Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 4 – Loans Receivable Year end loans are summarized below: (Dollars in thousands) December 31, 2018 December 31, 2017 Loans secured by real estate: Residential real estate $ 224,082 $ 172,780 Home equity 45,423 36,718 Commercial real estate 253,104 211,090 Construction and land development 64,433 50,746 Multifamily 47,234 43,369 Farmland 240 - Total loans secured by real estate 634,516 514,703 Commercial business 103,628 77,122 Consumer 5,293 460 Government 21,101 28,785 Subtotal 764,538 621,070 Adjustments: Net deferred loan origination costs (fees ) 530 (130 ) Undisbursed loan funds (668 ) (729 ) Loans receivable $ 764,400 $ 620,211 (Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the twelve months ended December 31, 2018: Allowance for loan losses: Residential real estate $ 1,568 $ (194 ) $ 1 $ 340 $ 1,715 Home equity 166 (48 ) - 84 202 Commercial real estate 3,125 (119 ) 24 305 3,335 Construction and land development 618 - - 138 756 Multifamily 622 - - (150 ) 472 Farmland - - - - - Commercial business 1,298 (592 ) 134 522 1,362 Consumer 31 (58 ) 24 85 82 Government 54 - - (16 ) 38 Total $ 7,482 $ (1,011 ) $ 183 $ 1,308 $ 7,962 The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the twelve months ended December 31, 2017: Allowance for loan losses: Residential real estate $ 2,111 $ (959 ) $ 3 $ 413 $ 1,568 Home equity 299 (60 ) - (73 ) 166 Commercial real estate 3,113 - - 12 3,125 Construction and land development 617 - - 1 618 Multifamily 572 - - 50 622 Farmland - - - - - Commercial business 896 (386 ) 39 749 1,298 Consumer 34 (71 ) 18 50 31 Government 56 - - (2 ) 54 Total $ 7,698 $ (1,476 ) $ 60 $ 1,200 $ 7,482 The Bancorp's impairment analysis is summarized below: Ending Balances (Dollars in thousands) Individually evaluated for impairment reserves Collectively evaluated for impairment reserves Loan receivables Individually evaluated for impairment Purchased credit impaired individually evaluated for impairment Collectively evaluated for impairment The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2018: Residential real estate $ 22 $ 1,693 $ 223,323 $ 570 $ 980 $ 221,773 Home equity 9 193 45,483 141 123 45,219 Commercial real estate 210 3,125 253,104 1,703 402 250,999 Construction and land development - 756 64,433 - - 64,433 Multifamily - 472 47,234 - - 47,234 Farmland - - 240 - - 240 Commercial business 5 1,357 103,439 423 1,440 101,576 Consumer - 82 6,043 - - 6,043 Government - 38 21,101 - - 21,101 Total $ 246 $ 7,716 $ 764,400 $ 2,837 $ 2,945 $ 758,618 The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2017: Residential real estate $ 21 $ 1,547 $ 172,141 $ 462 $ 690 $ 170,989 Home equity - 166 36,769 - - 36,769 Commercial real estate 144 2,981 211,090 512 - 210,578 Construction and land development - 618 50,746 134 - 50,612 Multifamily - 622 43,368 - - 43,368 Farmland - - - - - - Commercial business 539 759 76,851 724 - 76,127 Consumer - 31 461 - - 461 Government - 54 28,785 - - 28,785 Total $ 704 $ 6,778 $ 620,211 $ 1,832 $ 690 $ 617,689 The Bancorp has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of theses grades by the Bancorp is uniform and conforms to regulatory definitions. The loan grading system is as follows: 1 – Minimal Risk Borrower demonstrates exceptional credit fundamentals, including stable and predictable profit margins, strong liquidity and a conservative balance sheet with superior asset quality. Excellent cash flow coverage of existing and projected debt service. Historic and projected performance indicates borrower is able to meet obligations under almost any economic circumstances. 2 – Moderate risk Borrower consistently internally generates sufficient cash flow to fund debt service, working assets, and some capital expenditures. Risk of default considered low. 3 – Above average acceptable risk Borrower generates sufficient cash flow to fund debt service and some working assets and/or capital expansion needs. Profitability and key balance sheet ratios are at or slightly above peers. Current trends are positive or stable. Earnings may be level or trending down slightly or be erratic; however, positive strengths are offsetting. Risk of default is reasonable but may warrant collateral protection. 4 – Acceptable risk Borrower generates sufficient cash flow to fund debt service, but most working asset and all capital expansion needs are provided from external sources. Profitability ratios and key balance sheet ratios are usually close to peers but one or more ratios (e.g. leverage) may be higher than peer. Earnings may be trending down over the last three years. Borrower may be able to obtain similar financing from other banks with comparable or less favorable terms. Risk of default is acceptable but requires collateral protection. 5 – Marginally acceptable risk Borrower may exhibit excessive growth, declining earnings, strained cash flow, increasing leverage and/or weakening market position that indicate above average risk. Limited additional debt capacity, modest coverage, and average or below average asset quality, margins and market share. Interim losses and/or adverse trends may occur, but not to the level that would affect the Bank’s position. The potential for default is higher than normal but considered marginally acceptable based on prospects for improving financial performance and the strength of the collateral. 6 – Pass/monitor The borrower has significant weaknesses resulting from performance trends or management concerns. The financial condition of the company has taken a negative turn and may be temporarily strained. Cash flow may be weak but cash reserves remain adequate to meet debt service. Management weaknesses are evident. Borrowers in this category will warrant more than the normal level of supervision and more frequent reporting. 7 – Special mention (watch) Special mention credits are considered bankable assets with no apparent loss of principal or interest envisioned but requiring a high level of management attention. Assets in this category are currently protected but are potentially weak. These borrowers are subject to economic, industry, or management factors having an adverse impact upon their prospects for orderly service of debt. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard. 8 – Substandard This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected. 9 – Doubtful This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonably specific pending factors which may strengthen the credit can be exactly determined. These factors may include proposed acquisitions, liquidation procedures, capital injection and receipt of additional collateral, mergers or refinancing plans. Performing loans are loans that are paying as agreed and are approximately less than ninety days past due on payments of interest and principal. Credit Exposure - Credit Risk Portfolio By Creditworthiness Category December 31, 2018 (Dollars in thousands) 2 3 4 5 6 7 8 Loan Segment Moderate Above average acceptable Acceptable Marginally acceptable Pass/monitor Special mention Substandard Total Residential real estate $ 261 $ 58,276 $ 100,374 $ 10,404 $ 44,734 $ 3,908 $ 5,366 $ 223,323 Home equity 192 3,736 40,165 37 323 657 373 45,483 Commercial real estate - 5,042 78,611 110,984 51,982 4,715 1,770 253,104 Construction and land development - 322 24,271 29,383 10,457 - - 64,433 Multifamily - 569 19,255 23,417 3,844 149 - 47,234 Farmland - - - - 240 - - 240 Commercial business 10,655 19,127 20,941 34,996 14,034 2,958 728 103,439 Consumer 925 2,953 1,040 196 909 20 - 6,043 Government - 2,111 14,795 4,195 - - - 21,101 Total $ 12,033 $ 92,136 $ 299,452 $ 213,612 $ 126,523 $ 12,407 $ 8,237 $ 764,400 December 31, 2017 (Dollars in thousands) 2 3 4 5 6 7 8 Loan Segment Moderate Above average acceptable Acceptable Marginally acceptable Pass/monitor Special mention Substandard Total Residential real estate $ 887 $ 12,317 $ 92,241 $ 8,759 $ 50,075 $ 4,130 $ 3,732 $ 172,141 Home equity - 1,065 34,871 - 250 233 350 36,769 Commercial real estate - 2,372 79,847 81,547 40,054 6,758 512 211,090 Construction and land development - - 20,719 19,583 10,310 - 134 50,746 Multifamily - - 20,159 20,965 2,076 168 - 43,368 Farmland - - - - - - - - Commercial business 7,169 17,202 16,784 21,087 13,041 394 1,174 76,851 Consumer - 131 330 - - - - 461 Government - 2,318 20,202 6,265 - - - 28,785 Total $ 8,056 $ 35,405 $ 285,153 $ 158,206 $ 115,806 $ 11,683 $ 5,902 $ 620,211 One large commercial relationship totaling $1.1 million and eight residential or home equity loans totaling $301 thousand were modified as a troubled debt restructuring during 2018. No troubled debt restructurings defaulted during 2018. All of the loans classified as troubled debt restructurings are also considered impaired. The valuation basis for the Bancorp’s troubled debt restructurings is based on the present value of expected future cash flows, unless consistent cash flows are not present, then the fair value of the collateral securing the loan is the basis for valuation. The Bancorp's individually evaluated impaired loans are summarized below: For the twelve months ended As of December 31, 2018 December 31, 2018 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Residential real estate $ 1,389 $ 3,628 $ - $ 1,244 $ 79 Home equity 207 214 - 111 2 Commercial real estate 1,624 2,222 - 1,216 64 Construction and land development. - - - 54 - Multifamily - - - - - Farmland - - - - - Commercial business 1,799 2,038 - 880 38 Consumer - - - - - Government - - - - - With an allowance recorded: Residential real estate 161 161 22 123 5 Home equity 57 57 9 35 - Commercial real estate 481 481 210 320 - Construction and land development. - - - - - Multifamily - - - - - Farmland - - - - - Commercial business 64 64 5 140 1 Consumer - - - - - Government - - - - - Total: Residential real estate $ 1,550 $ 3,789 $ 22 $ 1,367 $ 84 Home equity $ 264 $ 271 $ 9 $ 146 $ 2 Commercial real estate $ 2,105 $ 2,703 $ 210 $ 1,536 $ 64 Construction & land development $ - $ - $ - $ 54 $ - Multifamily $ - $ - $ - $ - $ - Farmland $ - $ - $ - $ - $ - Commercial business $ 1,863 $ 2,102 $ 5 $ 1,020 $ 39 Consumer $ - $ - $ - $ - $ - Government $ - $ - $ - $ - $ - For the twelve months ended As of December 31, 2017 December 31, 2017 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Residential real estate $ 1,072 $ 3,351 $ - $ 1,101 $ 70 Home equity - - - - - Commercial real estate 253 253 - 339 6 Construction & land development 134 134 - 134 - Multifamily - - - - - Farmland - - - - - Commercial business 184 184 - 198 10 Consumer - - - - - Government - - - - - With an allowance recorded: Residential real estate 80 270 21 256 1 Home equity - - - - - Commercial real estate 259 259 144 163 - Construction & land development - - - - - Multifamily - - - - - Farmland - - - - - Commercial business 540 540 539 492 - Consumer - - - - - Government - - - - - Total: Residential real estate $ 1,152 $ 3,621 $ 21 $ 1,357 $ 71 Home equity $ - $ - $ - $ - $ - Commercial real estate $ 512 $ 512 $ 144 $ 502 $ 6 Construction & land development $ 134 $ 134 $ - $ 134 $ - Multifamily $ - $ - $ - $ - $ - Farmland $ - $ - $ - $ - $ - Commercial business $ 724 $ 724 $ 539 $ 690 $ 10 Consumer $ - $ - $ - $ - $ - Government $ - $ - $ - $ - $ - As a result of acquisition activity, the Bancorp acquired loans for which there was evidence of credit quality deterioration since origination and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. The following table details the acquired loans from the First Personal acquisition that are accounted for in accordance with ASC 310-30 as of July 24th, 2018: (dollars in thousands) First Personal 2018 Contractually required principal and interest at acquisition $ 5,580 Contractual cash flows not expected to be collected (nonaccretable discount) 1,255 Expected cash flows at acquistion 4,325 Interest component of expected cash flows (accretable discount) 424 Fair value of acquired loans accounted for under ASC 310-30 $ 3,901 At December 31, 2018, purchased credit impaired loans with unpaid principal balances totaled $6.0 million with a recorded investment of $2.9 million. At December 31, 2017, purchased credit impaired loans with unpaid principal balances totaled $2.6 million with a recorded investment of $690 thousand. The Bancorp's age analysis of past due loans is summarized below: (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Past Due Total Past Due Current Total Loans Recorded Investments Greater than 90 Days Past Due and Accruing December 31, 2018 Residential real estate $ 3,659 $ 909 $ 4,362 $ 8,930 $ 214,393 $ 223,323 $ 122 Home equity 143 5 304 452 45,031 45,483 50 Commercial real estate 842 18 611 1,471 251,633 253,104 - Construction and land development. 491 533 - 1,024 63,409 64,433 - Multifamily - 149 - 149 47,085 47,234 - Farmland - - - - 240 240 - Commercial business 733 260 436 1,429 102,010 103,439 149 Consumer 1 72 - 73 5,970 6,043 - Government - - - - 21,101 21,101 - Total $ 5,869 $ 1,946 $ 5,713 $ 13,528 $ 750,872 $ 764,400 $ 321 December 31, 2017 Residential real estate $ 4,921 $ 1,751 $ 3,092 $ 9,764 $ 162,377 $ 172,141 $ 225 Home equity 295 18 234 547 36,222 36,769 2 Commercial real estate 951 96 332 1,379 209,711 211,090 - Construction and land development. - - 133 133 50,613 50,746 - Multifamily 319 - - 319 43,049 43,368 - Farmland - - - - - - - Commercial business 285 162 539 986 75,865 76,851 - Consumer 1 - - 1 460 461 - Government - - - - 28,785 28,785 - Total $ 6,772 $ 2,027 $ 4,330 $ 13,129 $ 607,082 $ 620,211 $ 227 The Bancorp's loans on nonaccrual status are summarized below: (Dollars in thousands) December 31, 2018 December 31, 2017 Residential real estate $ 5,135 $ 3,509 Home equity 270 350 Commercial real estate 695 332 Construction and land development. - 133 Multifamily - - Farmland - - Commercial business 495 672 Consumer - - Government - - Total $ 6,595 $ 4,996 For the acquisitions of First Federal Savings & Loan (“First Federal”), Liberty Savings Bank (“Liberty Savings”), and First Personal, as part of the fair value of loans receivable, a net fair value discount was established for loans. This discount, or accretable yield, is recognized in interest income over the remaining estimated life of the loan pools. The net fair value discount at the acquisition date and accretable periods are summarized below: (dollars in thousands) First Federal Liberty Savings First Personal Net fair value discount Accretable period in months Net fair value discount Accretable period in months Net fair value discount Accretable period in months Residential real estate $ 1,062 59 $ 1,203 44 $ 948 56 Home equity 44 29 5 29 51 50 Commercial real estate - - - - 208 56 Construction and land development - - - - 1 30 Multifamily - - - - 11 48 Consumer - - - - 146 50 Commercial business - - - - 348 24 Purchased credit impaired loans - - - - 424 32 Total $ 1,106 $ 1,208 $ 2,137 Accretable yield, or income recorded for the twelve months ended December 31, is as follows: (dollars in thousands) First Federal Liberty Savings First Personal Total 2017 $ 149 $ 307 $ - $ 456 2018 138 266 424 828 Accretable yield, or income expected to be recorded in the future is as follows: (dollars in thousands) First Federal Liberty Savings First Personal Total 2019 $ 22 $ 42 $ 561 $ 625 2020 - - 496 496 2021 - - 319 319 2022 - - 277 277 2023 - - 60 60 Total $ 22 $ 42 $ 1,713 $ 1,777 |