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 March 31, 2018

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

For the transition period from __________ to __________

Commission file number 1-33377

Stewardship Financial Corporation
(Exact name of registrant as specified in its charter)
New Jersey	22-3351447
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
630 Godwin Avenue, Midland Park, NJ	07432
(Address of principal executive offices)	(Zip Code)
(201) 444-7100
(Registrant's telephone number, including area code)
(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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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 o     No x

The number of shares outstanding, net of treasury stock, of the Registrant’s Common Stock, no par value, as of May 10, 2018 was 8,674,890.

Stewardship Financial Corporation 

INDEX

	PAGE
	NUMBER
PART I  -  FINANCIAL INFORMATION
ITEM 1  -   FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition at March 31, 2018 (Unaudited) and December 31, 2017	1
Consolidated Statements of Income for the Three Months ended March 31, 2018 and 2017 (Unaudited)	2
Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2018 and 2017 (Unaudited)	3
Consolidated Statement of Changes in Shareholders’ Equity for the Three Months ended March 31, 2018 and 2017 (Unaudited)	4
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2018 and 2017 (Unaudited)	5
Notes to Consolidated Financial Statements (Unaudited)	7
ITEM 2  -   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3 -    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4 -    CONTROLS AND PROCEDURES	38
PART II  -  OTHER INFORMATION
ITEM 6 -    EXHIBITS	40
SIGNATURES	41
EXHIBIT INDEX	42

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Financial Condition

	March 31, 2018			December 31, 2017
	(Unaudited)
	(Dollars in thousands)
Assets
Cash and due from banks	$	21,852		$	20,558
Other interest-earning assets	326			712
Cash and cash equivalents	22,178			21,270
Securities available-for-sale	106,467			109,259
Securities held to maturity; estimated fair value of $50,299 (at March 31, 2018) and $51,551 (at December 31, 2017)	51,894			52,442
Other equity investments, at fair value	3,706			3,756
Federal Home Loan Bank of New York stock, at cost	3,039			3,715
Loans held for sale	—			370
Loans, net of allowance for loan losses of $8,445 (at March 31, 2018) and $8,762 (at December 31, 2017)	699,276			702,561
Premises and equipment, net	6,998			6,909
Accrued interest receivable	2,438			2,566
Bank owned life insurance	21,222			21,084
Other assets	5,223			4,834
Total assets	$	922,441		$	928,766
Liabilities and Shareholders' equity
Liabilities
Deposits:
Noninterest-bearing	$	178,572		$	172,861
Interest-bearing	593,644			591,238
Total deposits	772,216			764,099
Federal Home Loan Bank of New York advances	48,760			63,760
Subordinated Debentures and Subordinated Notes	23,333			23,317
Accrued interest payable	665			1,116
Accrued expenses and other liabilities	3,095			2,809
Total liabilities	848,069			855,101
Shareholders' equity
Common stock, no par value: 20,000,000 and 10,000,000 shares authorized at March 31, 2018 and December 31, 2017, respectively; 8,674,890 and 8,652,804 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	60,975			60,742
Retained earnings	15,439			14,307
Accumulated other comprehensive loss, net	(2,042		)	(1,384		)
Total Shareholders' equity	74,372			73,665
Total liabilities and Shareholders' equity	$	922,441		$	928,766

See accompanying notes to unaudited consolidated financial statements.      

1

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31,
	2018			2017
	(Dollars in thousands, except per share amounts)
Interest income:
Loans	$	7,518		$	6,586
Securities held to maturity:
Taxable	250			240
Nontaxable	33			59
Securities available-for-sale:
Taxable	593			460
Nontaxable	14			14
Other equity investments	25			26
FHLB dividends	64			34
Other interest-earning assets	42			5
Total interest income	8,539			7,424
Interest expense:
Deposits	1,065			633
FHLB-NY Borrowings	259			243
Subordinated Debentures and Subordinated Notes	392			368
Total interest expense	1,716			1,244
Net interest income before provision for loan losses	6,823			6,180
Provision for loan losses	(335		)	300
Net interest income after provision for loan losses	7,158			5,880
Noninterest income:
Fees and service charges	507			535
Bank owned life insurance	138			115
Gain on calls and sales of securities, net	6			—
Gain on sales of mortgage loans	22			17
Miscellaneous	52			132
Total noninterest income	725			799
Noninterest expenses:
Salaries and employee benefits	3,109			2,844
Occupancy, net	442			409
Equipment	181			162
Data processing	484			469
Advertising	157			136
FDIC insurance premium	64			77
Charitable contributions	180			125
Bank-card related services	127			142
Other real estate owned, net	—			15
Miscellaneous	684			735
Total noninterest expenses	5,428			5,114
Income before income tax expense	2,455			1,565
Income tax expense	647			574
Net income	$	1,808		$	991
Basic and diluted earnings per common share	$	0.21		$	0.16
Weighted average number of basic and diluted common shares outstanding	8,658,506			6,124,926

See accompanying notes to unaudited consolidated financial statements. 

2

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
	2018			2017
	(In thousands)
Net income	$	1,808		$	991
Other comprehensive income (loss), net of tax:
Change in unrealized holding gains (losses) on securities available-for-sale during the period	(993		)	205
Reclassification adjustment for gains in net income	(4		)	—
Accretion of loss on securities reclassified to held to maturity	9			7
Change in fair value of interest rate swap	167			—
Total other comprehensive income (loss)	(821		)	212
Total comprehensive income	$	987		$	1,203

See accompanying notes to unaudited consolidated financial statements.

3

Stewardship Financial Corporation and Subsidiary

Consolidated Statement of Changes in Shareholders' Equity

(Unaudited)

	Three Months Ended March 31, 2018
									Accumulated Other Comprehen-sive
	Common Stock					Retained			Income
	Shares		Amount			Earnings			(Loss), Net			Total
	(Dollars in thousands, except per share amounts)
Balance -- December 31, 2017	8,652,804		$	60,742		$	14,307		$	(1,384	)	$	73,665
Cash dividends declared on common stock	—		—			(260		)	—			(260		)
Payment of discount on dividend reinvestment plan	—		(1		)	—			—			(1		)
Common stock issued under dividend reinvestment plan	2,062		22			—			—			22
Common stock issued under stock plans	1,638		16			—			—			16
Issuance of restricted stock	28,221		301			(301		)	—			—
Amortization of restricted stock, net	(9,835	)	(105		)	48			—			(57		)
Net income	—		—			1,808			—			1,808
Other comprehensive income	—		—			—			(821		)	(821		)
Balance -- Reclassification due to the adoption of ASU 2016-01	—		—			(163		)	163			—
Balance -- March 31, 2018	8,674,890		$	60,975		$	15,439		$	(2,042	)	$	74,372

	Three Months Ended March 31, 2017
									Accumulated Other Comprehen-sive
	Common Stock					Retained			Income
	Shares		Amount			Earnings			(Loss), Net			Total
	(Dollars in thousands, except per share amounts)
Balance -- December 31, 2016	6,121,329		$	41,626		$	11,082		$	(1,321	)	$	51,387
Cash dividends declared on common stock	—		—			(184		)	—			(184		)
Payment of discount on dividend reinvestment plan	—		(1		)	—			—			(1		)
Common stock issued under dividend reinvestment plan	2,431		22			—			—			22
Common stock issued under stock plans	1,426		13			—			—			13
Issuance of restricted stock	20,876		185			(185		)	—			—
Amortization of restricted stock, net	(13,288	)	(118		)	47			—			(71		)
Tax benefit from restricted stock vesting	—		48			—			—			48
Net income	—		—			991			—			991
Other comprehensive income	—		—			—			212			212
Balance -- March 31, 2017	6,132,774		$	41,775		$	11,751		$	(1,109	)	$	52,417

See accompanying notes to unaudited consolidated financial statements.

4

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
	2018			2017
	(In thousands)
Cash flows from operating activities:
Net income	$	1,808		$	991
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of premises and equipment	111			96
Amortization of premiums and accretion of discounts, net	132			129
Amortization of restricted stock	(57		)	(71		)
Amortization of subordinated debenture issuance costs	16			16
Accretion of deferred loan fees	26			26
Fair value adjustment for equity security	74			—
Provision for loan losses	(335		)	300
Originations of mortgage loans held for sale	(847		)	(2,846		)
Proceeds from sale of mortgage loans	1,239			3,448
Gain on sales of mortgage loans	(22		)	(17		)
Gain on calls and sales of securities	(6		)	—
Deferred income tax expense (benefit)	134			(190		)
Excess tax benefit from restricted stock vesting	—			48
(Increase) decrease in accrued interest receivable	128			(69		)
Increase (decrease) in accrued interest payable	(451		)	305
Earnings on bank owned life insurance	(138		)	(115		)
Increase in other assets	(173		)	(15		)
Increase (decrease) in other liabilities	452			(261		)
Net cash provided by operating activities	2,091			1,775
Cash flows from investing activities:
Purchase of securities available-for-sale	(4,016		)	(524		)
Proceeds from maturities and principal repayments on securities available-for-sale	4,359			3,709
Proceeds from sales and calls on securities available-for-sale	1,006			—
Purchase of securities held to maturity	(1,493		)	(2,675		)
Proceeds from maturities and principal repayments on securities held to maturity	1,741			1,839
Proceeds from calls on securities held to maturity	280			340
Purchase of equity securities	(24		)	—
Purchase of FHLB-NY stock	(756		)	(5,034		)
Sale of FHLB-NY stock	1,432			4,765
Net (increase) decrease in loans	3,594			(50,570		)
Additions to premises and equipment	(200		)	(136		)
Net cash provided by (used in) investing activities	5,923			(48,286		)
Cash flows from financing activities:
Net increase in noninterest-bearing deposits	5,711			1,260
Net increase in interest-bearing deposits	2,406			40,514
Repayment of long term borrowings	(15,000		)	(5,000		)
Net increase in short term borrowings	—			11,000
Cash dividends paid on common stock	(260		)	(184		)
Payment of discount on dividend reinvestment plan	(1		)	(1		)
Issuance of common stock for cash	38			35
Net cash provided by (used in) financing activities	(7,106		)	47,624
Net increase in cash and cash equivalents	908			1,113
Cash and cash equivalents - beginning	21,270			11,680
Cash and cash equivalents - ending	$	22,178		$	12,793

5

Stewardship Financial Corporation and Subsidiary

Consolidated Statements of Cash Flows, continued

(Unaudited)

	Three Months Ended
	March 31,
	2018		2017
	(In thousands)
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	2,166	$	938
Cash paid during the period for income taxes	$	—	$	592

See accompanying notes to unaudited consolidated financial statements.  

6

Stewardship Financial Corporation and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2018

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Certain information and note disclosures normally included in the unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Stewardship Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 23, 2018 (the “2017 Annual Report”).

The interim unaudited consolidated financial statements included herein have been prepared in accordance with instructions for Form 10-Q and the rules and regulations of the SEC and, therefore, do not include information or footnotes necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the interim consolidated financial statements, have been included. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results which may be expected for the entire year. Certain prior period amounts have been reclassified to conform with the current period presentation.

Principles of consolidation

The consolidated financial statements include the accounts of Stewardship Financial Corporation and its wholly-owned subsidiary, Atlantic Stewardship Bank (the “Bank”), together referred to as “the Corporation”. The Bank includes its wholly-owned subsidiaries, Stewardship Investment Corporation, Stewardship Realty LLC, Atlantic Stewardship Insurance Company, LLC and several other subsidiaries formed to hold title to properties acquired through foreclosure or deed in lieu of foreclosure. The Bank’s subsidiaries have an insignificant impact on the Bank’s daily operations. All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The consolidated financial statements of the Corporation have been prepared in conformity with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions, based on available information, that affect the amounts reported in the consolidated financial statements and disclosures provided. Actual results could differ significantly from those estimates.

Material estimates

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and deferred income taxes. Management believes the Corporation’s policies with respect to the methodology for the determination of the allowance for loan losses and the evaluation of deferred income taxes involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Adoption of New Accounting Standards

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. 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 in the scope of other standards. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;” ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and

7

Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting;” and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” These amendments are intended to improve and clarify the implementation guidance of ASU 2014-09 and have the same effective date as the original standard. The Corporation’s implementation efforts include the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts and the respective performance obligations within those contracts. We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customer into more granular categories beyond what is presented in the the Condensed Consolidated Statement of Income was not necessary. We generally satisfy our performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying this ASU that significantly affect the determination of the amount and timing of the revenue from contracts with customers. The Corporation has completed its evaluation and adopted this ASU effective January 1, 2018 using the modified retrospective approach. Adoption of ASU 2014-09 did not have a material impact on our consolidated financial statements and related disclosures as our primary sources of revenues are derived from interest and dividends earned on loans, securities and other financial instruments that are not within the scope of the new standard. Our revenue recognition pattern for revenue streams within the scope of the new standard, including but not limited to service charges on deposit accounts and debit card interchange, did not change significantly from prior practice. The modified retrospective method requires application of ASU 2014-09 to uncompleted contracts at the date of adoption, however, periods prior to the date of adoption have not been retrospectively revised as the impact impact of the new standard on uncompleted contracts as the date of adoption was not material as such a cumulative effective adjustment to opening retained earnings was not deemed necessary.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This amendment supersedes the guidance to classify equity securities with readily determinable fair values into different categories, requires equity securities to be measured at fair value with changes in the fair value recognized through net income, and simplifies the impairment assessment of equity investments without readily determinable fair values. The amendment requires public business entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion. The amendment requires 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. The amendment requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. The amendment reduces diversity in current practice by clarifying 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. This amendment is effective for fiscal years, including interim periods, beginning after December 15, 2017. Entities should apply the amendment by means of a cumulative-effect adjustment as of the beginning of the fiscal year of adoption, with the exception of the amendment related to equity securities without readily determinable fair values, which should be applied prospectively to equity investments that exist as of the date of adoption. The Corporation's adoption of the guidance resulted in the reclassification from accumulated other comprehensive income (loss) to retained earnings of $163,000, reflected in the Consolidated Statements of Changes in Shareholders' Equity. In addition, the fair value of loans has been estimated using the exit price notion as described in Note 4.

In February 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842).” This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The amendments in ASU 2016-02 are effective for fiscal years, including interim periods, beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. The Corporation is currently assessing the impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments by a reporting entity at each reporting date. The amendments in this ASU require financial assets measured at amortized cost to be presented at

8

the net amount expected to be collected. The allowance for credit losses would represent a valuation account that would be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement would reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses would be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity will be required to use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The amendments in ASU 2016-13 are effective for fiscal years, including interim periods, beginning after December 15, 2019. Early adoption of this ASU is permitted for fiscal years beginning after December 15, 2018. The Corporation is currently evaluating the potential impact of ASU 2016-13 on the Corporation's consolidated financial statements. The Corporation has formed a working group, under the direction of the Chief Financial Officer, which is currently developing an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and the identification of data and resource needs, among other things. Also, the Corporation is currently evaluating third-party vendor solutions to assist in the application of the ASU 2016-13. The adoption of the ASU 2016-13 may result in an increase in the allowance for loan losses due to changing from an "incurred loss" model, which encompasses allowances for current known and inherent losses within the portfolio, to an "expected loss" model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate establishing an allowance for expected credit losses on debt securities. The Corporation is currently unable to reasonably estimate the impact of adopting ASU 2016-13, and it is expected that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU will be effective for interim and annual periods beginning after December 15, 2018. Early adoption of ASU 2017-12 is permitted. The Corporation is currently evaluating the potential impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

9

Note 2. Securities – Available-for-Sale and Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of the available-for-sale securities were as follows:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	22,046	$	23	$	586	$	21,483
Obligations of state and political subdivisions	3,218		—		115		3,103
Mortgage-backed securities	64,399		33		1,860		62,572
Asset-backed securities (a)	6,278		25		—		6,303
Corporate debt	13,420		98		512		13,006
Total debt securities	$	109,361	$	179	$	3,073	$	106,467

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	21,699	$	30	$	396	$	21,333
Obligations of state and political subdivisions	3,221		—		56		3,165
Mortgage-backed securities	64,775		70		1,011		63,834
Asset-backed securities (a)	6,672		30		4		6,698
Corporate debt	14,437		94		302		14,229
Total debt securities	$	110,804	$	224	$	1,769	$	109,259

(a) Collateralized by student loans.

There were cash proceeds of $1,006,500 realized from sales and calls of securities available-for-sale for the three months ended March 31, 2018. There were no cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2017. There were gross gains totaling $6,500 and no gross losses realized on sales or calls during the three months ended March 31, 2018. There were no gross gains and no gross losses realized on sales or calls during the three months ended March 31, 2017.

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The following is a summary of the amortized cost, gross unrealized gains and losses and fair value of the held to maturity securities:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	17	$	982
U.S. government-sponsored agencies	28,568		—		1,166		27,402
Obligations of state and political subdivisions	3,390		19		34		3,375
Mortgage-backed securities	18,937		42		439		18,540
	$	51,894	$	61	$	1,656	$	50,299

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	11	$	988
U.S. government-sponsored agencies	27,075		4		760		26,319
Obligations of state and political subdivisions	4,057		21		23		4,055
Mortgage-backed securities	20,311		76		198		20,189
	$	52,442	$	101	$	992	$	51,551

Cash proceeds realized from calls of securities held to maturity for the three months ended March 31, 2018 were $280,000. Cash proceeds realized from calls of securities held to maturity for the three months ended March 31, 2017 were $340,000. There were no gross gains and no gross losses realized on calls during the three months ended March 31, 2018 and March 31, 2017, respectively.

Mortgage-backed securities are a type of asset-backed security secured by a mortgage or collection of mortgages, purchased by government agencies such as the Government National Mortgage Association and government sponsored agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, which then issue securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool.

11

The following table presents the amortized cost and fair value of the debt securities portfolio by contractual maturity. As issuers may have the right to call or prepay obligations with or without call or prepayment premiums, the actual maturities may differ from contractual maturities. Securities not due at a single maturity date, such as mortgage-backed securities and asset-backed securities, are shown separately.

	March 31, 2018
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	—	$	—
After one year, but within five years	9,854		9,668
After five years, but within ten years	23,831		23,112
After ten years	4,999		4,812
Mortgage-backed securities	64,399		62,572
Asset-backed securities	6,278		6,303
Total	$	109,361	$	106,467
Held to maturity
Within one year	$	1,245	$	1,245
After one year, but within five years	10,154		10,021
After five years, but within ten years	21,063		20,032
After ten years	495		461
Mortgage-backed securities	18,937		18,540
Total	$	51,894	$	50,299

The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at March 31, 2018 and December 31, 2017, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2018 and December 31, 2017.

Available-for-Sale
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	9,094	$	(164	)	$	9,922	$	(422	)	$	19,016	$	(586	)
Obligations of state and political subdivisions	1,375		(14		)	1,728		(101		)	3,103		(115		)
Mortgage-backed securities	32,977		(740		)	24,397		(1,120		)	57,374		(1,860		)
Asset-backed securities	—		—			—		—			—		—
Corporate debt	—		—			8,908		(512		)	8,908		(512		)
Total temporarily impaired securities	$	43,446	$	(918	)	$	44,955	$	(2,155	)	$	88,401	$	(3,073	)

12

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	8,260	$	(70	)	$	11,174	$	(326	)	$	19,434	$	(396	)
Obligations of state and political subdivisions	1,384		(7		)	1,781		(49		)	3,165		(56		)
Mortgage-backed securities	30,575		(201		)	26,809		(810		)	57,384		(1,011		)
Asset-backed securities	—		—			3,013		(4		)	3,013		(4		)
Corporate debt	—		—			9,135		(302		)	9,135		(302		)
Total temporarily impaired securities	$	40,219	$	(278	)	$	51,912	$	(1,491	)	$	92,131	$	(1,769	)

Held to Maturity
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	982	$	(17	)	$	—	$	—		$	982	$	(17	)
U.S. government- sponsored agencies	12,390		(291		)	15,012		(875		)	27,402		(1,166		)
Obligations of state and political subdivisions	—		—			461		(34		)	461		(34		)
Mortgage-backed securities	11,298		(232		)	5,797		(207		)	17,095		(439		)
Total temporarily impaired securities	$	24,670	$	(540	)	$	21,270	$	(1,116	)	$	45,940	$	(1,656	)

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	988	$	(11	)	$	—	$	—		$	988	$	(11	)
U.S. government- sponsored agencies	10,032		(139		)	15,265		(621		)	25,297		(760		)
Obligations of state and political subdivisions	—		—			474		(23		)	474		(23		)
Mortgage-backed securities	9,531		(114		)	3,896		(84		)	13,427		(198		)
Total temporarily impaired securities	$	20,551	$	(264	)	$	19,635	$	(728	)	$	40,186	$	(992	)

13

Other-Than-Temporary Impairment

At March 31, 2018, there were available-for-sale investments comprising twelve U.S. government-sponsored agency securities, four obligations of state and political subdivision securities, forty mortgage-backed securities, and nine corporate debt securities in a continuous loss position for twelve months or longer. At March 31, 2018, there were held to maturity investments comprising fifteen U.S. government-sponsored agency securities, one obligation of state and political subdivision security, and fourteen mortgage-backed securities in a continuous loss position for twelve months or longer. Management has assessed the securities that were in an unrealized loss position at March 31, 2018 and December 31, 2017 and has determined that any decline in fair value below amortized cost primarily relates to changes in interest rates and market spreads and was temporary.

In making this determination management considered the following factors: the period of time the securities were in an unrealized loss position; the percentage decline in comparison to the securities’ amortized cost; any adverse conditions specifically related to the security, an industry or a geographic area; the rating or changes to the rating by a credit rating agency; the financial condition of the issuer and guarantor and any recoveries or additional declines in fair value subsequent to the balance sheet date.

The Corporation does not intend to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost bases, which may be at maturity.

Note 3. Loans and Allowance for Loan Losses

At March 31, 2018 and December 31, 2017, respectively, the loan portfolio consisted of the following:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	28,447	$	31,684
Other	59,664		57,372
Commercial real estate	488,641		493,542
Commercial construction	4,632		2,152
Residential real estate	86,050		85,760
Consumer:
Secured by real estate	32,958		32,207
Other	353		563
Government Guaranteed Loans - guaranteed portion	7,367		8,334
Other	57		106
Total gross loans	708,169		711,720
Less: Deferred loan costs, net	448		397
Allowance for loan losses	8,445		8,762
	8,893		9,159
Loans, net	$	699,276	$	702,561

The Corporation has purchased the guaranteed portion of several Government Guaranteed loans. Due to the guarantee of the principal amount of these loans, no allowance for loan losses is established for these loans.

14

Activity in the allowance for loan losses is summarized as follows:

	For the three months ended March 31, 2018
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	3,058	$	(189	)	$	(29	)	$	25	$	2,865
Commercial real estate	5,531		(204		)	—			22		5,349
Commercial construction	33		48			—			—		81
Residential real estate	68		4			—			—		72
Consumer	64		2			—			1		67
Other loans	1		—			(1		)	—		—
Unallocated	7		4			—			—		11
Total	$	8,762	$	(335	)	$	(30	)	$	48	$	8,445

	For the three months ended March 31, 2017
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,663	$	(118	)	$	(1	)	$	16	$	2,560
Commercial real estate	4,734		390			—			25		5,149
Commercial construction	355		29			—			—		384
Residential real estate	66		(1		)	—			—		65
Consumer	75		(3		)	—			1		73
Other loans	—		—			—			—		—
Unallocated	12		3			—			—		15
Total	$	7,905	$	300		$	(1	)	$	42	$	8,246

15

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	6	$	571	$	—	$	—	$	—	$	—	$	—	$	—	$	577
Collectively evaluated for impairment	2,859		4,778		81		72		67		—		—		11		7,868
Total ending allowance balance	$	2,865	$	5,349	$	81	$	72	$	67	$	—	$	—	$	11	$	8,445
Loans:
Loans individually evaluated for impairment	$	509	$	6,196	$	—	$	289	$	46	$	—	$	—	$	—	$	7,040
Loans collectively evaluated for impairment	87,602		482,445		4,632		85,761		33,265		7,367		57		—		701,129
Total ending loan balance	$	88,111	$	488,641	$	4,632	$	86,050	$	33,311	$	7,367	$	57	$	—	$	708,169

16

	December 31, 2017
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	34	$	575	$	—	$	—	$	—	$	—	$	—	$	—	$	609
Collectively evaluated for impairment	3,024		4,956		33		68		64		—		1		7		8,153
Total ending allowance balance	$	3,058	$	5,531	$	33	$	68	$	64	$	—	$	1	$	7	$	8,762
Loans:
Loans individually evaluated for impairment	$	549	$	6,236	$	—	$	295	$	62	$	—	$	—	$	—	$	7,142
Loans collectively evaluated for impairment	88,507		487,306		2,152		85,465		32,708		8,334		106		—		704,578
Total ending loan balance	$	89,056	$	493,542	$	2,152	$	85,760	$	32,770	$	8,334	$	106	$	—	$	711,720

The following table presents the recorded investment in nonaccrual loans at the dates indicated:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	105	$	136
Commercial real estate	696		701
Residential real estate	289		295
Consumer:
Secured by real estate	46		62
Total nonaccrual loans	$	1,136	$	1,194

At March 31, 2018 and December 31, 2017, there were no loans that were past due 90 days and still accruing.

17

The following table presents loans individually evaluated for impairment by class of loan at and for the periods indicated:

	At and for the three months ended March 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	489	$	383			$	386	$	4
Commercial real estate	3,415		3,093				3,108		26
Residential Real Estate	292		289				292		—
Consumer:
Secured by real estate	55		46				54		—
With an allowance recorded:
Commercial:
Secured by real estate	—		—		$	—	16		—
Other	126		126		6		127		2
Commercial real estate	3,103		3,103		571		3,108		40
	$	7,480	$	7,040	$	577	$	7,091	$	72

During the three months endedMarch 31, 2018, no interest income was recognized on a cash basis.

	At and for the year ended December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	389	$	389			$	964	$	70
Commercial real estate	3,442		3,124				3,148		121
Residential real estate	295		295				59		—
Consumer:
Secured by real estate	71		62				70		—
With an allowance recorded:
Commercial:
Secured by real estate	33		32		$	27	45		—
Other	128		128		7		171		12
Commercial real estate	3,112		3,112		575		3,144		128
	$	7,470	$	7,142	$	609	$	7,601	$	331

During the year ended December 31, 2017, no interest income was recognized on a cash basis.

The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2018 and December 31, 2017. Nonaccrual loans are included in the disclosure by payment status.

18

	March 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	135	$	74	$	105	$	314	$	28,133	$	28,447
Other	—		—		—		—		59,664		59,664
Commercial real estate	298		—		597		895		487,746		488,641
Commercial construction	—		—		—		—		4,632		4,632
Residential real estate	—		313		—		313		85,737		86,050
Consumer:
Secured by real estate	—		—		28		28		32,930		32,958
Other	—		—		—		—		353		353
Government Guaranteed	—		—		—		—		7,367		7,367
Other	—		—		—		—		57		57
Total	$	433	$	387	$	730	$	1,550	$	706,619	$	708,169

	December 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	186	$	—	$	—	$	186	$	31,498	$	31,684
Other	8		—		—		8		57,364		57,372
Commercial real estate	300		—		599		899		492,643		493,542
Commercial construction	—		—		—		—		2,152		2,152
Residential real estate	314		—		—		314		85,446		85,760
Consumer:
Secured by real estate	—		—		28		28		32,179		32,207
Other	—		—		—		—		563		563
Government Guaranteed	—		—		—		—		8,334		8,334
Other	—		—		—		—		106		106
Total	$	808	$	—	$	627	$	1,435	$	710,285	$	711,720

Troubled Debt Restructurings

In order to determine whether a borrower is experiencing financial difficulty necessitating a restructuring, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Corporation’s internal underwriting policy. A loan is considered to be in payment default once it is contractually 90 days past due.

At March 31, 2018 and December 31, 2017, the Corporation had $6.5 million and $6.6 million, respectively, of loans whose terms have been modified in troubled debt restructurings. Of these loans, $5.9 million had demonstrated a reasonable period of performance in accordance with their new terms at March 31, 2018 and December 31, 2017. The remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $577,000 and $582,000 have been recorded for the troubled debt restructurings at March 31, 2018 and December 31, 2017, respectively, and are included in the table above. As of March 31, 2018 and December 31, 2017, there were no additional funds committed to these borrowers.

There were no new loans classified as a troubled debt restructuring during the three months ended March 31, 2018 or March 31, 2017.

19

Credit Quality Indicators

The Corporation categorizes certain loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial, commercial real estate and commercial construction loans. This analysis is performed at the time the loan is originated and annually thereafter. The Corporation uses the following definitions for risk ratings.

Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or the Bank’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard – Substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – A Doubtful loan has all of 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 known facts, conditions, and values, highly questionable or improbable. The likelihood of loss is extremely high, but because of certain important and reasonably specific factors, an estimated loss is deferred until a more exact status can be determined.

Loss – A loan classified Loss is considered uncollectible and of such little value that its continuance as an asset is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be effected 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. As of March 31, 2018 and December 31, 2017, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,042	$	1,952	$	453	$	—	$	—	$	28,447
Other	58,951		208		505		—		—		59,664
Commercial real estate	473,999		12,583		2,059		—		—		488,641
Commercial construction	4,632		—		—		—		—		4,632
Government Guaranteed Loans - guaranteed portion	7,367		—		—		—		—		7,367
Total	$	570,991	$	14,743	$	3,017	$	—	$	—	$	588,751

20

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	29,025	$	2,153	$	506	$	—	$	—	$	31,684
Other	56,632		216		524		—		—		57,372
Commercial real estate	481,443		10,023		2,076		—		—		493,542
Commercial construction	2,152		—		—		—		—		2,152
Government Guaranteed Loans - guaranteed portion	8,334		—		—		—		—		8,334
Total	$	577,586	$	12,392	$	3,106	$	—	$	—	$	593,084

The Corporation considers the historical and projected performance of the loan portfolio and its impact on the allowance for loans losses. For the residential real estate and consumer loan segments, the Corporation evaluates credit quality primarily based on payment activity and historical loss data. The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,737	$	313	$	86,050
Consumer:
Secured by real estate	32,930		28		32,958
Other	353		—		353
Total	$	119,020	$	341	$	119,361

	December 31, 2017
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,446	$	314	$	85,760
Consumer:
Secured by real estate	32,179		28		32,207
Other	563		—		563
Total	$	118,188	$	342	$	118,530

21

Note 4. Fair Value of Financial Instruments

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

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 reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,483	$	—	$	21,483	$	—
Obligations of state and political subdivisions	3,103		—		3,103		—
Mortgage-backed securities	62,572		—		62,572		—
Asset-backed securities	6,303		—		6,303		—
Corporate debt	13,006		—		13,006		—
Total available-for-sale securities	$	106,467	$	—	$	106,467	$	—
Other equity investments	$	3,706	$	3,646	$	60	$	—
Interest Rate Swap	$	203	$	—	$	203	$	—

22

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,333	$	—	$	21,333	$	—
Obligations of state and political subdivisions	3,165		—		3,165		—
Mortgage-backed securities	63,834		—		63,834		—
Asset-backed securities	6,698		—		6,698		—
Corporate debt	14,229		—		14,229		—
Total available-for-sale securities	$	109,259	$	—	$	109,259	$	—
Other equity investments	$	3,756	$	3,696	$	60	$	—
Liabilities:
Interest Rate Swap	$	29	$	—	$	29	$	—

There were no transfers of assets between Level 1 and Level 2 during the three months ended March 31, 2018 or during the year ended December 31, 2017. There were no changes to the valuation techniques for fair value measurements as of March 31, 2018 and December 31, 2017.

The fair values of investment securities are determined by quoted market prices, if available (Level 1). If quoted prices are not available, fair values of investment securities are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The Corporation performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Corporation compares the prices received from the pricing service to a secondary pricing source. The Corporation’s internal price verification procedures have not historically resulted in adjustment in the prices obtained from the pricing service.

The interest rate swaps are reported at fair values obtained from brokers who utilize internal models with observable market data inputs to estimate the values of these instruments (Level 2 inputs).

Assets and Liabilities Measured on a Non-Recurring Basis

There were no assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2018.

Assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2017 are summarized below:

23

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	109	$	—	$	—	$	109
Commercial real estate	192		—		—		192
Residential real estate	296		—		—		296
	$	597	$	—	$	—	$	597

There were no collateral-dependent impaired loans measured for impairment using fair value of the collateral as of and for the three months ended March 31, 2018.

Collateral-dependent impaired loans measured for impairment using the fair value of the collateral had a recorded investment value of $624,000, resulting in an increase of the allocation for loan losses of $27,000 for the year ended December 31, 2017.

There was no OREO at March 31, 2018 or December 31, 2017.

The Corporation does not record loans at fair value on a recurring basis. However, from time to time, the Corporation records non-recurring fair value adjustments to collateral dependent loans to reflect impairment. The Corporation measures impairment of collateralized loans based on the estimated fair value of the collateral less estimated costs to sell the collateral, incorporating assumptions that experienced parties might use in estimating the value of such collateral (Level 3 inputs). At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Generally, impaired loans carried at fair value have been partially charged-off or receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. In the appraisal process, the independent appraisers routinely adjust for differences between the comparable sales and income data available. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. Methods for valuing non-real estate collateral include using an appraisal, the net book value recorded for the collateral on the borrower’s financial statements, or aging reports. Collateral is then 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 borrower and borrower’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals are generally obtained to support the fair value of collateral. Appraisals for collateral-dependent impaired loans are performed by licensed appraisers whose qualifications and licenses have been reviewed and verified by the Corporation. The Corporation utilizes a third party to order appraisals and, once received, reviews the assumptions and approaches utilized in the appraisal as well as the resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales price of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 12% discount to real estate appraised values to cover disposition / selling costs and to reflect the potential price reductions in the market necessary to complete an expedient sale transaction and to factor in the impact of the perception that a transaction being completed by a bank may result in further price reduction pressure.

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For the Level 3 assets measured at fair value on a non-recurring basis as December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

December 31, 2017
	Fair
Assets	Value		Valuation Technique	Unobservable Inputs	Range
(Dollars in thousands)
Impaired loans	$	597	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

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Fair value estimates for the Corporation’s financial instruments are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	22,178	$	22,178	$	—	$	—
Securities available-for-sale	106,467		—		106,467		—
Securities held to maturity	51,894		—		50,299		—
Other equity investments	3,706		3,646		60		—
FHLB-NY stock	3,039		N/A		N/A		N/A
Loans, net	699,276		—		—		686,029
Interest rate swap	203		—		203		—
Financial liabilities:
Deposits	772,216		566,147		204,006		—
FHLB-NY advances	48,760		—		48,150		—
Subordinated Debentures and Subordinated Notes	23,333		—		—		23,493

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2017
	(In thousands)
Financial assets:
Cash and cash equivalents	$	21,270	$	21,270	$	—	$	—
Securities available-for-sale	109,259		—		109,259		—
Securities held to maturity	52,442		—		51,551		—
Other equity investments	3,756		3,696		60		—
FHLB-NY stock	3,715		N/A		N/A		N/A
Mortgage loans held for sale	370		—		—		370
Loans, net	702,561		—		—		714,387
Financial liabilities:
Deposits	764,099		565,292		197,696		—
FHLB-NY advances	63,760		—		63,340		—
Subordinated Debentures and Subordinated Notes	23,317		—		—		23,478
Interest rate swap	29		—		29		—

The following methods and assumptions were used to estimate the fair value of financial instruments recorded at fair value on a recurring or non-recurring basis not previously described:

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Loans, net – Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential and commercial mortgages, commercial and other installment loans. Fair value for loans a March 31, 2018 is based on an exit price model as required by ASU 2106-01 taxing into account inputs such as probability of default and loss given default assumptions. As of December 31, 2017, the fair value of loans is estimated by discounting cash flows using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans resulting in a Level 3 classification. Fair values estimated in this manner do not fully incorporate an exit-price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Limitations

The preceding fair value estimates were made at March 31, 2018 and December 31, 2017 based on pertinent market data and relevant information concerning the financial instruments. These estimates do not include any premiums or discounts that could result from an offer to sell at one time the Corporation's entire holdings of a particular financial instrument or category thereof. Since no market exists for a substantial portion of the Corporation's financial instruments, fair value estimates were necessarily based on judgments with respect to future expected loss experience, current economic conditions, risk assessments of various financial instruments, and other factors. Given the subjective nature of these estimates, the uncertainties surrounding them and the matters of significant judgment that must be applied, these fair value estimates cannot be calculated with precision. Modifications in such assumptions could meaningfully alter these estimates.

Since these fair value estimates were made solely for on- and off-balance sheet financial instruments at March 31, 2018 and December 31, 2017, no attempt was made to estimate the value of anticipated future business. Furthermore, certain tax implications related to the realization of unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into the estimates.

Note 5. Earnings Per Share

The following reconciles the income available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings per share.

	Three Months Ended
	March 31,
	2018		2017
	(Dollars in thousands)
Net income	$	1,808	$	991
Weighted average common shares outstanding - basic	8,658,506		6,124,926
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,658,506		6,124,926
Basic earnings per common share	$	0.21	$	0.16
Diluted earnings per common share	$	0.21	$	0.16

There were no stock options to purchase shares of common stock for the three months ended March 31, 2018 and 2017.

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Note 6. Accumulated Other Comprehensive Income

The components of comprehensive income, both gross and net of tax, are presented for the periods below:

	Three Months Ended March 31,
	2018									2017
	Gross			Tax Effect			Net			Gross		Tax Effect			Net
	(In thousands)
Net income	$	2,455		$	(647	)	$	1,808		$	1,565	$	(574	)	$	991
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	(1,344		)	351			(993		)	331		(126		)	205
Reclassification adjustment for gains in net income	(6		)	2			(4		)	—		—			—
Accretion of loss on securities reclassified to held to maturity	12			(3		)	9			11		(4		)	7
Change in fair value of interest rate swap	232			(65		)	167			—		—			—
Total other comprehensive income (loss)	(1,106		)	285			(821		)	342		(130		)	212
Total comprehensive income	$	1,349		$	(362	)	$	987		$	1,907	$	(704	)	$	1,203

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The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive income for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income before reclassifications	(993		)	9			167			(817		)
Amounts reclassified from other comprehensive income	(4		)	—			—			(4		)
Other comprehensive income	(997		)	9			167			(821		)
Reclassification of tax effects due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

	Three Months Ended March 31, 2017
	Components of Accumulated Other Comprehensive Income (Loss)								Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives		Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2016	$	(1,243	)	$	(78	)	$	—	$	(1,321	)
Other comprehensive income before reclassifications	205			7			—		212
Amounts reclassified from other comprehensive income	—			—			—		—
Other comprehensive income	205			7			—		212
Balance at March 31, 2017	$	(1,038	)	$	(71	)	$	—	$	(1,109	)

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The following tables present amounts reclassified from each component of accumulated other comprehensive income on a gross and net of tax basis for the three months ended March 31, 2018 and 2017.

	Three Months Ended					Income
Components of Accumulated Other	March 31,					Statement
Comprehensive Income	2018			2017		Line Item
	(In thousands)
Unrealized gains on AFS securities before tax	$	6		$	—	Gains on securities transactions, net
Tax effect	(2		)	—
Total net of tax	4			—
Total reclassifications, net of tax	$	4		$	—

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” with respect to Stewardship Financial Corporation (the “Corporation”) within the meaning of the Private Securities Litigation Reform Act of 1995, which forward-looking statements may be identified by the use of such words as “expect,” “believe”, “anticipate,” “should,” “plan,” “estimate,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Corporation that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include: changes in general, economic and market conditions, legislative and regulatory conditions, or the development of an interest rate environment that adversely affects the Corporation’s interest rate spread or other income anticipated from operations and investments. As used in this Form 10-Q, “we”, “us” and “our” refer to the Corporation and its consolidated subsidiary, Atlantic Stewardship Bank (the “Bank”), unless the context indicates otherwise.

Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures found elsewhere in this Quarterly Report on Form 10-Q, are based upon the Corporation’s consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Corporation’s Audited Consolidated Financial Statements for the year ended December 31, 2017, included in the Corporation’s 2017 Annual Report on Form 10-K, contains a summary of the Corporation’s significant accounting policies. Management believes the Corporation’s policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. This critical accounting policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

Allowance for Loan Losses. The allowance for loan losses is based upon management’s evaluation of the adequacy of the allowance, including an assessment of known and inherent risks in the loan portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectability may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although management uses the best information available, the level of the allowance for loan losses remains an estimate, which is subject to significant judgment and short-term change. Various regulatory agencies, as an integral part of their

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examination process, periodically review the Corporation’s allowance for loan losses. Our regulators may require us to make additional provisions for loan losses based upon information available to the regulators at the time of the examination. Furthermore, the majority of the Corporation’s loans are secured by real estate in the State of New Jersey. Accordingly, the collectability of a substantial portion of the carrying value of the Corporation’s loan portfolio is susceptible to changes in real estate market conditions in northern New Jersey and may be adversely affected should real estate values decline or the northern New Jersey area experience adverse economic changes. Future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Corporation’s control.

Financial Condition

Total assets decreased $6.3 million to $922.5 million at March 31, 2018 from $928.8 million at December 31, 2017. Total securities (including available-for-sale, held to maturity, other equity investments and FHLBNY stock) decreased $4.1 million. Net loans decreased $3.3 million to $699.3 million at March 31, 2018 compared to $702.6 million at December 31, 2017. During the quarter, new loan originations were generally offset by several larger loan payoffs and normal principal amortization.

Deposits totaled $772.2 million at March 31, 2018, an increase of $8.1 million from $764.1 million at December 31, 2017. The growth in deposits primarily consisted of a $5.7 million increase in noninterest-bearing accounts and a $2.4 million increase in interest-bearing accounts. Other borrowings decreased to $48.8 million at March 31, 2018 compared to $63.8 million at December 31, 2017 reflecting repayment of maturing borrowings.

Results of Operations

General

The Corporation reported net income of $1.8 million, or $0.21 diluted earnings per common share for the three months ended March 31, 2018 compared to net income of $1.0 million, or $0.16 diluted earnings per share, for the three months ended March 31, 2017. Furthermore, earnings per share for the three months ended March 31, 2017 were impacted by the 2,509,090 shares issued in the Corporation's public offering of common stock completed in April 2017.

Net Interest Income

Net interest income, on a tax equivalent basis, for the three months ended March 31, 2018 was $6.8 million compared to $6.2 million recorded in the prior year period. The net interest rate spread, on a tax equivalent basis, and net yield on interest-earning assets, on a tax equivalent basis, for the three months ended March 31, 2018 were 2.90% and 3.15%, respectively, compared to 3.04% and 3.23% for the three months ended March 31, 2017.

The following tables reflect the components of the Corporation’s net interest income for the three months ended March 31, 2018 and 2017 including: (1) average assets, liabilities and shareholders’ equity based on average daily balances, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities and (4) net yield on interest-earning assets. Nontaxable income from investment securities and loans is presented on a tax-equivalent basis assuming a statutory tax rate of 21% for the periods presented. This was accomplished by adjusting non-taxable income upward to make it equivalent to the level of taxable income required to earn the same amount after taxes.

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Analysis of Net Interest Income (Unaudited)
Three Months Ended March 31,
	2018								2017
	Average Balance			Interest Income/ Expense			Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense			Average Rates Earned/ Paid
	(Dollars in thousands)
Assets
Interest-earning assets:
Loans (1) (2)	$	705,520		$	7,523		4.32	%	$	627,360		$	6,595		4.26	%
Taxable investment securities (1)	154,494			907			2.38		139,697			734			2.13
Tax-exempt investment securities (1) (2)	6,917			57			3.34		9,680			108			4.52
Other interest-earning assets	13,941			67			1.95		4,716			31			2.58
Total interest-earning assets	880,872			8,554			3.94		781,453			7,468			3.88
Non-interest-earning assets:
Allowance for loan losses	(8,784		)						(7,980		)
Other assets	47,598								44,548
Total assets	$	919,686							$	818,021
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	293,136		$	327		0.45	%	$	240,686		$	127		0.21	%
Savings deposits	85,810			22			0.10		92,974			23			0.10
Time deposits	204,538			716			1.42		173,952			483			1.13
FHLB-NY borrowing	60,408			259			1.74		68,607			243			1.44
Subordinated debentures and subordinated notes	23,325			392			6.82		23,260			368			6.42
Total interest-bearing liabilities	667,217			1,716			1.04		599,479			1,244			0.84
Non-interest-bearing liabilities:
Demand deposits	174,385								163,478
Other liabilities	4,158								2,940
Stockholders' equity	73,926								52,124
Total liabilities and stockholders' equity	$	919,686							$	818,021
Net interest income (taxable equivalent basis)				6,838								6,224
Tax equivalent adjustment				(15		)						(44		)
Net interest income				$	6,823							$	6,180
Net interest spread (taxable equivalent basis)							2.90	%							3.04	%
Net yield on interest-earning assets (taxable equivalent basis) (3)							3.15	%							3.23	%

(1) For purposes of these calculations, nonaccruing loans are included in the average balance.  Loans and total interest-earning assets are net of unearned income.  Securities are included at amortized cost.

(2) The tax equivalent adjustments are based on a marginal tax rate of 21%.

(3) Net interest income (taxable equivalent basis) divided by average interest-earning assets.

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For the three months ended March 31, 2018, total interest income, on a tax equivalent basis, was $8.6 million compared to $7.5 million for the same prior year period. The increase reflects an increase in the average balance of interest-earning assets coupled with an increase in the overall yield on interest-earning assets. Average interest-earning assets increased $99.4 million for the three months ended March 31, 2018, compared to the prior year period. The change in average interest-earning assets reflects an increase from the comparable prior year period in average loans and, to a lesser extent, an increase in investment securities. Average loans increased $78.2 million for the three months ended March 31, 2018 when compared to the prior year average. Average investment securities increased $12.0 million for the three months ended March 31, 2018 when compared to the prior year average. The average rate earned on interest-earning assets was 3.94% for the three months ended March 31, 2018 compared to an average rate of 3.88% for the three months ended March 31, 2017.

Interest expense increased $472,000 for the three months ended March 31, 2018, compared to the same period for 2017. The average balance of interest-bearing deposits increased $75.9 million for the three months ended March 31, 2018 from the comparable 2017 period. Partially offsetting, for the three months ended March 31, 2018, FHLB-NY borrowings decreased $8.2 million in average interest-bearing liabilities. The cost for total interest-bearing liabilities was 1.04% for the three months ended March 31, 2018, compared to 0.84% for the three months ended March 31, 2017.

Provision for Loan Losses

The Corporation maintains an allowance for loan losses at a level considered by management to be adequate to cover the probable losses to be incurred associated with its loan portfolio. The Corporation’s policy with respect to the methodology for the determination of the allowance for loan losses involves judgments. The adequacy of the allowance for loan losses is based upon management’s evaluation of the known and inherent risks in the portfolio, consideration of the size and composition of the loan portfolio, actual loan loss experience, the level of delinquencies, detailed analysis of individual loans for which full collectability may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions.

For the three months ended March 31, 2018, the Corporation recorded a negative $325,000 loan loss provision compared to a $300,000 loan loss provision for the three months ended March 31, 2017. The loan loss provision in the current year period reflects the continued growth in the loan portfolio. In addition, due to a stabilization of the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates, the benefits from these qualitative factors improving in prior periods, have been reduced, thus offsetting the need to record a provision due to loan growth.

Nonperforming loans were $1.1 million at March 31, 2018, or 0.16% of total gross loans, a slight decrease from $1.2 million of nonperforming loans, or 0.17% of total gross loans, at December 31, 2017.

The allowance for loan losses was $8.4 million, or 1.19% of total gross loans, as of March 31, 2018 compared to $8.8 million, or 1.23% of total gross loans, as of December 31, 2017. The allowance for loan losses related to impaired loans decreased slightly from $609,000 at December 31, 2017 to $577,000 at March 31, 2018. During the three months ended March 31, 2018, the Corporation charged off $30,000 of loans and recovered $48,000 of previously charged-off loans compared to a chargeoff of $1,000 of loan balances and recovery of $42,000 in previously charged off loans during the same period in 2017.

The Corporation monitors its loan portfolio and intends to continue to provide for loan loss reserves based on its ongoing periodic review of the loan portfolio, charge-off activity and general market conditions. There can be no assurances that the current level of provision for loan losses will continue in the future.

See “Asset Quality” section below for a summary of the allowance for loan losses and nonperforming assets.

Noninterest Income

Noninterest income was $725,000 for the three months ended March 31, 2018 compared to $799,000 for the comparable prior year three-month period. The three months ended March 31, 2018 include a negative $74,000 mark to market adjustment of a CRA investment which is classified as an equity security. Such security has been owned for years for CRA purposes, but in connection with the adoption of ASU 2016-01, equity securities now require a quarterly mark to market through the income statement. When comparing the current year period to the prior year

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period, a $23,000 increase in income from the purchase of of additional bank-owned life insurance in the second quarter of 2017 was offset by a $28,000 decrease in fees and service charges.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2018 was $5.4 million compared to $5.1 million in the comparable prior year period. The Corporation continues to appropriately control expenses as the balance sheet grows. The Corporation's largest expense is salaries and employee benefits, which increased $265,000 in the current quarter when compared to the three months ended March 31, 2017.

Income Tax Expense

Income tax expense totaled $647,000 for the three months ended March 31, 2018 representing an effective tax rate of 26.4%. For the three months ended March 31, 2017, income tax expense totaled $574,000 equating to an effective tax rate of 36.7%. For the 2018 period, tax expense reflects the impact of the Tax Cuts and Jobs Act ("Tax Act") that included a permanent reduction in the Federal corporate income tax rate from 35% to 21% effective January 1. 2018.

Asset Quality

The Corporation’s principal earning asset is its loan portfolio. Inherent in the lending function is the risk of deterioration in the borrowers’ ability to repay loans under existing loan agreements. The Corporation manages this risk by maintaining reserves to absorb probable incurred loan losses. In determining the adequacy of the allowance for loan losses, management considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with general economic and real estate market conditions. Although management endeavors to establish a reserve sufficient to offset probable incurred losses in the portfolio, changes in economic conditions, regulatory policies and borrowers’ performance could require future changes to the allowance.

Risk elements include nonaccrual loans, past due and restructured loans, potential problem loans and loan concentrations. The following table shows the composition of nonperforming assets at the end of each of the last four quarters:

	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017
	(Dollars in thousands)
Nonaccrual loans (1)	$	1,136		$	1,194		$	806		$	826
Loans past due 90 days or more and accruing (2)	—			—			—			320
Total nonperforming loans	1,136			1,194			806			1,146
Total nonperforming assets	$	1,136		$	1,194		$	806		$	1,146
Allowance for loan losses	$	8,445		$	8,762		$	8,614		$	8,550
Nonperforming loans to total gross loans	0.16		%	0.17		%	0.12		%	0.17		%
Nonperforming assets to total assets	0.12		%	0.13		%	0.09		%	0.13		%
Allowance for loan losses to total gross loans	1.19		%	1.23		%	1.24		%	1.24		%

(1) Generally represents loans as to which the payment of principal or interest is in arrears for a period of more than 90 days. Interest previously accrued on these loans and not yet paid is reversed and charged against income during the current period. Interest earned thereafter is only included in income to the extent that it is received in cash.

(2) Represents a loan as to which payment of principal or interest is contractually past due 90 days or more but which are currently accruing income at the contractually stated rates. A determination is made to continue accruing income on those loans which are sufficiently collateralized and on which management believes all interest and principal owed will be collected.

A loan is generally placed on nonaccrual when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The identification of nonaccrual loans reflects careful monitoring of the loan

34

portfolio. The Corporation is focused on resolving nonperforming loans and mitigating future losses in the portfolio. All delinquent loans continue to be reviewed by management.

At March 31, 2018, the balance of nonaccrual loans were comprised of eight loans, unchanged from December 31, 2017. Due to payments made on nonaccrual loans, during the three months ended March 31, 2018, nonaccrual loans decreased $58,000 to $1,136,000 compared to $1,194,000 at December 31, 2017.

Evaluation of all nonperforming loans includes the updating of appraisals and specific evaluation of such loans to determine estimated cash flows from business and/or collateral. We have assessed each of these loans for collectability and considered, among other things, the relevant borrower’s ability to repay, the value of the underlying collateral, and other market conditions to ensure the allowance for loan losses is adequate to absorb probable losses to be incurred. All of our nonperforming loans at March 31, 2018 are secured by real estate collateral. We have continued to record appropriate charge-offs and the existing underlying collateral coverage for the nonperforming loans currently supports collection of our remaining principal.

For loans not included in nonperforming loans, at March 31, 2018, the level of loans past due 30-89 days was $821,000, comprised of four loans, compared to $704,000 at December 31, 2017. We will continue to monitor delinquencies for early identification of new problem loans.

The Corporation maintains an allowance for loan losses at a level considered by management to be adequate to cover the probable losses to be incurred associated with its loan portfolio. The Corporation’s policy with respect to the methodology for the determination of the allowance for loan losses involves a high degree of complexity and requires management to make difficult and subjective judgments.

The adequacy of the allowance for loan losses is based upon management’s evaluation of the known and inherent risks in the portfolio, consideration to the size and composition of the loan portfolio, actual loan loss experience, the level of delinquencies, detailed analysis of individual loans for which full collectability may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions.

In establishing the allowance for loan losses, the Corporation utilizes a two-tier approach by (1) identifying problem loans and allocating specific loss allowances on such loans and (2) establishing a general loan loss allowance on the remainder of its loan portfolio. The Corporation maintains a loan review system that allows for a periodic review of its loan portfolio and the early identification of potential problem loans. Such a system takes into consideration, among other things, delinquency status, size of loan, type of collateral and financial condition of the borrower.

Allocations of specific loan loss allowances are established for identified loans based on a review of various information including appraisals of underlying collateral. Appraisals are performed by independent licensed appraisers to determine the value of impaired, collateral-dependent loans. Appraisals are periodically updated to ascertain any further decline in value. General loan loss allowances are based upon a combination of factors including, but not limited to, actual loss experience, composition of the loan portfolio, current economic conditions and management’s judgment.

When management expects that some portion or all of a loan balance will not be collected, that amount is charged-off as a loss against the allowance for loan losses. For the three months ended March 31, 2018 the Corporation recorded net recoveries of $18,000 compared to net recoveries of $41,000 for the three months ended March 31, 2017. Recorded charge-offs reflect partial writedowns or full charge-offs on nonaccrual loans due to the initial and ongoing evaluations of market values of the underlying real estate collateral in accordance with Accounting Standards Codification (“ASC”) 310-40. Regardless of our actions of recording partial and full charge-offs on loans, we continue to aggressively pursue collection, including legal action.

While regular monthly payments continue to be made on many of the nonaccrual loans, certain charge-offs result, nevertheless, from the borrowers’ inability to provide adequate documentation evidencing their ability to continue to service their debt. Therefore, consideration has been given to any underlying collateral and appropriate charge-offs recorded based, in general, on the deficiency of such collateral. In general, the charge-offs reflect partial writedowns and full charge-offs on nonaccrual loans due to the initial evaluation of market values of the underlying real estate collateral in accordance with ASC 310-40. Management believes the charge-off of these reserves provides a clearer indication of the value of nonaccrual loans.

35

At March 31, 2018 and December 31, 2017, the Corporation had $6.5 million and $6.6 million, respectively, of loans the terms of which have been modified in troubled debt restructurings. Of these loans, $5.9 million and $5.9 million were performing in accordance with their new terms at March 31, 2018 and December 31, 2017, respectively. The remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $577,000,000 and $582,000 have been allocated for the troubled debt restructurings at March 31, 2018 and December 31, 2017, respectively.

As of March 31, 2018, there were $11.3 million of other loans not included in the preceding table or discussion of troubled debt restructurings where credit conditions of borrowers, including real estate tax delinquencies, caused management to have concerns about the possibility of the borrowers not complying with the present terms and conditions of repayment and which may result in disclosure of such loans as nonperforming loans at a future date. These loans have been considered by management in conjunction with the analysis of the adequacy of the allowance for loan losses.

The Corporation’s lending activities are concentrated in loans secured by real estate located in northern New Jersey. Accordingly, the collectability of a substantial portion of the Corporation’s loan portfolio is susceptible to changes in real estate market conditions in northern New Jersey.

Capital Adequacy

The Corporation is subject to capital adequacy guidelines promulgated by the Board of Governors of the Federal Reserve System (“FRB Board”). The Bank is subject to somewhat comparable but different capital adequacy requirements imposed by the Federal Deposit Insurance Corporation (the “FDIC”). The federal banking agencies have adopted risk-based capital guidelines for banks and bank holding companies. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Under these guidelines, assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

Federal banking regulators have also adopted leverage capital guidelines to supplement the risk-based measures. Leverage capital to average total assets is determined by dividing Tier 1 Capital as defined under the risk-based capital guidelines by average total assets (non-risk adjusted).

Guidelines for Banks

In December 2010 and January 2011, the Basel Committee on Banking Supervision (the “Basel Committee”) published the final texts of reforms on capital and liquidity, which are generally referred to as “Basel III”. The Basel Committee is a committee of central banks and bank supervisors and regulators from the major industrialized countries that develops broad policy guidelines for the regulation of banks and bank holding companies. In July 2013, the FDIC and the other federal bank regulatory agencies adopted final rules (the “Basel Rules”) to implement certain provisions of Basel III and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Basel Rules revise the leverage and risk-based capital requirements and the methods for calculating risk-weighted assets. The Basel Rules apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $1 billion or more and top-tier savings and loan holding companies.

Among other things, the Basel Rules (a) establish a new common equity Tier 1 Capital (“CET1”) to risk-weighted assets ratio minimum of 4.5% of risk-weighted assets, (b) raise the minimum Tier 1 Capital to risk-based assets requirement (“Tier 1 Capital Ratio) from 4% to 6% of risk-weighted assets and (c) assign a higher risk weight of 150% to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities. The minimum ratio of Total Capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least 6% of the Total Capital is required to be “Tier 1 Capital”, which consists of common shareholders’ equity and certain preferred stock, less goodwill and other intangible assets. The remainder, “Tier 2 Capital,” may consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted assets, (b) excess of qualifying preferred stock, (c) hybrid capital instruments, (d) debt, (e) mandatory convertible securities and (f) qualifying subordinated debt. “Total Capital” is the sum of Tier 1 Capital and Tier 2 Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the federal banking regulatory agencies on a case-by-case basis or as a matter of policy after formal rule-making.

36

A small bank holding company that has the highest regulatory examination rating and is not contemplating significant growth or expansion must maintain a minimum level of Tier 1 Capital to average total consolidated assets leverage ratio of at least 3%. All other bank holding companies are expected to maintain a leverage ratio of at least 100 to 200 basis points above the stated minimum.

The Basel Rules also require unrealized gains and losses on certain available-for-sale securities to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised. Additional constraints are also imposed on the inclusion in regulatory capital of mortgage-servicing assets and deferred tax assets. The Basel Rules limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The purpose of the capital conservation buffer is to ensure that banking organizations conserve capital when it is needed most, allowing them to weather periods of economic stress. Banking institutions with a CET1 Ratio, Tier 1 Capital Ratio and Total Capital Ratio above the minimum capital ratios but below the minimum capital ratios plus the capital conservation buffer will face constraints on their ability to pay dividends, repurchase equity and pay discretionary bonuses to executive officers based on the amount of the shortfall. The Basel Rules became effective for the Bank on January 1, 2015. The capital conservation buffer requirement of 0.625% became effective on January 1, 2016, to be phased in annually through January 1, 2019, when the full capital conservation buffer requirement of 2.50% will become effective. At March 31, 2018, the Bank's capital conservation buffer requirement was 1.875%, and the actual capital conservation buffer was 5.39%.

Bank assets are given risk-weights of 0%, 20%, 50%, 100%, and 150%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for performing first mortgage loans fully secured by residential property which carry a 50% risk-weighting. Loan exposures past due 90 days or more or on nonaccrual are assigned a risk-weighting of at least 100%. High volatility commercial real estate exposures are assigned to the 150% category. Most investment securities (including, primarily, general obligation claims of states or other political subdivisions of the United States) are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. government, which have a 0% risk-weight. In converting off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing nonfinancial obligations, and undrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a 50% risk-weighting. Short-term undrawn commitments and commercial letters of credit with an initial maturity of under one year have a 50% risk-weighting and certain short-term unconditionally cancelable commitments are not risk-weighted.

Guidelines for Small Bank Holding Companies

In April 2015, the FRB Board updated and amended its Small Bank Holding Company Policy Statement. Under the revised Small Bank Holding Company Policy Statement, Basel III capital rules and reporting requirements will not apply to small bank holding companies (“SBHC”), such as the Corporation, that have total consolidated assets of less than $1 billion. The minimum risk-based capital requirements for a SBHC to be considered adequately capitalized are 4% for Tier 1 capital and 8% for total capital to risk-weighted assets.

The regulations for SBHCs classify risk-based capital into the categories Tier 1 Capital and Tier 2 Capital. The amount of Tier 2 Capital may not exceed the amount of Tier 1 Capital. The Corporation must maintain a minimum level of Tier 1 Capital to average total consolidated assets leverage ratio of 3%, which is the leverage ratio reserved for top-tier bank holding companies having the highest regulatory examination rating and not contemplating significant growth or expansion.

Bank holding company assets are given risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in the total risk-weighted assets.

As of March 31, 2018, the Corporation and the Bank exceeded all regulatory capital requirements as follows:

37

	Actual		Required for Capital Adequacy Purposes		To Be Well Capitalized Under Prompt Corrective Action Regulations
Tier 1 Leverage ratio
Corporation	9.04	%	4.00	%	N/A
Bank	10.22	%	4.00	%	5.00	%
Risk-based capital
Common Equity Tier 1
Corporation	N/A		N/A		N/A
Bank	12.29	%	4.50	%	6.50	%
Tier 1
Corporation	11.12	%	4.00	%	N/A
Bank	12.29	%	6.00	%	8.00	%
Total
Corporation	14.40	%	8.00	%	N/A
Bank	13.39	%	8.00	%	10.00	%

Liquidity and Capital Resources

The Corporation’s primary sources of funds are deposits, amortization and prepayments of loans and mortgage-backed securities, maturities of investment securities and funds provided from operations. While scheduled loan and mortgage-backed securities amortization and maturities of investment securities are a relatively predictable source of funds, deposit flow and prepayments on loans and mortgage-backed securities are greatly influenced by market interest rates, economic conditions and competition. The Corporation’s liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities.

The primary source of cash from operating activities is net income. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in interest-earning cash accounts or short-term investments, such as federal funds sold.

Cash and cash equivalents increased $908,000 during the first three months of 2018. Net operating and investing activities provided $2.1 million and $5.9 million, respectively, while financing activities used $7.1 million.

We anticipate that the Corporation will have sufficient funds available to meet its current contractual commitments. Should we need temporary funding, the Corporation has the ability to borrow overnight with the Federal Home Loan Bank-NY (“FHLB-NY”). The Corporation’s overall borrowing capacity is contingent on available collateral to secure borrowings and the ability to purchase additional activity-based capital stock of the FHLB-NY. The Corporation may also borrow from the Discount Window of the Federal Reserve Bank of New York based on the market value of collateral pledged. In addition, the Corporation has available overnight variable repricing lines of credit with other correspondent banks totaling $38 million on an unsecured basis.

The Corporation has historically paid a quarterly cash dividend on its common stock; however, management recognizes that the payment of future dividends could be impacted by losses or reduced earnings and the Corporation cannot assure the payment of future dividends. On April 18, 2018, the Corporation announced that its Board of Directors had declared a $0.03 per share cash dividend payable on its common stock to shareholders of record as of May 1, 2018. The dividend is to be paid on May 15, 2018.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

ITEM 4. Controls and Procedures

Evaluation of internal controls and procedures

38

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our internal disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls over Financial Reporting

Pursuant to Rule 13a-15(d) under the Exchange Act, our management, with the participation of our principal executive officer and principal financial officer, has evaluated our internal controls over financial reporting and based upon such evaluation concluded that there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

39

Part II -- Other Information

 Item 6. Exhibits

See Exhibit Index following this report.

_____________________________________________________________

40

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.

	Stewardship Financial Corporation
Date: May 11, 2018	By:	/s/ Paul Van Ostenbridge
		Paul Van Ostenbridge
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: May 11, 2018	By:	/s/ Claire M. Chadwick
		Claire M. Chadwick
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

41

EXHIBIT INDEX

Exhibit Number	Description of Exhibits
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following material from Stewardship Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text1

__________________________________________

¹ This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Corporation specifically incorporates it by reference.

42

EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,

as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Paul Van Ostenbridge, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stewardship Financial Corporation;

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 the 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 officer(s) 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 13(a)-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 subsidiaries, 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 officer(s) 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: May 11, 2018

/s/ Paul Van Ostenbridge

Paul Van Ostenbridge

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934,

as adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Claire M. Chadwick, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stewardship Financial Corporation;

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 the 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 officer(s) 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 13(a)-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 subsidiaries, 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 officer(s) 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: May 11, 2018

/s/ Claire M. Chadwick

Claire M. Chadwick

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. § 1350 as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Stewardship Financial Corporation (the “Company”), certifies that:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

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

Dated: May 11, 2018	/s/ Paul Van Ostenbridge
	Paul Van Ostenbridge
	President and Chief Executive Officer
Dated: May 11, 2018	/s/ Claire M. Chadwick
	Claire M. Chadwick
	Executive Vice President and
	Chief Financial Officer

This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 10, 2018
Document And Entity Information
Entity Registrant Name	STEWARDSHIP FINANCIAL CORP
Entity Central Index Key	0001023860
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		8,674,890
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash and due from banks	$ 21,852	$ 20,558
Other interest-earning assets	326	712
Cash and cash equivalents	22,178	21,270
Securities available-for-sale	106,467	109,259
Securities held to maturity; estimated fair value of $50,299 (at March 31, 2018) and $51,551 (at December 31, 2017)	51,894	52,442
Other equity investments, at fair value	3,706	3,756
Federal Home Loan Bank of New York stock, at cost	3,039	3,715
Loans held for sale	0	370
Loans, net of allowance for loan losses of $8,445 (at March 31, 2018) and $8,762 (at December 31, 2017)	699,276	702,561
Premises and equipment, net	6,998	6,909
Accrued interest receivable	2,438	2,566
Bank owned life insurance	21,222	21,084
Other assets	5,223	4,834
Total assets	922,441	928,766
Deposits:
Noninterest-bearing	178,572	172,861
Interest-bearing	593,644	591,238
Total deposits	772,216	764,099
Federal Home Loan Bank of New York advances	48,760	63,760
Subordinated Debentures and Subordinated Notes	23,333	23,317
Accrued interest payable	665	1,116
Accrued expenses and other liabilities	3,095	2,809
Total liabilities	848,069	855,101
Shareholders' equity
Common stock, no par value: 20,000,000 and 10,000,000 shares authorized at March 31, 2018 and December 31, 2017, respectively; 8,674,890 and 8,652,804 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	60,975	60,742
Retained earnings	15,439	14,307
Accumulated other comprehensive loss, net	(2,042)	(1,384)
Total Shareholders' equity	74,372	73,665
Total liabilities and Shareholders' equity	$ 922,441	$ 928,766

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets
Securities held to maturity	$ 50,299	$ 51,551
Allowance for loan losses	$ 8,445	$ 8,762
Shareholders' equity
Common stock, shares authorized (in shares)	20,000,000	10,000,000
Common stock, shares issued (in shares)	8,674,890	8,652,804
Common stock, shares outstanding (in shares)	8,674,890	8,652,804

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Interest income:
Loans	$ 7,518	$ 6,586
Securities held to maturity:
Taxable	250	240
Nontaxable	33	59
Securities available-for-sale:
Taxable	593	460
Nontaxable	14	14
Other equity investments	25	26
FHLB dividends	64	34
Other interest-earning assets	42	5
Total interest income	8,539	7,424
Interest expense:
Deposits	1,065	633
FHLB-NY Borrowings	259	243
Subordinated Debentures and Subordinated Notes	392	368
Total interest expense	1,716	1,244
Net interest income before provision for loan losses	6,823	6,180
Provision for loan losses	(335)	300
Net interest income after provision for loan losses	7,158	5,880
Noninterest income:
Fees and service charges	507	535
Bank owned life insurance	138	115
Gain on calls and sales of securities, net	6	0
Gain on sales of mortgage loans	22	17
Miscellaneous	52	132
Total noninterest income	725	799
Noninterest expenses:
Salaries and employee benefits	3,109	2,844
Occupancy, net	442	409
Equipment	181	162
Data processing	484	469
Advertising	157	136
FDIC insurance premium	64	77
Charitable contributions	180	125
Bank-card related services	127	142
Other real estate owned, net	0	15
Miscellaneous	684	735
Total noninterest expenses	5,428	5,114
Income before income tax expense	2,455	1,565
Income tax expense	647	574
Net income	$ 1,808	$ 991
Basic and diluted earnings per common share (in usd per share)	$ 0.21	$ 0.16
Weighted average number of basic and diluted common shares outstanding (in shares)	8,658,506	6,124,926

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 1,808	$ 991
Other comprehensive income (loss), net of tax:
Change in unrealized holding gains (losses) on securities available-for-sale during the period	(993)	205
Reclassification adjustment for gains in net income	(4)	0
Accretion of loss on securities reclassified to held to maturity	9	7
Change in fair value of interest rate swap	167	0
Total other comprehensive income (loss)	(821)	212
Total comprehensive income	$ 987	$ 1,203

XML

Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss), Net
Balance at the beginning (in shares) at Dec. 31, 2016		6,121,329
Balance at the beginning at Dec. 31, 2016	$ 51,387	$ 41,626	$ 11,082	$ (1,321)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash dividends declared on common stock	(184)		(184)
Payment of discount on dividend reinvestment plan	(1)	$ (1)
Common stock issued under dividend reinvestment plan (in shares)		2,431
Common stock issued under dividend reinvestment plan	22	$ 22
Common stock issued under stock plans (in shares)		1,426
Common stock issued under stock plans	13	$ 13
Issuance of restricted stock (in shares)		20,876
Issuance of restricted stock	0	$ 185	(185)
Amortization of restricted stock, net (in shares)		(13,288)
Amortization of restricted stock, net	(71)	$ (118)	47
Tax benefit from restricted stock vesting	48	$ 48
Net income	991		991
Other comprehensive income	212			212
Balance at the end (in shares) at Mar. 31, 2017		6,132,774
Balance at the end at Mar. 31, 2017	52,417	$ 41,775	11,751	(1,109)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reclassification due to the adoption of ASU 2016-01	$ 163		(163)	163
Balance at the beginning (in shares) at Dec. 31, 2017	8,652,804	8,652,804
Balance at the beginning at Dec. 31, 2017	$ 73,665	$ 60,742	14,307	(1,384)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash dividends declared on common stock	(260)		(260)
Payment of discount on dividend reinvestment plan	(1)	$ (1)
Common stock issued under dividend reinvestment plan (in shares)		2,062
Common stock issued under dividend reinvestment plan	22	$ 22
Common stock issued under stock plans (in shares)		1,638
Common stock issued under stock plans	16	$ 16
Issuance of restricted stock (in shares)		28,221
Issuance of restricted stock	0	$ 301	(301)
Amortization of restricted stock, net (in shares)		(9,835)
Amortization of restricted stock, net	(57)	$ (105)	48
Net income	1,808		1,808
Other comprehensive income	$ (821)			(821)
Balance at the end (in shares) at Mar. 31, 2018	8,674,890	8,674,890
Balance at the end at Mar. 31, 2018	$ 74,372	$ 60,975	$ 15,439	$ (2,042)

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Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income	$ 1,808,000	$ 991,000
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of premises and equipment	111,000	96,000
Amortization of premiums and accretion of discounts, net	132,000	129,000
Amortization of restricted stock	(57,000)	(71,000)
Amortization of subordinated debenture issuance costs	16,000	16,000
Accretion of deferred loan fees	26,000	26,000
Fair value adjustment for equity security	74,000	0
Provision for loan losses	(335,000)	300,000
Originations of mortgage loans held for sale	(847,000)	(2,846,000)
Proceeds from sale of mortgage loans	1,239,000	3,448,000
Gain on sales of mortgage loans	(22,000)	(17,000)
Gain on calls and sales of securities	(6,000)	0
Deferred income tax expense (benefit)	134,000	(190,000)
Excess tax benefit from restricted stock vesting	0	48,000
(Increase) decrease in accrued interest receivable	128,000	(69,000)
Increase (decrease) in accrued interest payable	(451,000)	305,000
Earnings on bank owned life insurance	(138,000)	(115,000)
Increase in other assets	(173,000)	(15,000)
Increase (decrease) in other liabilities	452,000	(261,000)
Net cash provided by operating activities	2,091,000	1,775,000
Cash flows from investing activities:
Purchase of securities available-for-sale	(4,016,000)	(524,000)
Proceeds from maturities and principal repayments on securities available-for-sale	4,359,000	3,709,000
Proceeds from sales and calls on securities available-for-sale	1,006,500	0
Purchase of securities held to maturity	(1,493,000)	(2,675,000)
Proceeds from maturities and principal repayments on securities held to maturity	1,741,000	1,839,000
Proceeds from calls on securities held to maturity	280,000	340,000
Purchase of equity securities	24,000	0
Purchase of FHLB-NY stock	(756,000)	(5,034,000)
Sale of FHLB-NY stock	1,432,000	4,765,000
Net (increase) decrease in loans	3,594,000	(50,570,000)
Additions to premises and equipment	(200,000)	(136,000)
Net cash provided by (used in) investing activities	5,923,000	(48,286,000)
Cash flows from financing activities:
Net increase in noninterest-bearing deposits	5,711,000	1,260,000
Net increase in interest-bearing deposits	2,406,000	40,514,000
Repayment of long term borrowings	(15,000,000)	(5,000,000)
Net increase in short term borrowings	0	11,000,000
Cash dividends paid on common stock	(260,000)	(184,000)
Payment of discount on dividend reinvestment plan	(1,000)	(1,000)
Issuance of common stock for cash	38,000	35,000
Net cash provided by (used in) financing activities	(7,106,000)	47,624,000
Net increase in cash and cash equivalents	908,000	1,113,000
Cash and cash equivalents - beginning	21,270,000	11,680,000
Cash and cash equivalents - ending	22,178,000	12,793,000
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	2,166,000	938,000
Cash paid during the period for income taxes	$ 0	$ 592,000

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Certain information and note disclosures normally included in the unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Stewardship Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 23, 2018 (the “2017 Annual Report”).

The interim unaudited consolidated financial statements included herein have been prepared in accordance with instructions for Form 10-Q and the rules and regulations of the SEC and, therefore, do not include information or footnotes necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the interim consolidated financial statements, have been included. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results which may be expected for the entire year. Certain prior period amounts have been reclassified to conform with the current period presentation.

Principles of consolidation

The consolidated financial statements include the accounts of Stewardship Financial Corporation and its wholly-owned subsidiary, Atlantic Stewardship Bank (the “Bank”), together referred to as “the Corporation”. The Bank includes its wholly-owned subsidiaries, Stewardship Investment Corporation, Stewardship Realty LLC, Atlantic Stewardship Insurance Company, LLC and several other subsidiaries formed to hold title to properties acquired through foreclosure or deed in lieu of foreclosure. The Bank’s subsidiaries have an insignificant impact on the Bank’s daily operations. All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The consolidated financial statements of the Corporation have been prepared in conformity with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions, based on available information, that affect the amounts reported in the consolidated financial statements and disclosures provided. Actual results could differ significantly from those estimates.

Material estimates

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and deferred income taxes. Management believes the Corporation’s policies with respect to the methodology for the determination of the allowance for loan losses and the evaluation of deferred income taxes involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Adoption of New Accounting Standards

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. 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 in the scope of other standards. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;” ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting;” and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” These amendments are intended to improve and clarify the implementation guidance of ASU 2014-09 and have the same effective date as the original standard. The Corporation’s implementation efforts include the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts and the respective performance obligations within those contracts. We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customer into more granular categories beyond what is presented in the the Condensed Consolidated Statement of Income was not necessary. We generally satisfy our performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying this ASU that significantly affect the determination of the amount and timing of the revenue from contracts with customers. The Corporation has completed its evaluation and adopted this ASU effective January 1, 2018 using the modified retrospective approach. Adoption of ASU 2014-09 did not have a material impact on our consolidated financial statements and related disclosures as our primary sources of revenues are derived from interest and dividends earned on loans, securities and other financial instruments that are not within the scope of the new standard. Our revenue recognition pattern for revenue streams within the scope of the new standard, including but not limited to service charges on deposit accounts and debit card interchange, did not change significantly from prior practice. The modified retrospective method requires application of ASU 2014-09 to uncompleted contracts at the date of adoption, however, periods prior to the date of adoption have not been retrospectively revised as the impact impact of the new standard on uncompleted contracts as the date of adoption was not material as such a cumulative effective adjustment to opening retained earnings was not deemed necessary.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This amendment supersedes the guidance to classify equity securities with readily determinable fair values into different categories, requires equity securities to be measured at fair value with changes in the fair value recognized through net income, and simplifies the impairment assessment of equity investments without readily determinable fair values. The amendment requires public business entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion. The amendment requires 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. The amendment requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. The amendment reduces diversity in current practice by clarifying 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. This amendment is effective for fiscal years, including interim periods, beginning after December 15, 2017. Entities should apply the amendment by means of a cumulative-effect adjustment as of the beginning of the fiscal year of adoption, with the exception of the amendment related to equity securities without readily determinable fair values, which should be applied prospectively to equity investments that exist as of the date of adoption. The Corporation's adoption of the guidance resulted in the reclassification from accumulated other comprehensive income (loss) to retained earnings of $163,000, reflected in the Consolidated Statements of Changes in Shareholders' Equity. In addition, the fair value of loans has been estimated using the exit price notion as described in Note 4.

In February 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842).” This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The amendments in ASU 2016-02 are effective for fiscal years, including interim periods, beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. The Corporation is currently assessing the impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments by a reporting entity at each reporting date. The amendments in this ASU require financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses would represent a valuation account that would be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement would reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses would be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity will be required to use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The amendments in ASU 2016-13 are effective for fiscal years, including interim periods, beginning after December 15, 2019. Early adoption of this ASU is permitted for fiscal years beginning after December 15, 2018. The Corporation is currently evaluating the potential impact of ASU 2016-13 on the Corporation's consolidated financial statements. The Corporation has formed a working group, under the direction of the Chief Financial Officer, which is currently developing an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and the identification of data and resource needs, among other things. Also, the Corporation is currently evaluating third-party vendor solutions to assist in the application of the ASU 2016-13. The adoption of the ASU 2016-13 may result in an increase in the allowance for loan losses due to changing from an "incurred loss" model, which encompasses allowances for current known and inherent losses within the portfolio, to an "expected loss" model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate establishing an allowance for expected credit losses on debt securities. The Corporation is currently unable to reasonably estimate the impact of adopting ASU 2016-13, and it is expected that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU will be effective for interim and annual periods beginning after December 15, 2018. Early adoption of ASU 2017-12 is permitted. The Corporation is currently evaluating the potential impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

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Securities - Available-for-Sale and Held to Maturity

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Securities - Available-for-Sale and Held to Maturity

Securities – Available-for-Sale and Held to Maturity

The amortized cost, gross unrealized gains and losses and fair value of the available-for-sale securities were as follows:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	22,046	$	23	$	586	$	21,483
Obligations of state and political subdivisions	3,218		—		115		3,103
Mortgage-backed securities	64,399		33		1,860		62,572
Asset-backed securities (a)	6,278		25		—		6,303
Corporate debt	13,420		98		512		13,006
Total debt securities	$	109,361	$	179	$	3,073	$	106,467

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	21,699	$	30	$	396	$	21,333
Obligations of state and political subdivisions	3,221		—		56		3,165
Mortgage-backed securities	64,775		70		1,011		63,834
Asset-backed securities (a)	6,672		30		4		6,698
Corporate debt	14,437		94		302		14,229
Total debt securities	$	110,804	$	224	$	1,769	$	109,259

(a) Collateralized by student loans.

There were cash proceeds of $1,006,500 realized from sales and calls of securities available-for-sale for the three months ended March 31, 2018. There were no cash proceeds realized from sales and calls of securities available-for-sale for the three months ended March 31, 2017. There were gross gains totaling $6,500 and no gross losses realized on sales or calls during the three months ended March 31, 2018. There were no gross gains and no gross losses realized on sales or calls during the three months ended March 31, 2017.

The following is a summary of the amortized cost, gross unrealized gains and losses and fair value of the held to maturity securities:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	17	$	982
U.S. government-sponsored agencies	28,568		—		1,166		27,402
Obligations of state and political subdivisions	3,390		19		34		3,375
Mortgage-backed securities	18,937		42		439		18,540
	$	51,894	$	61	$	1,656	$	50,299

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	11	$	988
U.S. government-sponsored agencies	27,075		4		760		26,319
Obligations of state and political subdivisions	4,057		21		23		4,055
Mortgage-backed securities	20,311		76		198		20,189
	$	52,442	$	101	$	992	$	51,551

Cash proceeds realized from calls of securities held to maturity for the three months ended March 31, 2018 were $280,000. Cash proceeds realized from calls of securities held to maturity for the three months ended March 31, 2017 were $340,000. There were no gross gains and no gross losses realized on calls during the three months ended March 31, 2018 and March 31, 2017, respectively.

Mortgage-backed securities are a type of asset-backed security secured by a mortgage or collection of mortgages, purchased by government agencies such as the Government National Mortgage Association and government sponsored agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, which then issue securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool.

The following table presents the amortized cost and fair value of the debt securities portfolio by contractual maturity. As issuers may have the right to call or prepay obligations with or without call or prepayment premiums, the actual maturities may differ from contractual maturities. Securities not due at a single maturity date, such as mortgage-backed securities and asset-backed securities, are shown separately.

	March 31, 2018
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	—	$	—
After one year, but within five years	9,854		9,668
After five years, but within ten years	23,831		23,112
After ten years	4,999		4,812
Mortgage-backed securities	64,399		62,572
Asset-backed securities	6,278		6,303
Total	$	109,361	$	106,467
Held to maturity
Within one year	$	1,245	$	1,245
After one year, but within five years	10,154		10,021
After five years, but within ten years	21,063		20,032
After ten years	495		461
Mortgage-backed securities	18,937		18,540
Total	$	51,894	$	50,299

The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at March 31, 2018 and December 31, 2017, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2018 and December 31, 2017.

Available-for-Sale
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	9,094	$	(164	)	$	9,922	$	(422	)	$	19,016	$	(586	)
Obligations of state and political subdivisions	1,375		(14		)	1,728		(101		)	3,103		(115		)
Mortgage-backed securities	32,977		(740		)	24,397		(1,120		)	57,374		(1,860		)
Asset-backed securities	—		—			—		—			—		—
Corporate debt	—		—			8,908		(512		)	8,908		(512		)
Total temporarily impaired securities	$	43,446	$	(918	)	$	44,955	$	(2,155	)	$	88,401	$	(3,073	)

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	8,260	$	(70	)	$	11,174	$	(326	)	$	19,434	$	(396	)
Obligations of state and political subdivisions	1,384		(7		)	1,781		(49		)	3,165		(56		)
Mortgage-backed securities	30,575		(201		)	26,809		(810		)	57,384		(1,011		)
Asset-backed securities	—		—			3,013		(4		)	3,013		(4		)
Corporate debt	—		—			9,135		(302		)	9,135		(302		)
Total temporarily impaired securities	$	40,219	$	(278	)	$	51,912	$	(1,491	)	$	92,131	$	(1,769	)

Held to Maturity
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	982	$	(17	)	$	—	$	—		$	982	$	(17	)
U.S. government- sponsored agencies	12,390		(291		)	15,012		(875		)	27,402		(1,166		)
Obligations of state and political subdivisions	—		—			461		(34		)	461		(34		)
Mortgage-backed securities	11,298		(232		)	5,797		(207		)	17,095		(439		)
Total temporarily impaired securities	$	24,670	$	(540	)	$	21,270	$	(1,116	)	$	45,940	$	(1,656	)

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	988	$	(11	)	$	—	$	—		$	988	$	(11	)
U.S. government- sponsored agencies	10,032		(139		)	15,265		(621		)	25,297		(760		)
Obligations of state and political subdivisions	—		—			474		(23		)	474		(23		)
Mortgage-backed securities	9,531		(114		)	3,896		(84		)	13,427		(198		)
Total temporarily impaired securities	$	20,551	$	(264	)	$	19,635	$	(728	)	$	40,186	$	(992	)

Other-Than-Temporary Impairment

At March 31, 2018, there were available-for-sale investments comprising twelve U.S. government-sponsored agency securities, four obligations of state and political subdivision securities, forty mortgage-backed securities, and nine corporate debt securities in a continuous loss position for twelve months or longer. At March 31, 2018, there were held to maturity investments comprising fifteen U.S. government-sponsored agency securities, one obligation of state and political subdivision security, and fourteen mortgage-backed securities in a continuous loss position for twelve months or longer. Management has assessed the securities that were in an unrealized loss position at March 31, 2018 and December 31, 2017 and has determined that any decline in fair value below amortized cost primarily relates to changes in interest rates and market spreads and was temporary.

In making this determination management considered the following factors: the period of time the securities were in an unrealized loss position; the percentage decline in comparison to the securities’ amortized cost; any adverse conditions specifically related to the security, an industry or a geographic area; the rating or changes to the rating by a credit rating agency; the financial condition of the issuer and guarantor and any recoveries or additional declines in fair value subsequent to the balance sheet date.

The Corporation does not intend to sell securities in an unrealized loss position and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost bases, which may be at maturity.

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Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

At March 31, 2018 and December 31, 2017, respectively, the loan portfolio consisted of the following:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	28,447	$	31,684
Other	59,664		57,372
Commercial real estate	488,641		493,542
Commercial construction	4,632		2,152
Residential real estate	86,050		85,760
Consumer:
Secured by real estate	32,958		32,207
Other	353		563
Government Guaranteed Loans - guaranteed portion	7,367		8,334
Other	57		106
Total gross loans	708,169		711,720
Less: Deferred loan costs, net	448		397
Allowance for loan losses	8,445		8,762
	8,893		9,159
Loans, net	$	699,276	$	702,561

The Corporation has purchased the guaranteed portion of several Government Guaranteed loans. Due to the guarantee of the principal amount of these loans, no allowance for loan losses is established for these loans.

Activity in the allowance for loan losses is summarized as follows:

	For the three months ended March 31, 2018
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	3,058	$	(189	)	$	(29	)	$	25	$	2,865
Commercial real estate	5,531		(204		)	—			22		5,349
Commercial construction	33		48			—			—		81
Residential real estate	68		4			—			—		72
Consumer	64		2			—			1		67
Other loans	1		—			(1		)	—		—
Unallocated	7		4			—			—		11
Total	$	8,762	$	(335	)	$	(30	)	$	48	$	8,445

	For the three months ended March 31, 2017
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,663	$	(118	)	$	(1	)	$	16	$	2,560
Commercial real estate	4,734		390			—			25		5,149
Commercial construction	355		29			—			—		384
Residential real estate	66		(1		)	—			—		65
Consumer	75		(3		)	—			1		73
Other loans	—		—			—			—		—
Unallocated	12		3			—			—		15
Total	$	7,905	$	300		$	(1	)	$	42	$	8,246

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	6	$	571	$	—	$	—	$	—	$	—	$	—	$	—	$	577
Collectively evaluated for impairment	2,859		4,778		81		72		67		—		—		11		7,868
Total ending allowance balance	$	2,865	$	5,349	$	81	$	72	$	67	$	—	$	—	$	11	$	8,445
Loans:
Loans individually evaluated for impairment	$	509	$	6,196	$	—	$	289	$	46	$	—	$	—	$	—	$	7,040
Loans collectively evaluated for impairment	87,602		482,445		4,632		85,761		33,265		7,367		57		—		701,129
Total ending loan balance	$	88,111	$	488,641	$	4,632	$	86,050	$	33,311	$	7,367	$	57	$	—	$	708,169

	December 31, 2017
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	34	$	575	$	—	$	—	$	—	$	—	$	—	$	—	$	609
Collectively evaluated for impairment	3,024		4,956		33		68		64		—		1		7		8,153
Total ending allowance balance	$	3,058	$	5,531	$	33	$	68	$	64	$	—	$	1	$	7	$	8,762
Loans:
Loans individually evaluated for impairment	$	549	$	6,236	$	—	$	295	$	62	$	—	$	—	$	—	$	7,142
Loans collectively evaluated for impairment	88,507		487,306		2,152		85,465		32,708		8,334		106		—		704,578
Total ending loan balance	$	89,056	$	493,542	$	2,152	$	85,760	$	32,770	$	8,334	$	106	$	—	$	711,720

The following table presents the recorded investment in nonaccrual loans at the dates indicated:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	105	$	136
Commercial real estate	696		701
Residential real estate	289		295
Consumer:
Secured by real estate	46		62
Total nonaccrual loans	$	1,136	$	1,194

At March 31, 2018 and December 31, 2017, there were no loans that were past due 90 days and still accruing.

The following table presents loans individually evaluated for impairment by class of loan at and for the periods indicated:

	At and for the three months ended March 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	489	$	383			$	386	$	4
Commercial real estate	3,415		3,093				3,108		26
Residential Real Estate	292		289				292		—
Consumer:
Secured by real estate	55		46				54		—
With an allowance recorded:
Commercial:
Secured by real estate	—		—		$	—	16		—
Other	126		126		6		127		2
Commercial real estate	3,103		3,103		571		3,108		40
	$	7,480	$	7,040	$	577	$	7,091	$	72

During the three months endedMarch 31, 2018, no interest income was recognized on a cash basis.

	At and for the year ended December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	389	$	389			$	964	$	70
Commercial real estate	3,442		3,124				3,148		121
Residential real estate	295		295				59		—
Consumer:
Secured by real estate	71		62				70		—
With an allowance recorded:
Commercial:
Secured by real estate	33		32		$	27	45		—
Other	128		128		7		171		12
Commercial real estate	3,112		3,112		575		3,144		128
	$	7,470	$	7,142	$	609	$	7,601	$	331

During the year ended December 31, 2017, no interest income was recognized on a cash basis.

The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2018 and December 31, 2017. Nonaccrual loans are included in the disclosure by payment status.

	March 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	135	$	74	$	105	$	314	$	28,133	$	28,447
Other	—		—		—		—		59,664		59,664
Commercial real estate	298		—		597		895		487,746		488,641
Commercial construction	—		—		—		—		4,632		4,632
Residential real estate	—		313		—		313		85,737		86,050
Consumer:
Secured by real estate	—		—		28		28		32,930		32,958
Other	—		—		—		—		353		353
Government Guaranteed	—		—		—		—		7,367		7,367
Other	—		—		—		—		57		57
Total	$	433	$	387	$	730	$	1,550	$	706,619	$	708,169

	December 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	186	$	—	$	—	$	186	$	31,498	$	31,684
Other	8		—		—		8		57,364		57,372
Commercial real estate	300		—		599		899		492,643		493,542
Commercial construction	—		—		—		—		2,152		2,152
Residential real estate	314		—		—		314		85,446		85,760
Consumer:
Secured by real estate	—		—		28		28		32,179		32,207
Other	—		—		—		—		563		563
Government Guaranteed	—		—		—		—		8,334		8,334
Other	—		—		—		—		106		106
Total	$	808	$	—	$	627	$	1,435	$	710,285	$	711,720

Troubled Debt Restructurings

In order to determine whether a borrower is experiencing financial difficulty necessitating a restructuring, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Corporation’s internal underwriting policy. A loan is considered to be in payment default once it is contractually 90 days past due.

At March 31, 2018 and December 31, 2017, the Corporation had $6.5 million and $6.6 million, respectively, of loans whose terms have been modified in troubled debt restructurings. Of these loans, $5.9 million had demonstrated a reasonable period of performance in accordance with their new terms at March 31, 2018 and December 31, 2017. The remaining troubled debt restructurings are reported as nonaccrual loans. Specific reserves of $577,000 and $582,000 have been recorded for the troubled debt restructurings at March 31, 2018 and December 31, 2017, respectively, and are included in the table above. As of March 31, 2018 and December 31, 2017, there were no additional funds committed to these borrowers.

There were no new loans classified as a troubled debt restructuring during the three months ended March 31, 2018 or March 31, 2017.

Credit Quality Indicators

The Corporation categorizes certain loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial, commercial real estate and commercial construction loans. This analysis is performed at the time the loan is originated and annually thereafter. The Corporation uses the following definitions for risk ratings.

Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or the Bank’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard – Substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – A Doubtful loan has all of 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 known facts, conditions, and values, highly questionable or improbable. The likelihood of loss is extremely high, but because of certain important and reasonably specific factors, an estimated loss is deferred until a more exact status can be determined.

Loss – A loan classified Loss is considered uncollectible and of such little value that its continuance as an asset is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be effected 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. As of March 31, 2018 and December 31, 2017, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,042	$	1,952	$	453	$	—	$	—	$	28,447
Other	58,951		208		505		—		—		59,664
Commercial real estate	473,999		12,583		2,059		—		—		488,641
Commercial construction	4,632		—		—		—		—		4,632
Government Guaranteed Loans - guaranteed portion	7,367		—		—		—		—		7,367
Total	$	570,991	$	14,743	$	3,017	$	—	$	—	$	588,751

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	29,025	$	2,153	$	506	$	—	$	—	$	31,684
Other	56,632		216		524		—		—		57,372
Commercial real estate	481,443		10,023		2,076		—		—		493,542
Commercial construction	2,152		—		—		—		—		2,152
Government Guaranteed Loans - guaranteed portion	8,334		—		—		—		—		8,334
Total	$	577,586	$	12,392	$	3,106	$	—	$	—	$	593,084

The Corporation considers the historical and projected performance of the loan portfolio and its impact on the allowance for loans losses. For the residential real estate and consumer loan segments, the Corporation evaluates credit quality primarily based on payment activity and historical loss data. The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,737	$	313	$	86,050
Consumer:
Secured by real estate	32,930		28		32,958
Other	353		—		353
Total	$	119,020	$	341	$	119,361

	December 31, 2017
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,446	$	314	$	85,760
Consumer:
Secured by real estate	32,179		28		32,207
Other	563		—		563
Total	$	118,188	$	342	$	118,530

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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

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 reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,483	$	—	$	21,483	$	—
Obligations of state and political subdivisions	3,103		—		3,103		—
Mortgage-backed securities	62,572		—		62,572		—
Asset-backed securities	6,303		—		6,303		—
Corporate debt	13,006		—		13,006		—
Total available-for-sale securities	$	106,467	$	—	$	106,467	$	—
Other equity investments	$	3,706	$	3,646	$	60	$	—
Interest Rate Swap	$	203	$	—	$	203	$	—

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,333	$	—	$	21,333	$	—
Obligations of state and political subdivisions	3,165		—		3,165		—
Mortgage-backed securities	63,834		—		63,834		—
Asset-backed securities	6,698		—		6,698		—
Corporate debt	14,229		—		14,229		—
Total available-for-sale securities	$	109,259	$	—	$	109,259	$	—
Other equity investments	$	3,756	$	3,696	$	60	$	—
Liabilities:
Interest Rate Swap	$	29	$	—	$	29	$	—

There were no transfers of assets between Level 1 and Level 2 during the three months ended March 31, 2018 or during the year ended December 31, 2017. There were no changes to the valuation techniques for fair value measurements as of March 31, 2018 and December 31, 2017.

The fair values of investment securities are determined by quoted market prices, if available (Level 1). If quoted prices are not available, fair values of investment securities are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The Corporation performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, the Corporation compares the prices received from the pricing service to a secondary pricing source. The Corporation’s internal price verification procedures have not historically resulted in adjustment in the prices obtained from the pricing service.

The interest rate swaps are reported at fair values obtained from brokers who utilize internal models with observable market data inputs to estimate the values of these instruments (Level 2 inputs).

Assets and Liabilities Measured on a Non-Recurring Basis

There were no assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2018.

Assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2017 are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	109	$	—	$	—	$	109
Commercial real estate	192		—		—		192
Residential real estate	296		—		—		296
	$	597	$	—	$	—	$	597

There were no collateral-dependent impaired loans measured for impairment using fair value of the collateral as of and for the three months ended March 31, 2018.

Collateral-dependent impaired loans measured for impairment using the fair value of the collateral had a recorded investment value of $624,000, resulting in an increase of the allocation for loan losses of $27,000 for the year ended December 31, 2017.

There was no OREO at March 31, 2018 or December 31, 2017.

The Corporation does not record loans at fair value on a recurring basis. However, from time to time, the Corporation records non-recurring fair value adjustments to collateral dependent loans to reflect impairment. The Corporation measures impairment of collateralized loans based on the estimated fair value of the collateral less estimated costs to sell the collateral, incorporating assumptions that experienced parties might use in estimating the value of such collateral (Level 3 inputs). At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Generally, impaired loans carried at fair value have been partially charged-off or receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. In the appraisal process, the independent appraisers routinely adjust for differences between the comparable sales and income data available. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. Methods for valuing non-real estate collateral include using an appraisal, the net book value recorded for the collateral on the borrower’s financial statements, or aging reports. Collateral is then 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 borrower and borrower’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals are generally obtained to support the fair value of collateral. Appraisals for collateral-dependent impaired loans are performed by licensed appraisers whose qualifications and licenses have been reviewed and verified by the Corporation. The Corporation utilizes a third party to order appraisals and, once received, reviews the assumptions and approaches utilized in the appraisal as well as the resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales price of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a 12% discount to real estate appraised values to cover disposition / selling costs and to reflect the potential price reductions in the market necessary to complete an expedient sale transaction and to factor in the impact of the perception that a transaction being completed by a bank may result in further price reduction pressure.

For the Level 3 assets measured at fair value on a non-recurring basis as December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

December 31, 2017
	Fair
Assets	Value		Valuation Technique	Unobservable Inputs	Range
(Dollars in thousands)
Impaired loans	$	597	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

Fair value estimates for the Corporation’s financial instruments are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	22,178	$	22,178	$	—	$	—
Securities available-for-sale	106,467		—		106,467		—
Securities held to maturity	51,894		—		50,299		—
Other equity investments	3,706		3,646		60		—
FHLB-NY stock	3,039		N/A		N/A		N/A
Loans, net	699,276		—		—		686,029
Interest rate swap	203		—		203		—
Financial liabilities:
Deposits	772,216		566,147		204,006		—
FHLB-NY advances	48,760		—		48,150		—
Subordinated Debentures and Subordinated Notes	23,333		—		—		23,493

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2017
	(In thousands)
Financial assets:
Cash and cash equivalents	$	21,270	$	21,270	$	—	$	—
Securities available-for-sale	109,259		—		109,259		—
Securities held to maturity	52,442		—		51,551		—
Other equity investments	3,756		3,696		60		—
FHLB-NY stock	3,715		N/A		N/A		N/A
Mortgage loans held for sale	370		—		—		370
Loans, net	702,561		—		—		714,387
Financial liabilities:
Deposits	764,099		565,292		197,696		—
FHLB-NY advances	63,760		—		63,340		—
Subordinated Debentures and Subordinated Notes	23,317		—		—		23,478
Interest rate swap	29		—		29		—

The following methods and assumptions were used to estimate the fair value of financial instruments recorded at fair value on a recurring or non-recurring basis not previously described:

Loans, net – Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential and commercial mortgages, commercial and other installment loans. Fair value for loans a March 31, 2018 is based on an exit price model as required by ASU 2106-01 taxing into account inputs such as probability of default and loss given default assumptions. As of December 31, 2017, the fair value of loans is estimated by discounting cash flows using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans resulting in a Level 3 classification. Fair values estimated in this manner do not fully incorporate an exit-price approach to fair value, but instead are based on a comparison to current market rates for comparable loans.

Limitations

The preceding fair value estimates were made at March 31, 2018 and December 31, 2017 based on pertinent market data and relevant information concerning the financial instruments. These estimates do not include any premiums or discounts that could result from an offer to sell at one time the Corporation's entire holdings of a particular financial instrument or category thereof. Since no market exists for a substantial portion of the Corporation's financial instruments, fair value estimates were necessarily based on judgments with respect to future expected loss experience, current economic conditions, risk assessments of various financial instruments, and other factors. Given the subjective nature of these estimates, the uncertainties surrounding them and the matters of significant judgment that must be applied, these fair value estimates cannot be calculated with precision. Modifications in such assumptions could meaningfully alter these estimates.

Since these fair value estimates were made solely for on- and off-balance sheet financial instruments at March 31, 2018 and December 31, 2017, no attempt was made to estimate the value of anticipated future business. Furthermore, certain tax implications related to the realization of unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into the estimates.

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Earnings Per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following reconciles the income available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings per share.

	Three Months Ended
	March 31,
	2018		2017
	(Dollars in thousands)
Net income	$	1,808	$	991
Weighted average common shares outstanding - basic	8,658,506		6,124,926
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,658,506		6,124,926
Basic earnings per common share	$	0.21	$	0.16
Diluted earnings per common share	$	0.21	$	0.16

There were no stock options to purchase shares of common stock for the three months ended March 31, 2018 and 2017.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2018

Stockholders' Equity Note [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

The components of comprehensive income, both gross and net of tax, are presented for the periods below:

	Three Months Ended March 31,
	2018									2017
	Gross			Tax Effect			Net			Gross		Tax Effect			Net
	(In thousands)
Net income	$	2,455		$	(647	)	$	1,808		$	1,565	$	(574	)	$	991
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	(1,344		)	351			(993		)	331		(126		)	205
Reclassification adjustment for gains in net income	(6		)	2			(4		)	—		—			—
Accretion of loss on securities reclassified to held to maturity	12			(3		)	9			11		(4		)	7
Change in fair value of interest rate swap	232			(65		)	167			—		—			—
Total other comprehensive income (loss)	(1,106		)	285			(821		)	342		(130		)	212
Total comprehensive income	$	1,349		$	(362	)	$	987		$	1,907	$	(704	)	$	1,203

The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive income for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income before reclassifications	(993		)	9			167			(817		)
Amounts reclassified from other comprehensive income	(4		)	—			—			(4		)
Other comprehensive income	(997		)	9			167			(821		)
Reclassification of tax effects due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

	Three Months Ended March 31, 2017
	Components of Accumulated Other Comprehensive Income (Loss)								Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives		Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2016	$	(1,243	)	$	(78	)	$	—	$	(1,321	)
Other comprehensive income before reclassifications	205			7			—		212
Amounts reclassified from other comprehensive income	—			—			—		—
Other comprehensive income	205			7			—		212
Balance at March 31, 2017	$	(1,038	)	$	(71	)	$	—	$	(1,109	)

The following tables present amounts reclassified from each component of accumulated other comprehensive income on a gross and net of tax basis for the three months ended March 31, 2018 and 2017.

	Three Months Ended					Income
Components of Accumulated Other	March 31,					Statement
Comprehensive Income	2018			2017		Line Item
	(In thousands)
Unrealized gains on AFS securities before tax	$	6		$	—	Gains on securities transactions, net
Tax effect	(2		)	—
Total net of tax	4			—
Total reclassifications, net of tax	$	4		$	—

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of presentation

Certain information and note disclosures normally included in the unaudited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Stewardship Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 23, 2018 (the “2017 Annual Report”).

The interim unaudited consolidated financial statements included herein have been prepared in accordance with instructions for Form 10-Q and the rules and regulations of the SEC and, therefore, do not include information or footnotes necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with GAAP. However, all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the interim consolidated financial statements, have been included. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results which may be expected for the entire year. Certain prior period amounts have been reclassified to conform with the current period presentation.

Principles of consolidation

Principles of consolidation

The consolidated financial statements include the accounts of Stewardship Financial Corporation and its wholly-owned subsidiary, Atlantic Stewardship Bank (the “Bank”), together referred to as “the Corporation”. The Bank includes its wholly-owned subsidiaries, Stewardship Investment Corporation, Stewardship Realty LLC, Atlantic Stewardship Insurance Company, LLC and several other subsidiaries formed to hold title to properties acquired through foreclosure or deed in lieu of foreclosure. The Bank’s subsidiaries have an insignificant impact on the Bank’s daily operations. All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The consolidated financial statements of the Corporation have been prepared in conformity with GAAP. In preparing the consolidated financial statements, management is required to make estimates and assumptions, based on available information, that affect the amounts reported in the consolidated financial statements and disclosures provided. Actual results could differ significantly from those estimates.

Material estimates

Material estimates

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and deferred income taxes. Management believes the Corporation’s policies with respect to the methodology for the determination of the allowance for loan losses and the evaluation of deferred income taxes involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The objective of this amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. 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 in the scope of other standards. The ASU is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017, and early adoption is permitted. Subsequently, the FASB issued the following standards related to ASU 2014-09: ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations;” ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting;” and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” These amendments are intended to improve and clarify the implementation guidance of ASU 2014-09 and have the same effective date as the original standard. The Corporation’s implementation efforts include the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts and the respective performance obligations within those contracts. We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customer into more granular categories beyond what is presented in the the Condensed Consolidated Statement of Income was not necessary. We generally satisfy our performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying this ASU that significantly affect the determination of the amount and timing of the revenue from contracts with customers. The Corporation has completed its evaluation and adopted this ASU effective January 1, 2018 using the modified retrospective approach. Adoption of ASU 2014-09 did not have a material impact on our consolidated financial statements and related disclosures as our primary sources of revenues are derived from interest and dividends earned on loans, securities and other financial instruments that are not within the scope of the new standard. Our revenue recognition pattern for revenue streams within the scope of the new standard, including but not limited to service charges on deposit accounts and debit card interchange, did not change significantly from prior practice. The modified retrospective method requires application of ASU 2014-09 to uncompleted contracts at the date of adoption, however, periods prior to the date of adoption have not been retrospectively revised as the impact impact of the new standard on uncompleted contracts as the date of adoption was not material as such a cumulative effective adjustment to opening retained earnings was not deemed necessary.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This amendment supersedes the guidance to classify equity securities with readily determinable fair values into different categories, requires equity securities to be measured at fair value with changes in the fair value recognized through net income, and simplifies the impairment assessment of equity investments without readily determinable fair values. The amendment requires public business entities that are required to disclose the fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion. The amendment requires 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. The amendment requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. The amendment reduces diversity in current practice by clarifying 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. This amendment is effective for fiscal years, including interim periods, beginning after December 15, 2017. Entities should apply the amendment by means of a cumulative-effect adjustment as of the beginning of the fiscal year of adoption, with the exception of the amendment related to equity securities without readily determinable fair values, which should be applied prospectively to equity investments that exist as of the date of adoption. The Corporation's adoption of the guidance resulted in the reclassification from accumulated other comprehensive income (loss) to retained earnings of $163,000, reflected in the Consolidated Statements of Changes in Shareholders' Equity. In addition, the fair value of loans has been estimated using the exit price notion as described in Note 4.

In February 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842).” This ASU requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The amendments in ASU 2016-02 are effective for fiscal years, including interim periods, beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. The Corporation is currently assessing the impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments by a reporting entity at each reporting date. The amendments in this ASU require financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses would represent a valuation account that would be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement would reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses would be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity will be required to use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The amendments in ASU 2016-13 are effective for fiscal years, including interim periods, beginning after December 15, 2019. Early adoption of this ASU is permitted for fiscal years beginning after December 15, 2018. The Corporation is currently evaluating the potential impact of ASU 2016-13 on the Corporation's consolidated financial statements. The Corporation has formed a working group, under the direction of the Chief Financial Officer, which is currently developing an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and the identification of data and resource needs, among other things. Also, the Corporation is currently evaluating third-party vendor solutions to assist in the application of the ASU 2016-13. The adoption of the ASU 2016-13 may result in an increase in the allowance for loan losses due to changing from an "incurred loss" model, which encompasses allowances for current known and inherent losses within the portfolio, to an "expected loss" model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate establishing an allowance for expected credit losses on debt securities. The Corporation is currently unable to reasonably estimate the impact of adopting ASU 2016-13, and it is expected that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This ASU will be effective for interim and annual periods beginning after December 15, 2018. Early adoption of ASU 2017-12 is permitted. The Corporation is currently evaluating the potential impact that the adoption of the guidance will have on the Corporation's consolidated financial statements.

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Securities - Available-for-Sale and Held to Maturity (Tables)

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of Amortized Cost, Fair Value of Securities Available For Sale and Related Gross Unrealized Gains and Losses

The amortized cost, gross unrealized gains and losses and fair value of the available-for-sale securities were as follows:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	22,046	$	23	$	586	$	21,483
Obligations of state and political subdivisions	3,218		—		115		3,103
Mortgage-backed securities	64,399		33		1,860		62,572
Asset-backed securities (a)	6,278		25		—		6,303
Corporate debt	13,420		98		512		13,006
Total debt securities	$	109,361	$	179	$	3,073	$	106,467

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. government-sponsored agencies	$	21,699	$	30	$	396	$	21,333
Obligations of state and political subdivisions	3,221		—		56		3,165
Mortgage-backed securities	64,775		70		1,011		63,834
Asset-backed securities (a)	6,672		30		4		6,698
Corporate debt	14,437		94		302		14,229
Total debt securities	$	110,804	$	224	$	1,769	$	109,259

(a) Collateralized by student loans.

Schedule of Held to Maturity Securities and Related Unrecognized Gains and Losses

The following is a summary of the amortized cost, gross unrealized gains and losses and fair value of the held to maturity securities:

	March 31, 2018
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	17	$	982
U.S. government-sponsored agencies	28,568		—		1,166		27,402
Obligations of state and political subdivisions	3,390		19		34		3,375
Mortgage-backed securities	18,937		42		439		18,540
	$	51,894	$	61	$	1,656	$	50,299

	December 31, 2017
	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
	(In thousands)
U.S. Treasury	$	999	$	—	$	11	$	988
U.S. government-sponsored agencies	27,075		4		760		26,319
Obligations of state and political subdivisions	4,057		21		23		4,055
Mortgage-backed securities	20,311		76		198		20,189
	$	52,442	$	101	$	992	$	51,551

Amortized Cost and Fair Value of the Investment Securities Portfolio by Contractual Maturity

The following table presents the amortized cost and fair value of the debt securities portfolio by contractual maturity. As issuers may have the right to call or prepay obligations with or without call or prepayment premiums, the actual maturities may differ from contractual maturities. Securities not due at a single maturity date, such as mortgage-backed securities and asset-backed securities, are shown separately.

	March 31, 2018
	Amortized Cost		Fair Value
	(In thousands)
Available-for-sale
Within one year	$	—	$	—
After one year, but within five years	9,854		9,668
After five years, but within ten years	23,831		23,112
After ten years	4,999		4,812
Mortgage-backed securities	64,399		62,572
Asset-backed securities	6,278		6,303
Total	$	109,361	$	106,467
Held to maturity
Within one year	$	1,245	$	1,245
After one year, but within five years	10,154		10,021
After five years, but within ten years	21,063		20,032
After ten years	495		461
Mortgage-backed securities	18,937		18,540
Total	$	51,894	$	50,299

Schedule of Continuous Unrealized Loss Position for Investment Securities Available for Sale and Held to Maturity

The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at March 31, 2018 and December 31, 2017, and if the unrealized loss position was continuous for the twelve months prior to March 31, 2018 and December 31, 2017.

Available-for-Sale
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	9,094	$	(164	)	$	9,922	$	(422	)	$	19,016	$	(586	)
Obligations of state and political subdivisions	1,375		(14		)	1,728		(101		)	3,103		(115		)
Mortgage-backed securities	32,977		(740		)	24,397		(1,120		)	57,374		(1,860		)
Asset-backed securities	—		—			—		—			—		—
Corporate debt	—		—			8,908		(512		)	8,908		(512		)
Total temporarily impaired securities	$	43,446	$	(918	)	$	44,955	$	(2,155	)	$	88,401	$	(3,073	)

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. government- sponsored agencies	$	8,260	$	(70	)	$	11,174	$	(326	)	$	19,434	$	(396	)
Obligations of state and political subdivisions	1,384		(7		)	1,781		(49		)	3,165		(56		)
Mortgage-backed securities	30,575		(201		)	26,809		(810		)	57,384		(1,011		)
Asset-backed securities	—		—			3,013		(4		)	3,013		(4		)
Corporate debt	—		—			9,135		(302		)	9,135		(302		)
Total temporarily impaired securities	$	40,219	$	(278	)	$	51,912	$	(1,491	)	$	92,131	$	(1,769	)

Held to Maturity
March 31, 2018	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	982	$	(17	)	$	—	$	—		$	982	$	(17	)
U.S. government- sponsored agencies	12,390		(291		)	15,012		(875		)	27,402		(1,166		)
Obligations of state and political subdivisions	—		—			461		(34		)	461		(34		)
Mortgage-backed securities	11,298		(232		)	5,797		(207		)	17,095		(439		)
Total temporarily impaired securities	$	24,670	$	(540	)	$	21,270	$	(1,116	)	$	45,940	$	(1,656	)

December 31, 2017	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
U.S. Treasury	$	988	$	(11	)	$	—	$	—		$	988	$	(11	)
U.S. government- sponsored agencies	10,032		(139		)	15,265		(621		)	25,297		(760		)
Obligations of state and political subdivisions	—		—			474		(23		)	474		(23		)
Mortgage-backed securities	9,531		(114		)	3,896		(84		)	13,427		(198		)
Total temporarily impaired securities	$	20,551	$	(264	)	$	19,635	$	(728	)	$	40,186	$	(992	)

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Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Summary of Loan Portfolio

At March 31, 2018 and December 31, 2017, respectively, the loan portfolio consisted of the following:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	28,447	$	31,684
Other	59,664		57,372
Commercial real estate	488,641		493,542
Commercial construction	4,632		2,152
Residential real estate	86,050		85,760
Consumer:
Secured by real estate	32,958		32,207
Other	353		563
Government Guaranteed Loans - guaranteed portion	7,367		8,334
Other	57		106
Total gross loans	708,169		711,720
Less: Deferred loan costs, net	448		397
Allowance for loan losses	8,445		8,762
	8,893		9,159
Loans, net	$	699,276	$	702,561

Schedule of Allowance for Loan Losses

Activity in the allowance for loan losses is summarized as follows:

	For the three months ended March 31, 2018
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	3,058	$	(189	)	$	(29	)	$	25	$	2,865
Commercial real estate	5,531		(204		)	—			22		5,349
Commercial construction	33		48			—			—		81
Residential real estate	68		4			—			—		72
Consumer	64		2			—			1		67
Other loans	1		—			(1		)	—		—
Unallocated	7		4			—			—		11
Total	$	8,762	$	(335	)	$	(30	)	$	48	$	8,445

	For the three months ended March 31, 2017
	Balance, beginning of period		Provision charged to operations			Loans charged off			Recoveries of loans charged off		Balance, end of period
	(In thousands)
Commercial	$	2,663	$	(118	)	$	(1	)	$	16	$	2,560
Commercial real estate	4,734		390			—			25		5,149
Commercial construction	355		29			—			—		384
Residential real estate	66		(1		)	—			—		65
Consumer	75		(3		)	—			1		73
Other loans	—		—			—			—		—
Unallocated	12		3			—			—		15
Total	$	7,905	$	300		$	(1	)	$	42	$	8,246

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	6	$	571	$	—	$	—	$	—	$	—	$	—	$	—	$	577
Collectively evaluated for impairment	2,859		4,778		81		72		67		—		—		11		7,868
Total ending allowance balance	$	2,865	$	5,349	$	81	$	72	$	67	$	—	$	—	$	11	$	8,445
Loans:
Loans individually evaluated for impairment	$	509	$	6,196	$	—	$	289	$	46	$	—	$	—	$	—	$	7,040
Loans collectively evaluated for impairment	87,602		482,445		4,632		85,761		33,265		7,367		57		—		701,129
Total ending loan balance	$	88,111	$	488,641	$	4,632	$	86,050	$	33,311	$	7,367	$	57	$	—	$	708,169

	December 31, 2017
	Commercial		Commercial Real Estate		Commercial Construction		Residential Real Estate		Consumer		Government Guaranteed		Other Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	34	$	575	$	—	$	—	$	—	$	—	$	—	$	—	$	609
Collectively evaluated for impairment	3,024		4,956		33		68		64		—		1		7		8,153
Total ending allowance balance	$	3,058	$	5,531	$	33	$	68	$	64	$	—	$	1	$	7	$	8,762
Loans:
Loans individually evaluated for impairment	$	549	$	6,236	$	—	$	295	$	62	$	—	$	—	$	—	$	7,142
Loans collectively evaluated for impairment	88,507		487,306		2,152		85,465		32,708		8,334		106		—		704,578
Total ending loan balance	$	89,056	$	493,542	$	2,152	$	85,760	$	32,770	$	8,334	$	106	$	—	$	711,720

Schedule of Recorded Investment in Nonaccrual Loans

The following table presents the recorded investment in nonaccrual loans at the dates indicated:

	March 31, 2018		December 31, 2017
	(In thousands)
Commercial:
Secured by real estate	$	105	$	136
Commercial real estate	696		701
Residential real estate	289		295
Consumer:
Secured by real estate	46		62
Total nonaccrual loans	$	1,136	$	1,194

Schedule of Recorded Investments in Impaired Loans

The following table presents loans individually evaluated for impairment by class of loan at and for the periods indicated:

	At and for the three months ended March 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	489	$	383			$	386	$	4
Commercial real estate	3,415		3,093				3,108		26
Residential Real Estate	292		289				292		—
Consumer:
Secured by real estate	55		46				54		—
With an allowance recorded:
Commercial:
Secured by real estate	—		—		$	—	16		—
Other	126		126		6		127		2
Commercial real estate	3,103		3,103		571		3,108		40
	$	7,480	$	7,040	$	577	$	7,091	$	72

During the three months endedMarch 31, 2018, no interest income was recognized on a cash basis.

	At and for the year ended December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized
	(In thousands)
With no related allowance recorded:
Commercial:
Secured by real estate	$	389	$	389			$	964	$	70
Commercial real estate	3,442		3,124				3,148		121
Residential real estate	295		295				59		—
Consumer:
Secured by real estate	71		62				70		—
With an allowance recorded:
Commercial:
Secured by real estate	33		32		$	27	45		—
Other	128		128		7		171		12
Commercial real estate	3,112		3,112		575		3,144		128
	$	7,470	$	7,142	$	609	$	7,601	$	331

Schedule of Aging of the Recorded Investment in Past Due Loans by Class of Loans

The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2018 and December 31, 2017. Nonaccrual loans are included in the disclosure by payment status.

	March 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	135	$	74	$	105	$	314	$	28,133	$	28,447
Other	—		—		—		—		59,664		59,664
Commercial real estate	298		—		597		895		487,746		488,641
Commercial construction	—		—		—		—		4,632		4,632
Residential real estate	—		313		—		313		85,737		86,050
Consumer:
Secured by real estate	—		—		28		28		32,930		32,958
Other	—		—		—		—		353		353
Government Guaranteed	—		—		—		—		7,367		7,367
Other	—		—		—		—		57		57
Total	$	433	$	387	$	730	$	1,550	$	706,619	$	708,169

	December 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
	(In thousands)
Commercial:
Secured by real estate	$	186	$	—	$	—	$	186	$	31,498	$	31,684
Other	8		—		—		8		57,364		57,372
Commercial real estate	300		—		599		899		492,643		493,542
Commercial construction	—		—		—		—		2,152		2,152
Residential real estate	314		—		—		314		85,446		85,760
Consumer:
Secured by real estate	—		—		28		28		32,179		32,207
Other	—		—		—		—		563		563
Government Guaranteed	—		—		—		—		8,334		8,334
Other	—		—		—		—		106		106
Total	$	808	$	—	$	627	$	1,435	$	710,285	$	711,720

Schedule of Loans by Credit Quality Indicators

As of March 31, 2018 and December 31, 2017, and based on the most recent analysis performed at those times, the risk category of loans by class is as follows:

	March 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	26,042	$	1,952	$	453	$	—	$	—	$	28,447
Other	58,951		208		505		—		—		59,664
Commercial real estate	473,999		12,583		2,059		—		—		488,641
Commercial construction	4,632		—		—		—		—		4,632
Government Guaranteed Loans - guaranteed portion	7,367		—		—		—		—		7,367
Total	$	570,991	$	14,743	$	3,017	$	—	$	—	$	588,751

	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful		Loss		Total
	(In thousands)
Commercial:
Secured by real estate	$	29,025	$	2,153	$	506	$	—	$	—	$	31,684
Other	56,632		216		524		—		—		57,372
Commercial real estate	481,443		10,023		2,076		—		—		493,542
Commercial construction	2,152		—		—		—		—		2,152
Government Guaranteed Loans - guaranteed portion	8,334		—		—		—		—		8,334
Total	$	577,586	$	12,392	$	3,106	$	—	$	—	$	593,084

Schedule of Recorded Investment in Residential Real Estate and Consumer Loans Based on Payment Activity

The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of March 31, 2018 and December 31, 2017.

	March 31, 2018
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,737	$	313	$	86,050
Consumer:
Secured by real estate	32,930		28		32,958
Other	353		—		353
Total	$	119,020	$	341	$	119,361

	December 31, 2017
	Current		Past Due or Nonaccrual		Total
	(In thousands)
Residential real estate	$	85,446	$	314	$	85,760
Consumer:
Secured by real estate	32,179		28		32,207
Other	563		—		563
Total	$	118,188	$	342	$	118,530

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,483	$	—	$	21,483	$	—
Obligations of state and political subdivisions	3,103		—		3,103		—
Mortgage-backed securities	62,572		—		62,572		—
Asset-backed securities	6,303		—		6,303		—
Corporate debt	13,006		—		13,006		—
Total available-for-sale securities	$	106,467	$	—	$	106,467	$	—
Other equity investments	$	3,706	$	3,646	$	60	$	—
Interest Rate Swap	$	203	$	—	$	203	$	—

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Available-for-sale securities
U.S. government - sponsored agencies	$	21,333	$	—	$	21,333	$	—
Obligations of state and political subdivisions	3,165		—		3,165		—
Mortgage-backed securities	63,834		—		63,834		—
Asset-backed securities	6,698		—		6,698		—
Corporate debt	14,229		—		14,229		—
Total available-for-sale securities	$	109,259	$	—	$	109,259	$	—
Other equity investments	$	3,756	$	3,696	$	60	$	—
Liabilities:
Interest Rate Swap	$	29	$	—	$	29	$	—

Schedule of Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2017 are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At December 31, 2017
	(In thousands)
Assets:
Impaired loans
Commercial:
Secured by real estate	$	109	$	—	$	—	$	109
Commercial real estate	192		—		—		192
Residential real estate	296		—		—		296
	$	597	$	—	$	—	$	597

Schedule of Fair Value Assumptions for Level 3 Assets Measured at Fair Value on a Non-recurring Basis

For the Level 3 assets measured at fair value on a non-recurring basis as December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

December 31, 2017
	Fair
Assets	Value		Valuation Technique	Unobservable Inputs	Range
(Dollars in thousands)
Impaired loans	$	597	Comparable real estate sales and / or the income approach.	Adjustments for differences between comparable sales and income data available.	5%
				Estimated selling costs.	7%

Schedule of Fair Value Estimates for the Financial Instruments

Fair value estimates for the Corporation’s financial instruments are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2018
	(In thousands)
Financial assets:
Cash and cash equivalents	$	22,178	$	22,178	$	—	$	—
Securities available-for-sale	106,467		—		106,467		—
Securities held to maturity	51,894		—		50,299		—
Other equity investments	3,706		3,646		60		—
FHLB-NY stock	3,039		N/A		N/A		N/A
Loans, net	699,276		—		—		686,029
Interest rate swap	203		—		203		—
Financial liabilities:
Deposits	772,216		566,147		204,006		—
FHLB-NY advances	48,760		—		48,150		—
Subordinated Debentures and Subordinated Notes	23,333		—		—		23,493

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2017
	(In thousands)
Financial assets:
Cash and cash equivalents	$	21,270	$	21,270	$	—	$	—
Securities available-for-sale	109,259		—		109,259		—
Securities held to maturity	52,442		—		51,551		—
Other equity investments	3,756		3,696		60		—
FHLB-NY stock	3,715		N/A		N/A		N/A
Mortgage loans held for sale	370		—		—		370
Loans, net	702,561		—		—		714,387
Financial liabilities:
Deposits	764,099		565,292		197,696		—
FHLB-NY advances	63,760		—		63,340		—
Subordinated Debentures and Subordinated Notes	23,317		—		—		23,478
Interest rate swap	29		—		29		—

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of Earnings Per Common Share

The following reconciles the income available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings per share.

	Three Months Ended
	March 31,
	2018		2017
	(Dollars in thousands)
Net income	$	1,808	$	991
Weighted average common shares outstanding - basic	8,658,506		6,124,926
Effect of dilutive securities - stock options	N/A		N/A
Weighted average common shares outstanding - diluted	8,658,506		6,124,926
Basic earnings per common share	$	0.21	$	0.16
Diluted earnings per common share	$	0.21	$	0.16

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2018

Stockholders' Equity Note [Abstract]

Schedule of Components of Comprehensive Income

The components of comprehensive income, both gross and net of tax, are presented for the periods below:

	Three Months Ended March 31,
	2018									2017
	Gross			Tax Effect			Net			Gross		Tax Effect			Net
	(In thousands)
Net income	$	2,455		$	(647	)	$	1,808		$	1,565	$	(574	)	$	991
Other comprehensive income (loss):
Change in unrealized holding gains (losses) on securities available-for-sale	(1,344		)	351			(993		)	331		(126		)	205
Reclassification adjustment for gains in net income	(6		)	2			(4		)	—		—			—
Accretion of loss on securities reclassified to held to maturity	12			(3		)	9			11		(4		)	7
Change in fair value of interest rate swap	232			(65		)	167			—		—			—
Total other comprehensive income (loss)	(1,106		)	285			(821		)	342		(130		)	212
Total comprehensive income	$	1,349		$	(362	)	$	987		$	1,907	$	(704	)	$	1,203

Schedule of Components of Accumulated Other Comprehensive Income

The following tables present the after-tax changes in the balances of each component of accumulated other comprehensive income for the three months ended March 31, 2018 and 2017.

	Three Months Ended March 31, 2018
	Components of Accumulated Other Comprehensive Income (Loss)									Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2017	$	(1,303	)	$	(60	)	$	(21	)	$	(1,384	)
Other comprehensive income before reclassifications	(993		)	9			167			(817		)
Amounts reclassified from other comprehensive income	(4		)	—			—			(4		)
Other comprehensive income	(997		)	9			167			(821		)
Reclassification of tax effects due to the adoption of ASU No. 2016-01	163			—			—			163
Balance at March 31, 2018	$	(2,137	)	$	(51	)	$	146		$	(2,042	)

	Three Months Ended March 31, 2017
	Components of Accumulated Other Comprehensive Income (Loss)								Total
	Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities			Loss on Securities Reclassified from Available-for-Sale to Held to Maturity			Unrealized Gains and (Losses) on Derivatives		Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2016	$	(1,243	)	$	(78	)	$	—	$	(1,321	)
Other comprehensive income before reclassifications	205			7			—		212
Amounts reclassified from other comprehensive income	—			—			—		—
Other comprehensive income	205			7			—		212
Balance at March 31, 2017	$	(1,038	)	$	(71	)	$	—	$	(1,109	)

Schedule of Amount Reclassified from Each Component of Accumulated Other Comprehensive Income

The following tables present amounts reclassified from each component of accumulated other comprehensive income on a gross and net of tax basis for the three months ended March 31, 2018 and 2017.

	Three Months Ended					Income
Components of Accumulated Other	March 31,					Statement
Comprehensive Income	2018			2017		Line Item
	(In thousands)
Unrealized gains on AFS securities before tax	$	6		$	—	Gains on securities transactions, net
Tax effect	(2		)	—
Total net of tax	4			—
Total reclassifications, net of tax	$	4		$	—

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Summary of Significant Accounting Policies Narrative (Details) $ in Thousands	Dec. 31, 2017 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassification due to the adoption of ASU 2016-01	$ 163
Accumulated Other Comprehensive Income (Loss)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassification due to the adoption of ASU 2016-01	163
Accumulated Other Comprehensive Income (Loss) | Accounting Standards Update 2016-01
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassification due to the adoption of ASU 2016-01	(163)
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassification due to the adoption of ASU 2016-01	(163)
Retained Earnings | Accounting Standards Update 2016-01
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Reclassification due to the adoption of ASU 2016-01	$ 163

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Securities - Available-for-Sale and Held to Maturity (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 USD ($) security	Mar. 31, 2017 USD ($)
Investments, Debt and Equity Securities [Abstract]
Proceeds from sales and calls on securities available-for-sale | $	$ 1,006,500	$ 0
Gross gains realized from sales or calls of available-for-sale securities | $	6,500	0
Gross losses realized from sales or calls of available for sale securities | $	0	0
Proceeds from calls on securities held to maturity | $	280,000	340,000
Gross realized gain from calls on securities held to maturity | $	0	0
Gross realized losses calls on securities held to maturity | $	$ 0	$ 0
U.S. government-sponsored agencies
Schedule of Available-for-sale Securities [Line Items]
Debt securities, available-for-sale, number of positions	12
Held-to-maturity securities, number of positions	15
Obligations of state and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Debt securities, available-for-sale, number of positions	4
Held-to-maturity securities, number of positions	1
Mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Debt securities, available-for-sale, number of positions	40
Held-to-maturity securities, number of positions	14
Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Debt securities, available-for-sale, number of positions	9

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Securities - Available-for-Sale and Held to Maturity (Schedule of Amortized Cost, Fair Value of Securities Available For Sale and Related Gross Unrealized Gains and Losses) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available for sale securities
Debt securities, amortized cost basis	$ 109,361	$ 110,804
Debt securities, gross unrealized gains	179	224
Debt securities, gross unrealized losses	3,073	1,769
Debt securities, fair value	106,467	109,259
U.S. government-sponsored agencies
Available for sale securities
Debt securities, amortized cost basis	22,046	21,699
Debt securities, gross unrealized gains	23	30
Debt securities, gross unrealized losses	586	396
Debt securities, fair value	21,483	21,333
Obligations of state and political subdivisions
Available for sale securities
Debt securities, amortized cost basis	3,218	3,221
Debt securities, gross unrealized gains	0	0
Debt securities, gross unrealized losses	115	56
Debt securities, fair value	3,103	3,165
Mortgage-backed securities
Available for sale securities
Debt securities, amortized cost basis	64,399	64,775
Debt securities, gross unrealized gains	33	70
Debt securities, gross unrealized losses	1,860	1,011
Debt securities, fair value	62,572	63,834
Asset-backed securities
Available for sale securities
Debt securities, amortized cost basis	6,278	6,672
Debt securities, gross unrealized gains	25	30
Debt securities, gross unrealized losses	0	4
Debt securities, fair value	6,303	6,698
Corporate debt
Available for sale securities
Debt securities, amortized cost basis	13,420	14,437
Debt securities, gross unrealized gains	98	94
Debt securities, gross unrealized losses	512	302
Debt securities, fair value	$ 13,006	$ 14,229

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Securities - Available-for-Sale and Held to Maturity (Schedule of Held to Maturity Securities and Related Unrecognized Gains and Losses) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Held to maturity securities
Amortized Cost	$ 51,894	$ 52,442
Gross Unrealized Gains	61	101
Gross Unrealized Losses	1,656	992
Securities held to maturity	50,299	51,551
U.S. Treasury
Held to maturity securities
Amortized Cost	999	999
Gross Unrealized Gains	0	0
Gross Unrealized Losses	17	11
Securities held to maturity	982	988
U.S. government-sponsored agencies
Held to maturity securities
Amortized Cost	28,568	27,075
Gross Unrealized Gains	0	4
Gross Unrealized Losses	1,166	760
Securities held to maturity	27,402	26,319
Obligations of state and political subdivisions
Held to maturity securities
Amortized Cost	3,390	4,057
Gross Unrealized Gains	19	21
Gross Unrealized Losses	34	23
Securities held to maturity	3,375	4,055
Mortgage-backed securities
Held to maturity securities
Amortized Cost	18,937	20,311
Gross Unrealized Gains	42	76
Gross Unrealized Losses	439	198
Securities held to maturity	$ 18,540	$ 20,189

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Securities - Available-for-Sale and Held to Maturity (Schedule of Amortized Cost and Fair Value of the Investment Securities Portfolio by Contractual Maturity) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available-for-sale, Amortized Cost
Within one year	$ 0
After one year, but within five years	9,854
After five years, but within ten years	23,831
After ten years	4,999
Debt securities, amortized cost basis	109,361	$ 110,804
Available-for-sale, Fair Value
Within one year	0
After one year, but within five years	9,668
After five years, but within ten years	23,112
After ten years	4,812
Debt securities, fair value	106,467	109,259
Held to maturity, Amortized Cost
Within one year	1,245
After one year, but within five years	10,154
After five years, but within ten years	21,063
After ten years	495
Securities held to maturity	51,894	52,442
Held to maturity, Fair Value
Within one year	1,245
After one year, but within five years	10,021
After five years, but within ten years	20,032
After ten years	461
Securities held to maturity	50,299	51,551
Mortgage-backed securities
Available-for-sale, Amortized Cost
Debt securities, amortized cost basis	64,399	64,775
Available-for-sale, Fair Value
Debt securities, fair value	62,572	63,834
Held to maturity, Amortized Cost
Securities held to maturity	18,937
Held to maturity, Fair Value
Securities held to maturity	18,540	20,189
Asset-backed securities
Available-for-sale, Amortized Cost
Debt securities, amortized cost basis	6,278	6,672
Available-for-sale, Fair Value
Debt securities, fair value	$ 6,303	$ 6,698

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Securities - Available-for-Sale and Held to Maturity (Schedule of Continuous Unrealized Loss Position for Investment Securities Available for Sale) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	$ 43,446	$ 40,219
Less than 12 Months, Unrealized Losses	(918)	(278)
12 Months or Longer, Fair Value	44,955	51,912
12 Months or Longer, Unrealized Losses	(2,155)	(1,491)
Fair Value	88,401	92,131
Unrealized Losses	(3,073)	(1,769)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	24,670	20,551
Less than 12 Months, Unrealized Losses	(540)	(264)
12 Months or Longer, Fair Value	21,270	19,635
12 Months or Longer, Unrealized Losses	(1,116)	(728)
Fair Value	45,940	40,186
Unrealized Losses	(1,656)	(992)
U.S. Treasury
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	982	988
Less than 12 Months, Unrealized Losses	(17)	(11)
12 Months or Longer, Fair Value	0	0
12 Months or Longer, Unrealized Losses	0	0
Fair Value	982	988
Unrealized Losses	(17)	(11)
U.S. government-sponsored agencies
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	9,094	8,260
Less than 12 Months, Unrealized Losses	(164)	(70)
12 Months or Longer, Fair Value	9,922	11,174
12 Months or Longer, Unrealized Losses	(422)	(326)
Fair Value	19,016	19,434
Unrealized Losses	(586)	(396)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	12,390	10,032
Less than 12 Months, Unrealized Losses	(291)	(139)
12 Months or Longer, Fair Value	15,012	15,265
12 Months or Longer, Unrealized Losses	(875)	(621)
Fair Value	27,402	25,297
Unrealized Losses	(1,166)	(760)
Obligations of state and political subdivisions
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	1,375	1,384
Less than 12 Months, Unrealized Losses	(14)	(7)
12 Months or Longer, Fair Value	1,728	1,781
12 Months or Longer, Unrealized Losses	(101)	(49)
Fair Value	3,103	3,165
Unrealized Losses	(115)	(56)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Losses	0	0
12 Months or Longer, Fair Value	461	474
12 Months or Longer, Unrealized Losses	(34)	(23)
Fair Value	461	474
Unrealized Losses	(34)	(23)
Mortgage-backed securities
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	32,977	30,575
Less than 12 Months, Unrealized Losses	(740)	(201)
12 Months or Longer, Fair Value	24,397	26,809
12 Months or Longer, Unrealized Losses	(1,120)	(810)
Fair Value	57,374	57,384
Unrealized Losses	(1,860)	(1,011)
Held to maturity securities,temporarily impaired securities
Less than 12 Months, Fair Value	11,298	9,531
Less than 12 Months, Unrealized Losses	(232)	(114)
12 Months or Longer, Fair Value	5,797	3,896
12 Months or Longer, Unrealized Losses	(207)	(84)
Fair Value	17,095	13,427
Unrealized Losses	(439)	(198)
Asset-backed securities
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Losses	0	0
12 Months or Longer, Fair Value	0	3,013
12 Months or Longer, Unrealized Losses	0	(4)
Fair Value	0	3,013
Unrealized Losses	0	(4)
Corporate debt
Available for sale, temporarily impaired securities
Less than 12 Months, Fair Value	0	0
Less than 12 Months, Unrealized Losses	0	0
12 Months or Longer, Fair Value	8,908	9,135
12 Months or Longer, Unrealized Losses	(512)	(302)
Fair Value	8,908	9,135
Unrealized Losses	$ (512)	$ (302)

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Loans and Allowance for Loan Losses (Loan Portfolio Schedule) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	$ 708,169	$ 711,720
Less: Deferred loan costs, net	448	397
Allowance for loan losses	8,445	8,762
Allowance net of deferred loan fees	8,893	9,159
Loans, net	699,276	702,561
Commercial
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	88,111	89,056
Allowance for loan losses	2,865	3,058
Commercial | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	28,447	31,684
Commercial | Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	59,664	57,372
Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	488,641	493,542
Allowance for loan losses	5,349	5,531
Commercial construction
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	4,632	2,152
Allowance for loan losses	81	33
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	86,050	85,760
Allowance for loan losses	72	68
Consumer
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	33,311	32,770
Allowance for loan losses	67	64
Consumer | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	32,958	32,207
Consumer | Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	353	563
Government Guaranteed
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	7,367	8,334
Allowance for loan losses	0	0
Other
Loans and Leases Receivable Disclosure [Line Items]
Total gross loans	57	106
Allowance for loan losses	$ 0	$ 1

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Loans and Allowance for Loan Losses (Schedule of Allowance for Loan Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Activity in the allowance for loan losses
Balance, beginning of period	$ 8,762	$ 7,905	$ 7,905
Provision charged to operations	(335)	300
Loans charged off	(30)	(1)
Recoveries of loans charged off	48	42
Balance, end of period	8,445	8,246	8,762
Commercial
Activity in the allowance for loan losses
Balance, beginning of period	3,058	2,663	2,663
Provision charged to operations	(189)	(118)
Loans charged off	(29)	(1)
Recoveries of loans charged off	25	16
Balance, end of period	2,865	2,560	3,058
Commercial real estate
Activity in the allowance for loan losses
Balance, beginning of period	5,531	4,734	4,734
Provision charged to operations	(204)	390
Loans charged off	0	0
Recoveries of loans charged off	22	25
Balance, end of period	5,349	5,149	5,531
Commercial construction
Activity in the allowance for loan losses
Balance, beginning of period	33	355	355
Provision charged to operations	48	29
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	81	384	33
Residential real estate
Activity in the allowance for loan losses
Balance, beginning of period	68	66	66
Provision charged to operations	4	(1)
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	72	65	68
Consumer
Activity in the allowance for loan losses
Balance, beginning of period	64	75	75
Provision charged to operations	2	(3)
Loans charged off	0	0
Recoveries of loans charged off	1	1
Balance, end of period	67	73	64
Other
Activity in the allowance for loan losses
Balance, beginning of period	1	0	0
Provision charged to operations	0	0
Loans charged off	(1)	0
Recoveries of loans charged off	0	0
Balance, end of period	0	0	1
Unallocated
Activity in the allowance for loan losses
Balance, beginning of period	7	12	12
Provision charged to operations	4	3
Loans charged off	0	0
Recoveries of loans charged off	0	0
Balance, end of period	$ 11	$ 15	$ 7

XML

Loans and Allowance for Loan Losses (Schedule of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	$ 577	$ 609
Collectively evaluated for impairment	7,868	8,153
Total ending allowance balance	8,445	8,762
Loans
Loans individually evaluated for impairment	7,040	7,142
Loans collectively evaluated for impairment	701,129	704,578
Total loans	708,169	711,720
Commercial
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	6	34
Collectively evaluated for impairment	2,859	3,024
Total ending allowance balance	2,865	3,058
Loans
Loans individually evaluated for impairment	509	549
Loans collectively evaluated for impairment	87,602	88,507
Total loans	88,111	89,056
Commercial real estate
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	571	575
Collectively evaluated for impairment	4,778	4,956
Total ending allowance balance	5,349	5,531
Loans
Loans individually evaluated for impairment	6,196	6,236
Loans collectively evaluated for impairment	482,445	487,306
Total loans	488,641	493,542
Commercial construction
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	81	33
Total ending allowance balance	81	33
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	4,632	2,152
Total loans	4,632	2,152
Residential real estate
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	72	68
Total ending allowance balance	72	68
Loans
Loans individually evaluated for impairment	289	295
Loans collectively evaluated for impairment	85,761	85,465
Total loans	86,050	85,760
Consumer
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	67	64
Total ending allowance balance	67	64
Loans
Loans individually evaluated for impairment	46	62
Loans collectively evaluated for impairment	33,265	32,708
Total loans	33,311	32,770
Government Guaranteed
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	0
Total ending allowance balance	0	0
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	7,367	8,334
Total loans	7,367	8,334
Other
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	1
Total ending allowance balance	0	1
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	57	106
Total loans	57	106
Unallocated
Allowance for loan losses, ending allowance balance attributable to loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	11	7
Total ending allowance balance	11	7
Loans
Loans individually evaluated for impairment	0	0
Loans collectively evaluated for impairment	0	0
Total loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses (Schedule of Recorded Investment in Nonaccrual Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	$ 1,136	$ 1,194
Commercial portfolio segment | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	105	136
Commercial real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	696	701
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	289	295
Consumer | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Total nonaccrual loans	$ 46	$ 62

XML

Loans and Allowance for Loan Losses (Narrative) (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($) loan	Mar. 31, 2017 loan	Dec. 31, 2017 USD ($)
Receivables [Abstract]
Loans past due 90 days and still accruing	$ 0		$ 0
Interest Income recognized on a cash basis	0		0
Total value of modified loans in troubled debt restructurings	6,500,000		6,600,000
Trouble debt restructuring classified as performing	5,900,000		5,900,000
Specific reserve related to TDR	577,000		582,000
Committed funds for construction loan, classified as troubled debt restructuring	$ 0		$ 0
Number of loans classified as a trouble debt restructuring | loan	0	0

XML

Loans and Allowance for Loan Losses (Schedule of Recorded Investments in Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
With an allowance recorded:
Allowance for Loan Losses Allocated	$ 577	$ 609
Total impaired loans
Total Unpaid Principal Balance	7,480	7,470
Total Recorded Investment	7,040	7,142
Total Average Recorded Investment	7,091	7,601
Total Interest Income Recognized	72	331
Commercial | Secured by real estate
With no related allowance recorded:
Unpaid Principal Balance	489	389
Recorded Investment	383	389
Average Recorded Investment	386	964
Interest Income Recognized	4	70
With an allowance recorded:
Unpaid Principal Balance	0	33
Recorded Investment	0	32
Allowance for Loan Losses Allocated	0	27
Average Recorded Investment	16	45
Interest Income Recognized	0	0
Commercial | Other
With an allowance recorded:
Unpaid Principal Balance	126	128
Recorded Investment	126	128
Allowance for Loan Losses Allocated	6	7
Average Recorded Investment	127	171
Interest Income Recognized	2	12
Commercial real estate
With no related allowance recorded:
Unpaid Principal Balance	3,415	3,442
Recorded Investment	3,093	3,124
Average Recorded Investment	3,108	3,148
Interest Income Recognized	26	121
With an allowance recorded:
Unpaid Principal Balance	3,103	3,112
Recorded Investment	3,103	3,112
Allowance for Loan Losses Allocated	571	575
Average Recorded Investment	3,108	3,144
Interest Income Recognized	40	128
Residential real estate
With no related allowance recorded:
Unpaid Principal Balance	292	295
Recorded Investment	289	295
Average Recorded Investment	292	59
Interest Income Recognized	0	0
Consumer | Secured by real estate
With no related allowance recorded:
Unpaid Principal Balance	55	71
Recorded Investment	46	62
Average Recorded Investment	54	70
Interest Income Recognized	$ 0	$ 0

XML

Loans and Allowance for Loan Losses (Schedule of Aging of the Recorded Investment in Past Due Loans by Class of Loans) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Aging analysis of past due loans
Total Past Due	$ 1,550	$ 1,435
Current	706,619	710,285
Total loans	708,169	711,720
30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	433	808
60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	387	0
Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	730	627
Commercial
Aging analysis of past due loans
Total loans	88,111	89,056
Commercial | Secured by real estate
Aging analysis of past due loans
Total Past Due	314	186
Current	28,133	31,498
Total loans	28,447	31,684
Commercial | Secured by real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	135	186
Commercial | Secured by real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	74	0
Commercial | Secured by real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	105	0
Commercial | Other
Aging analysis of past due loans
Total Past Due	0	8
Current	59,664	57,364
Total loans	59,664	57,372
Commercial | Other | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	8
Commercial | Other | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial | Other | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial real estate
Aging analysis of past due loans
Total Past Due	895	899
Current	487,746	492,643
Total loans	488,641	493,542
Commercial real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	298	300
Commercial real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	597	599
Commercial construction
Aging analysis of past due loans
Total Past Due	0	0
Current	4,632	2,152
Total loans	4,632	2,152
Commercial construction | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial construction | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Commercial construction | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Residential real estate
Aging analysis of past due loans
Total Past Due	313	314
Current	85,737	85,446
Total loans	86,050	85,760
Residential real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	314
Residential real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	313	0
Residential real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Consumer
Aging analysis of past due loans
Total loans	33,311	32,770
Consumer | Secured by real estate
Aging analysis of past due loans
Total Past Due	28	28
Current	32,930	32,179
Total loans	32,958	32,207
Consumer | Secured by real estate | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Consumer | Secured by real estate | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Consumer | Secured by real estate | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	28	28
Consumer | Other
Aging analysis of past due loans
Total Past Due	0	0
Current	353	563
Total loans	353	563
Consumer | Other | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Consumer | Other | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Consumer | Other | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Government Guaranteed
Aging analysis of past due loans
Total Past Due	0	0
Current	7,367	8,334
Total loans	7,367	8,334
Government Guaranteed | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Government Guaranteed | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Government Guaranteed | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Other
Aging analysis of past due loans
Total Past Due	0	0
Current	57	106
Total loans	57	106
Other | 30-59 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Other | 60-89 Days Past Due
Aging analysis of past due loans
Total Past Due	0	0
Other | Greater than 90 Days Past Due
Aging analysis of past due loans
Total Past Due	$ 0	$ 0

XML

Loans and Allowance for Loan Losses (Schedule of Loans by Credit Quality Indicators) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 708,169	$ 711,720
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	88,111	89,056
Commercial | Secured by real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	28,447	31,684
Commercial | Other
Financing Receivable, Recorded Investment [Line Items]
Total loans	59,664	57,372
Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	488,641	493,542
Commercial construction
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,632	2,152
Government Guaranteed
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,367	8,334
Receivables Acquired with Deteriorated Credit Quality
Financing Receivable, Recorded Investment [Line Items]
Total loans	588,751	593,084
Receivables Acquired with Deteriorated Credit Quality | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	570,991	577,586
Receivables Acquired with Deteriorated Credit Quality | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	14,743	12,392
Receivables Acquired with Deteriorated Credit Quality | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,017	3,106
Receivables Acquired with Deteriorated Credit Quality | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	28,447	31,684
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	26,042	29,025
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,952	2,153
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	453	506
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial | Secured by real estate | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other
Financing Receivable, Recorded Investment [Line Items]
Total loans	59,664	57,372
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	58,951	56,632
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	208	216
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	505	524
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial | Other | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Total loans	488,641	493,542
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	473,999	481,443
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	12,583	10,023
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,059	2,076
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial real estate | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial construction
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,632	2,152
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,632	2,152
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Commercial construction | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,367	8,334
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,367	8,334
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Receivables Acquired with Deteriorated Credit Quality | Government Guaranteed | Loss
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 0	$ 0

XML

Loans and Allowance for Loan Losses (Schedule of Recorded Investment in Residential Real Estate and Consumer Loans Based on Payment Activity) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans and Leases Receivable Disclosure [Line Items]
Current	$ 706,619	$ 710,285
Total loans	708,169	711,720
Residential real estate
Loans and Leases Receivable Disclosure [Line Items]
Current	85,737	85,446
Past Due or Nonaccrual	313	314
Total loans	86,050	85,760
Consumer
Loans and Leases Receivable Disclosure [Line Items]
Total loans	33,311	32,770
Consumer | Secured by real estate
Loans and Leases Receivable Disclosure [Line Items]
Current	32,930	32,179
Past Due or Nonaccrual	28	28
Total loans	32,958	32,207
Consumer | Other
Loans and Leases Receivable Disclosure [Line Items]
Current	353	563
Past Due or Nonaccrual	0	0
Total loans	353	563
Residential and Consumer Portfolio Segment
Loans and Leases Receivable Disclosure [Line Items]
Current	119,020	118,188
Past Due or Nonaccrual	341	342
Total loans	$ 119,361	$ 118,530

XML

Fair Value of Financial Instruments (Narrative) (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Provision for loan losses	$ (335,000)	$ 300,000
Discount to real estate appraised values	12.00%
Fair value, measurements, nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
OREO properties	$ 0		$ 0
Fair value, measurements, nonrecurring | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Recorded Investment			624,000
Provision for loan losses			$ 27,000

XML

Fair Value of Financial Instruments (Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets:
Total available-for-sale securities	$ 106,467	$ 109,259
Other equity investments	3,706	3,756
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total available-for-sale securities	0	0
Other equity investments	3,646	3,696
Interest Rate Swap	0
Liabilities:
Interest Rate Swap		0
Significant Other Observable Inputs (Level 2)
Assets:
Total available-for-sale securities	106,467	109,259
Other equity investments	60	60
Interest Rate Swap	203
Liabilities:
Interest Rate Swap		29
Significant Unobservable Inputs (Level 3)
Assets:
Total available-for-sale securities	0	0
Other equity investments	0	0
Interest Rate Swap	0
Liabilities:
Interest Rate Swap		0
Carrying Value
Assets:
Total available-for-sale securities	106,467	109,259
Other equity investments	3,706	3,756
Interest Rate Swap	203
Liabilities:
Interest Rate Swap		29
Fair value measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
U.S. government - sponsored agencies	0	0
Obligations of state and political subdivisions	0	0
Mortgage-backed securities	0	0
Asset-backed securities	0	0
Corporate debt	0	0
Total available-for-sale securities	0	0
Other equity investments	3,646	3,696
Interest Rate Swap	0
Liabilities:
Interest Rate Swap		0
Fair value measured on a recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
U.S. government - sponsored agencies	21,483	21,333
Obligations of state and political subdivisions	3,103	3,165
Mortgage-backed securities	62,572	63,834
Asset-backed securities	6,303	6,698
Corporate debt	13,006	14,229
Total available-for-sale securities	106,467	109,259
Other equity investments	60	60
Interest Rate Swap	203
Liabilities:
Interest Rate Swap		29
Fair value measured on a recurring basis | Significant Unobservable Inputs (Level 3)
Assets:
U.S. government - sponsored agencies	0	0
Obligations of state and political subdivisions	0	0
Mortgage-backed securities	0	0
Asset-backed securities	0	0
Corporate debt	0	0
Total available-for-sale securities	0	0
Other equity investments	0	0
Interest Rate Swap	0
Liabilities:
Interest Rate Swap		0
Fair value measured on a recurring basis | Carrying Value
Assets:
U.S. government - sponsored agencies	21,483	21,333
Obligations of state and political subdivisions	3,103	3,165
Mortgage-backed securities	62,572	63,834
Asset-backed securities	6,303	6,698
Corporate debt	13,006	14,229
Total available-for-sale securities	106,467	109,259
Other equity investments	3,706	3,756
Interest Rate Swap	$ 203
Liabilities:
Interest Rate Swap		$ 29

XML

Fair Value of Financial Instruments (Schedule of Assets and Liabilities Measured at Fair Value on Non-recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Carrying Value
Assets:
Loans, net	$ 699,276	$ 702,561
Fair value, measurements, nonrecurring | Carrying Value
Assets:
Commercial loan secured by real estate		192
Loans, net		597
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Loans, net	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		0
Loans, net		0
Significant Other Observable Inputs (Level 2)
Assets:
Loans, net	0	0
Significant Other Observable Inputs (Level 2) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		0
Loans, net		0
Significant Unobservable Inputs (Level 3)
Assets:
Loans, net	$ 686,029	714,387
Significant Unobservable Inputs (Level 3) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		192
Loans, net		597
Real estate | Fair value, measurements, nonrecurring | Carrying Value
Assets:
Commercial loan secured by real estate		109
Real estate | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		0
Real estate | Significant Other Observable Inputs (Level 2) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		0
Real estate | Significant Unobservable Inputs (Level 3) | Fair value, measurements, nonrecurring
Assets:
Commercial loan secured by real estate		109
Residential Mortgage | Fair value, measurements, nonrecurring | Carrying Value
Assets:
Loans, net		296
Residential Mortgage | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value, measurements, nonrecurring
Assets:
Loans, net		0
Residential Mortgage | Significant Other Observable Inputs (Level 2) | Fair value, measurements, nonrecurring
Assets:
Loans, net		0
Residential Mortgage | Significant Unobservable Inputs (Level 3) | Fair value, measurements, nonrecurring
Assets:
Loans, net		$ 296

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Fair Value of Financial Instruments (Schedule of Fair Value Assumptions for Level 3 Asset Measurements) (Details) - Impaired loans - Significant Unobservable Inputs (Level 3) - Fair value, measurements, nonrecurring - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value		$ 597
Adjustments for differences between comparable sales and income data available	5.00%
Estimated selling costs	7.00%

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Fair Value of Financial Instruments (Schedule of Fair Value Estimates for the Financial Instruments) (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial assets:
Securities available-for-sale	$ 106,467	$ 109,259
Securities held to maturity	51,894	52,442
Other equity investments, at fair value	3,706	3,756
FHLB-NY stock	3,039	3,715
Financial liabilities:
Subordinated Debentures and Subordinated Notes	23,333	23,317
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets:
Cash and cash equivalents	22,178	21,270
Securities available-for-sale	0	0
Securities held to maturity	0	0
Other equity investments, at fair value	3,646	3,696
Mortgage loans held for sale		0
Loans, net	0	0
Interest rate swap	0
Financial liabilities:
Deposits	566,147	565,292
FHLB-NY advances	0	0
Subordinated Debentures and Subordinated Notes	0	0
Interest Rate Swap		0
Significant Other Observable Inputs (Level 2)
Financial assets:
Cash and cash equivalents	0	0
Securities available-for-sale	106,467	109,259
Securities held to maturity	50,299	51,551
Other equity investments, at fair value	60	60
Mortgage loans held for sale		0
Loans, net	0	0
Interest rate swap	203
Financial liabilities:
Deposits	204,006	197,696
FHLB-NY advances	48,150	63,340
Subordinated Debentures and Subordinated Notes	0	0
Interest Rate Swap		29
Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	0	0
Securities available-for-sale	0	0
Securities held to maturity	0	0
Other equity investments, at fair value	0	0
Mortgage loans held for sale		370
Loans, net	686,029	714,387
Interest rate swap	0
Financial liabilities:
Deposits	0	0
FHLB-NY advances	0	0
Subordinated Debentures and Subordinated Notes	23,493	23,478
Interest Rate Swap		0
Carrying Value
Financial assets:
Cash and cash equivalents	22,178	21,270
Securities available-for-sale	106,467	109,259
Securities held to maturity	51,894	52,442
Other equity investments, at fair value	3,706	3,756
FHLB-NY stock	3,039	3,715
Mortgage loans held for sale		370
Loans, net	699,276	702,561
Interest rate swap	203
Financial liabilities:
Deposits	772,216	764,099
FHLB-NY advances	48,760	63,760
Subordinated Debentures and Subordinated Notes	$ 23,333	23,317
Interest Rate Swap		$ 29

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Earnings Per Share (Schedule of Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Earnings Per Share [Abstract]
Net income	$ 1,808	$ 991
Weighted average common shares outstanding - basic (in shares)	8,658,506	6,124,926
Weighted average common shares outstanding - diluted (in shares)	8,658,506	6,124,926
Basic earnings per common share (in usd per share)	$ 0.21	$ 0.16
Diluted earnings per common share (in usd per share)	$ 0.21	$ 0.16

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Earnings Per Share (Narrative) (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earning per share (in shares)	0	0

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Accumulated Other Comprehensive Income (Schedule of Components of Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net income, gross	$ 2,455	$ 1,565
Net income, tax effect	(647)	(574)
Net income	1,808	991
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, net	(993)	205
Other comprehensive income (loss), before reclassifications, net	167	0
Reclassification adjustment for gains in net income, net	4	0
Accretion of loss on securities reclassified to held to maturity, net	9	7
Total comprehensive income, gross	(1,106)	342
Total comprehensive income, tax effect	285	(130)
Total other comprehensive income (loss)	(821)	212
Comprehensive income, gross	1,349	1,907
Comprehensive income, tax effect	(362)	(704)
Total comprehensive income	987	1,203
Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, before tax	(1,344)	331
Other comprehensive income (loss) before reclassifications, tax	351	(126)
Other comprehensive income (loss), before reclassifications, net	(993)	205
Reclassification adjustment for gains in net income, gross	(6)	0
Reclassification adjustment for gains in net income, tax effect	2	0
Reclassification adjustment for gains in net income, net	4	0
Accretion of loss on securities reclassified to held to maturity, gross	12	11
Accretion of loss on securities reclassified to held to maturity, tax effect	(3)	(4)
Accretion of loss on securities reclassified to held to maturity, net	9	7
Total other comprehensive income (loss)	(997)	205
Change in fair value of interest rate swap
Other comprehensive income (loss):
Other comprehensive income (loss), before reclassifications, before tax	232	0
Other comprehensive income (loss) before reclassifications, tax	(65)	0
Other comprehensive income (loss), before reclassifications, net	167	0
Total other comprehensive income (loss)	$ 167	$ 0

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Accumulated Other Comprehensive Income (Schedule of Components of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	$ 73,665	$ 51,387
Other comprehensive income before reclassifications	(817)	212
Amounts reclassified from other comprehensive income	(4)	0
Total other comprehensive income (loss)	(821)	212
Reclassification due to the adoption of ASU 2016-01			$ 163
Balance at the end	74,372	52,417
Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(1,303)	(1,243)
Other comprehensive income before reclassifications	(993)	205
Amounts reclassified from other comprehensive income	(4)	0
Total other comprehensive income (loss)	(997)	205
Reclassification due to the adoption of ASU 2016-01			163
Balance at the end	(2,137)	(1,038)
Loss on Securities Reclassified from Available-for-Sale to Held to Maturity
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(60)	(78)
Other comprehensive income before reclassifications	9	7
Amounts reclassified from other comprehensive income	0	0
Total other comprehensive income (loss)	9	7
Reclassification due to the adoption of ASU 2016-01			0
Balance at the end	(51)	(71)
Unrealized Gains and (Losses) on Derivatives
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(21)	0
Other comprehensive income before reclassifications	167	0
Amounts reclassified from other comprehensive income	0	0
Total other comprehensive income (loss)	167	0
Reclassification due to the adoption of ASU 2016-01			0
Balance at the end	146	0
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Rollforward]
Balance at the beginning	(1,384)	(1,321)
Total other comprehensive income (loss)	(821)	212
Reclassification due to the adoption of ASU 2016-01			$ 163
Balance at the end	$ (2,042)	$ (1,109)

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Accumulated Other Comprehensive Income (Schedule of Amount Reclassified from Each Component of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Gains on securities transactions, net	$ 6	$ 0
Tax effect	(647)	(574)
Net income	1,808	991
Total reclassifications, net of tax	4	0
Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Total reclassifications, net of tax	4	0
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Gains and (Losses) on Available-for-Sale (AFS) Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Gains on securities transactions, net	6	0
Tax effect	(2)	0
Net income	$ 4	$ 0