arrangements are not expected to have a material impact on the Company’s consolidated financial condition or results of operations.

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Comparison of Operating Results for the Three and Nine months Ended September 30, 2018 and September 30, 2017

General. Net income for the three months ended September 30, 2018 increased $310,000, or 1,722.2%, to $292,000 from a net loss of $18,000 for the three months ended September 30, 2017. The increase in net income is primarily attributable to a decrease in the provision for loan losses of $778,000 to $169,000 for the three months ended September 30, 2018 from $947,000 for the three months ended September 30, 2017 and a subsequent measurement to decrease the estimated early contract termination fees by $470,000. The early contract termination fees decreased because the core processor conversion is rescheduled to the fourth quarter of 2018 from the third quarter of 2018. The early termination fee was originally calculated and recorded in December 2017 assuming the conversion was going to occur in August 2018, eight months before the data processing contract was to expire. Additionally, non-interest income increased $78,000 to $782,000 for the three months ended September 30, 2018 from $704,000 for the three months ended September 30, 2017. The increase in income is offset by a decrease in net interest income of $174,000 to $3.9 million for the three months ended September 30, 2018 from $4.0 million for the three months ended September 30, 2017, and an increase in non-interest expense, excluding the early contract termination fee subsequent measurement, of $531,000 to $4.4 million for the three months ended September 30, 2018 from $3.9 million for the three months ended September 30, 2017 due to the profession fees related to the merger. Income tax expense increased $311,000 to $260,000 for the three months ended September 30, 2018 compared to a tax benefit of $51,000 for the three months ended September 30, 2017.

Net income for the nine months ended September 30, 2018 increased $413,000, or 50.9%, to $1.2 million from net income of $812,000 for the nine months ended September 30, 2017. The increase in net income is primarily attributable to the recovery of $875,000 on fictitious loans for the nine months ended September 30, 2018, a decrease in the provision for loan losses of $311,000 to $1.3 million for the nine months ended September 30, 2018 from $1.6 million for the nine months ended September 30, 2017 and a subsequent re-measurement to decrease the estimated early contract termination fees by $470,000. The early contract termination fees decreased because the core processor conversion is rescheduled to the fourth quarter of 2018 from the third quarter of 2018. The increase in income is offset by a decrease in net interest income of $557,000 to $11.6 million for the nine months ended September 30, 2018 from $12.2 million for the nine months ended September 30, 2017 and an increase in non-interest expense of $605,000, excluding the early contract termination fee subsequent measurement, to $12.0 million for the nine months ended September 30, 2018 from $11.4 million for the nine months ended September 30, 2017. Additionally, income tax expense increased $101,000 to $439,000 for the nine months ended September 30, 2018 compared to tax expense of $338,000 for the nine months ended September 30, 2017.

Interest Income. Interest income decreased $106,000, or 2.2%, to $4.7 million for the three months ended September 30, 2018 from $4.8 million for the three months ended September 30, 2017. The average balance of interest-earning assets decreased $14.1 million, or 3.2%, to $420.2 million for the three months ended September 30, 2018 from $434.3 million for the three months ended September 30, 2017.

Interest income on loans decreased $198,000, or 4.6%, to $4.1 million for the three months ended September 30, 2018 from $4.3 million for the three months ended September 30, 2017. The average yields on loans increased 4 basis points to 5.05% for the three months ended September 30, 2018 compared to 5.01% for the three months ended September 30, 2017. The average balance of loans decreased $17.8 million, or 5.2%, to $322.2 million for the three months ended September 30, 2018 from $340.0 million for the three months ended September 30, 2017. The decrease in the average loan balance is primarily attributable to a decrease in one to four family residential mortgages. Income recognized from purchase discounts attributable to the Town Square and Commonwealth acquisitions decreased $48,000, or 57.1%, to $36,000 for the three months ended September 30, 2018 from $84,000 for the three months ended September 30, 2017. and contributed to the decrease in the average yield on loans.

Interest income on investment securities increased $46,000, or 12.4%, to $417,000 for the three months ended September 30, 2018 from $371,000 for the three months ended September 30, 2017. The average yield on securities increased 9 basis point to 2.40% for the three months ended September 30, 2018, compared to 2.31% for the three months ended September 30, 2017. The average balance of investment securities increased $5.0 million, or 7.9%, to $68.8 million for the three months ended September 30, 2018 from $63.8 million for the three months ended September 30, 2017.

Interest income on restricted stock increased $5,000, or 12.5%, to $45,000 for the three months ended September 30, 2018 from $40,000 for the three months ended September 30, 2017. The average yield on restricted stock increased 61 basis points to 5.45% for the three months ended September 30, 2018 compared to 4.84% for the three months ended September 30, 2017. The average balance of restricted stock remained constant at $3.3 million for the three months ended September 30, 2018 and 2017. Interest income on other interest-earning assets increased $41,000, or 56.2%, to $114,000 for the three months ended September 30, 2018 from $73,000 for the three months ended September 30, 2017. The average yield on other interest-earning assets increased 68 basis points to 1.74% for the three months ended September 30, 2018 compared to 1.06% for the three months ended September 30, 2017. The average balance of other interest earning assets decreased $1.4 million, or 5.0%, to $25.9 million for the three months ended September 30, 2018 from $27.3 million for the three months ended September 30, 2017.

Interest income decreased $313,000, or 2.2%, to $13.9 million for the nine months ended September 30, 2018 from $14.3 million for the nine months ended September 30, 2017. The average balance of interest-earning assets decreased $10.3 million, or 2.4%, to $422.8 million for the nine months ended September 30, 2018 from $433.1 million for the nine months ended September 30, 2017.

Interest income on loans decreased $535,000, or 4.2%, to $12.3 million for the nine months ended September 30, 2018 from $12.9 million for the nine months ended September 30, 2017. The average yield on loans decreased 2 basis points to 5.03% for the nine months ended September 30, 2018 compared to 5.05% for the nine months ended September 30, 2017. The average balance of loans decreased $12.4 million, or 3.7%, to $328.2 million for the nine months ended September 30, 2018 from $340.6 million for the nine months ended September 30, 2017. Income recognized from purchase discounts attributable to the Town Square and Commonwealth acquisitions decreased $168,000, or 55.5%, to $135,000 for the nine months ended September 30, 2018 from $303,000 for the nine months ended September 30, 2017 and contributed to the decrease in the average yields on loans.

41

Interest income on investment securities increased $109,000, or 10.1%, to $1.2 million for the nine months ended September 30, 2018 from $1.1 million for the nine months ended September 30, 2017. The average yield on securities increased 2 basis points to 2.36% for the nine months ended September 30, 2018, compared to 2.34% for the nine months ended September 30, 2017. The average balance of investment securities increased $5.6 million, or 9.0%, to $67.0 million for the nine months ended September 30, 2018 from $61.4 million for the nine months ended September 30, 2017.

Interest income on restricted stock increased $22,000, or 20.0%, to $132,000 for the nine months ended September 30, 2018 from $110,000 for the nine months ended September 30, 2017. The average yield on restricted stock increased 90 basis points to 5.39% for the nine months ended September 30, 2018 compared to 4.49% for the nine months ended September 30, 2017. The average balance of restricted stock remained constant at $3.3 million for the nine months ended September 30, 2018 and 2017. Interest income on other interest-earning assets increased $91,000, or 47.4%, to $283,000 for the nine months ended September 30, 2018 from $192,000 for the nine months ended September 30, 2017. The average yield on other interest-earning assets increased 63 basis points to 1.55% for the nine months ended September 30, 2018 compared to 0.92% for the nine months ended September 30, 2017. The average balance of other interest earning assets decreased $3.3 million, or 12.0%, to $24.5 million for the nine months ended September 30, 2018 from $27.8 million for the nine months ended September 30, 2017.

Interest Expense. Interest expense increased $68,000, or 9.2%, to $811,000 for the three months ended September 30, 2018 from $743,000 for the three months ended September 30, 2017. The average balance of interest bearing liabilities decreased $11.6 million, or 3.4%, to $323.8 million for the three months ended September 30, 2018 from $335.4 million for the three months ended September 30, 2017.

Interest expense on interest bearing deposits increased $84,000, or 13.4% to $713,000 for the three months ended September 30, 2018 from $629,000 for the three months ended September 30, 2017. The average balance of interest bearing deposits decreased $5.5 million, or 1.7%, to $314.6 million for the three months ended September 30, 2018 from $320.1 million for the three months ended September 30, 2017. The average interest rate paid on interest bearing deposits increased 12 basis points to 0.90% for the three months ended September 30, 2018 compared to 0.78% for the three months ended September 30, 2017. The decrease in average balance on interest bearing deposits is attributable to a decrease in certificates of deposits, offset by an increase in NOW and money market accounts.

Interest expense on FHLB advances, subordinated debentures and other borrowings decreased $16,000, or 14.0%, to $98,000 for the three months ended September 30, 2018 from $114,000 for the three months ended September 30, 2017. The average balance on FHLB advances decreased $4.6 million, or 42.2%, to $6.3 million for the three months ended September 30, 2018 from $10.9 million for the three months ended September 30, 2017. The average interest rate paid on FHLB advances increased 68 basis points to 2.39% from 1.71%. The average balance on subordinated debentures increased $63,000, or 2.2%, and remained unchanged at $2.9 million for the three months ended September 30, 2018 and 2017. The average interest rate paid on subordinated debentures increased 134 basis points to 8.13% for the three months ended September 30, 2018 from 6.79% for the three months ended September 30, 2017. The average balance on other borrowings decreased $1.5 million, or 100.0%, to $0 for the three months ended September 30, 2018 from $1.5 million for the three months ended September 30, 2017. The average interest rate paid on other borrowings decreased 476 basis points to 0% for the three months ended September 30, 2018 from 4.76% for the three months ended September 30, 2017.

Interest expense increased $244,000, or 11.7%, to $2.3 million for the nine months ended September 30, 2018 from $2.1 million for the nine months ended September 30, 2017. The average balance of interest bearing liabilities decreased $7.5 million, or 2.2%, to $326.7 million for the nine months ended September 30, 2018 from $334.2 million for the nine months ended September 30, 2017.

Interest expense on interest bearing deposits increased $243,000, or 13.4% to $2.1 million for the nine months ended September 30, 2018 from $1.8 million for the nine months ended September 30, 2017. The average balance of interest bearing deposits decreased $4.2 million, or 1.3%, to $317.1 million for the nine months ended September 30, 2018 from $321.3 million for the nine months ended September 30, 2017. The average interest rate paid on interest bearing deposits increased 11 basis points to 0.86% for the nine months ended September 30, 2018 compared to 0.75% for the nine months ended September 30, 2017. The decrease in average balance on interest bearing deposits is primarily attributable to a decrease in certificates of deposits which included $7.9 million in short-term non-brokered deposits acquired in the national market, offset by an increase in NOW and money market accounts.

Interest expense on FHLB advances, subordinated debentures and other borrowings increased $1,000, or 0.4%, to $284,000 for the nine months ended September 30, 2018 from $283,000 for the nine months ended September 30, 2017. The average balance on FHLB advances decreased $2.7 million, or 28.8%, to $6.7 million for the nine months ended September 30, 2018 from $9.4 million for the nine months ended September 30, 2017. The average interest rate paid on FHLB advances increased 54 basis points to 2.27% from 1.73%. The average balance on subordinated debentures increased $63,000, or 2.2%, to $2.9 million for the nine months ended September 30, 2018 from $2.8 million for the nine months ended September 30, 2017. The average interest rate paid on subordinated debentures increased 119 basis points to 7.81% for the nine months ended September 30, 2018 from 6.62% for the nine months ended September 30, 2017. The average balance on other borrowings decreased $566,000, or 100.0%, to $0 for the nine months ended September 30, 2018 from $566,000 for the nine months ended September 30, 2017. The average interest rate paid on other borrowings decreased 472 basis points to 0% for the nine months ended September 30, 2018 from 4.72% for the nine months ended September 30, 2017.

Net Interest Income. Net interest income decreased $174,000, or 4.3%, to $3.9 million for the three months ended September 30, 2018 from $4.0 million for the three months ended September 30, 2017. The ratio of average interest earning assets to average interest bearing liabilities increased to 129.76% for the three months ended September 30, 2018 from 129.49% for the three months ended September 30, 2017. The interest rate spread decreased 7 basis points to 3.42% for the three months ended September 30, 2018 from 3.49% for the three months ended September 30, 2017. Net interest margin decreased 4 basis points to 3.65% for the three months ended September 30, 2018 from 3.69% for the three months ended September 30, 2017.

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Net interest income decreased $557,000, or 4.6%, to $11.6 million for the nine months ended September 30, 2018 from $12.2 million for the nine months ended September 30, 2017. The ratio of average interest earning assets to average interest bearing liabilities decreased to 129.42% for the nine months ended September 30, 2018 from 129.61% for the nine months ended September 30, 2017. The interest rate spread decreased 11 basis points to 3.45% for the nine months ended September 30, 2018 from 3.56% for the nine months ended September 30, 2017. Net interest margin decreased 8 basis points to 3.67% for the nine months ended September 30, 2018 from 3.75% for the nine months ended September 30, 2017.

Provision for Loan Losses. We recorded $169,000 in provision for loan losses for the three months ended September 30, 2018 compared to $947,000 in provision for loan losses for the three months ended September 30, 2017. The decrease is primarily attributable to the decrease in loans outstanding and no new impaired loans requiring a specific allowance. The provision for the three months ended September 30, 2017 was attributable to charge-offs and the establishment of an allowance of $434,000 on five large commercial relationships classified as substandard.

We recorded $1.3 million in provision for loan losses for the nine months ended September 30, 2018 compared to $1.6 million in provision for loan losses for the nine months ended September 30, 2017. The decrease in the provision is primarily attributable to the decrease in loans outstanding, offset by the establishment of an allowance of $478,000 on one residential loan relationship classified as substandard, which had an outstanding balance of $0 at September 30, 2018 and an additional provision of $376,000 to increase an allowance to $895,000 on one commercial relationship classified as substandard, which had an outstanding balance of $0 at September 30, 2018. The aforementioned loans were charged-off in the third quarter. The provision for the nine months ended September 30, 2017 was attributable to charge-offs and an increase in loans classified as substandard.

Noninterest Income. Noninterest income increased $78,000, or 11.1%, to $782,000 for the three months ended September 30, 2018 from $704,000 for the three months ended September 30, 2017. The increase in noninterest income was primarily attributable an increase in service charges on deposits of $45,000, or 9.1%, to $541,000 for the three months ended September 30, 2018 from $496,000 for the three months ended September 30, 2017, an increase in loan servicing fees of $76,000, or 138.2% to $131,000 for the three months ended September 30, 2018 from $55,000 for the three months ended September 30, 2017 and an increase in other non-interest income of $37,000, or 616.7%, to $43,000 for the three months ended September 30, 2018 from $6,000 for the three months ended September 30, 2017. The increase in loan servicing fees is due to the receipt of funds from the Federal Home Loan Bank for loans sold and serviced. The increase in other non-interest income is attributable to the sale of 487 shares of Class B Common Stock of Visa Inc. The increase in noninterest income is offset by a decrease in gains on mortgage loans sold of $76,000, or 83.5%, to $15,000 for the three months ended September 30, 2018 from $91,000 for the three months ended September 30, 2017.

Noninterest income, including the recovery on fictitious loans, increased $895,000, or 43.1%, to $3.0 million for the nine months ended September 30, 2018 from $2.1 million for the nine months ended September 30, 2017. The increase in noninterest income was primarily attributable to the recovery of $875,000 on fictitious loans identified in September 2017, an increase in service charges on deposits of $63,000, or 4.2%, to $1.6 million for the nine months ended September 30, 2018 from $1.5 million for the nine months ended September 30, 2017, an increase in loan servicing fees of $40,000, or 18.3%, to $259,000 for the nine months ended September 30, 2018 from $219,000 for the nine months ended September 30, 2017 and an increase in other non-interest income of $35,000, or 269.2%, to $48,000 for the three months ended September 30, 2018 from $13,000 for the three months ended September 30, 2017. The increase in other non-interest income is attributable to the sale of 487 shares of Class B Common Stock of Visa Inc. These increases in noninterest income were partially offset by a decrease in net gain on disposal of land and equipment of $19,000, or 118.8%, to a net loss of $3,000 for the nine months ended September 30, 2018 from a net gain of $16,000 for the nine months ended September 30, 2017, and a decrease in gains on mortgage loans sold of $91,000, or 55.2%, to $74,000 for the nine months ended September 30, 2018 from $165,000 for the nine months ended September 30, 2017.

Noninterest Expense. Noninterest expense increased $61,000, or 1.6%, to remain unchanged at $3.9 million for the three months ended September 30, 2018 and 2017. This increase was primarily attributable to an increase professional fees of $517,000, or 170.6%, to $820,000 for the three months ended September 30, 2018 from $303,000 for the three months ended September 30, 2017 and director fees increased $34,000, or 66.7%, to $85,000 for the three months ended September 30, 2018 from $51,000 for the three months ended September 30, 2017. The increased professional fees and director fees are related to the pending merger. In addition, loan processing and collection increased $43,000, or 52.4%, to $125,000 for the three months ended September 30, 2018 from $82,000 for the three months ended September 30, 2017, salaries and employee benefits increased $22,000, or 1.4%, to remain unchanged at $1.6 million for the three months ended September 30, 2018 and 2017, occupancy and equipment increased $12,000, or 2.6%, to $470,000 for the three months ended September 30, 2018 from $458,000 for the three months ended September 30, 2017 and advertising increased $12,000, or 16.0%, to $87,000 for the three months ended September 30, 2018 from $75,000 for the three months ended September 30, 2017. Data processing increased $14,000, or 2.0%, to $712,000 for the three months ended September 30, 2018 from $698,000 for the three months ended September 30, 2017 and conversion expense increased $14,000, or 100.0%, to $14,000 for the three months ended September 30, 2018 from $0 for the three months ended September 30, 2017. The increase in data processing is attributable to increased activity for internet banking and volume for data processing charges. Conversion expense is related to the contract signed in December 2017 with the new data processing provider.

The increase in noninterest expense is offset by a subsequent re-measurement to decrease the estimated early contract termination fees by $470,000. The early contract termination fees decreased because the core processor conversion was rescheduled to the fourth quarter of 2018 from the third quarter of 2018 after the July announcement of Poage’s merger with City. The early termination fee was originally calculated and recorded in December 2017 assuming the conversion was going to occur in August 2018, eight months before the data processing contract was to expire. The early termination fee is 80% of the average monthly data processing charges for the previous six months multiplied by the number of months the conversion occurs prior to the contract end date of April 2019. Foreclosed assets expense, net decreased $67,000, or 100.0%, to $0 for the three months ended September 30, 2018 from $67,000 for the three months ended September 30, 2017.

43

Noninterest expense increased $135,000, or 1.2%, to $11.6 million for the nine months ended September 30, 2018 from $11.4 million for the nine months ended September 30, 2017. This increase was primarily attributable to an increase in professional fees of $536,000, or 115.5%, to $1.0 million for the nine months ended September 30, 2018 from $464,000 for the nine months ended September 30, 2017 and an increase in director fees of $46,000, or 35.4%, to $176,000 for the nine months ended September 30, 2018 from $130,000 for the nine months ended September 30, 2017. The increased professional fees and director fees are related to the pending merger. In addition, loan processing and collection increased $97,000, or 35.7%, to $369,000 for the nine months ended September 30, 2018 from $272,000 for the nine months ended September 30, 2017, data processing increased $136,000, or 6.9%, to $2.1 million for the nine months ended September 30, 2018 from $2.0 million for the nine months ended September 30, 2017 and conversion expense increased $169,000, or 100.0%, to $169,000 for the nine months ended September 30, 2018 from $0 for the nine months ended September 30, 2017. The increase in data processing is attributable to increased activity for internet banking and volume for data processing charges. Conversion expense is related to the contract signed in December 2017 with the new data processing provider.

The increase in noninterest expense is offset by a subsequent re-measurement to decrease the estimated early contract termination fees by $470,000. The early contract termination fees decreased because the core processor conversion is rescheduled to the fourth quarter of 2018 from the third quarter of 2018. The early termination fee was originally calculated and recorded in December 2017 assuming the conversion was going to occur in August 2018, eight months before the data processing contract was to expire. Additionally, the increase in noninterest expense is offset by a decrease in salaries and employee benefits of $99,000, or 1.9%, for the nine months ended September 30, 2018 and 2017, a decrease in foreclosed assets expense of $197,000, or 92.1%, to $17,000 for the nine months ended September 30, 2018 from $214,000 for the nine months ended September 30, 2017, a decrease in advertising of $47,000, or 16.2%, to $243,000 for the nine months ended September 30, 2018 from $290,000 for the nine months ended September 30, 2017 and a decrease in occupancy expense of $43,000, or 3.1%, to remain unchanged at $1.4 million for the nine months ended September 30, 2018 and 2017.

Income Tax Expense. The provision for income tax expense was $260,000 for the three months ended September 30, 2018 compared the tax benefit of $51,000 for the three months ended September 30, 2017. The federal statutory tax rate was 21% for 2018 and 34% for 2017. The following discusses reasons for the effective rate varying from the statutory rate. Our effective tax rate was 47.1% for the three months ended September 30, 2018 compared to 73.9% for the three months ended September 30, 2017 due to nondeductible merger related expenses of $725,000 for the three months ended September 30, 2018. In addition, the 73.9% effective tax rate for the three months ended September 30, 2017 was due to sustaining a net operating loss.

The provision for income tax expense was $439,000 for the nine months ended September 30, 2018 compared to $338,000 for the nine months ended September 30, 2017. Our effective tax rate for the nine months ended September 30, 2018 was 26.4% compared to 29.4% for the nine months ended September 30, 2017. The effective tax rate for the nine months ended September 30, 2018 was 26.4% due to nondeductible merger related expenses of $771,000. The effective tax rate for the nine months ended September 30, 2017 was 29.4% due to tax expense related to nondeductible incentive stock options.

44

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures of quantitative and qualitative market risk are not required by smaller reporting companies, such as the Company.

ITEM 4. CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of September 30, 2018, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of the evaluation date, our disclosure controls and procedures were not effective, because of the material weakness described below, to enable us to provide that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosures.

During the three months ended September 30, 2017, the Company uncovered evidence of suspected fraud involving the origination of fictitious loans by an employee of the Bank. Management discovered that an employee had been using falsified brokerage statements, financial statements, tax returns, deeds and mortgages to make fictitious loans. The employee is no longer with the Company. The Company’s internal audit department has conducted an extensive internal review of our internal controls with the assistance of an outside independent professional firm, with specific focus on our loan underwriting, approval and administration procedures. As a result of the internal review, management discovered a material weakness in the operating effectiveness of procedures and documentation related to loan underwriting. Additionally, these processes lacked effective supervision and oversight by lending management personnel. Our management, overseen by the Audit Committee, implemented new procedures to improve this process and remediate this control weakness.

During the nine months ended September 30, 2018, the Company’s management made certain changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended) that have materially affected, or reasonably likely to materially effect, the Company’s internal control over financial reporting, which were identified during the year ended December 31, 2017 in connection with management’s and the Audit Committee’s evaluation of the effectiveness of the system of internal control over financial reporting.

To address the material weakness identified by management in the operating effectiveness of procedures and documentation related to loan underwriting and in the supervision and oversight of the lending management personnel, which weakness was related to the discovery of an employee originating fictitious loans, management implemented procedures to verify the authenticity of the information related to loan underwriting.

Although the Company’s remediation efforts are completed, the material weakness will not be considered remediated until the new internal controls are operational for a period of time and are tested and management concludes that these controls are operating effectively.

There was no other change in our internal control over financial reporting that occurred during the quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

45

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to various legal actions that are considered ordinary routine litigation incidental to the business of the Company, and no claim for money damages exceeds ten percent of the Company’s consolidated assets. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s consolidated financial condition and results of operations.

ITEM 1A. RISK FACTORS

Disclosures of risk factors are not required by smaller reporting companies, such as the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) Not applicable.

(c) Issuer repurchases. On June 2, 2016, Poage Bankshares, Inc. commenced a stock repurchase program. The Board of Directors of Poage Bankshares, Inc. authorized program to repurchase up to 150,000 shares, which represented approximately 3.9% of the Company’s then issued and outstanding shares of common stock through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan that was adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. The Company repurchased 3,325 shares at a weighted average price of $19.46 per share and there remained 17,720 shares to be repurchased under this plan at September 30, 2018.   On December 5, 2017, the Board of Directors of Poage Bankshares, Inc. authorized a new stock repurchase program for the repurchase of up to $180,000 shares of common stock, which represents approximately 5% of the Company’s issued and outstanding shares of common stock. The Company repurchased 10,000 shares at a weighted average price of $19.30 per share and there remained 163,500 shares to be repurchased under this plan at September 30, 2018.

The Company’s stock repurchases pursuant to the repurchase programs are dependent on certain factors, including but not limited to, market conditions and prices, available funds and alternative uses of capital. The repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Any repurchased shares will be treated by the Company as authorized but unissued shares.

The following table sets forth information in connection with repurchases of the Company’s common stock for the period July 1, 2018 through September 30, 2018.

					Total Number		Number of Shares
					of Shares		That May Yet
	Total				Purchased as		Be Purchased
	Number of		Average		Part of		Under Publicly
	Shares		Price Paid		Publicly		Announced
	Purchased		Per Share		Announced Plan		Plan
July 1 - July 31, 2018		-	$	-		-		181,220
August 1 - August 31, 2018		-		-		-		181,220
September 1 - September 30, 2018		-		-		-		181,220
Total		-	$	-		-

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit
number	Description
3.1	Articles of Incorporation of Poage Bankshares, Inc. (1)
3.2	Bylaws of Poage Bankshares, Inc. (2)
31.1	Certification of President, and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15-d-14(a).
31.2	Certification of Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1	Certification of President and Chief Executive Officer, and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following material from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income (Loss), (iv) Unaudited Consolidated Statement of Shareholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.

(1) Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-172192, originally filed on February 11, 2011, and as subsequently amended)

(2) Incorporated by reference to the Current Report on Form 8-K (File No. 001-35295, filed on September 21, 2016)

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Poage Bankshares, Inc.
Date: November 14, 2018
	/s/ Bruce VanHorn
	Bruce VanHorn
	President & Chief Executive Officer
	/s/ Jane Gilkerson
	Jane Gilkerson
	Chief Financial Officer

48

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Bruce VanHorn, certify that:

1) I have reviewed this report on Form 10-Q of Poage Bankshares, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2018

/s/ Bruce VanHorn

Bruce VanHorn

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jane Gilkerson, certify that:

1) I have reviewed this report on Form 10-Q of Poage Bankshares, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2018

/s/ Jane Gilkerson

Jane Gilkerson

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Poage Bankshares, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Bruce VanHorn, President and Chief Executive Officer of the Company, and Jane Gilkerson, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to best of his or her knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bruce VanHorn	November 14, 2018
Bruce VanHorn	Date
President and Chief Executive Officer
/s/ Jane Gilkerson	November 14, 2018
Jane Gilkerson	Date
Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Poage Bankshares, Inc. and will be retained by Poage Bankshares, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 14, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Poage Bankshares, Inc.
Entity Central Index Key	0001511071
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Trading Symbol	pbsk
Entity Common Stock, Shares Outstanding		3,497,243
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
ASSETS
Cash and due from financial institutions	$ 22,852	$ 20,499
Interest-bearing deposits in other financial institutions	3,735	2,988
Securities available for sale	69,341	64,130
Loans held for sale	508	256
Loans, net of allowance of $3,124 and $4,681	315,290	328,554
Restricted stock, at cost	3,276	3,276
Other real estate owned, net	793	1,462
Premises and equipment, net	10,278	10,500
Company owned life insurance	7,413	7,292
Accrued interest receivable	1,398	1,413
Goodwill	1,894	1,894
Other intangible assets, net	413	667
Deferred tax asset, net	1,843	2,128
Other assets	1,694	1,821
Total assets	440,728	446,880
Deposits
Non-interest bearing	56,135	52,577
Interest bearing	309,492	317,473
Total deposits	365,627	370,050
Federal Home Loan Bank advances	6,219	7,419
Subordinated debenture	2,938	2,890
Accrued interest payable	34	24
Other liabilities	4,692	4,782
Total liabilities	379,510	385,165
Commitments and contingent liabilities
Shareholders' equity
Common stock, $.01 par value, 30,000,000 shares authorized, 3,497,243 and 3,514,171 issued and outstanding at September 30, 2018 and December 31, 2017, respectively	35	35
Additional paid-in-capital	32,260	32,371
Retained earnings	32,017	31,423
Unearned Employee Stock Ownership Plan (ESOP) shares	(1,753)	(1,854)
Accumulated other comprehensive income (loss)	(1,341)	(260)
Total shareholders' equity	61,218	61,715
Total liabilities and shareholders' equity	$ 440,728	$ 446,880

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
CONSOLIDATED BALANCE SHEETS
Loans allowance (in dollars)	$ 3,124	$ 4,681
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	3,497,243	3,514,171
Common stock, shares outstanding	3,497,243	3,514,171

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest and dividend income
Loans, including fees	$ 4,099	$ 4,297	$ 12,342	$ 12,877
Taxable securities	301	255	833	729
Tax-exempt securities	116	116	350	345
Federal funds sold and other	159	113	415	302
Total Interest and Dividend Income	4,675	4,781	13,940	14,253
Interest expense
Deposits	713	629	2,051	1,808
Federal Home Loan Bank advances and other borrowings	98	114	284	283
Total Interest Expense	811	743	2,335	2,091
Net interest income	3,864	4,038	11,605	12,162
Provision for loan losses	169	947	1,335	1,646
Net interest income after provision for loan losses	3,695	3,091	10,270	10,516
Non-interest income
Service charges on deposits	541	496	1,558	1,495
Other service charges	13	13	38	39
Net gain (loss) on disposal of land and equipment			(3)	16
Loan servicing fees	131	55	259	219
Gains on mortgage loans sold, net	15	91	74	165
Income from company owned life insurance	39	43	121	128
Insurance recovery on fictitious loans			875
Other	43	6	48	13
Total Non-Interest Income	782	704	2,970	2,075
Non-interest expense
Salaries and employee benefits	1,621	1,599	5,057	5,156
Occupancy and equipment	470	458	1,360	1,403
Data processing	712	698	2,101	1,965
Federal deposit insurance	27	32	91	99
Loan processing and collection	125	82	369	272
Foreclosed assets, net		67	17	214
Advertising	87	75	243	290
Professional fees	820	303	1,000	464
Other taxes	111	116	341	352
Director fees and expenses	85	51	176	130
Amortization of intangible assets	84	85	254	256
Loss on fictitious loans				25
Early contract termination subsequent measurement	(470)		(470)
Conversion costs	14		169
Other	239	298	868	840
Total Non-Interest Expense	3,925	3,864	11,576	11,441
Income (loss) before income taxes	552	(69)	1,664	1,150
Income tax expense (benefit)	260	(51)	439	338
Net income (loss)	$ 292	$ (18)	$ 1,225	$ 812
Earnings (loss) per common share:
Basic	$ 0.09	$ (0.01)	$ 0.37	$ 0.23
Dilutive	0.09	(0.01)	0.36	0.23
Dividend per share	$ 0.06	$ 0.06	$ 0.18	$ 0.18

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 292	$ (18)	$ 1,225	$ 812
Other comprehensive income (loss):
Unrealized holding gains (loss) on available for sale securities	(379)	(103)	(1,370)	608
Tax effect	80	35	289	(207)
Other comprehensive income (loss)	(299)	(68)	(1,081)	401
Comprehensive income (loss)	$ (7)	$ (86)	$ 144	$ 1,213

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Unearned Employee Stock Ownership Plan Shares [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balances, beginning at Dec. 31, 2016					$ (153)
Net income						$ 812
Stock based compensation expense						228
Other comprehensive loss						401
Balances, ending at Sep. 30, 2017					248
Balances, beginning at Jun. 30, 2017					316
Net income						(18)
Other comprehensive loss						(68)
Balances, ending at Sep. 30, 2017					248
Balances, beginning at Dec. 31, 2017	$ 35	$ 32,371	$ 31,423	$ (1,854)	(260)	61,715
Net income			1,225			1,225
Stock repurchases		(326)				(326)
Dividends paid			(631)			(631)
ESOP compensation earned		114		101		215
Stock based compensation expense		101				101
Other comprehensive loss					(1,081)	(1,081)
Balances, ending at Sep. 30, 2018	35	32,260	32,017	(1,753)	(1,341)	61,218
Balances, beginning at Jun. 30, 2018					(1,042)
Net income						292
Other comprehensive loss						(299)
Balances, ending at Sep. 30, 2018	$ 35	$ 32,260	$ 32,017	$ (1,753)	$ (1,341)	$ 61,218

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical)	9 Months Ended
	Sep. 30, 2018 $ / shares shares
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Treasury stock, shares, acquired | shares	16,928
Common stock, dividends, per share, cash paid | $ / shares	$ 0.18

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities:
Net income	$ 1,225	$ 812
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	511	569
Provision for loan losses	1,335	1,646
ESOP compensation expense	215	195
Stock based compensation expense	101	228
(Gain) Loss on sale of premises and equipment, net	3	(16)
(Gain) Loss on sale and write-downs of other real estate owned, net	(58)	126
Loss on sale of repossessed assets, net	1	6
Loss on fictitious loans		25
Amortization of core deposit intangible	254	256
Accretion of fair value adjustments related to loans	(135)	(303)
Accretion of fair value adjustments related to deposits	(49)	(49)
Amortization of fair value related to subordinated debenture	48	48
Net amortization on securities	207	97
Deferred income tax (benefit) expense	573	(72)
Net gain on mortgage banking activities	(74)	(165)
Origination of loans held for sale	(3,178)	(5,475)
Proceeds from loans held for sale	3,000	6,251
Increase in cash value of life insurance	(121)	(128)
Change in assets and liabilities, net assets and liabilities acquired:
Accrued interest receivable	15	90
Other assets	126	58
Accrued interest payable	10	28
Other liabilities	(90)	1,148
Net cash provided by operating activities	3,919	5,375
Investing activities:
Net increase in interest-bearing deposits with other institutions	(747)	(498)
Securities available for sale:
Proceeds from calls		65
Proceeds from maturities	939	435
Purchases	(17,038)	(11,762)
Principal payments received	9,312	5,374
Loan originations and principal payments on loans, net	11,101	2,738
Proceeds from the sale of other real estate owned	1,649	856
Proceeds from the sale of repossessed assets	41	44
Proceeds from the sale of premises and equipment		54
Purchase of premises and equipment	(292)	(173)
Net cash provided by (used in) investing activities	4,965	(2,867)
Financing activities:
Net change in deposits	(4,374)	254
Proceeds from other borrowings		1,500
Proceeds from Federal Home Loan Bank borrowings	5,000	13,000
Payments on Federal Home Loan Bank borrowings	(6,200)	(11,527)
Cash dividend paid	(631)	(654)
Stock repurchases	(326)	(3,648)
Net cash (used in) financing activities	(6,531)	(1,075)
Net increase in cash and cash equivalents	2,353	1,433
Cash and cash equivalents at beginning of period	20,499	24,389
Cash and cash equivalents at the end of the period	22,852	25,822
Cash paid during the year for:
Interest on deposits and debt	2,325	2,064
Income taxes payment	16	250
Other real estate owned and other repossessed assets acquired in settlement of loans	$ 963	$ 2,124

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Poage Bankshares, Inc. (the “Company” or “Poage”) and its wholly owned subsidiary Town Square Bank (which was formerly operated under the name “Home Federal Savings and Loan Association”) (the “Bank”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.  Actual results could differ from those estimates used in the preparation of the financial statements.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2018 and December 31, 2017 and the results of operations and cash flows for the interim periods ended September 30, 2018 and 2017. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year or any other period. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto filed as part of the Company’s 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2018

REVENUE RECOGNITION [Abstract]

REVENUE RECOGNITION

NOTE 2 – REVENUE RECOGNITION

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. We finalized our assessment and identified the revenue line items within the scope of this new guidance. Neither the new standard, nor any of the amendments detailed below, resulted in a material change from our current accounting for revenue because the majority of Poage’s financial instruments are not within the scope of Topic 606, and those that are require no change in the accounting.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services are distinct. Topic 606 includes two criteria for assessing whether promises to transfer goods or services are distinct. One of those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion. Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property, which is satisfied at a point in time, or a right to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to improve the operability and understandability of the licensing implementation guidance. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.

In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements. The FASB board decided to issue a separate update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued in ASU No. 2014-09.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “Topic 606”). We elected to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and securities are both excluded from this topic, a significant majority of our revenues are not subject to the new guidance. Our services that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our obligation to the customer. A description of the Company’s revenue that falls within the scope of Topic 606 as well as an explanation of why they are not impacted are as follows:

Service charges on deposit accounts: We earn fees from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation. Service charges on deposit accounts includes approximately $257,000,  $723,000,  $239,000 and $709,000 of revenue for the three and nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

Debit card and ATM fees: Debit card and ATM fees include ATM usage fees and debit card interchange income. As with the transaction-based fees on deposit accounts, the ATM fees are recognized at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Debit card and ATM fees includes approximately $262,000,  $766,000,  $235,000 and $728,000 of revenue for the three and nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

Gains/Losses on Sales of OREO - The Company records a gain or loss from the sale of other real estate owned (“OREO”) when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.  ASC 606 does not significantly change the pattern of revenue recognition unless the Company finances the sale. There are no instances of the Company financing the sale of one of its OREO properties during the three and nine months ended September 30, 2018. Sales of OREO includes approximately $25,000 and $12,000 in net gains for the three months ended September 30, 2018 and 2017 and $60,000 in net gains and $26,000 in net losses for the nine months ended September 30, 2018 and 2017, respectively, within the scope of Topic 606.

The adoption of Topic 606 did not have a material impact on our consolidated financial position, results of operations, equity, or cash flows as of the adoption date or for the three and nine months ended September 30, 2018.

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2018

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

Recent Accounting Pronouncements

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early adoption of the other provisions mentioned above is not permitted. Starting with the first quarter of 2018, the Company began using an exit price notion when measuring the fair value of its loan portfolio for disclosure purposes. The adoption of ASU No. 2016-01 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provided guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation-Stock Compensation.  Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The adoption of ASU No. 2017-09 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

Newly Issued Accounting Standards Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update 2016-02 Leases guidance requiring the recognition in the statement of financial position of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires that a lessee should recognize lease assets and lease liabilities as compared to previous GAAP that did not require lease assets and lease liabilities to be recognized for most leases. The guidance becomes effective for us on January 1, 2019. Poage is currently evaluating the impact on its leases to determine the impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (the ASU), which introduces the current expected credit losses methodology. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured as fair value through net income. Among other things, the ASU requires the measurement of all expected credit losses for financial assets, including loans and available-for-sale debt securities, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The new model, referred to as the current expected credit loss (“CECL”) model, will require institutions to calculate all probable and estimable losses that are expected to be incurred through the loan's entire life. ASU 2016-13 also requires the allowance for credit losses for purchased financial assets with credit deterioration since origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial allowance will be added to the purchase price rather than recorded as credit loss expense. The disclosure of credit quality indicators related to the amortized cost of financing receivables will be further disaggregated by year of origination (or vintage). Institutions are to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the standard is effective. The amendments are effective for fiscal years beginning after December 15, 2019. Early application will be permitted for fiscal years beginning after December 15, 2018. Management has formed a CECL committee that is evaluating the data gathering requirements, available economic forecasting and loss estimation models and potential software that would be employed by the Company to facilitate the adoption of this guidance and its required disclosures on the Company’s consolidated financial statements. Upon adoption, management anticipates an initial one-time increase in the allowance for loan losses along with a corresponding decrease in capital as permitted by the standard.

In January 2017, FASB issued ASU 2017-4, Intangible-Goodwill and Other (Topic 350), to simplify accounting for goodwill impairment. The new guidance will simplify financial reporting because it eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The revised guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. Poage is currently evaluating the impact of the new guidance on its consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fee and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.  The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer. The amendments require the premium for certain callable debt securities to be amortized to the earliest call date. The amendments are effective for public companies for annual periods beginning after December 15, 2019. The adoption of ASU No. 2017-08 is not expected to have a material effect on the Company’s consolidated operating results or financial condition. 

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—the ASU improves the disclosure requirements on fair value measurements in ASC 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. Poage is currently evaluating the impact of adopting the new guidance on its consolidated financial statements, but it is not expected to have a material impact.

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SECURITIES AVAILABLE FOR SALE

9 Months Ended

Sep. 30, 2018

SECURITIES AVAILABLE FOR SALE [Abstract]

Securities Available for Sale

NOTE 4 - SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale at September 30, 2018 and December 31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2018
States and political subdivisions	$	18,185	$	55	$	(258)	$	17,982
U.S. Government agencies and sponsored entities		5,000		-		(85)		4,915
Mortgage-backed securities: residential		27,664		-		(811)		26,853
Collateralized mortgage obligations		9,256		-		(199)		9,057
SBA loan pools		10,934		-		(400)		10,534
Total securities	$	71,039	$	55	$	(1,753)	$	69,341

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2017
States and political subdivisions	$	19,082	$	190	$	(108)	$	19,164
U.S. Government agencies and sponsored entities		3,500		-		(50)		3,450
Mortgage-backed securities: residential		27,449		44		(226)		27,267
Collateralized mortgage obligations		5,048		-		(93)		4,955
SBA loan pools		9,379		-		(85)		9,294
Total securities	$	64,458	$	234	$	(562)	$	64,130

There were no sales of securities for the three and nine months ended September 30, 2018 and 2017.

The amortized cost and fair value of the securities portfolio at September 30, 2018 are shown in the following table by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):

	September 30,
	2018
	Amortized		Fair
	Cost		Value
Within one year	$	2,521	$	2,521
One to five years		7,972		7,882
Five to ten years		9,168		9,086
Beyond ten years		3,524		3,408
Mortgage-backed securities and collateralized mortgage obligations		36,920		35,910
SBA loan pools		10,934		10,534
Total	$	71,039	$	69,341

The following table summarizes the securities with unrealized losses at September 30, 2018 and December 31, 2017, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

	Less Than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2018
States and political subdivisions	$	4,850	$	(89)	$	2,920	$	(169)	$	7,770	$	(258)
U.S. Government agencies and sponsored entities		1,486		(14)		3,429		(71)		4,915		(85)
Mortgage-backed securities: residential		14,878		(327)		11,975		(484)		26,853		(811)
Collateralized mortgage obligations		5,161		(57)		3,896		(142)		9,057		(199)
SBA loan Pools		3,612		(76)		6,922		(324)		10,534		(400)
Total available-for-sale securities	$	29,987	$	(563)	$	29,142	$	(1,190)	$	59,129	$	(1,753)

	Less Than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
December 31, 2017
States and political subdivisions	$	5,080	$	(56)	$	1,024	$	(52)	$	6,104	$	(108)
U.S. Government agencies and sponsored entities		992		(8)		2,458		(42)		3,450		(50)
Mortgage-backed securities: residential		19,256		(181)		2,394		(45)		21,650		(226)
Collateralized mortgage obligations		1,954		(15)		3,001		(78)		4,955		(93)
SBA loan Pools		6,565		(66)		1,343		(19)		7,908		(85)
Total available-for-sale securities	$	33,847	$	(326)	$	10,220	$	(236)	$	44,067	$	(562)

Unrealized losses on bonds have not been recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell, and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

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LOANS

9 Months Ended

Sep. 30, 2018

LOANS [Abstract]

Loans

NOTE 5 – LOANS

Loans at September 30, 2018 and December 31, 2017 were as follows (in thousands):

	September 30,		December 31,
	2018		2017
Real estate:
One to four family	$	155,357	$	170,754
Multi-family		7,777		6,505
Commercial real estate		82,225		84,312
Construction and land		9,253		10,004
		254,612		271,575
Commercial and industrial		34,930		33,664
Consumer
Home equity loans and lines of credit		10,974		10,707
Motor vehicle		11,049		10,368
Other		7,354		7,420
		29,377		28,495
Total		318,919		333,734
Less: Net deferred loan fees		505		499
Allowance for loan losses		3,124		4,681
	$	315,290	$	328,554

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2018 and December 31, 2017. Accrued interest receivable and net deferred loan fees are not considered significant and therefore are not included in the loan balances presented in the table below (in thousands):

September 30, 2018
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	321	$	-	$	2,085	$	2,406	$	5,039	$	1,075	$	248,498	$	254,612
Commercial and industrial		93		-		407		500		3,849		-		31,081		34,930
Consumer		4		-		214		218		54		-		29,323		29,377
Total	$	418	$	-	$	2,706	$	3,124	$	8,942	$	1,075	$	308,902	$	318,919

December 31, 2017
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	624	$	-	$	2,232	$	2,856	$	5,523	$	1,305	$	264,747	$	271,575
Commercial and industrial		1,290		-		275		1,565		2,612		-		31,052		33,664
Consumer		5		-		255		260		60		-		28,435		28,495
Total	$	1,919	$	-	$	2,762	$	4,681	$	8,195	$	1,305	$	324,234	$	333,734

The following table presents information related to impaired loans by class of loans as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018						December 31, 2017
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
With no related allowance recorded:
Real Estate:
One to four family	$	743	$	699	$	-	$	699	$	655	$	-
Multi-family		-		-		-		-		-		-
Commercial real estate		2,556		2,416		-		2,593		2,452		-
Construction and land		170		170		-		179		179		-
Commercial and industrial		3,616		2,849		-		136		136		-
Consumer:
Home equity and lines of credit		25		25		-		31		31		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal	$	7,110	$	6,159	$	-	$	3,638	$	3,453	$	-
With a related allowance recorded:
Real Estate:
One to four family	$	389	$	389	$	42	$	1,091	$	988	$	367
Multi-family		-		-		-		-		-		-
Commercial real estate		1,365		1,365		279		1,249		1,249		257
Construction and land		-		-		-		-		-		-
Commercial and industrial		1,000		1,000		93		2,476		2,476		1,290
Consumer:
Home equity and lines of credit		29		29		4		29		29		5
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal		2,783		2,783		418		4,845		4,742		1,919
Total	$	9,893	$	8,942	$	418	$	8,483	$	8,195	$	1,919

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial charge-offs.

The following tables present the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three months ended September 30, 2018						Three months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	2,660	$	4	$	4	$	2,345	$	1	$	1
Multi-family		-		-		-		-		-		-
Commercial real estate		3,787		19		19		3,358		29		29
Construction and land		172		2		2		169		2		2
Commercial and industrial		4,339		12		3		96		1		1
Consumer:
Home equity and lines of credit		55		-		-		33		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,013	$	37	$	28	$	6,001	$	33	$	33

	Nine months ended September 30, 2018						Nine months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	3,144	$	75	$	67	$	1,710	$	16	$	16
Multi-family		-		-		-		-		-		-
Commercial real estate		3,740		80		73		2,991		99		94
Construction and land		175		6		6		122		6		5
Commercial and industrial		4,037		27		18		196		1		1
Consumer:
Home equity and lines of credit		57		-		-		32		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,153	$	188	$	164	$	5,051	$	122	$	116

The following tables set forth an analysis of our allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 (in thousands): 

Three months ended			Commercial
September 30, 2018	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,941	$	1,411	$	210	$	4,562
Provision for loan losses		79		57		33		169
Loans charged-off		(616)		(974)		(36)		(1,626)
Recoveries		2		6		11		19
Total ending allowance balance	$	2,406	$	500	$	218	$	3,124

Three months ended			Commercial
September 30, 2017	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,244	$	233	$	210	$	2,687
Provision for loan losses		811		123		13		947
Loans charged-off		(449)		-		(27)		(476)
Recoveries		4		9		15		28
Total ending allowance balance	$	2,610	$	365	$	211	$	3,186

Nine months ended			Commercial
September 30, 2018	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,856	$	1,565	$	260	$	4,681
Provision for loan losses		714		636		(15)		1,335
Loans charged-off		(1,180)		(1,741)		(88)		(3,009)
Recoveries		16		40		61		117
Total ending allowance balance	$	2,406	$	500	$	218	$	3,124

Nine months ended			Commercial
September 30, 2017	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	1,946	$	218	$	185	$	2,349
Provision for loan losses		1,397		134		115		1,646
Loans charged-off		(742)		(23)		(137)		(902)
Recoveries		9		36		48		93
Total ending allowance balance	$	2,610	$	365	$	211	$	3,186

Nonaccrual loans, and loans past due 90 days still on accrual status, consist of smaller balance homogeneous loans that are collectively evaluated for impairment.

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual status, by class of loans, as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018				December 31, 2017
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
	Nonaccrual		Still Accruing		Nonaccrual		Still Accruing
Real estate:
One to four family	$	1,481	$	-	$	2,911	$	-
Multi-family		-		-		-		-
Commercial real estate		1,586		-		1,677		-
Construction and land		29		-		34		-
Commercial and industrial		3,333		-		1,638		-
Consumer:
Home equity loans and lines of credit		54		-		66		-
Motor vehicle		23		-		26		-
Other		7		-		6		-
Total	$	6,513	$	-	$	6,358	$	-

The following tables present the aging of the recorded investment in past due loans as of September 30, 2018 and December 31, 2017 by class of loans (in thousands). Non-accrual loans of $6.5 million as of September 30, 2018 and $6.3 million at December 31, 2017 are included in the tables below and have been categorized based on their payment status (in thousands):

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
September 30, 2018
Real estate:
One to four family	$	1,119	$	228	$	409	$	1,756	$	549	$	153,052	$	155,357
Multi-family		-		-		-		-		-		7,777		7,777
Commercial real estate		-		-		1,480		1,480		526		80,219		82,225
Construction and land		32		-		-		32		-		9,221		9,253
Commercial and industrial		23		-		3,333		3,356		-		31,574		34,930
Consumer:
Home equity loans and lines of credit		-		-		29		29		-		10,945		10,974
Motor vehicle		53		-		20		73		-		10,976		11,049
Other		8		7		7		22		-		7,332		7,354
Total	$	1,235	$	235	$	5,278	$	6,748	$	1,075	$	311,096	$	318,919

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
December 31, 2017
Real estate:
One to four family	$	1,615	$	628	$	1,199	$	3,442	$	590	$	166,722	$	170,754
Multi-family		-		-		-		-		-		6,505		6,505
Commercial real estate		249		315		1,367		1,931		715		81,666		84,312
Construction and land		-		-		-		-		-		10,004		10,004
Commercial and industrial		1,133		4		1,631		2,768		-		30,896		33,664
Consumer:
Home equity loans and lines of credit		-		-		60		60		-		10,647		10,707
Motor vehicle		40		-		21		61		-		10,307		10,368
Other		3		6		-		9		-		7,411		7,420
Total	$	3,040	$	953	$	4,278	$	8,271	$	1,305	$	324,158	$	333,734

Troubled Debt Restructurings (“TDRs”)

As of September 30, 2018, the Company had a recorded investment in seven TDRs which totaled $4.1 million. There were five TDRs which totaled $3.2 million at December 31, 2017. A less-than-market interest rate and an extended term were granted as concessions for TDRs. No additional charge-off has been made for the loan relationships. No additional commitments to lend have been made to the borrower. The Company allocated $176,000 and $153,000 of specific allowance for the loan relationships at September 30, 2018 and December 31, 2017.

September 30, 2018	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	23	$	15	$	38
Multi-family		-		-		-
Commercial real estate		906		2,195		3,101
Construction and land		-		-		-
Commercial and industrial		-		998		998
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	929	$	3,208	$	4,137

December 31, 2017	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	30	$	16	$	46
Multi-family		-		-		-
Commercial real estate		933		2,195		3,128
Construction and land		-		-		-
Commercial and industrial		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	963	$	2,211	$	3,174

There was one TDR in the amount of $831,000 considered to be in default within twelve months of modification as of September 30, 2018. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The following table presents TDRs that occurred during the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):

Three months ended September 30, 2018

Three months ended September 30, 2017

Loan Class

Number of Loans

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Number of Loans

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Real Estate:

One to four family

-

$

-

$

-

-

$

-

$

-

Multi-family

-

-

-

-

-

-

Commercial real estate

-

-

-

-

-

-

Construction and land

-

-

-

-

-

-

Commercial and industrial

-

-

-

-

-

-

Consumer:

Home equity loans and lines of credit

-

-

-

-

-

-

Motor vehicle

-

-

-

-

-

-

Other

-

-

-

-

-

-

Total

-

$

-

$

-

-

$

-

$

-

	Nine months ended September 30, 2018						Nine months ended September 30, 2017
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real Estate:
One to four family		-	$	-	$	-		2	$	148	$	148
Multi-family		-		-		-		-		-		-
Commercial real estate		-		-		-		1		117		117
Construction and land		-		-		-		-		-		-
Commercial and industrial		2		1,002		1,002		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-		-		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total		2	$	1,002	$	1,002		3	$	265	$	265

CREDIT QUALITY INDICATORS:

The Company 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 Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans. The analysis for residential real estate and consumer loans primarily includes review of past due status. This analysis is performed on a quarterly basis. The Company 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.

Loss. Loans classified as loss are considered uncollectable and of such little value that continuing to carry them as an asset is not feasible.  Loans will be classified as a loss when it is not practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

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

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
September 30, 2018	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	150,092	$	1,702	$	3,563	$	-	$	-	$	155,357
Multi-family		7,777		-		-		-		-		7,777
Commercial real estate		70,168		5,420		6,637		-		-		82,225
Construction and land		8,754		329		170		-		-		9,253
Commercial and industrial		27,529		770		5,767		864		-		34,930
Home equity loans and lines of credit		10,828		-		146		-		-		10,974
Motor vehicle		11,005		8		36		-		-		11,049
Other		7,351		-		3		-		-		7,354
Total	$	293,504	$	8,229	$	16,322	$	864	$	-	$	318,919

			Special
December 31, 2017	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	163,709	$	1,673	$	5,372	$	-	$	-	$	170,754
Multi-family		6,505		-		-		-		-		6,505
Commercial real estate		76,226		2,957		5,129		-		-		84,312
Construction and land		9,825		-		179		-		-		10,004
Commercial and industrial		25,891		2,602		5,171		-		-		33,664
Home equity loans and lines of credit		10,549		0		158		-		-		10,707
Motor vehicle		10,291		9		68		-		-		10,368
Other		7,413		-		7		-		-		7,420
Total	$	310,409	$	7,241	$	16,084	$	-	$	-	$	333,734

There were $888,000 and $1.1 million of purchased credit impaired (“PCI”) loans included in substandard loans at September 30, 2018 and December 31, 2017, respectively.

The Company holds purchased loans without evidence of credit quality deterioration. In addition, the Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable that all contractually required payments would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount of those loans is as follows at September 30, 2018 and December 31, 2017 (in thousands):

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of September 30, 2018	Loans		Loans
Real estate:
One to four family	$	22,587	$	549
Multi-family		1,389		-
Commercial real estate		13,002		526
Construction and land		400		-
Commercial and industrial		683		-
Consumer loans:
Home equity loans and lines of credit		981		-
Motor vehicle		16		-
Other		450		-
Total loans	$	39,508	$	1,075

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of December 31, 2017	Loans		Loans
Real estate:
One to four family	$	25,437	$	590
Multi-family		1,829		-
Commercial real estate		15,157		715
Construction and land		510		-
Commercial and industrial		1,359		-
Consumer loans:
Home equity loans and lines of credit		959		-
Motor vehicle		43		-
Other		521		-
Total loans	$	45,815	$	1,305

For the purchased loans disclosed above, the Company did not increase the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017.

The following table presents the composition of the acquired loans at September 30, 2018 and December 31, 2017:

As of September 30, 2018
	Contractual		Remaining		Carrying
(in thousands)	Amount		Discount		Amount
Real estate:
One to four family	$	23,362	$	(226)	$	23,136
Multi-family		1,389		-		1,389
Commercial real estate		13,608		(80)		13,528
Construction and land		400		-		400
Commercial and industrial		683		-		683
Consumer loans:
Home equity loans and lines of credit		982		(1)		981
Motor vehicle		16		-		16
Other		450		-		450
Total loans	$	40,890	$	(307)	$	40,583

As of December 31, 2017
	Contractual		Remaining		Carrying
(in thousands)	Amount		Discount		Amount
Real estate:
One to four family	$	26,335	$	(308)	$	26,027
Multi-family		1,832		(3)		1,829
Commercial real estate		16,050		(178)		15,872
Construction and land		511		(1)		510
Commercial and industrial		1,360		(1)		1,359
Consumer loans:
Home equity loans and lines of credit		962		(3)		959
Motor vehicle		44		(1)		43
Other		522		(1)		521
Total loans	$	47,616	$	(496)	$	47,120

The following tables presents the purchased loans that are included within the scope of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, as of September 30, 2018 and December 31, 2017.

(in thousands)	September 30, 2018		December 31, 2017
Carrying amount	$	1,075	$	1,305
Non-accretable difference		167		214
Accretable yield		67		100
Contractually-required principal and interest payments	$	1,309	$	1,619

The Company adjusted interest income to recognize $5,000,  $16,000,$9,000 and $33,000 of accretable yield on credit-impaired purchased loans for the three and nine months ended September 30, 2018 and 2017, respectively. 

Accretable yield, or income expected to be collected, is as follows for the nine months ended September 30, 2018 and 2017 (in thousands):

		2018		2017
Balance at January 1	$	100	$	146
New Loans Purchased		-		-
Accretion of income		(16)		(33)
Reclassifications from nonaccretable difference		-		-
Disposals		(17)		-
Balance at September 30	$	67	$	113

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

9 Months Ended

Sep. 30, 2018

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS [Abstract]

Federal Home Loan Bank Advances and Other Borrowings

NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Advances from the FHLB at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30, 2018		December 31, 2017
Maturities December 2018 through January 2029, fixed rate at rates from 2.16% to 3.35%, weighted average rate of 2.39% at September 30, 2018 and 1.97% at December 31, 2017	$	6,219	$	7,419

Payments contractually required over the next five years are as follows as of September 30, 2018 (in thousands): 

remainder for year ending 2018	$	5,298
2019		442
2020		93
2021		78
2022		66
Thereafter		242
Total	$	6,219

There were no other borrowings at September 30, 2018 and December 31, 2017.

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FAIR VALUE

9 Months Ended

Sep. 30, 2018

FAIR VALUE [Abstract]

Fair Value

NOTE 7 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities: The fair values for securities are determined by quoted market prices, if available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of similar securities (Level 2). This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3).

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less estimated costs to sell. Fair values are generally based on third party appraisals of the property resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less estimated costs to sell, an impairment loss is recognized.

Assets and liabilities measured at fair value on a recurring basis, at September 30, 2018 and December 31, 2017, are as follows (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	17,982	$	-	$	17,982	$	-
U.S. Government agencies and sponsored entities		4,915		-		4,915		-
Mortgage backed securities: residential		26,853		-		26,853		-
Collateralized mortgage obligations		9,057		-		9,057		-
SBA loan pools		10,534		-		10,534		-
Total securities	$	69,341	$	-	$	69,341	$	-

	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	19,164	$	-	$	19,164	$	-
U.S. Government agencies and sponsored entities		3,450		-		3,450		-
Mortgage backed securities: residential		27,267		-		27,267		-
Collateralized mortgage obligations		4,955		-		4,955		-
SBA loan pools		9,294		-		9,294		-
Total securities	$	64,130	$	-	$	64,130	$	-

There were notransfersbetweenLevel 1 and Level 2 during the nine months ended September 30, 2018.

Assets measured at fair value on a non-recurring basis at September 30, 2018 and December 31, 2017 are summarized below (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	369	$	-	$	-	$	369
Commercial real estate, net		1,161		-		-		1,161
Commercial and industrial, net		1,638		-		-		1,638
Consumer loan HELOC, net		25		-		-		25
Other real estate owned
Residential real estate, net	$	65	$	-	$	-	$	65

	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	621	$	-	$	-	$	621
Commercial real estate, net		992		-		-		992
Commercial and industrial, net		1,186		-		-		1,186
Consumer loan HELOC, net		24		-		-		24
Other real estate owned
Residential real estate, net	$	610	$	-	$	-	$	610

Commercial and residential real estate properties classified as OREO are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for real estate properties classified as other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank’s management. The appraisal values are discounted to allow for estimated selling expenses and fees, and the discounts range from 5% to 10%.

At September 30, 2018, impaired loans recorded at fair value had a net carrying value of $3.2 million, which was equal to the outstanding balance of $3.6 million, net of a valuation allowance of $418,000. At December 31, 2017, impaired loans recorded at fair value had a net carrying value of $2.8 million, which was equal to the outstanding balance of $4.7 million, net of a valuation allowance of $1.9 million. There were charge-offs of $1.5 million,  $2.2 million,$353,000 and $391,000 for the three and nine months ended September 30, 2018 and 2017, respectively. The change in specific reserve on impaired loans resulted in a provision for loan losses of $93,000 and $744,000 for the three and nine months ended September 30, 2018. The change in specific reserve on impaired loans resulted in an increase of $294,000 and $488,000 for the three and nine months ended September 30, 2017.

At September 30, 2018, OREO recorded at fair value had a net carrying value of $65,000, which was equal to the outstanding balance of $126,000, net of a valuation allowance of $61,000. There were no write-downs for the three months ended September 30, 2018 and $3,000 in write-downs for the nine months ended September 30, 2018. There were $42,000 in write-downs for the three months ended September 30, 2017 and $100,000 in write-downs for the nine months ended September 30, 2017. At December 31, 2017, other real estate owned recorded at fair value had a net carrying value of $610,000, which was equal to the outstanding balance of $1.03 million, net of a valuation allowance of $420,000.  

The carrying amounts and estimated fair values of financial instruments at September 30, 2018 and December 31, 2017 are as follows (in thousands):

			Fair Value Measurements
	Carrying
September 30, 2018	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	22,852	$	22,852	$	-	$	-	$	22,852
Interest bearing deposits		3,735		-		3,735		-		3,735
Securities		69,341		-		69,341		-		69,341
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		508		-		508		-		508
Loans, net		315,290		-		-		314,342		314,342
Accrued interest receivable		1,398		-		362		1,036		1,398
Financial liabilities
Deposits	$	365,627	$	210,147	$	151,904	$	-	$	362,051
Federal Home Loan Bank advances		6,219		4,999		1,212		-		6,211
Subordinated debenture		2,938		-		2,921		-		2,921
Accrued interest payable		34		-		34		-		34

			Fair Value Measurements
	Carrying
December 31, 2017	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	20,499	$	20,499	$	-	$	-	$	20,499
Interest bearing deposits		2,988		-		2,988		-		2,988
Securities		64,130		-		64,130		-		64,130
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		256		-		256		-		256
Loans, net		328,554		-		-		328,236		328,236
Accrued interest receivable		1,413		-		333		1,080		1,413
Financial liabilities
Deposits	$	370,050	$	212,625	$	154,859	$	-	$	367,484
Federal Home Loan Bank advances		7,419		4,999		2,404		-		7,403
Subordinated debenture		2,890		-		2,873		-		2,873
Accrued interest payable		24		-		24		-		24

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents:

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

Restricted Stock:

It is not practical to determine the fair value of FHLB and Bankers Bank of Kentucky stock due to restrictions placed on their transferability. 

Loans:

Fair values of loans, excluding loans held for sale, are estimated as follows: ASU 2016-1, "Recognition and Measurement of Financial Assets and Financial Liabilities," requires the Company to use the exit price notion when measuring fair value of financial instruments for disclosure purposes effective January 1, 2018, therefore the fair value presented in the following table may not be comparable to prior period.  For performing loans, the fair value is determined based on a discounted cash flow analysis (income approach).  The discounted cash flow was based on contractual maturity of the loan and market indications of rates, prepayment speeds, defaults and credit risk resulting in Level 3 classification.  For non-performing loans, the fair value is determined based on the estimated values of the underlying collateral or individual analysis of receipts (asset approach) resulting in Level 3 classification.  At September 30, 2018, the fair values of loans, excluding loans held for sale, were estimated as follows: for variable rate loans that reprice frequently and with no significant change in credit risk, fair values were based on carrying values resulting in a Level 3 classification. Fair values for other loans were estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans were valued as described previously.

The fair value of loans held for sale is based upon estimated values received from independent third-party purchasers. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans resulting in a Level 2 classification.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are by definition equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Other borrowings, Federal Home Loan Bank advances and Subordinate debenture:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable/Payable:

The carrying amounts of accrued interest approximate fair value and are classified by level consistent with the level of the related assets or liabilities.

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ESOP

9 Months Ended

Sep. 30, 2018

ESOP [Abstract]

ESOP

NOTE 8 - ESOP

Employees participate in an Employee Stock Ownership Plan (“ESOP”). The ESOP borrowed from the Company to purchase 269,790 shares of the Company’s common stock at $10 per share in the Company’s initial public offering. The Company makes discretionary contributions to the ESOP, and pays dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants receive the shares at the end of employment.

There were no contributions to the ESOP for the three and nine months ended September 30, 2018 and 2017.

Shares held by the ESOP at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30,		December 31,
	2018		2017
Allocated to participants		73,168		64,148
Committed to be released		10,115		13,538
Unearned		175,305		185,420
Total ESOP shares		258,588		263,106
Fair value of unearned shares	$	4,444	$	3,894

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2018

EARNINGS PER SHARE [Abstract]

Earnings Per Share

NOTE 9 – EARNINGS PER SHARE

The factors used in the earnings per share computation for the three and nine months ended September 30, 2018 and 2017, were as follows (dollar amounts in thousands, except per share data):

	Three months ended				Nine months ended
	September 30,				September 30,
	2018		2017		2018		2017
Basic
Net income (loss)	$	292	$	(18)	$	1,225	$	812
Less: Earnings (loss) allocated to participating securities		-		-		2		5
Net income (loss) available to common shareholders	$	292	$	(18)		1,223		807
Weighted average common shares outstanding		3,497,243		3,522,121		3,501,638		3,627,092
Less: Average unallocated ESOP shares		177,525		191,037		180,862		194,388
Average participating shares		134		15,357		5,937		21,170
Average shares		3,319,584		3,315,727		3,314,839		3,411,534
Basic earnings (loss) per common share	$	0.09	$	(0.01)	$	0.37	$	0.23
Diluted
Net income (loss) available to common shareholders	$	292	$	(18)	$	1,223	$	807
Weighted average common shares outstanding for basic earnings per common share		3,319,584		3,315,727		3,314,839		3,411,534
Add: Dilutive effects of assumed exercises of stock options		58,336		-		42,510		29,765
Average shares and dilutive potential common shares		3,377,920		3,315,727		3,357,349		3,441,299
Diluted earnings (loss) per common share	$	0.09	$	(0.01)	$	0.36	$	0.23

There were no stock options considered anti-dilutive for the three and nine months ended September 30, 2018 and the nine months ended September 30, 2017. All stock options were considered anti-dilutive for the three months ended September 30, 2017.

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STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2018

STOCK BASED COMPENSATION [Abstract]

Stock Based Compensation

NOTE 10 – STOCK BASED COMPENSATION

On January 8, 2013, the Company’s shareholders approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Plan”) for employees and directors of the Company. The Plan authorizes the issuance of up to 472,132 shares of the Company’s common stock, with no more than 134,895 of shares as restricted stock awards and 337,237 as stock options, either incentive stock options or non-qualified stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to whom equity incentive awards are granted.

The following table summarizes stock option activity for the nine months ended September 30, 2018:

		Weighted Average
	Options	Exercise Price
Outstanding -December 31, 2017	141,850	$	14.88
Granted	-		-
Exercised and settled	-		-
Forfeited	-		-
Outstanding -September 30, 2018	141,850	$	14.88
Fully vested and exercisable at September 30, 2018	135,850	$	14.90
Fully vested and exercisable at December 31, 2017	99,600	$	14.90
Expected to vest in future periods	6,000

Stock options are assumed to be earned ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the number of options assumed to be earned. At September 30, 2018, 141,850 options were outstanding, and 135,850 options were fully vested and exercisable with intrinsic value of $1.5 million and $1.4 million, respectively. At December 31, 2017, 141,850 options were outstanding, and 99,600 options were fully vested and exercisable with intrinsic value of $868,000 and $610,000, respectively.

During the nine months ended September 30, 2018, 36,250 options vested. Stock-based compensation expense for stock options included in salaries and benefits for the three and nine months ended September 30, 2018 and 2017 was $3,000,  $32,000,  $18,000 and $54,000, respectively. Total unrecognized compensation cost related to non-vested stock options was $7,000 at September 30, 2018 and is expected to be recognized over a period of 1.5 years.

The following table summarizes non-vested restricted stock activity for the nine months ended September 30, 2018:

Balance -December 31, 2017	15,222
Granted	-
Forfeited	-
Vested	(15,088)
Balance -September 30, 2018	134

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of the Company’s common stock at the date of the grant multiplied by the number of shares granted that are expected to vest. The fair value of the restricted stock awards vested during the nine months ended September 30, 2018 was $287,000.  Stock-based compensation expense for the restricted stock included in salaries and benefits for the three and nine months ended September 30, 2018 and 2017 was $700,  $69,000,  $58,000 and $173,000, respectively. Unrecognized compensation expense for non-vested restricted stock awards was $300 at September 30, 2018 and is expected to be recognized over a weighted-average period of 2 months.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

9 Months Ended

Sep. 30, 2018

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract]

Accumulated Other Comprehensive Income (Loss)

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax, for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities
		Three months ended				Nine months ended
		September 30,				September 30,
		2018		2017		2018		2017
Beginning balance		$	(1,042)	$	316	$	(260)	$	(153)
Other comprehensive income (loss), net of tax before reclassification			(299)		(68)		(1,081)		401
Amounts reclassified from accumulated other comprehensive income for loss on call of securities, net of tax expense of $0,  $0,  $0 and $0 respectively			-		-		-		-
Net current period other comprehensive income (loss)			(299)		(68)		(1,081)		401
Ending Balance		$	(1,341)	$	248	$	(1,341)	$	248

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AGREEMENT AND PLAN OF MERGER

9 Months Ended

Sep. 30, 2018

AGREEMENT AND PLAN OF MERGER [Abstract]

Agreement and Plan of Merger

NOTE 12 – AGREEMENT AND PLAN OF MERGER

On July 11, 2018, City Holding Company (“City”) and Poage entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which City will acquire Poage.

Under the terms of the Merger Agreement, each outstanding share of Poage common stock will be converted into the right to receive 0.335 shares of City common stock. In addition, each outstanding option to acquire shares of Poage common stock will convert into the right to receive a cash payment equal to the product of (i) the number of shares of Poage common stock subject to the stock option and (ii) the amount by which the per-share merger consideration exceeds the exercise price.

City and City National will increase the size of their respective Board of Directors by one member and will appoint Thomas L. Burnette, current Chairman of the Poage Board of Directors, to the Board of Directors of each of City and City National.

Following the acquisition of Poage by City, Town Square Bank, the wholly-owned subsidiary of Poage (“Town Square”), will merge with and into, City National Bank of West Virginia (“City National”), the wholly-owned subsidiary of City, with City National being the surviving institution.

The Merger Agreement contains customary representations and warranties from Poage and City, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of Poage’s businesses during the interim period between the execution of the Merger Agreement and the closing of the merger, (2) Poage’s obligations to facilitate its shareholders’ consideration of, and voting upon, the merger, (3) the recommendation by the Board of Directors of Poage in favor of approval of the merger by its shareholders, and (4) Poage’s non-solicitation obligations relating to alternative business combination transactions.

The merger was unanimously approved by the Board of Directors of each of City and Poage and is expected to close in the fourth quarter of 2018.

Consummation of the merger is subject to certain customary conditions, including, among others, approval of the merger by Poage’s shareholders, the receipt of all required regulatory approvals and expiration of applicable waiting periods, the accuracy of specified representations and warranties of each party, the performance in all material respects by each party of its obligations under the Merger Agreement and the absence of any injunctions or other legal restraints.

The Merger Agreement provides certain termination rights for both City and Poage and further provides that, upon termination of the Merger Agreement under certain circumstances, Poage is obligated to pay City a termination fee of $4.0 million.

In connection with the execution of the Merger Agreement, all Poage directors entered into a voting agreement with City and Poage pursuant to which such individuals, in their capacities as shareholders, have agreed, among other things, to vote their respective shares of Poage common stock in favor of the approval of the merger.

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RECENT ACCOUNTING PRONOUNCEMENTS (Policy)

9 Months Ended

Sep. 30, 2018

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early adoption of the other provisions mentioned above is not permitted. Starting with the first quarter of 2018, the Company began using an exit price notion when measuring the fair value of its loan portfolio for disclosure purposes. The adoption of ASU No. 2016-01 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting which amends the scope of modification accounting for share-based payment arrangements. The ASU provided guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation-Stock Compensation.  Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The adoption of ASU No. 2017-09 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial condition.

Newly Issued Accounting Standards Not Yet Effective

Newly Issued Accounting Standards Not Yet Effective

In February 2016, the FASB issued Accounting Standards Update 2016-02 Leases guidance requiring the recognition in the statement of financial position of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires that a lessee should recognize lease assets and lease liabilities as compared to previous GAAP that did not require lease assets and lease liabilities to be recognized for most leases. The guidance becomes effective for us on January 1, 2019. Poage is currently evaluating the impact on its leases to determine the impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (the ASU), which introduces the current expected credit losses methodology. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured as fair value through net income. Among other things, the ASU requires the measurement of all expected credit losses for financial assets, including loans and available-for-sale debt securities, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The new model, referred to as the current expected credit loss (“CECL”) model, will require institutions to calculate all probable and estimable losses that are expected to be incurred through the loan's entire life. ASU 2016-13 also requires the allowance for credit losses for purchased financial assets with credit deterioration since origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial allowance will be added to the purchase price rather than recorded as credit loss expense. The disclosure of credit quality indicators related to the amortized cost of financing receivables will be further disaggregated by year of origination (or vintage). Institutions are to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting period in which the standard is effective. The amendments are effective for fiscal years beginning after December 15, 2019. Early application will be permitted for fiscal years beginning after December 15, 2018. Management has formed a CECL committee that is evaluating the data gathering requirements, available economic forecasting and loss estimation models and potential software that would be employed by the Company to facilitate the adoption of this guidance and its required disclosures on the Company’s consolidated financial statements. Upon adoption, management anticipates an initial one-time increase in the allowance for loan losses along with a corresponding decrease in capital as permitted by the standard.

In January 2017, FASB issued ASU 2017-4, Intangible-Goodwill and Other (Topic 350), to simplify accounting for goodwill impairment. The new guidance will simplify financial reporting because it eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. The revised guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. Poage is currently evaluating the impact of the new guidance on its consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fee and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.  The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer. The amendments require the premium for certain callable debt securities to be amortized to the earliest call date. The amendments are effective for public companies for annual periods beginning after December 15, 2019. The adoption of ASU No. 2017-08 is not expected to have a material effect on the Company’s consolidated operating results or financial condition. 

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—the ASU improves the disclosure requirements on fair value measurements in ASC 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. Poage is currently evaluating the impact of adopting the new guidance on its consolidated financial statements, but it is not expected to have a material impact.

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SECURITIES AVAILABLE FOR SALE (Policy)

9 Months Ended

Sep. 30, 2018

SECURITIES AVAILABLE FOR SALE [Abstract]

Securities Available for Sale

Unrealized losses on bonds have not been recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell, and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

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SECURITIES AVAILABLE FOR SALE (Tables)

9 Months Ended

Sep. 30, 2018

SECURITIES AVAILABLE FOR SALE [Abstract]

Reconciliation from Amortized Cost to Fair Value of AFS Securities

The amortized cost and fair value of securities available for sale at September 30, 2018 and December 31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2018
States and political subdivisions	$	18,185	$	55	$	(258)	$	17,982
U.S. Government agencies and sponsored entities		5,000		-		(85)		4,915
Mortgage-backed securities: residential		27,664		-		(811)		26,853
Collateralized mortgage obligations		9,256		-		(199)		9,057
SBA loan pools		10,934		-		(400)		10,534
Total securities	$	71,039	$	55	$	(1,753)	$	69,341

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2017
States and political subdivisions	$	19,082	$	190	$	(108)	$	19,164
U.S. Government agencies and sponsored entities		3,500		-		(50)		3,450
Mortgage-backed securities: residential		27,449		44		(226)		27,267
Collateralized mortgage obligations		5,048		-		(93)		4,955
SBA loan pools		9,379		-		(85)		9,294
Total securities	$	64,458	$	234	$	(562)	$	64,130

Investments Classified by Contractual Maturity Date

The amortized cost and fair value of the securities portfolio at September 30, 2018 are shown in the following table by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands):

	September 30,
	2018
	Amortized		Fair
	Cost		Value
Within one year	$	2,521	$	2,521
One to five years		7,972		7,882
Five to ten years		9,168		9,086
Beyond ten years		3,524		3,408
Mortgage-backed securities and collateralized mortgage obligations		36,920		35,910
SBA loan pools		10,934		10,534
Total	$	71,039	$	69,341

Schedule of Investments in Unrealized Loss Position

The following table summarizes the securities with unrealized losses at September 30, 2018 and December 31, 2017, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

	Less Than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2018
States and political subdivisions	$	4,850	$	(89)	$	2,920	$	(169)	$	7,770	$	(258)
U.S. Government agencies and sponsored entities		1,486		(14)		3,429		(71)		4,915		(85)
Mortgage-backed securities: residential		14,878		(327)		11,975		(484)		26,853		(811)
Collateralized mortgage obligations		5,161		(57)		3,896		(142)		9,057		(199)
SBA loan Pools		3,612		(76)		6,922		(324)		10,534		(400)
Total available-for-sale securities	$	29,987	$	(563)	$	29,142	$	(1,190)	$	59,129	$	(1,753)

	Less Than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
December 31, 2017
States and political subdivisions	$	5,080	$	(56)	$	1,024	$	(52)	$	6,104	$	(108)
U.S. Government agencies and sponsored entities		992		(8)		2,458		(42)		3,450		(50)
Mortgage-backed securities: residential		19,256		(181)		2,394		(45)		21,650		(226)
Collateralized mortgage obligations		1,954		(15)		3,001		(78)		4,955		(93)
SBA loan Pools		6,565		(66)		1,343		(19)		7,908		(85)
Total available-for-sale securities	$	33,847	$	(326)	$	10,220	$	(236)	$	44,067	$	(562)

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LOANS (Tables)

9 Months Ended

Sep. 30, 2018

LOANS [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Loans at September 30, 2018 and December 31, 2017 were as follows (in thousands):

	September 30,		December 31,
	2018		2017
Real estate:
One to four family	$	155,357	$	170,754
Multi-family		7,777		6,505
Commercial real estate		82,225		84,312
Construction and land		9,253		10,004
		254,612		271,575
Commercial and industrial		34,930		33,664
Consumer
Home equity loans and lines of credit		10,974		10,707
Motor vehicle		11,049		10,368
Other		7,354		7,420
		29,377		28,495
Total		318,919		333,734
Less: Net deferred loan fees		505		499
Allowance for loan losses		3,124		4,681
	$	315,290	$	328,554

Schedule of Components of Provision for Loan Loss and Loan Charged Off

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of September 30, 2018 and December 31, 2017. Accrued interest receivable and net deferred loan fees are not considered significant and therefore are not included in the loan balances presented in the table below (in thousands):

September 30, 2018
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	321	$	-	$	2,085	$	2,406	$	5,039	$	1,075	$	248,498	$	254,612
Commercial and industrial		93		-		407		500		3,849		-		31,081		34,930
Consumer		4		-		214		218		54		-		29,323		29,377
Total	$	418	$	-	$	2,706	$	3,124	$	8,942	$	1,075	$	308,902	$	318,919

December 31, 2017
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total
Real estate	$	624	$	-	$	2,232	$	2,856	$	5,523	$	1,305	$	264,747	$	271,575
Commercial and industrial		1,290		-		275		1,565		2,612		-		31,052		33,664
Consumer		5		-		255		260		60		-		28,435		28,495
Total	$	1,919	$	-	$	2,762	$	4,681	$	8,195	$	1,305	$	324,234	$	333,734

Impaired Financing Receivables

The following table presents information related to impaired loans by class of loans as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018						December 31, 2017
					Allowance						Allowance
	Unpaid				for Loan		Unpaid				for Loan
	Principal		Recorded		Losses		Principal		Recorded		Losses
	Balance		Investment		Allocated		Balance		Investment		Allocated
With no related allowance recorded:
Real Estate:
One to four family	$	743	$	699	$	-	$	699	$	655	$	-
Multi-family		-		-		-		-		-		-
Commercial real estate		2,556		2,416		-		2,593		2,452		-
Construction and land		170		170		-		179		179		-
Commercial and industrial		3,616		2,849		-		136		136		-
Consumer:
Home equity and lines of credit		25		25		-		31		31		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal	$	7,110	$	6,159	$	-	$	3,638	$	3,453	$	-
With a related allowance recorded:
Real Estate:
One to four family	$	389	$	389	$	42	$	1,091	$	988	$	367
Multi-family		-		-		-		-		-		-
Commercial real estate		1,365		1,365		279		1,249		1,249		257
Construction and land		-		-		-		-		-		-
Commercial and industrial		1,000		1,000		93		2,476		2,476		1,290
Consumer:
Home equity and lines of credit		29		29		4		29		29		5
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal		2,783		2,783		418		4,845		4,742		1,919
Total	$	9,893	$	8,942	$	418	$	8,483	$	8,195	$	1,919

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial charge-offs.

The following tables present the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three months ended September 30, 2018						Three months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	2,660	$	4	$	4	$	2,345	$	1	$	1
Multi-family		-		-		-		-		-		-
Commercial real estate		3,787		19		19		3,358		29		29
Construction and land		172		2		2		169		2		2
Commercial and industrial		4,339		12		3		96		1		1
Consumer:
Home equity and lines of credit		55		-		-		33		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,013	$	37	$	28	$	6,001	$	33	$	33

	Nine months ended September 30, 2018						Nine months ended September 30, 2017
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Real Estate:
One to four family	$	3,144	$	75	$	67	$	1,710	$	16	$	16
Multi-family		-		-		-		-		-		-
Commercial real estate		3,740		80		73		2,991		99		94
Construction and land		175		6		6		122		6		5
Commercial and industrial		4,037		27		18		196		1		1
Consumer:
Home equity and lines of credit		57		-		-		32		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total	$	11,153	$	188	$	164	$	5,051	$	122	$	116

Allowance for Credit Losses on Financing Receivables

The following tables set forth an analysis of our allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 (in thousands): 

Three months ended			Commercial
September 30, 2018	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,941	$	1,411	$	210	$	4,562
Provision for loan losses		79		57		33		169
Loans charged-off		(616)		(974)		(36)		(1,626)
Recoveries		2		6		11		19
Total ending allowance balance	$	2,406	$	500	$	218	$	3,124

Three months ended			Commercial
September 30, 2017	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,244	$	233	$	210	$	2,687
Provision for loan losses		811		123		13		947
Loans charged-off		(449)		-		(27)		(476)
Recoveries		4		9		15		28
Total ending allowance balance	$	2,610	$	365	$	211	$	3,186

Nine months ended			Commercial
September 30, 2018	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	2,856	$	1,565	$	260	$	4,681
Provision for loan losses		714		636		(15)		1,335
Loans charged-off		(1,180)		(1,741)		(88)		(3,009)
Recoveries		16		40		61		117
Total ending allowance balance	$	2,406	$	500	$	218	$	3,124

Nine months ended			Commercial
September 30, 2017	Real Estate		and Industrial		Consumer		Total
Allowance for loan losses:
Beginning balance	$	1,946	$	218	$	185	$	2,349
Provision for loan losses		1,397		134		115		1,646
Loans charged-off		(742)		(23)		(137)		(902)
Recoveries		9		36		48		93
Total ending allowance balance	$	2,610	$	365	$	211	$	3,186

Schedule of Financing Receivables, Nonaccrual Status

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual status, by class of loans, as of September 30, 2018 and December 31, 2017 (in thousands):

	September 30, 2018				December 31, 2017
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
	Nonaccrual		Still Accruing		Nonaccrual		Still Accruing
Real estate:
One to four family	$	1,481	$	-	$	2,911	$	-
Multi-family		-		-		-		-
Commercial real estate		1,586		-		1,677		-
Construction and land		29		-		34		-
Commercial and industrial		3,333		-		1,638		-
Consumer:
Home equity loans and lines of credit		54		-		66		-
Motor vehicle		23		-		26		-
Other		7		-		6		-
Total	$	6,513	$	-	$	6,358	$	-

Past Due Financing Receivables

The following tables present the aging of the recorded investment in past due loans as of September 30, 2018 and December 31, 2017 by class of loans (in thousands). Non-accrual loans of $6.5 million as of September 30, 2018 and $6.3 million at December 31, 2017 are included in the tables below and have been categorized based on their payment status (in thousands):

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
September 30, 2018
Real estate:
One to four family	$	1,119	$	228	$	409	$	1,756	$	549	$	153,052	$	155,357
Multi-family		-		-		-		-		-		7,777		7,777
Commercial real estate		-		-		1,480		1,480		526		80,219		82,225
Construction and land		32		-		-		32		-		9,221		9,253
Commercial and industrial		23		-		3,333		3,356		-		31,574		34,930
Consumer:
Home equity loans and lines of credit		-		-		29		29		-		10,945		10,974
Motor vehicle		53		-		20		73		-		10,976		11,049
Other		8		7		7		22		-		7,332		7,354
Total	$	1,235	$	235	$	5,278	$	6,748	$	1,075	$	311,096	$	318,919

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		89 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
December 31, 2017
Real estate:
One to four family	$	1,615	$	628	$	1,199	$	3,442	$	590	$	166,722	$	170,754
Multi-family		-		-		-		-		-		6,505		6,505
Commercial real estate		249		315		1,367		1,931		715		81,666		84,312
Construction and land		-		-		-		-		-		10,004		10,004
Commercial and industrial		1,133		4		1,631		2,768		-		30,896		33,664
Consumer:
Home equity loans and lines of credit		-		-		60		60		-		10,647		10,707
Motor vehicle		40		-		21		61		-		10,307		10,368
Other		3		6		-		9		-		7,411		7,420
Total	$	3,040	$	953	$	4,278	$	8,271	$	1,305	$	324,158	$	333,734

Troubled Debt Restructurings on Financing Receivables

September 30, 2018	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	23	$	15	$	38
Multi-family		-		-		-
Commercial real estate		906		2,195		3,101
Construction and land		-		-		-
Commercial and industrial		-		998		998
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	929	$	3,208	$	4,137

December 31, 2017	TDRs on
(in thousands)	Non-accrual		Other TDRs		Total TDRs
Real Estate:
One to four family	$	30	$	16	$	46
Multi-family		-		-		-
Commercial real estate		933		2,195		3,128
Construction and land		-		-		-
Commercial and industrial		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-
Motor vehicle		-		-		-
Other		-		-		-
Total	$	963	$	2,211	$	3,174

There was one TDR in the amount of $831,000 considered to be in default within twelve months of modification as of September 30, 2018. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The following table presents TDRs that occurred during the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):

Three months ended September 30, 2018

Three months ended September 30, 2017

Loan Class

Number of Loans

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Number of Loans

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Real Estate:

One to four family

-

$

-

$

-

-

$

-

$

-

Multi-family

-

-

-

-

-

-

Commercial real estate

-

-

-

-

-

-

Construction and land

-

-

-

-

-

-

Commercial and industrial

-

-

-

-

-

-

Consumer:

Home equity loans and lines of credit

-

-

-

-

-

-

Motor vehicle

-

-

-

-

-

-

Other

-

-

-

-

-

-

Total

-

$

-

$

-

-

$

-

$

-

	Nine months ended September 30, 2018						Nine months ended September 30, 2017
Loan Class	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real Estate:
One to four family		-	$	-	$	-		2	$	148	$	148
Multi-family		-		-		-		-		-		-
Commercial real estate		-		-		-		1		117		117
Construction and land		-		-		-		-		-		-
Commercial and industrial		2		1,002		1,002		-		-		-
Consumer:
Home equity loans and lines of credit		-		-		-		-		-		-
Motor vehicle		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total		2	$	1,002	$	1,002		3	$	265	$	265

Classes of the Loan Portfolio Summarized by the Aggregate Risk Rating

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

			Special
September 30, 2018	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	150,092	$	1,702	$	3,563	$	-	$	-	$	155,357
Multi-family		7,777		-		-		-		-		7,777
Commercial real estate		70,168		5,420		6,637		-		-		82,225
Construction and land		8,754		329		170		-		-		9,253
Commercial and industrial		27,529		770		5,767		864		-		34,930
Home equity loans and lines of credit		10,828		-		146		-		-		10,974
Motor vehicle		11,005		8		36		-		-		11,049
Other		7,351		-		3		-		-		7,354
Total	$	293,504	$	8,229	$	16,322	$	864	$	-	$	318,919

			Special
December 31, 2017	Pass		Mention		Substandard		Doubtful		Loss		Total
One to four family	$	163,709	$	1,673	$	5,372	$	-	$	-	$	170,754
Multi-family		6,505		-		-		-		-		6,505
Commercial real estate		76,226		2,957		5,129		-		-		84,312
Construction and land		9,825		-		179		-		-		10,004
Commercial and industrial		25,891		2,602		5,171		-		-		33,664
Home equity loans and lines of credit		10,549		0		158		-		-		10,707
Motor vehicle		10,291		9		68		-		-		10,368
Other		7,413		-		7		-		-		7,420
Total	$	310,409	$	7,241	$	16,084	$	-	$	-	$	333,734

Schedule of Purchased Loans

The Company holds purchased loans without evidence of credit quality deterioration. In addition, the Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable that all contractually required payments would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount of those loans is as follows at September 30, 2018 and December 31, 2017 (in thousands):

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of September 30, 2018	Loans		Loans
Real estate:
One to four family	$	22,587	$	549
Multi-family		1,389		-
Commercial real estate		13,002		526
Construction and land		400		-
Commercial and industrial		683		-
Consumer loans:
Home equity loans and lines of credit		981		-
Motor vehicle		16		-
Other		450		-
Total loans	$	39,508	$	1,075

	Non-impaired		Credit-impaired
	Purchased		Purchased
Purchased Loans as of December 31, 2017	Loans		Loans
Real estate:
One to four family	$	25,437	$	590
Multi-family		1,829		-
Commercial real estate		15,157		715
Construction and land		510		-
Commercial and industrial		1,359		-
Consumer loans:
Home equity loans and lines of credit		959		-
Motor vehicle		43		-
Other		521		-
Total loans	$	45,815	$	1,305

Schedule of Composition of Acquired Financing Receivable

The following table presents the composition of the acquired loans at September 30, 2018 and December 31, 2017:

As of September 30, 2018
	Contractual		Remaining		Carrying
(in thousands)	Amount		Discount		Amount
Real estate:
One to four family	$	23,362	$	(226)	$	23,136
Multi-family		1,389		-		1,389
Commercial real estate		13,608		(80)		13,528
Construction and land		400		-		400
Commercial and industrial		683		-		683
Consumer loans:
Home equity loans and lines of credit		982		(1)		981
Motor vehicle		16		-		16
Other		450		-		450
Total loans	$	40,890	$	(307)	$	40,583

As of December 31, 2017
	Contractual		Remaining		Carrying
(in thousands)	Amount		Discount		Amount
Real estate:
One to four family	$	26,335	$	(308)	$	26,027
Multi-family		1,832		(3)		1,829
Commercial real estate		16,050		(178)		15,872
Construction and land		511		(1)		510
Commercial and industrial		1,360		(1)		1,359
Consumer loans:
Home equity loans and lines of credit		962		(3)		959
Motor vehicle		44		(1)		43
Other		522		(1)		521
Total loans	$	47,616	$	(496)	$	47,120

Schedule of Loans and Debt Securities Acquired with Deteriorated Credit Quality

The following tables presents the purchased loans that are included within the scope of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, as of September 30, 2018 and December 31, 2017.

(in thousands)	September 30, 2018		December 31, 2017
Carrying amount	$	1,075	$	1,305
Non-accretable difference		167		214
Accretable yield		67		100
Contractually-required principal and interest payments	$	1,309	$	1,619

Accretable yield, or income expected to be collected

Accretable yield, or income expected to be collected, is as follows for the nine months ended September 30, 2018 and 2017 (in thousands):

		2018		2017
Balance at January 1	$	100	$	146
New Loans Purchased		-		-
Accretion of income		(16)		(33)
Reclassifications from nonaccretable difference		-		-
Disposals		(17)		-
Balance at September 30	$	67	$	113

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FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of FHLB Advances

Advances from the FHLB at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30, 2018		December 31, 2017
Maturities December 2018 through January 2029, fixed rate at rates from 2.16% to 3.35%, weighted average rate of 2.39% at September 30, 2018 and 1.97% at December 31, 2017	$	6,219	$	7,419

Federal Home Loan Bank Advances and Other Borrowings [Member]

FHLB Advances, Contractually Required Payments

Payments contractually required over the next five years are as follows as of September 30, 2018 (in thousands): 

remainder for year ending 2018	$	5,298
2019		442
2020		93
2021		78
2022		66
Thereafter		242
Total	$	6,219

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FAIR VALUE (Tables)

9 Months Ended

Sep. 30, 2018

FAIR VALUE [Abstract]

Assets and Liabilities Measured on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, at September 30, 2018 and December 31, 2017, are as follows (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	17,982	$	-	$	17,982	$	-
U.S. Government agencies and sponsored entities		4,915		-		4,915		-
Mortgage backed securities: residential		26,853		-		26,853		-
Collateralized mortgage obligations		9,057		-		9,057		-
SBA loan pools		10,534		-		10,534		-
Total securities	$	69,341	$	-	$	69,341	$	-

	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Securities:
States and political subdivisions	$	19,164	$	-	$	19,164	$	-
U.S. Government agencies and sponsored entities		3,450		-		3,450		-
Mortgage backed securities: residential		27,267		-		27,267		-
Collateralized mortgage obligations		4,955		-		4,955		-
SBA loan pools		9,294		-		9,294		-
Total securities	$	64,130	$	-	$	64,130	$	-

Assets Measured at Fair Value on a Non-recurring Basis

Assets measured at fair value on a non-recurring basis at September 30, 2018 and December 31, 2017 are summarized below (in thousands):

	Fair Value Measurements at
	September 30, 2018 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	369	$	-	$	-	$	369
Commercial real estate, net		1,161		-		-		1,161
Commercial and industrial, net		1,638		-		-		1,638
Consumer loan HELOC, net		25		-		-		25
Other real estate owned
Residential real estate, net	$	65	$	-	$	-	$	65

	Fair Value Measurements at
	December 31, 2017 Using:
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans
Residential real estate, net	$	621	$	-	$	-	$	621
Commercial real estate, net		992		-		-		992
Commercial and industrial, net		1,186		-		-		1,186
Consumer loan HELOC, net		24		-		-		24
Other real estate owned
Residential real estate, net	$	610	$	-	$	-	$	610

Fair Value, by Balance Sheet Grouping

The carrying amounts and estimated fair values of financial instruments at September 30, 2018 and December 31, 2017 are as follows (in thousands):

			Fair Value Measurements
	Carrying
September 30, 2018	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	22,852	$	22,852	$	-	$	-	$	22,852
Interest bearing deposits		3,735		-		3,735		-		3,735
Securities		69,341		-		69,341		-		69,341
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		508		-		508		-		508
Loans, net		315,290		-		-		314,342		314,342
Accrued interest receivable		1,398		-		362		1,036		1,398
Financial liabilities
Deposits	$	365,627	$	210,147	$	151,904	$	-	$	362,051
Federal Home Loan Bank advances		6,219		4,999		1,212		-		6,211
Subordinated debenture		2,938		-		2,921		-		2,921
Accrued interest payable		34		-		34		-		34

			Fair Value Measurements
	Carrying
December 31, 2017	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	20,499	$	20,499	$	-	$	-	$	20,499
Interest bearing deposits		2,988		-		2,988		-		2,988
Securities		64,130		-		64,130		-		64,130
Restricted stock		3,276		N/A		N/A		N/A		N/A
Loans held for sale		256		-		256		-		256
Loans, net		328,554		-		-		328,236		328,236
Accrued interest receivable		1,413		-		333		1,080		1,413
Financial liabilities
Deposits	$	370,050	$	212,625	$	154,859	$	-	$	367,484
Federal Home Loan Bank advances		7,419		4,999		2,404		-		7,403
Subordinated debenture		2,890		-		2,873		-		2,873
Accrued interest payable		24		-		24		-		24

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ESOP (Tables)

9 Months Ended

Sep. 30, 2018

ESOP [Abstract]

Schedule of Shares Held by the ESOP

Shares held by the ESOP at September 30, 2018 and December 31, 2017 were as follows (dollars in thousands):

	September 30,		December 31,
	2018		2017
Allocated to participants		73,168		64,148
Committed to be released		10,115		13,538
Unearned		175,305		185,420
Total ESOP shares		258,588		263,106
Fair value of unearned shares	$	4,444	$	3,894

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2018

EARNINGS PER SHARE [Abstract]

Schedule of Earnings Per Share

The factors used in the earnings per share computation for the three and nine months ended September 30, 2018 and 2017, were as follows (dollar amounts in thousands, except per share data):

	Three months ended				Nine months ended
	September 30,				September 30,
	2018		2017		2018		2017
Basic
Net income (loss)	$	292	$	(18)	$	1,225	$	812
Less: Earnings (loss) allocated to participating securities		-		-		2		5
Net income (loss) available to common shareholders	$	292	$	(18)		1,223		807
Weighted average common shares outstanding		3,497,243		3,522,121		3,501,638		3,627,092
Less: Average unallocated ESOP shares		177,525		191,037		180,862		194,388
Average participating shares		134		15,357		5,937		21,170
Average shares		3,319,584		3,315,727		3,314,839		3,411,534
Basic earnings (loss) per common share	$	0.09	$	(0.01)	$	0.37	$	0.23
Diluted
Net income (loss) available to common shareholders	$	292	$	(18)	$	1,223	$	807
Weighted average common shares outstanding for basic earnings per common share		3,319,584		3,315,727		3,314,839		3,411,534
Add: Dilutive effects of assumed exercises of stock options		58,336		-		42,510		29,765
Average shares and dilutive potential common shares		3,377,920		3,315,727		3,357,349		3,441,299
Diluted earnings (loss) per common share	$	0.09	$	(0.01)	$	0.36	$	0.23

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STOCK BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2018

STOCK BASED COMPENSATION [Abstract]

Schedule of Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2018:

		Weighted Average
	Options	Exercise Price
Outstanding -December 31, 2017	141,850	$	14.88
Granted	-		-
Exercised and settled	-		-
Forfeited	-		-
Outstanding -September 30, 2018	141,850	$	14.88
Fully vested and exercisable at September 30, 2018	135,850	$	14.90
Fully vested and exercisable at December 31, 2017	99,600	$	14.90
Expected to vest in future periods	6,000

Schedule of Non-Vested Restricted Stock Activity

The following table summarizes non-vested restricted stock activity for the nine months ended September 30, 2018:

Balance -December 31, 2017	15,222
Granted	-
Forfeited	-
Vested	(15,088)
Balance -September 30, 2018	134

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Loss) (Tables)

9 Months Ended

Sep. 30, 2018

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax, for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Unrealized Gains and Losses on Available-for-Sale Securities
		Three months ended				Nine months ended
		September 30,				September 30,
		2018		2017		2018		2017
Beginning balance		$	(1,042)	$	316	$	(260)	$	(153)
Other comprehensive income (loss), net of tax before reclassification			(299)		(68)		(1,081)		401
Amounts reclassified from accumulated other comprehensive income for loss on call of securities, net of tax expense of $0,  $0,  $0 and $0 respectively			-		-		-		-
Net current period other comprehensive income (loss)			(299)		(68)		(1,081)		401
Ending Balance		$	(1,341)	$	248	$	(1,341)	$	248

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REVENUE RECOGNITION (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation of Revenue [Line Items]
(Gain) Loss on sale and write-downs of other real estate owned, net			$ (58,000)	$ 126,000
Service On Deposit Accounts [Member]
Disaggregation of Revenue [Line Items]
Disaggregated revenue	$ 257,000	$ 239,000	723,000	709,000
Debit Card and ATM Fees [Member]
Disaggregation of Revenue [Line Items]
Disaggregated revenue	262,000	235,000	766,000	728,000
Other Real Estate Owned [Member]
Disaggregation of Revenue [Line Items]
(Gain) Loss on sale and write-downs of other real estate owned, net	$ 25,000	$ 12,000	$ 60,000	$ 26,000

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SECURITIES AVAILABLE FOR SALE (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
SECURITIES AVAILABLE FOR SALE [Abstract]
Proceeds from sales	$ 0	$ 0	$ 0	$ 0

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SECURITIES AVAILABLE FOR SALE (Reconciliation from Amortized Cost to Fair Value of AFS Securities) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Total securities	$ 69,341	$ 64,130
Gross Unrealized Gains	55	234
Gross Unrealized Losses	(1,753)	(562)
Amortized Cost	71,039	64,458
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Total securities	17,982	19,164
Gross Unrealized Gains	55	190
Gross Unrealized Losses	(258)	(108)
Amortized Cost	18,185	19,082
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Total securities	4,915	3,450
Gross Unrealized Losses	(85)	(50)
Amortized Cost	5,000	3,500
Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Total securities	26,853	27,267
Gross Unrealized Gains		44
Gross Unrealized Losses	(811)	(226)
Amortized Cost	27,664	27,449
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Total securities	9,057	4,955
Gross Unrealized Losses	(199)	(93)
Amortized Cost	9,256	5,048
SBA Loan Pools [Member]
Schedule of Available-for-sale Securities [Line Items]
Total securities	10,534	9,294
Gross Unrealized Losses	(400)	(85)
Amortized Cost	$ 10,934	$ 9,379

XML

SECURITIES AVAILABLE FOR SALE (Investments Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Amortized Cost, Within one year	$ 2,521
Amortized Cost, One to five years	7,972
Amortized Cost, Five to ten years	9,168
Amortized Cost, Beyond ten years	3,524
Amortized Cost, Total	71,039
Fair Value, Within one year	2,521
Fair Value, One to five years	7,882
Fair Value, Five to ten years	9,086
Fair Value, Beyond ten years	3,408
Fair Value, Total	69,341	$ 64,130
Mortgage Backed Securities and Collateralized Mortgage Obligations [Member]
Amortized Cost, without single maturity period	36,920
Fair Value, without single maturity period	35,910
SBA Loan Pools [Member]
Amortized Cost, without single maturity period	10,934
Fair Value, without single maturity period	10,534
Fair Value, Total	$ 10,534	$ 9,294

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SECURITIES AVAILABLE FOR SALE (Schedule of Investments in Unrealized Loss Position) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 29,987	$ 33,847
12 Months or Longer, Fair Value	29,142	10,220
Total Securities, Fair Value	59,129	44,067
Less than 12 Months, Unrealized Losses	(563)	(326)
12 Months or Longer, Unrealized Losses	(1,190)	(236)
Total Securities, Unrealized Losses	(1,753)	(562)
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	4,850	5,080
12 Months or Longer, Fair Value	2,920	1,024
Total Securities, Fair Value	7,770	6,104
Less than 12 Months, Unrealized Losses	(89)	(56)
12 Months or Longer, Unrealized Losses	(169)	(52)
Total Securities, Unrealized Losses	(258)	(108)
US Government Agencies Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	1,486	992
12 Months or Longer, Fair Value	3,429	2,458
Total Securities, Fair Value	4,915	3,450
Less than 12 Months, Unrealized Losses	(14)	(8)
12 Months or Longer, Unrealized Losses	(71)	(42)
Total Securities, Unrealized Losses	(85)	(50)
Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	14,878	19,256
12 Months or Longer, Fair Value	11,975	2,394
Total Securities, Fair Value	26,853	21,650
Less than 12 Months, Unrealized Losses	(327)	(181)
12 Months or Longer, Unrealized Losses	(484)	(45)
Total Securities, Unrealized Losses	(811)	(226)
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	5,161	1,954
12 Months or Longer, Fair Value	3,896	3,001
Total Securities, Fair Value	9,057	4,955
Less than 12 Months, Unrealized Losses	(57)	(15)
12 Months or Longer, Unrealized Losses	(142)	(78)
Total Securities, Unrealized Losses	(199)	(93)
SBA Loan Pools [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	3,612	6,565
12 Months or Longer, Fair Value	6,922	1,343
Total Securities, Fair Value	10,534	7,908
Less than 12 Months, Unrealized Losses	(76)	(66)
12 Months or Longer, Unrealized Losses	(324)	(19)
Total Securities, Unrealized Losses	$ (400)	$ (85)

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LOANS (Narrative) (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) contract loan	Sep. 30, 2017 USD ($) loan	Dec. 31, 2017 USD ($) contract
Financing Receivable, Recorded Investment [Line Items]
Loss on fictitious loans				$ 25,000
Financing Receivable, Net	$ 318,919,000		$ 318,919,000		$ 333,734,000
Non-accrual loans	6,513,000		6,513,000		6,358,000
Accretion of income	5,000	$ 9,000	$ 16,000	$ 33,000
Financing receivable, modifications, number of contracts | loan			2	3
Financing receivable, modifications, recorded investment	4,137,000		$ 4,137,000		3,174,000
Provision for loan losses	169,000	$ 947,000	1,335,000	$ 1,646,000
Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,075,000		1,075,000		1,305,000
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	16,322,000		16,322,000		16,084,000
Substandard [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	888,000		888,000		1,100,000
TDRs Seven and Five [Member]
Financing Receivable, Recorded Investment [Line Items]
Provision for loan losses			$ 176,000		$ 153,000
Seven TDRs [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivable, modifications, number of contracts | contract			7
Financing receivable, modifications, recorded investment	4,100,000		$ 4,100,000
Five TDRs [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivable, modifications, number of contracts | contract					5
Financing receivable, modifications, recorded investment					$ 3,200,000
TDR In Default [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing receivable, modifications, recorded investment	$ 831,000		$ 831,000

XML

LOANS (Schedule of Outstanding Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts Notes and Loans Receivable [Line Items]
Total	$ 318,919	$ 333,734
Less: Net deferred loan fees	505	499
Loans receivable, allowance for losses	3,124	4,681
Loans, net of allowance, Total	315,290	328,554
Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	254,612	271,575
Commercial Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	34,930	33,664
Consumer Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	29,377	28,495
One to Four Family [Member] | Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	155,357	170,754
Multi-Family [Member] | Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	7,777	6,505
Commercial Real Estate [Member] | Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	82,225	84,312
Construction and Land [Member] | Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	9,253	10,004
Home Equity Loan [Member] | Consumer Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	10,974	10,707
Motor Vehicle [Member] | Consumer Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	11,049	10,368
Other [Member] | Consumer Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Total	$ 7,354	$ 7,420

XML

LOANS (Schedule of Balance in the Allowance For Loan Losses and Recorded Investment) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan Losses, Individually Evaluated for Impairment	$ 418		$ 1,919
Allowance for Loan Losses, Collectively Evaluated for Impairment	2,706		2,762
Allowance for Loan Losses	3,124	$ 4,562	4,681	$ 3,186	$ 2,687	$ 2,349
Loan Balances, Individually Evaluated for Impairment	8,942		8,195
Notes receivable, net	318,919		333,734
Loan Balances, Collectively Evaluated for Impairment	308,902		324,234
Total	318,919		333,734
Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Notes receivable, net	1,075		1,305
Total	3,600		4,700
Real Estate Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan Losses, Individually Evaluated for Impairment	321		624
Allowance for Loan Losses, Collectively Evaluated for Impairment	2,085		2,232
Allowance for Loan Losses	2,406	2,941	2,856	2,610	2,244	1,946
Loan Balances, Individually Evaluated for Impairment	5,039		5,523
Loan Balances, Collectively Evaluated for Impairment	248,498		264,747
Total	254,612		271,575
Real Estate Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Notes receivable, net	1,075		1,305
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan Losses, Individually Evaluated for Impairment	93		1,290
Allowance for Loan Losses, Collectively Evaluated for Impairment	407		275
Allowance for Loan Losses	500	1,411	1,565	365	233	218
Loan Balances, Individually Evaluated for Impairment	3,849		2,612
Notes receivable, net	34,930		33,664
Loan Balances, Collectively Evaluated for Impairment	31,081		31,052
Total	34,930		33,664
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan Losses, Individually Evaluated for Impairment	4		5
Allowance for Loan Losses, Collectively Evaluated for Impairment	214		255
Allowance for Loan Losses	218	$ 210	260	$ 211	$ 210	$ 185
Loan Balances, Individually Evaluated for Impairment	54		60
Loan Balances, Collectively Evaluated for Impairment	29,323		28,435
Total	$ 29,377		$ 28,495

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LOANS (Schedule of Impaired Loans by Class I) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	$ 7,110	$ 3,638
With an allowance recorded	2,783	4,845
Total	9,893	8,483
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	6,159	3,453
With an allowance recorded	2,783	4,742
Total	8,942	8,195
Allowance for Loan Losses Allocated	418	1,919
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	743	699
With an allowance recorded	389	1,091
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	699	655
With an allowance recorded	389	988
Allowance for Loan Losses Allocated	42	367
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	2,556	2,593
With an allowance recorded	1,365	1,249
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	2,416	2,452
With an allowance recorded	1,365	1,249
Allowance for Loan Losses Allocated	279	257
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	170	179
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	170	179
Commercial Portfolio Segment [Member]
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	3,616	136
With an allowance recorded	1,000	2,476
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	2,849	136
With an allowance recorded	1,000	2,476
Allowance for Loan Losses Allocated	93	1,290
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
With no related allowance recorded	25	31
With an allowance recorded	29	29
Impaired Financing Receivable, Recorded Investment [Abstract]
With no related allowance recorded	25	31
With an allowance recorded	29	29
Allowance for Loan Losses Allocated	$ 4	$ 5

XML

LOANS (Schedule of Impaired Loans by Class II) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	$ 11,013	$ 6,001	$ 11,153	$ 5,051
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	37	33	188	122
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method	28	33	164	116
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	2,660	2,345	3,144	1,710
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	4	1	75	16
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method	4	1	67	16
Real Estate Portfolio Segment [Member] | Multi-Family [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	3,787	3,358	3,740	2,991
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	19	29	80	99
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method	19	29	73	94
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	172	169	175	122
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	2	2	6	6
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method	2	2	6	5
Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	4,339	96	4,037	196
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	12	1	27	1
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method	3	1	18	1
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	$ 55	33	$ 57	$ 32
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method
Consumer Portfolio Segment [Member] | Other [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Interest Income, Cash Basis Method

XML

LOANS (Schedule of Loan Loss Allowance Analysis) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Accounts Notes and Loans Receivable [Line Items]
Beginning balance	$ 4,562	$ 2,687	$ 4,681	$ 2,349	$ 2,349
Provision for loan losses	169	947	1,335	1,646
Loans charged-off	(1,626)	(476)	(3,009)	(902)
Recoveries	19	28	117	93
Ending balance	3,124	3,186	3,124	3,186	4,681
Real Estate Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Beginning balance	2,941	2,244	2,856	1,946	1,946
Provision for loan losses	79	811	714	1,397
Loans charged-off	(616)	(449)	(1,180)	(742)
Recoveries	2	4	16	9
Ending balance	2,406	2,610	2,406	2,610	2,856
Commercial Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Beginning balance	1,411	233	1,565	218	218
Provision for loan losses	57	123	636	134
Loans charged-off	(974)		(1,741)	(23)
Recoveries	6	9	40	36
Ending balance	500	365	500	365	1,565
Consumer Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Beginning balance	210	210	260	185	185
Provision for loan losses	33	13	(15)	115
Loans charged-off	(36)	(27)	(88)	(137)
Recoveries	11	15	61	48
Ending balance	$ 218	$ 211	$ 218	$ 211	$ 260

XML

LOANS (Schedule of Recorded Investment in Nonaccrual and Loans Past Due) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	$ 6,513	$ 6,358
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	1,481	2,911
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	1,586	1,677
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	29	34
Commercial Portfolio Segment [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	3,333	1,638
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	54	66
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	23	26
Consumer Portfolio Segment [Member] | Other [Member]
Accounts Notes and Loans Receivable [Line Items]
Nonaccrual	$ 7	$ 6

XML

LOANS (Schedule of Aging of the Recorded Investment in Past Due Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	$ 6,748	$ 8,271
Loans Not Past Due	311,096	324,158
Total	318,919	333,734
Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivable, gross	1,075	1,305
Total	3,600	4,700
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,235	3,040
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	235	953
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	5,278	4,278
Real Estate Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	254,612	271,575
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,756	3,442
Loans Not Past Due	153,052	166,722
Total	155,357	170,754
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivable, gross	549	590
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,119	1,615
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	228	628
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	409	1,199
Real Estate Portfolio Segment [Member] | Multi-Family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	7,777	6,505
Total	7,777	6,505
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,480	1,931
Loans Not Past Due	80,219	81,666
Total	82,225	84,312
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing receivable, gross	526	715
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		249
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		315
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	1,480	1,367
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	32
Loans Not Past Due	9,221	10,004
Total	9,253	10,004
Real Estate Portfolio Segment [Member] | Construction and Land [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	32
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	3,356	2,768
Loans Not Past Due	31,574	30,896
Total	34,930	33,664
Commercial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	23	1,133
Commercial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due		4
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	3,333	1,631
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total	29,377	28,495
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	29	60
Loans Not Past Due	10,945	10,647
Total	10,974	10,707
Consumer Portfolio Segment [Member] | Home Equity Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	29	60
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	73	61
Loans Not Past Due	10,976	10,307
Total	11,049	10,368
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	53	40
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	20	21
Consumer Portfolio Segment [Member] | Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	22	9
Loans Not Past Due	7,332	7,411
Total	7,354	7,420
Consumer Portfolio Segment [Member] | Other [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	8	3
Consumer Portfolio Segment [Member] | Other [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	7	$ 6
Consumer Portfolio Segment [Member] | Other [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past Due	$ 7

XML

LOANS (Troubled Debt Restructured During The Period) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($) loan	Sep. 30, 2017 USD ($) loan	Dec. 31, 2017 USD ($)
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	$ 4,137		$ 3,174
Financing receivable, modifications, number of contracts | loan	2	3
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 1,002	$ 265
Financing Receivable, Modifications, Post-Modification Recorded Investment	1,002	$ 265
Troubled Debt Restructurings, Non-accrual [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	929		963
Troubled Debt Restructurings, Other [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	3,208		2,211
Commercial Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	$ 998
Financing receivable, modifications, number of contracts | loan	2
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 1,002
Financing Receivable, Modifications, Post-Modification Recorded Investment	1,002
Commercial Portfolio Segment [Member] | Troubled Debt Restructurings, Other [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	998
One to Four Family [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	38		46
Financing receivable, modifications, number of contracts | loan		2
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 148
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 148
One to Four Family [Member] | Real Estate Portfolio Segment [Member] | Troubled Debt Restructurings, Non-accrual [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	23		30
One to Four Family [Member] | Real Estate Portfolio Segment [Member] | Troubled Debt Restructurings, Other [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	15		16
Commercial Real Estate [Member] | Real Estate Portfolio Segment [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	3,101		3,128
Financing receivable, modifications, number of contracts | loan		1
Financing Receivable, Modifications, Pre-Modification Recorded Investment		$ 117
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 117
Commercial Real Estate [Member] | Real Estate Portfolio Segment [Member] | Troubled Debt Restructurings, Non-accrual [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	906		933
Commercial Real Estate [Member] | Real Estate Portfolio Segment [Member] | Troubled Debt Restructurings, Other [Member]
Financing Receivable, Modifications [Line Items]
Financing receivable, modifications, recorded investment	$ 2,195		$ 2,195

XML

LOANS (Financing Receivable Credit Quality Indicators ) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 318,919	$ 333,734
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	293,504	310,409
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	8,229	7,241
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	16,322	16,084
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	864
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	155,357	170,754
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	150,092	163,709
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	1,702	1,673
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	3,563	5,372
Real Estate Portfolio Segment [Member] | Multi-Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	7,777	6,505
Real Estate Portfolio Segment [Member] | Multi-Family [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	7,777	6,505
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	82,225	84,312
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	70,168	76,226
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	5,420	2,957
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	6,637	5,129
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	9,253	10,004
Real Estate Portfolio Segment [Member] | Construction and Land [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	8,754	9,825
Real Estate Portfolio Segment [Member] | Construction and Land [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	329
Real Estate Portfolio Segment [Member] | Construction and Land [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	170	179
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	34,930	33,664
Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	27,529	25,891
Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	770	2,602
Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	5,767	5,171
Commercial Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	864
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	10,974	10,707
Consumer Portfolio Segment [Member] | Home Equity Loan [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	10,828	10,549
Consumer Portfolio Segment [Member] | Home Equity Loan [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net		0
Consumer Portfolio Segment [Member] | Home Equity Loan [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	146	158
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	11,049	10,368
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	11,005	10,291
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	8	9
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	36	68
Consumer Portfolio Segment [Member] | Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	7,354	7,420
Consumer Portfolio Segment [Member] | Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	7,351	7,413
Consumer Portfolio Segment [Member] | Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Financing Receivable, Net	$ 3	$ 7

XML

LOANS (Schedule of Purchased Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Impaired [Line Items]
Notes receivable, net	$ 318,919	$ 333,734
Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	39,508	45,815
Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	1,075	1,305
Real Estate Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	1,075	1,305
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	155,357	170,754
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	22,587	25,437
Real Estate Portfolio Segment [Member] | One to Four Family [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	549	590
Real Estate Portfolio Segment [Member] | Multi-Family [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	7,777	6,505
Real Estate Portfolio Segment [Member] | Multi-Family [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	1,389	1,829
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	82,225	84,312
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	13,002	15,157
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	526	715
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	9,253	10,004
Real Estate Portfolio Segment [Member] | Construction and Land [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	400	510
Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	34,930	33,664
Commercial Portfolio Segment [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	683	1,359
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	10,974	10,707
Consumer Portfolio Segment [Member] | Home Equity Loan [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	981	959
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	11,049	10,368
Consumer Portfolio Segment [Member] | Motor Vehicle [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	16	43
Consumer Portfolio Segment [Member] | Other [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	7,354	7,420
Consumer Portfolio Segment [Member] | Other [Member] | Non-impaired Purchased Loans [Member]
Financing Receivable, Impaired [Line Items]
Notes receivable, net	$ 450	$ 521

XML

LOANS (Composition of Acquired Loans) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Financing Receivable, Impaired [Line Items]
Contractual Amount	$ 40,890	$ 47,616
Fair Value	40,583	47,120
Remaining Discount	(307)	(496)
Real Estate Portfolio Segment [Member] | One to Four Family [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	23,362	26,335
Fair Value	23,136	26,027
Remaining Discount	(226)	(308)
Real Estate Portfolio Segment [Member] | Multi-Family [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	1,389	1,832
Fair Value	1,389	1,829
Remaining Discount		(3)
Real Estate Portfolio Segment [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	13,608	16,050
Fair Value	13,528	15,872
Remaining Discount	(80)	(178)
Real Estate Portfolio Segment [Member] | Construction and Land [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	400	511
Fair Value	400	510
Remaining Discount		(1)
Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	683	1,360
Fair Value	683	1,359
Remaining Discount		(1)
Consumer Portfolio Segment [Member] | Home Equity Loan [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	982	962
Fair Value	981	959
Remaining Discount	(1)	(3)
Consumer Portfolio Segment [Member] | Motor Vehicle [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	16	44
Fair Value	16	43
Remaining Discount		(1)
Consumer Portfolio Segment [Member] | Other [Member]
Financing Receivable, Impaired [Line Items]
Contractual Amount	450	522
Fair Value	$ 450	521
Remaining Discount		$ (1)

XML

LOANS (Loans Acquired with Deteriorated Credit Quality, By Class) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
LOANS [Abstract]
Carrying amount	$ 1,075	$ 1,305
Non-Accretable difference	167	214
Accretable yield	67	100
Contractually-required principal and interest payments	$ 1,309	$ 1,619

XML

LOANS (Rollforward of Accretable Yield) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
LOANS [Abstract]
Beginning Balance			$ 100,000	$ 146,000
New Loans Purchased
Accretion of income	$ (5,000)	$ (9,000)	(16,000)	(33,000)
Reclassifications from nonaccretable difference
Disposals			(17,000)
Ending Balance	$ 67,000	$ 113,000	$ 67,000	$ 113,000

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Narrative) (Details) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS [Abstract]
Other borrowings	$ 0.0	$ 0.0

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Schedule of FHLB Advances) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Schedule of Federal Home Loan Bank Advances
Maturities December 2018 through January 2029, fixed rate at rates from 2.16% to 3.35%, weighted average rate of 2.39% at September 30, 2018 and 1.97% at December 31, 2017	$ 6,219	$ 7,419
Minimum [Member]
Schedule of Federal Home Loan Bank Advances
Maturities fixed rates	2.16%	2.16%
Maximum [Member]
Schedule of Federal Home Loan Bank Advances
Maturities fixed rates	3.35%	3.35%
Weighted Average [Member]
Schedule of Federal Home Loan Bank Advances
Maturities fixed rates	2.39%	1.97%

XML

FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (FHLB Advances, Contractually Required Payments) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Payments Contractually Required Over the Next Five Years
remainder for year ending 2018	$ 5,298
2019	442
2020	93
2021	78
2022	66
Thereafter	242
Total	$ 6,219	$ 7,419

XML

FAIR VALUE (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Transfers between Level 1 and Level 2, Assets	$ 0		$ 0
Transfers between Level 2 and Level 1, Assets	0		0
Transfers between Level 1 and Level 2, Liabilities	0		0
Transfers between Level 2 and Level 1, Liabilities	0		0
Impaired loans, gross	318,919,000		318,919,000		$ 333,734,000
Loans receivable, allowance for losses	3,124,000		3,124,000		4,681,000
Loans receivable, net of allowance	315,290,000		315,290,000		328,554,000
Other real estate owned write-downs	0	$ 42,000	3,000	$ 100,000
Other real estate owned, carrying amount	65,000		65,000		610,000
Outstanding balance	126,000		126,000		1,030,000
Other real estate, valuation allowance	61,000		$ 61,000		420,000
Minimum [Member] | Bank management [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal values discounted to allow for selling expenses and fees			5.00%
Maximum [Member] | Bank management [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Appraisal values discounted to allow for selling expenses and fees			10.00%
Receivables Acquired with Deteriorated Credit Quality [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Impaired loans, gross	3,600,000		$ 3,600,000		4,700,000
Loans receivable, allowance for losses	418,000		418,000		1,900,000
Loans receivable, net of allowance	3,200,000		3,200,000		$ 2,800,000
Impaired Loans [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Charge-offs	1,500,000	353,000	2,200,000	391,000
Increase (decrease) in provision for loan losses	$ 93,000	$ 294,000	$ 744,000	$ 488,000

XML

FAIR VALUE (Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	$ 69,341	$ 64,130
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	69,341	64,130
US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	17,982	19,164
US States and Political Subdivisions Debt Securities [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	17,982	19,164
US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	4,915	3,450
US Government Agencies Debt Securities [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	4,915	3,450
Residential Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	26,853	27,267
Residential Mortgage Backed Securities [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	26,853	27,267
Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	9,057	4,955
Collateralized Mortgage Obligations [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	9,057	4,955
SBA Loan Pools [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	10,534	9,294
SBA Loan Pools [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	10,534	9,294
Fair Value Measurements (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	69,341	64,130
Fair Value Measurements (Level 2) [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	17,982	19,164
Fair Value Measurements (Level 2) [Member] | US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	4,915	3,450
Fair Value Measurements (Level 2) [Member] | Residential Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	26,853	27,267
Fair Value Measurements (Level 2) [Member] | Collateralized Mortgage Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	9,057	4,955
Fair Value Measurements (Level 2) [Member] | SBA Loan Pools [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total securities	$ 10,534	$ 9,294

XML

FAIR VALUE (Assets Measured at Fair Value on a Non-recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 369	$ 621
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Commercial Real Estate [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,161	992
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 1) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 2) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	369	621
Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 3) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,161	992
Real Estate Portfolio Segment [Member] | Other Real Estate Owned [Member] | Real Estate Loan [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	65	610
Real Estate Portfolio Segment [Member] | Other Real Estate Owned [Member] | Fair Value Measurements (Level 1) [Member] | Real Estate Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Other Real Estate Owned [Member] | Fair Value Measurements (Level 2) [Member] | Real Estate Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Real Estate Portfolio Segment [Member] | Other Real Estate Owned [Member] | Fair Value Measurements (Level 3) [Member] | Real Estate Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	65	610
Commercial Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Commercial Real Estate [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,638	1,186
Commercial Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 1) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Commercial Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 2) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Commercial Real Estate Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 3) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,638	1,186
Consumer Portfolio Segment [Member] | Impaired Loans [Member] | Home Equity Loan [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	25	24
Consumer Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 1) [Member] | Home Equity Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Consumer Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 2) [Member] | Home Equity Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring
Consumer Portfolio Segment [Member] | Impaired Loans [Member] | Fair Value Measurements (Level 3) [Member] | Home Equity Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 25	$ 24

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FAIR VALUE (Fair Value, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	$ 69,341	$ 64,130
Accrued interest receivable	1,398	1,413
Accrued interest payable	34	24
Fair Value Measurements (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities	69,341	64,130
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	22,852	20,499
Interest bearing deposits	3,735	2,988
Securities	69,341	64,130
Restricted stock	3,276	3,276
Loans held for sale	508	256
Loans, net	315,290	328,554
Accrued interest receivable	1,398	1,413
Deposits	365,627	370,050
Federal Home Loan Bank advances	6,219	7,419
Subordinated debenture	2,938	2,890
Accrued interest payable	34	24
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	22,852	20,499
Interest bearing deposits	3,735	2,988
Securities	69,341	64,130
Loans held for sale	508	256
Loans, net	314,342	328,236
Accrued interest receivable	1,398	1,413
Deposits	362,051	367,484
Federal Home Loan Bank advances	6,211	7,403
Subordinated debenture	2,921	2,873
Accrued interest payable	34	24
Estimate of Fair Value Measurement [Member] | Fair Value Measurements (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	22,852	20,499
Deposits	210,147	212,625
Federal Home Loan Bank advances	4,999	4,999
Estimate of Fair Value Measurement [Member] | Fair Value Measurements (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest bearing deposits	3,735	2,988
Securities	69,341	64,130
Loans held for sale	508	256
Accrued interest receivable	362	333
Deposits	151,904	154,859
Federal Home Loan Bank advances	1,212	2,404
Subordinated debenture	2,921	2,873
Accrued interest payable	34	24
Estimate of Fair Value Measurement [Member] | Fair Value Measurements (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, net	314,342	328,236
Accrued interest receivable	$ 1,036	$ 1,080

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ESOP (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
ESOP [Abstract]
Number of shares issued for ESOP			269,790
Employee Stock Ownership Plan (ESOP), weighted average purchase price of shares purchased			$ 10.00
Employee Stock Ownership Plan (ESOP), cash contributions to ESOP	$ 0	$ 0	$ 0	$ 0

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ESOP (Schedule of Shares Held by the ESOP) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
ESOP [Abstract]
Allocated to participants	73,168	64,148
Released, but unallocated	10,115	13,538
Unearned	175,305	185,420
Total ESOP shares	258,588	263,106
Fair value of unearned shares (in dollars)	$ 4,444	$ 3,894

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EARNINGS PER SHARE (Narrative) (Details) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Employee Stock Option [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities	0	0	0

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EARNINGS PER SHARE (Schedule of Earnings per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic
Net income (loss)	$ 292	$ (18)	$ 1,225	$ 812
Less: Earnings (loss) allocated to participating securities			2	5
Net income (loss) available to common shareholders	$ 292	$ (18)	$ 1,223	$ 807
Weighted average common shares outstanding	3,497,243	3,522,121	3,501,638	3,627,092
Less: Average unallocated ESOP shares	177,525	191,037	180,862	194,388
Average participating shares	134	15,357	5,937	21,170
Average shares	3,319,584	3,315,727	3,314,839	3,411,534
Basic earnings (loss) per common share	$ 0.09	$ (0.01)	$ 0.37	$ 0.23
Diluted
Net income (loss) available to common shareholders	$ 292	$ (18)	$ 1,223	$ 807
Weighted average common shares outstanding for basic earnings per common share	3,319,584	3,315,727	3,314,839	3,411,534
Add: Dilutive effects of assumed exercises of stock options	58,336		42,510	29,765
Average shares and dilutive potential common shares	3,377,920	3,315,727	3,357,349	3,441,299
Diluted earnings (loss) per common share	$ 0.09	$ (0.01)	$ 0.36	$ 0.23

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STOCK BASED COMPENSATION (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Jan. 08, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized						472,132
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized						337,237
Options, granted
Options, vested			36,250
Allocated share-based compensation expense	$ 3,000	$ 18,000	$ 32,000	$ 54,000
Unrecognized stock-based compensation expense	$ 7,000		$ 7,000
Options outstanding	141,850		141,850		141,850
Options outstanding, intrinsic value	$ 1,500,000		$ 1,500,000		$ 868,000
Fully vested and exercisable	135,850		135,850		99,600
Fully vested and exercisable, intrinsic value	$ 1,400,000		$ 1,400,000		$ 610,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized						134,895
Other than options, granted
Share-based compensation arrangement by share-based payment award, award vesting period			5 years
Options, vested			15,088
Allocated share-based compensation expense	700	$ 58,000	$ 69,000	$ 173,000
Unrecognized stock-based compensation expense	$ 300		$ 300
Unrecognized compensation cost, period for recognition			2 months
Fair value of vested awards			$ 287,000
Maximum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, period for recognition			1 year 6 months

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STOCK BASED COMPENSATION (Schedule of Stock Option Activity) (Details) - Employee Stock Option [Member] - $ / shares	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Options
Options Outstanding - Beginning of period	141,850
Options Granted
Options Exercised and settled
Options Forfeited
Options Outstanding - End of period	141,850
Weighted Average Exercise Price
Weighted Average Exercise Price, Outstanding - Beginning of period	$ 14.88
Weighted Average Exercise Price, Granted
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Forfeited
Weighted Average Exercise Price, Outstanding - End of period	$ 14.88
Vested and Expected to Vest
Fully vested and exercisable	135,850	99,600
Fully vested and exercisable, weighted average exercise price	$ 14.90	$ 14.90
Expected to vest in future periods	6,000

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STOCK BASED COMPENSATION (Schedule of Non-Vested Restricted Stock Activity) (Details) - Restricted Stock [Member]	9 Months Ended
	Sep. 30, 2018 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Balance - Beginning of period	15,222
Granted
Forfeited
Vested	(15,088)
Balance - End of period	134

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Schedule of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balances, beginning			$ 61,715
Other comprehensive income (loss)	$ (299)	$ (68)	(1,081)	$ 401
Balances, ending	61,218		61,218
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balances, beginning	(1,042)	316	(260)	(153)
Other comprehensive income (loss)			(1,081)
Balances, ending	(1,341)	248	(1,341)	248
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income, net of tax before reclassification	(299)	(68)	(1,081)	401
Other comprehensive income (loss)	(299)	(68)	(1,081)	401
Other comprehensive income (loss), tax benefit (expense), portion attributable to parent	$ 0	$ 0	$ 0	$ 0

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AGREEMENT AND PLAN OF MERGER (Narrative) (Details) $ in Millions		9 Months Ended
	Jul. 11, 2018 USD ($)	Sep. 30, 2018
AGREEMENT AND PLAN OF MERGER [Abstract]
Agreement and plan of merger, date		Jul. 11, 2018
Agreement and plan of merger, description		On July 11, 2018, City Holding Company ("City") and Poage entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which City will acquire Poage. Under the terms of the Merger Agreement, each outstanding share of Poage common stock will be converted into the right to receive 0.335 shares of City common stock. In addition, each outstanding option to acquire shares of Poage common stock will convert into the right to receive a cash payment equal to the product of (i) the number of shares of Poage common stock subject to the stock option and (ii) the amount by which the per-share merger consideration exceeds the exercise price.
Merger agreement cancelation fee	$ 4.0
Poage stock coversion to City's stock, per merger agreement	0.335