LOANS AND ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2018

Notes and Loans Payable, Current [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the ending balances of loans is as follows:

	June 30,			December 31,
	2018			2017
	(In thousands)
Real estate loans:
Residential – fixed	$	41,657		$	31,433
Residential – variable		311,482			297,593
Commercial		147,351			138,784
Construction		112,998			120,004
		613,488			587,814
Commercial loans:
Secured		52,078			62,333
Unsecured		5,442			5,638
		57,520			67,971
Consumer loans:
Home equity lines of credit		39,537			36,378
Other		247			214
		39,784			36,592
Total loans		710,792			692,377
Less:
Allowance for loan losses		(6,413	)		(6,153	)
Net deferred origination costs		112			78
Loans, net	$	704,491		$	686,302

The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2018 and 2017:

	Residential Real Estate		Commercial Real Estate		Construction			Commercial			Home Equity		Other Consumer			Unallocated			Total
	(In thousands)
Three Months Ended June 30, 2018
Allowance at March 31, 2018	$	1,925	$	1,545	$	1,433		$	995		$	248	$	3		$	69		$	6,218
Provision (credit) for loan losses		74		70		26			(33	)		9		1			48			195
Allowance at June 30, 2018	$	1,999	$	1,615	$	1,459		$	962		$	257	$	4		$	117		$	6,413
Three Months Ended June 30, 2017
Allowance at March 31, 2017	$	1,487	$	1,134	$	1,695		$	710		$	211	$	3		$	181		$	5,421
Provision (credit) for loan losses		76		37		65			4			4		(1	)		(63	)		122
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760		$	714		$	215	$	2		$	118		$	5,543
Six Months Ended June 30, 2018
Allowance at December 31, 2017	$	1,722	$	1,520	$	1,661		$	917		$	237	$	2		$	94		$	6,153
Provision (credit) for loan losses		277		95		(202	)		45			20		2			23			260
Allowance at June 30, 2018	$	1,999	$	1,615	$	1,459		$	962		$	257	$	4		$	117		$	6,413
Six Months Ended June 30, 2017
Allowance at December 31, 2016	$	1,422	$	1,145	$	1,827		$	703		$	211	$	3		$	121		$	5,432
Provision (credit) for loan losses		141		26		(67	)		11			4		10			(3	)		122
Loans charged off		--		--		--			--			--		(11	)		--			(11	)
Allowance at June 30, 2017	$	1,563	$	1,171	$	1,760		$	714		$	215	$	2		$	118		$	5,543

Further information pertaining to the allowance for loan losses is as follows:

	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity		Other Consumer		Unallocated		Total
	(In thousands)
June 30, 2018
Allowance related to impaired loans	$	--	$	--	$	--	$	--	$	--	$	--	$	--	$	--
Allowance related to non-impaired loans		1,999		1,615		1,459		962		257		4		117		6,413
Total allowance	$	1,999	$	1,615	$	1,459	$	962	$	257	$	4	$	117	$	6,413
Impaired loan balances	$	826	$	561	$	--	$	--	$	--	$	--	$	--	$	1,387
Non-impaired loan balances		352,313		146,790		112,998		57,520		39,537		247		--		709,405
Total loans	$	353,139	$	147,351	$	112,998	$	57,520	$	39,537	$	247	$	--	$	710,792
December 31, 2017
Allowance related to impaired loans	$	--	$	--	$	--	$	--	$	--	$	--	$	--	$	--
Allowance related to non-impaired loans		1,722		1,520		1,661		917		237		2		94		6,153
Total allowance	$	1,722	$	1,520	$	1,661	$	917	$	237	$	2	$	94	$	6,153
Impaired loan balances	$	172		576	$	--	$	--	$	--	$	--	$	--	$	748
Non-impaired loan balances		328,854		138,208		120,004		67,971		36,378		214		--		691,629
Total loans	$	329,026	$	138,784	$	120,004	$	67,971	$	36,378	$	214	$	--	$	692,377

The following is a summary of past due and non-accrual loans at June 30, 2018 and December 31, 2017:

	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Past Due 90 Days or More and Still Accruing		Non-accrual Loans
	(In thousands)
June 30, 2018
Residential real estate	$	--	$	--	$	657	$	657	$	--	$	657
Commercial real estate		97		931		--		1,028		--		561
Home equity		395		--		--		395		--		--
Total	$	492	$	931	$	657	$	2,080	$	--	$	1,218
December 31, 2017
Residential real estate	$	598	$	65	$	--	$	663	$	--	$	--
Commercial real estate		--		--		576		576		--		576
Total	$	598	$	65	$	576	$	1,239	$	--	$	576

The following is a summary of impaired loans:

	June 30, 2018				December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	826	$	843	$	172	$	189
Commercial real estate		561		689		576		710
Total impaired loans	$	1,387	$	1,532	$	748	$	899

Further information pertaining to impaired loans follows:

	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis
	(In thousands)
Residential real estate	$	333	$	10	$	--	$	209	$	11	$	8
Commercial real estate		564		8		8		567		28		28
Total	$	897	$	18	$	8	$	776	$	39	$	36

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis
	(In thousands)
Residential real estate	$	176	$	2	$	--	$	177	$	3	$	--
Commercial real estate		581		43		43		583		43		43
Total	$	757	$	45	$	43	$	760	$	46	$	43

No additional funds are committed to be advanced in connection with impaired loans.

There were no new troubled debt restructurings recorded during the three and six months ended June 30, 2018.

The following is a summary of troubled debt restructurings recorded for the three and six months ended June 30, 2017.

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(In thousands)
Commercial real estate	$	1	$	572	$	582

During the three and six months ended June 30, 2017, the Company recorded a TDR for one commercial borrower which capitalized past-due interest over the remaining term of the loan in accordance with their bankruptcy filing.

There were no TDRs that defaulted, generally considered 90 days past due or longer, during the three and six months ended June 30, 2018 and 2017, and for which default was within one year of the restructure date. TDRs did not have a material impact on the allowance for loan losses for the three and six months ended June 30, 2018 and 2017.

Credit Quality Information

The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans.

Loans rated 1-4: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 5: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 6: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 7: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 8: Loans in this category are considered “loss” or uncollectible and of such little value that their continuance as loans is not warranted.

Loans rated 9: Loans in this category only include commercial loans under $25 thousand with no other outstandings or relationships with the Company that are not rated for credit quality on an annual basis.

Loans rated 10: Loans in this category include loans which otherwise require rating, but which have not been rated, or loans for which the Company’s loan policy does not require rating.

Loans rated 11: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If, within 60 days of the assignment of an 11 rating, information is still not available to allow a standard rating, the credit will be rated 6.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports.

The following table presents the Company’s loans by risk rating:

	June 30, 2018								December 31, 2017
	Commercial Real Estate		Construction		Commercial		Total		Commercial Real Estate		Construction		Commercial		Total
	(In thousands)
Loans rated 1-4	$	143,457	$	112,998	$	57,082	$	313,537	$	134,201	$	120,004	$	67,087	$	321,292
Loans rated 5		932		--		438		1,370		1,476		--		301		1,777
Loans rated 6		2,401		--		--		2,401		2,531		--		583		3,114
Loans rated 7		561		--		--		561		576		--		--		576
Total	$	147,351	$	112,998	$	57,520	$	317,869	$	138,784	$	120,004	$	67,971	$	326,759